REPORT TITLE:
Telemarketing Fraud


DESCRIPTION:
Provides safeguards against telemarketing fraud.  Provides for
penalties.

 
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HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO TELEMARKETING FRAUD.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Section 708-800, Hawaii Revised Statutes, is
 
 2 amended by adding nine new definitions to read as follows:
 
 3      ""Donation" in relation to telemarketing means a monetary
 
 4 gift that will be directed to a cause or charitable organization
 
 5 or public institution as declared by the telemarketer.
 
 6      "Outbound telephone call" means a telephone call initiated
 
 7 by a telemarketer to induce the purchase of goods or services, or
 
 8 solicitation of a donation.
 
 9      "Person" means any individual, group, unincorporated
 
10 association, limited or general partnership, corporation, or
 
11 other business entity.
 
12      "Prize" means anything offered, or purportedly offered, and
 
13 given, or purportedly given to a person by chance.  For purposes
 
14 of this definition, chance exists if a person is guaranteed to
 
15 receive an item and, at the time of the offer or purported offer,
 
16 the telemarketer does not identify the specific item that the
 
17 person will receive.
 
18      "Prize promotion" means:
 
19      (1)  A sweepstake or other game of chance, or;
 

 
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 1      (2)  An oral or written express or implied representation
 
 2           that a person has won, has been selected to receive, or
 
 3           may be eligible to receive a prize or purported
 
 4           prize.
 
 5      "Seller" means any person who, in connection with a
 
 6 telemarketing transaction, provides, offers to provide, or
 
 7 arranges for others to provide goods or services, or solicits a
 
 8 donation from the customer in exchange for consideration.
 
 9      "State" means any state of the United States, the District
 
10 of Columbia, Puerto Rico, the Northern Mariana Islands, and any
 
11 territory or possession of the United States.
 
12      "Telemarketer" means any person who, in connection with
 
13 telemarketing, initiates or receives telephone calls, or computer
 
14 communication to or from a customer.
 
15      "Telemarketing" means a plan, program, or a campaign which
 
16 is conducted to induce the purchase of goods or services by use
 
17 of one or more telephones or computers, and which involves the
 
18 use of a telephone, computer communication, mail services,
 
19 courier service, or door-to-door sales."
 
20      SECTION 2.  Chapter 708, Hawaii revised Statutes, is amended
 
21 by adding five new sections to be appropriately designated and to
 
22 read as follows:
 
23      "§708-     Deceptive telemarketing acts or practices.  It is
 

 
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 1 a deceptive telemarketing act or practice, and a violation of
 
 2 this section for any seller or telemarketer to engage in the
 
 3 following conduct:
 
 4      (1)  Before a customer pays for goods or services offered,
 
 5           or a donation is solicited, the telemarketer fails to
 
 6           disclose, in a clear and conspicuous manner, the
 
 7           following material information:
 
 8           (a)  The total cost to purchase, receive, or use, and
 
 9                the quantity of, any goods or services that are
 
10                the subject of the sales offer;
 
11           (b)  All material restrictions, limitations, or
 
12                conditions to purchase, receive, or use the goods
 
13                or services that are the subject of the sales
 
14                offer;
 
15           (c)  If the seller has a policy of not making refunds,
 
16                cancellations, exchanges, or repurchases, a
 
17                statement informing the customer that this
 
18                is the seller's policy or, if the seller or
 
19                telemarketer makes a representation about a
 
20                refund, cancellation, exchange, or repurchase
 
21                policy, a statement of all material terms and
 
22                conditions of such policy;
 
23           (d)  In any prize promotion, the odds of being able to
 

 
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 1                receive the prize, and if the odds are not
 
 2                calculable in advance, the factors used in
 
 3                calculating the odds, that no purchase or payment
 
 4                is required to win a prize or to participate in a
 
 5                prize promotion, and that if a no purchase/no
 
 6                payment method of participating in the prize
 
 7                promotion is used, either instructions on how to
 
 8                participate, or an address or local or toll-free
 
 9                telephone number to which customers may write or
 
10                call for information on how to participate;
 
11           (e)  All material costs or conditions necessary to
 
12                receive or redeem a prize that is the subject of
 
13                the prize promotion;
 
14           (f)  The organization the telemarketer is soliciting
 
15                for, and if the telemarketer is soliciting for a
 
16                charitable organization, identification must be
 
17                given of the charitable organization, the name and
 
18                telephone number of the person the telemarketer is
 
19                coordinating with at this charitable organization;
 
20                and
 
21           (g)  The amount of the donation the telemarketer is
 
22                soliciting that will be directed to the charitable
 
23                organization;
 

 
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 1      (2)  Misrepresenting, directly or by implication, any of the
 
 2           following material information:
 
 3           (a)  The total cost to purchase, receive, or use, and
 
 4                the quantity of, any donation, goods or services,
 
 5                that are the subject of a sales offer;
 
 6           (b)  Any material restriction, limitation, or condition
 
 7                to purchase, receive, or use the donation, goods,
 
 8                or services that are the subject of a sales offer;
 
 9           (c)  When a seller or telemarketer uses, or directs a
 
10                customer to use a courier provided by the seller
 
11                or telemarketer to transport payment, the seller
 
12                or telemarketer must make the disclosure before
 
13                sending a courier to pick up the payment or
 
14                authorization for payment, or directing a customer
 
15                to have a courier pick up payment or authorization
 
16                for payment.  The seller or telemarketer must be
 
17                able to identify the courier by name and social
 
18                security number and keep a log identifying the
 
19                pickup date, time, location, and signature of the
 
20                person making payment to the courier;
 
21           (d)  Any material aspect of the performance,
 
22                efficiency, nature, or central characteristics of
 
23                goods or services that are the subject of a sales
 

 
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 1                offer;
 
 2           (e)  Any material aspect of the nature or terms of the
 
 3                seller's refund, cancellation, exchange, or
 
 4                repurchase policies;
 
 5           (f)  Any material aspect of a prize promotion including
 
 6                the odds of being able to receive a prize, the
 
 7                nature or value of a prize, or that a purchase or
 
 8                payment is not required to win a prize or to
 
 9                participate in a prize promotion;
 
10           (g)  Any material aspect of an investment opportunity
 
11                including risk, liquidity, earnings potential, or
 
12                profitability; and
 
13           (h)  A seller's or telemarketer's affiliation with, or
 
14                endorsement by, any government or third-party
 
15                organization; and
 
16      (3)  Obtaining or submitting for payment a check, draft, or
 
17           other form of negotiable paper drawn on a person's
 
18           checking, savings, share, or similar account, without
 
19           that person's express verifiable authorization.  The
 
20           authorization shall be deemed verifiable if any of the
 
21           following means are employed:
 
22           (a)  Express written authorization by the customer,
 
23                which may include the customer's signature on the
 

 
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 1                negotiable instrument; or
 
 2           (b)  Express oral authorization which is tape-recorded
 
 3                and made available upon request to the customer's
 
 4                bank and which evidences clearly both the
 
 5                customer's authorization of payment for the
 
 6                donation, goods or services that are the subject
 
 7                of the sales offer, and the customer's receipt of
 
 8                all of the following information:
 
 9                (i)  The dates of the draft;
 
10               (ii)  The amount of the draft;
 
11              (iii)  The payor's name;
 
12               (iv)  The number of draft payments if more than
 
13                     one;
 
14                (v)  A telephone number for customer inquiry that
 
15                     is answered during normal business hours; and
 
16               (vi)  The date of the customer's oral
 
17                     authorization.
 
18      Making a false or misleading statement to induce any person
 
19 to pay for goods or services.
 
20      Deceptive telemarketing acts or practices is a class C
 
21 felony.
 
22      §708-     Abusive telemarketing acts or practice.  (1)
 
23 Abusive conduct, generally.  It is an abusive telemarketing act
 

 
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 1 or practice and a violation of this section for any seller or
 
 2 telemarketer to engage in threats, intimidation, or the use of
 
 3 profane or obscene language:
 
 4      (2)  Patterns of calls.  It is an abusive telemarketing act
 
 5 or practice and a violation of this section for a telemarketer to
 
 6 engage in, or for a seller to cause a telemarketer to engage in
 
 7 the following conduct:
 
 8      (a)  Causing any telephone to ring, or engaging any person
 
 9           in telephone conversation, repeatedly and continuously
 
10           with intent to abuse or harass any person at the called
 
11           number; or
 
12      (b)  Initiating an outbound telephone call to a person when
 
13           that person previously has stated that the person does
 
14           not wish to receive an outbound telephone call made by
 
15           or on behalf of the seller whose goods or services are
 
16           being offered.
 
17      (3)  Calling time restrictions:  Without the prior consent
 
18 of a person, it is an abusive telemarketing act or practice and a
 
19 violation of this section for a telemarketer to engage in
 
20 outbound telephone calls to a person's residence at any time
 
21 other than between 8:00 a.m. and 9:00 p.m. local time at the
 
22 called person's location.
 
23      (4)  Required disclosures:  It is an abusive telemarketing
 

 
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 1 act or practice and a violation of this section for a
 
 2 telemarketer in an outbound telephone call to fail to disclose
 
 3 promptly and in a clear and conspicuous manner to the person
 
 4 receiving the call, the following information:
 
 5      (a)  The identity of the seller;
 
 6      (b)  That the purpose of the call is to sell goods or
 
 7           services;
 
 8      (c)  The nature of the goods or services;
 
 9      (d)  That no purchase or payment is necessary to be able to
 
10           win a prize or participate in a prize promotion if a
 
11           prize promotion is offered.  This disclosure must be
 
12           made before or in conjunction with the description of
 
13           the prize to the person called.  If requested by that
 
14           person, that telemarketer must disclose the no-
 
15           purchase/no-payment entry method for the prize
 
16           promotion; and
 
17      (e)  The disclosure of the actual percentage of funds
 
18           solicited that is to be distributed to a charitable
 
19           organization and the percentage of funds solicited to
 
20           be utilized for operational expenses.
 
21      (5)  Abusive telemarketing acts or practices is a
 
22 misdemeanor.
 
23      §708-     Record keeping requirements.  Any seller or
 

 
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 1 telemarketer, for a period of twenty-four months from the date
 
 2 the record is produced, shall maintain the following records
 
 3 relating to its telemarketing activities:
 
 4      (1)  All substantially different advertising, brochures,
 
 5           telemarketing scripts, and promotional material;
 
 6      (2)  The name and last known address of each prize recipient
 
 7           and the prize awarded for prizes that are represented,
 
 8           directly or by implication, to have a value of $1 or
 
 9           more;
 
10      (3)  The name and last known address of each customer, the
 
11           goods or services purchased, the date such goods or
 
12           services were shipped or provided, and the amount paid
 
13           by the customer for the goods or services;
 
14      (4)  The name, date of birth, social security number of any
 
15           fictitious name used, the last known home address and
 
16           telephone number, and the job titles for all current
 
17           and former employees directly involved in telephone
 
18           sales; provided, however, that if the seller or
 
19           telemarketer permits fictitious names to be used by
 
20           employees, each fictitious name to be used by an
 
21           employee, must be traceable to only one specific
 
22           employee;
 
23      (5)  The name of the organization, site address, telephone
 

 
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 1           numbers, person of authority, of the telemarketer,
 
 2           amount paid, date of payment, receipt of payment of any
 
 3           money solicited for a charitable donation, and:
 
 4           (a)  No such payment be made in cash;
 
 5           (b)  To a second party representing to be an agent of
 
 6                the object of the donation.
 
 7      (6)  Violation of this section is a class B felony.
 
 8      §708-     Designation of funds and cost of business
 
 9 distribution to a charitable organization.  (1)  Any seller or
 
10 telemarketer shall disclose to the person being solicited the
 
11 amount of the person's contribution that will be utilized for
 
12 business expenses and the amount to be paid to the charitable
 
13 organization;
 
14      (2)  Any seller or telemarketer shall disclose to the person
 
15 being solicited the charitable organization to which their
 
16 solicited funds will be paid and shall provide a receipt with the
 
17 name of the organization to which the solicited funds will be
 
18 paid upon receipt of the solicited funds;
 
19      (3)  All proceeds derived from a telemarketing solicitation
 
20 shall be accounted for by the contributor's name, home or
 
21 business address, telephone number, the charitable organization
 
22 the person is contributing to, and the amount of the
 
23 contribution.  The person making the solicitation shall account
 

 
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 1 for the solicitation with the persons' name and social security
 
 2 number;
 
 3      (4)  Payment made from a donation must be accounted for by
 
 4 identifying the name of the organization, site address, telephone
 
 5 number, the amount of the contribution.  The person arranging
 
 6 payment to the organization that donated funds are being directed
 
 7 to, and the person receiving these donated funds must be
 
 8 identified by name and social security number.
 
 9      (5)  Failure to account for the payment of funds and cost of
 
10 business distribution to a charitable organizations is a class B
 
11 felony.
 
12      §708-     Establishment of trust checking account.  All
 
13 sellers or telemarketers shall establish a trust account in which
 
14 charitable funds solicited will be deposited and no disbursement
 
15 from this account shall be made in cash.  All disbursements shall
 
16 be paid directly to the designated charitable organization."
 
17      SECTION 3.  This Act does not affect rights and duties that
 
18 matured, penalties that were incurred, and proceedings that were
 
19 begun, before its effective date.
 
20      SECTION 4.  Statutory material to be repealed is bracketed.
 
21 New statutory material is underscored.
 

 
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 1      SECTION 5.  This Act shall take effect upon its approval.
 
 2 
 
 3                           INTRODUCED BY:  _______________________
 

 
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