STAND. COM. REP. NO. 868

                                 Honolulu, Hawaii
                                                   , 1999

                                 RE: H.B. No. 1073
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committees on Consumer Protection and Commerce and
Judiciary and Hawaiian Affairs, to which was referred H.B. No.
1073 entitled: 

     "A BILL FOR AN ACT RELATING TO TELEMARKETING FRAUD,"

beg leave to report as follows:

     The purpose of this bill is to add a new chapter to the
Hawaii Revised Statutes, entitled the Telemarketing Fraud
Prevention Act.  This bill:

     (1)  Includes two sections describing unfair or deceptive,
          and abusive telemarketing acts or practices;

     (2)  Provides civil penalties for violations of these
          sections;

     (3)  Requires that telephone solicitors keep specified types
          of records for a period of five years; and 

     (4)  Makes these records available upon demand of any
          governmental entity authorized to enforce the chapter.

     Testimony supporting this measure was submitted by the
Department of Commerce and Consumer Affairs (DCCA), Department of
the Prosecuting Attorney of the City and County of Honolulu,

 
 
 
 
 
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Executive Office on Aging, AARP, and the Policy Advisory Board
for Elder Affairs.  The Honolulu Police Department supported the
intent of this bill.  Direct Marketing Association (DMA)
submitted testimony opposing the bill's telemarketing
requirements, which it testified were more restrictive than those
of the Federal Trade Commission.  AT&T and GTE supported the
bill's intent but were opposed to additional regulatory
restrictions on telemarketing that might unduly burden the
industry, with GTE specifically objecting to the recordkeeping
requirements and overly strict five-phone-ring limit on telephone
solicitations.

     AARP testified that over $40,000,000,000 is lost to
telemarketing fraud each year, and that the crime is a difficult
one to detect, prevent, and remedy.  AARP also stated that older
persons are increasingly being targeted for and becoming victims
of telemarketing fraud.

     DCCA testified that most states have a telemarketing fraud
law, and that telemarketers are used to complying with
telemarketing laws on both the federal and state levels.  DCCA
stated that in Hawaii, one of the few states without a
telemarketing law, the number of complaints about telemarketing
fraud has been increasing.  In response, the DCCA had over the
past year, embarked on a campaign to increase consumer awareness
about the dangers of telemarketing fraud, encourage reporting,
and network with enforcement agencies in other states and
countries to investigate and stop telemarketing abuses.

     Your Committees have amended this measure by adopting, in
part, the recommendations developed by DCCA in collaboration with
DMA, GTE, and AT&T.  Specifically, your Committees have amended
this measure by:

     (1)  Adjusting language in the unfair or deceptive, and
          abusive telemarketing acts or practices sections to:

          (A)  Prohibit "credit repair scams" and "recovery room
               scams" using language that more closely tracks the
               Federal Telemarketing Sales Rule;

          (B)  Increase from five to ten rings, the maximum
               number of telephone rings allowed before a
               solicitation call would constitute an unfair or
               deceptive act;


 
 
 
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          (C)  Permit the use of a fictitious name by a specific
               telemarketing solicitor, consistent with the
               Federal Telemarketing Rule; and

          (D)  Delete an overly broad catchall provision;

     (2)  Reducing from five years to two years, the time that
          records must be retained by telemarketers;

     (3)  Providing exemptions from:

          (A)  The written authorization to access consumer
               credit card and bank account requirement in cases
               where merchants adopt the DMA national policy of
               providing refunds for goods returned within seven
               days;

          (B)  The requirement that records be kept of refund,
               cancellation, exchange, or repurchase policies
               where merchants adopt a full refund, unconditional
               satisfaction guaranteed policy;

          (C)  Recordkeeping requirements by broadening the
               exemption for businesses regulated by the Public
               Utilities Commission (PUC), to encompass the sale
               of goods or services subject to regulation by
               either the PUC or the Federal Communications
               Commission;

     (4)  Narrowing the range of records that must be kept to
          substantiate performance and other claims, to those
          substantiating claims regarding health, nutrition, or
          diet-related goods or services;

     (5)  Adopting the federal Telephone Consumer Protection
          Act's "do not call list" requirements by reference
          under the recordkeeping provisions of this bill; and

     (6)  Making technical, nonsubstantive amendments for
          purposes of clarity, consistency, and style.

     As affirmed by the records of votes of the members of your
Committees on Consumer Protection and Commerce and Judiciary and
Hawaiian Affairs that are attached to this report, your
Committees are in accord with the intent and purpose of H.B. No.
1073, as amended herein, and recommend that it pass Second
Reading in the form attached hereto as H.B. No. 1073, H.D. 1, and
be placed on the calendar for Third Reading.


 
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                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Consumer
                                   Protection and Commerce and
                                   Judiciary and Hawaiian
                                   Affairs,

                                   
                                   
                                   
                                   
______________________________     ______________________________
PAUL T. OSHIRO, Chair              RON MENOR, Chair