HBA-RBT H.B. 537 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 537 By: Danburg Business & Industry 3/16/1999 Introduced BACKGROUND AND PURPOSE Currently, federal and state laws regarding the issue of telemarketing are not sufficiently deterring abuse and fraud. There are exemptions in registration and bonding requirements which can make those laws difficult to enforce. Some telephone solicitors call citizens who have requested not to be called, and misrepresent themselves and the total cost of the goods or services they offer. Sales people have withdrawn money from consumer accounts without permission. H.B. 537 requires telephone solicitors to obtain a signed written authorization before making a charge to a credit or debit card account and prohibits telephone solicitors from using messengers to collect money before a product or service is delivered. It prohibits telephone solicitation calls to telephone numbers of residential customers in Texas who have requested that their telephone numbers be placed on a telephone solicitation no-call list, removes current registration exemptions, and provides civil and criminal penalties for telephone solicitors who violate certain provisions of this Act. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Public Utility Commission in SECTION 1 (Section 37.031, Business and Commerce Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Chapters 37 and 38, Business and Commerce Code, as follows: Sec. 37.01. DEFINITIONS. Removes "consumer" and "consumer telephone call" from the list of defined terms. Redefines "consumer good or service" and "telephone solicitor." Defines "telephone solicitation." Creates Subdivision (2) from existing text. Redesignates existing Subdivisions (4)-(5) to Subdivisions (3)-(4), respectively. Makes nonsubstantive changes. Sec. 37.02. SOLICITOR IDENTITY; PERMISSIBLE HOURS; DISCONNECT. Creates Subdivisions (b)(3)(A) and (b)(3)(B) with conforming language. Makes conforming and nonsubstantive changes. Sec. 37.03. New title: CONFIRMATION OF AGREEMENT. Deletes existing title. Deletes existing text. (a) Provides that any oral agreement made during a telephone solicitation to purchase a consumer good or service, make a contribution, or authorize charges to be made to a credit card account or debit card account are voidable by the called person unless the caller obtains a confirmation from the called person in the specified form. (b) Specifies content and form of the confirmation. (c) Provides that if a called person submits payment under an agreement that is made during a telephone solicitation and that authorizes charges to be made to a credit card account or debit card account and who does not submit a confirmation, may cancel the agreement by notifying the caller in writing and returning any goods in substantially the condition they were in when received. (d) Requires the caller to return all payments made, return any property received, and terminate any security interest within 10 business days of receiving notice of cancellation under Subsection (c). Sec. 37.031. NO-CALL LIST. (a) Provides that in this section, "commission" means the Public Utility Commission. (b) Requires the commission to maintain a telephone solicitation no-call list of the telephone numbers of residential customers in this state who have requested to be on the list. Requires the commission to update the list quarterly. Provides that entries on the list expire annually and authorizes renewal of the entries. Prohibits the commission from charging any person for a request to place a number on the list, or renew an entry on the list. (c) Prohibits a telephone solicitor from making a telephone solicitation to a number on the no-call list if the telephone solicitor has had the list containing the number available for over 30 days. (d) Provides that a violation of Subsection (c) is subject to enforcement and penalties under Subchapter B, Chapter 15, Utilities Code (Judicial Review, Enforcement, and Penalties), as if the violation were a violation of Title 2, Utilities Code (Public Utility Regulatory Act), by a person regulated under that title. Provides that a violation of Subsection (c) is subject to enforcement and penalties under this chapter. Prohibits the use of administrative penalties collected under Subsection (c) for any use other than administering this section. (e) Requires the commission to receive and investigate complaints concerning violations of Subsection (c). Requires the commission to take appropriate action for enforcement and penalties if the commission determines that a violation of Subsection (c) has occurred. (f) Authorizes the commission to adopt rules to administer this chapter. Requires the commission to adopt rules requiring each local exchange telephone company to inform its customers of the requirements of this section by annual inserts in billing statements mailed to customers or conspicuous publication of the notice in the consumer information pages of local telephone directories. Provides that a telephone solicitation made to a number on the no-call list is not a violation of this section if the call is an isolated occurrence made by a telephone solicitor who has in place adequate procedures to comply with this section. (g) Requires the commission to conduct an educational program designed to inform the public of their rights. Requires the educational program to be directed to all residential telephone subscribers and be conducted at least once a year if funds are available. (h) Requires the commission to provide for dissemination of the no-call list. Requires telephone solicitors registered under Chapter 38 to be provided with a copy of the list and all updates at no charge. Requires the commission to set and collect a fee for a copy of the list or an update of the list provided to a person not registered under Chapter 38 in an amount not more than $200 and necessary to cover the cost of administering this section, considering amounts available for that purpose under Subsection (d). Sec. 37.032. DIRECT COLLECTION AND DELIVERY. Prohibits a telephone solicitor from causing any person to go to the called person to collect a payment, a contribution, or make a delivery unless a confirmation has been obtained. Sec. 37.033. REQUEST OF CREDIT CARD NUMBER OR FINANCIAL INSTITUTION ACCOUNT NUMBER AFTER OFFER OF FREE CONSUMER GOOD OR SERVICE. Provides that a telephone solicitor commits a Class A misdemeanor if the telephone solicitor represents or implies that a called person will receive a consumer good or service without charge and requests a credit card account number, debit card account number, or financial institution account number for the purpose of charging an amount to the account number prior to sending the consumer good or service. Sec. 37.04. ENFORCEMENT. Makes conforming changes. Sec. 37.05. CIVIL PENALTY. Includes attorney fees and investigative costs in the list of damages the attorney general can seek when bringing an action for injunctive relief for a violation of this chapter. Provides that the damages awarded to a called person, rather than the consumer, must be at least as much as the called person paid to the caller. Makes conforming changes. Sec. 37.06. DECEPTIVE TRADE PRACTICES. Provides that a violation of this chapter is a false, misleading, or deceptive act or practice under Subchapter E, Chapter 17 (Deceptive Trade Practices and Consumer Protection), and authorizes any public or private right or remedy prescribed by that subchapter to enforce this chapter. CHAPTER 38. New Title: REGISTRATION OF TELEPHONE SOLICITORS. Replaces "Regulation" with "Registration" and "Solicitation" with "Solicitors" SUBCHAPTER A. GENERAL PROVISIONS Sec. 38.001. DEFINITIONS. Defines "consumer good or service," "principal," and "telephone solicitor." Redefines "owner," "purchaser," and "telephone solicitation." Redesignates existing Subdivisions (6)-(7) to (5)-(6), respectively. Deletes existing text. Sec. 38.002. MAKING TELEPHONE SOLICITATION. Deletes existing text to make a conforming change. Sec. 38.003. CONSTRUCTION AND APPLICATION. Makes no changes. SUBCHAPTER B. EXEMPTIONS Sec. 38.051. CLAIM OF EXEMPTION. Makes no changes. Sec. 38.052. New title: EXEMPTIONS APPLY TO TELEPHONE SOLICITOR. Replaces "Seller" with "Telephone Solicitor." Makes conforming changes. Sec. 38.053. New title: PERSONS REGULATED BY OTHER LAW. Deletes "or Items." Exempts a person who is required to post a bond under Article 9023 (b), (c), or (e), V.T.C.S., from the provisions of this chapter. Deletes existing text. Deletes text of Section 38.054. Sec. 38.054. CERTAIN NONPROFIT AND EDUCATIONAL ORGANIZATIONS. Redesignated from Section 38.055. Provides that an entity is exempt from this chapter if the entity is a nonprofit organization or an entity organized and operated exclusively for educational purposes, rather than an educational institution or organization or a nonprofit organization. Deletes existing text. Deletes text of Sections 38.056 and 38.057. Sec. 38.055. New title: SOLICITATION OF CURRENT OR FORMER CUSTOMERS OR CONTRIBUTORS. Adds "or Contributors." Redesignated from Section 38.058. Provides that this chapter does not apply to a call made to a person to whom the solicitor has previously sold a consumer good or service, extended credit, or contributed to the entity on whose behalf the solicitation is made. Deletes existing text. Sec. 38.056. New Title: ARRANGEMENT FOR LATER PRESENTATION. Deletes existing title. Redesignated from Section 38.059. Provides that this chapter does not apply to a solicitor who does not intend to complete or obtain provisional acceptance of a sale during the telephone solicitation, nor make the major sales presentation during the telephone solicitation, but arranges for the major sale presentation to be made at a later face-to-face meeting between the salesperson and the purchaser, and complies with Section 37.032. Deletes existing text. Deletes Section 38.060. Sec. 38.057. CERTAIN ISOLATED SOLICITATIONS. Redesignated from existing Section 38.061. Provides that this chapter does not apply to any isolated telephone solicitation, rather than to isolated commercial telephone solicitation. SUBCHAPTER C. REGISTRATION Sec. 38.101. REGISTRATION REQUIRED. Makes conforming and nonsubstantive changes. Sec. 38.102. CONTENTS OF REGISTRATION STATEMENT; VERIFICATION; PUBLIC INFORMATION. Deletes Subsection (e). Makes conforming changes. Sec. 38.103. FILING FEE. Creates Subsection (a) from existing text. Authorizes the fee collected under this section to be used only to defray the costs of the secretary of state and the Public Utility Commission in administering this chapter. Sec. 38.104. ISSUANCE OF CERTIFICATE OF REGISTRATION. Makes conforming changes. Sec. 38.105. EFFECTIVE DATE; RENEWAL. Makes no changes. Sec. 38.106. New title: CHANGE IN INFORMATION. Deletes existing title. Deletes text of existing Subsections (a) and (b). Makes conforming and nonsubstantive changes to existing Subsection (c). Sec. 38.107. SECURITY. Provides that the security must be "maintained" in the amount of $10,000. Authorizes a telephone solicitor to apply for the release of the security if the telephone solicitor has ceased all activities subject to this chapter. Provides that the application must be verified by each principal of the solicitor. Requires the secretary of state to promptly notify the attorney general of receipt of an application. Requires the secretary of state to release the security within 180 days of the date the solicitor conducted its final activity subject to this chapter or the 60th day after the date the attorney general is notified, whichever occurs later. Makes a conforming change. Sec. 38.108. New title: SECRETARY OF STATE AS TELEPHONE SOLICITOR'S AGENT TO RECEIVE SERVICE. Replaces "Seller's" with "Telephone Solicitor's." Makes conforming changes. SUBCHAPTER D. DISCLOSURES REQUIRED IN REGISTRATION STATEMENT Sec. 38.151. DISCLOSURE OF CERTAIN NAMES, ADDRESSES, AND ORGANIZATIONAL INFORMATION. Deletes text of Subdivisions (4)-(7), (9), and (12)(14). Redesignates Subdivisions (8), (10), (11), (15), and (16), to Subdivisions (4)-(8), respectively. Deletes Sections 38.152 and 38.153. Makes conforming and nonsubstantive changes. SUBCHAPTER E. New title: ADDITIONAL INFORMATION FROM TELEPHONE SOLICITOR. Replaces "Seller" with "Telephone Solicitor." Sec. 38.201. New title: INFORMATION POSTED OR AVAILABLE AT TELEPHONE SOLICITOR'S LOCATION. Replaces "Seller's Business" with "Telephone Solicitor's." Makes conforming changes. Sec. 38.202. New title: DISCLOSURES TO SOLICITED PERSONS. Replaces "Prospective Purchasers" with "Solicited Persons." Requires a telephone solicitor, where it is implied that the caller will receive a gift, premium, bonus, or prize (prize), to disclose the manner in which the telephone solicitor chooses between prizes, the odds of receiving a prize, and all rules or terms which must be met. Requires a telephone solicitor, when offering to sell an interest in an oil, gas, or mineral field, well or exploration site, to disclose the solicitor's ownership interest, the total number of interests to be sold, and if any reference is made to an investigation, the name, business address, telephone number, and professional credentials of the person who made the investigation, and a copy of the report and other documents relating to the investigation. Makes conforming and nonsubstantive changes. Sec. 38.203. REFERENCE TO COMPLIANCE WITH STATUTE PROHIBITED. Makes conforming and nonsubstantive changes. SUBCHAPTER F. OFFENSES Sec. 38.251. VIOLATION OF CHAPTER. Makes no changes. Sec. 38.252. New title: TELEPHONE SOLICITATION FOR UNREGISTERED TELEPHONE SOLICITOR. Replaces "Salesperson" with "Telephone Solicitation" and "Seller" with "Telephone Solicitor." Deletes Section 38.253. Makes conforming changes. SUBCHAPTER G. ENFORCEMENT Sec. 38.301. INJUNCTION. Makes no changes. Sec. 38.302. CIVIL PENALTIES. Provides that a person who violates an injunction under Section 38.301 (Injunction) is liable for not more than $25,000 for each violation, rather than not more than $25,000 for each violation and not more than $50,000 for all violations. Sec. 38.303. DECEPTIVE TRADE PRACTICES. Makes no changes. Sec. 38.304. ACTION TO RECOVER AGAINST SECURITY. Authorizes the attorney general to bring an action on behalf of an injured person to recover against the bond, letter of credit, or certificate of deposit. Requires the attorney general to distribute any recovery to the person injured. Makes conforming changes. Sec. 38.305. WAIVER PROHIBITED. Makes no changes. SECTION 2. Repealer: Subchapter G, Chapter 55, Utilities Code (Telephone Solicitation). SECTION 3. Makes application of this Act prospective. SECTION 4. Effective date: September 1, 1999, except that the requirements of Section 37.031, Business and Commerce Code, as added by this Act, apply only on and after January 1, 2000. SECTION 5. Emergency clause.