HBA-RBT C.S.H.B. 537 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 537 By: Danburg Business & Industry 5/5/1999 Committee Report (Substituted) 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 Sales people have withdrawn money from consumer accounts without permission. C.S.H.B. 537 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 nocall 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." Redesignates Subdivision (2) from existing Subdivision (3). Redesignates existing Subdivisions (4)-(5) to Subdivisions (3)-(4), respectively, with amendments to the existing definitions. Makes nonsubstantive changes. Sec. 37.02. SOLICITOR IDENTITY; PERMISSIBLE HOURS; DISCONNECT. Makes conforming and nonsubstantive changes. Sec. 37.03. CHARGES TO CONSUMER CREDIT ACCOUNT. Makes no change. 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 an entry to the list expires on the fifth anniversary of the date the entry is first included on the list. Authorizes the renewal of an entry for successive five-year periods. Prohibits the commission from charging any person for a request to place a number on the list, or renew an entry on the list. Requires the commission to develop and disseminate a form to be used by residential customers to request to be on the list and requires the commission to provide a toll-free number that customers are authorized to call to obtain a copy of the form. Sets forth the contents of the notice for the form. (c) Prohibits a telephone solicitor from making a telephone solicitation to a number on the no-call list if the list has been available to the telephone solicitor for over 30 days. (d) Provides that a violation of Subsection (c) is subject to enforcement and penalties under Subchapter B (Enforcement and Penalties), Chapter 15, Utilities Code, 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 other 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. 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 knowingly 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 from the called person for the purpose of charging an amount to the account number as a condition precedent 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 is authorized to 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 or the recipient of the contribution made as a result of the telephone solicitation. 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 (Deceptive Trade Practices and Consumer Protection), Chapter 17, and authorizes the use of any public or private right or remedy prescribed by that subchapter to enforce this chapter. Sec. 37.07. EXEMPTION. Sets forth a list of persons and entities to whom this chapter does not apply. Establishes that certain telephone solicitations are not covered by 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." Removes definitions for "item," "salesperson," and "seller." Redesignates existing Subdivisions (6)-(7) to Subdivisions (5)-(6), respectively. Sec. 38.002. MAKING TELEPHONE SOLICITATION. Deletes existing text to make a conforming change. Sec. 38.003. CONSTRUCTION AND APPLICATION. Makes no change. SUBCHAPTER B. EXEMPTIONS Sec. 38.051. CLAIM OF EXEMPTION. Makes no change. Sec. 38.052. New title: EXEMPTIONS APPLY TO TELEPHONE SOLICITOR. Replaces "seller" with "telephone solicitor" to make conforming changes. Sec. 38.053. New title: PERSONS REGULATED BY OTHER LAW. Deletes "or Items." Exempts a person who is required to register and post a bond under Article 9023b, c, or e, V.T.C.S., from the provisions of this chapter. Deletes existing text, regarding exemptions for specified corporations, financial institutions, and other persons. Deletes existing Section 38.054 (Media and Subscription Services and Certain Catalogs) and its specified exemptions. Sec. 38.054. New title: CERTAIN NONPROFIT, EDUCATIONAL, AND POLITICAL ORGANIZATIONS. Redesignated from existing 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. Additionally, exempts organizations calling on behalf of political candidates, officeholders, or regarding ballot issues. Deletes Sections 38.056 (Certain Commercial Sales) and 38.057 (Food) and their specified exemptions. Sec. 38.055. New title: SOLICITATION OF CURRENT OR FORMER CUSTOMERS OR CONTRIBUTORS. Redesignated from existing Section 38.058. Provides that this chapter does not apply to a call made to a person with whom the solicitor has an established business relationship, except that this exemption does not apply to a telephone solicitation by a provider of local exchange or interexchange telecommunication service. Deletes existing text and its exemptions of solicitations from former or current customers. Sec. 38.056. New Title: ARRANGEMENT FOR LATER PRESENTATION. Redesignated from existing 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. Deletes further qualifications in existing text. Deletes Section 38.060 (Certain Solicitation Services Having Predominantly Exempt Customers). Deletes "Promotions at Established Retail Sales Locations or at Consumer's Residence" from title. Sec. 38.057. CERTAIN ISOLATED SOLICITATIONS. Redesignated from existing Section 38.061. Provides that this chapter does not apply to an isolated transaction in a telephone solicitation, rather than to an isolated transaction in a 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) and its definition of "principal." Makes conforming changes. Sec. 38.103. FILING FEE. Provides that the filing fee for a registration statement is $75, rather than $200. 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 and Section 37.031. Sec. 38.104. ISSUANCE OF CERTIFICATE OF REGISTRATION. Makes conforming changes. Sec. 38.105. EFFECTIVE DATE; RENEWAL. Makes no change. Sec. 38.106. New title: CHANGE IN INFORMATION. Deletes text of existing Subsections (a) and (b) concerning quarterly filings with the secretary of state. Makes conforming and nonsubstantive changes to existing Subsection (c). Deletes "Update Addendum Required" from existing title. Sec. 38.107. SECURITY. Provides that the security must be "maintained" in the amount of $25,000, rather than $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, unless the attorney general files notice of objection with 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 within 60 days after the date the attorney general is notified, whichever occurs later. Authorizes the secretary of state to accept the selfinsurance or bond of the registrant itself, without separate surety, if the registrant demonstrates to the satisfaction of the secretary of state the existence of a suitable agent to receive service of process and a history of financial solvency and continuous operation sufficient to justify the self-insurance or bond of the registrant. Makes a conforming change. Sec. 38.108. New title: SECRETARY OF STATE AS TELEPHONE SOLICITOR'S AGENT TO RECEIVE SERVICE. 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)-(14), and (16), concerning the contents of a registration statement. Redesignates Subdivisions (8), (11), and (15), to Subdivisions (3), (5), and (6), respectively. Includes the physical location of the principal place of business of the telephone solicitor and the telephone number at that location, as well as the name of an officer, a general or limited partner, or the sole proprietor, as applicable, of the telephone solicitor among the items that the registration statement must contain. Deletes Sections 38.152 (Disclosure of Certain Convictions, Judgments, Orders, and Bankruptcies) and 38.153 (Disclosure of Certain Sales Information). Makes conforming and nonsubstantive changes. SUBCHAPTER E. New title: ADDITIONAL INFORMATION FROM TELEPHONE SOLICITOR. Sec. 38.201. New title: INFORMATION POSTED OR AVAILABLE AT TELEPHONE SOLICITOR'S LOCATION. Makes conforming changes. Sec. 38.202. New title: DISCLOSURES TO SOLICITED PERSONS. Requires a telephone solicitor, where it is represented or 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. Replaces "item" with "good or service." 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 change. Sec. 38.252. New title: TELEPHONE SOLICITATION FOR UNREGISTERED TELEPHONE SOLICITOR. Deletes Section 38.253 (Request of Credit Card Account Number or Checking Account Number After Offer of Free Item). Makes conforming changes. SUBCHAPTER G. ENFORCEMENT Sec. 38.301. INJUNCTION. Makes no change. 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 change. Sec. 38.304. ACTION TO RECOVER AGAINST SECURITY. Authorizes the attorney general to bring an action in the name of the state to recover against the bond, letter of credit, or certificate of deposit. Makes conforming changes. Sec. 38.305. WAIVER PROHIBITED. Makes no change. SECTION 2. Repealer: Subchapter G (Telephone Solicitation), Chapter 55, Utilities Code. 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. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute modifies the original in SECTION 1 by deleting existing Subsection (b) in Section 37.02, Business and Commerce Code, to make conforming changes with respect to Section 37.07, as added by this Act, and by deleting all of the new proposed text for Section 37.03, Business and Commerce Code. The substitute modifies the original in SECTION 1 by reinstating existing Section 37.03, Business and Commerce Code. The substitute modifies the original in SECTION 1 by amending proposed Section 37.031, Business and Commerce Code, to provide for the expiration of an entry on a no-call list after five years, rather than after one year. The substitute also requires the commission to develop and disseminate a form to request placement on the list and provides the language for the notice for the form. The substitute modifies the original in SECTION 1 by deleting proposed Section 37.032, Business and Commerce Code, relating to direct collection and delivery, and redesignating proposed Section 37.033 to Section 37.032. The substitute modifies the original in SECTION 1 by adding Section 37.07, Business and Commerce Code (relating to exemptions from Chapter 37). Please see the Section-by-Section Analysis. The substitute modifies the original in SECTION 1, Section 38.001, Business and Commerce Code, by deleting a provision regarding a solicitation originally sent by mail from the proposed redefinition of "telephone solicitation." The substitute modifies the original in SECTION 1 by further amending proposed Section 38.053, Business and Commerce Code, to reinstate an exemption to Chapter 38 for persons offering or selling certain securities. The substitute modifies the original in SECTION 1 by expanding the title of Section 38.054, Business and Commerce Code, to include "Certain Nonprofit, Educational, and Political Organizations." Exempts organizations calling on behalf of political candidates, office holders, or ballot issues accordingly. The substitute modifies the original in SECTION 1 by amending proposed Section 38.055, Business and Commerce Code, to redefine those to whom this chapter is inapplicable due to an established business relationship. The substitute modifies the original in SECTION 1, proposed Section 38.056, Business and Commerce Code, to delete the proposed provision that a person in compliance with Section 37.032 is eligible for the exemption. The substitute modifies the original in SECTION 1, by further amending Section 38.103, Business and Commerce Code, to decrease the filing fee from $200 to $75. The substitute modifies the original in SECTION 1 by further amending Section 38.106, Business and Commerce Code, to specify that a change of a telephone solicitation agent of the telephone solicitor submitted in a registration statement must be reported to the secretary of state. The substitute modifies the original in SECTION 1, by amending proposed Section 38.107(c), Business and Commerce Code, to specify that the secretary of state is required to release security unless the attorney general files notice of objection with the secretary of state. The substitute modifies the original in SECTION 1 by adding proposed Section 38.107(d), Business and Commerce Code, to authorize the secretary of state to accept the self-insurance or bond of the registrant itself, without separate surety, if the registrant demonstrates to the satisfaction of the secretary of state the existence of a suitable agent to receive service of process and a history of financial solvency and continuous operation sufficient to justify the self-insurance or bond of the registrant. The substitute modifies the original in SECTION 1 by further amending Section 38.151, Business and Commerce Code, to include the physical location of the principal place of business of the telephone solicitor and the telephone number at that location, as well as the name of an officer, a general or limited partner, or the sole proprietor, as applicable, of the telephone solicitor among the items that the registration statement must contain. The substitute modifies the original in SECTION 1, Section 38.304, Business and Commerce Code, to authorize the attorney general to bring an action in the name of the state, rather than on behalf of the injured person, as specified in the original, to recover against the bond, letter of credit, or certificate of deposit required under Section 38.107. The substitute removes the original's requirement that the attorney general distribute any amount recovered to the injured person.