Legislature(2003 - 2004)

04/28/2004 08:06 AM Senate JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
            HB  15-SOLICITATIONS/CONSUMER PROTECTION                                                                        
REPRESENTATIVE HUGH FATE, sponsor of  HB 15, told members that he                                                               
introduced  this  bill  last  year  but  held  it  since  similar                                                               
legislation was  introduced in the U.S.  House of Representatives                                                               
at the same  time. That bill passed Congress but  the federal law                                                               
was challenged in the 10   Circuit Court; it was determined to be                                                               
constitutional. After that, the Alaska  Department of Law felt it                                                               
necessary to  flesh out that  federal legislation so that  it fit                                                               
and  conformed  to  Alaska's situation  and  allowed  the  Alaska                                                               
Department of Law to determine  the penalties. The administration                                                               
intended to introduce  its own legislation until  it became aware                                                               
of HB 15.                                                                                                                       
CHAIR SEEKINS  indicated that  SCS CSHB  15(L&C), version  W, was                                                               
before  the committee.  He  asked  if any  part  of that  version                                                               
deviates from Representative Fate's intent for the bill.                                                                        
REPRESENTATIVE FATE  said there was  a "pebble in the  road" over                                                               
changes requested by  the Department of Law  that affect magazine                                                               
subscriptions but he believes that was taken care of.                                                                           
MR. JIM  POUND, staff  to Representative  Fate, told  members one                                                               
issue may  still be a  bit contentious between the  Department of                                                               
Law and  the Direct  Marketing Association.  He told  both groups                                                               
during discussions that Representative  Fate's objective was that                                                               
the intent language of the bill remain the same.                                                                                
CHAIR SEEKINS asked  if this bill passes in its  present form, an                                                               
Alaskan would not  be able to order  a magazine or a  book on the                                                               
telephone using  a credit card,  even if the buyer  initiated the                                                               
MR.  POUND said  he  does  not foresee  anything  in  any of  the                                                               
versions of the  legislation that addresses a  buyer initiating a                                                               
call to  a telephone answering  business. The intent of  the bill                                                               
is  directly   aimed  at  the   "annoying  dinner   hour  calls."                                                               
Representative Fate did not intend  to affect Alaskans generating                                                               
a call.                                                                                                                         
CHAIR SEEKINS said  he and Senator French heard this  bill in the                                                               
Senate Labor  and Commerce  Committee and he  did not  think that                                                               
was the intent of that committee.                                                                                               
SENATOR FRENCH  agreed and  said he heard  testimony that  it was                                                               
still okay  for a customer  to solicit  a vendor and  purchase by                                                               
credit card.                                                                                                                    
CHAIR SEEKINS said the committee  is more than willing to address                                                               
any restrictive language in the bill that might bar that.                                                                       
SENATOR OGAN asked if the  amendments adopted by the Senate Labor                                                               
&  Commerce  Committee  addressed  some  of  the  concerns  about                                                               
ordering by credit card and requiring a written notice.                                                                         
CHAIR SEEKINS  said the intent  of the substantive  amendment was                                                               
that a person  has the opportunity to return a  product within 30                                                               
days that was ordered via telemarketing activity.                                                                               
SENATOR FRENCH added:                                                                                                           
     That sounds familiar to me.  I was still thinking about                                                                    
     the first  point, which  was whether  or not  you could                                                                    
     actually  call someone  and order  something  and as  I                                                                    
     recall  -   we'll  have  to  hear   from  the  industry                                                                    
     representative  -  but I  recall  that  being a  fairly                                                                    
     strained interpretation  of the  bill. At  least that's                                                                    
     the way I remember it.                                                                                                     
CHAIR SEEKINS  said the language beginning  on line 20 of  page 8                                                               
received the most  substantive discussion. It gives  a person the                                                               
right to review  the magazine and cancel  the subscription within                                                               
7  days of  receipt  or  at the  time  the  invoice is  received,                                                               
whichever is later. He noted  that would prevent a publisher from                                                               
sending an invoice on  the 31  day, after  the 30-day time period                                                               
is  over. The  intent was  to give  people who  felt they'd  been                                                               
strong-armed the ability to cancel in a timely manner.                                                                          
SENATOR OGAN said a buyer who  purchases with a credit card could                                                               
call his or her credit card company and cancel that way.                                                                        
CHAIR SEEKINS took  public testimony and asked  Ms. Drinkwater if                                                               
Senator French's  description of the  intent of the  Senate Labor                                                               
and   Commerce    Committee   substitute   complies    with   her                                                               
MS. CINDY  DRINKWATER, Assistant Attorney General,  said it does,                                                               
although  she  believed  he   referenced  a  30-day  cancellation                                                               
period, which she thought was 7 days.                                                                                           
CHAIR SEEKINS agreed.                                                                                                           
MS.  VIRGINIA  TORNES,  Alaska  Public  Interest  Research  Group                                                               
(AkPIRG), asked  members to support  HB 15 because  it reinforces                                                               
existing  federal  "Do Not  Call"  legislation.  It more  clearly                                                               
defines  a  telemarketer,  it  gives  consumers  the  ability  to                                                               
address  any  complaints  at  the  local  level  and  it  ensures                                                               
Alaskans consumer protection in the privacy of their own homes.                                                                 
MS. MARIE  DARLIN, representing  the Capitol  City Task  Force of                                                               
the   AARP-Alaska  office,   urged   members   to  support   this                                                               
legislation. She  has worked with Representative  Fate's staff on                                                               
this  bill  since   the  prior  year  because   of  its  consumer                                                               
protection focus.  AARP-Alaska has received many  complaints from                                                               
members  about the  number  of phone  calls  they were  receiving                                                               
during the dinner hour. More than  half of the people targeted by                                                               
telemarketers  are   over  age  50.  A   considerable  amount  of                                                               
discussion  has taken  place on  this bill.  AARP-Alaska supports                                                               
the bill  as it  has been  amended. She  noted that  thousands of                                                               
Alaskans have signed up on  the federal "Do-Not-Call" list, which                                                               
has been incorporated into this  current version of the bill. She                                                               
again urged members to support the bill.                                                                                        
MS. SUSAN  BURKE, an attorney  representing the  Direct Marketing                                                               
Association  and the  Magazine  Publishers  of America,  informed                                                               
members she is substituting today  for Bob Flint. She stated that                                                               
her  clients  have  absolutely  no   objection  to  the  no  call                                                               
provision in version W of HB  15. She asked to concentrate on two                                                               
sections (on page 8) of version  W (the Senate Labor and Commerce                                                               
Committee  bill).  Those  sections   amend  AS  45.63,  which  is                                                               
essentially a telephonic anti-fraud  statute. It says that unless                                                               
a company is  among the long list of exempt  types of businesses,                                                               
before it can engage in  telemarketing, it must register with the                                                               
Department of Law and provide  all kinds of disclosures and, more                                                               
importantly,  it is  prohibited from  offering or  making a  sale                                                               
without a  written contract with  the buyer. "Sale  by telephonic                                                               
means" in AS 43.63.105 includes not  only a call initiated by the                                                               
seller, but  also a letter,  postcard, a notice or  other written                                                               
communication advising,  requesting, motivating or  encouraging a                                                               
person to  contact the seller  by telephonic means.  She reminded                                                               
members that definition only applies  to businesses or people who                                                               
are not on the exempt list.                                                                                                     
She  pointed out  that violating  a criminal  fraud statute  is a                                                               
felony. That statute  was designed to deal with  fraud and theft,                                                               
not  the ordinary  run-of-the-mill consumer  protection problems.                                                               
She pointed  out that  fraud and theft  would include  people who                                                               
sell an item on behalf of  a non-existent business and pocket the                                                               
money, not  a situation  where a  seller misrepresented  an item.                                                               
She said it is probably appropriate that thievery be a felony.                                                                  
MS. BURKE said  most other kinds of "unfair  trade practices" are                                                               
dealt  with  in an  entirely  different  section  of AS  45.  The                                                               
remedies under those sections are  injunctive relief, damages, or                                                               
refunds,  which seem  more appropriate  for the  types of  things                                                               
dealt with  in subsections  (10) and (11)  - sales  of magazines,                                                               
periodicals,  sound recordings,  books,  or  memberships in  book                                                               
clubs. She said  subsection (10) of version W  would remove, from                                                               
the list  of exempted businesses,  sales of sound  recordings and                                                               
books. That  means a book  distributor who  mails a buyer  a mail                                                               
order catalog would be exempt.  However, a bookseller who mails a                                                               
postcard advertising  a single book  to a buyer that  includes an                                                               
800 number to call to purchase,  cannot purchase that book with a                                                               
credit card  because, even  though the  sale is  buyer initiated,                                                               
that  would  constitute a  prohibited  telephonic  sale unless  a                                                               
written  contract accompanied  the transaction.  Magazines are  a                                                               
little different  because they have  a qualified  exemption under                                                               
version W. The  qualified exemption is from  the registration and                                                               
written contract requirement  only if the seller  gives the buyer                                                               
the right to review the  magazine and cancel the subscription and                                                               
the buyer is provided a written notice of that right.                                                                           
MS.  BURKE said  in looking  at  the rest  of the  bill, that  is                                                               
already required  for all those  exempt under existing  law, such                                                               
as funeral  directors, insurance  agents, etcetera, not  just for                                                               
magazine solicitation.  She referred to  page 7 of version  W and                                                               
pointed out that  although her clients have no  problem with this                                                               
section, its  import is  that only certain  sections of  AS 43.63                                                               
are entitled  to exemption, section  .010. Therefore,  under this                                                               
version,  if a  seller  falls under  the  listed exemptions,  the                                                               
seller does not have to  register, pay the registration fee, have                                                               
a contract  with the  buyer, or make  certain disclosures  in the                                                               
written  contract. However,  what is  now applicable  to everyone                                                               
are the  cancellation and refund  rights that are in  current law                                                               
under section  .030(a) and (b).  The opt-out is only  for .030(c)                                                               
and (d). Under  the cancellation and refund  provision of .030(a)                                                               
and (b),  they are  exactly the  same as  what is  being required                                                               
under   subsection  (11)(A)   just  for   magazines.  Ms.   Burke                                                               
emphasized, "So I  don't think you need this at  all - subsection                                                               
A, totally unnecessary."                                                                                                        
MS. BURKE then  turned attention to subsection  (B) and described                                                               
why the written disclosure is problematic. She stated:                                                                          
     We have no problem with  making disclosures in any kind                                                                    
     of telephone situation  if it's verbal -  no problem at                                                                    
     all.  The  difficulty is  if  it's  required to  be  in                                                                    
     writing,  and  that's true  of  whether  it's a  seller                                                                    
     initiated call  or if  it's a  buyer initiated  call in                                                                    
     response to a mail out of  a postcard, or what have you                                                                    
     and here's why.                                                                                                            
     If  it's a  seller  initiated call,  you  can't make  a                                                                    
     written  disclosure  and  do   the  credit  card  thing                                                                    
     because  you're on  the telephone  so that's  a problem                                                                    
     with that.                                                                                                                 
SENATOR FRENCH  noted the bill  says a written  disclosure notice                                                               
must be  given to  the buyer  before or at  the time  the initial                                                               
invoice is received. He said an  invoice strikes him as being the                                                               
receipt one  gets in the mail  after a purchase or  a credit card                                                               
MS. BURKE said she does not  interpret the word "invoice" to mean                                                               
a  credit card  statement. She  understands it  as a  request for                                                               
SENATOR FRENCH  asked whether  the entire  dispute is  about when                                                               
that  invoice is  received. He  questioned how  an invoice  could                                                               
accompany a telephonic credit card transaction.                                                                                 
MS. BURKE agreed  and said that perhaps is the  policy debate but                                                               
she is  suggesting that  if the legislature  wants to  outlaw all                                                               
credit card  sales for  magazines, that language  will do  it. If                                                               
the  legislature  does  not  want to  do  that,  section  (11)(B)                                                               
creates serious problems.                                                                                                       
TAPE 04-54, SIDE B                                                                                                            
CHAIR SEEKINS said an invoice  would indicate request for payment                                                               
and  usually for  goods received  before the  payment is  due. He                                                               
noted that  he believes  the committee  is trying  to say  if the                                                               
customer  is  to receive  an  invoice  for future  payment,  that                                                               
invoice should include a written notification.                                                                                  
SENATOR FRENCH agreed that is  the intent the committee is trying                                                               
to convey.                                                                                                                      
CHAIR SEEKINS  said the customer  needs to  be made aware  of the                                                               
option to  cancel two times: upon  receipt of the first  issue or                                                               
within 7 days  after receipt of the invoice,  whichever is later.                                                               
He  said he  believes  that  if the  practice  is  that a  person                                                               
receives unsolicited magazines and is  later sent an invoice, the                                                               
invoice should include written notification.                                                                                    
MS.  BURKE said  no  one has  a problem  with  that, however  the                                                               
qualifier is if the transaction  is structured so that payment is                                                               
not due  until later,  requiring a  disclosure is  fine. However,                                                               
the problem comes with the buyer  who initiated the call and does                                                               
not  want to  receive  an invoice  and write  a  check but  would                                                               
prefer to  pay by  credit card  on the  phone. She  repeated that                                                               
under the language of this bill, that sale would not be exempt.                                                                 
CHAIR  SEEKINS said  the committee  would be  willing to  look at                                                               
language  to accomplish  its intent.  It wants  to make  sure the                                                               
person receives the  notification along with the  first issue and                                                               
has  the right  to cancel;  it does  not want  to bar  a person's                                                               
ability to purchase with a credit card.                                                                                         
MS.  BURKE said  there is  no question  that under  this bill  as                                                               
drafted,  the right  to  cancel  exists whether  or  not that  is                                                               
disclosed to  the buyer, for  magazines and everything  else. The                                                               
form in which  disclosure of that right is required  is of issue:                                                               
whether it  should be  provided by  the seller  as opposed  to an                                                               
informational or educational campaign  by the consumer protection                                                               
division, and  whether disclosure can  be made in a  format other                                                               
than in writing.                                                                                                                
CHAIR  SEEKINS   asked  Representative   Fate  if   the  previous                                                               
discussion aligns with his intent.                                                                                              
REPRESENTATIVE  FATE  replied  that   he  sees  nothing  in  this                                                               
legislation that prohibits  the use of a credit card  by a person                                                               
initiating  the  sale  and  that  was not  his  intent.  He  said                                                               
regarding the  invoice issue,  he sees  an invoice  as more  of a                                                               
record  because sometimes  an invoice  arrives  before the  bill,                                                               
sometimes after. He emphasized that  he had no intent to prohibit                                                               
the use of a credit card.                                                                                                       
MS. BURKE  said she is  concerned that  the language in  the bill                                                               
does  not comport  with the  committee's intent.  She offered  to                                                               
work with committee staff to find appropriate language.                                                                         
SENATOR FRENCH  suggested changing the word  "invoice" to reflect                                                               
the  intent  that when  people  first  receive notice  that  they                                                               
purchased a magazine, they also  receive a disclosure. He thought                                                               
the  sponsor's intent  was that  the buyer  who purchases  on the                                                               
telephone is  told upfront during  the transaction of a  right to                                                               
cancel.  He said  the problem  is  that people  forget that  they                                                               
ordered something.                                                                                                              
MS. BURKE  said people who forget  that they've been told  of the                                                               
7-day cancellation  policy will also  lose their invoices  so she                                                               
does not  know why a  verbal declaration of the  cancellation and                                                               
refund right is inadequate.                                                                                                     
SENATOR FRENCH disagreed.                                                                                                       
CHAIR SEEKINS  said the  committee's intent  is to  fully protect                                                               
the Alaskan  citizen who  is involved  in the  transaction within                                                               
reason. He believes it is reasonable to expect both.                                                                            
MS. BURKE  said in terms of  having the disclosure come  with the                                                               
magazine that  may be problematic  only because this  pertains to                                                               
national  magazine   distributors.  Every  state   has  different                                                               
disclosure  requirements so  that  would require  a publisher  to                                                               
have an  Alaska-specific disclosure  requirement, which  would be                                                               
burdensome and  costly. The result  could be that  Alaskans might                                                               
not be able  to take advantage of perfectly  legitimate offers in                                                               
the  mail from  which  a  buyer would  call  and  subscribe to  a                                                               
magazine  because the  buyer  could not  purchase  with a  credit                                                               
CHAIR SEEKINS asked Ms. Drinkwater to comment.                                                                                  
MS.  DRINKWATER  said  she  agrees  from  a  consumer  protection                                                               
standpoint  that  written  notification is  very  important.  She                                                               
pointed out that people often do  not receive a magazine within a                                                               
week; often  the magazine arrives  60 to 90  days later so  it is                                                               
not  realistic   to  think  that  consumers   will  remember  the                                                               
information they were given when  they placed the order. She said                                                               
that  while the  industry  has suggested  that  it has  wonderful                                                               
cancellation policies,  consumers have  no way to  exercise their                                                               
rights without written notification of those policies.                                                                          
9:06 a.m.                                                                                                                       
CHAIR SEEKINS suggested, in the  interest of time, Ms. Burke, Ms.                                                               
Drinkwater and the  sponsor work to draft  adequate language that                                                               
will not restrict Alaskans' ability  to exercise their purchasing                                                               
prerogative  but  provide  for consumer  protection.  [No  member                                                               
MS. DRINKWATER deferred to Mr. Marcus.                                                                                          
MR. DAVE  MARCUS, Assistant Attorney General,  Department of Law,                                                               
clarified  that  his understanding  of  the  charge is  to  allow                                                               
instantaneous credit card purchases  that do not involve invoices                                                               
and  provide subsequent  written notice  of cancellation,  either                                                               
with the first  subscription delivery or otherwise  so that there                                                               
is a written notice of cancellation.                                                                                            
CHAIR SEEKINS agreed and said it  may not have to be simultaneous                                                               
with the first delivery but could come at a different point.                                                                    
SENATOR FRENCH questioned  why a consumer couldn't  get a written                                                               
notice of  the sale  and right  to cancel within  14 days  of the                                                               
telephone transaction.                                                                                                          
CHAIR SEEKINS  noted that  would come  from the  solicitor rather                                                               
than the publisher.                                                                                                             
MS. BURKE interrupted to say she  would be happy to explore those                                                               
issues.  She  asked for  clarification  about  mail or  telephone                                                               
solicitations for  books or sound recordings.  She said according                                                               
to this bill, those companies are  not exempt and would be guilty                                                               
of fraud.                                                                                                                       
SENATOR  FRENCH admitted  that he  had  difficulty following  Ms.                                                               
Burke's explanation of  that problem and asked her to  send him a                                                               
written explanation.                                                                                                            
CHAIR  SEEKINS said  he does  not  believe it  was the  sponsor's                                                               
intent to unduly single out CDs and books.                                                                                      
REPRESENTATIVE FATE affirmed that.                                                                                              
CHAIR  SEEKINS  asked  that  those items  be  considered  in  the                                                               
proposed  amendment. He  asked  that the  group  provide such  an                                                               
amendment  soon  otherwise  the  committee  would  have  to  move                                                               
forward without it.  He then announced he would hold  the bill in                                                               
committee. The committee took a 5-minute recess.                                                                                
9:15 a.m.                                                                                                                       

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