Legislature(2003 - 2004)
04/28/2004 08:06 AM Senate JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 th 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 call. 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 st 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 recollection. 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 statement. MS. BURKE said she does not interpret the word "invoice" to mean a credit card statement. She understands it as a request for payment. 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 card. 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 objected.] 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.