Legislature(2003 - 2004)
04/28/2004 08:06 AM Senate JUD
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ 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
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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.
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