H. R. 868

One Hundred Third Congress

of the

United States of America

AT THE SECOND SESSION

Begun and held at the City of Washington on Tuesday,

the twenty-fifth day of January, one thousand nine hundred and ninety-four

An Act

To strengthen the authority of the Federal Trade Commission to protect consumers

in connection with sales made with a telephone, and for other purposes.

Be it enacted by the Senate and House of Representatives of

the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘Telemarketing and Consumer

Fraud and Abuse Prevention Act’’.

SEC. 2. FINDINGS.

The Congress makes the following findings:

(1) Telemarketing differs from other sales activities in that

it can be carried out by sellers across State lines without

direct contact with the consumer. Telemarketers also can be

very mobile, easily moving from State to State.

(2) Interstate telemarketing fraud has become a problem

of such magnitude that the resources of the Federal Trade

Commission are not sufficient to ensure adequate consumer

protection from such fraud.

(3) Consumers and others are estimated to lose $40 billion

a year in telemarketing fraud.

(4) Consumers are victimized by other forms of

telemarketing deception and abuse.

(5) Consequently, Congress should enact legislation that

will offer consumers necessary protection from telemarketing

deception and abuse.

SEC. 3. TELEMARKETING RULES.

(a) IN GENERAL.—

(1) The Commission shall prescribe rules prohibiting deceptive telemarketing acts or practices and other abusive

telemarketing acts or practices. (2) The Commission shall include in such rules respecting

deceptive telemarketing acts or practices a definition of deceptive telemarketing acts or practices which may include acts

or practices of entities or individuals that assist or facilitate

deceptive telemarketing, including credit card laundering.

(3) The Commission shall include in such rules respecting

other abusive telemarketing acts or practices— (A) a requirement that telemarketers may not undertake a pattern of unsolicited telephone calls which the

reasonable consumer would consider coercive or abusive

of such consumer’s right to privacy,
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(B) restrictions on the hours of the day and night

when unsolicited telephone calls can be made to consumers,

and

(C) a requirement that any person engaged in

telemarketing for the sale of goods or services shall

promptly and clearly disclose to the person receiving the

call that the purpose of the call is to sell goods or services

and make such other disclosures as the Commission deems

appropriate, including the nature and price of the goods

and services.

In prescribing the rules described in this paragraph, the

Commission shall also consider recordkeeping requirements.

(b) RULEMAKING.—The Commission shall prescribe the rules

under subsection (a) within 365 days after the date of enactment

of this Act. Such rules shall be prescribed in accordance with

section 553 of title 5, United States Code.

(c) ENFORCEMENT.—Any violation of any rule prescribed under

subsection (a) shall be treated as a violation of a rule under section

18 of the Federal Trade Commission Act (15 U.S.C. 57a) regarding

unfair or deceptive acts or practices.

(d) SECURITIES AND EXCHANGE COMMISSION RULES.—

(1) PROMULGATION.—

(A) IN GENERAL.—Except as provided in subparagraph

(B), not later than 6 months after the effective date of

rules promulgated by the Federal Trade Commission under

subsection (a), the Securities and Exchange Commission

shall promulgate, or require any national securities

exchange or registered securities association to promulgate,

rules substantially similar to such rules to prohibit deceptive and other abusive telemarketing acts or practices by

persons described in paragraph (2). (B) EXCEPTION.—The Securities and Exchange

Commission is not required to promulgate a rule under

subparagraph (A) if it determines that— (i) Federal securities laws or rules adopted by the

Securities and Exchange Commission thereunder provide protection from deceptive and other abusive

telemarketing by persons described in paragraph (2)

substantially similar to that provided by rules promulgated by the Federal Trade Commission under subsection (a); or

(ii) such a rule promulgated by the Securities and

Exchange Commission is not necessary or appropriate

in the public interest, or for the protection of investors,

or would be inconsistent with the maintenance of fair

and orderly markets.

If the Securities and Exchange Commission determines

that an exception described in clause (i) or (ii) applies,

the Securities and Exchange Commission shall publish in

the Federal Register its determination with the reasons

for it.

(2) APPLICATION.—

(A) IN GENERAL.—The rules promulgated by the Securities and Exchange Commission under paragraph (1)(A)

shall apply to a broker, dealer, transfer agent, municipal

securities dealer, municipal securities broker, government

securities broker, government securities dealer, investment
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adviser or investment company, or any individual associated with a broker, dealer, transfer agent, municipal securities dealer, municipal securities broker, government

securities broker, government securities dealer, investment

adviser or investment company. The rules promulgated

by the Federal Trade Commission under subsection (a)

shall not apply to persons described in the preceding

sentence.

(B) DEFINITIONS.—For purposes of subparagraph (A)—

(i) the terms ‘‘broker’’, ‘‘dealer’’, ‘‘transfer agent’’,

‘‘municipal securities dealer’’, ‘‘municipal securities

broker’’, ‘‘government securities broker’’, and ‘‘government securities dealer’’ have the meanings given such

terms by paragraphs (4), (5), (25), (30), (31), (43), and

(44) of section 3(a) of the Securities and Exchange

Act of 1934 (15 U.S.C. 78c(a)(4), (5), (25), (30), (31),

(43), and (44));

(ii) the term ‘‘investment adviser’’ has the meaning

given such term by section 202(a)(11) of the Investment

Advisers Act of 1940 (15 U.S.C. 80b–2(a)(11)); and

(iii) the term ‘‘investment company’’ has the meaning given such term by section 3(a) of the Investment

Company Act of 1940 (15 U.S.C. 80a–3(a)).

(e) COMMODITY FUTURES TRADING COMMISSION RULES.—

(1) APPLICATION.—The rules promulgated by the Federal

Trade Commission under subsection (a) shall not apply to persons described in subsection (f)(1) of section 6 of the Commodity

Exchange Act (7 U.S.C. 8, 9, 15, 13b, 9a).

(2) PROMULGATION.—Section 6 of the Commodity Exchange

Act (7 U.S.C. 8, 9, 15, 13b, 9a) is amended by adding at

the end the following new subsection:

‘‘(f)(1) Except as provided in paragraph (2), not later than

six months after the effective date of rules promulgated by the

Federal Trade Commission under section 3(a) of the Telemarketing

and Consumer Fraud and Abuse Prevention Act, the Commission

shall promulgate, or require each registered futures association

to promulgate, rules substantially similar to such rules to prohibit

deceptive and other abusive telemarketing acts or practices by

any person registered or exempt from registration under this Act

in connection with such person’s business as a futures commission

merchant, introducing broker, commodity trading advisor, commodity pool operator, leverage transaction merchant, floor broker, or

floor trader, or a person associated with any such person.

‘‘(2) The Commission is not required to promulgate rules under

paragraph (1) if it determines that—

‘‘(A) rules adopted by the Commission under this Act provide protection from deceptive and abusive telemarketing by

persons described under paragraph (1) substantially similar

to that provided by rules promulgated by the Federal Trade

Commission under section 3(a) of the Telemarketing and

Consumer Fraud and Abuse Prevention Act; or

‘‘(B) such a rule promulgated by the Commission is not

necessary or appropriate in the public interest, or for the protection of customers in the futures and options markets, or

would be inconsistent with the maintenance of fair and orderly

markets.
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If the Commission determines that an exception described in

subparagraph (A) or (B) applies, the Commission shall publish

in the Federal Register its determination with the reasons for

it.’’.

SEC. 4. ACTIONS BY STATES.

(a) IN GENERAL.—Whenever an attorney general of any State

has reason to believe that the interests of the residents of that

State have been or are being threatened or adversely affected

because any person has engaged or is engaging in a pattern or

practice of telemarketing which violates any rule of the Commission

under section 3, the State, as parens patriae, may bring a civil

action on behalf of its residents in an appropriate district court

of the United States to enjoin such telemarketing, to enforce compliance with such rule of the Commission, to obtain damages, restitution, or other compensation on behalf of residents of such State,

or to obtain such further and other relief as the court may deem

appropriate.

(b) NOTICE.—The State shall serve prior written notice of any

civil action under subsection (a) or (f)(2) upon the Commission

and provide the Commission with a copy of its complaint, except

that if it is not feasible for the State to provide such prior notice,

the State shall serve such notice immediately upon instituting

such action. Upon receiving a notice respecting a civil action, the

Commission shall have the right (1) to intervene in such action,

(2) upon so intervening, to be heard on all matters arising therein,

and (3) to file petitions for appeal.

(c) CONSTRUCTION.—For purposes of bringing any civil action

under subsection (a), nothing in this Act shall prevent an attorney

general from exercising the powers conferred on the attorney general by the laws of such State to conduct investigations or to

administer oaths or affirmations or to compel the attendance of

witnesses or the production of documentary and other evidence.

(d) ACTIONS BY THE COMMISSION.—Whenever a civil action has

been instituted by or on behalf of the Commission for violation

of any rule prescribed under section 3, no State may, during the

pendency of such action instituted by or on behalf of the Commission, institute a civil action under subsection (a) or (f)(2) against

any defendant named in the complaint in such action for violation

of any rule as alleged in such complaint.

(e) VENUE; SERVICE OF PROCESS.—Any civil action brought

under subsection (a) in a district court of the United States may

be brought in the district in which the defendant is found, is

an inhabitant, or transacts business or wherever venue is proper

under section 1391 of title 28, United States Code. Process in

such an action may be served in any district in which the defendant

is an inhabitant or in which the defendant may be found.

(f) ACTIONS BY OTHER STATE OFFICIALS.—

(1) Nothing contained in this section shall prohibit an

authorized State official from proceeding in State court on

the basis of an alleged violation of any civil or criminal statute

of such State.

(2) In addition to actions brought by an attorney general

of a State under subsection (a), such an action may be brought

by officers of such State who are authorized by the State

to bring actions in such State on behalf of its residents.
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SEC. 5. ACTIONS BY PRIVATE PERSONS.

(a) IN GENERAL.—Any person adversely affected by any pattern

or practice of telemarketing which violates any rule of the Commission under section 3, or an authorized person acting on such person’s

behalf, may, within 3 years after discovery of the violation, bring

a civil action in an appropriate district court of the United States

against a person who has engaged or is engaging in such pattern

or practice of telemarketing if the amount in controversy exceeds

the sum or value of $50,000 in actual damages for each person

adversely affected by such telemarketing. Such an action may be

brought to enjoin such telemarketing, to enforce compliance with

any rule of the Commission under section 3, to obtain damages,

or to obtain such further and other relief as the court may deem

appropriate.

(b) NOTICE.—The plaintiff shall serve prior written notice of

the action upon the Commission and provide the Commission with

a copy of its complaint, except in any case where such prior notice

is not feasible, in which case the person shall serve such notice

immediately upon instituting such action. The Commission shall

have the right (A) to intervene in the action, (B) upon so intervening,

to be heard on all matters arising therein, and (C) to file petitions

for appeal.

(c) ACTION BY THE COMMISSION.—Whenever a civil action has

been instituted by or on behalf of the Commission for violation

of any rule prescribed under section 3, no person may, during

the pendency of such action instituted by or on behalf of the

Commission, institute a civil action against any defendant named

in the complaint in such action for violation of any rule as alleged

in such complaint.

(d) COST AND FEES.—The court, in issuing any final order

in any action brought under subsection (a), may award costs of

suit and reasonable fees for attorneys and expert witnesses to

the prevailing party.

(e) CONSTRUCTION.—Nothing in this section shall restrict any

right which any person may have under any statute or common

law.

(f) VENUE; SERVICE OF PROCESS.—Any civil action brought

under subsection (a) in a district court of the United States may

be brought in the district in which the defendant is found, is

an inhabitant, or transacts business or wherever venue is proper

under section 1391 of title 28, United States Code. Process in

such an action may be served in any district in which the defendant

is an inhabitant or in which the defendant may be found.

SEC. 6. ADMINISTRATION AND APPLICABILITY OF ACT.

(a) IN GENERAL.—Except as otherwise provided in sections 3(d),

3(e), 4, and 5, this Act shall be enforced by the Commission under

the Federal Trade Commission Act (15 U.S.C. 41 et seq.). Consequently, no activity which is outside the jurisdiction of that Act

shall be affected by this Act.

(b) ACTIONS BY THE COMMISSION.—The Commission shall prevent any person from violating a rule of the Commission under

section 3 in the same manner, by the same means, and with

the same jurisdiction, powers, and duties as though all applicable

terms and provisions of the Federal Trade Commission Act (15

U.S.C. 41 et seq.) were incorporated into and made a part of

this Act. Any person who violates such rule shall be subject to
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the penalties and entitled to the privileges and immunities provided

in the Federal Trade Commission Act in the same manner, by

the same means, and with the same jurisdiction, power, and duties

as though all applicable terms and provisions of the Federal Trade

Commission Act were incorporated into and made a part of this

Act.

(c) EFFECT ON OTHER LAWS.—Nothing contained in this Act

shall be construed to limit the authority of the Commission under

any other provision of law.

SEC. 7. DEFINITIONS.

For purposes of this Act:

(1) The term ‘‘attorney general’’ means the chief legal officer

of a State.

(2) The term ‘‘Commission’’ means the Federal Trade

Commission.

(3) The term ‘‘State’’ means any State of the United States,

the District of Columbia, Puerto Rico, the Northern Mariana

Islands, and any territory or possession of the United States.

(4) The term ‘‘telemarketing’’ means a plan, program, or

campaign which is conducted to induce purchases of goods

or services by use of one or more telephones and which involves

more than one interstate telephone call. The term does not

include the solicitation of sales through the mailing of a catalog

which—

(A) contains a written description, or illustration of

the goods or services offered for sale,

(B) includes the business address of the seller,

(C) includes multiple pages of written material or illustrations, and

(D) has been issued not less frequently than once a

year,

where the person making the solicitation does not solicit customers by telephone but only receives calls initiated by customers in response to the catalog and during those calls takes

orders only without further solicitation.

SEC. 8. FALSE ADVERTISEMENTS CONCERNING SERVICES.

Section 12(a) of the Federal Trade Commission Act (15 U.S.C.

52(a)) is amended by inserting ‘‘services,’’ immediately after

‘‘devices,’’ each place it appears.

SEC. 9. ENFORCEMENT OF ORDERS.

(a) GENERAL AUTHORITY.—Subject to subsections (b) and (c),

the Federal Trade Commission may bring a criminal contempt

action for violations of orders of the Commission obtained in cases

brought under section 13(b) of the Federal Trade Commission Act

(15 U.S.C. 53(b)).

(b) APPOINTMENT.—An action authorized by subsection (a) may

be brought by the Federal Trade Commission only after, and pursuant to, the appointment by the Attorney General of an attorney

employed by the Commission, as a special assistant United States

Attorney.

(c) REQUEST FOR APPOINTMENT.—

(1) APPOINTMENT UPON REQUEST OR MOTION.—A special

assistant United States Attorney may be appointed under subsection (b) upon the request of the Federal Trade Commission
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or the court which has entered the order for which contempt

is sought or upon the Attorney General’s own motion.

(2) TIMING.—The Attorney General shall act upon any

request made under paragraph (1) within 45 days of the receipt

of the request.

(d) TERMINATION OF AUTHORITY.—The authority of the Federal

Trade Commission to bring a criminal contempt action under subsection (a) expires 2 years after the date of the first promulgation

of rules under section 3. The expiration of such authority shall

have no effect on an action brought before the expiration date.

SEC. 10. REVIEW.

Upon the expiration of 5 years following the date of the first

promulgation of rules under section 3, the Commission shall review

the implementation of this Act and its effect on deceptive

telemarketing acts or practices and report the results of the review

to the Congress.

Speaker of the House of Representatives.

Vice President of the United States and

President of the Senate.