IIA

103D CONGRESS

1ST SESSION H. R. 868

IN THE SENATE OF THE UNITED STATES

MARCH 3, 1993

Received; read twice and referred to the Committee on Commerce, Science,

and Transportation

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.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Consumer Protection

5 Telemarketing Act’’.

6 SEC. 2. FINDINGS.

7 The Congress makes the following findings:
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1 (1) Telemarketing differs from other sales ac2 tivities in that it can be carried out by sellers across

3 State lines without direct contact. Telemarketers can

4 also be very mobile, easily moving from State to

5 State.

6 (2) Interstate telemarketing fraud has become a

7 problem of such magnitude that the resources of the

8 Federal Trade Commission are not sufficient to in9 sure adequate consumer protection from such fraud.

10 (3) Consumers and others are estimated to lose

11 $10,000,000,000 a year in telemarketing fraud.

12 (4) Consumers are victimized by other forms of

13 telemarketing deception and abuse.

14 (5) Consequently, Congress should enact legis15 lation that will offer consumers necessary protection

16 from telemarketing deception (including fraud) and

17 abuse.

18 SEC. 3. TELEMARKETING RULES.

19 (a) IN GENERAL.—

20 (1) The Commission shall prescribe rules pro21 hibiting deceptive (including fraudulent)

22 telemarketing activities and other abusive

23 telemarketing activities.

24 (2) The Commission shall include in such rules

25 respecting deceptive telemarketing activities—
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1 (A) a definition of deceptive telemarketing

2 activities, and

3 (B) criteria that are symptomatic of decep4 tive telemarketing as distinguished from ordi5 nary telemarketing business practices.

6 (3) The Commission shall include in such rules

7 respecting other abusive telemarketing activities a

8 requirement that telemarketers may not undertake a

9 pattern of unsolicited telephone calls which the rea10 sonable consumer would consider coercive or abusive

11 of such consumer’s right to privacy. In prescribing

12 the rules described in this paragraph, the Commis13 sion shall consider—

14 (A) including a requirement that goods or

15 services offered by telemarketing be shipped or

16 provided within a specified period and that if

17 the goods or services are not shipped or pro18 vided within such period, a refund be required,

19 and

20 (B) including, where practicable, authority

21 for a person who orders a good or service

22 through telemarketing to cancel the order with23 in a specified period.

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

2 under subsection (a) within 270 days after the date

3 of enactment of this Act. Such rules shall be pre4 scribed in accordance with section 553 of title 5,

5 United States Code.

6 (2) A rule issued under subsection (a) shall be

7 considered a rule issued under section 18(a)(1)(B)

8 of the Federal Trade Commission Act.

9 (c) ENFORCEMENT.—Any violation of any rule pre10 scribed under subsection (a) shall be treated as a violation

11 of a rule under section 5 of the Federal Trade Commission

12 Act (15 U.S.C. 45) regarding unfair or deceptive acts or

13 practices.

14 (d) SECURITIES AND EXCHANGE COMMISSION

15 RULES.—

16 (1) PROMULGATION.—

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

18 subparagraph (B), not later than 6 months

19 after the effective date of rules promulgated by

20 the Commission under subsection (a), the Secu21 rities and Exchange Commission shall promul22 gate, or require any national securities ex23 change or registered securities association to

24 promulgate, rules substantially similar to such

25 rules to prohibit deceptive and other abusive
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1 telemarketing activities by persons described in

2 paragraph (2).

3 (B) EXCEPTION.—The Securities and Ex4 change Commission is not required to promul5 gate a rule under subparagraph (A) if it deter6 mines that—

7 (i) Federal securities laws or rules

8 adopted by the Securities and Exchange

9 Commission thereunder provide protection

10 from deceptive and other abusive

11 telemarketing by persons described in

12 paragraph (2) substantially similar to that

13 provided by rules promulgated by the Com14 mission under subsection (a); or

15 (ii) such a rule promulgated by the

16 Securities and Exchange Commission is

17 not necessary or appropriate in the public

18 interest, or for the protection of investors,

19 or would be inconsistent with the mainte20 nance of fair and orderly markets.

21 If the Securities and Exchange Commission de22 termines that an exception described in clause

23 (i) or (ii) applies, the Securities and Exchange

24 Commission shall publish in the Federal Reg25 ister its determination with the reasons for it.
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1 (2) APPLICATION.—

2 (A) IN GENERAL.—The rules promulgated

3 by the Securities and Exchange Commission

4 under paragraph (1)(A) shall apply to a broker,

5 dealer, transfer agent, municipal securities deal6 er, municipal securities broker, government se7 curities broker, government securities dealer,

8 investment adviser or investment company, or

9 any individual associated with a broker, dealer,

10 transfer agent, municipal securities dealer, mu11 nicipal securities broker, government securities

12 broker, government securities dealer, invest13 ment adviser or investment company. The rules

14 promulgated by the Commission under sub15 section (a) shall not apply to persons described

16 in the preceding sentence.

17 (B) DEFINITIONS.—For purposes of sub18 paragraph (A)—

19 (i) the terms ‘‘broker’’, ‘‘dealer’’,

20 ‘‘transfer agent’’, ‘‘municipal securities

21 dealer’’, ‘‘municipal securities broker’’,

22 ‘‘government securities broker’’, and ‘‘gov23 ernment securities dealer’’ have the mean24 ings given such terms by paragraphs (4),

25 (5), (25), (30), (31), (43), and (44) of sec-
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1 tion 3(a) of the Securities and Exchange

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

3 (25), (30), (31), (43), and (44));

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

5 the meaning given such term by section

6 202(a)(11) of the Investment Advisers Act

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

8 (iii) the term ‘‘investment company’’

9 has the meaning given such term by sec10 tion 3(a) of the Investment Company Act

11 of 1940 (15 U.S.C. 80a–3(a)).

12 (e) COMMODITY FUTURES TRADING COMMISSION

13 RULES.—

14 (1) APPLICATION.—The rules promulgated by

15 the Commission under subsection (a) shall not apply

16 to persons described in subsection (f)(1) of section

17 6 of the Commodity Exchange Act (7 U.S.C. 8, 9,

18 15, 13b, 9a).

19 (2) PROMULGATION.—Section 6 of the Com20 modity Exchange Act (7 U.S.C. 8, 9, 15, 13b, 9a)

21 is amended by adding at the end the following new

22 subsection:

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

24 than 6 months after the effective date of rules promul25 gated by the Federal Trade Commission under section
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1 3(a) of the Consumer Protection Telemarketing Act, the

2 Commission shall promulgate, or require each registered

3 futures association to promulgate, rules substantially simi4 lar to such rules to prohibit deceptive and other abusive

5 telemarketing activities by any person registered or ex6 empt from registration under this Act in connection with

7 such person’s business as a futures commission merchant,

8 introducing broker, commodity trading advisory, commod9 ity pool operator, leverage transaction merchant, floor

10 broker, or floor trader, or a person associated with any

11 such person.

12 ‘‘(2) The Commission is not required to promulgate

13 rules under paragraph (1) if it determines that—

14 ‘‘(A) rules adopted by the Commission under

15 this Act provide protection from deceptive and abu16 sive telemarketing by persons described under para17 graph (1) substantially similar to that provided by

18 rules promulgated by the Federal Trade Commission

19 under section 3(a) of the Consumer Protection

20 Telemarketing Act; or

21 ‘‘(B) such a rule promulgated by the Commis22 sion is not necessary or appropriate in the public in23 terest, or for the protection of customers in the fu24 tures and options markets, or would be inconsistent

25 with the maintenance of fair and orderly markets.
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1 If the Commission determines that an exception described

2 in subparagraph (A) or (B) applies, the Commission shall

3 publish in the Federal Register its determination with the

4 reasons for it.’’.

5 SEC. 4. ACTIONS BY STATES.

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

7 any State has reason to believe that the interests of the

8 residents of that State have been or are being threatened

9 or adversely affected because any person has engaged or

10 is engaging in a pattern or practice of telemarketing which

11 violates any rule of the Commission under section 3, the

12 State may bring a civil action on behalf of its residents

13 in an appropriate district court of the United States to

14 enjoin such telemarketing, to enforce compliance with such

15 rule of the Commission, to obtain damages, restitution, or

16 other compensation on behalf of residents of such State,

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

18 deem appropriate.

19 (b) NOTICE.—The State shall serve prior written no20 tice of any civil action under subsection (a) upon the Com21 mission and provide the Commission with a copy of its

22 complaint, except that if it is not feasible for the State

23 to provide such prior notice, the State shall serve such

24 notice immediately upon instituting such action. Upon re25 ceiving a notice respecting a civil action, the Commission
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1 shall have the right (1) to intervene in such action, (2)

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

3 therein, and (3) to file petitions for appeal.

4 (c) CONSTRUCTION.—For purposes of bringing any

5 civil action under subsection (a), nothing in this Act shall

6 prevent an attorney general from exercising the powers

7 conferred on the attorney general by the laws of such

8 State to conduct investigations or to administer oaths or

9 affirmations or to compel the attendance of witnesses or

10 the production of documentary and other evidence.

11 (d) ACTIONS BY THE COMMISSION.—Whenever the

12 Commission has instituted a civil action for violation of

13 any rule prescribed under section 3, no State may, during

14 the pendency of such action instituted by the Commission,

15 institute a civil action under subsection (a) against any

16 defendant named in the Commission’s complaint for acts

17 or omissions alleged in the complaint for violation of any

18 rule as alleged in the Commission’s complaint.

19 (e) ACTIONS BY OTHER STATE OFFICIALS.—

20 (1) Nothing contained in this section shall pro21 hibit an authorized State official from proceeding in

22 State court on the basis of an alleged violation of

23 any civil or criminal statute of such State.

24 (2) In addition to actions brought by an attor25 ney general of a State under subsection (a), such an
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1 action may be brought by officers of such State who

2 are authorized by the State to bring actions in such

3 State for protection of consumers and who are des4 ignated by the Commission to bring an action under

5 subsection (a) against persons that the Commission

6 has determined have or are engaged in a pattern or

7 practice of telemarketing which violates a rule of the

8 Commission under section 3.

9 SEC. 5. ACTIONS BY PRIVATE PERSONS.

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

11 any pattern or practice of telemarketing which violates any

12 rule of the Commission under section 3 or an authorized

13 person acting on such person’s behalf may, within 3 years

14 after discovery of the violation, bring a civil action in an

15 appropriate district court of the United States against a

16 person who has engaged or is engaging in such pattern

17 or practice of telemarketing if the amount in controversy

18 exceeds the sum or value of $50,000 in actual damages

19 for each person adversely affected by such telemarketing.

20 Such an action may be brought to enjoin such

21 telemarketing, to enforce compliance with any rule of the

22 Commission under section 3, to obtain damages, or to ob23 tain such further and other relief as the court may deem

24 appropriate.
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1 (b) NOTICE.—The plaintiff shall serve prior written

2 notice of the action upon the Commission and provide the

3 Commission with a copy of its complaint, except in any

4 case where such prior notice is not feasible, in which case

5 the person shall serve such notice immediately upon insti6 tuting such action. The Commission shall have the right

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

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

9 petitions for appeal.

10 (c) ACTIONS BY THE COMMISSION.—Whenever the

11 Commission has instituted a civil action for violation of

12 any rule prescribed under section 3, no person may, dur13 ing the pendency of such action instituted by the Commis14 sion, subsequently institute a civil action against any de15 fendant named in the Commission’s complaint for viola16 tion of any rule as alleged in the Commission’s complaint.

17 (d) COSTS AND FEES.—The court, in issuing any

18 final order in any action brought under subsection (a),

19 may award costs of suit and reasonable fees for attorneys

20 and expert witnesses to the prevailing party.

21 (e) CONSTRUCTION.—Nothing in this section shall re22 strict any right which any person may have under any

23 statute or common law.
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1 SEC. 6. CLEARINGHOUSE.

2 (a) IN GENERAL.—The Commission shall establish a

3 clearinghouse for inquiries made to Federal agencies con4 cerning telemarketing. The clearinghouse will provide in5 formation (other than information which may not be dis6 closed under section 552(b) of title 5, United States Code,

7 or under regulations prescribed by the Commission to im8 plement such section) to anyone making inquiries respect9 ing persons engaged in telemarketing or direct such

10 inquiries to the appropriate Federal or State agency.

11 (b) LIABILITY FOR PROVIDING INFORMATION.—No

12 person who provides information to the clearinghouse es13 tablished under subsection (a) shall be liable for damages

14 for the provision of such information unless such person

15 provided such information knowing it to be false.

16 SEC. 7. ADMINISTRATION AND APPLICABILITY OF ACT.

17 (a) IN GENERAL.—Except as otherwise provided in

18 sections 3(d), 3(e), 4, and 5, this Act shall be enforced

19 by the Commission under the Federal Trade Commission

20 Act (15 U.S.C. 41 et seq.). Consequently, no activity

21 which is outside the jurisdiction of that Act shall be

22 affected by this Act.

23 (b) ACTIONS BY THE COMMISSION.—The Commis24 sion shall prevent any person from violating a rule of the

25 Commission under section 3 in the same manner, by the

26 same means, and with the same jurisdiction, powers, and
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1 duties as though all applicable terms and provisions of the

2 Federal Trade Commission Act (15 U.S.C. 41 et seq.)

3 were incorporated into and made a part of this Act. Any

4 person who violates such rule shall be subject to the pen5 alties and entitled to the privileges and immunities pro6 vided in the Federal Trade Commission Act in the same

7 manner, by the same means, and with the same jurisdic8 tion, power, and duties as though all applicable terms and

9 provisions of the Federal Trade Commission Act were

10 incorporated into and made a part of this Act.

11 SEC. 8. REVIEW.

12 Upon the expiration of 5 years following the date of

13 the enactment of this Act, the Commission shall review

14 its implementation of this Act and its effect on deceptive

15 telemarketing activities and report the results of the

16 review to the Congress.

17 SEC. 9. DEFINITIONS.

18 For purposes of this Act:

19 (1) The term ‘‘attorney general’’ means the

20 chief legal officer of a State.

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

22 Trade Commission.

23 (3) The term ‘‘State’’ means any State of the

24 United States, the District of Columbia, Puerto
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1 Rico, the Northern Mariana Islands, and any terri2 tory or possession of the United States.

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

4 program, or campaign which is conducted to induce

5 purchases of goods or services by significant use of

6 one or more telephones and which involves more

7 than one interstate telephone call. The term does not

8 include the solicitation of sales through the mailing

9 of a catalog which—

10 (A) contains a written description or illus11 tration of the goods or services offered for sale,

12 (B) includes the business address of the

13 seller,

14 (C) includes multiple pages of written ma15 terial or illustrations, and

16 (D) has been issued not less frequently

17 than once a year,

18 where the person making the solicitation does not

19 solicit customers by telephone but only receives calls

20 initiated by customers in response to the catalog and

21 during those calls takes orders only without further

22 solicitation.

Passed the House of Representatives March 2,

1993.

Attest: DONNALD K. ANDERSON,

Clerk.