Analysis

Topic: Telemarketing
Sponsor: Representative Faunce
Committee: Second Conference Committee
Date Introduced: January 25, 2001
Date of Analysis: February 5, 2002

Position: The Department of Consumer and Industry Services supports amended version (S-8), as passed by the Senate.

Background: Many people feel their rights to privacy and freedom from unsolicited telephone intrusions into their homes are not adequately protected. Loopholes in state and federal law only add to the problem. Further, with the advent of automatic dialing devices and the trend toward deregulation, the result has been a flood of aggressive telemarketing calls that many residential telephone customers deeply resent.

In response to the increase in unwanted and intrusive commercial telephone calls, 24 states have implemented state "do-not-call" lists. Residential customers in those states seeking to eliminate nuisance calls by telemarketers can have their names added to a "do-not-call" list either for free or for a nominal fee (typically, $5-$15).

The original bill, as passed by the House on June 14, 2001, made the Michigan Public Service Commission responsible for developing and maintaining such a list. The amended version of the bill, as passed by the Senate on December 13, 2001, shifts the onus to provide a do-not-call list away from the MPSC and squarely onto the shoulders of the telemarketing solicitors.

Description of Bill: HB 4042 proposes to amend the Home Solicitation Act to add new provisions regulating telemarketing activities by requiring telephone solicitors to provide certain information about themselves and the companies for which they work. The bill would also prohibit telephone solicitors and persons or organizations on whose behalf calls are made from engaging in certain acts and practices, including:

- Making telephone solicitations to a consumer who has requested that s/he not receive such calls.
- Failing to maintain a list of names/phone numbers of consumers making requests not to be called.
- Misrepresenting or failing to disclose certain terms of a sale, providing false or misleading statements, and offering a prize promotion in which a purchase or payment is necessary to obtain the prize.

Violations of these provisions would be punishable by imprisonment for up to six months or a fine of up to $500, or both. Persons suffering a loss would be allowed to recover actual damages or $250, whichever is greater, together with reasonable attorney fees.

Secondly, the bill would require publishers of telephone directories that include residential phone numbers to include a notice describing how a residential telephone subscriber could enroll in a do-not-call list with an organization or other person. It also requires residential telecommunication providers to include information on subscribing to "do-not-call" lists with each phone bill.

Lastly, sections 1(m), 1E, and 3(5) of the bill exempt various categories of organizations from the provisions.

Arguments For: The purpose of the bill is to provide residential telephone customers with relief from unwanted and intrusive telephone solicitations. The provisions of the bill protect consumers against unwanted telephone solicitations by providing them information on how to add their name to a "do-not-call" list.

The bill requires the telephone solicitor organizations to keep such a list, and penalizes them for failure to maintain and honor such a list. The bill also requires the telephone solicitor to provide accurate and complete information to the residential telephone subscriber regarding the telephone solicitor's name, represented organization, etc. Finally, the bill establishes penalties for telephone solicitors who engage in specified unfair or deceptive acts.

Sections 1(m), 1E, and 3(5) of the amended bill exempt various categories of organizations from the bills's provisions, namely voice communications to residential subscribers by:

• a real estate broker or salesperson licensed by MDCIS, if that person uses telephone equipment that displays the phone number of the caller of any residential telephone subscriber with caller ID.
• a health care provider who provides/provided care to an individual at that telephone number.
• an insurance agent licensed by MDCIS, the Office of Financial and Insurance Services in connection with a sale or offer for sale of insurance.
• persons subject to the Charitable Organizations and Solicitations Act (MCL 400.271).
• persons subject to the Public Safety Solicitation Act (MCL 14.301)
• persons subject to the Internal Revenue Code of 1986.

Without the amendatory language provided for in the substitute bill (S-8), the bill could be, in some cases, in conflict with (or duplicate) existing statutes.

Arguments Against: Although the public may resent the intrusion of unwanted telephone calls into their dinner hour, telemarketing is a multi-billion dollar industry. The bill imposes unreasonable and unnecessary burdens on telemarketers, telecommunication providers, and telephone directory publishers. The amended version of the bill which passed the Senate (S-8) shifts the onus to maintain lists away from a state department/bureau and onto the telemarketers themselves. Telecommunications providers will also bear the cost of publishing and distributing information with their bills, and the telephone directory publishers will also bear the cost of publishing information on their bills.

Supporters:
• The AARP supports the bill package, in general.
• The Michigan Consumer Federation supports a state-owned do-not-call list, but not a list owned and operated by a private lobbying and trade association.
• The Department of Consumer and Industry Services supports the version passed by the Senate (S-8). The Senate adopted a floor amendment to exempt insurance agents from regulation under the bill. This provision is extremely important, because the Office of Finance and Insurance Services already regulates the activities of insurance agents and they are not elsewhere exempt in the bill. Further, the Senate version of the bill does not include the Public Service Commission in development of a do-not-call list, as such a list would have required additional resources and a budget to maintain it. Additionally, the final version should continue to exempt telephone solicitation sales made pursuant to the MTA or that fall under Commission slamming rules. Without the exemption under (S-8), as spelled out in Section 3(5), Competitive Local Exchange Carriers could be faced with higher costs and delays in customer enrollment.

Opponents: The Direct Marketing Association opposes the bill package (HB's 4042, 4154, 4250, 4631, and 4632).

Fiscal Information: Since the Senate (S-8) version of HB 4042 does not establish any new requirements on public sector entities, there would be no fiscal impact on the Department of Consumer and Industry Services.

Economic Impact: The bill imposes financial burdens on telemarketers, telecommunication providers, and telephone directory publishers. The amended version of the bill which passed the Senate (S-8) shifts the onus to maintain lists away from a state department/bureau and onto the telemarketers themselves.

Telecommunications providers will also bear the cost of publishing information on their bills, and telephone directory publishers will bear the cost of publishing information on their bills. Arguably, these costs could be passed on to the consumer in the form of higher service fees (i.e. the cost of printing and distributing information with telephone bills). Telephone directory publishers would likely recoup their costs by increasing advertising fees, however these costs are expected to be minimal.

Administrative Rules Impact: There is no impact on administrative rules.