Analysis

Topic: State “Do Not Call” List
Sponsor: Representative Faunce
Date Introduced: January 25, 2001
Date Enrolled: December 5, 2002
Date of Analysis: December 13, 2002

Position: The Department of Consumer and Industry Services does not support the creation of a state do-not-call list.

Bill Content: The bill amends the Home Solicitation Sales Act by adding telephone solicitation sales to the scope of the act. The bill requires the Public Service Commission to do one of two things within 120 days after the effective date of the bill.

· Establish a Do-Not-Call List; or
· Designate a vendor to maintain a Do-Not-Call List. Vendor is defined as a person designated by the Commission to maintain a Do-Not-Call List and may include a governmental entity.

The bill authorizes the Commission to establish and collect fees for either or both of the following:

· Fees charged to telephone solicitors for access to the list. The Commission would determine the amount of the fees.
· Fees charged to residential telephone subscribers for inclusion on the list. The Commission would determine the amount of the fees, but the fee may not exceed more than $5 for a 3-year period.

Fees charged by a vendor selected to maintain the list fall into two categories:

· Fees charged by the vendor to telephone solicitors for access to the list.
· Fees charged by the vendor to residential telephone subscribers. The fee is limited to no more than $5 for a 3-year period.

If the Commission elects to create and maintain a list, it is required to maintain the list for at least one year. After one year, the Commission may at any time elect to designate a vendor to maintain a list.

The bill creates two funds within the State Treasury.

· The Do-Not-Call List Fund to cover the administrative costs associated with the list. Money in the fund may not be appropriated to compensate or reimburse a vendor designated by the Commission to maintain a list.
· The Designee Do-Not-Call List Fund is created. Money received from fees charged by vendors is to be credited to the fund and is to be paid to the vendor to cover the costs of administering the Do-Not-Call List.

The Commission has the option to designate a vendor to maintain the list. It may do so in the first instance or, alternatively, after maintaining its own list for at least one year, the Commission may designate a vendor. When designating a vendor, all of the following apply:

· The Commission is required to establish a procedure for submission of bids by vendors; and
· The Commission is required to establish a procedure for selection of the vendor, or it may follow existing procedure.

The Commission is required to consider at least the following factors in the selection of a vendor:

· The cost of obtaining and the accessibility and frequency of publication of the list.
· The cost and ease of registration for consumers.

The Commission may review its designation and make a different designation if it is determined that another person would be better than the designated vendor in meeting the selection factors or if the designated vendor engages in activities the Commission considers contrary to the public interest.

If the Commission does not establish a Do-Not-Call list, it is required to comply with the designation requirements for at least one year. After one year the Commission may elect to establish and maintain its own list.

A vendor designated by the Commission is not an agent of the Commission unless the vendor is a governmental entity. A written contract is required between the Commission and the designated vendor. State funds may not be used to compensate or reimburse a vendor designated under this subdivision. The vendor may receive compensation or reimbursement for maintaining a list by charging fees to telephone solicitors for access to the list and by charging residential telephone subscribers a fee or not more than $5 for a 3-year period.

In determining whether to establish and maintain its own list or to designate a vendor the Commission is required to consider comments from consumers, telephone solicitors, or any other person submitted to the Commission.

The bill addresses the possibility that either the Federal Trade Commission or the Federal Communications Commission, or both, may create a list. The bill states that the Commission is required to designate the federal list as the state list within 120 days after the creation of the federal list.

Beginning 90 days after establishment of a list or the designation of a vendor to maintain a list, a telephone solicitor is prohibited from making a telephone solicitation to a residential telephone subscriber whose name is on the current version of the list. The list may only be used for purposes related to the bill.

The bill establishes a code of conduct for telephone solicitation. At the beginning of the conversation a person making a telephone solicitation is required to give his name and number, the full name of the organization or other person on whose behalf the call is being initiated, and provide a telephone number of the organization or other person upon request. A natural person (e.g. not an answering machine) must be available to answer the telephone number at any time when solicitations are being made. The person answering the telephone at the organization or other person on whose behalf the solicitation is being made is required to provide information describing the organization or other person to callers.

A telephone solicitor is prohibited from intentionally blocking or otherwise interfering with the Caller ID function.

The bill prohibits a number of unfair or deceptive acts:

· Misrepresentation or failure to disclose, in a clear, conspicuous, and intelligible manner and before payment is received from the consumer certain information, including total purchase price; restrictions, limitations, or conditions to purchase or use the goods or services; material terms or conditions relating to refund, cancellation or exchange; material costs or conditions related to receiving a prize; any material aspect of an investment opportunity; the quantity and material aspect of the quality or basic characteristics of goods or services offered; and the right to cancel a sale, if any.
· Misrepresentation of any material aspect of the quality or basic characteristics of the goods or services offered;
· Making a false or misleading statement with the purpose of inducing a consumer to pay for goods or services;
· Requesting or accepting payment from a consumer or making or submitting any charge to the consumer credit or bank account before receiving express verifiable authorization.
· Making a telephone solicitation to a consumer who has requested that he or she not receive calls from the organization or person on whose behalf the solicitation is being made. Each organization or person is required to record requests from consumers that they not receive calls from that organization or person and to maintain a list of their names and telephone numbers. The list may not be sell or transfer the list to any other organization or person, including an affiliate, for any other purpose.

Violation of the bill’s requirements is defined as a misdemeanor punishable by imprisonment for not more than 6 months or a fine of not more than $500, or both. A person who suffers loss as a result of a violation may bring an action to recover actual damages or $250, whichever is greater. The person may also recover reasonable attorney fees. The bill clarifies that a person is not prevented by the bill’s provisions from being charged with, convicted of, or punished for any other crime arising out of the transaction. The bill also clarifies that a consumer is not prohibited from asserting his or her rights if the solicitation results in a sale or asserting rights or claims under other applicable state or federal laws. The penalties provided in the bill take effect 210 days after the effective date of the provisions.

Telephone directories containing residential telephone numbers are required to include a notice describing how subscribers may enroll on a Do-Not-Call list with an organization or other person. Residential telephone service providers are also required to provide a similar notice to their subscribers. The notice must also describe how to enroll on any national registry established by the Federal Communications Commission or any other federal agency. These requirements take effect 210 days after the effective date of the bill.

The bill provides a limited number of exemptions from certain sections of the bill. Those exempt are those subject to the Charitable Organizations and Solicitations Act, the Public Safety Solicitation Act, and Section 527 of the Internal Revenue Code (political organizations). The person claiming an exemption has the burden of proving an exemption. The definitions section of the bill provides a potentially significant exemption by excluding certain calls from “telephone solicitation”, including a call in which the caller requests a meeting with the consumer to discuss a sale, rental, or investment.

An exemption to the requirements of Section 3 of the act that sellers obtain the buyer’s signature to written agreement in cases where Sections 505 to 507 of the Michigan Telecommunications Act apply. These sections relate to switching telephone providers.

Arguments For: Telemarketing calls are more than a nuisance. In addition to the annoying interruptions of dinner time and personal lives, millions of consumers lose money through telemarketing scams. Telemarketing fraud is a $40 billion industry, according to the American Association of Retired Persons. Technology (e.g. automated dialing) has spurred the growth of the telemarketing industry and consumer calls have increased dramatically. Technology has also permitted telemarketers to block Caller ID used by many consumers to screen calls. Current laws regulating telemarketing are ineffective due to extensive loopholes and lack of enforcement. The national list currently maintained by the Direct Marketing Association is insufficient protection for consumers, because participation by business is voluntary.

Twenty-seven states have now established do-not-call lists. Such lists have been very popular. In Minnesota 189,339 residential phone customers signed up on the first day. Pennsylvania signed up 206,000 people in one day. Missouri signed up 570,000 people within six months. The response was so great in Connecticut that the state’s toll-free telephone lines reportedly crashed twice.

Arguments Against: A state Do-Not-Call List will be ineffective in dealing with the telemarketing issue. Consumers will continue to receive a significant number of calls from exempt organizations whether they are listed on the state list or not. Furthermore, it is questionable whether out-of-state telemarketers are required to comply with a state list. A national list is really essential. Although voluntary, the list maintained by the Direct Marketing Association is quite effective. Most of the large telemarketers are members of the DMA and they do comply with the DMA’s list. Also, the federal government is moving quite quickly toward a federal list. Both the Federal Trade Commission and the Federal Communications Commission are studying the issue. The State of California recently postponed implementation of its own Do-Not-Call list in the hope that a federal list would be created.

Creating a state Do-Not-Call list in Michigan could subject Michigan citizens to the latest telemarketing scam. Rip-off artists have begun taking advantage of the popularity of do-not-call lists by claiming to represent one of these lists. The phony official asks the consumer for personal information to verify that the consumer wants to be on the list. Once the con artist has the personal information it is of course used to run up debts in the name of the consumer. In a related scam the caller identifies himself or herself as representing a “verification” agency which for $399 will make sure that a person’s name is definitely on the "do not call" list. Of course, the $399 is charged to the consumer’s credit card, which is then used for other purchases by the caller.

The Public Service Commission is concerned that the possibility that a federal list may be created will make it difficult for the Commission to attract bidders interested in maintaining the list required by the bill.

Supporters/Opponents: The American Association of Retired Persons and the Michigan Consumer Federation reportedly support the bill. The House analysis of an earlier version of the bill lists the National Federation of Independent Business—Michigan and the Direct Marketing Association as opposing the bills. Opposition from bankers, realtors, insurance agents, and some locally-based business groups was reportedly addressed in the conference report language exempting calls requesting a meeting for the purpose of discussing a sale.

Fiscal Impact: Creation of such a list could have a significant impact on the state. If the state creates its own list, significant upgrades to the state’s telephone system would be required to handle the huge number of calls that can be expected. Although fees would pay for the costs of maintaining the list, enforcement costs would impose additional costs on the Public Service Commission and the Attorney General. In Missouri, the Attorney General reportedly received 50 complaints a day initially and assigned 38 of his 200 attorneys to investigate the cases.