BILL ANALYSIS SB 771 Page 1 Date of Hearing: August 21, 2001 ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS Lou Correa, Chair SB 771 (Figueroa) - As Amended: August 20, 2001 (As Proposed to be Amended) SENATE VOTE (vote not relevant) SUBJECT : Unsolicited and unwanted telephone calls. SUMMARY : Establishes a "do not call" list for residential and wireless telephone subscribers who do not want to receive unsolicited telephone solicitations, and prohibits telephone solicitors from calling subscribers who are currently on the "do not call" list. Specifically, this bill : 1)Requires the Department of Consumer Affairs (DCA) to maintain a "do not call" list containing all of the telephone numbers of residential and wireless telephone subscribers (excluding their names and addresses) who do not want to receive unsolicited telephone calls. 2)Requires DCA to update the "do not call" list on a quarterly basis. 3)Defines "telephone solicitor" to mean any person or entity who on his or her own behalf or through salespersons, agents, or automatic dialing announcement devices, makes any of the specified types of solicitations (e.g., sales of consumer goods or services, extensions of credit, etc.). This definition does not include or apply to charitable or political calls. 4)Permits solicitors to obtain copies of the "do not call" list by paying a fee to DCA in an amount not to exceed the costs for preparation, production, and distribution of the list. Also, creates a special Telephone Solicitors Fund that will be subject to annual appropriation in the Budget Act. 5)Prohibits solicitors from calling any telephone number on the current "do not call" list to do any of the following: SB 771 Page 2 a) Seek to rent, sell, exchange, promote, gift, or lease goods or services or documents that can be used to obtain goods or services. a) Offer or solicit or seek to offer or solicit any extension of credit for personal, family, or household purposes. a) Seek marketing information that will or may be used for the direct solicitation of a sale of goods or services to the subscriber. a) Seek to sell or promote any investment, insurance, or financial services. 1)Prohibits entities that rent, sell, exchange, promote, gift, or lease telephone solicitation lists from including telephone numbers that appear in the current DCA "do not call" list, and prohibits solicitors from making telephone solicitations to people on the list. 2)Allows subscribers who place their names on the "do not call" list to exclude from its coverage any calls from entities identified by the subscriber in the manner prescribed by DCA. 3)Allows any business to make telephone solicitations notwithstanding a subscriber's placement on the "do not call" list, as long as the solicitor contacts the subscriber by mail to obtain written permission allowing the solicitor to make future calls. Also specifies that in any dispute regarding the written permission by a subscriber, the burden of proof will be on the solicitor to produce the original document signed by the subscriber. 4)Specifies that the solicitor has an affirmative defense regarding any inadvertent calls. The solicitor must prove that the call was accidental and that "do not call" polices were in place at the time of the call, and prove that the telemarketer received prior training and instruction regarding "do not call" policies before the inadvertent call occurred. 5)Explicitly exempts telephone solicitations that are made: SB 771 Page 3 a) In response to a subscriber's express request or in response to a subscriber's advertisement. a) In connection with the collection of a lawful debt or the offer by a creditor of an extension of credit to pay a delinquent obligation owed by the subscriber to that creditor. a) By a business that a subscriber has specifically excluded from the coverage of the "do not call" list. a) To nonprofit entities that have established a relationship by means of previous donations, participation or attendance at events held by the nonprofit. a) By a business that, under specified conditions, has an "established business relationship" with the subscriber. 1)Specifies that an "established business relationship" means a relationship by a voluntary, two way communication between a solicitor and a subscriber, with or without an exchange of consideration, on the basis of an application, purchase, rental, lease or transaction, where the relationship has not been terminated by the subscriber or the business. 2)Specifies that when a subscriber purchases products or services through a licensed agent or broker, an established business relationship is created with the licensed agent or broker individually, apart from and in addition to any established business relationship that may have been created by a licensed agent or broker acting on behalf of another entity. 3)Subjects violations to possible legal action as an unfair business practice, and gives subscribers who receive a prohibited solicitation the right to bring a civil action to obtain an injunction, civil penalties ($500 first offense, $1000 for subsequent offenses), court costs, attorney's fees, and any other relief a court deems appropriate. EXISTING LAW : SB 771 Page 4 1)Provides for the regulation of advertising practices, including false or misleading advertisements. 2)Provides for the regulation and registration of "telemarketers" who make specified types of phone solicitations, and provides exemptions to this telemarketing law for certain types of businesses and solicitations. 3)Requires solicitors to have standard procedures in place for "do not call" requests from subscribers who have indicated that they do not want to receive any additional telephone solicitations (federal Telephone Consumer Protection Act (TCPA) of 1991). 4)Prohibits the use of automatic telephone dialing systems to initiate certain types of calls, including calls to emergency numbers or residences, without the prior written consent of the party being called. FISCAL EFFECT : Unknown. The cost of establishing, maintaining, and updating the "do not call" list at DCA should be offset by revenue collected from telephone solicitors who must obtain the list. COMMENTS : Purpose of the bill . According to the author, this bill is intended to reduce unsolicited and unwanted telephone solicitations and give a telephone subscriber the option to request that a solicitor refrain from calling the subscriber. The bill allows subscribers to request to have their phone numbers placed on a "do not call" list. According to the author, the bill is modeled on other "do not call" programs existing in 24 other states. The states that currently have "do not call" programs are Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Kentucky, Louisiana, Maine, Missouri, Nebraska, New York, North Carolina, Oregon, Tennessee, Texas, Virginia and Wyoming. According to the author, this "opt out" bill will provide subscribers with greater privacy in their homes and on their cell phones from unwanted telephone solicitations. ("Opt-out" refers to the fact that telemarketers make SB 771 Page 5 unsolicited telemarketing calls to consumers, and the person being solicited must make an affirmative effort to "opt-out" of that norm in order to be covered by the proposed "do not call" prohibition against unsolicited telemarketing calls.) Support . Supporters argue that this bill will provide subscribers with the ability to maintain privacy in their homes. The California Constitution guarantees a right of privacy for every Californian and, at a minimum, subscribers should be able to control access to their home. Supporters point out that people with dementia and other incapacities are repeatedly solicited and lured into making purchases they cannot afford. Additionally, people that are handicapped or ill (e.g., people with arthritis or people being treated for cancer) with significant pain and difficulty must repeatedly answer their phones only to be subjected to an unwanted telephone solicitation. The author quotes letters describing the high number of calls some individuals are experiencing. For example, a subscriber being treated for cancer says she receives three or more unsolicited calls per night. Another elderly subscriber has phone records indicating that he has received about 360 unsolicited calls in a five-month period. The author states that the expansion of telemarketing is a result of increased sophistication in communication technology and the increased amount of highly specific profiled information that is available and easily accessible. This has resulted in an escalating number of consumer complaints regarding this type of marketing practice. Federal law gives subscribers, during a telephone solicitation, the option to request that they be put on the solicitor's "do not call" list, which every telemarketing company is required to maintain. However, this option only takes place after the privacy of the home or cell phone has been invaded, and the law works only on an ad hoc, company-by-company basis. The author also believes that federal law is generally being ignored. An article in the SB 771 Page 6 industry's trade magazine, "Teleprofessional," describes a three-month investigation regarding the level of compliance with existing federal law that requires telemarketing companies, upon request, to provide a subscriber with a copy of their company's "do not call" policies. The investigation revealed that only 35 percent of the investigated companies were in compliance with federal requirements. Additionally, despite protestations to the contrary, some of the entities that were found to be out of compliance with federal requirements include prominent members of the American Telemarketing Association and the Direct Marketing Association (DMA). Likewise, the author states that while DMA has a "do not call" list, participation is voluntary for all telemarketers; hence, 24 other states have moved to enact "do not call" programs. According to Gryphon Networks, a company that implements federal and state "do not call" technologies for telemarketing companies, there is not one documented case regarding "do not call" enforcement under the federal Telephone Consumer Protection Act. However, the Federal Trade Commission (FTC) reported in 2000 that the single greatest volume of consumer complaints involved unwanted telephone solicitations in their homes. According to Gryphon Networks, telemarketing companies now are beginning to implement stricter business practices in order to comply with existing federal law, despite the fact that federal laws designed to regulate this type of activity have been in effect for more than ten years. They argue that fear of state enforcement is influencing telemarketing companies to comply with existing federal requirements. The author notes that business groups historically have advocated "opt-out" programs as the preferred means of addressing privacy concerns. Additionally, the author points out that people who subscribe to "do not call" programs are those who are most annoyed by such calls, and are the least likely to respond favorably to an unwanted telephone solicitation. Likewise, calls to people who are likely to sign up for the "do not call" list are the most likely to damage that caller's goodwill, both with that consumer and in his or her community. SB 771 Page 7 Finally, the author cites the public popularity of doing something to address what the author refers to as another form of "home invasion." The Attorney General was quoted last year as saying that the problem of unwanted telephone solicitations was the number one privacy concern of Californians. A recent San Diego Union Tribune article quotes a Pac Bell poll indicating that telemarketing calls are more unpopular than traffic jams and paying taxes. And in the February edition of the "AARP Bulletin," a Florida official states that "do not call" lists are one of the most popular consumer protection programs. Opposition . Various organizations have expressed concerns with specific provisions in the bill. In response, the author of the bill has made several amendments, including: adding an exemption for existing business relationships based on the language in other states' "do not call" programs; specifying that businesses have thirty-one days to implement the latest "do not call" list issued by DCA; providing for an affirmative defense for accidental violations of the law; permitting businesses to write to subscribers asking that they be allowed to call them again; permitting subscribers to exempt businesses when the subscriber signs up to be place on the "do not call" list. These amendments have eliminated or mitigated much of the opposition, but opposition continues to exist. Opponents generally argue that this bill: a) Unreasonably limits an important sales channel for businesses. a) Applies too broadly to businesses that are not responsible for the types of abuses being complained about and/or businesses that are already subject to state licensing regulation. a) Unreasonably penalizes a business for an inadvertent call. a) Lacks clarity regarding when names will be added to the "do not call" list. a) Creates confusion by establishing yet another state law that is different from that enacted in other SB 771 Page 8 states with which a marketer must comply, and adds another set of state fees to marketers' costs. Opponents further argue that the provisions in the bill are unnecessary because currently subscribers are able to restrict unwanted telemarketing calls by utilizing one of two existing methods. One method is that subscribers can have their name placed on the Direct Marketing Association's nationwide Telephone Preference List ("do not call" list) which is honored by DMA members as well as other businesses who subscribe to receive that list. Additionally, DMA does not charge the consumer to be placed on the list, and the list is updated on a quarterly basis. The second method, pursuant to federal law, requires a telemarketing company to maintain a "do not call" list, and at the request of a subscriber, the telemarketing company must place the subscriber's name on its "do not call" list. Once a subscriber's name is placed in the "do not call" list, the telemarketing company must refrain from calling the subscriber's telephone number unless the subscriber gives the solicitor written permission allowing future telephone calls. The California Association of Realtors (CAR) opposes the bill as being overly broad and inflexible because it would treat the occasional "cold call" by a licensed realtor the same as an unwanted solicitation from telemarketing boiler rooms. CAR argues that realtors are licensed and regulated by the state and should have their telemarketing practices regulated through their licensing law by the Department of Real Estate. The Association of California Insurance Companies (ACIC) reiterates CAR's arguments and asserts that licensed brokers, agents, and insurers should be exempt. REGISTERED SUPPORT / OPPOSITION : Support AARP AFL-CIO California Advocates for Nursing Home Reform (CANHR) California Attorney General California Conference Board of the Amalgamated Transit SB 771 Page 9 Union California Conference of Machinists California Teamsters Californians Against Telephone Solicitation (CATS) Congress of California Seniors Consumers Union Engineers & Scientists of California, Local 20 IFPTE, AFL-CIO Hotel Employees, Restaurant Employees International Union, AFL-CIO Older Women's League of California Pacific Bell Privacy Rights Clearinghouse Region 8 States Council of the United Food & Commercial Workers (UFCW) Opposition Alliance of American Insurers Association of California Insurance Companies (ACIC) California Association of Realtors (CAR) California Newspaper Publishers Association (CNPA) MCI WorldCom Pacific West Association of Realtors Personal Insurance Federation of California Analysis Prepared by : Chris L. Gallardo / B. & P. / (916) 319-3301