BILL ANALYSIS                                                                                                                                                                                                    



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          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:









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             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:








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             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  :









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          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  








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          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  








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          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. 









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          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  








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               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  








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          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