BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
AB 792
Assemblymember Duvall
As Amended April 29, 2009
Hearing Date: June 16, 2009
Business and Professions Code
SK:jd
SUBJECT
Mailed Solicitations: Disclosures
DESCRIPTION
This bill would revise last year's AB 2059 (Nunez, Ch. 738,
Stats. 2008) which required that companies provide additional
disclosures when mailing solicitations that request a consumer
to consent to receive marketing information by telephone. This
bill would permit a company to include a space on the
solicitation for a consumer to provide his or her telephone
number.
BACKGROUND
Federal law provides for a nationwide "Do Not Call" registry in
which consumers may include their personal home and cellular
telephone numbers to reduce unsolicited and unwanted
telemarketing sales calls. There are several exceptions to the
law, including that contact is permitted when the company has an
established business relationship with the consumer, which can
be based on a consumer's inquiry or application regarding a
seller's goods or services.
After the registry went into effect, complaints arose that
companies were taking advantage of the established business
relationship exception by purchasing "lead cards" from marketing
firms in order to claim an established business relationship
with a consumer. The firms would send cards to consumers asking
them to return the card for more information about an issue such
as estate planning, insurance, or annuities.
(more)
AB 792 (Duvall)
Page 2 of ?
After the consumer returns the card, the marketing firm sells
the cards to companies related to the issues mentioned in the
cards. These companies then contact the consumers who returned
the card, using the established business relationship exception
to the "Do Not Call" registry. In response to complaints,
Attorneys General across the country including California,
Illinois, Minnesota, Pennsylvania, and Texas have taken action
against the lead generator companies, their affiliates, and
insurance companies that use lead generators.
Last year, the Legislature passed and the Governor signed AB
2059 which was intended to provide consumers with disclosure
protections in instances where companies use "lead cards." AB
2059 required that companies provide additional disclosures when
mailing solicitations that request a consumer to consent to
receive marketing information by telephone.
According to the author and sponsor, this bill, which would
permit a company to include a space on the solicitation for a
consumer to provide his or her telephone number, is intended to
codify "legislative intent" contained in a letter to the
Assembly Journal on AB 2059 (See Comment 2).
CHANGES TO EXISTING LAW
1. Existing federal law provides for a national "Do Not Call"
registry in which consumers, who do not wish to receive
telemarketing calls, may register their personal home and
cellular telephone numbers. The law provides for specified
exceptions including calls from companies with whom a consumer
has an existing business relationship. (Public Law 108-10
(2003); Telemarketing Sales Rule, 16 C.F.R. Part 310;
Telemarketing and Consumer Fraud and Abuse Prevention Act, 15
U.S.C. Section 6101 et seq.)
Existing state law regulates telephonic sellers and prohibits
telephone solicitors from calling any number on the "Do Not
Call" list and, among other things, seeking to sell or promote
any investment, insurance, or financial services unless the
telephone solicitor has an established business relationship
with the consumer. (Bus. & Prof. Code Secs. 17592(c) and
(e).)
Existing state law provides that a telephone solicitor may
contact a consumer whose phone number is listed on the "Do Not
Call" list to obtain the consumer's express written permission
AB 792 (Duvall)
Page 3 of ?
to permit the solicitor to market by telephone to the
consumer. In that case, the solicitor must include a clear
and conspicuous disclosure of all of the following:
a) identification of the name of the sender of the mailing and
of the entity that is
requesting permission to call;
b) the subscriber's telephone number to which the calls may
be placed;
c) the signature of the subscriber authorizing the call; and
d) notice that the subscriber may be contacted by a
telephone solicitor or someone
calling on behalf of the specific party identified in the
request for permission, even if the subscriber's telephone
number is listed on the federal "Do Not Call" registry.
(Bus. & Prof. Code Sec. 17592(f).)
This bill would provide that if the telephone solicitor does
not have the subscriber's telephone number, the solicitor may
comply with b) above by providing a space on the mail
solicitation for the subscriber to provide his or her
telephone number to the sender of the mailing rather than
including the subscriber's telephone number.
2. Existing law provides that-for consumers who have not placed
their telephone numbers on the "Do Not Call" list - a
solicitor must include the following clear and conspicuous
disclosure in a mailed solicitation that seeks to obtain the
consumer's consent to receive information via telephone:
a) identification of the name of the sender of the mailing and
of the entity that is
requesting permission to call;
b) the telephone number to which calls are to be placed; and
c) notice that the recipient my be contacted by a telephone
solicitor. (Bus. & Prof.
Code Sec. 17514.)
This bill would provide that the telephone solicitor may
comply with b) above by providing a space on the mail
solicitation for the consumer to provide his or her telephone
number to the sender of the mailing rather than including the
consumer's telephone number.
COMMENT
AB 792 (Duvall)
Page 4 of ?
1. Stated need for the bill
The author writes:
AB 792 codifies legislative intent language from last year's
AB 2059 (Nunez). It is intended to clarify how new disclosure
requirements are intended to apply to mailed solicitations
that follow telephone solicitations. This bill will allow
consumers to provide an accurate telephone number, when it is
not known by the entity sending a solicitation by mail. This
change will not remove any of the existing consumer protection
disclosures contained in B&P Section 17514 and 17592.
The sponsor of the measure, the Association of California Life
and Health Insurance Companies (ACLHIC), writes:
The simple change proposed by this bill is based on
legislative intent language that followed updates to this area
under AB 2059 last year. Companies that send a "reply if
interested" mailer want to comply with the new requirements of
the Business and Professions Code. This bill would simply
clarify that a space could be provided for a consumer's phone
number if it is not known by the sender of the mailing. If
the number is known, it must be included.
The "legislative intent" referred to by the author and sponsor
was contained in a letter to the Assembly Journal submitted on
August 15, 2008 by Asssemblymember Nunez at the time the
Assembly was considering his AB 2059 on concurrence. That
letter stated "In Section 1 of the bill a person would be
required in paragraph (a)(2) of Business and Professions Code
section 17514 to disclose the number to which calls are to be
placed. However, if the solicitor does not have the phone
number for the consumer a space should be provided on the mail
solicitation for the consumer to provide this information to the
sender of the mailing. By doing this, the sender of the mailing
would be in compliance with Business and Professions Code
section 17514." The letter also described Section 2 of the bill
which relates to consumers whose numbers are already listed on
the "Do Not Call" list, stating: "Section 2 of the bill
addresses a similar issue relative to consumers who are listed
on the federal ''Do Not Call'' registry in paragraph (f)(2)(B)
of Business and Professions Code section 17592. In order to
comply with this provision the mailed solicitation should list
the subscriber's telephone number which is listed on the federal
''Do Not Call'' registry. The sender of the mailing may also
AB 792 (Duvall)
Page 5 of ?
provide a space for the consumer to provide an alternate number
to be contacted to obtain additional information."
2. Use of lead cards as a marketing tool; abuses noted in the
press, Congressional testimony, and other states
An October 2007 Wall Street Journal article described the
marketing practices used by insurers and other companies based
on "lead cards." The article noted that "[s]ome cards gush
about sweepstakes prizes, and returns may be used by marketers
in any number of industries. But state regulators say the most
ubiquitous type of card is delivered to seniors on behalf of
insurers. Often plastered with American flags, such cards may
cite 'changes in your Medicare benefits' or mention 'new
legislation' passed by Congress . . . along with references to
research by federal agencies or AARP on how to handle such
changes." The article also stated:
When Naomi and Horace Williams got a postcard warning that
estates of older Americans could be wiped out by taxes unless
they moved quickly, they believed it came from AARP . . .
since it said that "AARP found" probate taxes were hurting
seniors. So the Williamses filled out a reply card that
promised more information and mailed it to a post-office box
in Washington, D.C. Soon after came a phone call from a man
saying he wanted to drop by their North Carolina home to
deliver the information they'd requested. It never occurred
to the Williamses -- who had registered on the Federal Trade
Commission's Do Not Call Registry -- that the caller was a
marketer. They assumed he was affiliated with AARP, they
say.
As it turned out, the actual sender of the card had been
America's Recommended Mailers Inc., a company housed in a
Lewisville, Texas, strip mall that provides leads to
insurance agents nationwide. Soon after they mailed the
reply, a living-trust marketer, and then an insurance agent,
showed up at the couple's Morganton, N.C., home . . . Mr.
Williams, an 83-year-old retired factory worker, says the
agent talked him into transferring much of the couple's
$179,000 nest egg into annuities that barred them from
tapping the bulk of their money, unless they paid high
penalties, until Mr. Williams was nearly 90.
AB 792 (Duvall)
Page 6 of ?
In another case, Mrs. Bloom, an 81-year-old retired
office-building cleaner, registered on the "Do Not Call" list,
received a lead card offering free information on estate
planning, which she sent back. Soon a salesperson for American
Family contacted Mrs. Bloom and convinced her to purchase a
living trust-aimed to save her the costs of probate-for $2,295,
about one-third of her savings. She lives on $900 a month from
Social Security and her estate is worth far less than $20,000,
for which the probate fee in her county is $250.
In testimony before the U.S. Senate Judiciary Committee in 2003,
James Huse, Inspector General of the Social Security
Administration, described scams perpetrated against seniors
which included the use of lead cards:
First, an individual in Texas was producing mass mailers
containing what are referred to as "lead cards" for the
insurance industry. These cards, enclosed in mailers that
advertise such products as private burial insurance, urge
seniors to fill out the card with their personal information
and return the card to the sender. We all receive junk mail,
and don't hesitate to throw it in the trash. But when the
recipient is a senior-and this individual targeted seniors-and
when the outside of the mailer contains the words "Social
Security Benefits Update," as these did, most seniors will
open the mailer. These mailers are designed to elicit a
belief that the recipient, by filling out the card with
sensitive personal data, will receive important information
about Social Security benefits. Instead, their information is
sold as an insurance lead to a private company, for purposes
of soliciting the sale of private insurance.
In San Antonio, another individual was running a company that
sent similar lead cards to seniors. The San Antonio mailers
depicted the company's logo-a stylized image of the U.S.
Capitol-and were otherwise designed to resemble official
government documents. On the back of many of the mailers were
listed the titles of a number of official Social Security
informational brochures that the company offered free of
charge. While the company alleged that this was a public
service, it was in fact a ruse intended to mislead seniors
into thinking that they were giving their personal information
to the SSA, not to a private lead card company.
In addition, as previously discussed, Attorneys General across
the country including California, Illinois, Minnesota,
AB 792 (Duvall)
Page 7 of ?
Pennsylvania, and Texas have taken action against the lead
generator companies, their affiliates, and insurance companies
that use lead generators. These actions were taken in response
to consumer complaints.
3. This bill would raise the possibility that consumers' "Do Not
Call" rights are waived more easily and more often
As a result of removing the requirement that a solicitor must
include the consumer's phone number on a lead card, this bill
would likely increase the use of those cards by allowing
solicitors to send cards to consumers for whom they do not have
a telephone number. Since, in many cases, solicitors will not
have a consumer's phone number, this bill would have the effect
of increasing the use of lead cards. Committee staff also notes
that examples of lead cards available for purchase online do
currently contain a blank space for the consumer's phone number,
suggesting that the model for the industry is a card with blank
spaces.
By increasing the number of consumers who may be sent lead
cards, the bill would also encourage companies to use those
cards for the purpose of targeted mailing campaigns. For
example, under the program offered by America's Recommended
Mailers, Inc. (ARM), the company mentioned in the above Wall
Street Journal article, an insurer or other business chooses the
demographics it wishes to target by using ARM's consumer data,
which it touts as "accurate and fresh." As a result of the
express statutory authorization in this bill, companies would be
able to target consumers and send them lead cards regardless of
whether the consumer's phone number is on file.
Accordingly, this bill would make it easier for companies to
engage in those marketing campaigns-and thus easier for
consumers' "Do Not Call" rights to be waived. It is a question
of public policy as to whether or not it is appropriate to allow
for the possibility that consumers' "Do Not Call" rights may be
waived more easily and more often.
IS IT APPROPRIATE TO ALLOW COMPANIES TO USE LEAD CARDS IN A WAY
THAT WOULD LIKELY RESULT IN THE INCREASED WAIVER OF CONSUMERS'
"DO NOT CALL" RIGHTS?
SHOULD THE USE OF LEAD CARDS BE INCREASED AS PROPOSED BY THIS
AB 792 (Duvall)
Page 8 of ?
BILL?
Support : None Known
Opposition : None Known
HISTORY
Source : Association of California Life and Health Insurance
Companies
Related Pending Legislation : None Known
Prior Legislation : AB 2059 (Nunez, Ch. 738, Stats. 2008) See
Background.
Prior Vote :
Assembly Business and Professions Committee (Ayes 11, Noes 0)
Assembly Floor (Ayes 77, Noes 0)
**************