[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 568 Introduced in Senate (IS)]

103d CONGRESS
  1st Session
                                 S. 568

 To strengthen the authority of the Federal Trade Commission regarding 
fraud committed in connection with sales made with a telephone, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

               March 11 (legislative day, March 3), 1993

  Mr. Bryan (for himself, Mr. McCain, and Mr. Gorton) introduced the 
 following bill; which was read twice and referred to the Committee on 
                 Commerce, Science, and Transportation

_______________________________________________________________________

                                 A BILL


 
 To strengthen the authority of the Federal Trade Commission regarding 
fraud committed in connection with sales made with a telephone, and for 
                            other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

                              short title

    Section 1. This Act may be cited as the ``Telemarketing and 
Consumer Fraud and Abuse Prevention Act''.

                              definitions

    Sec. 2. As used in this Act, the term--
            (1) ``attorney general'' means the chief legal officer of a 
        State;
            (2) ``Commission'' means the Federal Trade Commission;
            (3) ``State'' means any State of the United States, the 
        District of Columbia, Puerto Rico, the Northern Mariana 
        Islands, and any territory or possession of the United States;
            (4) ``telemarketing'' means a plan, program, or campaign 
        which is conducted to induce purchases of goods or services by 
        significant use of one or more telephones and which has 
        involved interstate telephone calls; the term does not include 
        other use of a telephone in connection with business or 
        personal transactions, nor does the term include the 
        solicitation of sales through the mailing of a catalog which--
                    (A) contains a written description or illustration 
                of the goods or services offered for sale;
                    (B) includes the business address of the seller;
                    (C) includes multiple pages of written material or 
                illustrations;
                    (D) is issued not less frequently than once a year; 
                and
                    (E) is at least the third catalog satisfying the 
                requirements of subparagraphs (A) through (D) that has 
                been issued by the seller within the last five years,
        where the seller does not place calls to customers but only 
        receives calls initiated by customers in response to the 
        catalog and during those calls takes orders only without 
        further solicitation; and
            (5) ``credit card laundering'' means--
                    (A) the act or practice by a person engaged in 
                telemarketing (other than an act or practice permitted 
                in a valid agreement with a member of a credit card 
                system or the member's agent) of transferring to 
                another person to be presented to a member of a credit 
                card system or the member's agent, for payment, one or 
                more evidences or records of transactions involving 
                goods or services offered by telemarketing and paid for 
                by credit card;
                    (B) the act or practice by a person acting on 
                behalf of a person engaged in telemarketing (other than 
                an act or practice permitted in a valid agreement with 
                a member of a credit card system or the member's agent) 
                of causing or arranging for a third person to present 
                to a member of a credit card system or the member's 
                agent, for payment, one or more evidences or records of 
                transactions involving goods or services offered by 
                telemarketing and paid for by credit card;
                    (C) the act or practice by a person (other than an 
                act or practice permitted in a valid agreement with a 
                member of a credit card system or the member's agent) 
                of knowingly presenting to a member of a credit card 
                system or the member's agent, for payment, one or more 
                evidences or records received from another person of 
                transactions involving goods or services offered by 
                telemarketing and paid for by credit card; or
                    (D) such other acts or practices defined in the 
                rules of the Commission as credit card laundering.

                          telemarketing rules

    Sec. 3. (a) Rules on Telemarketing Activities.--The Commission 
shall prescribe rules regarding telemarketing activities. In 
prescribing such rules, the Commission shall consider the inclusion 
of--
            (1) a requirement that goods or services offered by 
        telemarketing be shipped or provided within a specified period 
        and that if the goods or services are not shipped or provided 
        within such period a refund be required;
            (2) where practicable, authority for a person who orders a 
        good or service through telemarketing to cancel the order 
        within a specified period;
            (3) restrictions on the hours of the day when unsolicited 
        telephone calls can be made to consumers;
            (4) a prohibition of telemarketing generated by computers 
        on equipment that does not permit the individual called to 
        terminate the telephone call; and
            (5) recordkeeping requirements.
    (b) Prohibition of Fraudulent Telemarketing Acts or Practices.--The 
Commission also shall prescribe rules prohibiting fraudulent 
telemarketing acts or practices and shall include in such rules a 
definition of the term ``fraudulent telemarketing acts or practices'', 
which may include activities of entities or individuals that assist or 
facilitate fraudulent telemarketing. Credit card laundering shall be a 
fraudulent telemarketing act or practice.
    (c) Deadline; Administrative Procedure.--The Commission shall 
prescribe the rules under subsections (a) and (b) of this section 
within 180 days after the date of enactment of this Act. Such rules 
shall be prescribed in accordance with section 553 of title 5, United 
States Code.
    (d) Treatment of Rule Violations.--Any violation of any rule 
prescribed under subsection (a) or (b) of this section shall be treated 
as a violation of a trade regulation rule promulgated under section 18 
of the Federal Trade Commission Act (15 U.S.C. 57a) regarding unfair or 
deceptive acts or practices (subject to any remedy or penalty 
applicable to any violation thereof).
    (e) Effect of State Law.--The rules promulgated under this section 
shall not be construed as preempting State law.

                   actions by state attorneys general

    Sec. 4. (a) Authority of States.--Whenever the attorney general of 
any State has reason to believe that the interests of the residents of 
that State have been or are being threatened or adversely affected 
because any person has engaged or is engaging in a pattern or practice 
of telemarketing which violates any rule, regulation, or order of the 
Commission under this Act, the State may bring a civil action on behalf 
of its residents to enjoin such telemarketing, to enforce compliance 
with any rule, regulation, or order of the Commission under this Act, 
to obtain damages on behalf of their residents, or to obtain such 
further and other relief as the court may deem appropriate.
    (b) Court Jurisdiction.--The district courts of the United States, 
the United States courts of any territory, and the District Court of 
the United States for the District of Columbia shall have exclusive 
jurisdiction over all civil actions brought under this section to 
enforce any liability or duty created by any rule, regulation, or order 
of the Commission under this Act, or to obtain damages or other relief 
with respect thereto. Upon proper application, such courts shall also 
have jurisdiction to issue writs of mandamus, or orders affording like 
relief, commanding the defendant to comply with the provisions of any 
rule, regulation, or order of the Commission under this Act, including 
the requirements that the defendant take such action as is necessary to 
remove the danger of violation of any such rule, regulation, or order. 
Upon a proper showing, a permanent or temporary injunction or 
restraining order shall be granted without bond.
    (c) Rights of Commission.--The State shall serve prior written 
notice of any such civil action upon the Commission and provide the 
Commission with a copy of its complaint, except in any case where such 
prior notice is not feasible, in which case the State shall serve such 
notice immediately upon instituting such action. The Commission shall 
have the right (1) to intervene in the action, (2) upon so intervening, 
to be heard on all matters arising therein, and (3) to file petitions 
for appeal.
    (d) Venue; Service of Process.--Any civil action brought under this 
section in a district court of the United States may be brought in the 
district wherein the defendant is found or is an inhabitant or 
transacts business or wherever venue is proper under section 1391 of 
title 28, United States Code, and process in such cases may be served 
in any district in which the defendant is an inhabitant or wherever the 
defendant may be found.
    (e) Effect on State Powers of Attorneys General.--For purposes of 
bringing any civil action under this section, nothing in this Act shall 
prevent the attorney general from exercising the powers conferred on 
the attorney general by the laws of such State to conduct 
investigations or to administer oaths or affirmations or to compel the 
attendance of witnesses or the production of documentary and other 
evidence.
    (f) Effect on Actions Under State Statute.--Nothing contained in 
this section shall prohibit an authorized State official from 
proceeding in State court on the basis of an alleged violation of any 
general civil or criminal statute of such State.
    (g) Civil Action By Commission.--Whenever the Commission has 
instituted a civil action for violation of any rule prescribed under 
this Act, no State may, during the pendency of such action instituted 
by the Commission, subsequently institute a civil action against any 
defendant named in the Commission's complaint for violation of any rule 
as alleged in the Commission's complaint.

                   actions brought by private persons

    Sec. 5. (a) Definition.--As used in this section, the term ``person 
adversely affected by telemarketing'' means--
            (1) any person who has incurred loss or damage in 
        connection with telemarketing and who actually purchased goods 
        or services through telemarketing, or paid or is obligated to 
        pay for goods or services purchased through telemarketing;
            (2) any financial institution that has incurred loss or 
        damage in connection with telemarketing; or
            (3) any member organization comprised of financial 
        institution members, or any parent organization of such member 
        organization, if one or more of the financial institution 
        members is eligible to bring a civil action under this 
        subsection.
Such term does not include a governmental entity.
    (b) Private Right of Action.--(1) Any person adversely affected by 
any pattern or practice of telemarketing which violates any rule, 
regulation, or order of the Commission under this Act may, within three 
years after discovery of the violation, bring a civil action against a 
person who has engaged or is engaging in such pattern or practice of 
telemarketing if the amount in controversy exceeds the sum or value of 
$50,000 in actual damages for each person adversely affected by such 
telemarketing. Such an action may be brought to enjoin such 
telemarketing, to enforce compliance with any rule, regulation, or 
order of the Commission under this Act, to obtain damages, or to obtain 
such further and other relief as the court may deem appropriate.
    (2) The district courts of the United States, the United States 
courts of any territory, and the District Court of the United States 
for the District of Columbia shall have exclusive jurisdiction over all 
civil actions brought under this section to enforce any liability or 
duty created by any rule, regulation, or order of the Commission under 
this Act, or to obtain damages or other relief with respect thereto. 
Upon proper application, such courts shall also have jurisdiction to 
issue writs of mandamus, or orders affording like relief, commanding 
the defendant to comply with the provisions of any rule, regulation, or 
order of the Commission under this Act, including the requirement that 
the defendant take such action as is necessary to remove the danger of 
violation or of any such rule, regulation, or order. Upon a proper 
showing, a permanent or temporary injunction or restraining order shall 
be granted without bond.
    (3) The plaintiff shall serve prior written notice of the action 
upon the Commission and provide the Commission with a copy of its 
complaint, except in any case where such prior notice is not feasible, 
in which case the person shall serve such notice immediately upon 
instituting such action. The Commission shall have the right (A) to 
intervene in the action, (B) upon so intervening, to be heard on all 
matters arising therein, and (C) to file petitions for appeal.
    (4) Whenever the Commission has instituted a civil action for 
violation of any rule prescribed under this Act, no person may, during 
the pendency of such action instituted by the Commission, subsequently 
institute a civil action against any defendant named in the 
Commission's complaint for violation of any rule as alleged in the 
Commission's complaint.
    (5) Any civil action brought under this section in a district court 
of the United States may be brought in the district wherein the 
defendant is found or is an inhabitant or transacts business or 
wherever venue is proper under section 1391 of title 28, United States 
Code, and process in such cases may be served in any district in which 
the defendant is an inhabitant or wherever the defendant may be found.
    (c) Award of Costs and Fees.--The court, in issuing any final order 
in any action brought under subsection (b), may award costs of suit and 
reasonable fees for attorneys and expert witnesses to the prevailing 
party.
    (d) Rights Under Statute or Common Law.--Nothing in this section 
shall restrict any right which any person may have under any statute or 
common law.

                                 venue

    Sec. 6. Subsections (a) and (b) of section 13 of the Federal Trade 
Commission Act (15 U.S.C. 53) are each amended by adding at the end 
thereof the following: ``Whenever it appears to the court that the 
interests of justice require that any other person, partnership, or 
corporation should be a party in such suit, the court may cause such 
person, partnership, or corporation to be summoned without regard to 
whether they reside or transact business in the district in which the 
suit is brought, and to that end process may be served wherever the 
person, partnership, or corporation may be found.''.

                                subpoena

    Sec. 7. (a) Physical Evidence Defined.--Section 20(a) of the 
Federal Trade Commission Act (15 U.S.C. 57b-1(a)) is amended--
            (1) by redesignating paragraph (7) as paragraph (8); and
            (2) by inserting immediately after paragraph (6) the 
        following new paragraph:
            ``(7) The term `physical evidence' means any object or 
        device.''.
    (b) Issuance of Demand.--Section 20(c)(1) of the Federal Trade 
Commission Act (15 U.S.C. 57b-1(c)(1)) is amended--
            (1) by inserting ``physical evidence or'' immediately after 
        ``any'' the second time it appears;
            (2) by inserting ``to produce such physical evidence for 
        inspection,'' immediately before ``to produce'';
            (3) by inserting ``physical evidence,'' immediately after 
        ``concerning''; and
            (4) by inserting ``evidence,'' immediately before 
        ``material, answers,''.
    (c) Contents of Demand.--Section 20(c)(3)) of the Federal Trade 
Commission Act (15 U.S.C. 57b-1(c)(3)) is amended--
            (1) by inserting ``physical evidence or'' immediately 
        before ``documentary material'';
            (2) in subparagraph (A)--
                    (A) by inserting ``physical evidence or'' 
                immediately before ``documentary''; and
                    (B) by inserting ``evidence or'' immediately after 
                ``permit such'';
            (3) in subparagraph (B), by inserting ``evidence or'' 
        immediately before ``material''; and
            (4) in subparagraph (C), by inserting ``evidence or'' 
        immediately before ``material''.
    (d) Production of Evidence in Response to Demand.--Section 
20(c)(10) of the Federal Trade Commission Act (15 U.S.C. 57b-1(c)(10) 
is amended by inserting ``physical evidence or'' immediately before 
``documentary material'' each place it appears.

                false advertisements concerning services

    Sec. 8. Section 12(a) of the Federal Trade Commission Act (15 
U.S.C. 52(a)) is amended by inserting ``services,'' immediately after 
``devices,'' each place it appears.

                             clearinghouse

    Sec. 9. The Commission shall establish a clearinghouse for 
inquiries made to Federal agencies concerning telemarketing. The 
clearinghouse will provide information (other than information which 
may not be disclosed under section 522(b) of title 5, United States 
Code, or under regulations prescribed by the Commission to implement 
section 552(b) of title 5, United States Code) to anyone making 
inquiries respecting persons engaged in telemarketing or direct such 
inquiries to the appropriate Federal or State agency.

                             financial data

    Sec. 10. Section 1109(a)(3) of the Right to Financial Privacy Act 
of 1978 (12 U.S.C. 3409(a)(3)) is amended--
            (1) by redesignating subparagraph (E) as subparagraph (F);
            (2) by striking ``or'' at the end of subparagraph (D); and
            (3) by inserting immediately after subparagraph (D) the 
        following new subparagraph:
                    ``(E) dissipation, removal, or destruction of 
                assets that are subject to forfeiture, seizure, 
                redress, or restitution under any law of the United 
                States by reason of having been obtained in violation 
                of law; or''.

                      criminal contempt authority

    Sec. 11. Section 16(a)(1) of the Federal Trade Commission Act (15 
U.S.C. 56(a)(1)) is amended--
            (1) in subparagraph (A) by striking ``civil'' the first 
        place it appears and inserting in lieu thereof ``Federal 
        court''; and
            (2) by adding at the end the following: ``The Commission 
        may bring a criminal contempt action for violations of orders 
        obtained in cases brought under section 13(b) of this Act in 
        the same manner as civil penalty and other Federal court 
        actions to which this subsection applies. Such cases may be 
        initiated by the Commission on its own complaint, or pursuant 
        to its acceptance of an appointment by a court to assist it in 
        enforcing such orders pursuant to Rule 42(b) of the Federal 
        Rules of Criminal Procedure.''.

                administration and applicability of act

    Sec. 12. (a) Enforcement.--Except as otherwise provided in sections 
4 and 5 of this Act, this Act shall be enforced by the Commission under 
the Federal Trade Commission Act (15 U.S.C. 41 et seq.).
    (b) Applicability of FTCA.--The Commission shall prevent any person 
from violating a rule, regulation, or order of the Commission under 
this Act in the same manner, by the same means, and with the same 
jurisdiction, powers, and duties as though all applicable terms and 
provisions of the Federal Trade Commission Act (15 U.S.C. 41 et seq.) 
were incorporated into and made a part of this Act. Any person who 
violates such a rule, regulation, or order shall be subject to the 
penalties and entitled to the privileges and immunities provided in the 
Federal Trade Commission Act in the same manner, by the same means, and 
with the same jurisdiction, powers, and duties as though all applicable 
terms and provisions of the Federal Trade Commission Act were 
incorporated into and made a part of this Act.
    (c) Exemption.--(1) No provision of this Act shall apply to any 
person exempt from the jurisdiction of the Commission under section 
5(a)(2) of the Federal Trade Commission Act (15 U.S.C. 45(a)(2)), and 
nothing in this Act shall be construed to vest the Commission, or the 
attorney general of any State or any person, with jurisdiction or 
authority over any person not otherwise subject to the jurisdiction or 
authority of the Commission.
    (2)(A) No provision of this Act shall apply--
            (i) to a broker, dealer, municipal securities dealer, 
        government securities broker, government securities dealer, or 
        investment company in connection with the offer, sale, or 
        purchase of any security, or to an issuer in connection with 
        the offer, sale, or purchase of any security which that issuer 
        has issued, or to any investment adviser providing investment 
        advice relating to any security; or
            (ii) to the solicitation, acceptance, confirmation, or 
        execution of orders for the entry into, purchase of, or sale of 
        any contract, account, agreement, or transaction subject to the 
        exclusive jurisdiction of the Commodity Futures Trading 
        Commission under the Commodity Exchange Act (7 U.S.C. 1 et 
        seq.) by a person registered under the Commodity Exchange Act 
        in order to engage in such activity, including as a futures 
        commission merchant, introducing broker, commodity trading 
        adviser, commodity pool operator, leverage transaction 
        merchant, floor broker, or floor trader, or as a person 
        associated with any such person.
    (B) For purposes of subparagraph (A)(i)--
            (1) the terms ``broker'', ``dealer'', ``municipal 
        securities dealer'', ``government securities broker'', and 
        ``government securities dealer'' have the meanings given them 
        in section 3(a) (4), (5), (30), (43), and (44), respectively, 
        of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a) (4), 
        (5), (30), (43), and (44));
            (2) the term ``investment adviser'' has the meaning given 
        it in section 202(a)(11) of the Investment Advisers Act of 1940 
        (15 U.S.C. 80b-2(a)(11));
            (3) the term ``investment company'' has the meaning given 
        it in section 3(a) of the Investment Company Act of 1940 (15 
        U.S.C. 80a-3(a));
            (4) the term ``issuer'' has the meaning given it in section 
        2(4) of the Securities Act of 1933 (15 U.S.C. 77b(4)); and
            (5) the term ``security'' has the meaning given to it in 
        section 2(1) of the Securities Act of 1933 (15 U.S.C. 77b(1)), 
        section 3(a)(10) of the Securities Exchange Act of 1934 (15 
        U.S.C. 78c(a)(10)), and section 2(a)(36) of the Investment 
        Company Act of 1940 (15 U.S.C. 80a-2(a)(36)).

                          life care home study

    Sec. 13. (a) Study.--The Federal Trade Commission shall conduct a 
study of unfair or deceptive acts or practices in the life care home 
industry, including acts or practices engaged in by life care homes. 
Within twenty-four months after the date of enactment of this Act, the 
Commission shall report the findings and conclusions of the study to 
Congress. The Commission shall indicate in its report whether it 
intends to initiate a trade regulation rulemaking under section 18 of 
the Federal Trade Commission Act (15 U.S.C. 57a) respecting unfair or 
deceptive acts or practices in the life care home industry and the 
reasons for such determination.
    (b) Definitions.--For purposes of subsection (a), the term--
            (1) ``life care home'' includes the facility or facilities 
        occupied, or planned to be occupied, by residents or 
        prospective residents where a provider undertakes to provide 
        living accommodations and services pursuant to a life care 
        contract, regardless of whether such facilities are operated on 
        a profit or nonprofit basis; and
            (2) ``life care contract'' includes a contract between a 
        resident and a provider to provide the resident, for the 
        duration of such resident's life, living accommodations and 
        related services in a life care home, including nursing care 
        services, medical services, and other health-related services, 
        which is conditioned upon the transfer of an entrance fee to 
        the provider and which may be further conditioned upon the 
        payment of periodic service fees.

                                 sunset

    Sec. 14. The provisions of section 3, 4, and 5 shall cease to have 
force an effect on and after the date that is five years following the 
date of enactment of this Act.

                                 <all>

S 568 IS ----2