[Congressional Record Volume 140, Number 98 (Monday, July 25, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: July 25, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
 PROVIDING FOR CONCURRENCE, WITH AN AMENDMENT, IN SENATE AMENDMENT TO 
 H.R. 868, TELEMARKETING AND CON- SUMER FRAUD AND ABUSE PREVENTION ACT

  Mr. SWIFT. Mr. Speaker, I move to suspend the rules and agree to the 
resolution (H. Res. 488), providing for the concurrence by the House, 
with an amendment, in the amendment by the Senate to the bill H.R. 868.
  The Clerk read as follows:

                              H. Res. 488

       Resolved, That, upon adoption of this resolution, the bill 
     (H.R. 868) to strengthen the authority of the Federal Trade 
     Commission to protect consumers in connection with sales made 
     with a telephone, and for other purposes, with the Senate 
     amendment thereto, shall be considered to have been taken 
     from the Speaker's table, and the same are hereby agreed to 
     with an amendment as follows:
       In lieu of the matter proposed to be inserted by the 
     Senate, insert the following:

     SECTION 1. SHORT TITLE.

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

     SEC. 2. FINDINGS.

       The Congress makes the following findings:
       (1) Telemarketing differs from other sales activities in 
     that it can be carried out by sellers across State lines 
     without direct contact with the consumer. Telemarketers also 
     can be very mobile, easily moving from State to State.
       (2) Interstate telemarketing fraud has become a problem of 
     such magnitude that the resources of the Federal Trade 
     Commission are not sufficient to ensure adequate consumer 
     protection from such fraud.
       (3) Consumers and others are estimated to lose $40 billion 
     a year in telemarketing fraud.
       (4) Consumers are victimized by other forms of 
     telemarketing deception and abuse.
       (5) Consequently, Congress should enact legislation that 
     will offer consumers necessary protection from telemarketing 
     deception and abuse.

     SEC. 3. TELEMARKETING RULES.

       (a) In General.--
       (1) The Commission shall prescribe rules prohibiting 
     deceptive telemarketing acts or practices and other abusive 
     telemarketing acts or practices.
       (2) The Commission shall include in such rules respecting 
     deceptive telemarketing acts or practices a definition of 
     deceptive telemarketing acts or practices which may include 
     acts or practices of entities or individuals that assist or 
     facilitate deceptive telemarketing, including credit card 
     laundering.
       (3) The Commission shall include in such rules respecting 
     other abusive telemarketing acts or practices--
       (A) a requirement that telemarketers may not undertake a 
     pattern of unsolicited telephone calls which the reasonable 
     consumer would consider coercive or abusive of such 
     consumer's right to privacy,
       (B) restrictions on the hours of the day and night when 
     unsolicited telephone calls can be made to consumers, and
       (C) a requirement that any person engaged in telemarketing 
     for the sale of goods or services shall promptly and clearly 
     disclose to the person receiving the call that the purpose of 
     the call is to sell goods or services and make such other 
     disclosures as the Commission deems appropriate, including 
     the nature and price of the goods and services.

     In prescribing the rules described in this paragraph, the 
     Commission shall also consider recordkeeping requirements.
       (b) Rulemaking.--The Commission shall prescribe the rules 
     under subsection (a) within 365 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.
       (c) Enforcement.--Any violation of any rule prescribed 
     under subsection (a) shall be treated as a violation of a 
     rule under section 18 of the Federal Trade Commission Act (15 
     U.S.C. 57a) regarding unfair or deceptive acts or practices.
       (d) Securities and Exchange Commission Rules.--
       (1) Promulgation.--
       (A) In general.--Except as provided in subparagraph (B), 
     not later than 6 months after the effective date of rules 
     promulgated by the Federal Trade Commission under subsection 
     (a), the Securities and Exchange Commission shall promulgate, 
     or require any national securities exchange or registered 
     securities association to promulgate, rules substantially 
     similar to such rules to prohibit deceptive and other abusive 
     telemarketing acts or practices by persons described in 
     paragraph (2).
       (B) Exception.--The Securities and Exchange Commission is 
     not required to promulgate a rule under subparagraph (A) if 
     it determines that--
       (i) Federal securities laws or rules adopted by the 
     Securities and Exchange Commission thereunder provide 
     protection from deceptive and other abusive telemarketing by 
     persons described in paragraph (2) substantially similar to 
     that provided by rules promulgated by the Federal Trade 
     Commission under subsection (a); or
       (ii) such a rule promulgated by the Securities and Exchange 
     Commission is not necessary or appropriate in the public 
     interest, or for the protection of investors, or would be 
     inconsistent with the maintenance of fair and orderly 
     markets.

     If the Securities and Exchange Commission determines that an 
     exception described in clause (i) or (ii) applies, the 
     Securities and Exchange Commission shall publish in the 
     Federal Register its determination with the reasons for it.
       (2) Application.--
       (A) In general.--The rules promulgated by the Securities 
     and Exchange Commission under paragraph (1)(A) shall apply to 
     a broker, dealer, transfer agent, municipal securities 
     dealer, municipal securities broker, government securities 
     broker, government securities dealer, investment adviser or 
     investment company, or any individual associated with a 
     broker, dealer, transfer agent, municipal securities dealer, 
     municipal securities broker, government securities broker, 
     government securities dealer, investment adviser or 
     investment company. The rules promulgated by the Federal 
     Trade Commission under subsection (a) shall not apply to 
     persons described in the preceding sentence.
       (B) Definitions.--For purposes of subparagraph (A)--
       (i) the terms ``broker'', ``dealer'', ``transfer agent'', 
     ``municipal securities dealer'', ``municipal securities 
     broker'', ``government securities broker'', and ``government 
     securities dealer'' have the meanings given such terms by 
     paragraphs (4), (5), (25), (30), (31), (43), and (44) of 
     section 3(a) of the Securities and Exchange Act of 1934 (15 
     U.S.C. 78c(a)(4), (5), (25), (30), (31), (43), and (44));
       (ii) the term ``investment adviser'' has the meaning given 
     such term by section 202(a)(11) of the Investment Advisers 
     Act of 1940 (15 U.S.C. 80b-2(a)(11)); and
       (iii) the term ``investment company'' has the meaning given 
     such term by section 3(a) of the Investment Company Act of 
     1940 (15 U.S.C. 80a-3(a)).
       (e) Commodity Futures Trading Commission Rules.--
       (1) Application.--The rules promulgated by the Federal 
     Trade Commission under subsection (a) shall not apply to 
     persons described in subsection (f)(1) of section 6 of the 
     Commodity Exchange Act (7 U.S.C. 8, 9, 15, 13b, 9a).
       (2) Promulgation.--Section 6 of the Commodity Exchange Act 
     (7 U.S.C. 8, 9, 15, 13b, 9a) is amended by adding at the end 
     the following new subsection:
       ``(f)(1) Except as provided in paragraph (2), not later 
     than six months after the effective date of rules promulgated 
     by the Federal Trade Commission under section 3(a) of the 
     Telemarketing and Consumer Fraud and Abuse Prevention Act, 
     the Commission shall promulgate, or require each registered 
     futures association to promulgate, rules substantially 
     similar to such rules to prohibit deceptive and other abusive 
     telemarketing acts or practices by any person registered or 
     exempt from registration under this Act in connection with 
     such person's business as a futures commission merchant, 
     introducing broker, commodity trading advisor, commodity pool 
     operator, leverage transaction merchant, floor broker, or 
     floor trader, or a person associated with any such person.
       ``(2) The Commission is not required to promulgate rules 
     under paragraph (1) if it determines that--
       ``(A) rules adopted by the Commission under this Act 
     provide protection from deceptive and abusive telemarketing 
     by persons described under paragraph (1) substantially 
     similar to that provided by rules promulgated by the Federal 
     Trade Commission under section 3(a) of the Telemarketing and 
     Consumer Fraud and Abuse Prevention Act; or
       ``(B) such a rule promulgated by the Commission is not 
     necessary or appropriate in the public interest, or for the 
     protection of customers in the futures and options markets, 
     or would be inconsistent with the maintenance of fair and 
     orderly markets.

     If the Commission determines that an exception described in 
     subparagraph (A) or (B) applies, the Commission shall publish 
     in the Federal Register its determination with the reasons 
     for it.''.

     SEC. 4. ACTIONS BY STATES.

       (a) In General.--Whenever an 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 
     of the Commission under section 3, the State, as parens 
     patriae, may bring a civil action on behalf of its residents 
     in an appropriate district court of the United States to 
     enjoin such telemarketing, to enforce compliance with such 
     rule of the Commission, to obtain damages, restitution, or 
     other compensation on behalf of residents of such State, or 
     to obtain such further and other relief as the court may deem 
     appropriate.
       (b) Notice.--The State shall serve prior written notice of 
     any civil action under subsection (a) or (f)(2) upon the 
     Commission and provide the Commission with a copy of its 
     complaint, except that if it is not feasible for the State to 
     provide such prior notice, the State shall serve such notice 
     immediately upon instituting such action. Upon receiving a 
     notice respecting a civil action, the Commission shall have 
     the right (1) to intervene in such action, (2) upon so 
     intervening, to be heard on all matters arising therein, and 
     (3) to file petitions for appeal.
       (c) Construction.--For purposes of bringing any civil 
     action under subsection (a), nothing in this Act shall 
     prevent an 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.
       (d) Actions by the Commission.--Whenever a civil action has 
     been instituted by or on behalf of the Commission for 
     violation of any rule prescribed under section 3, no State 
     may, during the pendency of such action instituted by or on 
     behalf of the Commission, institute a civil action under 
     subsection (a) or (f)(2) against any defendant named in the 
     complaint in such action for violation of any rule as alleged 
     in such complaint.
       (e) Venue; Service of Process.--Any civil action brought 
     under subsection (a) in a district court of the United States 
     may be brought in the district in which the defendant is 
     found, is an inhabitant, or transacts business or wherever 
     venue is proper under section 1391 of title 28, United States 
     Code. Process in such an action may be served in any district 
     in which the defendant is an inhabitant or in which the 
     defendant may be found.
       (f) Actions by Other State Officials.--
       (1) 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 civil or criminal 
     statute of such State.
       (2) In addition to actions brought by an attorney general 
     of a State under subsection (a), such an action may be 
     brought by officers of such State who are authorized by the 
     State to bring actions in such State on behalf of its 
     residents.

     SEC. 5. ACTIONS BY PRIVATE PERSONS.

       (a) In General.--Any person adversely affected by any 
     pattern or practice of telemarketing which violates any rule 
     of the Commission under section 3, or an authorized person 
     acting on such person's behalf, may, within 3 years after 
     discovery of the violation, bring a civil action in an 
     appropriate district court of the United States 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 of the Commission under 
     section 3, to obtain damages, or to obtain such further and 
     other relief as the court may deem appropriate.
       (b) Notice.--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.
       (c) Action by the Commission.--Whenever a civil action has 
     been instituted by or on behalf of the Commission for 
     violation of any rule prescribed under section 3, no person 
     may, during the pendency of such action instituted by or on 
     behalf of the Commission, institute a civil action against 
     any defendant named in the complaint in such action for 
     violation of any rule as alleged in such complaint.
       (d) Cost and Fees.--The court, in issuing any final order 
     in any action brought under subsection (a), may award costs 
     of suit and reasonable fees for attorneys and expert 
     witnesses to the prevailing party.
       (e) Construction.--Nothing in this section shall restrict 
     any right which any person may have under any statute or 
     common law.
       (f) Venue; Service of Process.--Any civil action brought 
     under subsection (a) in a district court of the United States 
     may be brought in the district in which the defendant is 
     found, is an inhabitant, or transacts business or wherever 
     venue is proper under section 1391 of title 28, United States 
     Code. Process in such an action may be served in any district 
     in which the defendant is an inhabitant or in which the 
     defendant may be found.

     SEC. 6. ADMINISTRATION AND APPLICABILITY OF ACT.

       (a) In General.--Except as otherwise provided in sections 
     3(d), 3(e), 4, and 5, this Act shall be enforced by the 
     Commission under the Federal Trade Commission Act (15 U.S.C. 
     41 et seq.). Consequently, no activity which is outside the 
     jurisdiction of that Act shall be affected by this Act.
       (b) Actions by the Commission.--The Commission shall 
     prevent any person from violating a rule of the Commission 
     under section 3 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 
     rule 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, power, 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) Effect on Other Laws.--Nothing contained in this Act 
     shall be construed to limit the authority of the Commission 
     under any other provision of law.

     SEC. 7. DEFINITIONS.

       For purposes of this Act:
       (1) The term ``attorney general'' means the chief legal 
     officer of a State.
       (2) The term ``Commission'' means the Federal Trade 
     Commission.
       (3) The term ``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) The term ``telemarketing'' means a plan, program, or 
     campaign which is conducted to induce purchases of goods or 
     services by use of one or more telephones and which involves 
     more than one interstate telephone call. The term does not 
     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, and
       (D) has been issued not less frequently than once a year,

     where the person making the solicitation does not solicit 
     customers by telephone but only receives calls initiated by 
     customers in response to the catalog and during those calls 
     takes orders only without further solicitation.

     SEC. 8. FALSE ADVERTISEMENTS CONCERNING SERVICES.

       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.

     SEC. 9. ENFORCEMENT OF ORDERS.

       (a) General Authority.--Subject to subsections (b) and (c), 
     the Federal Trade Commission may bring a criminal contempt 
     action for violations of orders of the Commission obtained in 
     cases brought under section 13(b) of the Federal Trade 
     Commission Act (15 U.S.C. 53(b)).
       (b) Appointment.--An action authorized by subsection (a) 
     may be brought by the Federal Trade Commission only after, 
     and pursuant to, the appointment by the Attorney General of 
     an attorney employed by the Commission, as a special 
     assistant United States Attorney.
       (c) Request for Appointment.--
       (1) Appointment upon request or motion.--A special 
     assistant United States Attorney may be appointed under 
     subsection (b) upon the request of the Federal Trade 
     Commission or the court which has entered the order for which 
     contempt is sought or upon the Attorney General's own motion.
       (2) Timing.--The Attorney General shall act upon any 
     request made under paragraph (1) within 45 days of the 
     receipt of the request.
       (d) Termination of Authority.--The authority of the Federal 
     Trade Commission to bring a criminal contempt action under 
     subsection (a) expires 2 years after the date of the first 
     promulgation of rules under section 3. The expiration of such 
     authority shall have no effect on an action brought before 
     the expiration date.

     SEC. 10. REVIEW.

       Upon the expiration of 5 years following the date of the 
     first promulgation of rules under section 3, the Commission 
     shall review the implementation of this Act and its effect on 
     deceptive telemarketing acts or practices and report the 
     results of the review to the Congress.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Washington [Mr. Swift] will be recognized for 20 minutes, and the 
gentleman from California [Mr. Moorhead] will be recognized for 20 
minutes.
  The Chair recognizes the gentleman from Washington [Mr. Swift].
  Mr. SWIFT. Mr. Speaker, I yield myself such time as I may consume.
  (Mr. SWIFT asked and was given permission to revise and extent his 
remarks.)
  Mr. SWIFT. Mr. Speaker, I am pleased to bring up this amendment which 
has been agreed to by the Senate, to H.R. 868, the Telemarketing and 
Consumer Fraud and Abuse Prevention Act.
  This legislation is the product of many conferences with the Federal 
Trade Commission, the National Association of Attorneys General, with 
consumer organizations and with interested business groups. H.R. 868 
was originally passed by the house on March 2, 1993, by a vote of 411 
to 3.
  The telemarketing bill does not impose further regulations on the 
legitimate telemarketing industry. It is targeted strictly to 
telemarketing fraud, deception and other patterns of clearly abusive 
telemarketing activities. But problems with interstate 
telemarketing fraud have become so pervasive that the 
resources of the Federal Trade Commission are not sufficient to ensure 
adequate consumer protection.
  The bill directs the FTC to undertake a rulemaking to prohibit 
deceptive and abusive telemarketing activities. It will also allow the 
State attorneys general and certain other State legal officers to use 
the powers of this act to target fly-by-night telemarketers who make 
deceptive long distance telemarketing calls and then skip 
across State lines before the State authorities are able to stop them 
under State law. The bill also allows private rights of action in 
limited circumstances.
  I want to commend the gentleman from Michigan, Chairman Dingell, the 
gentleman from California [Mr. Moorhead], and the gentleman from Ohio 
[Mr. Oxley], for their cooperation in constructing this necessary 
legislation. And I would be remiss if I did not also commend Senator 
Bryan for his very diligent efforts in seeing this legislation through.
  Telemarketing fraud is estimated to cost the American Public as much 
as $40 billion a year.
  We need to offer our consumer protection agencies more tools to do 
the job, and this legislation--we are told by those groups--will be of 
significant help to them in accomplishing their job of protecting 
consumers from telemarketing fraud.
  H.R. 868, the Telemarketing and Consumer Fraud and Abuse Act as 
passed by the House on March 2, 1993, included references in section 
2(5) and section 3(a)(1) to ``fraud'' and ``fraudulent'' telemarketing. 
These terms and subsequent references in House Report 103-20 at page 10 
to ``fraudulent telemarketing activities'' defined as a ``subset'' of 
deceptive telemarketing practices have been deleted in this bill. It 
was felt that use of the terms ``fraud'' and ``fraudulent'' in the act 
and in the House report could cause unnecessary and unintended 
confusion. The word ``fraudulent'' was intended to be synonymous with 
the term ``deceptive'' in section 5(a)(1) of the Federal Trade 
Commission Act [FTCA], as that term is interpreted by the Commission 
and the Federal courts. The word ``fraudulent'' has therefore been 
deleted as redundant and unnecessary from this legislation. No common-
law fraud, criminal fraud, or intent to deceive is necessary to prove 
that an act or practice under this act is ``deceptive''. The elements 
of telemarketing fraud should not be any more difficult to establish in 
a court of law than the elements of any deceptive act or practice 
prohibited by the FTC Act.
  Mr. MOORHEAD. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in strong support of H. Res. 488. This amended 
version of the bill represents a House-Senate agreement on a final 
version of legislation that both bodies passed last year.
  Fraud and deception using telemarketing techniques is a scourge upon 
the American consumer. Current estimates are that as much as $40 
billion may be lost by consumers each year to telemarketing con 
artists.
  This kind of nefarious activity hurts thousands of consumers. But it 
also damages the legitimate, honest telemarketers who rely upon 
telecommunications technology to make a variety of goods and services 
more readily available to the American public. Each time a consumer 
falls victim to a boiler room or other telemarketing scam, the 
credibility and trust which are essential to everyday retail 
transactions are irreparably damaged. It is therefore critically 
important to legitimate users of telemarketing that we reduce the fraud 
and deception that infect this area of retailing.
  H.R. 868, the underlying bill, does this in two important ways. 
First, it directs the Federal Trade Commission to issue rules addressed 
specifically to combating and preventing deceptive telemarketing 
practices. Second, it empowers State attorneys general to enforce the 
FTC rules--along with the FTC itself. This not only targets Federal 
enforcement efforts on the bad apples of the telemarketing industry, 
but also maximizes the impact of available resources through close 
State-Federal cooperation. I know that many of our State attorneys 
general are strongly supportive of this legislation precisely because 
of the enhanced enforcement tools it will make available to them.
  We in California are particularly conscious of the need for a multi-
state enforcement effort in this area. All too often, California 
consumers are bilked by boiler room operators who call from adjacent 
States, so as to remain beyond the reach of our State and local 
consumer protection authorities. Given the sheer size of the California 
market, it is not surprising that this technique would be adopted by 
operators who wish to retain as much legal sanctuary as possible. The 
bill will help the FTC and the States mount a coordinated attack on 
fraud and deception of this type.
  Mr. Speaker, this legislation represents a bipartisan effort of the 
House Energy and Commerce Committee and the Senate Commerce Committee. 
It also closely parallels legislation approved by the House in the 102d 
Congress. I strongly support the amended version of H.R. 868, and urge 
its prompt approval.
  Mr. Speaker, I want to commend the gentleman from Michigan, Mr. John 
Dingell chairman of our Committee on Energy and Commerce, the gentleman 
from Washington, Mr. Swift, who is chairman of the subcommittee, and 
the gentleman from Ohio, Mr. Oxley, our ranking republican member for 
the work that they have done in bringing the legislation to the floor.

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