[Congressional Record Volume 140, Number 104 (Tuesday, August 2, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: August 2, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                 CONSUMER PROTECTION TELEMARKETING ACT

  Mr. FORD. Mr. President, I ask that the Chair lay before the Senate a 
message from the House of Representatives on a 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.
  The PRESIDING OFFICER laid before the Senate the following message 
from the House of Representatives:
       Resolved, That the House agree to the amendment of the 
     Senate to the bill (H.R. 868) entitled ``An Act 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 following amendment:
       In lieu of the matter inserted by said amendment, insert:

     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.

  Mr. BRYAN. Mr. President, as chairman of the Commerce Committee's 
Consumer Subcommittee, I am extremely pleased to present for full 
Senate consideration legislation to protect consumers and legitimate 
businesses from fraudulent telemarketers. Addressing telemarketing 
fraud has been one of my legislative priorities since I entered the 
Senate. I know firsthand from my constituents of the unscrupulous 
tactics that many of these fraudulent telemarketers employ. I am 
delighted that our legislative effort, the Telemarketing and Consumer 
Fraud and Abuse Prevention Act, stands an excellent chance to become 
law this summer.
  In each Congress since I arrived in the Senate, Senator McCain and I 
have introduced legislation to combat the pernicious problem of 
telemarketing fraud. I note that in this Congress, our original Senate 
bill is cosponsored by members of the Consumer Subcommittee--Senators 
Gorton, Burns, and Dorgan--as well as Senator Bingaman. Our bill 
unanimously passed the Senate on June 30, 1993, and the text of our 
bill was substituted for the text of the House-passed telemarketing 
fraud bill, H.R. 868, sponsored by Congressman Swift. House and Senate 
staff were able to successfully resolve the differences between the two 
bills. I am pleased that the final version sends a strong message to 
fraudulent telemarketers that such conduct will not be tolerated and 
will be subject to swift enforcement action.
  While there are, of course, many legitimate telemarketers, the 
industry has also unfortunately become rife with scam artists and other 
crooked operators. Some estimates of the costs associated with such 
fraud are as high as $40 billion per year. In telemarketing fraud, 
consumers are typically offered goods and services at incredibly low 
prices, or are enticed into purchases through offers of luxury items or 
fabulous trips, at little or no cost. Consumers often are required to 
pay in advance, and are generally asked to pay by credit card.
  As we have learned, however, the offer is indeed too good to be true. 
Sometimes the items are never received, and even when delivered, the 
consumer discovers that it is not of the promised value. In some 
instances, persons are promised a valuable prize, if a purchase is 
made. The make the purchase, but never receive the prize. These 
fraudulent schemes have involved the sale of vitamins, diet aids, 
credit card protection programs, luggage, vacations, and office machine 
supplies, to name just a few.
  According to a 1992 study conducted by Louis Harris and Associates on 
behalf of the National Consumers League, over one in six Americans find 
it very difficult to resist a telephone solicitation. Coupled with the 
fact that less than one-third of the people who have been cheated out 
of money ever report their losses to authorities, it is clear that 
fraudulent telemarketing has become a lucrative business for 
unscrupulous operators to prey on innocent victims, especially the 
elderly.
  At a Consumer Subcommittee hearing that I chaired on March 18, 1993, 
the Federal Bureau of Investigations shared with us the results of a 3 
year undercover sting operation that it had conducted, appropriately 
named ``Operation Disconnect.'' The FBI's successful efforts to target 
illegal telemarketers were the result of an innovative undercover 
approach and its ability to use the telemarketer's own greed and desire 
for quick profits against him. The results of the FBI's efforts 
illustrate the need to attack this serious and growing problem from a 
variety of fronts, and to pursue coordinated law enforcement efforts 
when possible.
  Recently, the Committee has seen a new type of telemarketing fraud 
emerge involving charitable solicitations, often referred to as 
telefunding. These telefunding schemes often mirror the typical 
telemarketing prize promotion scheme, in which a caller guarantees that 
the consumer has won one of several valuable prizes or thousands of 
dollars in cash. To receive the prize, the consumer need only make a 
small contribution to a worthwhile charity. The catch, however, is that 
the consumer does not, in fact, receive a valuable prize. The small 
contribution is often a thousand dollars or more, and the only people 
that benefit from the generous contribution are the telefunders 
themselves!
  These schemes are particularly troubling because they play not only 
upon the consumer's desire to win big, but also appeal to the 
consumer's generosity and human compassion, taking advantage of the 
very qualities that should be encouraged and rewarded, not exploited. I 
have chaired two hearings on telefunding fraud--one on October 11, 1993 
in Las Vegas and another on March 24, 1994--and am pleased to note that 
testimony at those hearings indicated that our telemarketing fraud bill 
could provide assistance to the Federal Trade Committee [FTC] and the 
States in their efforts to combat telefunding fraud.
  Clearly, the time is right for passage of our telemarketing fraud 
legislation. Our legislation requires the FTC to promulgate 
telemarketing rules to prohibit deceptive and abusive telemarketing 
acts and practices. The FTC shall include in such rules a definition of 
deceptive telemarketing acts and practices. We also direct the FTC to 
develop a requirement that the telemarketer may not undertake a pattern 
of unsolicited telephone calls which the reasonable consumer would 
consider coercive or abusive of his or her privacy rights; restrictions 
on the hours when unsolicited call may be made to consumers; 
and recordkeeping requirements

  Our bill also requires the FTC to expressly prohibit credit card 
laundering. Credit card laundering is the practice by which fraudulent 
telemarketers, sometimes acting in conjunction with third-party 
intermediaries as brokers, persuade merchants with access to the credit 
card system to submit, in the name of that merchant, the fraudulent 
telemarketers' sales drafts into the credit card system. This practice 
enables the fraudulent telemarketer to avoid the safeguards the credit 
card systems and financial institutions have established to preclude 
access by the fraudulent telemarketer to the credit card system.
  The FTC's prohibition of credit card laundering should be broad 
enough to cover all of the parties involved in credit card laundering--
the fraudulent telemarketer, the merchant submitting the fraudulent 
telemarketer's sales drafts into the credit card system, and any third-
party intermediaries causing or arranging the credit card laundering. 
This credit card laundering prohibition, however, should not cover the 
activities of a legitimate servicing organization which provides 
services directly to merchants. It should not cover a practice 
expressly permitted in a valid agreement with a member of a credit card 
system or the member's authorized agent. An agreement in violation of 
the rules of the applicable credit card system should not constitute a 
valid agreement for these purposes. In addition, this prohibition 
generally should not apply to a messenger or other delivery service 
that is used by a telemarketer merely to physically transport sales 
drafts.
  Our bill also expands the FTC's authority to obtain enforcement of 
its court orders through criminal, as well as civil, contempt 
proceedings. I am pleased to note that our previous Senate-passed 
provisions extending the FTC's enforcement authority with respect to 
such issues as venue and subpoena power have been included in the 
recently completed conference on FTC reauthorization, and therefore 
need not be included in this bill.
  Additionally, our bill permits State attorneys general and other 
authorized State officials to bring civil actions in U.S. district 
courts for violations of the telemarketing rules promulgated by the 
FTC, and the FTC is permitted to intervene in such actions. This 
provision, however, in no way prohibits State officials from proceeding 
in State court on the basis of any State civil or criminal statute.
  Our bill also permits private parties to bring lawsuits to enforce 
the newly promulgated FTC telemarketing rules directly against those 
engaged in telemarketing fraud, if the amount of damages exceeds 
$50,000. This private party right of action is intended to include a 
financial institution that has incurred loss or damage. Finally, the 
bill creates jurisdiction in Federal courts for actions brought under 
the bill.
  I would like to commend my colleague on the House side, Congressman 
Swift, for his continuing interest in the issue of telemarketing fraud 
and his diligence in moving this legislation forward. I also would like 
to express my appreciation to all the Senate cosponsors of this bill--
Senators McCain, Gorton, Burns, Dorgan, and Bingaman--for the their 
able assistance.
  Mr. President, this legislation is vitally important. So often, the 
activities of the Congress seem far removed from the every day lives of 
our constituents. With the passage our bill, however, Congress will 
have acted to directly protect the consumers of all the 50 States, 
including the citizens in my own State of Nevada, from becoming 
unwilling victims of unscrupulous and fraudulent telemarketers. I ask 
for the unanimous support of my colleagues and ask that the text of 
H.R. 868 be printed in the Record.
  Mr. HOLLINGS. Mr. President, I am pleased that the Senate is 
considering H.R. 868, legislation designed to protect consumers and 
legitimate businesses from the ever-growing abuses and costs associated 
with telemarketing fraud. Such abuses cannot be permitted to go 
unchecked. According to some estimates, the costs from this fraudulent 
activity are in the billions--possibly as much as $40 billion.
  Under fraudulent telemarketing practices, consumers are frequently 
lured into purchasing goods and services with offers of investment 
opportunities, fabulous prizes, deluxe vacations, and even household 
products such as vitamins, all at little or no cost. Consumers often 
are required to pay in advance, and are generally asked to pay by 
credit card. The offer is often, however, too good to be true. 
Sometimes the item is never received, and even when delivered, the 
consumer discovers that it is not of the promised value. In some 
instances, an individual is promised a valuable prize if a purchase is 
made, but never receives the prize. In addition, the required purchase 
typically costs much more than the value of the item. The most common 
mode of telemarketing fraud is fly-by-night, boiler room, anonymous 
operators, whose contact with the consumer is limited to the telephone, 
and whose mobility and anonymity preclude the consumer from having any 
recourse if the goods are deficient or undelivered.
  Despite the difficulties in locating and pursuing fraudulent 
telemarketers, both State and Federal law enforcement agencies continue 
to report that telemarketing fraud remains high on their list of 
enforcement priorities. H.R. 868 will aid their efforts by enhancing 
the Federal Trade Commission's ability to pursue fraudulent 
telemarketers, and creating a new cause of action for State attorneys 
general and private parties with damages exceeding $50,000.
  The original Senate bill, S. 568, was favorably reported by the 
Commerce Committee on May 25, 1993, and its text was passed unanimously 
by the full Senate on June 30, 1993, as a substitute for the text of 
the House-passed telemarketing bill, H.R. 868. The telemarketing bill 
now before the Senate is the culmination of many years of efforts by 
both the Senate and House Commerce Committees and is a measure that is 
certainly ripe for passage. I commend Senator Bryan, chairman of the 
Consumer Subcommittee, for his untiring work on this bill.
  I would note also that both the House and Senate are poised, after 
more than a decade, to reauthorize the FTC. The Congress recognizes the 
important role this agency can play to increase competition in the 
marketplace and improve the lives of consumers. The Telemarketing and 
Consumer Fraud and Abuse Prevention Act confirms the commitment by this 
Congress to assist the FTC in its enforcement efforts, particularly 
with respect to telemarketing fraud.
  Mr. President, I urge my colleagues to support this important 
consumer protection measure.
  Mr. GORTON. Mr. President, as the ranking Republican of the Consumer 
Subcommittee, I am very pleased that the Senate is considering the 
conference report on the Telemarketing and Consumer Fraud and Abuse 
Prevention Act on the floor today. I was a cosponsor of S. 568, the 
Senate's companion bill which we passed on June 30, 1993 and am 
delighted that we stand prepared to enact this vital bill to protect 
American consumers from telemarketing fraud. I also want to 
acknowledge the efforts made over the last two Congresses to advance 
this legislation and applaud the work of the distinguished chairman, 
Senator Bryan and my colleague on the subcommittee, Senator McCain. I 
also wish to commend my colleague from Washington State, Representative 
Al Swift, who tirelessly pursued enactment of this legislation on the 
House side. Al is retiring at the end of this year. I will miss him as 
a friend, as well as a strong partner and very effective advocate for 
consumer issues.
  Mr. President, telemarketing is one of the fastest growing industries 
in the United States, involving more than 140,000 firms employing 2 
million people. Although the vast majority of telemarketing firms are 
legitimate, fraud is a major problem. According to a recent report by 
the House Committee on Government Operations, telemarketing 
fraud may cost Americans as much as $40 billion annually.
  One survey conducted by the National Consumers League found that 92 
percent of all Americans had been contacted about a guaranteed prize. 
Most of those who responded received no prize at all. Those who did 
receive a prize found that it was worth far less than the promised 
value.
  Combatting telemarketing fraud is particularly difficult, since scam 
artists often operate out of boiler rooms consisting of banks of phone 
lines on which solicitors place calls to likely prospects. If the scam 
artists determine that legal action by State or Federal authorities is 
imminent, the boiler room is packed up and moved to a new location. 
These criminals also avoid soliciting in the State in which they are 
located, since interstate prosecution is much tougher for State law 
enforcement officials than intrastate prosecution.
  Both the magnitude and variety of the scams and the difficulty of 
enforcement make the provisions of this bill crucial to the FTC's 
ongoing fight against telemarketing fraud. For example, pursaunt to 
this legislation, the FTC will promulgate rules clarifying what 
telemarketing practices are acceptable and establishing requirements 
and restrictions that legitimate telemarketers will follow. 
This is vital to protect every family with a telephone from becoming 
the victim of unwanted and abusive instrusions which are often coercive 
or misleading.
  Once perpetrators of telemarketing abuse or fraud are targeted, 
moreover, this bill helps the FTC shut them down. Scam artists are 
notorious for ignoring FTC ``cease and desist'' orders and are not 
afraid of the possibility of civil sanctions because their scams are so 
lucrative. By allowing for the Commission to bring criminal contempt 
charges under certain circumstances, this legislation enhances the 
sanctions available to the FTC for use against those that repeatedly 
violate Commission orders.
  As a former attorney general, I believe that one of the most 
important elements in this bill is the expansion of enforcement power 
at the State level. For the first time, State attorneys general can 
bring scam artists who have defrauded their citizens to justice, even 
when the scam artists are located outside their State. Individuals, 
too, will have standing to sue in Federal court on their own behalf, if 
the amount in controversy exceeds $50,000.
  Mr. President, the business of ripping off Americans is booming. I am 
pleased that we are moments away from passing legislation that will 
strengthen the enforcement efforts to the FTC and the States in their 
fight against telemarketing fraud.
  Mr. FORD. Mr. President, I move that the Senate concur in the House 
amendment to the Senate amendment.
  The motion was agreed to.
  Mr. FORD. Mr. President, I move to reconsider the vote by which the 
motion was agreed to.
  Mr. COHEN. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.

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