INTRODUCTION

The bills would modify law governing telephone solicitation, which is generally the process through which an organization or other person contacts a consumer (a subscriber) by telephone to sell goods or services or to ask for donations. Currently, the State governs telephone solicitation through a few provisions in Public Act 227 of 1971 (the home solicitation sales Act). Senate Bill 351 would enact the "Telephone Solicitation Act". Generally, the Act would prohibit abusive, annoying, or deceitful behavior by a telephone solicitor. This would include contacting a subscriber whose telephone number was on the most current version of the Federal Trade Commission’s do-not-call registry. The Act would require a telephone solicitor to disclose certain information about the solicitor, the organization or person on whose behalf the call was initiated, and the goods or services being offered.

The Act would allow the Attorney General (AG), if the AG believed that a solicitor violated the Act, to bring a civil action against the person to cease the unlawful behavior; however, the AG would have to notify the prospective defendant of the proposed action and, if applicable, accept an assurance from the prospective defendant that the action had been discontinued. The Act also would allow a person to bring a civil action for damages caused by a loss due to a violation of the Act. The Act would prescribe civil fines associated with violations of the Act.

Senate Bill 351 is tie-barred to Senate Bills 352 through 355, all of which are tie-barred to Senate Bill 351.

FISCAL IMPACT

Senate Bill 351 would have a positive fiscal impact on local units of government. The bill would impose civil fines ranging from $10,000 to $100,000, depending on the violation. Revenue collected from civil fines is used to support local and county law libraries. The amount of revenue for local libraries is indeterminate and dependent on the actual number of violations. The bill also would allow the AG to bring a civil action against anyone violating the bill’s provisions. The cost should be absorbable within the annual appropriations for the Department of Attorney General.

Senate Bills 352 through 355 would have no fiscal impact on State or local government.

MCL 600.2529 (S.B. 352) Legislative Analyst: Nathan Leaman

445.903 (S.B. 353) Fiscal Analyst: Joe Carrasco, Jr.

445.111 & 445.113 (S.B. 354) Nathan Leaman

484.125 (repealed) (S.B. 355) Michael Siracuse

CONTENT

Senate Bill 351 would enact the "Telephone Solicitation Act" to do the following:

-- Prohibit a telephone solicitor from making a telephone solicitation to a subscriber whose telephone number was on the most current version of the do-not-call list or including such a subscriber in a lead generation.

-- Require a telephone solicitor to disclose information about the solicitor and the organization or person on whose behalf the call was initiated at the beginning of a solicitation.

-- Prohibit a person from using an ADAD when soliciting by telephone unless the list of numbers from which the ADAD selected excluded vulnerable phone numbers or the telephone numbers of subscribers who were on the most current version of the do-not-call list.

-- Establish requirements for contracts made with a telephone solicitor.

-- Prescribe civil fines for violations under the Act.

-- Require the AG to notify a person suspected of violating the Act before initiating a civil action, issue a cease and desist order, or otherwise confer with the person to discuss the action.

-- Require the AG to accept an assurance of discontinuance provided by a person thought to have violated the Act, if applicable.

-- Allow the AG to issue to a person suspected of having information necessary to an investigation of a violation a written demand to appear and be examined under oath and to produce the information for record.

-- Allow the AG to bring a civil action to restrain a defendant by temporary or permanent injunction from engaging in the method, act, or practice considered a violation under the Act following notification.

-- Prescribe civil fines for the obstruction of an investigation or noncompliance with the legal process.

-- Allow a person that suffered a loss because of a violation of the Act to bring a civil action to recover actual damages plus reasonable attorney fees or $1,000 plus reasonable attorney fees, whichever was greater.

Senate Bill 352 would amend the Revised Judicature Act to exempt an action brought in a circuit court under Senate Bill 351 from a required $150 filing fee.

Senate Bill 353 would make a violation of Senate Bill 351 unlawful under the Michigan Consumer Protection Act.

Senate Bill 354 would amend Public Act 227 of 1971, which governs home solicitation sales, to delete certain definitions and a provision exempting telephone solicitation from the Act’s requirements.

Senate Bill 355 would repeal Public Act 206 of 1913, which defines terms related to commercial advertising by telephone.

Senate Bill 351 is described in greater detail below.

Senate Bill 351

Telephone Solicitation Defined

Under the bill, "telephone solicitation" would mean a telephone communication made for any of the following purposes:

-- To encourage the recipient to purchase, rent, receive, or invest in goods or services or contribute to a charitable organization.

-- To encourage the recipient to provide personal information, including identity, financial, or preferences information.

-- To encourage the recipient to accept or participate in any employment, whether temporary or permanent, contracting, investment, or other income opportunity.

-- To encourage the recipient to accept a prize promotion.

-- To encourage the recipient or a member of the recipient's family to avoid liability, legal or otherwise.

-- To obtain or attempt to obtain anything of value from the recipient with the intent to defraud, violate the Act, or commit another unlawful act.

The term would not include any of the following:

-- A telephone communication to a residential telephone subscriber with that subscriber's express verifiable authorization.

-- A telephone communication to an existing customer of the person on whose behalf the telephone communication is made, unless the existing customer is a consumer who has requested to not receive telephone communications from or on behalf of that person.

-- A telephone communication made consistent with and not in violation of any Federal or State law relating to debt collection.

-- A telephone communication to a business telephone number, unless the business has requested that it not receive telephone communications from or on behalf of that person.

"Residential telephone subscriber" or "subscriber" would mean an individual residing in the State who has a residential, wireless, or VoIP telephone service.

"Telephone solicitor" would mean a person that makes, or causes to be made, a telephone solicitation from within or outside of the State.

"Charitable organization" would mean a benevolent, educational, philanthropic, humane, patriotic, or public safety organization of persons that solicits or obtains contributions solicited from the public for charitable or purported charitable purposes. The term would not include a duly constituted religious organization.

"Express verifiable authorization" would mean a written agreement that includes all the following:

-- A signature of the subscriber being called.

-- Clear authorization that the telephone solicitor could deliver or cause to be delivered a telephone solicitation to the subscriber using an ADAD, a recorded message, or a prerecorded voicemail.

-- The telephone number to which the subscriber authorized a telephone solicitation to be delivered.

-- A clear and conspicuous disclosure that informed the subscriber that the subscriber authorized the solicitor to deliver or caused to be delivered a solicitation to the subscriber using an ADAD, a recorded message, or a prerecorded voicemail and that the subscriber was not required to sign the written agreement.

Telephone Solicitation Restrictions

The bill would prohibit a telephone solicitor from making a telephone solicitation to a residential telephone subscriber whose home or wireless telephone number was on the most current version of the do-not-call list.¹ This provision would not apply to a solicitation made on behalf of a charitable organization if the telephone solicitor were either 1) a volunteer working under the direct supervision of an employee of the charitable organization or 2) an employee of the charitable organization.

The bill also would prohibit a person from using the telephone number of a residential telephone subscriber that was on the most current version of the do-not-call list in a lead generation. "Lead generation" would mean the sourcing, sale, subscription, leasing, renting, distribution, purchase, wholesaling, or transfer of a list of telephone numbers utilized or intended to be utilized for telephone solicitations.

Additionally, the bill would prohibit a person from making a telephone solicitation using a recorded message in whole or in part.

Under the bill, there would be a rebuttable presumption that a telephone solicitation made to any telephone number with an area code of the State was made to a residential telephone subscriber.

Telephone Solicitation Requirements

The bill would require, at the beginning of a telephone solicitation, the organization or other person on whose behalf the call was initiated to ensure that the telephone solicitor stated the telephone solicitor's true first and last name and the full name, address, and telephone number of the organization or other person on whose behalf the call was initiated. A volunteer or employee of a charitable organization also would have to give this information.

The organization or other person for whom a call was initiated would have to ensure that an individual was available to answer the telephone number provided during a soliciting call at any time during traditional business hours between 9 AM and 5 PM local time at the subscriber's residence. Furthermore, the organization or other person would have to ensure that the individual answering the telephone number provided callers with information to describe the purpose and operations of the organization or other person and to describe the purpose of the telephone solicitation.

The bill would prohibit a telephone solicitor from acting to interfere with a subscriber's caller identification service or to otherwise misrepresent the location of origin of a telephone solicitation or the identity of the telephone solicitor. This prohibition would not create liability for a carrier or VoIP whose action was undertaken for the purpose of complying with a wireless local number portability requirement promulgated by the Federal Communications Commission. ("VoIP" would mean a type of telephone communication service utilizing voice over internet protocol or otherwise utilizing the internet to generate, send, or receive telephone communications).

Telephone Solicitation Requirements; ADAD

Under the bill, "ADAD" would mean any device or system of devices that is used, whether alone or in conjunction with other equipment, for the purpose of automatically selecting or dialing telephone numbers.

A person could not use an ADAD when soliciting by telephone unless the list of numbers from which the ADAD selected excluded vulnerable phone numbers or the telephone numbers of subscribers who were on the most current version of the do-not-call list.

"Vulnerable telephone number" would mean any of the following:

-- An emergency telephone number.

-- A telephone number of a hospital, medical physician or service office, health care facility, or health care provider.

-- A telephone number of a governmental entity.

-- A telephone number of a school or educational facility.

This prohibition would not apply to a telephone solicitation if any of the following applied:

-- The telephone solicitation was made to a subscriber with that subscriber's express verifiable authorization.

-- The telephone solicitation was made to an existing customer of the person on whose behalf the telephone communication was made, unless the existing customer was a consumer who had requested to not receive telephone communications from or on behalf of that person.

-- The telephone solicitation was made by a representative of an entity using an emergency telephone number.

-- The telephone solicitation was made by a representative of a school or educational facility if the subscriber were an employee, student, or student's guardian or family member of the school or educational facility.

-- The telephone solicitation was made consistent with any Federal or State law relating to debt collection.

Telephone Solicitation Requirements; Contracts

A contract made in accordance with a telephone solicitor would have to satisfy all the following requirements:

-- Be in writing and signed by the subscriber.

-- Contain the name, address, and business telephone number of the seller, the total price of the contract, and a detailed description of the goods or services being sold.

-- Contain a description of goods or services that was the same as the description principally used in the telephone solicitation.

-- Contain, in bold, conspicuous type immediately preceding the signature the words: "You are not obligated to pay any money unless you sign this contract and return this contract to the seller".

-- Contains all oral or written representations made by the telephone solicitor to the subscriber in connection with the transaction.

A contract made in accordance with a telephone solicitation that did not comply with these requirements would be invalid and unenforceable against a consumer; however, these requirements would not apply to a sale for which the following applied:

-- A prior payment was not made.

-- An invoice accompanied the goods or services.

-- A subscriber was allowed seven days to cancel the services or return the goods without obligation for payment.

It also would not apply to a contractual agreement that required payment and allowed the subscriber at least 10 days to cancel the contract and receive a full refund of the payment.

Violations; General

The bill specifies certain actions that would be considered violations under the Act. Generally, this would include actions that annoyed, harassed, or abused a subscriber, as well as misleading, misrepresentative, or otherwise deceptive actions. A telephone solicitor that failed to comply with the requirements of the Act, including the required disclosure of certain information, also would be considered to have violated the Act.

A violation of a Federal law, rule, or regulation relating to the subject matter of the Act also would be considered a violation.

Generally, each telephone communication committed by a person could be considered a separate violation. A singular telephone communication could generate multiple separate violations.

Violations; Vulnerable Individuals and Telephone Numbers

A person that knowingly used, or had knowingly used, a method, act, or practice that targeted vulnerable individuals and was in violation of the Act would be subject to a civil fine of up to $50,000 for each violation, or $75,000 for each persistent and knowing violation. ("Vulnerable individual" would mean an individual who is 75 years of age or older or an individual who has one or more disabilities).

A person that knowingly used, or had knowingly used, a method, act, or practice that targeted or mimicked vulnerable telephone numbers and was in violation of the Act would be subject to a civil fine of up to $75,000 for each violation, or $100,000 for each persistent and knowing violation.

When determining the amount of the civil fine to be imposed for a person that knowingly used or had knowingly used such a method, act, or practice, the court could consider the following:

-- The good or bad faith of the person as it related to the violation.

-- The injury to the public.

-- The person's ability to pay.

-- The public's interest in eliminating the benefits derived by the person from the violation.

-- The necessity of vindicating the authority of the State.

-- The public's interest in deterring future similar methods, acts, or practices.

The civil fines recoverable by the State under these provisions would be in addition to any other available civil fine and relief available under the Act and other laws, regulations, or rules.

Violations; Notification and Assurance of Discontinuance

If the AG had probable cause to believe that a person’s method, act, or practice was unlawful under the Act, the AG would have to notify that person of possible action and 1) give the person an opportunity to cease and desist from the alleged unlawful method, act, or practice or 2) to confer with the AG in person, by counsel, or by other representative as to the proposed action before the proposed filing date. This notice would have to be given to the person by mail, postage prepaid, to the person's usual place of business or, if the person did not have a usual place of business, to the person's last known address. If the person were a corporation, the notice could be sent only to a resident agent who was designated to receive service of process or to an officer of the corporation. A court could waive these requirements on good cause, at least 10 days before the commencement of the action.

If the AG had authority to bring a civil action or proceeding, the AG could accept an assurance of discontinuance of a method, act, or practice that was alleged to be unlawful from the person that was alleged to have engaged, was engaging, or was about to engage in the method, act, or practice. Such an assurance would not be an admission of guilt and could not be introduced in any other proceeding. The assurance could include a stipulation for any of or all the following:

-- The voluntary payment by the person for the costs of investigation and reasonable attorney fees.

-- An amount to be held in escrow pending the outcome of an action.

-- An amount for restitution to any aggrieved individual.

An assurance of discontinuance would have to be in writing and filed in the circuit court of Ingham County. The clerk of the circuit court would have to maintain a record of the filings. Unless rescinded by the parties or voided by the circuit court for good cause, the assurance could be enforced in the circuit court by the parties to the assurance. The assurance could be modified by the parties under an agreement by all parties in writing or by a court for good cause.

Violations; Investigation

If the AG had reason to believe that a person had information or was in possession, custody, or control of any document or other tangible object relevant to an investigation for a violation of the Act, the AG could serve on the person, before bringing a civil action, a written demand to appear and be examined under oath, and to produce the document or object for inspection and copying. A demand would have to meet the following requirements:

-- The demand would have to be served on the person in the manner required for service of process in the State.

-- The demand would have to describe the nature of the conduct constituting the violation under investigation.

-- The demand would have to describe the document or object with sufficient definiteness to permit the document or object to be fairly identified.

-- If requested, the demand would have to contain a copy of the written interrogatories.

-- The demand would have to prescribe a reasonable time at which the person would have to appear to testify, within which to answer the written interrogatories, and within which the document or object would have to be produced, and advise the person that objections to or reasons for not complying with the demand could be filed with the AG on or before that time.

-- The demand would have to specify a place for the taking of testimony or for production and designate the individual who was custodian of the document or object.

Any procedure, testimony taken, or material produced would have to be kept confidential by the AG before bringing a civil action against a person under the Act for a violation, unless this information had become a matter of public record in an enforcement proceeding or confidentiality was waived by the person being investigated and by the person that had testified, answered interrogatories, or produced material. The AG could disclose any testimony taken or material produced to assist a State, local, or Federal government official with an investigation of a violation of a similar telephone privacy and consumer protection law.

At any time before the return date specified in the demand for information, or within 14 days after notice of the demand, whichever was shorter, a person from whom information had been requested could petition the circuit court of Ingham County, stating good cause, for a protective order to extend the return date for a reasonable time, or to modify or set aside the demand. The AG would have to receive at least 14 days' notice of such a petition and be given an opportunity to respond.

If no protective order from the circuit court of Ingham County were secured and the demand was not complied with by the return date, the AG, on notice to the person requested to provide information, could apply to the court for an order compelling compliance with the request.

Violations; Prosecution

If the AG had probable cause to believe that a person had engaged, was engaging, or was about to engage in a method, act, or practice that was unlawful under the Act and gave notice as required (see Violations; Notification and Assurance of Discontinuance), the AG could bring a civil action to restrain the defendant by temporary or permanent injunction from engaging in the method, act, or practice.

A civil action could be brought in the circuit court of the county where the defendant was established or conducted business or, if the defendant were not established in the State, in the circuit court of Ingham County. The court could award costs to the prevailing party. For each violation, the court could assess the defendant a civil fine of up to $25,000.

It would be a defense to a claim brought under the Act that a practice engaged in or a communication made was not a telephone solicitation. The burden of proof would be on the person claiming the communication was not a telephone solicitation.

A court, on a showing by the AG that there were reasonable grounds to believe that the provisions of the Act were being, had been, or were about to be violated; that the person violating the Act or that possessed the relevant documentary material had left the State or was about to leave the State; and that an order to comply would be necessary for the enforcement of the Act, could order the person to comply with the AG’s demand to appear and be examined under oath, and to produce the document or object for inspection and copying, whether the AG had made a prior demand for information or not.

The court could, immediately and without notice, forbid the concealment, withholding, destruction, or alteration by any other means of a documentary material in the possession, custody, or control of a person believed to be connected with methods, acts, or practices that violated the Act. A person that had received notice of a demand for information but concealed, withheld, destroyed, or otherwise altered any relevant documentary material would be subject to a civil fine of up to $10,000 per violation, recoverable by the State in addition to any other appropriate sanction.

Any compliance with a demand for information or an order to compel compliance would not create liability for a carrier or VoIP by a subscriber to whom the information related.

A person served would have to comply with the terms of the notice unless otherwise provided by an order of the circuit court. A person that did any of the following would have to pay a civil fine of up to $10,000:

-- Knowingly and without good cause failed to appear as provided in the notice.

-- Knowingly avoided, evaded, or prevented compliance with an investigation under the Act.

-- Knowingly concealed relevant information in an investigation under the Act.

[1] "Do-not-call list" would mean the national Do-Not-Call Registry maintained by the Federal Trade Commission.