Brief⁽¹⁾

Sub. for S.B. 573 would amend the Kansas Consumer Protection Act and Telemarketing Fraud Act to make all telecommunications service providers comply with the statutorily prescribed procedures for telephone solicitations and telemarketing practices. Under existing law, telecommunications service providers having pre-existing business relationships with a consumer would be exempted from the provisions of these acts with respect to any telephone solicitations of, or telemarketing transactions with, that consumer. Moreover, the Kansas Consumer Protection Act and Telemarketing Fraud Act would exempt from their requirements any business which purchased or acquired a business which had a pre-existing business relationship with the solicited consumer. Under existing law, there is no provision for exempting such a business from these requirements.

In addition, the bill would amend the Telemarketing Fraud Act to allow consumers at least seven days, regardless of the date of receipt, to review goods or services resulting from a telemarketing transaction and decide whether to keep the merchandise or return it for a refund. The return and refund privilege must be disclosed to the consumer both by telephone and in writing. The bill also would prohibit a telephone solicitor from obtaining a consumer's payment unless the consumer has been afforded the opportunity of inspecting any goods delivered to the consumer.

Under existing law, the consumer only has seven days after receipt of such goods or services to return the goods or cancel the services in order to qualify for a full refund. Disclosure of a consumer's return and refund privilege need only be made by telephone or in writing. Moreover, existing law does not require that collection of a consumer's payment be conditioned upon an opportunity to inspect delivered goods.

The bill would change the word "immediately" to "promptly," modifying the telephone solicitor's required discontinuance of any solicitation to which the consumer gives a negative response.

Furthermore, the bill would include the provisions of H.B. 2745. It would amend the Kansas Consumer Protection Act pertaining to the requirements and penalties governing violations of transactions involving "door-to-door sales," by excluding from those transactions sales that occur at the Kansas State Fair by an authorized vendor at the state fairgrounds. "Door-to-door sales" involve a sale, lease, or rental of property or services at a purchase price of $25 or more. The transaction occurs at a place other than the supplier's place of business.

Sub. for S.B. 573 also would include the provisions of Sub. for Sub. for H.B. 2649. These provisions would amend the Kansas Consumer Protection Act to prohibit "slamming"--the practice of a carrier switching a consumer's primary long distance carrier or local exchange carrier or adding other telecommunications services without obtaining the consumer's express authorization. Specifically, the anti-slamming provisions are:

Burden of Proof. The carrier requesting the change of carrier or change or addition of service would have the burden of proving express authorization by clear and convincing evidence. "Express authorization" is defined in the bill as an express, affirmative act by a consumer clearly agreeing to the change in the consumer's primary long distance carrier or local exchange carrier or to change or add to the consumer's other telecommunications services.

Prohibited Solicitation and Verification Methods. Local exchange carriers, telecommunications carriers, or any third-party verification entity would be prohibited from soliciting or verifying changes in carrier or changes or additions to service that could be potentially misleading, deceptive, or confusing. Other prohibited procedures for inducing a consumer's change in service or carrier would include: the use of a box to collect sweepstakes, contests, or drawings to gather authorization for change in carrier or change or addition to services; and methods not approved by the Federal Communications Commission or Kansas Corporation Commission.

Carrier's Liability to Consumer. Any carrier in violation of the Act would be required to refund to a consumer any amounts collected or credit any unpaid amounts resulting from slamming. Moreover, the bill would require the carrier to restore to a consumer any premiums the consumer may have forfeited through slamming.

Notice of Change. Within three business days of submitting an order to change a consumer's carrier, the carrier making the change would have to mail the consumer a letter describing the authorized change. The letter would have to contain information specified in the bill.

Penalties. Any carrier in violation of the Act would be subject to a civil penalty of not less than $5,000, nor more than $20,000, for each violation. The bill also would authorize the Kansas Corporation Commission to pursue any other sanctions deemed necessary to respond to a carrier's violations of the Act. Moreover, the Attorney General would be authorized to pursue violations of the other sections of the Kansas Consumer Protection Act.

Background

The introduced version of S.B. 573 was requested by Direct Marketing Association in an effort to conform state telemarketing law more closely to federal law. That version of the bill would have repealed a portion of the Kansas Consumer Protection Act related to telecommunications solicitations and would have incorporated certain provisions of the repealed statute, in modified form, into a new section related to telemarketing procedures.

The Senate Commerce Committee amended the bill to retain from the introduced version two changes related to the seven-day review period and the use of "promptly" instead of "immediately." According to a spokesperson for Direct Marketing Association, the proposed change initiating the review period would afford consumers greater protection in that they may be traveling or in the hospital and therefore may be unable to review the product within seven days after it is received. The amendment requiring all telecommunications service providers to comply with statutorily-prescribed telemarketing procedures was requested by a spokesperson for Sprint to ensure that more established telecommunications service providers would not have an unfair marketing advantage over providers with less established customer bases. The language referring to a solicitor's successor was included by the Committee to ensure that a successor business was not penalized if it elected to call or transact business with a consumer with whom the purchased business had a business relationship.

The Senate Committee of the Whole amended the bill to make the language more grammatical.

The House Committee on Business, Commerce, and Labor included the prohibition against telephone solicitors obtaining a consumer's payment until the consumer has been afforded the opportunity of inspecting any goods delivered to the consumer. Moreover, disclosure of a consumer's return and refund privilege need be made by telephone and in writing. A House Committee's amendment also applies statutorily prescribed procedures for telephone solicitations to independent contractors of telecommunications service providers.

The House Committee of the Whole amended existing law to incorporate provisions of H.B. 2745, which would exclude sales transacted on state fairgrounds during the Kansas State Fair from the definition of "door-to-door sales." In addition, the House Committee of the Whole incorporated the provisions of Sub. for Sub. for H.B. 2649 pertaining to slamming.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext-bill.html.