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ACT OF THE GENERAL ASSEMBLY 2007-2008

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NO. 134.  AN ACT RELATING TO TELEMARKETING.

(H.306)

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1.  FINDINGS AND PURPOSE

(a)  Findings. 

(1)  Title 9 V.S.A. section 2464, which is part of the Consumer Fraud Act, was enacted in 1997 in response to complaints about certain telemarketing practices.  Specifically, a fraudulent telemarketer, often based in another country, would charge a Vermonter’s bank account.  The only piece of information needed to do this was the code number at the bottom of the consumer’s check, known as a “MICR” code.  Armed with that information, the telemarketer would hire a U.S.-based third-party processor to (a) print up unsigned checks, called “demand drafts,” to deposit into the telemarketer’s own bank account; or (b) electronically withdraw funds from the consumer’s account, using an “automated clearing house” or “ACH” debit.

(2)  Although such debits are often used, they are usually not reported because many consumers do not know that their bank accounts can be charged without their permission.  One court action brought by the Attorney General’s Office (along with several other states and the Federal Trade Commission) against a third-party processor began with a single complaint from an elderly consumer’s daughter who found an unauthorized charge on her mother’s bank statement, which in turn led to the discovery of a handful of other related complaints and over 100 times that number of Vermont victims.

(3)  Fraudulent telemarketers obtain bank account numbers by tricking consumers, by promising goods and services that they do not deliver, and by buying lists of past victims’ account information.

(4)  Existing law provides protections for Vermont consumers against this type of fraud.  If a telemarketer wishes to charge a Vermonter’s bank account using a demand draft, the telemarketer must first obtain written permission.  If the telemarketer wishes to charge the consumer’s account with an ACH debit, the telemarketer can only do so based on an inbound call from the consumer, or based on a prior business relationship with the consumer, but in either event, the telemarketer must also confirm the consumer’s consent, typically with a digital voice recording.  Third-party processors hired by telemarketers must follow the same standards.

(5)  Nonetheless, there are two gaps in existing law.  The first is that when telemarketers confirm a consumer’s consent to an ACH debit, they usually do so by recording just a short “verification” portion of their telemarketing call, which has little information on it and often does not reveal what the consumer is consenting to; recording the entire call instead would resolve this problem.  The second gap is that there may be a delay of years before a fraudulent telemarketer’s debits to Vermonters’ bank accounts are discovered, so it is important for state investigators to be able to check telemarketing and processor records going back more than the two years that they are now required to be kept.

Sec. 2.  9 V.S.A. § 2464(a)(4) is amended to read:

(4)  “Telemarketer” means any person who initiates telephone calls to, or who receives telephone calls from, a consumer in connection with a plan, program, or campaign to market goods or services. The term “telemarketer” does not include:

* * *

(C)  Any person who initiates telephone calls to or who receives telephone calls from a consumer in connection with collection of an amount due for goods or services previously provided to the consumer.

(D)  Any company registered with and regulated by the public service board.

(E)  Any other category of persons that the attorney general may exempt by rule consistent with the purposes of this section.

Sec. 3.  9 V.S.A. § 2464(a)(1) is amended to read:

(1)  “Express oral authorization” means that a consumer has explicitly authorized an electronic funds transfer from his or her financial account for goods or services offered by a telemarketer:

(A)  during a telephone call in which the telemarketer has clearly stated that the consumer is authorizing the transfer from his or her account, and has further stated the consumer’s name, a description of the specific goods or services offered, any material terms of the transaction, the date on or after which the account will be debited, the amount of the transfer, a telephone number for consumer inquiries that is answered during normal business hours, and the date of the authorization; and

(B)  where the telemarketer has either tape-recorded the consumer’s authorization entire telemarketing call on which the consumer has authorized the transaction and not disposed of the recording until at least two four years after the authorization, or has provided written notice to the consumer, prior to the settlement date of the transfer, confirming the terms of the authorization as described in subdivision (A) of this subdivision (2), (1) and has not disposed of the written notice until at least four years after the notice was created.  Isolated and inadvertent failure to comply with this record-keeping requirement shall not give rise to liability under this subsection, provided that the telemarketer has in place reasonable procedures designed to comply with this requirement.

Sec. 4.  9 V.S.A. § 2464(b)(2) is amended to read:

(2)  to obtain or submit for payment a check, draft, or other form of negotiable instrument drawn on a person’s financial account without the consumer’s prior written authorization or to dispose of the written authorization until at least four years after the authorization.

Sec. 5.  9 V.S.A. § 2464(e) is added to read:

(e)  It is an unfair and deceptive act and practice in commerce for a party other than a federally insured depository institution who processes a telemarketing transaction for payment from a consumer’s financial account to:

(1)  fail to obtain, before processing the transaction, any prior written authorization required by subdivision (b)(2) of this section or any tape recording or copy of a written confirmation required by subdivision (b)(3) of this section as part of the consumer’s express oral authorization; or

(2)  dispose any document required by subdivision (1) of this subsection, or of telemarketer applications or agreements, records of payments processed or returned, electronic communications relating to telemarketers, consumer complaints, or any other category of record that the attorney general may prescribe by rule, until at least four years after the records were created.

Approved:  May 9, 2008



Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont


www.leg.state.vt.us