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An act relating to telemarketing

The Senate proposes to the House to amend the bill as follows:

First:  By adding two new sections to be numbered Secs. 1 and 2 to read as follows:


(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.

     And by renumbering the remaining sections of the bill to be numerically correct.

Second:  In renumbered Sec. 3, 9 V.S.A. § 2464(a)(1)(B), at the end after the period by adding 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.

Third:  In renumbered Sec. 5, in 9 V.S.A. § 2464(e), by striking out the following: “federally-insured” and inserting in lieu thereof the following: federally insured and by striking out subdivision (1) in its entirety and inserting in lieu thereof a new subdivision (1) to read as follows:

(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

Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont