Nebraska Gov. Signs Ban on Prize-Promotion Fees

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Nebraska Gov. Mike Johanns said Monday that he signed a bill on March 1 banning direct mailers and telemarketers from charging consumers fees in prize promotions.

Violations of the law, known as the Telemarketing and Prize Promotions Act, will carry civil fines of up to $2,000 per violation and would take effect 90 days after the end of the current legislative session, scheduled for June 1. The bill, introduced by state Sen. Douglas A. Kristensen, also makes it illegal to misrepresent the source of a prize notice or the value of a prize.

Similar state laws exist in Kansas and Iowa. The bill mirrors a federal law that also makes it illegal for marketers to require consumers to pay a fee before receiving a prize, said Tyler Prochnow, state legislative counsel for the American Teleservices Association.

Charging money for participation in prize contests essentially creates an illegal lottery, Prochnow said. Those who violate the federal ban on upfront fees for prize promotions may face penalties of up to $2 million.

"No legitimate prize operator requires an upfront fee," Prochnow said.

Creating a state ban on prize fees empowers the state attorney general to pursue charges against fraudulent prize promoters who sometimes escape the notice of federal authorities, Prochnow said.

A spokeswoman for Kristensen said fraudulent prize promotions are the source of one of the 10 most common complaints made to the Nebraska attorney general's office. However, the attorney general currently has no power to pursue legal action against fraudulent prize promoters.

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