On May 24, Louisiana Gov. M.J. Foster signed House Bill 175 into law, creating a state do-not-call list to be implemented by Jan. 1. Though it resembles laws enacted in a score of states, the Louisiana law differs from all previous state do-not-call list laws in an important way: It requires all purchasers of the list to post a $20,000 bond to be applied to penalties for future violations.
This is one of the most onerous provisions possible in this type of law. It requires that potential speakers either access credit or deposit $20,000 to exercise their free-speech rights. Even if no penalty is ever assessed to a given caller, that caller is either paying a premium to maintain that bond or holding a significant amount of money in an account unusable to pay salaries, buy computers or use for other legitimate functions. Callers are thus punished by having to pay a premium or tie up money for violations that may never occur. The bond is in addition to a fee that the Louisiana Public Service Commission is directed to charge telemarketers for the cost of implementing the list. If a business does not have established credit and cannot deposit $20,000 in a secured account, it is out of luck.
The law gives little indication why the legislature adopted such a dramatic change from other state laws on the topic, merely stating that “there is a compelling state interest to protect the privacy of such subscribers who wish to avoid unsolicited and unwanted telephone solicitations.” It does not address why telemarketers need to be punished in advance of any potential violation, nor does it give any evidence that the state would be unable to punish future violations if a bond were not posted or that other states have experienced difficulty in collecting penalties.
The law also requires that every telephone company notify its subscribers of the new law and sets a $5 fee for consumers to sign onto the list for a five-year period. The law allows the commission to impose a $1,500 penalty per violation but does not allow individual consumers to sue to enforce the law themselves.
The bonding provision in this law is constitutionally suspect. Courts rarely allow such a sizable price tag upon the enjoyment of a constitutionally guaranteed freedom. Further, it is unlikely that a court would uphold a law that silenced some speech and allowed others based on the speaker’s credit rating.
The Texas Legislature has passed another do-not-call bill and sent it to the governor for signature as of the writing of this column. Texas House Bill 472 directs the Public Utilities Commission to establish the list and charge consumers not more than $3 for a three-year period. The bill allows the commission to charge telemarketers up to $75 per quarter to receive the list and provides for enforcement by individual consumers.
The bill also prohibits telemarketers from blocking the identity of their numbers from caller-ID devices if the caller has the capability to provide such information. The bill specifically states that it is not a violation to use equipment that does not have the capability to transmit caller-ID information.
Finally, the Texas bill prohibits faxing solicitations to people who have notified the sender that they do not wish to receive further faxes from the sender. The bill requires that senders of facsimile solicitations clearly disclose the correct and complete name of the sender and a toll-free or local telephone number that is answered at all times between 9 a.m. and 5 p.m. weekdays for questions concerning the solicitations. The bill allows administrative enforcement and enforcement by individual consumers.
As you may know, the Federal Telephone Consumer Protection Act already contains stringent rules concerning unsolicited faxes and allows recipients to sue for liquidated damages for violations of the law.
On another regulatory front, a new law in Arizona substantially changes who is required to register as a commercial telemarketer. Senate Bill 1254, effective Aug. 9, changes Arizona from a state that required registration only if certain representations were made in the script to a state that requires all telemarketers, absent an exemption, to register.
Before this amendment, Arizona’s telemarketing law defined “seller” as a “person who made an offer or hired a solicitor to make an offer, which involved a prize or gift, loss recovery services, or advance-fee loans.” The law then went on to exempt many of the types of businesses most states’ laws also exempt. Telemarketers, exempt or not, that did not make this type of solicitation were not “sellers” and were not required to register. Arizona’s law was similar to those found in “prize” states, including California, Nevada and several others.
The new law, however, changes the definition of “seller” to any person who “initiates telephone calls to provide or arrange to provide goods or services to consumers in exchange for payment.” The law still contains many standard exemptions for certain types of products and businesses, e.g., face-to-face sellers and some businesses operating retail establishments, and requires only a limited registration (no fee or bond and limited filing) for certain other types of businesses, such as regulated financial institutions and publicly traded companies.
Arizona has always been active in enforcement of consumer protection laws in general and specifically telemarketing laws. It would be wise to review your activities in the state in the near future. In all likelihood, you will only have to file the limited registration statement that can be submitted electronically, saving even the cost of a stamp.