N.Y. General Business Law § 399-pp: Telemarketing and consumer fraud and abuse prevention act

§ 399-pp. Telemarketing and consumer fraud and abuse prevention act.

1. Legislative findings and declaration. The legislature finds and

declares that the prevention of deceptive and unfair practices in

association with telemarketing is in the public interest and subject to

the authority of appropriate political subdivisions of the state for the

purpose of protecting the public against fraud, deception and other

abuses. The legislature intends that the federal telemarketing and

consumer fraud and abuse prevention act (P.L. 103-297) be fully

enforceable by appropriate state and local enforcement officials.

The legislature further declares that additional requirements

applicable to the telemarketing industry not present in the federal

statute are necessary to protect residents of the state and others from

telemarketing abuses. The legislature therefore intends that provisions

in this section which differ from the aforementioned federal act and

other New York state laws regulating telemarketing be construed whenever

reasonable as providing additional protections to victims of

telemarketing fraud.

2. Definitions. As used in this section, the following terms shall

have the following meanings:

a. "Applicant" means a person seeking a certificate of registration or

to renew a certificate of registration under this section.

b. "Customer" means any person who is or may be required to pay for or

to exchange consideration for goods and services offered through

telemarketing.

c. "Goods or services" means any goods or services, and shall include

any real property or any tangible or intangible personal property or

services of any kind.

d. "Investment opportunity" means anything tangible or intangible,

that is offered for sale, sold, or traded based wholly or in part on

representations, either express or implied, about past, present, or

future income, profit, or appreciation.

e. "Person" means any natural person, association, partnership, firm,

corporation and its affiliates or subsidiaries or other business entity.

f. "Premium" means anything offered or given, independent of chance,

to customers as an incentive to purchase or otherwise contract for goods

or services offered through telemarketing.

g. "Principal" means any person participating in or responsible for

the management of a telemarketer's business, whether or not the position

is compensated, including but not limited to an owner in the case of a

sole proprietorship, an officer, director or stockholder holding more

than ten percent of the outstanding stock in the case of a corporation,

a partner in the case of a partnership, and a manager or member in the

case of a limited liability company.

h. "Prize" means anything offered or purportedly offered and given or

purportedly given to a person by chance. For purposes of this

definition, chance exists if a person is guaranteed to receive an item

and, at the time of the offer or purported offer, the telemarketer does

not identify the specific item that the person will receive.

i. "Prize promotion" means a sweepstakes or other game of chance or an

oral or written, express or implied representation that a person has

won, has been selected to receive or is eligible or may be eligible to

receive a prize or purported prize.

j. "Telemarketer" means any person, who, for financial profit or

commercial purposes in connection with telemarketing, either initiates,

or initiates and receives telephone calls to or from a customer when the

customer is in this state or any person who directly controls or

supervises the conduct of a telemarketer. For the purposes of this

section, "commercial purposes" shall mean the sale or offer for sale of

goods and services.

k. "Telemarketing" means any plan, program or campaign which is

conducted to induce payment or the exchange of any other consideration

for any goods or services by use of one or more telephones and which

involves more than one telephone call by a telemarketer in which the

customer is located within the state at the time of the call.

Telemarketing does not include the solicitation of sales through any

media other than by telephone calls.

l. "Secretary" shall mean the secretary of state.

m. "Department" shall mean the department of state.

n. "Caller identification information" means information provided by a

caller identification service regarding the telephone number and name of

the person calling.

o. "Caller identification service" means a service that allows a

telephone subscriber to have the telephone number, and, where available,

name of the calling party transmitted contemporaneously with the

telephone call, and displayed on a device in or connected to the

subscriber's telephone.

3. Registration of telemarketers. a. No person shall act as a

telemarketer without first having received a certificate of registration

from the secretary as provided in this section. Employees of

telemarketers shall be exempt from the requirements of this paragraph

and paragraph b of this subdivision.

b. No person required to register pursuant to paragraph a of this

subdivision shall act as a telemarketer without holding a valid

certificate of registration from the secretary as provided in this

section.

c. Any applicant shall file with the department an application for a

certificate of registration in such form and containing such information

as the secretary shall prescribe, including the following:

(1) the applicant's name, address and telephone number;

(2) each business name under which the applicant engages in or intends

to engage in telemarketing, if such name is different than the

applicant's;

(3) the complete street address and primary telephone number of each

location, designating the principal location, from which the applicant

engages in or intends to engage in telemarketing, including each

location at which mail will be received by or on behalf of the

applicant, and identifying any such location that is a post office box

or mail drop;

(4) the name, address and telephone number of each principal of the

business;

(5) whether the applicant or any principal thereof has been convicted

or plead guilty to or is being prosecuted by indictment or information

for racketeering, violations of securities laws, or a theft offense of

any state, or the United States;

(6) whether any injunction or judgment has been entered into against

the applicant or any principal, or such applicant or principal has

entered into a settlement agreement, assurance of discontinuance,

consent decree or any similar instrument in any civil action involving

theft, racketeering, embezzlement, conversion, misappropriation of

property, fraud, or deceptive, unfair, illegal or unconscionable trade

practices, and whether any civil action involving such practices is

currently pending, to the extent not inconsistent with any existing

court orders; and

(7) whether the license to engage in any business, trade or profession

of the applicant or any principal thereof has been refused, suspended or

revoked in any jurisdiction.

d. Upon receipt of the completed application for registration and

required fee, and unless such certificate of registration has been

denied as provided in subdivision five of this section, the secretary

shall issue and deliver to the applicant a certificate in such form and

manner as the secretary shall prescribe, but which must set forth the

applicant's name, business address, and the effective term of the

registration. A registration certificate issued or renewed under the

provisions of this section shall entitle a person to act as a registered

telemarketer for a period of two years from the effective date of the

registration.

e. Any registration granted under this section may be renewed by the

secretary upon application by the holder thereof, in such form as the

secretary may prescribe. The secretary shall have the authority to

assign staggered expiration dates for licenses at the time of renewal.

If the assigned date results in a term that exceeds two years, the

applicant shall pay an additional pro-rata adjustment together with the

fee prescribed in paragraph f of this subdivision.

f. Each application for a certificate of registration shall be

accompanied by a fee of five hundred dollars, which shall not be

refundable.

g. The fees collected pursuant to this subdivision shall be deposited

to the credit of the business and licensing services account established

pursuant to the provisions of section ninety-seven-y of the state

finance law.

h. Any person holding a certificate of registration shall be required

to provide notice of any change in the information required of

applicants by this section, in such form and manner, and within such

time period as the secretary shall prescribe.

i. No person required to be registered under this subdivision shall be

entitled to enforce any agreement or seek any consideration or any other

payment for goods and services offered through telemarketing unless such

person is in compliance with this subdivision and subdivision four of

this section.

j. The secretary shall prescribe rules and regulations to administer

this subdivision and subdivision four of this section.

4. Bonding of telemarketers. a. Any applicant shall, at the time of

any original application for a certificate of registration, file with

the secretary, in the form and amount as prescribed in this subdivision

and satisfactory to the secretary:

(1) A bond with a corporate surety, from a company authorized to do

business in this state; or

(2) An irrevocable letter of credit or a certificate of deposit from a

New York state or federally chartered bank, trust company, savings bank

or savings and loan association qualified to do business in New York

state and insured by the federal deposit insurance corporation.

b. Such bond, letter of credit, or certificate of deposit shall be

maintained for three years from the date the telemarketer ceases

telemarketing, or three years from the date the certificate of

registration terminates, whichever is earlier.

c. The principal sum of the bond, letter of credit, or certificate of

deposit shall be twenty-five thousand dollars, which shall be maintained

until the period specified in paragraph b of this subdivision, subject

to paragraph g of this subdivision.

d. The bond, letter of credit or certificate of deposit shall be

payable in favor of the people of the state of New York for the benefit

of any customer injured as a result of a violation of this section,

pursuant to a determination of any court of competent jurisdiction

pursuant to this section, or article ten-B of the personal property law.

e. The aggregate liability of the surety upon the bond or the banking

organization upon the letter of credit or certificate of deposit to all

persons for all breaches of the conditions of the bond shall in no event

exceed the amount of the bond, letter of credit or certificate of

deposit.

f. The bond, letter of credit or certificate of deposit shall not be

canceled, revoked, diminished or terminated except after notice to, and

with the consent of, the secretary at least forty-five days in advance

of such cancellation, revocation, or termination. Unless the bond is

replaced by another bond, letter of credit or certificate of deposit in

conformity with this subdivision prior to the expiration of the

forty-five day period, the registration of the telemarketer shall be

treated as terminated as of the cancellation, revocation or termination

of the bond.

g. The registration of the telemarketer shall be treated as terminated

as of the date the amount of the bond, letter of credit or certificate

of deposit falls below the amount required by this subdivision.

h. Any change in ownership of a telemarketer shall not release, cancel

or terminate liability under this subdivision under any bond, letter of

credit, or certificate of deposit filed for any telemarketer as to any

customer who was injured as a result of a violation of this section or

article ten-B of the personal property law while such bond, letter of

credit or certificate of deposit was in effect unless such transferee,

purchaser, successor or assignee of such telemarketer obtains a bond,

letter of credit or certificate of deposit under this subdivision for

the benefit of such customer. Nothing in this paragraph shall be

construed to authorize any telemarketer to cancel any bond, letter of

credit, or certificate of deposit where such cancellation is not

otherwise authorized by this subdivision.

5. Refusal to issue, suspension, and revocation of registration. a.

The secretary, or any person deputized or so designated by him or her

may deny the application of any person for a certificate of

registration, refuse to issue a renewal thereof, suspend or revoke such

certificate or in lieu thereof assess a fine not to exceed one thousand

dollars per violation, if he or she determines that such applicant, or

any of its principals:

(1) has made a material false statement or omitted a material fact in

connection with an application under this section;

(2) was the former holder of a certificate of registration issued

hereunder which the secretary revoked, suspended, or refused to renew;

(3) has failed to furnish satisfactory evidence of good character,

reputation and fitness;

(4) with respect to the applicant, is not the true owner of the

telemarketer, except in the case of a franchise;

(5) is in violation of or has violated any of the following statutes

and the regulations thereunder, as such statutes and regulations may

from time to time be amended:

(a) this section;

(b) article ten-B of the personal property law;

(c) the act of congress entitled the "telemarketing and consumer fraud

and abuse prevention act" (P.L. 103-297);

(6) has been convicted or plead guilty to or is being prosecuted by

indictment or information for racketeering, violations of securities

laws, or a theft offense of this state, or the United States;

(7) has had any injunction or judgment entered against him or her in

any civil action, or such applicant or principal has entered into a

settlement agreement, assurance of discontinuance, consent decree or any

similar instrument involving theft, racketeering, embezzlement,

conversion, misappropriation of property, fraud or deceptive, unfair,

illegal or unconscionable trade practices;

(8) has had a license or registration to engage in any business,

occupation or profession suspended or revoked in any jurisdiction which

may impact upon the applicant's fitness for registration under this

section; or

(9) has committed, or is committing deceptive, unfair, illegal or

unconscionable trade practices in violation of the laws of this or any

other state or the United States.

b. Any proceeding conducted pursuant to paragraph a of this

subdivision shall be subject to the state administrative procedure act.

6. Deceptive telemarketing acts and practices. a. It shall be unlawful

for any telemarketer to directly or indirectly engage in the following

conduct:

(1) fail to furnish a copy of the certificate of registration at the

request of any interested party;

(2) present or attempt to present, as their own, the registration

certificate of another;

(3) give false or misleading information;

(4) misrepresent himself or herself to be registered;

(5) use or attempt to use a registration certificate which has been

revoked, suspended or is otherwise not valid;

(6) advertise telemarketing services without having a valid

certificate of registration under this section;

(7) represent in any manner that his or her registration constitutes

approval or endorsement of any governmental agency;

(8) assist or support any person when the telemarketer or any

identified employee knew or should have known that the person was

engaged in an act or practice in violation of this section or article

ten-B of the personal property law;

(9) request a fee in advance to remove adverse information or modify

adverse information to improve a person's credit history or credit

record;

(10) except for an attorney engaged in the practice of law, request or

receive payment in advance from a person to recover or otherwise aid in

the return of money or any other item lost by the customer in a prior

telemarketing transaction;

(11) obtain or submit for payment a check, draft, or other form of

negotiable paper drawn on a person's checking, savings, share, or

similar account, without that person's express written authorization;

(12) procure the services of any professional delivery, courier or

other pickup service to obtain receipt or possession of a customer's

payment, unless the goods or services are delivered with the reasonable

opportunity to inspect before any payment is collected; or

(13) misrepresent, directly or by implication, that a premium is a

prize.

b. Telemarketers shall provide all of the following information, in a

clear and coherent manner using words with common and everyday meanings,

when making a telemarketing call:

(1) at the beginning but no later than thirty seconds from the

commencement of the call and prior to any request by the caller of the

customer to release or disclose any of the customer's personal or

financial information, including but not limited, to the customer's

name, address, credit card, checking account or other financial account

number or information:

(a) that the purpose of the telephone call is to offer goods or

services for which a fee will be charged or to provide an investment

opportunity, whichever is the case;

(b) the telemarketer's name and the person on whose behalf the

solicitation is being made if other than the telemarketer;

(c) the identity of the goods or services for which a fee will be

charged; and

(d) whether the call is being recorded.

(2) the cost of the goods or services that are the subject of the

call.

(3) in any prize promotion, the odds of being able to receive the

prize, and if the odds are not calculable in advance, the factors used

in calculating the odds; that no purchase or payment is required to win

a prize or to participate in a prize promotion; and the no purchase/no

payment method of participating in the prize promotion with either

instructions on how to participate or an address or local or toll-free

telephone number to which customers may write or call for information on

how to participate; and all material costs or conditions to receive or

redeem a prize that is the subject of the prize promotion.

7. Abusive telemarketing acts or practices. It shall be unlawful for

any telemarketer to:

a. threaten, intimidate or use profane or obscene language;

b. engage in conduct or behavior a reasonable person would deem to be

abusive or harassing;

c. initiate a telemarketing call to a person, when that person has

stated previously that he or she does not wish to receive solicitation

calls from that telemarketer provided, however that nothing in this

section shall be construed to prohibit a telemarketer from telemarketing

goods, services or investment opportunities to any customer of any

affiliate, subsidiary or parent of such telemarketer;

d. engage in telemarketing to a person's residence at any time other

than between 8:00 A.M. and 9:00 P.M. local time, at the called person's

location; or

e. make a false, deceptive or misleading statement in regard to the

requirements of subdivision six of this section to a customer, or to

engage in any deceptive or unfair act or practice in association with

telemarketing.

f. knowingly make an unsolicited telemarketing sales call to any

person in a county, city, town or village under a declared state of

emergency or disaster emergency as described in sections twenty-four or

twenty-eight of the executive law.

7-a. Unlawful transmission of certain caller identification

information. It shall be unlawful for any telemarketer or seller to

knowingly cause any caller identification service to transmit

misleading, inaccurate, or false caller identification information,

provided that it shall not be a violation to substitute (for the name

and phone number used in, or billed for, making the call) the name or

telephone number of the person or seller on behalf of which a

telemarketing call is placed.

8. Recordkeeping requirements. a. All telemarketers shall keep for a

period of twenty-four months from the date the record is produced

records of all financial transactions, written notices, disclosures and

acknowledgments, including but not limited to:

(1) records of calls resulting in a promise by the customer to pay or

otherwise exchange consideration for goods and services, including but

not limited to the name and last known address of each customer, the

goods or services selected, the date such goods were shipped or provided

and the quantity provided, the amount charged by the company for the

goods or services provided (including all other related fees or charges

of any kind, including shipping and handling fees), and the amount

actually paid by the customer for the goods and services provided;

(2) the name and last known address of each prize recipient and the

prize awarded having a value of twenty-five dollars or more; and

(3) the name, any fictitious name used, the last known home address

and telephone number, and the job title for all current and former

employees directly involved in telephone sales; provided, however, that

if the telemarketer permits fictitious names to be used by employees,

each fictitious name must be traceable to only one specific employee.

b. A telemarketer may keep the records required by paragraph a of this

subdivision in any form, and in the manner, format, or place as they

keep such records in the ordinary course of business.

c. In the event of any dissolution or termination of the

telemarketer's business, a representative of the telemarketer shall

maintain all records as required under this subdivision, which shall be

the person required to maintain such records in the event of dissolution

or termination under rules and regulations issued under the act of

congress entitled the "telemarketing and consumer fraud and abuse

prevention act" (P.L. 103-297), or any person designated by the

telemarketer. In the event of any sale, assignment or other change of

ownership of the telemarketer's business, the successor or assignee

shall maintain all records required by this subdivision. In any case in

which this paragraph applies, the telemarketer shall provide notice to

the secretary, in the form and manner designated by the secretary of the

disposition of such records within thirty days of the dissolution,

termination, sale, assignment or change of ownership.

9. Waiver. Any waiver of the provisions of this section by any

customer shall be unenforceable and void.

10. Exemptions. a. The following persons shall be exempt from the

registration and bonding requirements set forth in subdivisions three

and four of this section:

(1) the state, municipalities of the state, or any department or

division of the state or such municipalities;

(2) the United States or any of its departments, agencies or

divisions;

(3) colleges, universities and other institutions authorized by the

regents of the university of the state of New York or comparable body in

any other state or jurisdiction, to grant degrees, including licensed

private schools and any registered business schools regulated by article

one hundred one of the education law;

(4) a person, which has been operating for at least three years a

retail business establishment in this state under the same name as that

used in connection with telemarketing, and both of the following occur

on a continuing basis:

(a) Either products are displayed and offered for sale or services are

offered for sale and provided at the business establishment; and

(b) A majority of the person's business involves buyers' obtaining

such products or services at the person's location;

(5) any not-for-profit corporation as defined in section one hundred

two of the not-for-profit corporation law and charitable organizations.

b. The following acts or practices are exempt from the requirements of

this section:

(1) telephone calls made by a telemarketer, collection agency or

attorney engaged in the practice of law for the exclusive purpose of

collecting a legal debt owed, in accordance with the applicable

provisions of the Federal Fair Debt Collection Practices Act (15 U.S.C.

§1692 et. seq.);

(2) telephone calls in which the sale, lease or other agreement for

goods or services is not completed, and payment or authorization of

payment is not required, until after a face-to-face sales presentation

by a telemarketer, or a meeting between a telemarketer and customer;

(3) telephone calls that are received by a telemarketer initiated by a

customer that are not the result of any solicitation by such

telemarketer; and

(4) telephone calls between a telemarketer and any for-profit

business, except calls involving the retail sale of nondurable office or

cleaning supplies.

c. The following acts or practices are exempt from the requirements of

paragraph b of subdivision six of this section.

(1) telephone calls pertaining to a renewal or continuation of an

existing or prior contractual relationship or the continuation of an

established business relationship between a customer and any

telemarketer, provided that the telemarketer discloses any material

changes in the terms and conditions of the prior contract, except for

calls made by a telemarketer in which the telemarketer or any of its

principals has previously engaged in any act or practice described in

subparagraphs one, two, five, six, seven and eight of paragraph a of

subdivision five of this section; and

(2) unsolicited telephone calls made by the telemarketer for the

purpose of overall efforts to develop new business that include other

methods and techniques intended to identify and communicate with

potential customers provided however that for all transactions which are

incidental to the call and result in the exchange of goods and services

the telemarketer shall disclose the following information:

(a) the telemarketer's name and the person on whose behalf the

solicitation is being made if other than the telemarketer;

(b) the identity of the goods or services for which a fee will be

charged; and

(c) the cost of the goods or services that are the subject of the

call.

10-a. The following persons are exempt from the fee and bonding

requirements set forth in paragraph f of subdivision three and

subdivision four of this section: A person engaged in a business or

occupation which is licensed, registered, chartered, certified or

incorporated with or by any state or federal agency. Provided, however,

any person not licensed, registered, chartered, certified or

incorporated with any New York state or federal agency, shall submit

evidence to the secretary of state, in a form and manner to be

prescribed by the secretary, of any license, registration, charter,

certification or incorporation issued by an agency or governmental

entity in this or any other state.

10-b. A telemarketer shall disclose the address of any company on

whose behalf such telemarketer is providing telemarketing services, on

any website owned or operated by the telemarketer and on any subsequent

written communication to any customer.

11. Enforcement. a. Every violation of this section shall be deemed a

deceptive act and practice subject to enforcement under article

twenty-two-A of this chapter. In addition, the district attorney, county

attorney, and the corporation counsel shall have concurrent authority to

seek the relief in paragraph b of this subdivision, and all civil

penalties obtained in any such action shall be retained by the

municipality or county.

b. In every case where the court shall determine that a violation of

this section has occurred, it may impose a civil penalty of not less

than one thousand dollars nor more than two thousand dollars for each

violation. Such penalty shall be in addition to the denial of

registration or renewal, suspension of registration or revocation of

registration or assessment of a fine authorized by subdivision five of

this section.

c. Any person who contracts with a telemarketer for telemarketing

services and has actual knowledge that the telemarketer is acting in

violation of this section shall be deemed to be in violation of this

section, unless such person takes reasonable measures to prevent and

correct any conduct that violates this section.

d. Nothing in this section shall be construed to restrict any right

which any person may have under any other statute or the common law.

12. Criminal penalties. Any person who is convicted of knowingly

violating paragraph a or b of subdivision three of this section, or

subparagraph two, three, four or five of paragraph a of subdivision six

of this section shall be guilty of a class B misdemeanor. Any person who

is convicted of knowingly violating subparagraph eleven or twelve of

paragraph a of subdivision six of this section shall be guilty of a

class A misdemeanor.

13. Separability clause; construction. If any part or provision of

this section or the application thereof to any person or circumstances

be adjudged invalid by any court of competent jurisdiction, such

judgment shall be confined in its operations to the part, provision or

application directly involved in the controversy in which such judgment

shall have been rendered and shall not affect or impair the validity of

the remainder of this section or the application thereof to other

persons or circumstances.