MINUTES OF THE
SENATE Committee on Commerce and Labor
Seventy-First Session
May 2, 2001
The Senate Committee on Commerce and Laborwas called to order by Chairman Randolph J. Townsend, at 8:00 a.m., on Wednesday, May 2, 2001, in Room 2135 of the Legislative Building, Carson City, Nevada. This meeting was video conferenced to the Grant Sawyer State Office Building, Room 4412, 555 East Washington Street, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Randolph J. Townsend, Chairman
Senator Ann O’Connell, Vice Chairman
Senator Dean A. Rhoads
Senator Mark Amodei
Senator Raymond C. Shaffer
Senator Michael A. (Mike) Schneider
Senator Maggie Carlton
GUEST LEGISLATORS PRESENT:
Joseph (Joe) E. Dini, Jr., Lyon and Storey Counties, and Carson City, Assembly District No. 38
Greg Brower, Carson City and Washoe County Assembly District No. 37
Barbara E. Buckley, Clark County Assembly District No. 8
STAFF MEMBERS PRESENT:
Scott Young, Committee Policy Analyst
Silvia Motta, Committee Secretary
OTHERS PRESENT:
Frankie Sue Del Papa, Attorney General
Kevin Higgins, Chief Deputy Attorney General, Fraud Control Unit for Industrial Insurance, Office of the Attorney General
Alice A. Molasky-Arman, Commissioner, Division of Insurance, Department of Business and Industry
Howard Goldblatt, Lobbyist, Coalition Against Insurance Fraud
Timothy Hay, Chief Deputy Attorney General, Bureau of Consumer Protection, Office of the Attorney General
Kimberly Maxson Rushton, Legislative Liaison, Office of the Attorney General
Robert Barengo, Lobbyist, Nevada Consumer Finance Association
Kevin Ross, Rolling Thunder Communications
Will Hall, Legislative Intern for Assemblywoman Barbara E. Buckley
John P. Sande, III, Lobbyist, Nevada Franchised Auto Dealers Association, Nevada Bankers Association
Marilyn Skibinski, Regulatory Analyst, Bureau of Consumer Protection, Office of the Attorney General
Patricia Jarman-Manning, Commissioner, Consumer Affairs Division, Department of Business and Industry
Samuel P. McMullen, Lobbyist, Retail Association of Nevada, AT&T
Scott M. Craigie, Lobbyist, Farmers Insurance Group, Sprint
Chairman Townsend opened the hearing on Assembly Bill (A.B.) 134.
ASSEMBLY BILL 134: Makes various changes concerning assessment imposed by commissioner of insurance upon insurers to pay for program to investigate certain violations and fraudulent acts. (BDR 57-331)
Frankie Sue Del Papa, Attorney General, Office of the Attorney General:
In representation of all the fraud units, I would like to thank this committee for its leadership and vision throughout the years. You have clearly been there for our consumer advocacy, and our workmen's compensation fraud unit. I truly believe the citizens of Nevada have benefited from your leadership. I also would like to recognize Speaker Dini (Assemblyman Joseph Dini) for the guidance he has shown in reference to these bills. I would like to personally express my gratitude and appreciation for all he has done to make it possible for us to be here today.
Assembly Bill 134 makes certain changes concerning the assessment imposed by the commissioner of insurance on insurers to pay for our insurance fraud unit. Over the last several years we have worked with several senators, the industry, and various contingency groups to try and fight insurance fraud in Nevada. Insurance fraud is a challenge in Nevada; it always has been, and still is a growing issue. Of these 2 bills, A.B. 134 and A.B. 135, one is the financing bill. As you know, the insurance fraud unit does not have any General Fund money. In the past, the mechanism to fund the unit has been a flat $500 fee, which is assessed on every insurance company who does business in the state, regardless of the amount of insurance business.
ASSEMBLY BILL 135: Makes various changes to provisions governing investigation and prosecution of insurance fraud. (BDR 57-332)
Assembly Bill 135 is a bill we have worked on along with the industry for a long time. I believe it is a fair mechanism, because it establishes a gradual scale from $500 to $2,000, depending on the amount of insurance written. As I said, this system is more equitable. It is anticipated this bill will raise approximately $1,076,500 in total revenue. The funds raised by the assessment will be distributed as follows: 15 percent to the insurance commissioner’s office, and 85 percent to the Office of the Attorney General, providing a net increase of approximately $117,944 to the insurance fraud unit’s budget. This will permit us to continue to operate at our current level over the next 2 years. Such revenue is essential.
Senator Carlton:
I remember some discussions during last session about applying insurance fraud to individuals and companies as well. Will the two bills you referred to be applied to insurance companies as well as individuals?
Kevin Higgins, Chief Deputy Attorney General, Fraud Control Unit for Industrial Insurance, Office of the Attorney General:
Since insurance companies are a regulated industry, the first “reprimand” is set by the insurance commissioner, if an insurance company is not complying with regulations, or they are not financially solvent. A major problem is if they are not behaving themselves, the commissioner can decline any operating licensing. In the case of a corporation, it requires a greater effort, forcing them out of business or putting a corporate officer in jail, except when the incident rises to a criminal conduct such as embezzling funds.
In those instances our insurance fraud unit uses its authority to prosecute. In the past, we have prosecuted employees of various insurance companies, including Employers Insurance Company of Nevada (EICON), where we prosecuted a claims adjuster for criminal conduct. We, too, have jurisdiction; however, the insurance commissioner handles most of the fraud cases, since they have the financial means to do so.
Joseph (Joe) E. Dini, Jr., Lyon and Storey Counties, and Carson City, Assembly District No. 38:
Both of these bills were addressed in the Assembly Committee on Commerce and Labor in collaboration with the insurance commissioner’s office, the attorney general’s office, and the Nevada Trial Lawyers Association.
Assembly Bill 134 is the funding mechanism between the attorney general and the insurance commissioner, with 85 percent of the funds allocated to the attorney general’s budget, and 15 percent to the insurance commissioner. It provides for the fees and graduated schedule, depending on the size of the company. We had unanimous support from the assembly committee and the assembly floor on both bills.
I believe it is very important to pass this legislation, because insurance fraud is a culprit in our system. If you want to control it, you must get a handle on it, especially in the urban areas. The faster these communities grow, the more frequent the fraud will happen. Currently, the people who have moved from California and Arizona into the Las Vegas area have their gangs right up in there, which is costing ratepayers and the state a lot of money. With active units such as the one we have in the attorney general’s office, and with strong issues as in the insurance commissions, these measures would be good for all of the citizens in our state. I would appreciate your consideration on these two bills.
Chairman Townsend:
Do you have the ability to work with the commissioner regarding these issues?
Mr. Higgins:
Yes, Mr. Chairman, particularly with A.B. 135, which would bring some of the authorities in power to the insurance and other fraud units. Assembly Bill 135 increases the authority on subpoenas, allowing the insurance fraud unit to subpoena records. The immunity provisions have been improved. Now we can press charges on a misdemeanor crime. People can report fraud and benefit from those provisions, and since we are requiring them to report fraud, it would be more appropriate if they were immune from doing so. The bill also allows the courts to reimburse the insurance fraud unit for costs of prosecution cases. We currently do so in workmen's compensation when we commonly order people to pay investigative costs. The money is then held in funding in the Interim Finance Committee, allowing us to make use of it. This particular procedure places the insurance fraud unit on an even level with other fraud units.
There is an exhibit we would like to present to the committee from the Office of the Attorney General to outline some of the section’s proposed amendment to A.B. 135. Section 5, page 3 (Exhibit C) clarifies the jurisdiction between the attorney general and the insurance commissioner; it assists us to reconcile where it becomes criminal or administrative. Section 6 sets out the provisions for subpoenas, to allow the insurance fraud unit to be able to see records on items allegedly stolen, or other pertinent business records. This would be based on a civil subpoena authority. So, if a company refuses to produce the records, we then could go to a judge and let him or her decide whether we are within our authority to see the records. In most cases, companies will only require an official notification in place of a subpoena, one that can be used if the company is audited in a 10-year period. Then they could prove these records were appropriately subpoenaed.
Section 6.5 of A.B. 135 sets off the confidentiality provisions regarding information the insurance commissioner shares with the fraud unit, such as business records, profits, et cetera. In the second page of our presentation (Exhibit C), it explains when government entities must report insurance fraud to the insurance fraud unit. Recently, we have included the attorney general on the list of insurance agencies reporting fraud. Even after a prosecution case is closed, we would still share information with insurers. Also, we have included insurance fraud in the Racketeer Influenced and Corrupt Organization Act (RICO) statute.
Based on Assemblyman Dini’s testimony, we do have people in organized gangs, and organizations staging accidents and stealing cars, costing more money to the state. After the cars are stolen, they are sent outside of Nevada. If we could just get to these criminals under the organized crime statute! Overall, the bill defines the relationship between the insurance commissioner and the insurance fraud unit. I believe this would provide us with the essential tools to fight these problems in the next decade.
Senator O'Connell:
Can you give us an idea as to how many fraud cases you handle annually?
Mr. Higgins:
In the Attorney General’s handout (page 19, Exhibit C), there is a brief summary illustrating a list of cases from 1997 to the year 2000; the number of actions initiated, arrests, convictions, and court appearances. For example, in fiscal year 2000 there were 29 cases initiated, 31 arrests, 27 convictions, and over 160 court appearances.
There is a bill being presented this morning in the Assembly Committee on Ways and Means with the intention of administratively combining the insurance and workmen's compensation fraud units. Such a project will take a couple of years; however, it may give us other resources to add to the units. Currently, those are the statistics.
Senator O'Connell:
Would that mean you are experiencing growth? It is interesting to note the difference between 1997 and 1998, where you went from 8 to 26 initiated actions.
Mr. Higgins:
Unfortunately, there are only 4 prosecutors statewide, and approximately 6 investigators. Over the years they have had to deal with larger cases and cases with bigger impact; and it has been a challenge over the last several sessions to keep caught up. The funding bill, A.B. 134, frankly, will only maintain a level for now. Currently, it is built into the Governor’s budget, but if we don’t get the funding needed, we may actually have to lay people off. I think within the next few years, if we are successful in combining the two units, I am sure we will see a dramatic increase in the number of prosecutions.
Ms. Del Papa:
In support, I would like to add there is a measure to be heard in the Assembly, which allows the combining of these two units with very strict accounting mechanisms; and since the funding sources are so different, I think it will be a good pilot program to economize and assist one another. However, because of the funding mechanisms, we need to be extraordinarily careful and make certain the funds are not misused.
In the long run everyone could benefit if we share the resources and collaborate with one another, then return to the following legislative session with our experiences and offer new recommendations.
Senator O'Connell:
Are you under any federal jurisdiction or constraint as far as using the money?
Ms. Del Papa:
There isn’t any federal money allocated to these two programs.
Senator O'Connell:
I was just wondering if you had anything to abide by, as far as the offices are concerned?
Ms. Del Papa:
Well, whenever we receive federal funding, such as for the Medicaid Fraud Control Unit, there is a great deal of federal funding involved in the budget. Therefore, we must follow different accounting rules and mechanisms. Likewise with our transportation, because whenever we get into a funding situation, there is a different set of rules that apply internally. Those types of budgets are a fairly complicated “mish-mash,” since we get funding from so many different sources, and they set us up on allocation plans.
In one instance, we are billed directly; in other instances, we have a component of General Fund money. So, this becomes a real challenge, but certainly it is one you must commit to, in terms of making sure you have your proper account mechanism set up. That is the reason we came up with separate bills. I really hope they pass. I think it would allow some economy of scale, and produce recommendations which may be helpful to others down the road.
Alice A. Molasky-Arman, Commissioner, Division of Insurance, Department of Business and Industry:
It has been a long journey in reaching this point. I also would like to thank this committee, which has always understood the problems of deceptive fraud in the state of Nevada. I certainly want to thank the attorney general, also. I know it has been approximately 5 years since Ms. Del Papa and I joined forces to try and make the public aware of the devastating effects of fraud. I, and my office, fully support this bill. I believe it is critical.
I testified before the Assembly Committee on Commerce and Labor as to how one of my former fellow commissioners in California was sending those who had committed automobile and other kinds of fraud to state borders. Well, we need a big sign stating these kinds of entries into Nevada are not welcome. Unfortunately, members of the industry are not immune from being perpetrators of fraud. Last year alone our office recovered $2.6 million for consumers who were essentially cheated out of their money. In the small community of Yerington $2 million arose from the embezzlement of one single agent. The cost of internal fraud is high. In the last 10 years, it has cost the public approximately $13 million in the reduction of premium taxes. The cost of the guarantee associations, which are funded by assessments to insurers, offsets collected premium taxes. I would hope for your support on both bills (A.B. 134 and A.B. 135).
Senator O'Connell:
Have we had any insurance companies leaving the state due to the lack of enforcement quality, or problems such as assistance with material or financing to the different agencies? Mr. Higgins mentioned the unit was so small, with only four investigators, they are not able to go after smaller fraud problems. Has the insurance premium risen so much that there has been no impact on the number of insurance companies?
Ms. Molasky-Arman:
No, I cannot say fraud has caused any single insurer to voluntarily leave the state. We only have two companies where we had to revoke the licenses, about a year ago; but those two companies were related to six of the Martin Frankel insurance companies. When I review insurance rates, I know many of the rate increases are caused by fraud.
Chairman Townsend:
Do you have any sense of the effect on premiums, based on fraud in the state, particularly in southern Nevada?
Ms. Molasky-Arman:
Not geographically, but it has been estimated the cost of insurance fraud is from $200,000 to $300,000 per person per year in the state of Nevada. It is extraordinarily high.
Chairman Townsend:
The committee would assume all other jurisdictions would be interactive with your office and the attorney general’s, and learn the skills needed to find these kinds of problems. Is that an accurate network?
Ms. Molasky-Arman:
Currently there is a network through the National Association of Insurance Commissioners (NAIC). There are several databases showing the location where persons have been prosecuted and convicted of fraud, and even administrative violations. Those names are in the database maintained at the NAIC. Under the Health Insurance Portability and Accountability Act of 1996, there is also a database maintained by the federal government. We are, in fact, required to report, as other states, every single conviction related to health insurance fraud. There is also, currently, a bill before the United States Congress as a result of the Gramm-Leach-Bliley Act or the federal Financial Modernization Act of 1999. Such a bill would establish a board consisting of one insurance commissioner and two members of the federal financial regulatory bodies, such as the Office of the Controllers of Currency. Under this bill, a national federal database would be created to collect the same kinds of information on property and casualty fraud. In fact, it would contain information on all acts of fraud.
We are, through the NAIC, planning to use the NAIC as the central database. We have not developed the programs at this time, but all information would eventually be entered through the NAIC, and then reported to the federal agencies as well.
Howard Goldblatt, Lobbyist, Coalition Against Insurance Fraud:
I am the director for government affairs for the Coalition Against Insurance Fraud. We are a national broad-based organization of consumer groups, insurance industry, and government organizations. Our membership includes the Consumer Federation of America, the National District Attorney’s Association, Allstate, State Farm, Firemen’s Fund, USAA Automobile Insurance, Liberty Mutual, among others.
There is a handout entitled “Insurance Fraud: The Crime You Pay For” (Exhibit D) from the coalition. We have been involved in Nevada for at least 5 or 6 years. I first testified at the Attorney General’s Fraud Task Force in 1996 on the needs for the state to straighten its insurance fraud laws. Since then we have worked with Senator Townsend, Assemblyman Dini, Attorney General Frankie Sue Del Papa, the insurance commissioner, and former Senator John (Jack) B. Regan, among others, in the state.
The funding mechanism currently in place clearly does not have the resources to meet the needs Nevada is facing today. We were told by some of our members that they have become aware of the organized fraud rings coming into Nevada, and of the people who stage automobile accidents for insurance fraud, mainly from California, New Mexico, and Arizona. They believe the welcome sign (Welcome to Nevada) sitting at the border as you drive into the city of Las Vegas, because of the lack of resources to fight the insurance fraud in the state, encourages organized groups to commit fraud.
Assembly Bill 134 will help raise the revenues for the department. And, it should be noted, no taxpayer money is involved; it is insured assessment. It is important to know the industry is in full support and willing to pay more money to the fraud unit and to the insurance commissioner to effectively fight fraud, because they perceive there are cost benefits at the other end. Under A.B. 135, defining an insurance company as a person to receive restitution, it makes eminent sense when a defrauded person is able to get restitution. With this language, you define an insurance entity.
From the coalition’s perspective, insurance fraud is a pass-along procedure. Insurance companies do not lose money; instead, they pass it on to their customers by raising premiums to offset what they have paid out. We support anti-fraud to reduce the effects of fraud and the cost of insurance paid by consumers.
The reason for companies leaving Nevada is insurance fraud. We have seen it happen in other states, and only after an increase in efforts to stop fraud do companies consider returning. In the last year, in the state of New York, one major insurance company reportedly may be going insolvent due to insurance fraud. Fraud rings and automobile accident rings specifically targeted that company and basically drove it into insolvency.
We believe both A.B. 134 and A.B. 135 are good bills and hope you will consider passing them in this session.
Senator O'Connell:
It has a lot to do with the tax base. The insurance premium tax is the third largest contributor to our General Fund, so we are impacted from both ends when it comes to fraud. If we experience such a high rate and lose companies, it could only mean it is coming out of our tax base. Something to be aware of is a double hit for us.
Mr. Goldblatt:
Actually, it is more than a double hit, because consumers and small businesses are paying more. They may not have enough money to go out and buy goods and services, or to do some expansion of their businesses and hire more people. On the other hand, it reduces the amount of disposable income small businesses and individuals have to spend and help the state’s economy.
Senator Carlton:
You spoke about the restitution issue. How is the mechanism set up for insurance companies to receive restitution? You said it is a pass-through industry, and mentioned how we need to make sure the money goes where it is supposed to go. Would that be under the insurance commissioner?
Mr. Goldblatt:
The insurance companies rate their policies and premiums based on their history. If they are paying more in insurance fraud, their claim data would show they need more in premiums to pay for claims. With restitution, as a company receives more funds, they may be able to hold down the level of their premiums. When it comes to reducing the effect of fraud and the cost of insurance, many things go into consideration as to how an insurance company defines a premium. For instance, if fraud is 4 to 5 percent of what a premium is and you could reduce fraud down to 2 percent of a premium, all of sudden, as a consumer, your premium will not be the same level as before, you see less increase in premiums, because you are reducing the effect of fraud on premiums. In reality, the consumer will never see restitution, since the fraud is normally against the company.
Senator Carlton:
We have talked about the rings contriving staged accidents, the true victims, and how premiums go up. Now, when prosecuting a ring of such magnitude, is there any mechanism in place to make sure the actual victims are not victimized twice? We know for certain insurance premiums will rise for at least 10 years.
Mr. Goldblatt:
You raise a good point. The coalition has not considered the victims of staged accidents. I promise you, I will go back to Washington and bring this issue before the board.
Senator Schneider:
I was wondering how many agents or investigators would you be able to add in the state of Nevada? Currently you seem to have only three.
Mr. Higgins:
No, if I said three investigators, I misspoke; it is three prosecutors, and I believe there are five or six investigators. Basically, because of the way the funding was setup with the flat rate, the assumption was to have more and more insurance companies in Nevada, so the funds would go up. However, what has happened is insurance companies are writing more policies, because the rates have not risen; therefore, the funds have not increased due to the non-increase in insurance companies. So, the way the budget is built, which is basically a flat-line budget for this unit, there just may be the possibility of hiring one more person.
SENATOR AMODEI MOVED TO AMEND AND DO PASS A.B. 134 AND A.B. 135.
SENATOR O’CONNELL SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
Chairman Townsend:
We will now close the hearing on A.B. 134 and A.B. 135, and open the hearing on A.B. 152.
ASSEMBLY BILL 152: Revises provisions governing trade practices. (BDR 52-485)
Ms. Del Papa:
Assembly Bill 152 enables the courts to order attorney fees against a person willfully engaged in deceptive trade practices. The bill will also strengthen the anti-trust section of Nevada Revised Statutes (NRS) 598A, by giving the attorney general jurisdiction over monopolization of trade or commerce in the state, including, without limitation, attempt to monopolize or otherwise combine, or conspire to monopolize trade or commerce. As you know, over the last few years our office and the legislature have been aggressive in terms of consumer protection. This is why we have expanded our anti-trust jurisdiction. For the longest time, Nevada has been only one of two states in the country not to have an anti-trust attorney. Currently, we do have one anti-trust attorney within the attorney general’s office. The attorney fee provision, as you know, is an additional tool for us to have. The straightening of the anti-trust section is something everyone benefits from. It is an overall component, and a small component of what the Bureau of Consumer Protection’s mission is. I would like to express how pleased I am with the consumer advocate’s personal efforts in protecting the citizens of our state, and for what the unit does in general. It is a very active unit in cooperation with the Consumer Affairs Division; it is a team effort and I think they do a great job for our consumers.
Timothy Hay, Chief Deputy Attorney General, Bureau of Consumer Protection Office of the Attorney General:
The essential provisions of A.B. 152 provide explicit statutory authority for the attorney general’s office to look at mergers, which lessen competition. Currently, under the provisions of chapter 598A of NRS, we have explicit statutory authority to look at issues such as price-fixing, division of markets, and allocation of consumers. We do our anti-trust review under the derived federal authority from the Clayton and Sherman Anti-trust Act. Therefore, this bill would make clear, in state law, the provisions paralleling the Clayton and Sherman Act. The reason this is important is because we recently experienced some difficulties in our investigations. Unlike most of the other states, our state did not include specific parallel provisions to both of those acts in the state law. The advantage is it gives us better opportunities to investigate potential monopolizations and consumer impact. It is not as much a broadening of our authorities so much as a clarification of it. It eliminates the uncertainty of operating only under derivative authority from federal acts. Most of the other Western states have such authority. Often in this matter, particularly on mergers of a fairly large scope and while working with other states, it would simplify our ability to participate in those mergers.
As everyone here knows, there has been an increasing trend of mergers over the past decade, going from about 1500 to about 3500 nationwide. Many of these are very critical to Nevada, such as the mergers in the airline industry, the oil industry, and other companies with a direct impact, not only on our consumers, but our economy. So, this simply clarifies our authority to look at those types of business arrangements. We believe it would be a useful addition to Nevada law, going forward in an environment where mergers and acquisitions are going to become increasingly more common and have an increasing effect on states like Nevada.
Senator O'Connell:
Does it look like the tobacco settlement will remain steady?
Ms. Del Papa:
The tobacco settlement situation is fluid. The National Association of Attorneys General continues to spend a great deal of time on this issue. In fact, it is currently spending approximately $2 million annually on various fronts. On behalf of all of the states, the National Association of Attorneys General has hired the number one bank firm in the country, because of the possibility, if huge settlements continue, bankruptcy issues may loom on the horizon. In addition, under the terms of the master settlement agreement, states are obligated to pursue what are called non-participating manufacturers. In fact, Nevada has filed three lawsuits. We are one of the lead states and one of the major non-participating manufacturers. The recent funding has been reduced somewhat because of the courts. There was another issue the National Association of Attorneys General and all of the states are working on, which has to do with the “gray market.” What we found is a number of tobacco companies will ship their cigarettes overseas, then ship them back trying to avoid the count and the taxes. Almost every day something comes across my desk with reference to the remaining ongoing issues, such as the tobacco litigation.
Senator Amodei:
Mr. Hay, regarding the provision on the attorney’s fee, lines 16 and 17, section 1 of the bill. Is that to the prevailing party? It just says, “Award reasonable attorney’s fees.”
Mr. Hay:
We have been successful in getting attorney’s fees; however, from time to time we find the lack in statutory authority to indicate we are entitled to attorney fees. There are some judges who feel that since we are a public-funded law firm, we are not entitled to fees as private parties would be; therefore, attorney fees would be determined as in any other litigation to the prevailing party, and at the discretion of the judge.
Chairman Townsend:
When I fist reviewed this proposal, what first came to my mind was our dominant airline. I tried to do an analysis of federal jurisdiction, interstate commerce, et cetera. If one airline currently serving the Las Vegas and Reno markets were to be the only carrier on a non-stop route, meaning within the borders, all it would take is for a competing airline to drop off one flight a day. Then you would only have one dominant carrier. Would that then fall within the jurisdiction of this bill?
Mr. Hay:
First of all, as you may know, our office has gotten more involved in reviewing airline mergers on a national basis, particularly with concerns of the northern Nevada market, which has suffered a substantial decline in flights since the acquisition of Reno Air by American Airlines, which subsequently dropped a number of flights. If there were circumstances as the one you just described, I am not sure if there would be a jurisdictional clash, but we would certainly want to make sure there were no price manipulations or other factors to make any route uneconomic for other carriers. I am not sure it would necessarily be an indication of inappropriate trade practice, but those of us who travel on those flights realize it is an exceptionally busy route, and we would all benefit if there were more carriers.
Ms. Del Papa:
There are a couple of concerns indirectly related which I would like to share with you. One, I have long thought of the way we handle travel for the state. I wish there were greater negotiations. We have been fairly lucky in continuing our negotiations with Southwest Airlines, and particularly when renewing the contract, to have the state rate remain stable. As Mr. Hay has pointed out, we have faced many challenges since Reno Air went out of business.
There are bigger challenges on the horizon. Our state joined with 21 other states expressing concern to the Federal Trade Commission about the soon-to-be on-line orbits, which are on-line travel entities which would involve the five major carriers. However, Southwest Airlines has not been invited. If those five major carriers decide to compete with Southwest Airlines, 20 percent in each of their markets, and 20 percent times 5 equals 100 percent. This presents a real problem for Southwest Airlines.
Interestingly enough, Southwest Airlines flies to 56 cities in our country, but their number one market is Las Vegas; 30 percent of all the flights into Las Vegas are Southwest flights. A Southwest spokesperson made a very compelling argument when they came to us about their external situation. Many of us who have had to buy a last-minute ticket know there are real challenges with airline travel and our economy. It is important to have the necessary staff and the ability to interface with other states, because these issues do get complicated, and they are increasingly regionally based as well. That is the reason we need to participate in these multiple state activities. I am really proud of our staff and the job they have been able to do with very limited resources.
Chairman Townsend:
I believe we need to discuss this issue, and not just the north/south flight for tourist purposes, but also for business, and its effects, or the issue of why companies are leaving the northern Nevada market to go to other markets. I think we have to be very sensitive, because it involves the federal government and interstate commerce. It is not the nature of this state to do price setting and caps. We are trying to make sure people are not disadvantaged. I think the point you made, Mr. Hay, might be helpful if, in fact, we see prices rise due to the increase in fuel prices.
I hear complaints. I am constantly questioned from all sorts of people. “I cannot get on a flight when I need to, I have to get there an hour and a half ahead of time. It is very crowded, and sometimes flights are cancelled.” Those are some of the concerns from the people we represent. We just would like to convey those concerns to you. I would appreciate it if you could look into those matters and keep us informed.
Mr. Hay:
We certainly will.
SENATOR AMODEI MOVED TO AMEND AND DO PASS A.B. 152.
SENATOR O’CONNELL SECONDED THE MOTION.
THE MOTION CARRIED.
* * * * *
Chairman Townsend:
We will close A.B. 152, and open the hearing on A.B. 337.
ASSEMBLY BILL 337: Revises provisions relating to deceptive trade practices. (BDR 52-484)
Kimberly Maxson Rushton, Legislative Liaison, Office of the Attorney General:
The bill before you is an amendment to chapter 598 of NRS, which deals with deceptive trade practices. In essence, what we attempted to do is to bring it inline with state law, which is already provided for under the Deceptive Trade Practices Act, the Telephone Consumer Protection Act, and by federal law. The bill applies to deceptive trade practice for an individual to solicit someone by phone, or do a sales presentation by phone, using threatening, intimidating, profane, or obscene language. Additionally, it applies to repetitive phone calls, in a continuance conduct or manner, considered by a reasonable person, not a standard call, but an annoying, abusive or threatening call.
It would prevent phone-call solicitation during the hours of 9 p.m. and 8 a.m. to a residence. Basically, these are the phone calls made in the most inopportune times, as you are getting ready to go to bed, or in the middle of the night, and anything else perceived as being annoying, harassing, obscene, or threatening.
Chairman Townsend:
In regard to lines 9 and 10 of the bill, do we need to add “Pacific Standard Time” in order to avoid any misunderstandings?
Ms. Rushton:
Under general criminal law, it is where the victim resides, or where the person receiving the phone call would be at the time frame we would use. It is what I would argue before the court, and I believe the court would take judicial notice of it as well. Under section 1, subsection 4, beginning on line 11, it prohibits people from blocking or intentionally circumventing any service used to identify the caller when placing an unsolicited telephone call. All of this is just a reiteration pursuant to the federal telemarketing act.
Senator Carlton:
Could you explain to me the blocking you have referred to?
Ms. Rushton:
The blocking applies to individuals who have caller ID (identification) on their phone. Often when they look at the caller ID, it will display “caller unknown,” or will have some obscure identification which does not allow the individual at the residence to determine who is calling them. Under this bill, companies and phone solicitors will be disallowed from intentionally blocking their numbers. We added the word, “intentionally,” in the bill for a specific reason. There are some systems and caller ID boxes which simply will not be able to identify who the caller is. In such case, it would not be the responsibility or the fault of the solicitor, but the equipment at the residence. We decided to use this language to ensure a caller cannot intentionally block the number, and the residents will be able to see who is trying to contact them.
Senator Carlton:
Would any of these provisions apply to political campaigns or fund-raising for nonprofit organizations? Or is this strictly for solicitation?
Ms. Rushton:
It is perceived to be strictly for telephone solicitations. However, under the provisions, if it got to a point where someone felt he or she was being harassed, or where profane language was used under the guise of a political call, I believe it could apply to those as well. But again, this is a very high standard. It is not intended to disallow people from just calling for the simple fact of making a solicitation, but rather to prevent the victim from receiving calls continually, or harassing and annoying phone calls.
Senator Carlton:
Currently there are companies using automatic calling. Would this apply to those companies also?
Ms. Rushton:
It is exactly what this bill is intended to do.
Senator O'Connell:
How high of a priority is it going to have, as far as the enforcement?
Ms. Rushton:
It is difficult to say. We have had a number of phone calls through Consumer Affairs Division (CAD) as well as the Bureau of Consumer Protection about issues such as this one. I think we recognize this to be a strong message to the industry and telephone solicitors, warning them these matters are taken very seriously in Nevada. Our consumers come first, and they will not be subjected to harassing and annoying phone calls. It takes a high priority in the fact that we are before you today proposing this bill; but in terms of enforcement, I cannot estimate what type of enforcement this will have. I could not give you any indication once the law has passed. I can, however, tell you we feel very strongly about this measure; it is based on complaints we received by our office and CAD. This measure is consistent with the laws in other states; it has passed in most every other state.
Senator O'Connell:
The procedure is, a person would make the complaint, possibly to the CAD first, which keeps a record of the complaints against the company and then passes the information on to you. Is that accurate?
Ms. Rushton:
With respect to deceptive trade practices, when a call comes into the CAD, the initial call is logged. If it becomes a repeated pattern from the same company, then the CAD forwards the information to our office and we begin our internal investigation; we proceed pursuant to NRS 598.099, taking the necessary steps in order to ensure it does not continue.
Senator O'Connell:
How many people do you have on staff responding to these complaints?
Ms. Rushton:
Well, the consumer affairs would do the initial intake, then once it is forwarded to us, there are six attorneys in the division who are all assigned with the responsibility of upholding chapter 598 of NRS.
Robert Barengo, Lobbyist, Nevada Consumer Finance Association:
We are specifically concerned about section 1, subsection 4, lines 11 and 12 (of A.B. 337). It says, “Blocks or otherwise intentionally circumvents any service used to identify the caller when placing an unsolicited telephone call.” The household company has machines that do not block, but have no capability to give out a phone number. If those machines were used, it would not be in violation under this law. We are not trying to block it. The machine is just not capable of giving a number.
Senator O'Connell:
Ms. Rushton had mentioned this was codifying federal law. Has your company or industry dealt with this issue in any other states?
Mr. Barengo:
We had provided the interim committee with some suggested language from the New York law: “The use of the telecommunication service of equipment, as incapable of transmitting caller identification information, would not, of itself, constitute interference with blocking or circumvention of the capability of a caller identification service access of who provided the information.” Whether or not this is an actual codification of federal law, I am not aware.
Chairman Townsend:
With regard to the service you work for, Mr. Barengo, is it considered an automated call service, or do they use a person to make the calls? Are you saying the mechanism they use to dial does not provide a number?
Mr. Barengo:
It is my understanding they use automated calling. However, when they dial the number, a person comes on.
Chairman Townsend:
I am talking about an automated message. I had intentions of addressing the issue on one of these bills, to ensure it would not happen in this state ever again. I do not know how much support I would get, but it would certainly make my everyday life easier, because every night when I get home, I get two or three of those calls or find messages on my voicemail.
Mr. Barengo:
My understanding is folks would program into the machines either collection calls, or a variety of solicitation calls; then, the machine dials the number and a person intervenes. When the call is finished, the machine closes, and the next call simply goes forward.
Ms. Rushton:
We met with Mr. Barengo and discussed the issue, taking into consideration his recommendations by amending the language to include the standard “intentionally.” It is a strong standard for us to have to proceed under, sending a notice to the effect that if it was done intentionally, it would capture what Mr. Barengo’s organization is concerned with. However, if it were done inadvertently, because in fact it is part of their system, or because the residence has a system which does not allow identifying the caller, then they would not be accountable for it.
Senator O'Connell:
It occurs to me, all of these matters are all right if they occur before 9 p.m.
Ms. Rushton:
No, that would not be correct. Pursuant to the statute, the standard applies if the call is threatening, intimidating, made in a profane or obscene manner. If soliciting calls are made to a residence after 9 p.m., or before 8 a.m., those calls, too, would be considered to be deceptive trade practices. Initially the times were different, because we wanted to protect people from receiving these phone solicitations during the dinner hour as well. As some of you know, at dinnertime is when most of us receive such calls, at the most inopportune time. However, in accordance with federal law, which was brought to my attention by Mr. Barengo, we decided to go with the time frame currently written in the proposal, versus what we originally intended.
Senator O'Connell:
Did I misunderstand you when you said you were codifying federal law?
Ms. Rushton:
No, madam, you did not. That is correct. This is done pursuant to the telemarketing act (Telemarketing and Consumer Fraud and Abuse Prevention Act).
Senator O'Connell:
In relation to lines 6 through 8, the college my husband graduated from calls us at least every 2 to 3 weeks soliciting money, and it does become a really annoying situation. Would these calls fall under any of these categories?
Ms. Rushton:
If you call our office to say this call is annoying, I would tell you this is part of a companion bill we have today, Assembly Bill 439. It is also possible for you, as a resident and a consumer, to simply ask the individual to stop calling you; under federal law, it precludes them from continuingly calling you.
ASSEMBLY BILL 439: Revises provisions relating to deceptive trade practices. (BDR 52-1263)
Senator O'Connell:
I have asked them to stop calling, but they have not stopped. The calls have continued over the last 5 years.
Ms. Rushton:
Yes, what you would need to do is contact our office and report you have asked them to stop the repeated phone calls. Under this statute and the companion bill, A.B. 439, we would look into it and begin to take action.
Kevin Ross, Rolling Thunder Communications:
In regard to the word “blocks” in section 1, subsection 4, the technology exists through the phone companies with automated and routing capabilities to place a number from a particular service. In most cases, including my own business, and primarily in politics, we are requested not to place a fax number or our client’s number on the caller ID. We do not do much pro-active campaigning because it usually backfires on our clients.
Chairman Townsend:
We will suspend the hearing on A.B. 337 and continue it at a later time. Let us open A.B. 439.
Greg Brower, Carson City and Washoe County, Assembly District No. 37:
It is my pleasure to present to this committee A. B 439. Basically what this bill does is create a state “no-call” list, which would be maintained by the Consumer Affairs Division within the Department of Business and Industry. The intent of the list is to allow any consumer in Nevada to call the division, put his or her name on the list, and as a result not receive unwanted telemarketing calls. Any business engaging in telemarketing in Nevada would be responsible for obtaining the list from the state, and cleaning up its own call list to reflect or eliminate all of those consumers whose names are on the state’s list.
There have been some changes made to the bill since its first introduction in the Assembly, and further detail is likely to be provided in the form of regulations through a rule-making process. I would submit, many of the detailed issues in the bill may not be addressed to the committee’s satisfaction as written, but really do need to be the main subject of the rule-making process. This bill is not a novel concept. Thirteen states in the country have gone to a state no-call list. It seems to be a trend around the country, and a popular idea among consumers in Nevada. I am sure I am not the only representative from this body who has received calls from constituents wondering why we do not have such a list. I would urge this committee to favorably consider this bill.
Chairman Townsend:
We will suspend the hearing on A.B. 439, and open the hearing on A.B. 204.
ASSEMBLY BILL 204: Provides knowing falsification of application for credit relating to retail installment transaction is deceptive trade practice and requires award of court costs and attorney’s fees to certain victims of consumer fraud. (BDR 52-1091)
Barbara E. Buckley, Clark County Assembly District No. 8:
I am very pleased to have my intern from the University of Nevada, Las Vegas with me. Will Hall will present the bill to you.
Will Hall, Legislative Intern for Assemblywoman Barbara E. Buckley:
Assembly Bill 204 is a measure to protect the consumer against fraud for those individuals who seek to complete an application from their business, which may be engaging in a deceptive trade practice, where a credit application may be altered so as to defraud the consumer. The effects of the bill also protect honest businesses from the unfair practices of other deceitful businesses intending to injure or lessen competition, and who defraud their own applications.
The first reprint of this bill, under section 1, subsection 15, amending NRS 598.0915, explains when businesses or an occupational person knowingly falsifies an application for credit, this person is engaging in a deceptive trade practice, and the consumer is then entitled to a civil action against the business. This provision is not reflected in the current law, on the other hand without A.B. 204, there is loophole, where the sellers may altered credit applications, and have set up and assigned retail installment sales contracts to finance companies or banks to provide credit. Common-law fraud covers only false representations made by the seller to the buyer; it does not cover false information to the lender by the seller, who then extends the credit to the buyer.
Assembly Bill 204 will ameliorate this ambiguity and provide a clear definition of what the law represents when it comes to business practice. The inflation of incomes and the lengthening of periods of employment and residence by applicants, and the altering of applications by sellers, need to be brought to an end; and fair business practices established. The bill is necessary and must be executed into law. Consumers and honest businesses need protection that only the government can provide. Please consider this opportunity to accomplish something good for the public. I encourage the approval of A.B. 204.
Senator Schneider:
Would citizens of Nevada who, when applying to purchase a home, may not declare all of the tips as income be falsifying income if they reported their income into two different areas? Would that also cause a problem for the resort industry in our state?
Mr. Hall:
I believe this problem could be addressed with the implementation of this proposal.
Assemblywoman Buckley:
A situation like the one you have described, where an individual, consumer, or tip earner, may falsify their income by not reporting it to the Internal Revenue Service (IRS), or by inflating the amount in a purchase, is another matter for which they are subject to penalties as a result of their conduct. If the IRS does an audit, they will be “zapped.” If a lender verifies their credit by requesting income-tax information, and finds out they misrepresented their income, they may be denied credit. This bill addresses the other side of the coin, remedies already existing for consumers who lie about their earnings.
On the other hand, under this proposal, an individual in the course of business, who knowingly falsifies an application for credit, meaning if the lender says, “Let’s get you qualified; I am going to write in here . . .” or after the application is left blank, the lender may go back and fill in the blanks, this bill would create equity and ensure there are reciprocal penalties when either party commits fraud.
John P. Sande, III, Lobbyist, Nevada Franchised Auto Dealers Association, Nevada Bankers Association:
There were some problems with the original draft. It actually addressed the application itself, and had some complicated requirements for businesses to comply with. We worked with Assemblywoman Buckley on the language for the bill. The bill certainly accomplishes our goal in making clear if you do something illicit, you will be penalized. We are supportive of this bill.
Chairman Townsend:
I would like to make note, I am a member of the two industries Mr. Sande represents, and none of the issues I am involved with get treated any differently.
Senator O'Connell:
I wonder if you could explain to us exactly what happens to a person who has done wrong and what kind of penalties would be imposed.
Mr. Hall:
Regarding the penalties, basically, the penalty would be assessed charges for any damage incurred, such as the cost for filing a lawsuit and the attorney’s fee.
Senator O'Connell:
In other words, you just receive your actual cost, and there is no penalty beyond that?
Mr. Hall:
That is correct.
Chairman Townsend:
The first issue is “unlawful act,” defined in NRS 119.330 as a category C felony? I believe it is the reason we have a fiscal note on it.
Assemblywoman Buckley:
Because there was existing law, I did not read that portion of the statutes more carefully prior to just now. Nevada Revised Statutes 41.600, of course, is separate from chapter 598 of NRS, which is addressed in section 1 of the bill, and provides a cause of action. Just because there is a law, it does not mean you have the right to sue on it, and NRS 41.600 and section 2, subsection 3, paragraph (a) of A.B. 204 describes who has the right to bring an action against consumer fraud. An unlawful act is defined in this section also. It does not necessarily mean anything in chapter 598 of NRS is a category C felony, but if someone is victimized, or of any victim is already in existing law as a category C felony, this gives them the right to start a cause of action. That was reprinted because it is part of statutes we are attempting to make clear: when people get a product and are forced to lose it because a lender falsifies a credit application, and as a result the consumers’ credit is affected, it would be included in the regular damages, as mentioned by Mr. Hall. But in addition, if consumers need attorneys to straighten out their credit records, they also can claim those costs.
Chairman Townsend:
One of the saddest things we see here is the lack of respect for credit rating. I do not think we teach young people enough in school about the respect for their credit ratings. Credit is given freely when they are young. I would hope sometime, maybe in our resource committee, we could talk about sharing such principles with young people as they move into their adult lives.
Senator O'Connell:
If and when we start teaching economics here, it would be a part of the course, having sat on the writing team.
Chairman Townsend:
Chapter 482 of NRS under line 28 is the “bait and switch” definition.
Assemblywoman Buckley:
On the Assembly side we had a couple of victims of consumer fraud who had their credit application modified. I have copies of their testimony (Exhibit E and Exhibit F).
SENATOR O’CONNELL MOVED TO AMEND AND DO PASS A.B. 204.
SENATOR SCHNEIDER SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
Chairman Townsend:
We will reopen the hearing on A.B. 439 at this time. Please proceed.
Marilyn Skibinski, Regulatory Analyst, Bureau of Consumer Protection, Office of the Attorney General:
In the letters and complaints mailed to us from consumers, the main complaint is about the number of calls people receive from telemarketers. Currently, the only advice we can offer them is to write a letter to Direct Marketing Association (DMA) in New York City asking to be placed on their member’s do-not-call list. The DMA has about 4500 members. According to the latest information I received, there are 140,000 telemarketers in the United States. You would be placed on a list of members of a relatively small organization, and it is a voluntarily compliance by those members which would cut down on the number of phone calls you are getting. However, it is not enforceable.
The second piece of advice we give people is, if a telemarketer calls, under federal law they can asked to be put on the telemarketer’s own individual do-not-call list. It takes approximately 6 to 8 weeks, roughly, to get on their list. The problem with it is you still have to receive the first call from each telemarketer, and, again, there are 140,000 of them. If the request is violated, the person has the additional burden of keeping a log, and being able to recognize it is the same telemarketer calling; then, taking the time to file an action, pay the filing fees, take the time off from work to appear in court to see how you fare in proving someone called you after you asked to be put on their do-not-call list. It is not terribly effective, and I do not know how many people would really pursue it on an individual basis.
What a lot of states have done, as you heard this morning, is to institute a state do-not-call list with some kind of enforceable measure, for consumers to place their names on the list and say, “I don’t want calls from telemarketers.” People have told us they would go to the trouble of writing to the New York Direct Marketing Association, and they have a valid reason for not wanting to be called by telemarketers. For some people it may be more annoying than for others, such as someone with an ill relative in the home, or a person who may have trouble saying no to telemarketers and would prefer cutting these calls off. I had numerous conversations with a gentleman here in Carson City who operates an answering service for physicians. He says when the automatic dialers call in sequential numbers, it hits his phone banks, tying up his operators for up to 2 hours at a time. The call comes in through his 400-line system, taking one-half of his operators to answer those lines. Every time a phone rings, they have to answer in case it is an emergency call. He would like to be on the list where no telemarketers call his business.
We support A.B. 439. We feel it is a good measure for consumer protection and privacy.
Senator Rhoads:
I have no problem with the bill, except with the fiscal note. The wording in section 3, says, “The commissioner shall establish and maintain or cause to be established and maintained a registry,” but on the last page of the bill it says, “There is zero fiscal note.”
Patricia Jarman-Manning, Commissioner, Consumer Affairs Division, Department of Business and Industry:
We have agreed to try to initiate this program with our existing staff and our existing funds. We anticipate making it a self-funded program, and will be collecting a fee from telemarketers who are not registered with the division under chapter 599B of NRS. They would get the list for free, since they already pay the registration fee, but all other businesses will pay up to $500 per year for the list. We foresee providing the list twice a year.
I would like to reserve the right to go back to the Interim Finance Committee, in the event we find the program is overwhelmed. Based on other states’ experiences, this project has had a fairly good response.
However, we have not encountered one person who would say, “Put my name on every telemarketing list in the country,” or, “Let them call me, particularly when I am sitting down to have dinner with my children, or during family time.”
There is an overwhelming response in favor of this bill. We are still willing to try to implement it without cost to the state, at this point. We are not certain at this time, but if and when the time comes, we will be asking for financial support.
Assemblyman Brower:
For example, the State of Idaho, which adopted a similar measure, self-funds the program, so there is no state general fund money devoted to the program and operating it. What Idaho does differently is to charge a fee to the consumer. I know the charge is a nominal fee, but, frankly, it would not be the way for consumers in our state. The idea is to self-fund the program as it has been accomplished in other states.
Chairman Townsend:
In section 5, page 2, line 28 (of A.B. 439), regarding exemptions “on behalf of the public utility or community antenna television company regulated pursuant to chapters 704 and 711 of NRS . . . if the making of the telephone call is authorized by the terms and conditions of the certificate of public convenience.” My understanding is this includes approximately 450 telecommunications providers.
Ms. Skibinski:
Actually, there are currently 450 or more telecommunications providers registered with the public utilities commission under chapter 704 of NRS, which would include electric, gas, and water providers.
Chairman Townsend:
Since the vast majority of the complaints this committee has received are about, “If you switch carriers for long-distance, you’ll get 1000 free miles on Southwest Airlines,” why should we exclude the people who are creating part of the problem?
Ms. Skibinski:
In a way, some of the concerns raised by the telecommunications industry were because they felt their industry is different from other industries, due to being under so much regulation, where it is moving into a competitive realm, and this is a vehicle they needed available in order to reach consumers.
Chairman Townsend:
Let’s go to section 5 of A.B. 439 to talk about television services by satellite.
Ms. Skibinski:
I think it needed to be included to make it fair to the satellite people, who became an exception, since the community antenna television cable was included.
Chairman Townsend:
If we eliminate long distance carriers and local exchange carriers and now cable and satellite people, it seems we are now exempting three quarters of the people who call. Then on line 36, page 2 of A.B. 439, it says, “To a person, with whom the caller or an entity on whose behalf the call is made, or its affiliate, has a business relationship . . .“ I do not see any problem, because you have an established relationship. Except if their account needs adjusting, or there is a new product or service available, I can understand that. However, “if the call is made within 12 months after the business and the relationship was terminated.” There are a couple of reasons to terminate a relationship on behalf of the business: one could be because the company has “crummy” customers, or due to existing problems with the company and they don’t want to talk to the company. Now they are going to allow the company to call you again.
I am not comfortable with all of this. We are either going to do this or we are not. It would be up to this committee, but I think the point is all of us have received complaints in this regard; not one, not two, but hundreds of calls. Everyone has received telemarketer calls, including our constituents. Not one, not two, but hundreds. It is not geographic, and it is not economic. You are the consumer advocate. I ask you, are we going to do this or not? Why should these guys get a break?
Ms. Skibinski:
From the consumer advocate’s point of view, we did not write the original language; it already existed in A.B. 337. We do feel it is a strong measure for consumers with no exemptions, especially for those people, and it may be a small percentage of people, who say, “I want no (telemarketer) calls.”
Chairman Townsend:
Do you agree, Ms. Jarman-Manning?
Ms. Jarman-Manning:
Yes, sir.
Assemblyman Brower:
No one at this table had the idea of creating a bill with any exemptions at all, but, as you know, in this process certain interested parties have their own interests, which also need to be considered. The bill came through the Assembly with the current exemptions. I would like to state, because it is obvious, the no-call list would apply only to calls made for the purpose of selling goods or services. Right there, your charitable donation and political type of calls would not be precluded. When you look at some of the other states which have adopted a similar scheme, different kinds of exemptions have been included. What we certainly do not need to do, as Chairman Townsend has pointed out, is create too many exemptions.
When you look at the Kentucky Attorney General’s web site, the first thing you see is an apology, in effect, because the exemption list is so long. I believe there are about 25 specifically enumerated exemptions, including an exemption for a public company. So, in Kentucky, for example, the exemptions have swallowed up the rule. That is not what we are seeking here.
Chairman Townsend:
I would think the postal service would be in here trying to eliminate all of these exemptions, so the direct mail would become more of an issue, given the fact they want to raise our price one more time, according to the news this morning.
Assemblyman Brower:
The exemptions in the bill were exemptions the Assembly felt sensitive to and agreed to include in the bill as part of a compromise bill. No one showed opposition in the end, or will demand you remove the exemptions. It is up to this committee to review the bill, decide which exemptions, if any, make sense, and which don’t, and come to its own conclusions.
Chairman Townsend:
Is there case law or a federal law addressing the issue of the difference between mechanized and automated calls from a political person or party, versus a call by a real person? Is it possible to separate mechanized calls, for political purposes, from real human being calls?
Ms. Rushton:
No sir, not to my knowledge. It has not been addressed. However, as Assemblyman Brower pointed out, what we are trying to prohibit here does not take into consideration political calls, or calls made by nonprofit organizations. I will be happy to look into it.
Chairman Townsend:
Over the last 10 years, this committee has heard issues on mechanized calls. For example, I do not know how many phone lines there are in a hotel, there might be hundreds of them, but when one of those machines starts calling in, it is really disruptive; and if it is a business with three, four, or ten lines, the business could be brought to its knees.
Ms. Rushton:
You are absolutely right. When those calls just keep coming in, it can certainly have a chilling effect on the business, in terms of its operation. Similar to a hotel would be the bank-by-phone, tying them up for an indefinite period of time.
Chairman Townsend:
It will be to the discretion of this committee to leave the provision against mechanized calls in the bill. But, we also have to consider whether it includes free speech for political purposes. I would like to ask for clarification on page 3, section 8, subsection 3, where it says, “The commissioner or his designee may: (a) Sign all checks drawn upon the revolving account; and (b) Make withdrawals of cash from the . . . .“ Is that a term of art? Why would you be getting cash? I know you did not draft the language, but is it written correctly?
Ms. Jarman-Manning:
When I last looked at the bill, the whole section 8 was not in the bill; in fact, we discovered it today. I guess this language was added to give us the independence to be able to purchase software. Besides, it is supposed to be a self-funded program. I would think it would be easier if we just go through the normal system. The only revolving account we have is for our sting operations.
Chairman Townsend:
We do not want to interfere with the intent of the bill which, I think, is very noble, and the effort is remarkable. But the financial mechanism language could be corrected, so there would be no problems and it would operate appropriately.
Senator O'Connell:
On page 3, line 35, are we expecting an appropriation from the state General Fund to get this off the ground?
Ms. Jarman-Manning:
We are not asking for money from the General Fund, or the State of Nevada, to start this program. Again, this language is new.
Assemblyman Brower:
Let me clarify. I am urging this committee’s favorable consideration of the concept; I am also encouraging this committee’s fine-tuning of the language, as it sees fit. There is much language in this bill taken from other similar statutes.
Senator O'Connell:
What you’re saying is this was not intended.
Assemblyman Brower:
That specific language was not.
Chairman Townsend:
Because this committee has struggled extensively, as long as 10 years ago, on the telemarketing exemptions, is why I brought up the question as to who should be exempted. We tend to be sensitive to some of those issues, and there may be a good reason for them. At the same time, others will have a chance to make their cases. We did not agree on all of the exemptions in the original telemarketing statute. Nonetheless, there were members from the other House who felt very strongly about it.
Assemblyman Brower:
I think the same idea prevailed on the Assembly side for this bill. The goal was to get the bill together, in concept. And as I mentioned previously, it would be up to this committee and this house to review the exemptions and fine-tune them as they see fit. I would also like to add, as Chairman Townsend pointed out, this committee, in previous sessions, has dealt extensively with telemarketing in general and specifically in telemarketing fraud, including the statutory scheme dealing with telemarketing fraud.
The first question came up when the bill was introduced. Why are we reopening or redoing it? This bill is aimed at all telemarketers, which are encompassed by the bill, fraudulent or legitimate. It is a matter of consumer privacy and choice, as opposed to whether or not to receive unwanted calls, and as opposed to the alleging the fraudulent nature of the calls. Many so-called telemarketers encompassed by this bill are legitimate businesses, and are represented here today. No one challenges the legitimate nature of the product or service they are trying to sell. It is a matter of whether the consumer should be able to choose whether to receive those calls or not.
Ms. Jarman-Manning:
You will be happy to know not even a state agency, such as consumer affairs, is exempt from getting these calls. Last year, the division’s telephone lines were hung up in its rotary system. We kept getting call after call on political donations and announcements, et cetera, et cetera. We are just as eager. We urge you to pass this bill.
Chairman Townsend:
I think we are credibly sympathetic to the goal of this bill, and will process it. We just do not know exactly in what form, because we have to make sure when we, as the subcommittee, work through this bill, we carve out the appropriate language for your funding mechanism and what you need, as well as work on the issue of who should or should not be exempted from it.
Mr. Barengo:
Nevada Revised Statutes 597.812, 597.814, 597.816, and 597.818, deal with devices for automatic dialing and announcing. Basically, it says (Exhibit G), A person shall not use a device for automatic dialing and announcing to disseminate a prerecorded message in a telephone call unless, before the message is disseminated, a recorded or unrecorded natural voice: “(a) Informs the person who answers the phone call of the nature of the call, including, without limitation, the fact that a device for automatic dialing and announcing will be used to disseminate the message if the person who answers the call remains on the line; and (b) Provides to the person who answers the telephone call the name, address and telephone number of the business or organization, if any, being represented by the caller.” Then it says, You shall not operate automatic dialing and announcing between 9 p.m. and 9 a.m., or call-back or second call to the same telephone number, or, to the person at the telephone number who terminated the original call.
Senator Carlton:
The problem I am seeing is the answering machine used in people’s homes. Nowhere in this bill does it call for a positive response from the recipient of the call. What happens where they are doing the dissemination of the initial language when the answering machine turns on?
Mr. Barengo:
It is my recollection we did not discuss the issue of an answering machine having a long message, and the response was, “When you heard that, you just hung up.”
Samuel P. McMullen, Lobbyist, Retail Association of Nevada, AT&T:
Basically, the law requires a person to be informed, not just a machine.
Senator Carlton:
Then they are breaking the law, because when I come home every day, there is this long political message on my answering machine about a candidate, and without the answering machine I would have no way of back-tracking the origin of the call.
Mr. Barengo:
There are exceptions throughout the bill, with no provision to prohibit the use of a device product for automatic dialing if they use it on behalf of a school district, a nonprofit organization, a company providing cable television services, a public utility, a facility processing or storing petroleum, state or local government agency, or a private entity operating under contract with and at the direction of such an agency, information relating to public safety, information relating to a police or fire emergency, or warning of an impending or threatening emergency, a candidate for public office.
Mr. McMullen:
The political issues also have some additional implications that are not the same as business contacts.
Mr. Ross:
We, as a company, are in favor of the do-not-call policy and the ability for people to have a choice, when it comes to whether or not they receive these kinds of business-related type phone calls. I believe it could be expanded into the political arena, and eliminate all form of, whether its an automated with somebody’s voice, or live-body type phone call, with the use of this list. In working with an Assembly bill from last session, which was codified into law for NRS 597.812, we had a very long workshop session on how to announce, at either the beginning, the middle, or the end of a statement, if a political party or the political candidate should be told “this call is made on behalf of,” much like you see on a television commercial. My only concern about A.B. 439 is the length of time before the list is updated, and the deletion of the information at the end of each year.
If we go into a commercial campaign, we are required to maintain the do-not-call list for 7 years. In this case, a new telemarketing firm comes in or opens up and do not know there is an old list where persons have chosen to be put on or removed from.
Chairman Townsend:
Specifically in the bill (A.B. 439), the references to the time frame, which are on line 20, page 1, and lines 1, 2, and 3, on page 2; what are your suggestions for updating the list?
Mr. Ross:
Based on technology and samples we have given the staff of consumer affairs, it could be updated every 30 days, then placed on a protected web site. This is how the industry in most call-set environments currently runs, where the current list can be easily download or updated within a matter of an hour. Running into a 6-month process, as it is proposed, it almost looks like a backward cascading effect, if the next day from the new registry someone chooses to place themselves on it. We know from working in politics and the attention span of the general public what could happen. Someone is going to get an unwanted, unsolicited telephone call. The list needs to be continuously processed and updated.
That is my concern. Based on the language of this bill, companies will see a pattern of people placing themselves on the list, then going back and having to replace themselves, time and time again. At least from a company’s point of view, we will see a tremendous flow-back with the program, but we do not want to see the program go away. We happen to think the program is needed, and as part of the industry, we would like to be able to put ourselves on the list as well.
Chairman Townsend:
We will debate this issue of NRS 597.814 and 597.816 as we process this bill. I will ask Senator Shaffer to assist in scheduling this matter for subcommittee.
Mr. McMullen:
This bill is in a better shape today than when it was first introduced. It is important we have some of these issues, which seem to be resurfacing again and need to be addressed in general, on the record.
The issue concerning us is the reneging effect on the on-going business practices. There are, of course, other predicaments to this bill, one being the program has no budget allowance to augment the existing resources in the Consumer Affairs Division. The gentleman from Rolling Thunder can talk about all the technology in the world, but the bottom line is the businesses using this system may not have the ability to utilize that technology. Certainly, you do not want to update the list every 30 days, and still be in violation, if and when they happen to make a phone call within 30 days. We tried to focus on the goals of this bill to make sure we agreed on regulatory particulars with an objective policy.
I would like to reiterate, with some of these implementations it is going to change the way people do business today, and add significant costs to businesses. I believe it is the reason why the bill is in the shape it is today.
The exemptions are where I know this committee will focus the most, not only from the existing business relationships and business practice point of view, but also from the counter-balancing policy such as utilities. Per the language on page 2, line 33, certain companies are allowed to call, based on their relationship, but those which do not have a business relationship cannot make a competitive phone call. When new competitors started to move into telecommunications, it seemed to be a different policy statement, which later ended up in an exemption. Currently, some telephone companies may provide local service in one area, but if they move to another area and become a competitor, then there needs to be some ability to market it effectively, and on an equal basis. Consequently, that is an issue affecting all telephone and telecommunication companies.
We don’t know the magnitude of computerization or implementation of the system that would actually make it work. We certainly are not going to put the Consumer Affairs Division in the position of understanding, whether or not there is a positive or negative business relationship and then terminated for negative or other reasons. For instance, a newspaper service like the Nevada Press Association could just be un-renewed but someone may forget about it. So without having the resources for the list, to understand why the business relationship was terminated, then, there is no opportunity to call to see if, in fact, they want to renew (the relationship). Some people actually choose to wait for a better deal to renew.
There were issues raised about people who buy in a seasonal fashion, or it could be a company just marketing to their clients in a given season. Of course, there is no business relationship at that point, but it does not necessarily mean the clients do not want to be called again.
In reality, we would not be able to exercise the implementations, given the high budget dollars and other kinds of issues with the cost purging and redoing the list every 6 months, it seems the list would have to be sold to raise money for the program. But our concern is the penalties, when the list becomes available and a phone call is made to somebody on the list without having diligently done everything correctly. We want to make sure we do things right. If the list is not updated daily, how would we know the list is the most current one? There needs to be some sort of certainty. For some reason it was decided on the dates of January and July. As businesses, you must have an updated list, and continually update it. We are asking for additional time, but for some reason 30 days was decided to make sure you have the list.
It is easy to talk about computerization, but it can conceivably be done by paper. Hopefully, it will be in electronic format to make it easier. But again, we need to have some certainty as to when the list should available, and time to place it. You are talking about passing a law to please all circumstances.
For instance, in other states when you do, in fact, use an organization to serve the division as a list company, they have restrictions in the statutes which have to have been in existence for a track record in running this type of list. The company providing the list is really the serious key player as to whether or not you can comply without violating, fundamentally, a very important set of statutes and deceptive trade practices statutes.
We need the committee to understand, this is a product of many concerns on our part, and we are trying to make sure a policy objective is implemented, but done adequately. We can certainly revisit it in 2 years, once we know whether or not a budget will be needed, and when we know the system works.
Mr. Barengo:
Lines 36 through 44 (page 2, of A.B. 439), which was added from the New York law, indicates when a telephone call is made to a person with whom the caller or entity on whose behalf the call is made and who has a business relationship. An established relationship means a prior or existing relationship formed by a voluntary two-way communication between a person or entity; on a telephone subscriber with or without an extraneous consideration; on the basis of an inquiry, application, purchase, or transaction by the telephone subscriber; regarding product or services offered by such person or entity, which relationship has not been previously terminated by either party. Out of the New York law, content was distilled. What we have here is found in other states across the county. I think we have done it in a more succinct fashion.
Mr. Craigie:
I would like to point out on page 2, line 42, in reference to terminating the business relationship. According to testimony before the Assembly committee, if a person is on the list and their insurance has lapsed, the company must be able to verify if the client intended for it to lapse.
Chairman Townsend:
Send them a letter like everybody else.
Mr. Craigie:
It is a possibility, but many people don’t read their mail. In section 5, subsection 2, it is very important to know the reason why the exemptions were added to chapter 704 of NRS. I represent Sprint, and for the record, my company also works with alternate-service sellers in the utility and energy areas. What is happening in the new market places is formerly monopoly markets are being opened up to competition. A radical set of changes happen when a monopoly area is opened to competition.
Chairman Townsend:
These issues will be taken up in the subcommittee, which will be set by the subcommittee chairman Senator Shaffer.
The meeting was adjourned at 10:44 a.m.
Silvia Motta,
Committee Secretary
APPROVED BY:
Senator Randolph J. Townsend, Chairman
DATE: