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S.B. 245

             1     

CONSUMER PROTECTION AMENDMENTS

             2     
2001 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Sponsor: Mike Dmitrich

             5      This act modifies the Commerce and Trade Code. The act amends the definition of a
             6      deceptive act or practice by a supplier. The act amends the definition of an assisted
             7      marketing plan. The act adjusts the bonding requirements for credit services organizations
             8      and health spa facilities.
             9      This act affects sections of Utah Code Annotated 1953 as follows:
             10      AMENDS:
             11          13-11-4, as last amended by Chapter 21, Laws of Utah 1999
             12          13-15-2, as last amended by Chapter 85, Laws of Utah 1995
             13          13-21-3, as last amended by Chapter 124, Laws of Utah 1999
             14          13-23-5, as last amended by Chapter 89, Laws of Utah 1995
             15      Be it enacted by the Legislature of the state of Utah:
             16          Section 1. Section 13-11-4 is amended to read:
             17           13-11-4. Deceptive act or practice by supplier.
             18          (1) A deceptive act or practice by a supplier in connection with a consumer transaction
             19      violates this chapter whether it occurs before, during, or after the transaction.
             20          (2) Without limiting the scope of Subsection (1), a supplier commits a deceptive act or
             21      practice if the supplier knowingly or intentionally:
             22          (a) indicates that the subject of a consumer transaction has sponsorship, approval,
             23      performance characteristics, accessories, uses, or benefits, if it has not;
             24          (b) indicates that the subject of a consumer transaction is of a particular standard, quality,
             25      grade, style, or model, if it is not;
             26          (c) indicates that the subject of a consumer transaction is new, or unused, if it is not, or has
             27      been used to an extent that is materially different from the fact;


             28          (d) indicates that the subject of a consumer transaction is available to the consumer for a
             29      reason that does not exist;
             30          (e) indicates that the subject of a consumer transaction has been supplied in accordance
             31      with a previous representation, if it has not;
             32          (f) indicates that the subject of a consumer transaction will be supplied in greater quantity
             33      than the supplier intends;
             34          (g) indicates that replacement or repair is needed, if it is not;
             35          (h) indicates that a specific price advantage exists, if it does not;
             36          (i) indicates that the supplier has a sponsorship, approval, or affiliation the supplier does
             37      not have;
             38          (j) indicates that a consumer transaction involves or does not involve a warranty, a
             39      disclaimer of warranties, particular warranty terms, or other rights, remedies, or obligations, if the
             40      representation is false;
             41          (k) indicates that the consumer will receive a rebate, discount, or other benefit as an
             42      inducement for entering into a consumer transaction in return for giving the supplier the names of
             43      prospective consumers or otherwise helping the supplier to enter into other consumer transactions,
             44      if receipt of the benefit is contingent on an event occurring after the consumer enters into the
             45      transaction;
             46          (l) after receipt of payment for goods or services, fails to ship the goods or furnish the
             47      services within the time advertised or otherwise represented or, if no specific time is advertised
             48      or represented, fails to ship the goods or furnish the services within 30 days, unless within the
             49      applicable time period the supplier provides the buyer with the option to either cancel the sales
             50      agreement and receive a refund of all previous payments to the supplier or to extend the shipping
             51      date to a specific date proposed by the supplier, but any refund shall be mailed or delivered to the
             52      buyer within ten business days after the seller receives written notification from the buyer of the
             53      buyer's right to cancel the sales agreement and receive the refund;
             54          (m) fails to furnish a notice of the purchaser's right to cancel a direct solicitation sale
             55      within three business days of the time of purchase if the sale is made other than at the supplier's
             56      established place of business pursuant to the supplier's personal contact, whether through mail,
             57      electronic mail, facsimile transmission, telephone, or [personal contact] any other form of direct
             58      solicitation and if the sale price exceeds $25, unless the supplier's cancellation policy is


             59      communicated to the buyer and the policy offers greater rights to the buyer than this Subsection
             60      (2)(m), which notice shall be a conspicuous statement written in dark bold at least 12 point type,
             61      on the first page of the purchase documentation, and shall read as follows: "YOU, THE BUYER,
             62      MAY CANCEL THIS CONTRACT AT ANY TIME PRIOR TO MIDNIGHT OF THE THIRD
             63      BUSINESS DAY (or time period reflecting the supplier's cancellation policy but not less than
             64      three business days) AFTER THE DATE OF THE TRANSACTION OR RECEIPT OF THE
             65      PRODUCT, WHICHEVER IS LATER.";
             66          (n) promotes, offers, or grants participation in a pyramid scheme as defined under Title
             67      76, Chapter 6a, Pyramid Scheme Act;
             68          (o) represents that the funds or property conveyed in response to a charitable solicitation
             69      will be donated or used for a particular purpose or will be donated to or used by a particular
             70      organization, if the representation is false; [or]
             71          (p) if a consumer indicates his intention of making a claim for a motor vehicle repair
             72      against his motor vehicle insurance policy:
             73          (i) commences the repair without first giving the consumer oral and written notice of:
             74          (A) the total estimated cost of the repair; and
             75          (B) the total dollar amount the consumer is responsible to pay for the repair, which dollar
             76      amount may not exceed the applicable deductible or other copay arrangement in the consumer's
             77      insurance policy; or
             78          (ii) requests or collects from a consumer an amount that exceeds the dollar amount a
             79      consumer was initially told he was responsible to pay as an insurance deductible or other copay
             80      arrangement for a motor vehicle repair under Subsection (2)(p)(i), even if that amount is less than
             81      the full amount the motor vehicle insurance policy requires the insured to pay as a deductible or
             82      other copay arrangement, unless:
             83          (A) the consumer's insurance company denies that coverage exists for the repair, in which
             84      case, the full amount of the repair may be charged and collected from the consumer; or
             85          (B) the consumer misstates, before the repair is commenced, the amount of money the
             86      insurance policy requires the consumer to pay as a deductible or other copay arrangement, in which
             87      case, the supplier may charge and collect from the consumer an amount that does not exceed the
             88      amount the insurance policy requires the consumer to pay as a deductible or other copay
             89      arrangement[.];


             90          (q) includes in any contract, receipt, or other written documentation of a consumer
             91      transaction, or any addendum to any contract, receipt, or other written documentation of a
             92      consumer transaction, any confession of judgment or any waiver of any of the rights to which a
             93      consumer is entitled under this chapter; or
             94          (r) charges a consumer for a consumer transaction that has not previously been agreed to
             95      by the consumer.
             96          Section 2. Section 13-15-2 is amended to read:
             97           13-15-2. Definitions.
             98          As used in this chapter:
             99          (1) (a) "Assisted marketing plan" means the sale or lease of any products, equipment,
             100      supplies, or services that are sold to the purchaser upon payment of an initial required
             101      consideration of $300 or more for the purpose of enabling the purchaser to start a business, and
             102      in which the seller represents:
             103          (i) that the seller will provide locations or assist the purchaser in finding locations for the
             104      use or operation of vending machines, racks, display cases, or other similar devices, or currency
             105      operated amusement machines or devices, on premises neither owned nor leased by the purchaser
             106      or seller;
             107          (ii) that the seller will purchase any or all products made, produced, fabricated, grown, or
             108      modified by the purchaser, using in whole or in part the supplies, services, or chattels sold to the
             109      purchaser;
             110          (iii) that the seller will provide the purchaser with a guarantee that the purchaser will
             111      receive income from the assisted marketing plan that exceeds the price paid for the assisted
             112      marketing plan, or repurchase any of the products, equipment, supplies, or chattels supplied by the
             113      seller if the purchaser is dissatisfied with the assisted marketing plan; or
             114          (iv) that upon payment by the purchaser of a fee or sum of money, which exceeds $300
             115      to the seller, the seller will provide a sales program or marketing program that will enable the
             116      purchaser to derive income from the assisted marketing plan that exceeds the price paid for the
             117      marketing plan[, but Subsection (1)(a)(iv) does not apply to the sale of a sales program or
             118      marketing program made in conjunction with the licensing of a registered trademark or service
             119      mark].
             120          (b) "Assisted marketing plan" does not include:


             121          (i) the sale of an ongoing business when the owner of that business sells and intends to sell
             122      only that one assisted marketing plan;
             123          (ii) not-for-profit sale of sales demonstration equipment, materials, or samples for a total
             124      price of $300 or less; or
             125          (iii) the sale of a package franchise or a product franchise defined by and in compliance
             126      with Federal Trade Commission rules governing franchise and business opportunity ventures[, if
             127      the seller does not make any representation defined in Subsections (1)(a)(i), (ii), (iii), or (iv)].
             128          (c) As used in Subsection (1)(a)(iii) "guarantee" means a written agreement, signed by the
             129      purchaser and seller, disclosing the complete details and any limitations or exceptions of the
             130      agreement.
             131          (2) "Business opportunity" means an assisted marketing plan subject to this chapter.
             132          (3) "Division" means the Division of Consumer Protection of the Department of
             133      Commerce.
             134          (4) (a) "Initial required consideration" means the total amount a purchaser is obligated to
             135      pay under the terms of the assisted marketing plan, either prior to or at the time of delivery of the
             136      products, equipment, supplies, or services, or within six months of the commencement of
             137      operation of the assisted marketing plan by the purchaser. If payment is over a period of time,
             138      "initial required consideration" means the sum of the down payment and the total monthly
             139      payments.
             140          (b) "Initial required consideration" does not mean the not-for-profit sale of sales
             141      demonstration equipment, materials, or supplies for a total price of less than $300.
             142          (5) "Person" means any natural person, corporation, partnership, organization, association,
             143      trust, or any other legal entity.
             144          (6) "Purchaser" means a person who becomes obligated to pay for an assisted marketing
             145      plan.
             146          (7) "Registered trademark" or "service mark" means a trademark, trade name, or service
             147      mark registered with the United States Patent and Trademark Office, or Utah, or the state of
             148      incorporation if a corporation.
             149          (8) "Seller" means a person who sells or offers to sell an assisted marketing plan.
             150          Section 3. Section 13-21-3 is amended to read:
             151           13-21-3. Credit services organizations -- Prohibitions.


             152          (1) A credit services organization, its salespersons, agents, and representatives, and
             153      independent contractors who sell or attempt to sell the services of a credit services organization
             154      may not do any of the following:
             155          (a) conduct any business regulated by this chapter without first:
             156          (i) securing a certificate of registration from the division; and
             157          (ii) unless exempted under Section 13-21-4 , posting a bond, letter of credit, or certificate
             158      of deposit with the division in the amount of [$100,000] $75,000;
             159          (b) make a false statement, or fail to state a material fact, in connection with an application
             160      for registration with the division;
             161          (c) charge or receive any money or other valuable consideration prior to full and complete
             162      performance of the services the credit services organization has agreed to perform for the buyer
             163      [unless the credit services organization meets the requirements of Subsection (1)(a)(ii)];
             164          (d) dispute or challenge, or assist a person in disputing or challenging an entry in a credit
             165      report prepared by a consumer reporting agency without a factual basis for believing and obtaining
             166      a written statement for each entry from the person stating that that person believes that the entry
             167      contains a material error or omission, outdated information, inaccurate information, or unverifiable
             168      information;
             169          (e) charge or receive any money or other valuable consideration solely for referral of the
             170      buyer to a retail seller who will or may extend credit to the buyer, if the credit that is or will be
             171      extended to the buyer is upon substantially the same terms as those available to the general public;
             172          (f) make, or counsel or advise any buyer to make, any statement that is untrue or
             173      misleading and that is known, or that by the exercise of reasonable care should be known, to be
             174      untrue or misleading, to a credit reporting agency or to any person who has extended credit to a
             175      buyer or to whom a buyer is applying for an extension of credit, with respect to a buyer's
             176      creditworthiness, credit standing, or credit capacity;
             177          (g) make or use any untrue or misleading representations in the offer or sale of the services
             178      of a credit services organization or engage, directly or indirectly, in any act, practice, or course of
             179      business that operates or would operate as fraud or deception upon any person in connection with
             180      the offer or sale of the services of a credit services organization; and
             181          (h) transact any business as a credit services organization, as defined in Section 13-21-2 ,
             182      without first having registered with the division by paying an annual fee set pursuant to Section


             183      63-38-3.2 and filing proof that it has obtained a bond or letter of credit as required by Subsection
             184      (1).
             185          (2) (a) A bond, letter of credit from a Utah depository, or certificate of deposit posted with
             186      the division shall be used to cover the losses of any person arising from a violation of this chapter
             187      by the posting credit services organization. A bond, letter of credit, or certificate of deposit may
             188      also be used to satisfy administrative fines and civil damages arising from any enforcement action
             189      against the posting credit service organization.
             190          (b) A bond, letter of credit, or certificate of deposit shall remain in force:
             191          (i) until replaced by a bond, letter of credit, or certificate of deposit of identical or superior
             192      coverage; or
             193          (ii) for one year after the credit servicing organization notifies the division in writing that
             194      it has ceased all activities regulated by this chapter.
             195          Section 4. Section 13-23-5 is amended to read:
             196           13-23-5. Registration -- Bond, letter of credit, or certificate of deposit required --
             197      Penalties.
             198          (1) (a) (i) It is unlawful for any health spa facility to operate in this state unless the facility
             199      is registered with the division.
             200          (ii) Registration is effective for one year. If the health spa facility renews its registration,
             201      the registration shall be renewed at least 30 days prior to its expiration.
             202          (iii) The division shall provide by rule for the form, content, application process, and
             203      renewal process of the registration.
             204          (b) Each health spa registering in this state shall designate a registered agent for receiving
             205      service of process. The registered agent shall be reasonably available from 8 a.m. until 5 p.m.
             206      during normal working days.
             207          (c) The division shall charge and collect a fee for registration under guidelines provided
             208      in Section 63-38-3.2 .
             209          (2) (a) Each health spa shall obtain and maintain:
             210          (i) a performance bond issued by a surety authorized to transact surety business in this
             211      state;
             212          (ii) an irrevocable letter of credit issued by a financial institution authorized to do business
             213      in this state; or


             214          (iii) a certificate of deposit.
             215          (b) The bond, letter of credit, or certificate of deposit shall be payable to the division for
             216      the benefit of any consumer who incurs damages as the result of:
             217          (i) the health spa's violation of this chapter; or
             218          (ii) as the result of the health spa's going out of business or relocating and failing to offer
             219      an alternate location within ten miles.
             220          (c) The division may recover from the bond, letter of credit, or certificate of deposit the
             221      costs of collecting and distributing funds under this section, up to 10% of the face value of the
             222      bond, letter of credit, or certificate of deposit but only if the consumers have fully recovered their
             223      damages first. The total liability of the issuer of the bond, letter of credit, or certificate of deposit
             224      may not exceed the amount of the bond, letter of credit, or certificate of deposit. The health spa
             225      shall maintain a bond, letter of credit, or certificate of deposit in force for one year after it notifies
             226      the division in writing that it has ceased all activities regulated by this chapter.
             227          (d) A health spa providing services at more than one location shall comply with the
             228      requirements of Subsection (2)(a) for each separate location.
             229          (e) The division may impose a fine against a health spa that fails to comply with the
             230      requirements of Subsection (2)(a) of up to $100 per day that the health spa remains out of
             231      compliance. All penalties received shall be deposited into the Consumer Protection Education and
             232      Training Fund created in Section 13-2-8 .
             233          (3) The minimum principal amount of the bond, letter of credit, or certificate of credit
             234      required under Subsection (2) shall be based on the number of unexpired contracts for health spa
             235      services to which the health spa is a party, in accordance with the following schedule:
             236      Principal Amount of                     Number of Contracts
             237      Bond, Letter of Credit,                 [with an Unexpired Term]
             238      or Certificate of Deposit                 [Exceeding 90 Days]
             239          $15,000                                500 or fewer
             240           35,000                                501 to 1,500
             241           50,000                                1,500 to 3,000
             242          75,000                                     3,001 or more
             243          (4) Each health spa shall obtain the bond, letter of credit, or certificate of deposit and
             244      furnish a certified copy of the bond, letter of credit, or certificate of deposit to the division prior


             245      to selling, offering or attempting to sell, soliciting the sale of, or becoming a party to any contract
             246      to provide health spa services. A health spa is considered to be in compliance with this section
             247      only if the proof provided to the division shows that the bond, letter of credit, or certificate of
             248      credit is current.
             249          (5) Each health spa shall maintain accurate records of the bond, letter of credit, or
             250      certificate of credit and of any payments made, due, or to become due to the issuer and shall open
             251      the records to inspection by the division at any time during normal business hours.
             252          (6) If a health spa changes ownership, ceases operation, discontinues facilities, or relocates
             253      and fails to offer an alternate location within ten miles within 30 days after its closing, the health
             254      spa is subject to the requirements of this section as if it were a new health spa coming into being
             255      at the time the health spa changed ownership. The former owner may not release, cancel, or
             256      terminate the owner's liability under any bond, letter of credit, or certificate of deposit previously
             257      filed with the division, unless:
             258          (a) the new owner has filed a new bond, letter of credit, or certificate of deposit for the
             259      benefit of consumers covered under the previous owner's bond, letter of credit, or certificate of
             260      deposit; or
             261          (b) the former owner has refunded all unearned payments to consumers.
             262          (7) If a health spa ceases operation or relocates and fails to offer an alternative location
             263      within ten miles, the health spa shall provide the division with 45 days prior notice.




Legislative Review Note
    as of 1-29-01 11:34 AM


A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel


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