December 15, 2002

Honorable Sheldon Silver
Speaker of the Assembly
State Capitol, Room 349
Albany, New York 12248

Dear Speaker Silver:

It is my pleasure to forward to you the 2002 Annual Report of the Assembly Standing Committee on Consumer Affairs and Protection.

This was a challenging and productive year for the Committee. I am proud of the accomplishments we achieved this legislative session. Through hard work and diligence, the Committee was responsible for enacting legislation to prevent and criminalize identity theft. Chapter 619 of the Laws of 2002 makes identity theft a crime and expands the definition of "victim" to include individual consumers as well as financial institutions.

Several other laws were enacted this year to help consumers become more informed participants in the marketplace. Chapter 530 of the Laws of 2002 prohibits the sale of certain articles of children's clothing that contain neck and waist drawstrings. This will reduce the number of child-related accidents and deaths associated with children's clothing. In addition, Chapter 479 of the Laws of 2002 was enacted to increase the security provided to debit cards to the level currently provided to credit cards under state law.

In addition to these measures, the Committee advanced legislation changing the business practices of social training facilities (i.e., dance studios). In the past, businesses were limited to a $500 ceiling for contracts. Chapter 549 of the Laws of 2002 adjusts contractual monetary ceilings while also enabling consumers to cancel a contract at any time.

I would like to take this opportunity to thank the Committee members for their continued contributions to this past year's achievements. I would also like to express my appreciation for the assistance that the Committee received from the Committee staff in the course of our work. Finally, Mr. Speaker, I commend you for your continued leadership and support of our legislative initiatives to better protect New York State consumers.

Sincerely, Audrey I. Pheffer, Chair

MAJORITY
William F. Boyland
Peter J. Abbate, Jr.
Sandra R. Galef
Naomi Matusow
Peter M. Rivera
Jeffrey Dinowitz
Jeffrey Klein
Kevin A. Cahill
Margaret M. Markey
Steve Levy

MINORITY
Roy McDonald,
   Ranking Minority Member
Patricia Acampora
Robert Barra

Joanne Barker, Legislative Coordinator
Cheryl Couser, Senior Analyst
Elizabeth Hogan, Associate Counsel
Julie Marlette, Committee Assistant
Kimberly A. Lease, Committee Clerk
Kathleen Quackenbush, Program and Counsel Secretary

1. Committee Responsibilities and Goals
2. 2002 Committee Accomplishments
   1. Protecting Personal Privacy
      1. Preventing Identity Theft
      2. Safeguarding Credit and Debit Card Numbers
      3. Regulating Unsolicited Electronic Mail
      4. Regulating Credit Card Charges
      5. Enhancing Credit Card Security
   2. Improving Business Practices
      1. Requiring Notice of Grey Merchandise
      2. Increasing Regulation on Dance Club Studio Contracts
      3. Cracking Down on Price Gouging
      4. Extending Wheelchair Warranties
      5. Authorizing Class Actions Lawsuits in Anti-Trust Actions
      6. Preventing Fraudulent Practices by Computer Industries
      7. Requiring Toll-free Numbers for Unsolicited Services
      8. Creating New Home Protection
      9. Permitting Transportation Costs
      10. Free Estimates in Writing
      11. Prohibiting the Use of Energy Service Prize Boxes
      12. Requiring Internet Access Number Warnings
   3. Protecting Consumer Heath and Safety
      1. Enhanced Protection for Child Clothing
      2. Increasing CPR Requirements for Health Clubs
      3. Prohibiting the Sale of Ephedra-based Dietary Supplements
      4. Prohibiting "Box Cutters"
      5. Labeling Sunscreen Products
      6. Requiring Weight Loss Service Disclosures
      7. Regulating Laser Pointers
   4. Enhancing Motor Vehicle Safety
      1. Allowing Collision Damage Waivers
      2. Requiring Rental Car Manuals
      3. Enhancing Child Safety Seat Disclosures
      4. Prohibiting Rental Vehicle Discrimination
3. Hearings and Roundtables
4. Outlook and Goals for 2002

The Assembly Consumer Affairs and Protection Committee (the "Committee") is responsible for developing legislation aimed at protecting consumers' rights and ensuring the public's ability to make informed choices in the marketplace. Generally, the Committee has jurisdiction over legislation that amends sections of the General Business and Personal Property Laws and parts of the Agriculture and Markets and Education Laws. The broad interests of the Committee reflect the fact that today's consumers can be victims of fraud, misinformation, or lack of information that is vital to their health, safety, and welfare.

To protect consumer's rights and help them make informed choices, the Committee works with consumer groups and state and federal agencies. At the State level, these agencies include: the Department of Law, the Consumer Protection Board, the Department of Education, the Department of Environmental Conservation, the Department of Health, the Department of Agriculture and Markets, and the Department of State. The federal government agencies with which the Committee works include: the Federal Trade Commission (FTC), the Food and Drug Administration (FDA), the Federal Communications Commission (FCC), the Consumer Product Safety Commission (CPSC), and the National Highway Traffic Safety Administration (NHTSA). The Committee also works with local agencies, such as the New York City Department of Consumer Affairs, local consumer affairs offices, numerous Better Business Bureaus, and bar associations throughout the State.

In addition, the Committee works to help consumers in the development of legislation under the jurisdiction of other Assembly standing committees. Such committees include: Transportation, Corporations, Authorities and Commissions, Economic Development, Job Creation, Commerce and Industry, Agriculture, and Insurance.

A. Protecting Personal Privacy

The Assembly has traditionally been a strong advocate for the protection of consumers' rights, including the protection of personal privacy. As technology has continued to evolve, the potential for inappropriate actions concerning personal information has risen dramatically in recent years. The public is increasingly aware that it has less control than in the past over its personal and sensitive information. Privacy issues include a number of very broad topics, such as: the theft of identity; credit reporting; and, telecommunications.

The Committee has taken great strides in promoting legislation that would protect the privacy of New York State's consumers.

1. Preventing Identity Theft

A serious misuse of personal information has come to the forefront of the Committee's attention: the theft of identity. While this crime is becoming more widespread, there have been few laws enacted that protect consumers from this crime.

This new legislation defines the crime of identity theft so that it is clear that the individual whose identity is misused is a victim of the crime as well as any entities, such as banks, who are defrauded by the identity theft. It creates three classes of theft of identity crimes and permits the Attorney General to seek injunctive relief. This law creates significant deterrents to the crime of identity theft.
(Chapter 619 of the Laws of 2003, Pheffer)

2. Safeguarding Credit and Debit Card Numbers

This law will extend the security measures currently available to credit card transactions to debit card transactions. Specifically, it would require debit card transaction forms to be carbonless and would prohibit entities that accept debit cards from writing the cardholder's address or telephone number on the transaction form.

These protections are already available to credit card transactions. With the expanded use of debit cards, it is only appropriate to extend these provisions to protect debit card users and transactions.
(Chapter 479 of the Laws of 2002, Matusow)

3. Regulating Unsolicited Electronic Mail

This measure would regulate the transmission of unsolicited electronic mail advertisements by requiring that certain identifiable information accompany such advertisements. While the transmission of unsolicited facsimile transmissions is prohibited by law, the transmission of unsolicited electronic mail (E-mail) advertising currently is not. This type of advertising (known as "junk E-mail" or "SPAM") can be costly to the recipient.

This bill provides consumers with a means of alerting the sender that they do not want any further transmissions of these unwanted and unsolicited electronic mail advertisements. Those who find such communications valuable would need do nothing and they would continue to receive E-mail advertisements.
(A.8330-A, Markey) (Passed Assembly)

4. Regulating Credit Card Charges

The purpose of this bill is to prohibit credit card companies from imposing a fee on only those customers who choose not to carry a monthly balance. Paying off the monthly balance on a credit card is something many people strive for and is a great accomplishment. Imposing a fee on such conscientious credit card holders to offset the losses incurred by other card holders is an unjust business practice.

This bill was introduced to send a clear message that companies should support their customers who pay off their bills in a timely manner and not penalize them.
(A.1870, Lentol) (Passed Assembly)

5. Credit Card Security Increased

This bill would prohibit a merchant from writing or attaching a consumer's address or telephone number on a credit card transaction form. In 1989, the legislature enacted a credit card privacy law that prohibits merchants from requiring customers to put their name and address on a credit card transaction form.

A number of merchants are circumventing the law by taking the customer's name and address on a separate piece of paper and attaching it to a credit card form. This legislation would ensure that personal identifying information on credit card forms or attached paper falls under the protection of the 1989 law.
(A.367, Kaufman) (Passed Assembly)

B. Improving Business Practices

1. Requiring Notice of Grey Merchandise

This bill would require retail sellers of grey merchandise to disclose the sale of such merchandise by posting information on two signs. Currently, "grey market" merchandise refers to any consumer product normally accompanied by a warranty valid in the United States that is imported into the United States through channels other than the manufacturer's authorized distributor for sale to the public. As a result, the product may not be accompanied by a manufacturer's express written warranty.

By adding products distributed through these channels to the definition and by requiring retailers to post two conspicuous signs identifying the merchandise as such, consumers are better protected against deceptive practices.
(A.366-A, Kaufman) (Vetoed by Governor Pataki, Memo 12)

2. Increasing Regulation on Dance Club Studio Contracts

This legislation would increase consumer protection to ensure consumers have choice when entering into contracts with dance studios while also providing businesses and consumers some flexibility when negotiating contracts for various services. Specifically, this law allows a consumer to cancel a dance studio contract at any time.

In 1964, the legislature passed a law which placed limitations on contracts for use of certain training facilities, including dance studios. One such limitation placed a $500 monetary limit on all contracts. Thirty seven years have passed without an adjustment to the law or monetary limitations. It is appropriate to mirror the acceptable dollar value. The amendment provides consumers with more choices on entering into contracts while adding additional consumer protections, such as posting of contract limitations and the option to cancel a contract at any time.
(Chapter 549 of the Laws of 2002, Pheffer)

3. Cracking Down on Price Gouging

This bill would allow consumers to seek relief from alleged price gougers by bringing their own actions and/or damages against businesses they believed engaged in this practice. It was introduced to help consumers fight price gouging during times of emergency and natural disaster. Price gouging during the 1998 ice storm in the northern part of the State demonstrated the need for this legislation. Five northern counties were in a declared state of emergency, which placed existing price gouging provisions in effect in those areas. Nonetheless, reports from these northern counties indicate that prices on everything from electrical generators to hotel space increased dramatically in an attempt to take advantage of those suffering from the disaster.

The current statute only gives enforcement authority to the Attorney General's office, thereby leaving consumers with a limited recourse against unscrupulous businesses. The Attorney General's office deals with numerous issues and cannot focus on every violation. Private Citizens must be able to seek relief on their own from those who seek to profit unjustly from other's misfortunes.
(A.4110, Pheffer) (Passed Assembly)

4. Extending Wheelchair Warranties

This bill would apply the same consumer protections that currently exist for purchasers of motorized wheelchairs to non-motorized wheelchairs. It would extend warranty, replacement, and quality standards to wheelchairs purchased by State agencies, non-profit medical, dental, health and hospital service corporations, and health maintenance organizations.

Wheelchairs and their customized component parts are absolutely essential to the mobility of many persons with disabilities. They are also very expensive, costing as much as $8,000. Much of this equipment is subject to frequent breakdown and is often not covered by warranties or other basic consumer protection. This bill would significantly reduce financial stress for those citizens who rely on wheelchairs to meet their basic transportation needs.
(A.5895, Sanders) (Passed Assembly)

5. Authorizing Class Actions Lawsuits in Anti-Trust Actions

This bill would correct a legislative oversight, by affording consumers who allege anti-trust violations the right to file suit as part of a class action and seek damages as a group.

Section 340 of the General Business law provides that agreements for monopoly or in restraint of trade are illegal and void and that the state or any person damaged by such agreements may sue for damages. In 1999, a new subdivision was added, providing a right of action where the claim arouse from a purchase made indirectly. In 2000, the New York Supreme Court dismissed two class action suits brought pursuant to section 340 of the General Business law holding that section 340 provides for treble damages and is therefore punitive. In that instance a class action will survive only when a statute specifically provides for it.

This bill would extend that remedy to private suits. The history of the anti-trust law reflects the desire of the legislature to protect consumers and to enable them to seek damages if appropriate. Broadening the methods of righting the wrong would better utilize resources and reduce the costs of bringing actions. This would serve both the legal system and the consumer.
(A.11124, Pheffer) (Passed Assembly)

6. Preventing Fraudulent Practices by Computer Industries

This bill would protect consumers from fraudulent practices by computer manufacturers and retailers by prohibiting the industry from selling as "new" computers and computer accessories with old or recycled parts. In 1996, the Packard-Bell Computer Company was caught and convicted of trying to pass off remanufactured and used computer parts as new to consumers.

This bill would mandate that the computer industry use only new computer parts when it sells "new" computer hardware, monitors, printers, and other accessories to consumers. It also requires retailers to affix a label or tag on the outside of the container box indicating that only new parts have been used on the computer.
(A.531, Brodsky) (Passed Assembly)

7. Requiring Toll-free Numbers for Unsolicited Services

This legislation would require telephone service providers to furnish toll-free customer service numbers for consumers offered unsolicited services through a negative option sales plan. Under current law, any company or business offering unsolicited telephone service in New York for any specific period of time is not require to provide a toll-free number for consumers to discontinue such service.

Without appropriate access to service providers in respect to billing, rate, and other information, a consumer may be vulnerable to charges for additional services that they do not want or cannot afford.
(A.6346, Cahill) (Passed Assembly)

8. Permitting Transportation Costs

This bill would permit the arbitrator in a dispute over a motorized wheelchair warranty to award reasonable attorney fees and the reasonable and necessary costs of attending an in-person hearing to a prevailing consumer. Current law provides that each party has the right to be in attendance at any presentation, but does not provide for reimbursement to disabled consumers of the costs of transportation to a presentation.
(A.368, Kaufman) (Passed Assembly)

9. Free Estimates in Writing

This bill would prohibit the advertising or offering of free estimates unless such estimate is in writing and there is no charge for providing such estimate. Unscrupulous merchants sometime offer "free estimates." After providing the offered estimate, the merchant then insists on being paid for a written estimate.

This proposed legislation would require that estimates advertised as free are indeed provided at no charge to the customer. This requirement would protect consumers from merchants who might try to employ misleading business practices.
(A.1290, Greene) (Passed Assembly)

10. Prohibiting the Use of Prize Boxes to Collect Authorization to Switch Energy-Related Services

This bill would ban the use of prize boxes as a means of collecting authorizations to switch electricity or natural gas suppliers. Current law prohibits the use of prize boxes to switch telecommunication suppliers. As movement continues towards a more competitive marketplace for energy, current law should be extended to cover changes in electricity and gas suppliers.

This proactive measure would help ensure that consumers do not face the same problems with changes in energy suppliers as experienced in the transition to a competitive telecommunications market.
(A.7744, McLaughlin) (Passed Assembly)

11. Requiring Internet Access Number Warning Regarding Local and Long Distance Connections

This bill would ensure that Internet users have adequate warning that some access numbers may involve long distance charges. Many consumers do not realize that numbers in their geographic region or area code are not necessarily local numbers for the purpose of charges made by a phone company. In addition, the Attorney General's office receives many complaints each year from consumers who have incurred charges for internet access.

In order to alleviate this problem, this bill would require internet service providers to post a warning that some phone numbers provided for connection may not be within the user's local calling zone.
(A.11458, P. Rivera) (Passed Assembly)

C. Protecting Consumer Health and Safety

1. Enhanced Protection for Child Clothing

This bill would prohibit the sale of certain articles of children's clothing that have either a large waist or bottom drawstring. The Consumer Product Safety Commission (CPSC) released voluntary guidelines for hood and waist drawstrings. It recommended that manufacturers and retailers provide outerwear with alternative hood and neck closures like snaps and buttons. The recommendations were made after the CPSC received reports of 17 deaths and 42 injuries to children associated with clothing with drawstrings.

This bill would prohibit drawstrings on all size 2T to 12 clothing and long waist and bottom drawstrings on size 2T to 16 clothing. In doing so, this measure would help protect children from potential injury.
(Chapter 530 of the Laws of 2002, Dinowitz)

2. Increasing CPR Requirements for Health Clubs

This bill would ensure consumer safety in health club facilities by requiring health clubs to employ at least one person who is certified in first aid and CPR. Statewide, health clubs offer a variety of activities to a wide range of consumers. Many of the activities can be strenuous and result in possible injury. By setting a minimum safety standard to be met at all health clubs where training takes place, serious injuries may be prevented.
(A.4665-B, Pheffer) (Passed Assembly)

3. Prohibiting the Sale of Ephedra-based Dietary Supplements to Minors

This bill would protect the public from the potential harmful effects of dietary supplements containing ephedra by banning its sale to minors. The US Food and Drug Administration (FDA) has reported more than 2,500 reports of problems linked to the use of dietary supplements containing ephedra. In addition, the National Football League (NFL), International Olympic Committee (IOC), and the National Collegiate Athletic Association (NCAA) have added ephedra to their banned lists, as such products may present health risks to athletes.

This legislation would keep dietary supplements containing ephedra out of the hands of minors while also informing the general public of potential health risks.
(A.9796, Pheffer) (Passed Assembly)

4. Prohibiting "Box Cutters"

This bill would prohibit the sale of utility knives or "box cutters" to persons under the age of eighteen. In the past few years, the incidence of assaults on students and teachers in New York State has escalated dramatically. These utility knives are sometimes being used as weapons by students. This legislation would prevent these tools from being misused and brought into schools.

In addition, this legislation would allow communities to enact stricter laws regarding the sale and regulation of box cutters.
(A.174-A, Markey) (Passed Assembly)

5. Labeling Sunscreen Products

This bill would require all sunscreen products to be labeled with an expiration date. According to the American Cancer Society, over 800,000 new skin cancer cases of highly curable basal cell or squamous cell cancers are diagnosed each year. Since 1973, the incidence of skin cancer has increased about 4% per year.

Many consumers use sunscreen products to prevent the risk of skin cancer. In light of how important these products are in combating skin cancer, it is important that the consumer be aware that sunscreen is not protective against the sun's rays after a certain shelf life. This legislation would increase consumer awareness of sunscreen products effectiveness by requiring all products to be labeled with an expiration date and storage recommendations. (A.1988, Weisenberg) (Passed Assembly)

6. Requiring Weight Loss Services to Increase Consumer Disclosures

The purpose of this bill is to provide consumers with guidance and protection when choosing weight loss services and products. It requires anyone selling or offering for sale weight loss services or products to provide certain disclosures to the consumer.

Millions of New Yorkers have tried or are trying to lose weight for medical and cosmetic reasons. It is estimated that dieters across the nation are spending as much as $33 billion each year on diet programs and products. Unfortunately, the results of medical research about the safety and effectiveness of diet programs are often vague and contradictory. This makes it difficult for consumers to decide what programs and products to use. The disclosure of certain weight loss and dieting information will be useful to such a consumer prior to purchasing a product or service.
(A.820, Cook) (Passed Assembly)

7. Regulating Laser Pointers

This bill would prohibit the sale of laser pointing devices to persons under eighteen years of age. The Food and Drug Administration (FDA) warns parents that children may risk their eyesight if they play with laser pointing devices. The FDA has stated that the light energy that such devices emit can be more damaging than staring directly into the sun. Eye injuries have already been reported to the FDA as a result of improper use of such devices. In addition, this bill would set up restricted access for the sale of these devices in stores.
(A. 287, Tokasz) (Passed Assembly)

D. Enhancing Motor Vehicle Safety

1. Allowing Collision Damage Waivers

This bill would modify existing law governing rental vehicle protection to allow rental companies to offer collision damage waivers. Collision damage waivers are short term insurance policies which cover the consumer for loss or damage to the rental vehicle.
(Chapter 656 of the Laws of 2002, Klein)

2. Requiring Rental Car Manuals

This bill would require rental vehicle companies to furnish every customer with an owner's manual or diagram describing the operation of the vehicle. Failure to provide the required manual would result in a fine against the rental company.

Currently, there are no requirements that a rental vehicle be equipped with operational manuals. Therefore, renters are forced to guess the location and operation of the vehicle's mechanisms, which could create safety problems. By mandating that rental companies provide all the necessary car manuals to the consumer prior to renting the vehicle, consumer safety associated with the operation of such vehicle would be increased.
(A.2494, Lafayette) (Passed Assembly)

3. Enhancing Child Safety Seat Disclosures

This legislation would provide consumers with important information regarding child safety seats and their proper use for maximum safety. The National Highway Traffic and Safety Administration (NHTSA) estimated that a properly used child car seat reduces the risk of fatality by 71% and the risk of serious injury by 67% for children of less than 5 years of age.

This proposed legislation would require the disclosure of the compatibility of the seat with the automobile and require the age limit of the child users to be properly labeled. This measure would serve to help consumers, especially parents, in selecting a safe, compatible car seat for their loved one.
(A.4111, Pheffer) (Passed Assembly)

4. Prohibiting Rental Agencies From Discriminating Against Authorized Drivers Based Solely on Credit Card Ownership

This bill would prevent rental car agencies from discriminating against non-primary drivers of a rental car on the basis of ownership of a credit card.

Current law prohibits rental companies from refusing to rent a vehicle to a person on the basis that the renter does not own a credit card. There is no justification for rental car agencies to require other qualified drivers of a vehicle to own a major credit card.
(A.162, Gantt) (Passed Assembly)

This fall, the Committee held a joint roundtable with the Subcommittee on Child Product Safety. The purpose of the roundtable was to discuss current regulatory standards for child products, how to better inform consumers regarding these standards, and to explore policy solutions to identified child safety risks.

Representatives from the federal government, state government, local government, the business community, and consumer advocacy groups met in New York City to discuss child product safety issues. Participants included: the Consumer Product Safety Commission (CPSC), the New York State Consumer Protection Board, the Office of the Attorney General, the New York City Department of Consumer Affairs, Consumers Union, and the New York Public Interest Research Group (NYPIRG).

The Committee will pursue many of the issues it addressed during the 2002 Session. The Committee remains committed to enacting legislation to further protect consumers by providing them with one free credit report, enhancing food safety, and enhancing automobile leasing protections. The Committee will also continue to focus on increasing consumer protection associated with funeral services and with the proliferation of unsolicited communications; including facsimile, mail, and electronic mail (e-mail).