A familiar hustle is set to draw more rigorous enforcement if legislation in the Senate and House passes next year.
The “Direct Sales Consumer Protection Act” is being carried by Sen. Clay Yarborough (SB 712) and Rep. Ryan Chamberlin (HB 265). The bill would revamp statute and tighten penalties related to pyramid schemes.
Yarborough, who filed his version Wednesday, said Chamberlin “approached (him) with the idea and it immediately sounded like a great consumer protection effort.”
“The goal is to help businesses that actually have a significant amount of retail sales to consumers versus enabling bad actors who simply want to line their own pockets through recruitment schemes. Pyramid promotions contain high levels of deception and can easily lead to destroyed relationships and devastating financial loss,” the Jacksonville Republican added.
The legislation would ban people from working to “establish, promote, operate, or participate in a pyramid promotional scheme, even if such person, upon giving consideration, obtains products, goods, services, or intangible property in addition to the right to receive compensation.”
Pyramid schemes include scenarios where contractors have to buy more of a product than they can sell, putting them on the hook for people higher up. As well, situations in which people would have to sell defective, expired, or promotional merchandise fall under this category.
Those suspected of this crime could expect a cease-and-desist letter from the Department of Legal Affairs. Failure to comply could bring consequences beyond simple restitution.
Orchestrating a pyramid scheme would be a third-degree felony, punishable by up to five years in prison and a $5,000 fine.
Participating in one would be a first-degree misdemeanor, punishable by a year in jail and a $1,000 fine.
