Chapter 24

Regulation Z

A set of rules issued by the Federal Reserve Board of Governors to implement the provisions of the Truth-in-Lending Act.

Deceptive Advertising

Advertising that misleads consumers, either by making unjustified claims about a product's performance or by omitting a material fact concerning the product's composition or performance. Deceptive advertising can include: 1. Claims that appear to be based on factual evidence but in fact are not 2. Claims based on half-truths 3. Bait-and-switch advertising

State vs. Federal Laws in Terms of Consumer Protection

State consumer protection laws in advertising, marketing, and sales often provide more sweeping and significant protections than do federal laws.

Multiple Product Order

An order requiring a firm that has engaged in deceptive advertising to cease and desist from false advertising in regard to all the firm's products.

Consumer Product Safety Act

Created a comprehensive regulatory scheme over consumer safety matters and established the Consumer Product Safety Commission (CPSC) with the authority to do the following: 1. Set safety standards for consumer products 2. Ban the manufacture and sale of any product that the commission believes poses an "unreasonable risk" to consumers 3. Remove from the market any products it believes to be immediately hazardous 4. Require manufacturers to report on any products already sold or intended for sale if the products have proved to be hazardous 5. Administer other product-safety legislation

Federal Trade Commission Act

Created the Federal Trade Commission (FTC) to prevent unfair and deceptive trade practices, including deceptive advertising.

Consumer Financial Protection Bureau (CFPB)

The agency that oversees the credit practices of banks, mortgage lenders, and credit-card companies.

Consumer Law

The body of statutes, agency rules, and judicial decisions protecting consumers of goods and services from dangerous manufacturing techniques, mislabeling, unfair credit practices, deceptive advertising, and other such practices.

Truth-in-Lending Act (TILA)

Title I of the Consumer Credit Protection Act, as amended; administered by the Federal Reserve Board and requires sellers and lenders to disclose credit terms and loan terms so that individuals can shop around for the best financing arrangements. TILA only applies to those who, in the ordinary course of business, lend funds, sell on credit, or arrange for the extension of credit.

Telemarketing and Consumer Fraud and Abuse Prevention Act

Directed the FTC to establish rules governing telemarketing and to bring actions against fraudulent telemarketers.

Notification Requirement of the Consumer Product Safety Act

Distributors of consumer products are required to notify the CPSC immediately if they receive information that a product "contains a defect which... creates a substantial risk to the public" or "an unreasonable risk of serious injury or death"

Fair and Accurate Credit Transactions (FACT) Act

Enacted to combat identity theft; allows consumers to place an alert in a national fraud alert system; requires major credit companies to provide free credit reports; allows consumers victimized by identity theft to rebuild their credit.

Federal Food, Drug, and Cosmetic Act (FDCA)

Establishes food standards, specifies safe levels of potentially hazardous food additives, and provides classifications of food and food advertising; monitored and enforced by the Food and Drug Administration (FDA).

Food Safety Modernization Act (FSMA)

Gives the FDA authority to directly recall any food products that it suspects are tainted rather than relying on the producers to recall items; it also requires anyone who manufactures, processes, packs, distributes, receives, holds, or imports food products to pay a fee and register with the U.S. Department of Health and Human Services.

Counteradvertising

New advertising that is undertaken to correct earlier false claims that were made about a product.

Telephone Consumer Protection Act (TCPA)

Prohibits telephone solicitations using automated dialing systems or a pre-recorded voice or unsolicited faxes. Enforced by the Federal Communication Commission (FCC).

Equal Credit Opportunity Act (ECOA)

Prohibits the denial of credit solely on the basis of race, religion, national origin, color, gender, marital status, or age; also prohibits credit discrimination on the basis of whether an individual receives certain forms of income, such as public-assistance benefits.

Fair Credit Reporting Act (FCRA)

Protects consumers against inaccurate credit reporting and requires that lenders and other creditors report correct, relevant, and up-to-date information.

FTC Mail of Telephone Order Merchandise Rule

Protects consumers who purchase goods via mail, Internet, phone, or fax.

Lanham Act

Protects trademarks and covers false advertising claims. False advertising claims must establish each of the following to qualify: 1. An injury to a commercial interest in reputation or sales 2. Direct causation of the injury by false or deceptive advertising 3. A loss of business from buyers who were deceived by the advertising

Telemarketing Sales Rule (TSR)

Requires a telemarketer to identify the seller's name, describe the product being sold, and disclose all material facts related to the sale.

Energy Policy and Conservation Act (EPCA)

Requires automakers to attach an information label containing the EPA's fuel economy estimate for the vehicle to every new car.

Nutrition Labeling and Education Act

Requires food labels to provide standard nutrition facts and regulates the use of such terms as fresh and low fat.

Fair Packaging and Labeling Act

Requires that food product labels identify the product, the net quantity of the contents (and, if the number of servings is stated, the size of a serving), the manufacturer, and the packager or distributor.

Fair Debt Collection Practices Act (FDCPA)

Specifies what a collection agency may and may not do when pursuing payment of past due accounts. They may not do any of the following: 1. Contact the debtor at the debtor's place of employment if the debtor's employer objects 2. Contact the debtor at inconvenient or unusual times, or at any time if the debtor is being represented by an attorney 3. Contact third parties other than the debtor's parents, spouse, or financial adviser about payment of the debt unless a court authorizes such action 4. Harass or intimidate the debtor or make false or misleading statements 5. Communicate with the debtor at any time after receiving notice that the debtor is refusing to pay the debt, except to advise the debtor of further action to be taken by the collection agency

Remedies for Violations of the FCRA

1. Actual damages 2. Additional damages not to exceed $1,000 3. Attorneys' fees

Federal Trade Commission (FTC) Actions

1. Formal complaint 2. Orders and remedies 3. Damages when consumers are injured 4. Restitution possible

Bait-and-Switch Advertising

Advertising a product at an attractive price and then telling the consumer that the advertised product is not available or is of poor quality and encouraging her or him to purchase a more expensive item. Occurs if the seller does any of the following: 1. Refuses to show the advertised item 2. Fails to have a reasonable quantity of the item in stock 3. Fails to promise to deliver the advertised item within a reasonable time 4. Discourages employees from selling the advertised item

Cease-and-Desist Order

An administrative or judicial order prohibiting a person or business firm from conducting activities that an agency or court has deemed illegal.

Validation Notice

An initial notice to a debtor from a collection agency informing the debtor that he or she has thirty days to challenge the debt and request verification.

"Cooling-off" Laws

Laws that allow buyers of goods sold in certain transactions to cancel their contracts within three business days.

Puffery

Vague generalities and obvious exaggerations are permissible and not considered deceptive.