Chapter 32 Business Law

what are the 5 things a credit card issuer must show to recover the lost amount on a credit card

1) the credit card was an accepted card 2) the issuer gave the holder adequate notice of possible liability in such a case 3)the issuer furnished the holder with notification means in the event of loss or theft of the credit card 4) the issuer provided a method by which the user of the card could be identified as the person authorized to use it 5) unauthorized use of the card had occurred or might occur as a result of loss, theft, or some other event

Under CARD, all credit card companies must have bills in consumers' hands not less than 21 days before the bill is due

Also requires that conspicuous disclosures about the amount of late fees as well as the impact of a late payment on the consumer's rate of interest

what is included in the consumer protection laws?

Application of payments, preservation of consumer defenses as against a transferee of the consumer's contract, product safety, the protection of credit standing and reputation, and (to some extent) real estate development sales, franchises, and service contracts

What is TILA and the Consumer Financial Protection Bureau?

Consumer Financial Protection Bureau, created under the Dodd-Frank Wall Street Reform and Consumer Protection Act, holds the enforcement role over TILA (Truth in Lending Act) → deals with consumer credit laws, regulations, and issues

what do consumer protection laws do?

Consumer protection laws, at both the state and federal levels, afford rights to consumers and impose requirements on those who deal with consumers

do consumer protection statues require proof of intent?

NO!!

is a cardholder liable for more than $50 for the unauthorized use of a credit card?

NO!!

can a consumer waive or give up any defense provided by law?

NO!! Consumer protection laws generally prohibit a consumer from waiving or giving up any defense provided by law

does consumer protection protect consumers from their own negligence?

NO!! Consumers who sign contracts without reading or understanding what is in them are still bound

can credit cards be distributed to persons who have not applied for them?

NO!! Federal regulations prohibit the unsolicited distribution of credit cards to persons who have not applied for them The practice of simply sending credit cards through the mail to consumers is now illegal → identity theft

is the right to prove fraud, misrepresentation, duress, or breach of practical value to consumers?

NO!! because both the costs of litigation and the burden of proof are high

are these laws based on fault or intent?

NO!! only whether a buyer is likely to be misled by the ad, no matter the advertiser's intent!!

can a consumer claim both treble damages authorized by a statue and also punitive damages under the common law?

NO!!! these are duplicative remedies for the same wrong.

punitive damages

Other statutes authorize of recovery of punitive damages, which are additional damages beyond compensatory damages and may be a percentage of the company's net worth

compensatory damages

Some consumer protection statutes authorize the recovery of compensatory damages to compensate the consumer for the loss

why can an automobile be classified as a lemon?

Statutes generally classify an automobile as a lemon if it cannot be put in proper or warranted condition within a specified number of repair attempts

Describe what it is like for credit cards for those under 21.

The CARD Act substantially restricts the solicitation of credit card accounts from those under the age of 21 Credit card companies must have a written application in hand from those under 21 and those applications must carry the signature of a parent, guardian, or someone over 21 who can repay the debt Colleges and universities are now restricted in their partnering with credit card companies

describe the relationship and terms between a franchisee and franchisor.

To protect prospective franchisees from deception by franchisors that seek to sell interests, an FTC regulation requires that the franchisor give a prospective franchisee a disclosure statement 10 days before the franchisee signs a contract or pays any money for a franchise

does consumer protection legislation provide special remedies for consumers so that pursuing their rights in court is cost beneficial?

YES!! class-action suits provides groups of consumers options for pursuing remedies that they might not be able to pursue (due to the cost)

are there civil and criminal penalties under consumer protection statutes?

Yes! Only government agencies and attorneys general can seek criminal and civil penalties against those who violate consumer protections, however consumers themselves can recover damages

describe the selling method of Home - Solicited Sales

a sale of goods or services for $25 or more made to a buyer at home may be set aside within three business days → this consumer right of rescission may be exercised merely because the buyer does not want to go through with the contract No call on phone or oral agreement to work out at home later

what is Government Agency Action?

administrative agencies have the power to take steps to obtain relief for consumers

Corrective Advertising

also called retractive advertising, it is new advertising required by the FTC that is to correct the former statements so that consumers are aware of the truth

what are the 3 ways a consumer is protected in the contract agreement?

by regulation of its form, prohibition of unconscionable terms, and limitation of the credit that can be extended to a consumer

what is Action by Attorney General?

civil suits brought by state attorney generals (so the standard of proof is a preponderance of the evidence, not proof beyond a reasonable doubt) and can request that consumers' contracts be canceled and that they be given restitution of whatever they paid

what are improper collection methods?

constitute an unreasonable invasion of privacy, a creditor is liable for unreasonably attempting to collect a bill that in fact has been paid

what should the contract terms look like?

consumer protection legislation does not ordinarily affect the right of the parties to make a contract on whatever terms they choose → it is customary, however, to prohibit the use of certain clauses that are harsh for the consumer or that have too great a potential for exploitative abuse by a creditor, such as waiving a warranty limitations disclosure

what is the Fair Credit Billing Act?

correction of errors → when a consumer believes that a credit card issuer has made a billing error, the consumer should send the creditor a written statement and explanation of the error

what is the Equal credit opportunity act?

credit discrimination → it is unlawful to discriminate against an applicant for credit on the basis of race, color, religion, national origin, gender, marital status, or age → when a credit application is refused, the applicant must be furnished a written explanation

what is consumer credit?

credit for "personal, family, and household" use; it does not apply to business or commercial transactions

what is the subprime lending market?

credit market that makes loans to consumers who have bankruptcies, no credit history, low-to-moderate incomes, or a poor credit history → have notoriously difficult-to-read contracts

what are consumer protection laws directed at?

false and misleading advertising, misleading or false use of labels, the methods of selling, with specific requirements on the disclosure of terms and the permitting of consumer cancellation of home-solicited sales, and types of credit arrangements

what is predatory lending?

highly regulated by both the states and federal government, sometimes called title loans (loans made in exchange for title to a car or house if the borrower defaults)

what are credit card protections?

include prohibition of the unauthorized distribution of credit cards and limited liability of the cardholder for the unauthorized use of a credit card

Hearsay evidence

much of the information that is obtained by credit bureaus is based on statements made by persons, such as neighbors, when interviewed by the bureau's investigator → not admissible in a legal proceeding

a consumer claiming a violation of the consumer protection statute has the burden of what?

of proving that the statutory definition of consumer has been satisfied → the business accused of unfair or deceptive trade practices then has the burden of showing that the statute does NOT apply as well as establishing exceptions and exemptions

Deceptive advertising

prohibited by consumer protection statutes that provide remedies for consumers who were deceived or misled by the ads --> is often easier consumers to prove than a common law case of fraud

what are lemon laws?

provide special protection to buyers of cars for personal, household, or family use

in terms of the consumer contract, what should the form of the contract be?

requires that certain items be specifically listed, that payments under the contract be itemized, and that finance charges be clear, certain portions of the contract be printed in a certain font size and that a copy of the contract be furnished the consumer

describe telemarketing fraud.

the TCPA outlaws automated marketing calls without the prior express consent of the called party and prohibits calls to emergency telephone lines or patient rooms in hospitals, health care facilities, or elderly homes → consumers can register to opt out of any telemarketing except for political and charitable calls

what is Action by Consumer?

the consumer may either seek to recover a penalty provided for in the consumer protection statute or bring an action on behalf of consumers as a class

what is not a defense in this case?

the debtor owed the money that the agency was seeking to collect, no defense that the improper acts were performed by an agent, an employee, or any other person acting on behalf of the creditor

Invalidation of Consumer's Contract

the seller cannot recover from the consumer buyer for any unpaid balance; the seller cannot repossess the goods for nonpayment; the consumer keeps the goods without making any further payment

Deception

these laws are not based on fault, rather on the question of whether a buyer is likely to be misled by the ad → false advertising regulation protects consumers regardless of the advertiser's motives

what is the burden of proof on the card issuer in this case?

to show that the use of the card was authorized or that the holder is liable for its unauthorized use

describe Unconscionability

types of provisions that make contracts unconscionable include clauses that award excessive damages or the application of credit payments across purchases over time so that the consumer is never able to pay off any goods

what is the Consumer Product Safety Act?

uniform safety code and establishes civil and criminal penalties for the distribution of unsafe products

Labeling

various federal statutes are designed to give consumer accurate information about a product, whereas others require warnings about dangers of use or misuse → cannot terms that tend to exaggerate and mislead

how did consumer protection begin?

with the goal of protecting persons of limited means and limited knowledge Expansion of Consumer Protection

can consumers also get a replacement or refund?

yes!

are statutes prohibiting false advertising liberally interpreted?

yes!!

do credit reporting agencies gather information on borrowers, buyers, and applicants and sell the information to interested persons?

yes!! and the fair credit reporting act protects consumers from various abuses that may arise → this statute governs credit reporting agencies, sometimes called credit bureaus