LAW 2810: Chapter 24

FCRA - Consumer Notification and Inaccurate Information: *Remedies for Violations*

A credit reporting agency that fails to comply with the act is liable for actual damages, plus additional damages not to exceed $1,000 and attorneys' fees.

Fair Debt Collection Practices Act: *Enforcement of the Act*

The FTC is primarily responsible for enforcing the FDCPA. - A debt collector who does not comply with the act is liable for actual damages, plus additional damages not to exceed $1,000 and attorneys' fees. •Debt collectors who violate the act are exempt from liability if they can show that the violation was unintentional and resulted from a bona fide error.

Fair Credit Reporting Act (FCRA)

The 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. The act provides that consumer credit reporting agencies may issue credit reports to users only for specified purposes (such as the extension of credit).

Advertising, Marketing & Sales:

- All statutes, agency rules, and common law judicial decisions that serve to protect the interests of consumers are classified as consumer law. - Numerous federal laws have been passed to define the duties of sellers and the rights of consumers.

TILA: *Equal Credit Opportunity*

Congress enacted the Equal Credit Opportunity Act (ECOA) as an amendment to the TILA. - Under the act, credit cannot be denied solely on the basis of race, religion, national origin, color, gender, marital status, or age. - The act also prohibits credit discrimination on the basis of whether an individual receives certain forms of income. - Under the ECOA, a creditor may not require a cosigner if the applicant qualifies for the amount and terms of the credit request based on the creditor's standards of creditworthiness.

FCRA: *Consumer Notification and Inaccurate Information*

If denied credit, consumer has right to source of any information used by the credit agency, as well as the identity of anyone who has received an agency's report. - If a consumer's credit files contain inaccurate information, she/he should report the problem to the agency, and it must conduct a systematic examination of its records. Any unverifiable or erroneous information must be deleted within a reasonable period of time.

Deceptive Advertising: *Formal Complaint*

If the FTC concludes that a given advertisement is unfair or deceptive, it sends a formal complaint to the alleged offender.

Deceptive Advertising - FTC Action: *FTC Orders and Remedies*

If the FTC succeeds in proving that an advertisement is unfair or deceptive, it usually issues a cease-and-desist order to the company. - The FTC may also impose a sanction known as *counteradvertising* that requires the company to inform the public about the earlier misinformation.

Labeling and Packaging Laws

Labeling must be accurate and must use words that are easily understood by the ordinary consumer.

Credit Protection

The Consumer Financial Protection Bureau (CFPB) is the agency that oversees the credit practices of banks, mortgage lenders, and credit-card companies.

Automobile Fuel Economy Labels

The Energy Policy and Conservation Act (EPCA) requires automakers to attach an information label to every new car. - Labels must include the Environmental Protection Agency's fuel economy estimate for the vehicle.

Deceptive Advertising: *Puffery*

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

Food Labeling: *Caloric Content of Restaurant Foods*

•The Affordable Care Act (or Obamacare) included provisions aimed at combating the problem of obesity in the United States. • All restaurant chains with twenty or more locations are required to post the caloric content of the foods on their menus. •Vending machine foods must be labeled so that their caloric content is visible. • Restaurants must also post guidelines on the number of calories that an average person requires daily.

Fair and Accurate Credit Transactions Act (FACT):

- The purpose of the act is to combat identity theft. - FACT established a national fraud alert system that allows consumers to place an alert on their credit file. - FACT requires major credit reporting companies to provide consumers with a free credit report every twelve months. - Account numbers on credit-card receipts must be truncated (shortened). - Merchants and others who have access to the receipts can no longer obtain the consumers' names and full credit-card numbers. - Financial institutions must work with the FTC to identify "red flag" indicators of identity theft and to develop rules for the disposal of sensitive credit information.

Deceptive Advertising: *Claims Based on Half-Truths*

A "half-truth" is true but incomplete information that may lead consumers to a false conclusion

Deceptive Advertising: *Bait-and-Switch Advertising*

Advertising a product at an attractively low price to lure customers in to buy more expensive items. - Under the FTC guidelines, bait-and-switch advertising occurs if the seller: • Refuses to show the advertised item. Fails to have a reasonable quantity of the item in stock. •Fails to promise to deliver the advertised item within a reasonable time. •Discourages employees from selling the advertised item.

Deceptive Advertising: *Claims that Appear to be Based on Factual Evidence*

Advertising that appears to be based on factual evidence but is not reasonably supported by evidence will be deemed deceptive.

Food Labeling

Fair Packaging and Labeling Act requires 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/distributor, plus savings claims, components of nonfood products and partial filling.

TILA: *Application*

It only applies to people who lend funds, sell on credit, or arrange an extension of credit in the ordinary course of business.

Deceptive Advertising: *Online Deceptive Advertising*

The FTC monitors Web sites for deceptive claims involving everything from medical treatments to exercise equipment. •All ads—both online and offline—must be truthful and not misleading. • Claims must be substantiated and advertisers must have evidence to back up their claims. •Ads cannot be unfair, which the FTC defines as "likely to cause substantial consumer injury that consumers could not reasonably avoid and that is not outweighed by the benefit to consumers or competition." •Ads must disclose relevant limitations and qualifying information concerning the claims advertisers are making. •Required disclosures must be "clear and conspicuous."

Fair Debt Collection Practices Act (FDCPA)

The Fair Debt Collection Practices Act (FDCPA) attempts to curb abuses by collection agencies. - A creditor that is attempting to collect a debt is not covered by the act unless it mispresented itself as a collection agency to a debtor. - A creditor that is attempting to collect a debt is not covered by the act unless it mispresented itself as a collection agency to a debtor.

Deceptive Advertising

The Federal Trade Commission Act created the Federal Trade Commission (FTC) to carry out the broadly stated goal of preventing unfair and deceptive trade practices, including deceptive advertising. - Occurs if a reasonable consumer would be misled by the advertising claim.

Deceptive Advertising: *False Advertising Claims under Lanham Act*

The Lanham Act protects trademarks and also covers false advertising claims. To state a successful claim for false advertising under this act, a business must establish each of the following elements: •An injury to a commercial interest in reputation or sales. •Direct causation of the injury by false or deceptive advertising. •A loss of business from buyers who were deceived by the advertising.

Food Labeling: *Nutritional Content of Food Products*

The Nutrition Labeling and Education Act requires food labels to have standard nutrition facts and regulates the use of such terms as fresh and low fat. - The U.S. Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA) issue most food label regulations.

TILA: *Credit Card Rules*

The TILA limits consumer liability for credit card debt in cases of stolen cards to $50. - Credit-card companies must disclose the computation method that is used to determine the outstanding balance and to state when finance charges begin to accrue.

TILA: *Disclosure Requirements*

The TILA's disclosure requirements are contained in Regulation Z. - If contracting parties are subject to the TILA, Regulation Z applies to any transaction that has four or more payment installments. - Transactions subject to Regulation Z typically include installment loans, car loans, and home-improvement loans. - Under the TILA, all credit instrument terms must be clearly and conspicuously disclosed including the annual percentage rate (APR), finance charge, amount financed, and total payments (loan amount, plus any fees, finance charges, and interest). - If a creditor fails to follow the exact TILA procedures, the creditor risks contract rescission under the act.

Truth-in-Lending Act (TILA)

The Truth-in-Lending Act (TILA) is the name given to Title I of the Consumer Credit Protection Act, as amended. The TILA is basically a disclosure law that is administered by the Federal Reserve Board.

Fair Debt Collection Practices Act: *Requirements of the Act*

Under the FDCPA, a collection agency may not: • Contact debtor at his place of employment, if employer objects. • Contact debtor during inconvenient or unusual times, or at any time debtor is being represented by an attorney. • Contact third parties other than the debtor's parents, spouse, or financial adviser about payment of a debt, unless a court authorizes such action. • Harass or intimidate the debtor or make false or misleading statements. • Communicate with debtor at any time after receiving notice that the debtor is refusing to pay the debt, except to advise debtor of further action to be taken by a collection agency. A collection agency must include a *validation notice* when it initially contacts a debtor for debt payment or within five days of that initial contact. • The notice must state that the debtor has thirty days in which to dispute the debt and to request a written verification of the debt from the collection agency.

Deceptive Advertising - FTC Action: *Damages when Consumers are Injured*

When a company's deceptive ad involves wrongful charges to consumers, the FTC may seek other remedies including damages. *Restitution Possible* - When a company's deceptive ad leads to wrongful payments by consumers, the FTC may seek restitution.

Deceptive Advertising: *Federal Trade Commission Actions*

When the FTC receives numerous and widespread complaints about a particular problem, it will investigate.

TILA: *Amendments to Credit-Card Rules*

•A company may not retroactively increase the interest rates on existing card balances, unless the account is sixty days delinquent. •A company must provide forty-five days' advance notice to consumers before changing the credit-card terms. •Monthly bills must be sent to cardholders twenty-one days before the due date. •The interest rate charged on a customer's credit-card balance may not be increased except in specific situations, such as when a promotional rate ends. •A company may not charge over limit fees except in specified situations. •If a customer has balances at different interest rates, payments in excess of the minimum amount due must be applied first to the balance with the highest rate. •A company may not compute finance charges based on the previous billing cycle (known as double-cycle billing).