BL-240 Ch. 19- 24

Notice of the Proposed Rulemaking

A agency publishes a notice of proposed rulemaking proceedings in the Federal Register, stating where and when proceedings will be held, the agency's authority for making the rule, and the terms or subject matter.

Formal Complaints and Hearings

A complaint is a public document, and a press release may accompany it. If the party against whom the complaint is made and the agency cannot agree on a settlement, the case goes before an administrative law judge (ALJ).

TRUTH-IN-LENDING ACT

Administered by the Federal Reserve Board, it requires sellers and lenders to disclose credit or loan terms to debtors so that the latter may shop around for the best available financing terms. The text explains who is covered by the act, as well as specific disclosure requirements of the TILA and Regulation Z.

DECEPTIVE ADVERTISING

Deceptive advertising is generally defined as advertising that may be interpreted as false or misleading. Deception and half-truths are contrasted with puffing, and examples are provided.

the subpoena ad testificandum

an ordinary subpoena, compelling a witness to appear at a hearing

subpoena duces tecum

compelling an individual or organization to hand over books, papers, records, or documents

Fair Credit Reporting Act of 1970

consumers must be notified when information is being given out by a credit agency about their credit standing, they must be allowed to correct any misinformation.

FTC "Mail or Telephone Order Merchandise Rule" of 1993

covers sales in which orders are transmitted using computers, fax machines, or similar means over phone lines. The rule covers shipping, notice of delays, and refunds.

Equal Credit Opportunity Act (ECOA) of 1974

prohibits the denial of credit on the basis of race, religion, national origin, color, gender, marital status, age, or source of income.

The Consumer Leasing Act (CLA) of 1988

protects consumers who lease cars and other goods.

The Postal Reorganization Act of 1970

provides that unsolicited merchandise sent by U.S. mail may be disposed of in any manner the recipient considers appropriate, without obligation to the sender. Generally, mailing unordered merchandise is also an unfair trading practice.

AGENCY POWERS AND THE CONSTITUTION

Administrative agencies exercise powers that are normally divided among the three branches of government (rulemaking, rule enforcement, and adjudication). Article I of the U.S. Constitution is generally held to authorize delegating such powers to administrative agencies. Section 1 grants all legislative powers to Congress and requires Congress to oversee the implementation of all laws. Section 8 gives Congress the power to make all laws necessary for executing its specified powers. Under the delegation doctrine, Congress has the power to establish agencies that can create legislative rules to implement those laws and interpretive rules to declare policy.

The Administrative Procedure Act

Administrative process is the administration of law by administrative agencies. The Administrative Procedure Act (APA) of 1946 imposes procedural requirements that all federal agencies must follow in their rulemaking, adjudication, and enforcement functions.

agencies provide a comprehensive regulatory scheme

Agencies at different levels of government may cooperate to create and enforce their regulations.

SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT

Among the provisions of the Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996, the SBREFA allows Congress to review new federal regulations for at least sixty days before they take effect.

The Practical Significance of Administrative Law

Congress delegates some authority to make and implement laws, particularly in highly technical areas, to administrative agencies. A. ADMINISTRATIVE AGENCIES EXIST AT ALL LEVELS OF GOVERNMENT B. AGENCIES PROVIDE A COMPREHENSIVE REGULATORY SCHEME

Legislative Controls

Congress exercises authority over agency power through enabling legislation and subsequent leg-islation. Congress can restrict or expand agency power substantively, limit or increase it through funding, or set time limits. Congress can investigate an agency. Individual legislators may affect agency policy through attempts to help their constituents deal with agencies. The Administrative Procedure Act (APA) of 1946 and other laws also act as a check on agency power.

INVESTIGATION

During the rulemaking process, an investigation obtains information about a certain individual, firm, or industry to avoid issuing a rule that is arbitrary and capricious and instead is based on a consideration of relevant factors. After final rules are issued, agencies conduct investigations to monitor compliance.

Agency Orders

Either party may appeal the ALJ's decision to the board or commission that governs the agency. If the party against whom the complaint was filed is dissatisfied with the commission's decision, it may appeal the decision to a federal court of appeals. If no party appeals (or if review is denied), the ALJ's decision is the final order.

Agency Creation and Powers

Enabling legislation specifies the name, purposes, functions, and powers of an agency (state or federal).

FREEDOM OF INFORMATION ACT

Enacted in 1966, the Freedom of Information Act (FOIA) requires federal agencies to disclose certain "records" to "any person" on request. An agency's failure to comply may be challenged in a federal district court.

GOVERNMENT IN THE SUNSHINE ACT

Enacted in 1976, the Government-in-the-Sunshine Act requires "every portion of every meeting of an agency" to be open to "public observation." Closed meetings are permitted when (1) the subject of the meeting concerns accusing any person of a crime, (2) open meetings would frustrate implementation of future agency actions, or (3) the subject of the meeting involves matters relating to future litigation or rulemaking.

Federal Agencies

Executive agencies within the cabinet departments of the executive branch are subject to the power of the president to appoint and remove their officers. The officers of independent agencies serve fixed terms and cannot be removed without just cause.

Some of the specific federal laws in this area include— •The Fur Products Labeling Act of 1951. •The Wool Products Labeling Act of 1939. •The Flammable Fabrics Act of 1953. •The Comprehensive Smokeless Tobacco Health Education Act of 1986.

FEDERAL STATUTES

Bait-and-Switch Advertising

Federal Trade Commission (FTC) rules define and prohibit bait-and-switch advertising (refusing to show an advertised item, failing to have in stock a reasonable quantity of the item, failing to promise to deliver the advertised item within a reasonable time, or discouraging employees from selling the item).

Hearing Procedures

Hearing procedures vary from agency to agency. Disputes are often resolved through informal proceedings. A formal hearing resembles a trial in many respects: The parties can use extensive discovery; during the hearing, the parties may give testimony, present other evidence, and cross-examine adverse witnesses. Much more information, including hearsay, can be introduced as evidence during an administrative hearing, however.

search warrants

In most instances, a physical search for evidence must be conducted under the authority of a search warrant. Warrants are not required, however, to conduct searches in highly regulated industries. Sometimes, a statute permits warrantless searches of certain types of hazardous operations, such as mines. Also, a warrantless inspection in an emergency situation is normally considered reasonable.

Comment Period

Interested parties can express their views on a proposed rule in writing or, if a hearing is held, orally. The agency must respond to any significant comments that bear directly on the proposed rule by either modifying its final rule or explaining why it did not change it.

The FTC Advertising and Marketing on the Internet: Rules of the Road guidelines of 2000 describe how existing laws apply to online ads. Generally— •Ads must be truthful and not misleading). •Claims must be substantiated. •Ads must not be unfair (causing a substantial injury that a consumer cannot avoid and that is not outweighed by a benefit to consumers or competition. •The guidelines call for "clear and conspicuous" disclosure of qualifying or limiting information. Burying this information on an internal Web page and linking to it is not recommended except in certain circumstances.

Online Deceptive Advertising

NUISANCE

Persons may be liable if they use their property in a way that unreasonably interferes with others' rights to use or enjoy their property. Courts balance the equities between the harm caused and the cost of stopping it.

•The purpose of an investigation (an improper purpose is harassment). •The relevancy of the information being sought. •The specificity of the demand for testimony or documents. •The burden of the demand on the party from whom the information is sought.

Subpoena Agency demands are limited by—

The Role of an Administrative Law Judge

The text explains that an ALJ presides over a trial-like hearing, with the power to administer oaths, take testimony, rule on questions of evidence, and make determinations of fact. An ALJ must be an unbiased adjudicator (judge). The APA requires that an ALJ be separate from an agency's investigative and prosecutorial staff; prohibits ex parte communications with a party to an agency proceeding; and protects ALJs from arbitrary agency disciplinary actions.

•Protect consumers from retroactive increases in interest rates on existing card balances unless the account is sixty days delinquent. •Require companies to provide forty-five days' notice to consumers before changing credit-card terms. •Require companies to send out monthly bills to cardholders twenty-one days before the due date. •Prevent companies from increasing the interest rate on a customer's credit-card balance except in certain situations such as the expiration of a promotional rate. •Prevent companies from charging over-limit fees except in certain situations. •Require companies to apply payments in excess of the minimum amount due to the customer's highest-interest balance first when the borrower has balances with different rates. •Prevent companies from computing finance charges based on the previous billing cycle.

TILA credit card provisions limit a cardholder's liability to $50 for unauthorized charges in some cases. Other provisions—

Judicial Controls

The APA provides for judicial review of most agency decisions. According to the exhaustion doctrine, a party must have used all potential administrative remedies before filing a suit.

THE ARBITRARY AND CAPRICIOUS TEST

The APA provides that courts should set aside agency decisions that are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." This includes such factors as the following. 1. Failure to provide a rational explanation for a decision. 2. Change in prior policy without an explanation. 3. Consideration of legally inappropriate factors. 4. Failure to consider a relevant factor. 5. Render of a decision plainly contrary to the evidence.

•Conducts research on product safety. •Sets standards for consumer products, and bans the manufacture or importation and sale of products that are potentially hazardous to consumers. •Removes from the market any products imminently hazardous. •Administers other product safety legislation.

The CPSC

•Contacting the debtor at the debtor's place of employment if the employer objects. •Contacting the debtor during inconvenient times or at any time if an attorney represents the debtor. •Contacting third parties other than the debtor's parents, spouse, or financial advisor about payment unless a court agrees. •Using harassment, or false and misleading information. •Contacting the debtor any time after the debtor refuses to pay the debt, except to advise the debtor of further action to be taken.

The FDCPA prohibits—

•The product. •The net quantity of contents; and the size of a serving if the number of servings is stated. •The manufacturer. •The packager or distributor.

The Fair Packaging and Labeling Act of 1966 requires that product labels identify—

*Create rules and regulations to carry out the FTC Act. *Conduct investigations of business practices.*Obtain reports from interstate corporations concerning their business practices. *Investigate possible violations of federal antitrust statutes. *Publish the findings of its investigations *Recommend new legislation *Hold trial-like hearings to resolve certain kinds of trade disputes that involve FTC regulations or federal antitrust laws

The Federal Trade Commission (FTC) Act created the Federal Trade Commission with the power to—

Executive Controls

The executive branch exercises control over agencies through the president's powers to appoint federal officers and through the president's power to veto enabling legislation or congressional at-tempts to modify an existing agency's authority.

The Final Rule

The final rule is published in the Federal Register and later compiled in the Code of Federal Regulations (CFR). Final rules ("legislative rules") have binding legal effect unless the courts later overturn them.

Negotiated Settlements

The text explains that settlement is an appealing option to firms for two reasons (regulated industries often do not want to appear to the agency to be uncooperative, and litigation can be very expensive) and to agencies for one reason (agencies thereby conserve their own resources).

FTC Actions against Deceptive Advertising

The text outlines FTC actions against those who are accused of deceptive advertising. An action begins with an investigation, often after a consumer complaint. The investigation may lead to a formal complaint. If the alleged offender does not agree to settle, a hearing is held before an administrative law judge. A cease-and-desist order or an order requiring counteradvertising may be issued.

State and Local Agencies

These agencies are often parallel federal agencies in areas of expertise and subjects of regulation. Federal rules that conflict with state rules take precedence.

TELEMARKETING AND FAX ADVERTISING

This section of the text highlights two federal statutes and an FTC rule. The Telephone Consumer Protection Act (TCPA) of 1991 prohibits phone solicitation using an automatic telephone dialing system or a prerecorded voice and the transmission of ads via fax without the recipient's permission. The Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994 directed the FTC to establish rules governing telemarketing and to act against fraudulent telemarketers. In response, the FTC issued the Telemarketing Sales Rule of 1995. The rule's requirements are set out in the text. Essentially, it bans misrepresentation and requires disclosure. In 2003, the FTC set up a "National Do Not Call Registry."

•Insurance companies cannot deny coverage for preexisting conditions or cancel coverage for technical mistakes. •Children can stay on their parents' health insurance until age 26. •Lifetime and annual limits on care are eliminated. •Preventive services, such as cancer-screening, must be provided without cost to patients. •Medicare patients get a 50 percent discount on name-brand drugs. •Medicare's prescription drug coverage gap will close by 2020. •Small businesse are eligible for tax crdits for providing insurance benefits to workers. •States receive federal funds to cover low-income individuals and families. •Insurance companies must spend 85 percent of premium dollars from large employers, and 80 percent from individuals and small employers, on benefits and quality improvement. •States can require insurance companies to justify premium increases to participate in a health insurance exchange.

Under the Patient Protection and Affordable Care Act of 2010—

REGULATORY FLEXIBILITY ACT

Under the Regulatory Flexibility Act (passed in 1980), whenever a new regulation will have a "significant impact upon a substantial number of small entities," an agency must conduct a regulatory flexibility analysis. The analysis must measure the cost that the rule would impose on small businesses and must consider less burdensome alternatives. (This relieves some record-keeping burdens for small businesses, especially with regard to hazardous waste management.)

Federal Food, Drug and Cosmetic Act

are mentioned briefly. The act and its accompanying regulations set food and drug standards, safe levels of potentially hazardous additives, and classifications of advertising. Pacemakers and other health devices are also covered. Most of the enforcement is by the Food and Drug Administration (FDA).

The Fair Debt Collection Practices Act (FDCPA) of 1977

regulates the practices of collection agencies collecting consumer debts.

The Energy Policy and Conservation Act of 1975

requires automakers to include the Environmental Protection Agency's fuel economy estimate on a label on every new car.

Notification and Bona Fide Errors

•Collection agencies must give a debtor a validation notice that states he or she has thirty days to dispute the debt and request written verification of it. Debt collectors are not liable if they can show that a violation was unintentional and the result of a "bona fide error" despite following procedures designed to avoid such errors. •The Federal Trade Commission enforces the act. A debt collector may be liable for actual damages, additional damages not to exceed $1,000, and attorneys' fees.

The Fair and Accurate Credit Transactions Act

•The Fair and Accurate Credit Transactions Act (FACT Act) of 2003 established a national "fraud alert" system so that consumers who suspect identity theft can place an alert on their credit files. •The FACT Act requires credit-reporting agencies to provide consumers with free copies of their reports and to stop reporting allegedly fraudulent information once a consumer shows that identify theft occurred. •Businesses are required to include shortened ("truncated") account numbers on credit card receipts. •Businesses are also required to provide consumers with copies of records that help prove an account or transaction was fraudulent.