BL Chapter 24

Certain states have also passed laws allowing consumers to cancel contracts for:

- Dating services - Gym memberships - Weight loss programs

If the FTC succeeds in proving that an advertisement is unfair:

- It usually issues a cease-and-desist order - it may also impose a sanction known as counteradvertising - It sometimes issues a multiple product order

Federal and State Laws deal specifically with the information given on labels and packages

- Labels must be accurate - Labels must use words that are easily understood by the ordinary consumer - Labels must specify the raw materials used in the products (in some instances) - In some instances products must carry a warning

A credit reporting agency that fails to comply with the FCRA is liable for all of the following

- actual damages - additional damages not to exceed 1,000 - attorney fees

A debt collector who fails to comply with the act is liable for all of the following

- actual damages - additional damages that do not exceed 1,000 - attorney fees

Legitimate purposes include:

- extending credit - issuing insurance policies - responding to the customer's requests

Contracts that fall under cooling off cancellation rules include:

- trade show sales contracts - contracts for home equity loans - internet purchase contracts - home (door-to-door) sales contracts

Amendments to the TILA credit card rules include

1) A company may not retroactively increase the interest rate on existing cards unless the account is 60 days deliquent 2) A company must provide 45 days advance notice to consumers before changing credit card terms 3) Monthly bills must be sent to cardholders 21 days before the due date 4) Interest rate charged on a customer's credit card balance may not be increased except in specific situations such as when promotional rate ends 5) A company may not charge over-limit fees except in specified situations 6) When the 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 7) A company may not compute finance charges based on previous billing cycle (a practice called double cycle billing)

Lender must disclose all of the following:

1) APR 2) finance charge 3) amount financed 4) total payments (sum of the amount loaned, plus any fees, finance charges, and interest)

FTC's following regulations include:

1) All ads - both online and offline - must be truthful and not misleading 2) The claims made in an ad must be substantiated - that is, advertisers must have evidence to back up their claims 3) 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 benefits to the consumers or competitors" 4) Ads must disclose relevant limitations and qualifying information concerning the claims advertisers are making 5) Required disclosures must be clear and conspicuous

To state a successful claim for false advertising under the Lanham Act, a business must establish each of the following:

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 this falses advertising

Owners and operators of such facilities are required to

1) Analyze and identify food safety hazards 2) Implement preventative controls 3) Monitor effectiveness 4) Take corrective actions

CPSC authority:

1) Conducts research on the safety of individual consumer products 2) Maintains a clearinghouse on the risks associated with various products

Under FDCPA, a collection agency may not do any of the following:

1) Contact the debtor at their place of employment if the employer objects 2) Contact the debtor at inconvenient times or at any time they are represented by an attorney 3) Contact third parties other than the debtor's immediate family about a payment of a debt unless court authorizes 4) Harass or intimidate debtor or by making false/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 collection agency

Transactions typically subject to Regulation Z include:

1) Installment loans 2) Car loans 3) Retail and installment sales 4) Home-improvement loans 5) Certain real estate loans if the amount of financing is less than $25,000

TILA provisions regarding credit cards:

1) Liability of a cardholder is limited to 50 per card for unauthorized charges made before the creditor is notified that it has been lost 2) If a consumer receives an unsolicited credit card in the mail that is later stolen, a company that issued the card cannot charge the consumer for any unauthorized charges 3) Credit card companies must disclose the balance computation method that is used to determine the outstanding balance and state when finance charges begin to accrue 4) Procedures are set forth for resolving billing disputes with the credit card company

Consumer Production Safety Act authorizes the CPSC 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 imminently 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, including the Child Protection and Toy Safety Act and the Federal Hazardous Substance Act

To get recovery under state law, what proof must be found:

1) The defendant committed a deceptive or unfair act 2) The act was committed in the course of trade or commerce 3) The defendant intended that others rely on the deception 4) The plaintiff suffered actual damages proximately caused by the deception

Act also includes additional requirements:

1) descriptions on packages 2) savings claims 3) components of nonfood products 4) standards for the partial filling of packages

Under the FTC guidelines, bait-and-switch advertising 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 advertised items in stock 3) fails to promise to deliver the advertised item within a reasonable time frame 4) discourages employees from selling the advertised item

Fair Packaging and Labeling Act require that food product labels identify

1) the product 2) the net quantity of contents (if number of serving is stated, then the serving size) 3) manufacturer 4) packager or distributor

Truth in Lending Act (TILA)

Administered by the FRB, requires sellers and lenders to disclose credit and loan terms so that individuals can shop around for the best financing arrangements

Bait and switch advertising

Advertising a product at an attractive price and telling the consumer that the advertised product is not available or is of poor quality and encouraging them to purchase a more expensive item. The low price is the "bait" and the salesperson is instructed to "switch" the consumer to a different, more expensive item.

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.

Consumer Financial Protection Bureau (CFPB)

Agency that oversees the credit practices of banks, mortgage lenders, and credit-card companies

Affordable Care Act (Obamacare) included provisions that aimed at combatting the obesity problem in US

All restaurant chains with 20 or more locations are required to post the caloric content of foods on their menus so that customers will know how many calories the foods contained. Foods in vending machines must also be labeled so caloric content is seen through someone trying to purchase. Restaurants are supposed to post guidelines on the number of calories that an average person requires daily so that customers can determine what portion of a days calories a particular food will be.

Equal Credit Opportunity Act (ECOA)

Amended TILA. Prohibits the denial of credit solely on the basis of any: race, religion, national origin, color, gender, marital status, age. ECOA prohibits credit discrimination on the basis of whether an individual receives certain forms of income, such as public assistance benefits.

Cease-and-desist letter

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

What is the Do Not Call Registry?

An amendment to the TSR that says telemarketers must refrain from calling consumers who have placed their names on the list.

Validation Notice

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

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

Fair Debt Collection Practices Act (FDCPA)

Attempts to curb perceived abuses by collection agencies. Applies only to specialized debt collection agencies and attorneys who regularly attempt to collect debts on behalf of someone else usually for a % of an amount owed.

Under the FCPA, consumers may request the source of information used by the credit agency, as well as the identity of anyone who has received an agency's report

Consumers are also allowed to access the information about them contained in a credit reporting agency file

Consumer Product Safety Act

Created a comprehensive regulatory scheme over consumer safety matters Established the Consumer Product Safety Commission (CPSC)

Telemarketing Consumer Fraud and Abuse Prevention Act

Directed by the FTC to establish rules for governing telemarking and bringing actions against fraudulent telemarketers

Fair and Accurate Credit Transactions Act (FACTA)

Established a national fraud alert system --> consumers who suspect that they have been or may be victimized by identity theft can place an alert on their credit files. When a consumr establishes that identity theft has occured, the credit reporting agency must stop reporting allegedly fraud account information

Who enforces the FDCPA

FTC

What is the most important federal legislation regulating food and drugs?

Federal Food, Drug, and Cosmetic Act (FDCA)

What did Congress enact in response to the problems of tainted foods?

Food Safety Modernization Act (FSMA) --> to provide greater government control over the US good safety system

FSMA:

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

TCPA gives the consumers the right to sue for either 500 for each violation of the act or for the actual monetary losses resulting --> whichever is greater

If a court finds that the defendant willfully or knowingly violated the act, the court has the discretion to triple the amount of damages awarded

Under the provisions of TILA, all of the terms of a credit instrument must be clearly and conspicuously disclosed

If a creditor fails to follow exact procedures required, the creditor risks the contract rescission (cancellation) under the act

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

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

Cooling Off Laws

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

Counteradvertising

New advertising that is undertaken to correct earlier false claims that were made about a product. Needs to be done at the same level of distribution as the original ad.

Is the Lanham Act enforced by the FTC?

No

Does the TILA protect companies?

No --> only protects debtors who are natural persons so does not extend to other legal entities

Are creditors covered by FDCPA?

No usually not unless by misrepresenting themselves, they cause debtors to believe that they are collection agencies

Federal Trade Commission Act

One of the most important federal consumer protection laws. Created by the FTC to carry out the broadly stated goal of preventing unfair and deceptive trade practices, including deceptive advertising

Telephone Consumer Protection Act (TCPA)

Prohibits telephone solicitation using an automatic telephone dialing system or a prerecorded voice. Makes it illegal to transmit unsolicited advertisements without the sender having an established business relationship with the recipient or first obtaining the recipients permission.

The FDCA:

Protects consumers against adulterated (contaminated) and misbranded foods and drugs. Establishes food standards. Specifies safe levels of potentially hazardous food additives. Provides classifications of foods and food advertising. Most of these statutory requirements are regulated by the FDA

Fair Credit Reporting Act

Protects consumers against inaccurate credit reporting. Requires that lenders and other creditors report correct, relevant, and up-to-date information. Provides that consumer credit reporting agencies may issue credit reports to users only for specified purposes

FTC Mail, Internet or Telephone Order Merchandise Rule

Protects consumers who purchase goods via mail, internet, phone, or fax. Merchants are required to: (1) ship orders within the times promised in their ads (2) notify customers when orders cannot be shipped on time --> if no estimated shipping is given then it must ship within 30 days (3) issue a refund within a specified time period when a consumer cancels an order

Where are the TILA's disclosure requirements contained?

Regulation Z --> a set of rules issued by the FRB of governors to implement the provisions of the TILA

The FTC's Telemarketing Sales Rule (TSR)

Requires a telemarketer to: (1) identify the seller's name (2) describe the product being sold (3) disclose all material facts related to the sale including the total cost Makes it illegal for telemarketers to misrepresent information or facts about their goods/services Requires a telemarketer to remove a consumer's name from potential customer list if they request so

Energy Policy and Conservation Act (EPCA)

Requires automakers to attach to every new car an information label that includes the EPA fuel economy estimate for the vehicle

Nutrition Labeling and Education Act

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

Deceptive advertising can be claims based on half-truths

Some advertisements contain half truths, meaning that the presented information is true but incomplete and may therefore lead consumers to a false conclusion. Advertising that contains an endorsement by celebrity can also be deemed deceptive if the celebrity does not actively use the product.

State consumer laws vs federal?

State consumer protection laws often provide more sweeping and significant protections than do federal laws.

Federal law on menu labeling

Supersedes all previous state and local laws in this area

In addition to regulating advertising practices, Congress has also passed several laws to protect consumers against other marketing practices, including

Telephone solicitation and fraudulent telemarketing

A number of statutes protect consumers by requiring the disclosure of certain terms in sales transactions and providing rules for governing unsolicited merchandise

The FTC has regulatory authority in this area, and so do some federal agencies

What happens when a company's deceptive ad leads to wrongful payments by consumers?

The FTC may seek other remedies including restitution

What happens if a company's deceptive ad involves wrongful charges to consumers?

The FTC may seek other remedies that include damages

Who enforces the TPCA?

The Federal Communications Commission (FCC) The FCC imposes substantial fines (1,000 each day) on companies that violate the provisions of the act

Various laws that regulate the actual products made available to consumers include:

The Federal Food Drug and Cosmetic Act The Consumer Product Safety Act

The primary agencies that issue regulations on food labeling are

The US Food and Drug Administration The US Department of Agriculture

Lanham Act can also protect false advertising

The act protects trademarks but also covers false advertising claims.

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

What happens after receiving a formal complaint?

The company may agree to settle the complaint without further proceeding. If not, the FTC can conduct a hearing in which the company can present a defense.

At any time a consumer is denied credit or insurance on the basis of their credit report, they must be notified of the fact

The notice must include the name and address of the credit reporting agency that issued the report. the same notice must be sent to consumers who are charged more than others ordinarily would be for credit or insurance because of their credit reports

Food products must contain labels detailing nutritional content, including:

The number of calories contained and the amounts of various nutrients that the food contains

What happens if the consumer discovers that the information contained about them is inaccurate?

They must report the problem to the agency. On the consumers written (or electronic) request, the agency must conduct a systematic examination of the records and delete any unverifiable or erroneous information within a reasonable time period

Who do TILA requirements apply to?

Those who in the ordinary course of business lend funds, sell on credit, or arrange for the extension of credit. Sales or losses made between two customers do not come in under protection.

FTC actively monitors online deceptive advertising and has identified hundreds of websites that have made false or deceptive claims for products and services

To help online businesses comply, the FTC has set new laws and prohibitions against deceptive advertising

Does nearly every agency and department of the federal government have an office of consumer affairs?

Yes and most states have one or more such offices as well

Is puffery permissible?

Yes, vague generalizations and obvious exaggerations are

Deceptive advertising can be claims that appear to be based on factual evidence

advertising that appears to be based on factual evidence but in fact is not reasonably supported by evidence will be deemed deceptive

FDA is responsible under the FDCA for ensuring that drugs are safe and effective before they are marketed to the public

because the FDA must ensure that the safety of new medication, there is always a delay before they are make public --> can sometimes lead to controversy

Who else can be liable for violations under the FCRA?

creditors and other companies that use information from the credit reporting agency

What do major credit reporting agencies have to provide their consumers under FAFTA?

free copies of their own credit reports every 12 months

Under EOCA, creditor may not require a cosigner on a credit instrument

if the applicant qualifies under creditor's standards of creditworthiness for the amount and terms of the credit request

how can debt collectors who violate the act not be liable?

if they can show that the violation was not intentional and resulted from a bona fide error. the error must have occured in spite of procedures the company had already put in place to avoid such errors

Some selected areas governing consumer law

labeling and packaging sales credit protection product safety food and drugs advertising

What else does FAFTA require in regards to credit-card numbers?

the account numbers on receipts need to be shortened. merchants, employers, and others who may have access to the receipts can no longer obtain the consumer full name and credit card numbers

If the contracting parties are subject to TILA, the requirements of Regulation Z apply

to any transaction involving an installment sales contract that calls for payment to be made in more than 4 installments