Business Law Chapter 44 "Consumer Law"

Define Fair Debt Collection Practices Act

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.

Define False Advertising Claims under Lanham Act

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

Define Claims Based on Half-Truths

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

What are the 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).

Define Dyson awarded $16 million (2018 )

A federal jury in Illinois recently awarded Dyson, Inc. over $16 million in damages after finding that SharkNinja falsely advertised that its Rotator Powered Lift-Away vacuum was better than Dyson's best-performing vacuum, the DC65. SharkNinja ran ads that claimed that independent testing showed that the Rotator Powered Lift Away vacuum was proven to have "more suction" and "deep-cleans carpets better than Dyson's best vacuum." The commercial also featured a graph that purported to measure each machine's cleanability, but Dyson alleged that the results were not actually from referenced independent tests but rather internal tests. Dyson further alleged that the tests failed to comply with industry standards for vacuum cleaning testing in the first instance and that SharkNinja effectively rigged the third-party tests by directing the testing company on how to test the machines. The jury found that SharkNinja's advertising of results from unsound tests was an intentional act to mislead consumers and awarded significant damages accordingly. The case underscores the importance of conducting objective and reliable testing and carefully tailoring ad claims to accurately convey the results of tests. The decision also is striking in terms of the size of the award, particularly as the jury found it appropriate to disgorge nearly all of the $18 million in profits that SharkNinja made from its vacuum during the time the commercial aired.

Define 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: 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

Define 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

Define 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

Define other Federal Trade Commission Actions

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

Define the Expansion Coverage for Children and Seniors

Enabled more children to obtain health insurance coverage. Allowed adults (up to age twenty-six) to remain on their parents' health insurance policies Ended lifetime limits and most annual limits on care. Gave insured persons access to recommended preventive services at no cost Ended denial of insurance due to preexisting conditions. Gave Medicare recipients a 50 percent discount on name-brand drugs. Will eliminate a gap in Medicare's prescription drug coverage by 2020

Define How Food Label is regulated

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 Fair Packaging and Labeling Act requires that food product labels identify: the manufacturer; and the packager/distributor, plus savings claims, components of nonfood products, and partial filling

Define 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 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

Define 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.

Define Tainted Foods (FDCA)

In response to the rates of food contamination in the United States, Congress enacted the Food Safety Modernization Act (FSMA) to provide greater government control over the U.S. food safety system The act gives the FDA direct authority to recall food products that it suspects are tainted, rather than relying on the producers to recall items Under the FSMA, anyone who manufactures, processes, packs, distributes, receives, holds, or imports food products must pay a fee and register with the U.S. Department of Health and Human Services. Owners and operators of such facilities are required to analyze and identify food safety hazards, implement preventive controls, monitor effectiveness, and take corrective actions The FSMA places additional restrictions on food importers and requires them to verify that their products meet U.S. safety standards

Define the Controlling Costs of Health Insurance

Insurance companies must spend at least 85 percent of all premium dollars from large employers (80 percent of premiums collected from individuals and small employers) on benefits and quality improvement. If they do not meet these goals, they must provide rebates to consumers The Consumer Financial Protection Bureau (CFPB) is the agency that oversees the credit practices of banks, mortgage lenders, and credit-card companies

How is Label regulated?

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

Define Sales laws in marketing

Several statutes require the disclosure of certain terms in sales transactions and provide rules governing unsolicited merchandise. Many states and the FTC have "cooling-off" laws that permit the buyers of certain goods to cancel their contracts within three business days The FTC Mail or Telephone Order Merchandise Rule protects consumers who purchase goods via mail, Internet, phone, or fax Merchants are required to ship orders within the promised time and to notify consumers when orders cannot be shipped on time. If the seller does not give an estimated shipping time, it must ship within thirty days. Merchants must also issue a refund within a specified period of time when a consumer cancels an order

How is Caloric Content of Restaurant Food Regulated

The Affordable Care Act (Obamacare) included provisions aimed at combating the obesity problem in the United States. All restaurant chains with twenty or more locations are now 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 post guidelines on the number of calories that an average person requires daily

Define the importance of The CPSC's Authority

The CPSA created the Consumer Product Safety Commission (CPSC) with broad regulatory authority over the safety of consumer products. The CPSC has the authority to: Set safety standards for consumer products Ban the manufacture and sale of any product that the commission believes poses an "unreasonable risk" to consumers Remove from the market any products it believes to be imminently hazardous and issue recalls Require manufacturers to report on any products already sold or intended for sale if the products have proved to be hazardous. Administer other product-safety legislation, such as the Child Protection and Toy Safety Act

How are Automobile Fuel Economy Labels Regulated?

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

Define Drugs and Medical Devices (FDCA)

The 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 the safety of new medications, there is always a delay before drugs are available to the public

Define the 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

Define Online Deceptive Advertising

The FTC monitors Web sites for deceptive claims involving everything from medical treatments to exercise equipment 1. All ads—both online and offline—must be truthful and not misleading. 2. Claims must be substantiated, and 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." 4. Ads must disclose relevant limitations and qualifying information concerning the claims advertisers are making. 5. Required disclosures must be "clear and conspicuous."

Define Fraudulent Telemarketing

The FTC's 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 The TSR makes it illegal for telemarketers to misrepresent information or facts about their goods or services. Telemarketers must also remove a consumer's name from its list of potential contacts if the customer so requests An amendment to the TSR established the national Do Not Call Registry. Telemarketers must refrain from calling those consumers who have placed their names on the list

Define Fair Credit Reporting Act

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).

Define 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. Puffery: Vague generalities and obvious exaggerations are permissible and not considered deceptive

Define 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

Define 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

Define 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.

Define 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 home-improvement loans Under the TILA, all credit instrument terms must be clearly and conspicuously disclosed including annual percentage rate (APR) finance charge amount financed 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

Define Telephone Solicitation in marketing

The Telephone Consumer Protection Act (TCPA) prohibits telephone solicitation using an automatic telephone dialing system or a prerecorded voice The TCPA makes it illegal to transmit ads via fax without first obtaining the recipient's permission. (antiquated) Most states also have laws regulating telephone solicitation The Federal Communications Commission (FCC) enforces the TCPA. The FCC imposes substantial fines ($11,000 each day) on companies that violate the junk fax provisions of the act The TCPA gives consumers a right to sue for $500 per violation of the act OR for the actual monetary losses resulting from a violation, whichever is greater

Define Truth-in-Lending Act

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

Define Federal Food, Drug, and Cosmetic Act

The act protects against adulterated and misbranded foods and drugs by establishing food standards, specifying safe levels of potentially hazardous food additives, and providing classifications of foods and food advertising. Most FDCA standards and regulations are monitored and enforced by the FDA

Define Health-Care Reforms

The health-care reforms enacted in 2010 gave Americans new health-care rights and benefits as well as prohibited certain insurance company practices

Define 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

Define The Lanham Act Elements

To prevail on a false-advertising claim under the Lanham Act, a plaintiff must satisfy the following elements: (1) a false or misleading statement of fact; that is (2) used in a commercial advertisement or promotion; that (3) deceives or is likely to deceive in a material way; (4) in interstate commerce; and (5) has caused or is likely to cause competitive or commercial injury to the plaintiff

Define Notification Requirements of CPSA

Under the CPSA, distributors of consumer products must 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

FDCPT Requirements (Continued)

Under the FDCPA, a collection agency may not: Communicate with a 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

What's the Requirements of the FDCPT?

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 Under the FDCPA, a collection agency may not: Contact third parties other than the debtor's parents, spouse, or financial adviser about payment of a debt, unless a court authorizes such action Under the FDCPA, a collection agency may not: Harass or intimidate the debtor or make false or misleading statements

Define Federal Trade Commission Actions

When the FTC receives numerous and widespread complaints about a particular problem, it will investigate. Formal Complaint: If the FTC concludes that a given advertisement is unfair or deceptive, it sends a formal complaint to the alleged offender.

Define Consumer Law

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