Chapter 44: Consumer Law

Snarky Bling Corporation sells consumer products. Generally, the labels must use words as they are A. normally used in the scientific community. B. ordinarily understood by consumers. C. reasonably approved by ABC's officers. D. typically explained by the marketing department

B. ordinarily understood by consumers.

A consumer cannot rescind a contract freely entered into.

F

Labels must be accurate

T

Labeling and Packaging Laws

- Labeling must be accurate, and must use words that are easily understood by the ordinary consumer- 3rd grade reading level

Truth-in-Lending Act: credit card rules

- Limits consumer liability for credit card debt in cases of stolen cards to $50. - 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

Fair and Accurate Credit Transactions Act (FACT)

- Purpose is to combat identity theft. - allows consumers can place an alert on national fraud alert system - requires major credit companies provide free credit report. - allows consumers victimized by identity theft to rebuild their credit

credit protection

- Truth-in-Lending Act. - Fair Credit Reporting Act. - Fair Debt Collection Practices Act. - Wage Garnishment.

telephone and mail order sales

- mail and telephone merchants must ship orders within the time promised in their catalogs and advertisements, - must notify consumers when orders cannot be shipped on time - must issue timely refunds when orders cannot be shipped.

deceptive advertising

- when a reasonable customer would be misled - puffery - Claims Based on Half-Truths - bait and switch ads

to state a successful false advertising claim under Lanham Act, a business must establish each of the following elements

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.

Fair Debt Collection Practices Act: Prohibited Debt Collection Tactics

1. Contact debtor at his place of employment, if employer objects. 2. Contact debtor during inconvenient or unusual times, or at any time debtor is being represented by an attorney 3. Contact third parties other than the debtor's parents, spouse, or financial adviser about payment of a debt, unless a court authorizes such action 4. Harass or intimidate the debtor or make false or misleading statements 5. 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

The FTC can do what when a company uses deceptive advertising

1. Issue Complaints. 2. Issue Cease and Desist Orders.- stop packaging 3. Restitution Possible.- fine you

online deceptive advertising

1. must be truthful and not misleading. 2. Claims must be substantiated; advertisers must have evidence to back up their claims. 3.must be fair

Slick Toy Company begins marketing a new toy that is highly flammable. The Consumer Product Safety Commission may A. ban the toy's furniture manufacture and sale, and order that the toy be removed from the market. B. ban the toy's future manufacture and sale only. C. do nothing until there is an injury or damage on which to base an action. D. order that the toy be removed from the market only.

A. ban the toy's furniture manufacture and sale, and order that the toy be removed from the market.

bait and switch ads

Advertising of a product at an attractively low price to lure customers in to buy more expensive items

The ordinary business of Homeowner Credit Company is to lend money to consumers. Homeowner must disclose all credit terms clearly and conspicuously in A. all credit transactions. B. any credit transaction in which payments are to be made in more than four installments. C. any credit transaction in which payments are to be made in more than one installment. D. no credit transaction.

B. any credit transaction in which payments are to be made in more than four installments.

US Tobacco Corporation (USTC) sells tobacco products. On the packages of its smokeless tobacco products, USTC must include warnings about health hazards associated with A. cigarettes. B. smokeless products. C. tobacco products generally. D. none of the choices.

B. smokeless products.

Nick comes to Marisa's home and, after a long presentation, sells her a vacuum cleaner. Maria has A. no right to rescind this transaction. B. three days to exercise any "lowest" price guarantee. C. three days to rescind this transaction. D. three days to substitute a neighbor as the customer in this transaction.

B. three days to exercise any "lowest" price guarantee.

Fair Debt Collection Practices Act: Notification and Bona Fide Errors

Bona fide error (genuine error without the intent to deceive) is a defense against violations

Ed takes out a student loan from First National Bank. After graduation, Ed goes to work, but he does not make payments on the loan. The bank agrees with Good Collection Agency (GCA) that if GCA collects the debt, it can keep a percentage of the amount. To collect the debt, GCA can contact A. Ed at his place of employment, even if his employer objects. B. Ed at unusual or inconvenient times or any time if he retains an attorney. C. Ed only to advise him of further action that GCA will take. D. third parties, including Ed's parents, unless ordered otherwise by a court.

C. Ed only to advise him of further action that GCA will take.

Krunchies, Inc., sells snack foods. Krunchies must include on the packages A. no nutrition information. B. the identity of the product only. C. the identity of the product, the net quantity of the contents, and the number of servings. D. the net quantity of the contents and the number of servings only.

C. the identity of the product, the net quantity of the contents, and the number of servings.

Jada receives an unsolicited credit card in the mail and tosses it in her desk. Without Jada's permission, her roommate Loni uses the card to buy new clothes for $1,000. Jada is liable for A. $1,000. B. $500. C. $50. D. $0.

D. $0.

Tasty Treat Company advertises that its cereal, "Fiber Rich", reduces cholesterol. After an investigation and a hearing, the FTC finds no evidence to support the claim. To correct the public's impression of Fiber Rich, the most appropriate action would be A. a cease-and-desist order. B. a civil fine. C. a criminal fine. D. counter-advertising.

D. counter-advertising.

Eve borrows money to buy a car and to pay for repairs to the roof of her house. She also buys furniture in a transaction financed by the seller whom she will repay in installments. If all of the parties are subject to the Truth-in-Lending Act, Regulation Z applies to A. the car loan only. B. the home improvement loan only. C. the retail installment sale only. D. the car loan, the home improvement loan, and the retail installment sale.

D. the car loan, the home improvement loan, and the retail installment sale.

A consumer can include a note in his or her credit file to explain any misinformation in the file, but the misinformation cannot be deleted.

F

One who leases consumer goods in the ordinary course of business does not have to disclose any material terms in writing.

F

The Fair Debt Collection Practices Act applies to anyone who attempts to collect a debt.

F

There are no federal agencies that regulate sales.

F

Deceptive Advertising- Telemarketing and Fax ads: Telephone consumer Protection Act

Prohibits telephone solicitations using automated dialing systems or a pre-recorded voice or unsolicited faxes

Fair Credit Reporting Act

Protects consumers against inaccurate credit reporting and requires lenders and creditors to correct errors

online sales

Some states are now requiring explicit refund and return policies

Food Labeling: Nutritional Content of Food Products

Standard nutrition facts, terms such as 'low fat' and 'fresh' are regulated by FDA and USDA

Advertising will be deemed deceptive if a consumer would be misled by the advertising claim.

T

An advertiser cannot fax ads to consumers without their permission

T

The TILA applies to creditors who, in the ordinary course of business, sell goods on credit to consumers.

T

The same laws that apply to other media generally protect consumers online.

T

puffery

Vague generalities and obvious exaggerations are permissible and not considered deceptive

door to door sales

consumers have a post-sale "cooling-off" period during which they can cancel their purchase without obligation

Postal Reorganization Act

provides that unsolicited merchandise sent by U.S. mail may be retained, used, discarded, or disposed of in any manner deemed appropriate, without the recipient's incurring any obligation to the sender.

Truth-in-Lending Act: equal credit opprotunity

requires credit be extended without regard to race, sex, color, national origin, age, or marital status.

Food Labeling: Fair Packaging and Labeling Act

requires food product labels identify: 1. the product 2. the net quantity of the contents and, if the number of servings is stated, the size of a serving 3. the manufacturer; and 4. the packager/distributor, plus savings claims, components of nonfood products, and partial filling.