Chapter 16

Prohibited practices under the telephone consumer protection act of 1991

- Calling a person's residence anytime other than between 8 AM and 8 PM; - Claiming a government affiliation when one does not exist; - Claiming an ability to provide a loan or improve a consumer's credit record regardless of the consumer's credit history; - Failing to tell the consumer that the call is a sales communication; and - Claiming an ability to recover goods or money lost by the consumer.

Fair credit billing act provisions

- Creditors must give notice to consumers-debtors regarding rights and duties at time account opened and every 6 months - Debtors must receive info on billing statements as to how to place inquiry when they discover a billing error. - consumer-debtor who believes billing statement contains error must notify in writing creditor within 60 days to report it by providing consumer's name, account number, and item and amount in dispute. The creditor has 30 days to notify consumer for receipt of disputed notice, and within 90 days or 2 billing cycles must give notice to the consumer regarding the outcome of its investigation. While the debt is in dispute, the consumer does not have to pay it. The creditor, however, can report it on the billing statement with a note that it does not have to be paid. - A creditor must correct any found billing errors and notify the consumer. - A creditor must notify the consumer and provide an explanation for the reasons if no errors are found in disputed billing statements. - A consumer can withhold payment if a faulty product was purchased on credit after the creditor receives a notice immediately after the consumer discovers that the product is faulty. - The creditor is obligated to negotiate a settlement between the seller and the consumer.

Major provisions of the Fair and accurate credit transactions act

- consumer entitled to copy of credit report 1 every 12 months free of charge - Account # on credit card receipts must be truncated so others can't identify full account number - financial institutions required to ID red flag circumstances of identity theft and develop procedures for disposal of sensitive credit info. - consumers must receive assistance when they are victims of ID theft. - consumers are free to report accounts affected by ID theft directly to creditors to minimize spread of wrong information.

Fair Credit Reporting Act provisions

- lender/creditor must give notice to consumer each time consumer is unfavorably affected by content of credit report created by consumer report agency. - Consumer can request information from consumer credit agency that issued adverse report. - Consumer reporting agencies are required to maintain current and accurate files regarding consumers' information and provide notice to third party receiving inaccurate information from agency. - Consumer can submit written statement to consumer credit agency of 100 words or less with position on disputed info found on credit report/consumer's file with agency. - A consumer reporting agency may issue a credit report: - To a court after a court order - To consumer after written request - To any entity a consumer reporting agency believes is requesting report to use it for obtaining employment, credit, licensing, or personal or family insurance, and to anyone having legitimate business reason for information to establish business transaction with consumer. - act restricts credit report use by employers and must notify/ receive consent from applicant or employee before employer requests credit report from consumer reporting agency.

Not dischargeable debts under bankruptcy code

-Student loans unless excepting the debt will cause undue hardship -Certain taxes and customs duties - Legal obligations incurred due to fraud, false pretenses, or false representations - Domestic support obligations (spousal and child support) - Fines, penalties, or forfeitures owed to a government entity - Debts that were not included in a previous bankruptcy or that were waived from discharge

FTC test to determine deceptive advertising

1. The advertising contains a misrepresentation or omission that will likely mislead a reasonable consumer; 2. The consumer is acting reasonably under the circumstances; and 3. Misrepresentation or omission of advertisement is material. Consumer doesn't have to show intent to deceive by advertising or any reliance on advertising to prove deception

Types of deceptive advertising

1. advertising involving prices. 2. advertising involving product quality and quantity 3. advertising involving testimonials by well known persons from sports, entertainment and business areas.

ECOA provisions

1. creditor cant request info from applicant relates to (a) spouse/former (b) applicant's marital status; (c) alimony and child support received; (d) gender; (e) childbearing; and (f) race, color, religion, or national origin. 2. creditor must provide notice to applicant within 30 days from date application was received containing following information: (a) a statement of action taken, and, if application was denied, either reason(s) for denial or disclosure that applicant has right to request and receive statement for reason(s) of denial; (b) name and address of administrative agency dealing with compliance by creditors; and (c) statement containing basic provisions

Provisions in the Truth In Lending Act

1. general disclosures 2. finance charges 3. annual percentage rate 4. right to cancel contract 5. open and closed ended transactions 5. credit advertising

Requirements for creditor to become secured party

1. written or authenticated security agreement signed by debtor clearly describing collateral subject to security interest 2. Secure party must give debtor something of value and 3. Debtor must have rights to collateral subject to security interest

third party guaranty

3rd party only liable to the creditor in the event the debt fails to make the payment on the debt and the creditor made the proper attempts to collect it.

Writ of execution

After judgement entered, if debtor refuses to pay or is unable to satisfy the debt, court can obtain directing sheriff to seize certain property of the debtor and sell it through auction which proceeds used to satisfy payment of the judgement. Excess money paid to debtor

Chapter 11 advantageous

Allows debtor to retain its assets, continue its operation and make arrangements for the discharge of its debts.

Fair Credit Reporting Act

Amended Consumer Credit Protection Act to protect consumers from inaccurate credit reporting and to mandate creditors to report correct, relevant and up to date information for consumer credit reports and to ensure that the information obtained by credit agencies remains confidential. - equifax, try and transunion authorized by act to provide credit reports to users for specified purposes.

Fair and accurate credit transactions act

Amended the fair credit reporting act to establish national alert system for consumers to report actual or suspected identity theft case.

Fair credit billing act

Amendment to the Truth in Lending act to element inaccurate and unfair billing practices and limit the liability of consumer creditors for the unauthorized use of their credit cards. - applies to issuers of credit cards, creditors who extend credit to more than 4 monthly installments and creditors who assess finance charges.

Consumer law protection

Any statutory or common law intended to protect interests of consumers. - state and federal statutes to protect interests

Limited warranty

Any warranty offered that doesn't meet full warranty conditions. Magnuson Moss Warranty Act prohibits sellers and manufactures from limiting the time an implied warranty is effective. Damages cannot be limited unless expressly stated on the face of the product.

Bankruptcy petition

Application filed with bankruptcy court to seek a relief - voluntarily or involuntarily. Must be signed by all debtors named on the petition and must contain true and accurate statements

Power of the Federal Trade Commission

Assess fines or penalties, obtain injunctive relief orders, order certain advertising to be corrected, terminate contracts and order refunds to consumers, and obtain court orders on behalf of consumers awarding damages against sellers.

Statements

Bank required to provide monthly statements to electronic funds transfer act consumer at end of month in which transaction is made, if no transaction made, statements are quarterly.

Discharge

Bankruptcy court, when debtor meets all requirements of bankruptcy code, will grant debtor a relieve from responsibility to pay all or some debts.

Telephone Consumer Act consumers

Can sue directly any violators of the act and recover higher of $500 for each violation or actual monetary losses resulting from the violations. Court has authority to triple damages against violator who acts intentionally or with knowledge.

Exempt personal property

Certain personal property belonging to debtor is also exempt from creditors: household furniture, primary car to get to and from work, clothes, certain equipment used in debtors trade and animals such as pet and livestock.

Artisans lien

Common law lien created against personal property to recover payment for services rendered against the property. - creditor retains possessory interest of the personal property until some form of payment made.

Bait and switch advertising

Considered deceptive because the advertising offers a very low price for specified item usually not amiable to consumer for purchase and consumer will most likely be encouraged to purchase an alternative product at much higher price. - low price = bait. - encouragement to purchase another product at much higher price = switch

Financial institution liability

Consumer for all damages it causes by filling to make an electronic fund transfer, failing to credit a deposit of funds or failing to stop an unauthorized transfer from customers account. - not liable if failure occurred because of natural disasters to technical malfunction

Right to cancel

Consumer has right to cancel a contract for a home loan within 3 days from date of closing or after proper truth in lending disclosures are made, if not done at closing

Lost or stolen credit cards

Consumer liable for $50 of unauthorized use of lost or stolen card if consumer notifies bank within 2 days from card being lost/stolen. - liability increases up to $300 up to 60 days and to more than $500 after when no notice given. - consumer has no liability for unauthorized use that was sent to consumer and later was lost.

Do Not Call Registry

Consumers through national registry can sign up with FTC to eliminate certain telemarketing calls.

Security agreement

Contract or agreement between the debtor and secured party that creates or provides for security interest.

Foreclosure

Court will order the sale of real property through an auction and proceeds will be used to pay for the cost and the mortgage debt and any surplus amount will be received by the debtor.

Federal Trade Commission

Created under the federal trade commission act to enforce section 5 of the FTCA.

Unsecured transactions

Created when consumer uses credit card to purchase goods and payment debt is not guaranteed.

Closed end credit

Credit issues for specific period of time ex. car loan. Creditor required to disclose total finance charges, APR, total # of installments, security interest and terms for repayment.

Open ended credit

Credit that doesn't have set period of time for repayment and debtor can pay either in full or make installment payments. ex. credit card account Creditor required statement to consumer outlines terms of credit, interest rate, finance charges, minimum payment

Collecting debt

Creditor can bring legal action against debtor when debt is past due. Court can issue judgement against debtor. - the awarded judgement often not paid by debtor. - creditor can request through court that certain property of debtor be seized to satisfy debt. - can request court order to seize property of debtor to satisfy the debt

Writ of attachment

Creditor can request that a court order the court officer (sheriff) to seize the property of a debtor to satisfy the debt. - usually available prior to court judgement and after certain state law procedures met.

Garnishment

Creditor may request court to issue to allow creditor to collect debt by seizing the debtors property held by a third party to satisfy the debt.

Annual Percentage Rate

Creditor must disclose in a meaningful and sequential way the effective annual interest rate charged by creditor for loan. Disclosure makes it easy for consumers to identify interest rate they pay and allows them to compare what they are paying with other creditors.

Truth in Lending Act does apply

Creditors that regularly extend credit for less than $25,000 to natural persons for personal and family purposes.

Voluntary bankruptcy

Debtor files request (petition) with the bankruptcy court seeking some type of relief from creditors or debts.

Chapter 7 - straight bankruptcy

Debtor gives all nonexempt assets to the trustee and the trustee liquidates the assets. - proceeds used to pay administration of the liquidation and the debtors debts. Any debts that could not be satisfied from the proceeds are discharged unless they are not dischargeable. This provides a fresh beginning for the debtor to start over free from debts

Chapter 12

Debtor must be either a family farmer or fishermen who meets certain requirements and files a bankruptcy petition for reorganization. Debtor must file a plan of reorganization. - after all payments are made under the plan within 3-5 year period, court will grant debtor discharge of all unpaid debts provided in plan.

Chapter 13

Debtor must have regular income and portion of income is deposited with the trustees office. Debtor is required to draft a plan of repayment that provides for the payment of certain debts for period of time (3-5 years) through the trustee. After the approval of the payment plan, debtor must comply with payment plan requirements for specified duration. - any debts not satisfied at end of payment plan discharged unless not dischargeable.

Bankruptcy schedules

Debtor must submit certain schedules when he or she files a voluntary petition. - A list of all creditors, with the address and applicable debt amount for each creditor - A list of all of the debtor's property - A list of all of the debtor's expenses or financial obligations - A statement of the debtor's income - The debtor's current expense and income statement - A copy of the debtor's federal income tax returns for the three preceding years from the date of filing the bankruptcy petition

Chapter 11

Debtor, usually business is allowed to reorganize and continue to operate while arranging discharge of debts. - debtor files a reorganization with the court and seeks its approval.

Food labeling

Department of health and human services promulgates rules governing packaging of products under fair packaging and labeling act. - various products (foods, drugs, cosmetics) must be labeled and packaged in accordance with FPLA requirements

Financing statement

Document filed with appropriate state department to provide notice to third parties of the secured parties security interest

Billing errors

Electronic Funds Transfer Act provides 60 day period from day of receipt to consumer to review bank statement and notify of any errors. - bank has 10 days to investigate errors and additional 45 days if it re-credits consumers account.

Unsolicited cards

Electronic funds transfer act permits banks to send to a consumer so long as card is not activated and ready for use when received by consumer.

Debtor-creditor relationship

Established between parties engaged in transactions when party borrows money to purchase property/service and another loss the money for that purchase - form of contractual relationship where creditor agrees to advance money to debtor and in return debtor agrees to repay loan amount + interest/other expenses agreed between parties.

Federal US district courts

Exclusive jurisdiction over bankruptcy cases given to courts with original and exclusive jurisdiction over all bankruptcy cases. - each has bankruptcy judges who are specialists

Guaranty

Express contract similar to suretyship with exception that the 3rd party not primary liable for the debt, instead serving as a secondary liability to the creditor.

Suretyship

Express contract where 3rd party promises to pay for debt of another thats owed to the creditor - creditor has option to collect debt from either party.

5 commissioners

FTC composed with 5 of them, one being the chairperson.

Controlling the Assault of Non-Solicited Pornography and marketing Act of 2003

Federal Communications Commission has authority to enforce. Which bars senders from submitting commercial emails by using fictitious names and requires them to provide information to recipient of such emails concerning how to be removed from mailing list.

Magnuson Moss Warranty Act

Federal Trade Commission empowered to enforce under Federal Trade Improvement Act of 1975. Applies to manufacturers and sellers of consumer products that offer such products with express written warranties. - prohibits sellers/manufacturers from giving confusing and misleading information to consumers

Remedies under Truth in Lending Act

Federal Trade commission along with other agencies responsible for enforcement of the truth in lending act and can bring an action against a violator on behalf of a consumer-debtor. - consumer can bring lawsuit for reimbursement of finance charges due to billing error or discharge

US trustee

Federal gov. through trustees federal law will provide federal official to supervise and handle many of administrative details associated with the bankruptcy case. - usually attorney appointed for this capacity

Electronic fund transfer act

Federal statute enacted in 1978 amended truth in lending act to regulate financial institutions that offer electronic fund transfers involving consumer accounts

Best form of perfection

For secured party to file a financial statement with the proper state agency. Without filing can be either possession of the collateral or automatic perfection

Fair credit billing act remedy

Forfeiture by creditor of right to collect up to $50 for every item in dispute on each periodic billing statement.

Magnuson Moss Warranty Act warranties

Full and limited warranty

Chapter 11 organizational plan approval

If it is drafted for the best interest of the creditors, its feasible and each class of creditors accepts the plan.

Deceptive Advertising

If reasonable consumer is misled by the content of the ad, the FTC uses 3 part test to determine if its occurred.

Mortgage foreclosure

If the debtor(mortgagor) failed to satisfy the terms of the mortgage, the mortgagee (creditor) has the right to foreclose on the real property by following state law applicable to real property.

Exempted from Telephone Consumer Act

Insurers, nonprofit, franchisers, online services and securities salespersons regulated by the SEC.

Security interest

Interest secured party has in collateral (debtors personal property) that secures payment or performance of an obligation

Responsibility of the Federal Trade Commission

Investigation of any unfair or deceptive practices and the enforcement of section 5.

Fair packaging and labeling act requirements

Label must 1. identify product 2. identify manufacturer 3. list quantity of the contents and serving size if provided 4. list identity of the distributor.

Violators of the fair debt collection practices act

Liable for fines imposed by government agency enforcing the act. - consumers can sue and receive a. actual damages (embarrassment and mental distress b. $1,000 for each malicious damages c. attorney fees to bring lawsuit or defend one filed by creditor if found harassing.

Proceeds

May be cash or other property received from disposition or sale of collateral.

Department of Justice

May seek criminal charges against creditor if creditor exhibited pattern of negligence, misleading statements or intentionally failing to disclose.

Purchase money security interest

Most common security interest that will automatically perfect applies to consumer goods when seller or lender agrees to extend credit to the debtor and provides money to purchase goods primarily for personal, household or family purposes.

Debtor failing to meet terms of security agreement

Often debtor unable or unwilling to meet terms of security agreement, and debtor will default. Article 9 of UCC provides remedies: 1. retain collateral in full satisfaction of the security interest 2. retain collateral and sue the debtor for any deficiency in value to satisfy the security interest or 3. release the collateral and sue for the full value of the security interest

Debtor or borrower

Party borrowing the money

Secured transactions

Party purchases personal property on credit and guarantees payment by giving creditor interest in personal property. Allows sellers and lenders to minimize risk of nonpayment - article 9 of UCC governs

Creditor or lender

Party that loans the money

Possession

Perfection occurs when secured party obtains collateral until the security interest is satisfied. - certain security interests are automatically perfected at the time of creation.

Fair debt collection practices act

Primary goal is to prevent harassment of debtors by creditors or debt collectors at a debtors place of employment/home.

Telephone consumer protection act of 1991

Prohibits telephonic solicitation for any sales by using an automatic telephone dialing system or prerecorded voice system. Further makes it illegal to transmit ads via fax without first obtaining the recipients consent.

Purchase money security interest coverage

Property owned by debtor or that is in debtors possession, can be extended to cover other property if provided by security agreement. - security interest may cover proceeds of sale of collateral.

Open and Closed Ended Credit Transactions

Regulation Z, established by Federal Reserve Board of Governeors, governs credit provisions associated with sales contracts and distinguishes between open ended and closed ended credit.

Bankruptcy

Relief provided under federal law when debtor unable to pay debt when it comes due. Goals are to provide: 1. relief to the debtor when debtor lost control of debts 2. fair distribution of debtors assets among all debtors creditors.

Federal Communications Commission

Responsbile for enforcing telephone consumer act. Can impose fines up to $11,000/day against any violator.

Consumer reporting agency violation

Responsible for actual damages, attorney fees, and additional damages not to exceed $1,000. A violation of the act by the agency is considered "unfair or deceptive practice."

Excluded property from the state

Savings for post secondary education deposited in certain accounts, individual retirement accounts, retirement plans such as 401k, government benefits, certain income received for child support, spousal support, and real and personal property up to a certain value

Types of bankruptcy reliefs

Specific chapters provide different types of relief to a debtor. Most common chapters are - ch. 7 - liquidation proceedings - ch. 11 - reorganizations - c.h. 12 - family farmers/fishermen - ch. 13 - adjustment of debts for individuals with regular income

Credit Advertising

The Truth in Lending Act advertising to the public associated with the extension of consumer credit. Imposes certain disclosure requirements in ads, including amount of down payment, terms of repayment and finance charges accumulated in annual percentage term.

Garnishee

Third party ordered to seize debtors property thats requested to withhold a % of debtors wages as permitted by state law every pay period and return it to the creditor until the full amount of debt as provided is satisfied.

Truth In Lending Act

Title 1 of the Consumer Credit Protection Act provides protection to consumers by requiring creditors to disclose all terms of a credit agreement before an agreement signed by parties. - only to businesses or person engaged in ordinary course of business, in credit business by offering loans, sales on credit.

Electronic Funds Transfer Acts requires credit card issuers

To disclose balance on account and method of computation and when and how the finance charges apply.

Credit

Transaction when purchase is made without exchange of cash between purchaser and seller of goods (through use of credit card) - most business transactions - US economy more and more dependent

Finance charges

Truth in Lending Act requires creditors to disclose all charges associated with transaction including a. interest rates b. finance charges c. amount financed d. loan fees e. points when purchasing home f. appraisal fees g. total amount required to be paid by consumer by end of loan period (principal amount + interest, finance charges, fees and interest)

Personal property

UCC governs for secured transactions and accounts including accounts, chattel papers, agricultural liens, commercial assignments of $1000 +, fixtures and other intangible property.

General Disclosures

Under Truth in Lending Act, creditor must clearly disclose all credit terms in a conspicuous place and in a meaningful list and provide copy of disclosure requirements to consumer.

Creditors meeting

Upon receipt of the bankruptcy petition, bankruptcy court will schedule a 341 hearing, where debtor is interviewed by trustee and creditors have opportunity to appear and question the debtor who may or may not be represented by attorney.

Third party

When debtor borrows money with help of third party where 3rd party promises to pay debtors debt if debtr failed to pay, a surety or guaranty relationship is created. - 3rd parties creditworthiness becomes the security of the debt.

Automatic stay

When debtor files a bankruptcy petition with the bankruptcy court, they receive certain protections and creditors immediately suspend certain activities.

Bankruptcy Estate

When petition is filed, case is initiated and a separate legal entity is created that refers to the debtors property. This consists of all legal and equitable interests of the debtor in nonexempt property. - proceeds, rents and profits from debtors property.

Bait and switch advertising is deceptive

When seller fails to maintain reasonable inventory in stock for the advertised item, discourages employees from selling the advertised item or the seller fails to offer the advertised item within reasonable time.

Involuntary bankruptcy

When'd debtors creditors force debtor to file petition. Requirements must be met for creditors to file action: 1. debtor has 12+ creditors and 3+ have unsecured claims totaling $14,425+ and join the petition 2. debtor has fewer than 12 creditors and 1 + having a claim totaling at least $14,425 may file.

Prohibited activities under fair debt collection practices act

a. Creditors and debt collectors cant contact third party except to find out whereabouts of debtor, unless third party is debtor's family member or lawyer. b. Debtor cant be contacted during inconvenient times. "Inconvenient times" covers any time between 9:00 PM and 8:00 AM. If attorney represents debtor, debtor cannot be contacted at all c. debtor cant be contacted in abusive, deceptive, or unfair way. Forbidden for collector or creditor to pose as attorney or police officer.

2009 amendement to truth in lending act

a. credit card company cant retroactively increase interest rate on existing balances unless account is 60 days delinquent. b. Credit card companies are required to give 45-day advance notice to consumers for any changes in terms of credit card. c. The credit card monthly statement must be sent 21 days before due date. d. The interest rate on credit card balances cannot be increased unless a specific situation occurs (i.e., expiration of a promotional rate period). e. The credit card issuer cant charge over-the-limit fees except in specific situations. f. Payments in excess of minimum monthly payment must be applied to balances on account w/ highest interest rate if account has balances at different interest rates. g. A credit card issuer cant compute any finance charges based on previous billing cycle.

Electronic fund transfer act applies to:

a. unsolicited cards b. billing erros c. lost or stolen credit cards d. transactions e. statements

Secured party

any creditor who has security interest in the debtors personal property used as collateral

After- acquired property

any property acquired by debtor after execution of the security agreement and may include inventory or equipment.

chattel paper

any writing evidencing debt secured by personal property

ECOA remedy

applicant must file lawsuit within 2 year statute of limitations when violation occurs. Applicant can obtain injunction as well as actual and punitive damages.

Bankruptcy Trustee

appointed in most bankruptcy proceeding and have a wide responsibility associated with the bankruptcy estate and proceedings. Generally, assigned to bankruptcy case upon filing of a petition. Generally lawyers, accountants or other business professionals

Transactions

bank must keep and provide evidence of transactions that occurred on the account through a computer terminal - EFTA covers only transactions involving EFTA accounts held by consumers who are natural persons for personal, family and household purposes.

collateral

certain personal property of the debtor subject to the security interest

False price comparison

considered deceptive price advertising

State law

debtor is protected when certain property is exempt from creditors actions - most common exemption is the homestead exemption

ECOA

enacted in 1974 primary purpose is to eliminate all forms of discrimination in granting credit. Primary applies to transactions for household or family purposes. Most commercial transactions exempted

Section 5 of the Federal Trade Commission act

forbids unfair methods of composition

Lien

legal claim against debtors property to satisfy a debt or the value of a service or to protect creditors interest for payment of the debt or satisfaction for value of a service. - prevents borrower from selling/transferring title to property that has it. - common and statutory

Perfection

legal process allowing secured parties to protect themselves against other claims on collateral. To better protect interests, secured party must perfect security interest especially if the collateral is subject to other security interest.

Puffery

mere opinion is not deceptive but considered a form of this.

Homestead exemption

most common exemption where sate law allows debtor to retain family home in entirety or up to certain amount of the equity. - unsecure creditors or creditors not holding a mortgage are not permitted to seize part or all of the debtors family home to satisfy a debt.

Full warranty

seller or manufacturer must fix a defective product within a reasonable time without any cost to consumer. - if failed to fix defective product after reasonable time and reasonable number of effort, consumer has option to either receive replacement product without any cost or full refund for amount spent to purchase defective product.

Third party surety

stands in the shoes of the debtor meaning both have same obligations to creditor

Mechanics lien

statutory lien created against real property to recover payment for services rendered against real property. - creditor becomes lien holder and acquires interest in real property until debt satisfied. - lien holder may force sale of real property to satisfy debt.

Truth in Lending Act Doesn't apply

transactions between ordinary consumers. - doesn't apply to a corporation or person applying for more than $25,000 in credit, except for purchasing a home

Remedies of consumer reporting agency user

who is able to show negligence: 1. actual damages 2. court costs 3. reasonable attorney fees

Debt collector written notice

within 5 days from initial communication with debtor must provide a. debt amount b. current creditors name c. statement with info that debtor can request verification about alleged debt