LAW Chapter 26 - Consumer Protection

The Acer computer at $449 was the BAIT —an alluring offer that sounds almost too good to be true. Of course, it is. Once a customer asks to buy it, the company tries to sell an upgraded product at a much higher price. That is the SWITCH. The real purpose of the advertisement was simply to lure interested customers into a trap to buy a more expensive item.

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Truth in Lending Act (TILA) does not regulate interest rates or the terms of a loan; these rules are set by state law. TILA simply requires lenders to disclose the terms of a loan in an understandable and complete manner.

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What is a consumer report?

A consumer report is any communication about a consumer's creditworthiness, character, general reputation, or lifestyle that is considered as a factor in establishing credit, obtaining insurance, securing a job, or acquiring a government license.

What is a Consumer reporting agencies?

Consumer reporting agencies are businesses that collect and sell personal information on consumers to third parties.

Congress has empowered two federal agencies to enforce consumer laws: they are...

Federal Trade Commission (FTC). Consumer Financial Protection Bureau (CFPB).

To combat the Housing crisis, the CFPB established criteria for what it calls qualified mortgages (QMs). Explain Qualified Mortgages.

If lenders give a QM, they are deemed to have complied with TILA because it is likely that the borrower can afford to repay the loan.

The Commission (FTC) considers a practice to be unfair if it meets all of the following three tests😊

It causes a substantial consumer injury. The harm of the injury outweighs any countervailing benefit The consumer could not reasonably avoid the injury. In addition, the FTC may decide that a practice is unfair simply because it violates public policy, even if it does not meet these three tests.

What foes the Consumer Financial Protection Bureau (CFPB) do?

It regulates consumer financial products and services, including mortgages, credit cards, and checking accounts.

The FTC has established the following rules for these types of sales:

Sellers must ship an item within the time stated or, if no time is given, within 30 days after receipt of the order. If a company cannot ship the product when promised, it must send the customer a notice with the new shipping date and an opportunity to cancel if the customer wants If the company cannot ship by the second shipment date, it must send the customer another notice. This time, however, the company must cancel the order unless the customer returns the notice, indicating that he still wants the item.

What does the Federal Trade Commission (FTC) do?

The FTC regulates a wide range of business activities that affect consumers. The agency can impose a fine or file suit in federal court asking for damages on behalf of an injured consumer.

An electronic fund transfer authorized in advance to recur at regular intervals is called a Preauthorized Transfer. 😊

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FTC rules prohibit bait-and-switch advertisements: A merchant may not advertise a product and then disparage it (or otherwise make it unavailable) to consumers in an effort to sell a different (more expensive) item. In addition, merchants must have enough stock on hand to meet reasonable demand for any advertised product. 😊

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In the case of ATM and debit cards, banks cannot overdraw an account and charge an overdraft fee unless the consumer signs up for an overdraft plan. 😊

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The Consumer Product Safety Act of 1972 (CPSA) was to prevent injuries in the first place. This act created the Consumer Product Safety Commission (CPSC) to evaluate consumer products and develop safety standards. 😊

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The Equal Credit Opportunity Act (ECOA) prohibits any creditor from discriminating against a borrower because of race, color, religion, national origin, sex, marital status, or age (as long as the borrower is old enough to enter into a legal contract) or because the borrower is receiving welfare. 😊

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The FTC prohibits telemarketers from calling or texting any telephone number listed on its do-not-call registry The Telephone Consumer Protection Act (TCPA) prohibits telemarketers from making autodialed and/or prerecorded calls or texts to cell phones and prerecorded calls to residential land lines unless the consumer unambiguously consents in writing. 😊

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Under the FTC Act, an advertisement is deceptive if it contains an important misrepresentation or omission that is likely to mislead a reasonable consumer. 😊

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Under the FTC door-to-door rules, a salesperson is required to notify the buyer that she has the right to cancel the transaction at any time before midnight of the third business day thereafter. 😊

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Under the Fair and Accurate Credit Transactions Act (FACTA), consumers are entitled by law to one free credit report every year from each of the three major reporting agencies. 😊

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Under §5 of the FTC Act, anyone who receives unordered merchandise in the mail may treat it as a gift. She may use it, throw it away, or do whatever else she wants with it 😊

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Under the Fair Credit Reporting Act (FCRA)😊

😊 A consumer report can be used only for a legitimate business need. An employer cannot request a consumer report on any current or potential employee without the employee's permission. Anyone who makes an adverse decision against a consumer because of a credit report must reveal the name and address of the reporting agency that supplied the information Upon request from a consumer, a reporting agency must disclose all information in his file If a consumer tells an agency that some of the information in his file is incorrect, the agency must both investigate and forward the data to the information provider

Fair Credit Billing Act (FCBA) provides protection for credit card holders 😊

😊 The FCBA provides that if a consumer has a complaint about a bill and writes to the credit card company within 60 days of receipt of the bill, the company must acknowledge receipt of the complaint within 30 days and, then, within two billing cycles (but no more than 90 days) investigate the complaint and respond.

In all loans covered by TILA, the lender must😊

😊Disclose all information clearly Disclose the amount financed. That is, the amount the consumer has borrowed. The total of payments. The amount the consumer will have paid by the end of the loan. The finance charge. The finance charge is the amount, in dollars, the consumer will pay in interest and fees over the life of the loan The annual percentage rate (APR).

The Fair Debt Collection Practices Act (FDCPA) prohibits a debt collector from making any false, deceptive, or misleading representation or using any unfair or unconscionable means to collect, or attempt to collect, a debt. 😊

😊It prevents the debtor from Call or write a debtor who has notified the collector in writing that he wishes no further contact; Call or write a debtor who is represented by an attorney; Call a debtor before 8:00 a.m. or after 9:00 p.m.; Threaten a debtor or use obscene or abusive language; Call or visit the debtor at work if the consumer's employer prohibits such contact;