TAMU MGMT 211 Chapter 24 (Consumer Protection) - Professor Hailey

What fines do the FCC impose on companies?

$11,000/day for violations

What remedies can someone recover in a private lawsuit under Telephone Consumer Protection Act (TCPA) of 1991?

1. Consumer can recover actual monetary loss; or 2. $500 for each violation, whichever is greater. 3. triple the damages, if the act was on purpose

What are the five things a collection agency cannot do under the Fair Dept Collection Practices Act (FDCPA)?

1. Contact the debtor at the debtor's place of employment if the debtor's employer objects. 2. Contact the debtor at an inconvenient or unusual time (3 a.m), or at any time if the 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 (by using abusive language or threatening violence) or make false or misleading statements (such as posing as a police officer) 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 the collection agency.

What specifically does the FDA enforce in the FFDCA?

1. Drugs must be proven effective and safe before marketing to the public. 2. Food additives suspected of causing cancer are banned. 3. FDA regulates medical devices and equipment.

What does the Fair & Accurate Credit Transactions Act (FACT) do?

1. FACT created a national fraud alert system. 2. If a consumer suspects that he is a victim of identity theft, he an place an alert on his credit files. 3. Account numbers on credit card receipts have to be shortened

There are many federal and state laws that deal with labels and packaging. Generally, the rules for labels are:

1. Labels must be accurate and use words that are easily understood by the ordinary consumer 2. Sometimes, labels must specify the raw materials used, like cotton, nylon, etc. 3. Sometimes, a warning label is required

What does the Federal Food, Drug, and Cosmetic Act (FFDCA) do?

1. Protects consumers against contaminated and misbranded foods and drugs 2. Establishes food standards 3. Specifies safe levels of potentially hazardous food additives 4. Sets classifications of food and food advertising.

What does the Fair Credit Reporting Act (FCRA) do?

1. Protects consumers against inaccurate credit reporting 2. Requires that lenders and other creditors report correct, relevant, and up-to-date information. 3. If a consumer is denied credit or insurance based on their credit report, they must be notified of that fact. 4. Remedies: If a credit reporting agency fails to comply with the FCRA, they are liable for actual damages, plus additional damages up to $1000 and attorneys' fees.

According to the FTC, bait-and-switch advertising occurs if the seller does any of the following:

1. Refuses to show the advertised item 2. Fails to have 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.

The Consumer Product Safety Commission (CPSC) has the authority to do what?

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." (recalls) 4. Require manufacturers to immediately notify CPSC of products already sold or intended for sale if the products have proved to be hazardous. 5. Administer other product safety legislation.

The Fair Packaging and Labeling Act requires product labels to identify:

1. The product 2. The net quantity 3. The serving size (if # of servings are stated on the label) 4. The manufacturer 5. The Packager or distributor

What sales transactions are considered under "cooling-off" laws?

1. Tradeshows 2. Home Equity loans 3. Internet Purchases 4. Door-to-door sales

What are the remedies under the Texas Deceptive Trade Practices Act (DTPA)?

1. Treble damages 2. Attorney's fees 3. Cost of courts

If the FTC succeeds in proving that an advertisement is unfair or deceptive, it can _____________.

1. issue a cease-and-desist order; or 2. impose a sanction known as counteradvertising. 3. institute a multiple product order 4. seek a restitution

The Nutrition Labeling and Education Act requires food labels to provide __________ and regulates the use of ______________:

1. standard nutrition facts; AND 2. words like "fresh," "low fat," and "trans free" *** can say trans free if the product has < 0.5 grams of trans fat total

What are the credit card rules in the Truth-in-Lending Act?

1. unsolicited credit card- If the card is stolen, the company that issued the card CANNOT charge the consumer for ant unauthorized charges 2. solicited credit cards- If the card is stolen, the company that issued the card can only charge the consumer $50 per card for any unauthorized charges after being notified the card is stolen. 3. Company must disclose the balance computation method they used to determine the outstanding balance.

When it comes to sales, the ___________ has regulatory authority.

FTC

False advertisement under the Lanham Act

Gives rival companies the chance to sue each other over adverting claims.

What are the disclosure requirements in the Truth-in-Lending Act?

If there are more than 4 installment payments, there are disclosure requirements.

Who does the Truth-in-Lending apply to?

It applies to anyone who in the ordinary course of business: 1. lends funds; or 2. sells products on credit; or 3. arranges for extension of credit

What is the purpose of the Fair Dept Collection Practices Act (FDCPA)?

It attempts to stop abuses by collection agencies. Only applies to collection agencies, NOT creditors collection debt.

What is the Texas Deceptive Trade Practices Act (DTPA)?

It is a Texas consumer law that has a long list (35) of deceptive and unfair practices for which a merchant/seller of goods can be liable.

What is the Postal Reorganization Act?

It makes it unlawful for merchandise to be shipped unsolicited to a consumer and so the consumer is free to do whatever they choose with the unsolicited merchandise, including: 1. Keeping it 2. Selling it 3. Burning it 4. Whatever they want to do with it

What is the Telemarketing and Consumer Fraud and Abuse Prevention Act and what does it entail?

It tells telemarketers what to say when they are giving a sales pitch: 1. Before making a sales pitch, telemarketers must inform the recipient that the call is a sales call and to identify the seller and the product. 2. Telemarketers must inform recipients of the total cost of the goods, any restrictions in obtaining or using the goods, and whether a sale will be considered final and nonrefundable. 3. Telemarketer must remove a consumer's name from its list of potential contacts if the consumer requests.

What are cooling-off laws?

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

What is the Telephone Consumer Protection Act (TCPA) of 1991?

Prohibits: 1. telephone solicitation using automatic dialing or a prerecorded voice. 2. ads via fax without first obtaining the recipients consent. Also, the TCPA allows for private lawsuits: 1. Consumer can recover actual monetary loss; or 2. $500 for each violation, whichever is greater. 3. If willful or knowing violation of the Act, court can triple the damages.

What is the Energy Policy and Conservation Act (EPCA)?

Requires automakers to attach an information label to every new car, including the fuel economy estimate for the vehicle.

What is the Truth-in-Lending Act?

Requires sellers and lenders to disclose credit terms and loan terms so that we can shop around for the best financing options.

What is a multiple product order?

Similar to a cease-and-desist order: When a company is found guilty of deceptive advertising, it requires a firm to stop false advertising for all of its products, not just the product involved in the original action.

What is a cease-and-desist order?

Similar to an injunction, its an administrative order that prohibits a company from advertising or conduction activities that an agency has deemed illegal.

What is the FTC Mail or Telephone Order Merchandise Rule?

States that: 1. merchants are required to ship orders within the time promised in their advertisements; and 2. merchants must notify consumers when orders cannot be shipped on time.

What agency governs credit protection?

The Consumer Financial Protection Bureau (CFPB) They oversee the credit practices of banks, mortgage lenders, and credit-card companies.

What agency did the Consumer Product Safety Act (CPSA) create?

The Consumer Product Safety Commission (CPSC)

What agency enforces the Energy Policy and Conservation Act (EPCA)?

The Environmental Protection Agency (EPA)

What agency enforces the Telephone Consumer Protection Act (TCPA) of 1991

The Federal Communications Commission (FCC)

The Federal Trade Commission Act created what agency?

The Federal Trade Commission (FTC)

What agency controlls deceptive advertising?

The Federal Trade Commission (FTC)

What agency enforces the Telemarketing and Consumer Fraud and Abuse Prevention Act?

The Federal Trade Commission (FTC).

What agency enforces the Federal Food, Drug, and Cosmetic Act (FFDCA)?

The Food and Drug Administration (FDA)

What is half-truth advertising?

The advertisement presents information that is true but incomplete and may therefore lead consumers to a false conclusion. Ex: The maker of Campbell's soups advertised that "most" Campbell's soups are low in fat and cholesterol and thus helpful in fighting heart disease. What the ad did not say was that many Campbell's soups are high in sodium and that high-sodium diets may increase the risk of heart disease. Hence, the FTC ruled that Campbell's claims were deceptive. Ex: An endorsement by a celebrity if the celebrity does not actually use the product.

What is deceptive advertising?

This occurs when a reasonable consumer would be misled by the advertising claim. 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.

What is the role of the Federal Trade Commission?

To carry out the broadly stated goal of preventing unfair and deceptive trade practices, including deceptive advertising.

What is counteradvertising?

When a company is found guilty of deceptive advertising: New advertising that is undertaken to correct earlier false claims that were made about a product.

What is a restitution?

When a company's deceptive ad leads to wrongful payments by consumers, restitution pays back injured consumers.

What is bait-and-switch advertising?

When a retailer advertises merchandise at a low price to get customers into their store, but when the customers arrive, the merchandise is not in stock. At that point, salesman encourage the customers to purchase more expensive items instead.

When a company receives a formal complaint from the FTC, it may ___________________.

agree to settle the complaint without further proceedings with a negotiated settlement.

If the company who received the formal complaint from the FTC refuses to settle and agreement, the FTC ____________________.

can conduct a hearing in which the company can present its defense.

If the FTC concludes that a given a advertisement is unfair or deceptive, the FTC ______________.

drafts a formal complaint, which is sent to the alleged offender.