2. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2

3.  Occurs if a reasonable consumer would be misled by the advertising claim.  Puffery: Vague generalities and obvious exaggerations are permissible and not considered deceptive.  CASE 24.1 FTC v. QT, Inc. (2008). The court characterized QT’s claims as “blather”. Do you agree? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3

4.  Bait and Switch: advertising of a product at an attractively low price to lure customers in to buy more expensive items.  Online Deceptive Advertising: FTC monitors websites for deceptive claims involving everything from medical treatments, to exercise equipment.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 4

5.  Online Advertising (cont’d).  1. All ads—both online and offline—must be truthful and not misleading.  2. The claims made in an ad must be substantiated; that is, advertisers must have evidence to back up their claims.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 5

6.  Online Advertising (cont’d).  3. Ads cannot be unfair, which the FTC defines as “likely to cause substantial consumer injury that ads must: be truthful, substantiated, and fair. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 6

7.  The FTC is charged with enforcing federal laws against deceptive advertising, can:  Issue Complaint Orders.  Issue Cease and Desist Orders.  Counteradvertising.  Multiple Product Order. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 7

8.  Telephone Consumer Protection Act: Prohibits telephone solicitations using automated dialing systems or a pre-recorded voice or unsolicited faxes. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 8

9.  Telemarketing and Consumer Fraud and Abuse Prevention Act 1994: requires telemarketers to identify themselves and not misrepresent facts. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9

10.  Labeling must be accurate, and must use words that are easily understood by the ordinary consumer.  Federal Statutes: p roduct labeling and packaging are regulated by various laws, depending on the product.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 10

11.  Federal Statutes (cont’d).  CASE 24.2 Paduano v. American Motor Honda Co. (2009). Is a state action for false advertising better for the consumer? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 11

12.  Food Labeling. Fair Packaging and Labeling Act requires food product labels to 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 or distributor, plus additional requirements on descriptions. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 12

13.  Door-to-door sales.   Telephone and Mail Order Sales.   Online Sales.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 13

14.  The FTC and many states require that, for door-to-door sales, consumers have a post- sale “cooling-off” period during which they can cancel their purchase without obligation. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 14

15.  FTC rules require mail and telephone merchants to:  Ship orders within the time promised in their catalogues and advertisements,  Notify consumers when orders cannot be shipped on time, and  Issue timely refunds when orders cannot be shipped. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 15

16.  The Postal Reorganization Act of 1970 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. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 16

17.  FTC and other federal agencies have brought a number of enforcement actions against deceptive online sales.  Some states are now requiring explicit refund and return policies. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 17

18.  Truth-in-Lending Act.   Fair Credit Reporting Act.   Fair Debt Collection Practices Act.   Wage Garnishment.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 18

19.  TILA is essentially a disclosure law. Only applies to firms who lend funds, sell on credit, or arrange an extension of credit.  Disclosure Requirements.  Equal Credit Opportunity: requires credit be extended without regard to race, sex, color, national origin, age, or marital status.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 19

20.  Credit Card Rules. Limits consumer liability for credit card debt in cases of stolen cards to $50.  2010 Credit Card Protections.  1. A company may not retroactively increase the interest rates on existing card balances, unless the account is sixty days delinquent.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 20

21.  2010 Protections (cont’d).  2. A company must provide forty- five days’ advance notice to consumers before changing the credit card terms.  3. Monthly bills must be sent to cardholders twenty-one days before the due date.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21

22.  2010 Protections (cont’d).  4. 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.  5. A company may not charge over limit fees except in specified situations.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 22

23.  2010 Protections (cont’d).  6. 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.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 23

24.  2010 Protections (cont’d).  7. A company may not compute finance charges based on the previous billing cycle (known as double-cycle billing).  Consumer Leases. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 24

25.  Protects consumers against inaccurate credit reporting and requires lenders and creditors to correct errors.  Consumer Notification and Inaccurate Information. If denied credit, consumer has right to source of information. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 25

26.  Purpose is to combat identity theft. FACT:  Allows consumers to 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. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 26

27.  Prohibited Debt Collection Tactics:  1. Contact the debtor at the debtor’s place of employment if the debtor’s employer objects.  2. Contact the debtor during inconvenient or unusual times or at any time if the debtor is being represented by an attorney.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 27

28.  Prohibited Debt Collection Tactics:  3. Contact third parties other than the debtor’s parents, spouse, or financial adviser about payment of a debt without court order.  4. Harass or intimidate debtor or make false or misleading statements.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 28

29.  Prohibited Debt Collection Tactics:  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. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 29

30.  Notification and Bona Fide Errors.  Bona fide error is a defense against violations.  CASE 24.3 Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, LPA (2010). What is the status of this defense after this case? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 30

31.  Creditor may collect on a debt by directly attaching, or seizing, a portion of the debtor’s assets or paycheck.  Some states prohibit garnishment except for child- support and court-approved spousal maintenance. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 31

32.  Federal Food, Drug, and Cosmetic Act.  This statute protects consumers against adulterated and misbranded foods and drugs.  Also charges the FDA to ensuring drugs are safe and effective before marketed to the public. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 32

33.  CPSA: created the Consumer Product Safety Commission (CPSC) which has broad regulatory authority over the safety of consumer products, including:  1. Setting safety standards for consumer products.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 33

34.  The CPSC has the authority to:  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 and issue recalls.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 34

35.  The CPSC has the authority to:  4. Require manufacturers to report on any products already sold or intended for sale if the products have proved to be hazardous.  5. Administer other product-safety legislation, such as the Child Protection and Toy Safety Act. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 35

36.  Notification Requirements.  Manufacturers have a duty to notify the CPSC immediately if they receive information about a defective product which creates a substantial risk of serious injury or death. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 36