1. Chapter 40 Consumer Law

2. Learning Objectives When will advertising be deemed deceptive?
What special rules apply to telephone solicitation?
What is Regulation Z, and to what type of transactions does it apply? 
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3. Learning Objectives
How does the Federal Food, Drug, and Cosmetic Act protect consumers?
What are the major federal statutes providing for consumer protection in credit transactions?
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4. Ex. 40-1 Selected Areas of Consumer Law
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5. Deceptive Advertising
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 FTC v. QT, Inc. (2008). The court characterized QT’s claims as “blather”. What do you think?
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6. Deceptive Advertising
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. 
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7. Deceptive Advertising
Online Deceptive 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. 
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8. Deceptive Advertising
Online Deceptive Advertising (continued).
3. Ads cannot be unfair, which the FTC defines as “likely to cause substantial consumer injury that ads must: be truthful, substantiated, and fair.
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9. Deceptive Advertising
FTC Actions.
The FTC is charged with enforcing federal laws against deceptive advertising, can:
Issue Complaint Orders.
Issue Cease and Desist Orders.
Counteradvertising.
Multiple Product Order.
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10. Telemarketing and Electronic Advertising
Telephone Consumer Protection Act. Prohibits telephone solicitations using automated dialing systems or a pre-recorded voice or unsolicited faxes.
Telemarketing and Consumer Fraud and Abuse Prevention Act Requires telemarketers to identify themselves and not misrepresent facts.
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11. Labeling and Packaging
Labeling must be accurate, and must use words that are easily understood by the ordinary consumer.
Federal Statutes. Product labeling and packaging are regulated by:
Wool Products Labeling Act of 
Fur Products Labeling Act of 
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12. Labeling and Packaging
Federal Statutes (cont’d).
Flammable Fabrics Act of 1953.
Fair Packaging and Labeling Act of 1966.
Smokeless Tobacco Health Education Act of 1986.
Nutrition Labeling and Education Act of 1990.
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13. Sales Door-to-Door Sales. Telephone and Mail Order Sales. 
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.
Telephone and Mail Order Sales. 
Online Sales. 
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14. Sales Telephone and Mail Order Sales.
FTC Rules require mail and telephone merchants to ship orders within the time promised in their catalogues and advertisements, to notify consumers when orders cannot be shipped on time, and to issue timely refunds when orders cannot be shipped. 
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15. Sales
Online Sales.
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.
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16. Protection of Health and Safety
Food and Drugs.
The Federal Food, Drug, and Cosmetic Act is statute protects consumers against adulterated and misbranded foods and drugs.
Also charges the FDA to ensure drugs are safe and effective before marketed to the public.
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17. Protection of Health and Safety
Consumer Product Safety.
Consumer Product Safety Act created the Consumer Product Safety Commission which has broad regulatory authority over the safety of consumer products.
CPSC’s Authority:
1. Setting safety standards for consumer products. 
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18. Protection of Health and Safety
Consumer Product Safety (cont’d).
CPSC’s Authority (cont’d).
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. 
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19. Protection of Health and Safety
Consumer Product Safety (cont’d).
CPSC’s Authority (cont’d).
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.
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20. Protection of Health and Safety
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.
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21. Credit Protection Truth-in-Lending Act.  Fair Credit Reporting Act. 
Fair Debt Collection Practices Act.
Wage Garnishment.
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22. Credit Protection Truth in Lending Act.
TILA is essentially a disclosure law. Only applies to people who, in the ordinary course of business, lend funds, sell on credit, or arrange an extension of credit.
Equal Credit Opportunity: requires credit be extended without regard to race, sex, color, national origin, age, or marital status. 
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23. Credit Protection Truth in Lending Act (cont’d).
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. 
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24. Credit Protection Truth in Lending Act (cont’d).
2010 Credit Card Protections.
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. 
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25. Credit Protection Truth in Lending Act (cont’d).
2010 Credit Card Protections.
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.
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26. Credit Protection Truth in Lending Act (cont’d).
2010 Credit Card Protections.
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.
7. A company may not compute finance charges based on the previous billing cycle (known as double-cycle billing).
Consumer Leases.
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27. Credit Protection Fair Credit Reporting Act.
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.
Remedies for Violations.
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28. Credit Protection
Fair and Accurate Credit Transactions Act: Purpose is to combat identity theft.
FACT allows consumers can place an alert on national fraud alert system.
FACT requires major credit companies provide free credit report.
FACT allows consumers victimized by identity theft to rebuild their credit.
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29. Credit Protection
Fair Debt Collection Practices Act: prohibits the following:
1. Contacting the debtor at the debtor’s place of employment, if the debtor’s employer objects.
2. Contacting the debtor during inconvenient or unusual times or at any time if the debtor is being represented by an attorney. 
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30. Credit Protection
Fair Debt Collection Practices Act: prohibits the following:
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.
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31. Credit Protection
Fair Debt Collection Practices Act: prohibits the following:
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.
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32. Credit Protection Fair Debt Collection Practices Act.
Enforcement of the Act (FTC).
Requires collection agency to include a validation notice to debtor.
Is a bona fide error a defense against violations? CASE Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, LPA (2010). What is the status of this defense after this case?
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