Chapter 12 - Part 2

>> In the second part of chapter 12, we're going to look at consumer law. The FTC is primarily responsible for policing deceptive advertising. Deceptive advertising is defined as a reasonable consumer would be misled by an advertising claim. Distinguish that from puffery, which is a vague generality or an obvious exaggeration. That is not considered deceptive. It is permissible. The FTC does not regulate puffery. It regulates deceptive advertising. Half-truths, because some of the information is true but incomplete, and that ends up being deceptive. Or bait and switch, where you advertise an attractive low price to lure a customer in with the scheme or plan to get them to buy a more expensive item. And you can have this deceptive advertising online, too. The FTC is looking for clear and conspicuous disclosures or information, and it gives the complete terms of the agreement online. If it's lengthy, a hyperlink to it, but it just needs to be something that isn't hidden from the consumer. The FTC can issue a cease-and-desist order if they feel an advertisement or a particular product is deceptive. They can also impose counter-advertising, which is basically new advertising that lets people know that previous advertising was wrong, was deceptive, and to correct misinformation. There's also telemarketing sales rules, the require a telemarketer to identify the seller, describe the product being sold, and disclose all material facts related to the sale. Probably most of you are aware of the "Do Not Call" registry. It's a national registry run by the FTC, where you can put your number and ask for it not to be contacted. In the area of labeling and packaging-- packaging and labeling must be accurate, use words that are easily understood by the ordinary consumer. This might include things like fuel economy on automobiles, labeling on food, or menu labeling. In terms of regulating sales, the FTC at the federal level, and also state statutes require the consumers have a "cooling-off" period-- the most common period is three business days-- during which they could cancel a purchase or contract that they entered into without obligation. There's also protection for health and safety. This is probably an area of the FDA-- the Food and Drug Administration. There's also consumer product safety under the Consumer Product Safety Act. It regulates matters affecting consumer safety. The act established the Consumer Product Safety Commission. There's also an even more recent law, especially in the area of healthcare and healthcare reform. In 2010, the Congress passed the Patient Protection and Affordable Care Act. When we talk about credit protection, here are the major areas that we're talking about-- truth in lending, fair credit reporting, Fair Debt Collection Practices Act, and wage garnishment. When we talk about TILA, or Truth-in-Lending Act, it's basically a disclosure law that requires that all consumer lenders compute the cost of a loan of the same way and advertise it in the same way, including listing the annual percentage rate. There's also an equal opportunity for credit. In other words, credit has to be extended without regard to race, sex, color, national origin, age, or marital status. Those are the specific categories. Certainly a creditor could discriminate based on income, education, some other factors. In credit card rules, the credit card and now debit cards, a customer's liability is limited to $50 for the time period from the time it stolen until when it's reported, and then zero dollars afterwards. The Fair Credit Reporting Act limits the activities of credit reporting agencies. Basically, it was kind of a trade-off. The credit reporting agencies need to be more accurate, and they have limited liability. And basically, they need to give consumers access to credit information, report the information that they have filed, not be grossly negligent, and delete unverifiable information. There's also FACT, which is put together to combat identity theft. It created the national fraud alert system. Customers could get fraud alerts placed on their credit files. Credit card companies need to give consumers a free credit report each year. There's really three major credit reporting agencies. Technically, you can get up to three. It gives victims of identity theft some assistance. Fair Debt-Collection Practices Act requires a validation notice by any party who attempts to collect the debt for another. So this slide says-- the book says that it prohibits collection agencies. Well, that really means anybody who's collecting as an agent for someone else. So some third party who's collecting a debt on behalf of the creditor. So it doesn't apply to the creditors' direct attempts to collect their own debt. Some of the things that it prohibits is contacting a debtor at work in a way that harasses them. The debtor could ask that they not be contacted at work, not to have them contact their attorney, not contacting third parties about payment, using it to harass or intimidate or provide false or misleading information about the debtor. And then, kind of what the process is is once they're contacted and they refuse to pay, basically you shouldn't continue to harass the debtor, but instead take them to court.