CHAPTER 38 CONSUMER PROTECTION DAVIDSON, KNOWLES & FORSYTHE Business Law: Cases and Principles in...

CHAPTER 38CHAPTER 38CONSUMER PROTECTIONCONSUMER PROTECTION

CHAPTER 38CHAPTER 38CONSUMER PROTECTIONCONSUMER PROTECTION

DAVIDSON, KNOWLES & FORSYTHE DAVIDSON, KNOWLES & FORSYTHE Business Law: Cases and Principles Business Law: Cases and Principles

in the Legal Environmentin the Legal Environment (8 (8thth Ed.) Ed.)

2© 2004 West Legal Studies in Business© 2004 West Legal Studies in BusinessA Division of Thomson LearningA Division of Thomson Learning

BUSINESS LAW: BUSINESS LAW: Cases & PrinciplesCases & PrinciplesDavidson Davidson • Knowles • Forsythe 8• Knowles • Forsythe 8 thth Ed. Ed.

INTRODUCTIONINTRODUCTIONINTRODUCTIONINTRODUCTIONState laws regulated consumer credit State laws regulated consumer credit

activities.activities.But they lacked uniformity.But they lacked uniformity.Led to the enactment of numerous federal Led to the enactment of numerous federal

laws. laws. Adopted to provide uniformity and correct Adopted to provide uniformity and correct

abuses in commercial practices.abuses in commercial practices.Product safety also remains significant issue Product safety also remains significant issue

to vast majority of the American public.to vast majority of the American public.



NEED FOR REGULATIONNEED FOR REGULATIONNEED FOR REGULATIONNEED FOR REGULATION

Large volume of credit transactions in the Large volume of credit transactions in the United States.United States.

Creates giant industry involving sale of Creates giant industry involving sale of credit reports. credit reports.

Which has led to government regulation.Which has led to government regulation.



THE CONSUMER CREDIT THE CONSUMER CREDIT PROTECTION ACTPROTECTION ACT


Title I of the Consumer Credit Protection Title I of the Consumer Credit Protection Act of 1968, also known as the Truth in Act of 1968, also known as the Truth in Lending Act (TILA).Lending Act (TILA).

Landmark consumer protection law.Landmark consumer protection law.TILA primarily a disclosure statute, forcing TILA primarily a disclosure statute, forcing

creditors inform consumers of actual costs creditors inform consumers of actual costs of credit.of credit.

Statute carries civil, criminal, and statutory Statute carries civil, criminal, and statutory liabilities for failure to comply.liabilities for failure to comply.



TILA also regulates transactions in which TILA also regulates transactions in which consumer uses home as collateral. consumer uses home as collateral.

TILA allows three-day period for consumers to TILA allows three-day period for consumers to cancel loans.cancel loans.

Lobbying led to passage of Truth in Lending Lobbying led to passage of Truth in Lending Simplification and Reform Act. Simplification and Reform Act.

Act designed to simplify disclosures mandated by Act designed to simplify disclosures mandated by the TILA.the TILA.

TILA amended to provide relief from liability for TILA amended to provide relief from liability for certain creditor finance charges.certain creditor finance charges.





Regulation Z summarizes scope of TILA .Regulation Z summarizes scope of TILA .– Covers persons who regularly offer/extend credit Covers persons who regularly offer/extend credit

to consumers for personal, family, or household to consumers for personal, family, or household use and transactions have a finance charge or are use and transactions have a finance charge or are payable in four or more installments.payable in four or more installments.

– Requires detailed disclosures in initial statement Requires detailed disclosures in initial statement and periodic statements containing specified and periodic statements containing specified disclosures.disclosures.

– Tells consumer how to satisfy notification Tells consumer how to satisfy notification procedures.procedures.





Regulation Z summarizes scope of TILA.Regulation Z summarizes scope of TILA.– Covers “open-ended” and “close-ended” credit Covers “open-ended” and “close-ended” credit

transactions. transactions. – Covers only leases of personal property.Covers only leases of personal property.– Prohibits the issuance of a credit card except to Prohibits the issuance of a credit card except to

an oral, written request, or application.an oral, written request, or application.





Remedies to individuals for creditors Remedies to individuals for creditors violation of TILA:violation of TILA:– Actual and statutory damages of an amount Actual and statutory damages of an amount

equal to the lesser of $500,000 or 1% of equal to the lesser of $500,000 or 1% of creditors net worth.creditors net worth.

– Awards of attorney’s fees.Awards of attorney’s fees.– Fines of not more than $5,000 and/or one year’s Fines of not more than $5,000 and/or one year’s

imprisonment.imprisonment.





THE FAIR CREDIT REPORTING THE FAIR CREDIT REPORTING ACTACT


Regulates practices by companies that Regulates practices by companies that regularlyregularly engage in credit reporting.engage in credit reporting.

Requires consumer-reporting agencies Requires consumer-reporting agencies maintain reasonable procedures to for maintain reasonable procedures to for meeting the needs of consumer credit.meeting the needs of consumer credit.

Agencies must report information in a Agencies must report information in a manner that is fair and equitable to the manner that is fair and equitable to the consumer and ensures confidentiality.consumer and ensures confidentiality.





Act requires information be provided only Act requires information be provided only those eligible to receive it.those eligible to receive it.

Consumers have little recourse against Consumers have little recourse against agencies reporting irrelevant information agencies reporting irrelevant information that invades their privacy. that invades their privacy.

Consumers have no right under FCRA to Consumers have no right under FCRA to see their files but do have right to be see their files but do have right to be notified if adverse actions have been taken notified if adverse actions have been taken on a credit report.on a credit report.





Consumers must be informed of the identity Consumers must be informed of the identity and address of the reporting agency.and address of the reporting agency.

Which compiled a report that led to adverse Which compiled a report that led to adverse action.action.

Consumer has limited right to correct Consumer has limited right to correct erroneous information contained in a report.erroneous information contained in a report.

The FCRA sets out civil remedies for The FCRA sets out civil remedies for violations of the act.violations of the act.




Willful failure to comply with the act, suits Willful failure to comply with the act, suits for compensatory/punitive damages are for compensatory/punitive damages are possible.possible.

Violations stemming from negligent Violations stemming from negligent noncompliance, injured consumer can only noncompliance, injured consumer can only recover compensatory damages.recover compensatory damages.

The FCRA prohibits court actions brought The FCRA prohibits court actions brought for defamation, invasion of privacy, or for defamation, invasion of privacy, or negligence.negligence.



THE EQUAL CREDIT THE EQUAL CREDIT OPPORTUNITY ACTOPPORTUNITY ACTTHE EQUAL CREDIT THE EQUAL CREDIT OPPORTUNITY ACTOPPORTUNITY ACT

Prohibits discrimination whenever creditors Prohibits discrimination whenever creditors extend credit.extend credit.

Based on sex, marital status, race, religion, Based on sex, marital status, race, religion, national origin, age, receipt of public national origin, age, receipt of public assistance, and exercise of consumer assistance, and exercise of consumer protection rights.protection rights.

Federal Reserve Board (FRB) Regulation B Federal Reserve Board (FRB) Regulation B sets out rules and implementing regulations sets out rules and implementing regulations for ECOA.for ECOA.



THE EQUAL CREDIT THE EQUAL CREDIT OPPORTUNITY ACTOPPORTUNITY ACTTHE EQUAL CREDIT THE EQUAL CREDIT OPPORTUNITY ACTOPPORTUNITY ACT

ECOA requires creditors follow rules in ECOA requires creditors follow rules in making evaluations of credit worthiness.making evaluations of credit worthiness.

ECOA requires creditors to give notice to ECOA requires creditors to give notice to applicants an any action taken concerning applicants an any action taken concerning request for credit.request for credit.

Actions include:Actions include:– Approval of the application.Approval of the application.– Extension of credit under different terms.Extension of credit under different terms.– Adverse action.Adverse action.



THE EQUAL CREDIT THE EQUAL CREDIT OPPORTUNITY ACTOPPORTUNITY ACT

Remedies under ECOA include:Remedies under ECOA include:– Actual and/or punitive damages.Actual and/or punitive damages.– Maximum of $10,000 for individual actions.Maximum of $10,000 for individual actions.– Maximum of $500,000 for class actions.Maximum of $500,000 for class actions.– Equitable relief, attorney’s fees, and cost may Equitable relief, attorney’s fees, and cost may

also be granted.also be granted.



Regulates the activities of those who collect Regulates the activities of those who collect bills owed to others.bills owed to others.

Intended to eliminate abusive, deceptive, Intended to eliminate abusive, deceptive, and unfair debt-collection practices to and unfair debt-collection practices to protect consumer.protect consumer.

Limits manner in which debt collector can Limits manner in which debt collector can communicate with debtor. communicate with debtor.

THE FAIR DEBT COLLECTION THE FAIR DEBT COLLECTION PRACTICES ACTPRACTICES ACT




Debt collector in communication must Debt collector in communication must disclose only that communication is from a disclose only that communication is from a debt collector.debt collector.

Statute permits for communication to stop if Statute permits for communication to stop if debtor notifies in writing to debt collector debtor notifies in writing to debt collector that debtor will not pay and wishes that debtor will not pay and wishes communication to stop.communication to stop.



FDCPA provides for civil and criminal FDCPA provides for civil and criminal penalties.penalties.

Civil remedies of actual plus statutory damages Civil remedies of actual plus statutory damages not to exceed $1000, that court can set are not to exceed $1000, that court can set are possible in individual suits.possible in individual suits.

Class actions $1000 per person awarded, but Class actions $1000 per person awarded, but damages awarded not to exceed lesser of damages awarded not to exceed lesser of $500,000.$500,000.

Criminal penalty of $1000 and/or sentence of Criminal penalty of $1000 and/or sentence of one year’s imprisonment. one year’s imprisonment.




THE UNIFORM CONSUMER THE UNIFORM CONSUMER CREDIT CODECREDIT CODE

THE UNIFORM CONSUMER THE UNIFORM CONSUMER CREDIT CODECREDIT CODE

Designed to replace state laws governing Designed to replace state laws governing consumer credit. consumer credit.

Few states have adopted the Uniform Few states have adopted the Uniform Consumer Credit Code (UCCC).Consumer Credit Code (UCCC).

Most states rely on their own statutes.Most states rely on their own statutes.Represents an additional statutory attempt Represents an additional statutory attempt

to benefit consumers.to benefit consumers.



THE CONSUMER PRODUCT THE CONSUMER PRODUCT SAFETY ACTSAFETY ACT

THE CONSUMER PRODUCT THE CONSUMER PRODUCT SAFETY ACTSAFETY ACT

Established Consumer Product Safety Established Consumer Product Safety Commission (CPSC).Commission (CPSC).

An independent federal regulatory agency.An independent federal regulatory agency.Has authority over a great number of Has authority over a great number of

consumer products.consumer products.To help protect the public from injuries To help protect the public from injuries

from consumer products, the commission from consumer products, the commission can take several actions.can take several actions.

CHAPTER 38 CONSUMER PROTECTION DAVIDSON, KNOWLES & FORSYTHE Business Law: Cases and Principles in...

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