Chapter 19 Consumer Protection

Drug companies bear the cost of developing new drugs. How much the average development cost of a new drug?

1 billion

Where is the scam of a postcard informing the recipient that they won valuable prizes results in the recipient having to pay money to get the prizes? What the FTC can do about it?

mailed postcards — the FTC settles with a informal consent agreement

What is the FTC three-prong test for deception? -- be able to look at examples and find the one that meets the three prongs. HINT: look for deception (lies)

1. there is a misrepresentation or omission of information in a communication to consumers

2. likely to mislead a reasonable consumer

3. is material: that is, it is likely to be misleading to the detriment of consumers

What does the FTC test for unfairness (it also has three elements)?

1. causes substantial harm to consumers

2. injury is harmful in its net effects

3. cannot reasonably avoid injury

Example of what is not deceptive advertising

calling a pastry a " Danish" when it was made in America is not deceptive

What law that allows a private person to sue a false advertiser?

Lanham Act

What kind of damages a company can get when its competitor makes false statements about the company in advertising?

If you win you get double damages

What the FTC must do to finalize a new regulation?

Proposed rules must be published in the Federal Register

FTC v. Consumer Defense, LLC

The court held that a restraining order could be issued to shutdown consumer defense immediately for actions in violation of the rule.

How do states deal with deceptive business practices?

either the state Attorney General or injured party can sue for deceptive advertising

KS Trade LLC v. International Gemological Inst. Inc.

The court held the case could proceed as KS provided evidence of misrepresentation of diamond value.

What are the five requirements put on creditors by the Consumer Credit Protection Act (CCPA)?

1. Creditors must disclose all relevant terms in credit transactions (truth in lending)

2. The procedures for correcting inaccurate & disputed bills & charges must be provided (fair credit billing)

3. Credit-reporting agencies must provide accurate information in consumer reports (fair credit reporting)

4. Creditors may not use certain personal characteristics such as sex or race in determining a person's creditworthiness (equal credit opportunity.)

5. Abusive debt collection techniques are prohibited (fair debt collection practice).

What does Truth in Lending requires?

1. Finance Charge Disclosures

2. Credit Cost Disclosure

3. Enforcement & Penalties — The creditor must disclose all relevant terms in credit transactions

Who does Truth in Lending apply to?

“natural person” not a business organization

What right does a consumer have under the Fair Credit Reporting Act?

Credit bureaus must

1. respond to consumer complaints about inaccurate information w/in 30 days

2. tell consumer, on request, who has asked for copies of their credit history in the past year; provide a toll-free consumer service #

3. get a consumer's permission b/4 giving a report to an employer or b/4 releasing a report containing medical information

What must a credit reporting company do when a consumer notifies it of an error on their credit report?

the information must be delated or changed or a statement from the consumer about the problem must be put in the file

Which statute gives you the right to see your credit report for free once a year?

amendment to the FACT -- you get to see your credit report annually for free.

What is the name of the statute that prohibits discrimination in credit?

Equal Credit Opportunity Act/Unlawful Credit Discrimination -- Race, sex, color, religion, national origin, marital status, receipt of public benefits, age (40 & over) or the good-faith exercise of the applicant's rights under any part of the CCPA

What does the Fair Debt Collection Practices Act prohibit?

harassing, deceptive, & unfair debt collection practices;

1. threats of violence or arrest

2. obscene language

3. the publication of a list of delinquent consumers

4. harassing phone calls

Chuway v. National Action Financial Services Court -- debt collector

The appeals court held that the debt collector used inaccurate terms about the balance due and so violated the FDCPA.