Chapter 24: Consumer Protection

2 Introduction Today, federal and state laws govern consumer law. Tennessee has a whole set of consumer law. Federal Law

3 I. Deceptive Advertising Federal Trade Commission - unfair and deceptive ads Advertising is deceptive if a consumer would be misled by the advertising claims.

Puffing: Vague generalities and obvious exaggerations are permissible and not considered deceptive. EX: If you aren’t using a Tech computer, you aren’t using the best 4

5 Deceptive Advertising Case 23.1 Federal Trade Commission v. QT, Inc. (2008). Pg. 581 Pain Relief Bracelets with no research. Claimed only last a year and specific for wearer. Campbell soup – Claimed the soup help in heart disease but soup is high in sodium

Nutella Ad Nutella is the target of a consumer action filed on Tuesday alleging the company falsely markets its hazelnut spread as healthy for children even though the product is loaded with saturated fat and processed sugar 6

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Skecher Tennis Shoes Skechers claims in its advertisements that wearing Shape-Ups can result in noticeable improvements. These claims, Skechers says, are based on results shown in four clinical studies. Skechers USA Inc. will pay $40 million to settle charges by the Federal Trade Commission 8

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4 Loco trouble again The FTC had accused Phusion of implying in ads that its supersized 23.5-ounce can of Four Loko was equal to one or two regular 12-ounce beers. In fact, the agency says, the can — which contains up to 12 percent alcohol — is really more like four to five beers. 10

FTC – All Ads: 1. must be truthful 2. Must have evidence to back up claims 3. Ads cannot be unfair – likely to cause consumer injury 11

12 FTC Actions Against Deceptive Advertising Remedies can be: –Remove product – Impose counter advertising – correct ads. –Multiple product orders- cease all ads with all products made by company –Restitution – pay damages- reimburse consumer

II. Bait and Switch Advertising Bait and Switch: seller refuses to show advertised product, fails to have reasonable quantity, fails to promise to deliver. 13

14 III. Telemarketing TCPA The Telephone Consumer Protection Act (1991) or TCPA - prohibits automated solicitation using automatic telephone dialing system or a prerecorded voice FTC’s Telemarketing Sales Rule (donotcall.gov)

15 Door-to-Door Sales Door to Door sales –Change mind Midnight the 3 rd business after to cancel Tennessee – 3 days.

Tennessee door to door sales Cancellation -- Notice to buyer of rights. (a) In a home solicitation sale, the seller must present to the buyer a receipt,,,,, which designates as the date of the transaction the date on which the buyer actually makes payment in whole or in part or signs. 16

Door to Door Sales -Form Must be on Receipt: "BUYER'S RIGHT TO CANCEL"; and “If this agreement was solicited at your residence and you do not want the goods or services, you may cancel this agreement by mailing a notice to the seller. The notice must say that you do not want the goods or services and must be mailed before twelve o’clock midnight (12:00) of the third business day after you sign this agreement. 17

The Postal Reorganization Act of 1970 provides that unsolicited merchandise 18

VI. Truth in Lending Act Who is a LENDER: Lender – ordinary course of business lend funds – in business of loaning money Must disclose –Finance Charges – interest rate How about Joe’s Car Lot? 19

Truth in Lending – Credit Card Liability to $50 per card for unauthorized charges made before the creditor is notified that the card has been lost, etc. 20

However if unsolicited credit card sent in mail and is stolen – THEN owe -0- Nothing 21

The Credit Card Accountability Responsibility and Disclosure Act of 2009 or Credit CARD Act of 2009 Sweeping changes to protect credit card users Under 21 years old: Co signer - Need a good reason to participate on college campuses at university-themed events. Under 21 year olds: Outlaws banks giving gifts or any promotional items (such as coupons for free pizza) to entice students to get a credit card 22

New Credit Card Rules: 45 day’s notice of any interest rate increases. Requires the due date to fall on the same day each month. 23

Credit Card Act of 2009 Requires that creditors print on their statements if the debtor makes the minimum payment only (with no further increases in debt) how long it would take to retire the debt and how much the debtor would pay in interest combined. Requires creditors to print on their statements the payment it would take the debtor to retire the debt in 3 years, how much the debtor would pay in interest combined and the difference than if the debtor was to pay only the minimum payment. 24

25 Fair Credit Reporting Act Regulates consumer credit reporting agencies Only go back 7 yrs unless bk then 10 Whenever consumer is denied credit, consumer must be notified and is entitled to FREE credit report.

26 Fair and Accurate Credit Transactions Act ONCE A YEAR -

27 Fair Debt Collection Practices Act Collection Agencies: –Creditors cannot be deceptive and can’t: –Contact debtors at work if debtor objects. –Contact debtors at odd hours and not before 8am or after 9pm –Harass or intimidate debtor. –Contact the debtor after debtor informs the creditor the debtor is refusing to pay the debt. –Contacting family members

28 Garnishment of Wages State law governs garnishment Wages cannot be garnished beyond 25% of the debtor’s after-tax earnings

29 Consumer Product Safety Act. Product Safety Standards and Recalls Click here: Recalls | CPSC.gov –Juicer suddenly exploding. Once company has notice, the company MUST report the problem to CPSC within 24 hours!!

TENNESSEE CONSUMER PROTECTION ACT Unfair or deceptive acts prohibited. (a) Unfair or deceptive acts or practices affecting the conduct of any trade or commerce constitute unlawful acts or practices and are Class B misdemeanors. 30

TN Unfair Deceptive Practices ( 28)(A)(i) Failing of a motor vehicle repair facility to return to a customer any parts which were removed from the motor vehicle (31) Offering lottery winnings in exchange for making a purchase; (32) The act of misrepresenting the geographic location of a florist by listing a fictitious business name or an assumed business name in a local telephone directory 31

Tn Law: Limitations of actions within one (1) year from a person's discovery of the unlawful act or practice but no later than 4 years from transaction (called statute of repose) 32

TN – Membership Club Can cancel within third business day following the date on which membership was attained.. (b) Notice of cancellation must be in writing and delivered personally or by mail. (c) The entitled refund shall be delivered to the member within fourteen (14) days after notice of cancellation is given. 33