Chapter 38 Consumer Law

2  When will advertising be deemed deceptive?  How does the federal Food, Drug and Cosmetic Act protect consumers?  When will advertising be deemed deceptive?  How does the federal Food, Drug and Cosmetic Act protect consumers? Learning Objectives

3 Consumer Law  Areas of Consumer Law Regulated by Statutes: Deceptive Advertising. Labeling and Packaging. Sales. Credit Protections. Consumer Health and Safety. State Consumer Protection.  Areas of Consumer Law Regulated by Statutes: Deceptive Advertising. Labeling and Packaging. Sales. Credit Protections. Consumer Health and Safety. State Consumer Protection.

4  Puffing. Vague generalities and obvious exaggerations are permissible and not considered deceptive.  Bait and Switch. The advertising of a product at an attractively low price to lure customers in to buy more expensive items.  Online Deceptive Advertising Same rules apply To satisfy the “clear and conspicuous” requirement, disclosures must be close (only hyperlink if lengthy).  Puffing. Vague generalities and obvious exaggerations are permissible and not considered deceptive.  Bait and Switch. The advertising of a product at an attractively low price to lure customers in to buy more expensive items.  Online Deceptive Advertising Same rules apply To satisfy the “clear and conspicuous” requirement, disclosures must be close (only hyperlink if lengthy). Deceptive Advertising

5  Telemarketing and Electronic Advertising. The Telephone Consumer Protection Act (TCPA) prohibits automated solicitation using automatic telephone dialing system or a prerecorded voice. Consumers have a private civil cause of action and can recover $500 for each violation of actual damages. Court can treble damages if willful violation. Telemarketer must remove a consumer’s name from its list of potential contacts if requested.  Telemarketing and Electronic Advertising. The Telephone Consumer Protection Act (TCPA) prohibits automated solicitation using automatic telephone dialing system or a prerecorded voice. Consumers have a private civil cause of action and can recover $500 for each violation of actual damages. Court can treble damages if willful violation. Telemarketer must remove a consumer’s name from its list of potential contacts if requested.

6 FTC Actions Against Deceptive Advertising  The FTC, charged with enforcing federal laws against deceptive advertising, can, in appropriate circumstances: Issue cease and desist orders. With respect to a particular product or advertisement. With regard to multiple product orders. Impose counter-advertising.  The FTC, charged with enforcing federal laws against deceptive advertising, can, in appropriate circumstances: Issue cease and desist orders. With respect to a particular product or advertisement. With regard to multiple product orders. Impose counter-advertising.

7 Labeling and Packaging  Labeling must be accurate, and must use words that are easily understood by the ordinary consumer.  Product labeling and packaging are regulated by: Wool Products Labeling Act of Fur Products Labeling Act of Flammable Fabrics Act of Fair Packaging and Labeling Act of Smokeless Tobacco Health Education Act of Nutrition Labeling and Education Act of of  Labeling must be accurate, and must use words that are easily understood by the ordinary consumer.  Product labeling and packaging are regulated by: Wool Products Labeling Act of Fur Products Labeling Act of Flammable Fabrics Act of Fair Packaging and Labeling Act of Smokeless Tobacco Health Education Act of Nutrition Labeling and Education Act of of 1990.

8 Sales  Forms of Sales : Door-to-Door Sales. Mail Order Sales. Telephone Sales. Unsolicited Receipt of Merchandise. On-Line Sales.  Forms of Sales : Door-to-Door Sales. Mail Order Sales. Telephone Sales. Unsolicited Receipt of Merchandise. On-Line Sales.

9 Health & Safety Protection  Food and Drugs Legislation: Federal Food, Drug & Cosmetic Act (1938). Enforcement by Food and Drug Administration (FDA) amendment allows FDA to regulate medical devices.  Food and Drugs Legislation: Federal Food, Drug & Cosmetic Act (1938). Enforcement by Food and Drug Administration (FDA) amendment allows FDA to regulate medical devices.

10 Door-to-Door Sales  Most states requires that, for door-to- door sales, consumers have a post-sale “cooling-off” period during which they can cancel their purchase without obligation.  Consumers are given the most favorable benefits of the FTC rule and their own state statutes.  Most states requires that, for door-to- door sales, consumers have a post-sale “cooling-off” period during which they can cancel their purchase without obligation.  Consumers are given the most favorable benefits of the FTC rule and their own state statutes.

11 Telephone and Mail-Order Sales  Sellers can be subject to federal mail and wire fraud statutes.  FTC Rules require: shipment 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.  The Postal Reorganization Act of 1970 provides that unsolicited merchandise sent by U.S. mail may be retained, used, discarded, or disposed of in any manner deemed appropriate, without the recipient’s incurring any obligation to the sender.  Sellers can be subject to federal mail and wire fraud statutes.  FTC Rules require: shipment 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.  The Postal Reorganization Act of 1970 provides that unsolicited merchandise sent by U.S. mail may be retained, used, discarded, or disposed of in any manner deemed appropriate, without the recipient’s incurring any obligation to the sender.

12 Health & Safety Protection  Consumer Product Safety Flammable Fabrics Act (1958). Consumer Product Safety Act (1973) enforced by Consumer Product Safety Commission. Child Protection and Toy Safety Act (1969) extends to toys, fireworks, cribs.  Consumer Product Safety Flammable Fabrics Act (1958). Consumer Product Safety Act (1973) enforced by Consumer Product Safety Commission. Child Protection and Toy Safety Act (1969) extends to toys, fireworks, cribs.

13 Credit Protections  Consumer Credit is protected by: Truth in Lending Act. Fair Credit Reporting Act. Fair Debt Collection Practices Act. Wage Garnishment.  Consumer Credit is protected by: Truth in Lending Act. Fair Credit Reporting Act. Fair Debt Collection Practices Act. Wage Garnishment.

14 Truth in Lending Act  TILA is basically a disclosure law. Requires all consumer lenders to compute the cost of a loan the same way and to advertise it as an Annual Percentage Rate (APR)  Equal Credit Opportunity: requires that credit be extended without regard to race, sex, color, national origin, age, or marital status  Credit Card Rules: limits consumer liability for credit card debt in cases of stolen cards  Consumer Leasing Act: requires that leasors of consumer items valued at less than $25,000 make certain disclosures  TILA is basically a disclosure law. Requires all consumer lenders to compute the cost of a loan the same way and to advertise it as an Annual Percentage Rate (APR)  Equal Credit Opportunity: requires that credit be extended without regard to race, sex, color, national origin, age, or marital status  Credit Card Rules: limits consumer liability for credit card debt in cases of stolen cards  Consumer Leasing Act: requires that leasors of consumer items valued at less than $25,000 make certain disclosures

15 Fair Credit Reporting Act  Limits the activities of credit reporting agencies.  Consumers have the right to access information contained about them in a credit reporting agency’s files and to require credit reporting agencies to delete unverifiable information in a consumer’s credit record.  Limits the activities of credit reporting agencies.  Consumers have the right to access information contained about them in a credit reporting agency’s files and to require credit reporting agencies to delete unverifiable information in a consumer’s credit record.

16 Fair Debt Collection Practices Act  Prohibits Collection Agencies from the following: Type, times, and places that debt collectors can contact debtors. Contacting third parties about payments. Using harassment or intimidation or employing false misleading information. Contact debtor after notice of payment refusal.  Requires that collectors provide validation notice to the debtor, at the time of first contact.  Prohibits Collection Agencies from the following: Type, times, and places that debt collectors can contact debtors. Contacting third parties about payments. Using harassment or intimidation or employing false misleading information. Contact debtor after notice of payment refusal.  Requires that collectors provide validation notice to the debtor, at the time of first contact.

17 State Consumer Protection Laws  Virtually all states have state consumer protection laws.  Texas has the Deceptive Trade Practices Act which forbids seller of good/service to sell anything the buyer does not need or cannot afford.  Virtually all states have state consumer protection laws.  Texas has the Deceptive Trade Practices Act which forbids seller of good/service to sell anything the buyer does not need or cannot afford.