THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch The Legal Environment of Business A Critical Thinking Approach 5 th Edition Nancy K. Kubasek Bartley A. Brennan M. Neil Browne

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch THE LEGAL ENVIRONMENT OF BUSINESS CHAPTER 24 Laws of Debtor - Creditor Relations and Consumer Protection

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch Debtor-Creditor Relations Creditors’ rights to collect judgment Creditors’ rights to collect judgment  Liens: mechanics; artisans  Attachment  Writ of execution  Garnishment  Foreclosure  Suretyship and guarantee contracts

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch Debtor-Creditor Relations Homestead Exemption Real Property  Established under state law  Varies in amount Personal Property  Furniture  Tools  Vehicles Debtor’s rights

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch Federal Bankruptcy Code and the Incorporation of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (Act of 2005)  Chapter 7: Liquidation  Chapter 13: Wage earner’s plan  Chapter 11: Business Reorganization GOALS - To allow debtors a “fresh start” via ‘discharge’ in bankruptcy; to provide orderly process of payment to creditors

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch Chapter 7 - Liquidation  Debtor’s assets placed into hands of Trustee  Trustee sells nonexempt assets, liquidates and pays creditors.  Remaining debts are discharged Process: Note: The Act of 2005 restricts debtors’ ability to obtain a Chapter 7.

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch Chapter 7 - Liquidation  Tests: in the Act of 2005  Dollar Means Test  Medium Income Test  Goal of 2005 Act:  Deny Chapter 7 discharge to debtors able to pay some of their unsecured debts  Steer Chapter 7 bankruptcies to chapter 13  Avoid abuse of Chapter 7

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch Nondischargeable Debts  Paternity  Alimony  Maintenance  Child Support  Student loans  Debt for luxury goods

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch Exemptions Exemptions Categories - (amounts subject to change)  Residence  Vehicle  Household Goods  Jewelry  Alimony/child support  Life Insurance  Health Aids  Social Security Benefits  Miscellaneous

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch Chapter 13 – Wage Earner’s Plan  Debtor’s finances placed under court control  Only voluntary petitions can be filed  Composition plan: Creditors receive a percentage in exchange for releasing debtor from debt  Bankruptcy Court can confirm a plan if  it is in good faith,  passed feasibility test, and  best interest of the creditors.

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch Chapter 11 - Reorganization  Business continues to operate  Under court control  Payment schedules established with creditors  Voluntary or involuntary  Plan of Reorganization  Small business bankruptcy

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch Consumer Law Traditional View  Freedom of contract  Caveat emptor  Laissez-faire Modern View  Unconscionable  Fundamental breach  Consumer protection

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch Consumer-Business Relations Federal Trade Commission  Prohibits “unfair methods of competition”  Used to protect consumers  Methods: Fines, injunction, corrective advertising, rescission, refunds, damages

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch Deceptive and Unfair Advertising Wheeler-Lea Act of 1938 Scope: Price; quality and quantity; testimonials Examples: False price comparisons Examples: False price comparisonsStandard:  Misrepresentation likely to mislead  Consumers are acting reasonably  Misrepresentation is material Additional concerns: Unfair advertising, deceptive advertising, & deceptive labeling and packaging

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch Consumer Legislation Franchising: Section 5 of FTC Act Warranties: Magnuson-Moss Warranty Act  Express written warranties must meet guidelines  Full or limited warranties must be clear  Private right of action established

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch Telemarketing FTC Regulations in Force 1995 Prohibited Practices:  Calling before 8 am or after 8 pm  False claims of affiliation  False claims regarding credit  Failing to disclose nature of call  Claiming ability to recover goods or money lost

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994  Remedies: fines up to $10,000  Exemptions: insurers; franchisers; online services; those regulated by SEC; not-for-profit organizations  Enforcement via 50 state attorneys general or FTC

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch Telephone Company Protection Act of 1991  “Do Not Call” Registry  Junk faxes  Spam  State laws also enacted

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch Consumer Credit and Debt Collection Laws  Truth in Lending Act of 1969  Electronic Fund Transfer Act  Fair Credit Reporting Act of 1970  Fair Credit Billing Act of 1974  Fair and accurate Credit Transaction Act of 2003  Equal Credit Opportunity Act  Fair Debt Collection Practices Act of 1977

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch State Consumer Laws  Consumer protection division of 50 state attorney generals  Uniform Consumer Credit Code  Baby FTC laws  Arbitration of consumer disputes

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch Global Dimensions  Comparative Advertising  Truthfulness in Content  Tobacco and Alcohol  Labeling  Warnings  Warranties  Credit Terms Disclosure  Different countries have widely varied acceptance of advertising claims  EU has similar approach to that of FTC Section 5  Areas of concern – with different approaches

THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2009 Pearson Education, Inc. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall