1. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Chapter 20: Consumer ProtectionChapter 20: Consumer Protection © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

2. Selected Areas of Consumer Law 2

3. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Occurs if a reasonable consumer would be misled by the advertising claim. Puffery: Vague generalities and obvious exaggerations are permissible and not considered deceptive.  Deceptive Advertising 3

4. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Deceptive Advertising  Bait and Switch. Advertising of a product at an attractively low price to lure customers in to buy more expensive items.  Online Deceptive Advertising. FTC monitors websites for deceptive claims involving everything from medical treatments, to exercise equipment.  4

5. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Deceptive Advertising  Online Advertising (cont’d). 1. All ads—both online and offline—must be truthful and not misleading. 2. The claims made in an ad must be substantiated; that is, advertisers must have evidence to back up their claims.  5

6. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Deceptive Advertising  Online Advertising (cont’d). 3. Ads cannot be unfair, which the FTC defines as “likely to cause substantial consumer injury that ads must: be truthful, substantiated, and fair. CASE 20.1 Hyptertouch, Inc. v ValueClick, Inc. (2011). CASE 20.1 Hyptertouch, Inc. v ValueClick, Inc. (2011). Why was the state SPAM law preempted by the federal CAN-SPAM Act? 6

7. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Deceptive Advertising  Federal Trade Commission Actions. The FTC is charged with enforcing federal laws against deceptive advertising, can: Issue Complaint Orders. Issue Cease and Desist Orders. – Counteradvertising. – Multiple Product Order. 7

8. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Telemarketing and Fax Advertising  Telephone Consumer Protection Act: Prohibits telephone solicitations using automated dialing systems or a pre- recorded voice or unsolicited faxes. 8

9. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Telemarketing and Fax Advertising  Telemarketing and Consumer Fraud and Abuse Prevention Act 1994: requires telemarketers to identify themselves and not misrepresent facts. 9

10. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Labeling must be accurate, and must use words that are easily understood by the ordinary consumer.  Federal Statutes: p roduct labeling and packaging are regulated by various laws, depending on the product.  Labeling and Packaging Laws 10

11. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Federal Statutes (cont’d). CASE 20.2 P ADUANO V. A MERICAN M OTOR H ONDA C O. (2009). CASE 20.2 P ADUANO V. A MERICAN M OTOR H ONDA C O. (2009). Is a state action for false advertising better for the consumer? Labeling and Packaging Laws 11

12. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Food Labeling. Fair Packaging and Labeling Act requires food product labels to identify: 1) the product; (2) the net quantity of the contents and, if the number of servings is stated, the size of a serving; (3) the manufacturer; and (4) the packager or distributor, plus additional requirements on descriptions. Labeling and Packaging Laws 12

13. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  New Menu Labeling Regulations. President Obama signed new labeling law in 2010, aimed at combating obesity. FDA is developing a national standard for menu and caloric information. Applies to any restaurant chain with over 20 restaurants. Labeling and Packaging Laws 13

14. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Door-to-Door sales.   Telephone and Mail Order Sales.   Online Sales.  Sales 14

15. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Door-To-Door Sales. The FTC and many states require that, for door-to-door sales, consumers have a post- sale “cooling-off” period during which they can cancel their purchase without obligation.Sales 15

16. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Telephone and Mail-Order Sales. FTC rules require mail and telephone merchants to: Ship orders within the time promised in their catalogues and advertisements, Notify consumers when orders cannot be shipped on time, and Issue timely refunds when orders cannot be shipped.Sales 16

17. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Telephone and Mail-Order Sales. 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.Sales 17

18. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Sales  Online Sales. FTC and other federal agencies have brought a number of enforcement actions against deceptive online sales. Some states are now requiring explicit refund and return policies. 18

19. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Food and Drugs. Federal Food, Drug, and Cosmetic Act. This statute protects consumers against adulterated and misbranded foods and drugs. Also charges the FDA to ensuring drugs are safe and effective before marketed to the public. Protection of Health and Safety 19

20. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Consumer Product Safety. The Consumer Product Safety Commission (CPSC) has broad regulatory authority over the safety of consumer products, including: 1.Setting safety standards for consumer products. 2.Ban the manufacture and sale of any product that the commission believes poses an “unreasonable risk” to consumers.  Protection of Health and Safety 20

21. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Consumer Product Safety. The Consumer Product Safety Commission (CPSC) has the authority to: 3.Remove from the market any products it believes to be imminently hazardous and issue recalls. 4.Require manufacturers to report on any products already sold or intended for sale if the products have proved to be hazardous. 5.Administer other product-safety legislation, such as the Child Protection and Toy Safety Act. Protection of Health and Safety 21

22. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Health Care Reforms. In 2010, President Obama signed the new Patient Protection and Affordable Care Act. Reforms help more children and young adults get health coverage. Businesses are now given tax credits to assist in providing healthcare. Protection of Health and Safety 22

23. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Truth-in-Lending Act.   Fair Credit Reporting Act.   Fair Debt Collection Practices Act.   Wage Garnishment.  Credit Protection 23

24. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Truth in Lending Act. TILA is essentially a disclosure law. Only applies to firms who lend funds, sell on credit, or arrange an extension of credit. Disclosure Requirements. Equal Credit Opportunity: requires credit be extended without regard to race, sex, color, national origin, age, or marital status.  Credit Protection 24

25. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Truth in Lending Act. Credit Card Rules. Limits consumer liability for credit card debt in cases of stolen cards to $50. 2010 Credit Card Protections. 1.A company may not retroactively increase the interest rates on existing card balances, unless the account is sixty days delinquent. Credit Protection 25

26. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Truth in Lending Act. 2010 Credit Card Protections. 2.A company must provide forty-five days’ advance notice to consumers before changing the credit card terms. 3.Monthly bills must be sent to cardholders twenty-one days before the due date.  Credit Protection 26

27. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Truth in Lending Act. 2010 Credit Card Protections. 4.The interest rate charged on a customer’s credit-card balance may not be increased except in specific situations, such as when a promotional rate ends. 5.A company may not charge over limit fees except in specified situations.  Credit Protection 27

28. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Truth in Lending Act. 2010 Credit Card Protections. 6.If a customer has balances at different interest rates, payments in excess of the minimum amount due must be applied first to the balance with the highest rate. 7.A company may not compute finance charges based on the previous billing cycle (known as double-cycle billing). Credit Protection 28

29. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Truth in Lending Act. Consumer Leases.  Fair Credit Reporting Act. Protects consumers against inaccurate credit reporting and requires lenders and creditors to correct errors. Consumer Notification and Inaccurate Information. If denied credit, consumer has right to source of information. Credit Protection 29

30. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Fair And Accurate Credit Transactions Act (combat identity theft). Allows consumers to place an alert on national fraud alert system. Requires major credit companies provide free credit report. Allows consumers victimized by identity theft to rebuild their credit. Credit Protection 30

31. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Fair Debt Collection Practices Act. 1. Contact the debtor at the debtor’s place of employment if the debtor’s employer objects. 2. Contact the debtor during inconvenient or unusual times or at any time if the debtor is being represented by an attorney.  Credit Protection 31

32. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Fair Debt Collection Practices Act. 3. Contact third parties other than the debtor’s parents, spouse, or financial adviser about payment of a debt without court order. 4. Harass or intimidate debtor or make false or misleading statements.  Credit Protection 32

33. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Fair Debt Collection Practices Act. 5. Communicate with the debtor at any time after receiving notice that the debtor is refusing to pay the debt, except to advise the debtor of further action to be taken by the collection agency. Credit Protection 33

34. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Fair Debt Collection Practices Act. Notification and Bona Fide Errors. Bona fide error is a defense against violations. CASE 20.3 J ERMAN V. C ARLISLE, M C N ELLIE, R INI, K RAMER & U LRICH, LPA (2010). CASE 20.3 J ERMAN V. C ARLISLE, M C N ELLIE, R INI, K RAMER & U LRICH, LPA (2010). What is the status of this defense after this case? Credit Protection 34