Consumer Protection Law in a Nutshell
Author:
Pridgen, Dee
Edition:
5th
Copyright Date:
2020
22 chapters
have results for consumer protection law in a nutshell
Preface to the Fifth Edition 9 results (showing 5 best matches)
- This Nutshell intends to provide a concise overview of the law of consumer protection in the United States. It can be used as a supplement to the regular course materials in a consumer law course, as well as a reference for practicing attorneys, judges and/or legislators, both domestic and international, who wish to obtain a “big picture” perspective on American consumer law. Rather than offering an in-depth study, this Nutshell aims to provide a stepping off point or general orientation to help start the reader on a journey into the fascinating world of consumer protection law.
- In the four years that have passed since the fourth edition of this Nutshell was published in 2016, the path of consumer protection law has not been smooth, nor has it been straightforward. No major consumer legislation emerged, with the exception of a comprehensive California privacy law. Some new federal regulations have been promulgated, while others have been rejected or put on hold. A Consumer Financial Protection Bureau (CFPB) regulation that would have limited consumer arbitration clauses was vetoed by Congress, and the main provisions of a regulation governing fringe lenders were revoked at the agency level.
- Consumer protection laws are only useful if they are effectively enforced. Thus, this volume, like the preceding edition, covers government and private enforcement of both federal and state consumer protection laws. With a change of administration in 2017, however, the federal government’s enthusiasm for enforcing consumer laws appears to have waned somewhat. Also, the standing requirement in federal court cases, as well as the continuation unabated of arbitration clauses in consumer contracts, may deter private enforcement as well.
- As in the 4th edition, some aspects of consumer law, such as international or comparative consumer law, are beyond the scope of this book. Likewise, consumer product safety and products liability cases, are also not included. In the interest of brevity and to avoid becoming dated, this book mainly uses primary sources, such as statutes, regulations, and cases, for its relatively limited citations. Law review articles related to consumer law, while sparingly referenced here, should be explored by those seeking a more comprehensive knowledge of the subject matter. Another resource for those seeking greater detail and depth are two treatises, Consumer Protection and the Law, and Consumer Credit and the Law, with new yearly editions by current coauthors Dee Pridgen, Richard Alderman and Jolina Cuaresma. The National Consumer Law Center also has a library of detailed reference books on consumer law.
- The U.S. Supreme Court issued several major cases in this field, most of which represent retractions in the law. For instance, the Court ruled in 2017 that debt buyers who collect debts they own are not “debt collectors” covered by the Fair Debt Collection Practices Act, thus carving a major exemption out of the debt collection industry. The Court held in 2016 that plaintiffs in statutory consumer law cases tried in federal courts must demonstrate Article III standing, specifically “injury in fact.” This requirement created a preliminary hurdle for most consumer plaintiffs in federal court. In 2020, the Court held that the law setting up the CFPB Director as serving a five-year term, removable only for cause, was an unconstitutional undermining of the Article II executive authority of the President. The offending provision was deemed “severable,” however, so that the agency can go forward with a Director serving at the pleasure of the President. Also in 2020, the Court struck down a...
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Preface to the Third Edition 7 results (showing 5 best matches)
- This Nutshell treats the traditional areas in consumer protection, but also introduces new state and federal laws that reflect the changes noted above. Although there was little activity from Congress in the 1980s in enacting new consumer protection laws, there was a resurgence of activity in the 1990s. The new laws reflect a change in the political climate and the need to provide some procedural protections and additional disclosures, as prices were deregulated in a number of markets. This Nutshell explores the development of the subprime credit market, dealer-arranged financing and the explosion in the use of open-end credit by consumers. The “fringe banks,” such as pawnshops, payday lenders and rent-to-own operations are also discussed. Arbitration and class actions in consumer disputes are also discussed, although more complete coverage of these subjects must be found elsewhere.
- Consumer protection laws today reflect fundamental changes in the way individuals obtain credit, pay their bills and make purchases. In the past, consumers purchased most goods and services through local merchants in face-to-face transactions, and borrowed money in established relationships with local depositary institutions. People were more conservative in their use of credit and lenders often required significant down payments, strong credit records and an established history of employment. Consumers paid in cash, occasionally wrote checks, and dealt in a paper world of bank notes and credit sales contracts.
- Credit is now available to consumers who have shaky credit records, although the price of the credit may be high. Usury laws no longer exist in some places. And although depositary institutions such as banks, credit unions and a variety of mortgage lenders remain dominant, there are many nondepositary subprime lenders serving individuals who have a history of slow payments and default. The supply of credit to the subprime market has been bolstered through the bundling and securitization of subprime loans, attracting investors in search of higher returns.
- The author acknowledges the excellent research assistance provided by law students Beth Bosquet, Gregg Curry and Hope Stewart. Typing and technical help were provided by Wanda Elliott. The author also appreciates the research support provided by The University of Alabama Law School Foundation and the George M. and Mary C. Akers Fund. Finally, the author acknowledges the excellent work of Professor David Epstein and Professor Steve Nickles, whose 1981 second edition of this Nutshell stood the test of time and was appreciated by many law students and professors who explored this area of the law.
- Much has changed. Consumers continue to trade with local merchants, but they also make purchases from telemarketers, catalog sellers and companies marketing their products over the internet. Many cars are leased and some appliances are rented. The “paper world” in consumer credit and payment systems is still with us, but individuals now pay some of their bills electronically. They use credit cards, debit cards, stored-value cards and they access cash through an ATM rather than a teller.
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Preface to the Fourth Edition 8 results (showing 5 best matches)
- The limitations of scope, as well as the summary nature of the coverage within this book, are premised on the basic purpose of this Nutshell, which is to provide a concise overview of the law of consumer protection in the United States. The book is intended for use as a supplement to the regular course materials in a consumer law course, as well as a reference for practicing attorneys, judges and/or legislators, both domestic and international, who wish to obtain a “big picture” perspective on American consumer law. Any in-depth study of the topics covered here should go well beyond this volume. Nonetheless, it is a goal of this Nutshell to provide a stepping off point or general orientation to help start the reader on a journey into the fascinating world of consumer protection law.
- The evolution of consumer protection law in the United States has continued apace since the 3rd edition of this Nutshell was published in 1999. The rise of the Internet and online transactions described in the prior edition resulted in a wave of federal legislation and a new concern for consumer privacy that came to the forefront around the time of the first decade of the 21st century. For instance, Congress passed the Children’s Online Privacy Protection Act in 1998 and the Gramm-Leach-Bliley (financial privacy) Act in 1999. The Federal Trade Commission (FTC) expanded the Telemarketing Sales Rule in 2003 to include the hugely popular Do-Not-Call Registry, based on the consumer’s interest in protecting the privacy of their home from annoying and often fraudulent intrusions by telemarketers. This was soon followed by the CAN-SPAM Act, meant to curb the onslaught of unsolicited commercial emails, or “spam” as it has come to be known. Since 2000, the FTC has used its general authority...
- Consumer law is not only based on legislation and regulations. Consumer-related case law has also seen significant new developments since the publication of the 3rd edition of this Nutshell. For instance, in the landmark 2011 case of , the United States Supreme Court continued a series of cases in which it upheld standard form mandatory arbitration clauses, including class action waivers, in consumer contracts, based on the supremacy of the Federal Arbitration Act. The CFPB in 2016, after conducting a major study of arbitration clauses in consumer contracts, proposed a regulation that would ban the use of class action waivers in such contracts. Arbitration clauses, as well as other unwelcome clauses, often appear in online contracts contained in hyperlinks or in scroll-down text, next to the click “I agree” button. Many common law contracts cases have enforced such clauses under the legal fiction that consumers have exercised meaningful assent, as long as they have any sort of...
- The rise of the subprime credit market, including the use of exotic and sometimes toxic mortgage loans, and the expansion of the credit card industry along with increased fees and hidden penalties for consumers, led in part to the collapse of the housing market and the Great Recession of 2008. Responding to the financial crisis, Congress passed the Dodd-Frank Act in 2010, which created the Consumer Financial Protection Bureau, a major new federal consumer protection agency charged with regulating consumer finance service providers. The Dodd-Frank Act also contained the Mortgage Reform and Anti-Predatory Lending Act, which mandates many substantive and other protections for consumers in the residential real estate finance arena. The CFPB’s activities, including new and proposed regulations on mortgage loans, mortgage servicing, fringe lending, and arbitration clauses, are covered in the expanded Truth in Lending chapters featured in this edition. Congress also passed the Credit CARD...
- Consumer protection laws are only useful if they are effectively enforced. Thus, this volume covers federal and state government enforcement, as well as private enforcement, of both federal and state consumer protection laws, including state unfair and deceptive trade practices acts and the federal Truth in Lending Act. In addition, the Federal Trade Commission’s advertising substantiation doctrine is a major enforcement tool in the advertising area. In a 2015 D.C. Circuit Court case against a dietary supplement maker, the FTC established that when a food or beverage product claims to have disease-related properties, the marketer must have some random, clinical tests to back up such claims.
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Chapter One Introduction to Consumer Protection Law 34 results (showing 5 best matches)
- Consumer transactions (and scams) now play out on a global level, due to the expansion of world trade and the ability for consumers everywhere to engage in Internet-based purchases. Although this Nutshell does not examine consumer protection policies outside of the United States, there is a growing consensus of international opinion on what good consumer laws and practices should be. In 1985 the United Nations adopted
- Consumer product safety laws could also legitimately be considered as part of consumer law. A federal agency, the Consumer Product Safety Commission, was set up in the 1970s to protect the public from dangerous products. In addition, there is a huge body of products liability tort law that also deals with the same subject. This aspect of consumer law is also beyond the scope of this Nutshell.
- This Nutshell provides a comprehensive but concise overview of the law of consumer protection. As noted in the prior section, there are a myriad of federal and state statutes involved, and the breadth of the topics covered has only grown over the decades since consumer law came into its own. In this volume, we try to present this topic in an organized fashion that will make it accessible to law students, lawyers, judges, legislators and others as well.
- The Dodd Frank Act also established the Consumer Financial Protection Bureau in 2011, which ushered in a new era of consumer protection law in the United States. This new agency consolidated the consumer protection functions of the Federal Reserve Board and other bank regulatory agencies into one agency that supervises and regulates all providers of consumer financial services, from very large banks to fringe lenders. The CFPB works side by side with the FTC to protect consumers in all sectors of the economy.
- In each circumstance, the ordinary rules of contract law apply. However, since each is also a “consumer transaction,” special consumer protection statutes and rules may be in play as well. In the case of Art and Alma, there is a federal law that requires lenders to verify that borrowers have the ability to repay a home-secured loan, and certain practices are prohibited, such as negative amortization and so-called “no-doc” loans. Cassie may be protected by a state usury law, but federal regulation of payday and car title loans has been revoked in substantial part. Consumer protection statutes typically attempt to provide some advantages to the consumer in what is presumed to be a one-sided bargain that favors the merchant or financial service provider. Thus, in every area covered in this volume, it is critical to be aware of the boundaries of the legal protections discussed, because these protections may not be applicable outside of the consumer transaction context.
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Chapter Two Public and Private Actions to Regulate Consumer Markets 93 results (showing 5 best matches)
- The emergence of public agencies as the primary enforcers of consumer rights in the consumer transaction arena was, in part, due to problems with private enforcement of consumer protection at common law. In the modern era of consumer transactions, various state and federal agencies have a wide array of responsibilities. Part B of this chapter will provide a brief overview of enforcement by the Federal Trade Commission. Part C will discuss the creation of the Consumer Financial Protection Bureau under the 2010 Dodd-Frank Act, and its role in enforcing consumer protection laws in the financial sector. Part D will discuss state enforcement of both state and federal consumer protection laws. The rest of this chapter focuses on the private enforcement of consumer protection statutes, both state and federal, including class actions and arbitration.
- Class actions play an important part in the enforcement of consumer protection laws. In cases where individual consumer claims would produce a small award of damages, a class-based effort may provide the appropriate incentives to bring the action. Attorney’s fees may also be available and may be substantially higher in a class action than in an individual case or in individual joined actions, due to economies of scale.
- In states where effective and aggressive state regulatory enforcement is rare, the void can be filled by federal agencies such as the Federal Trade Commission and the Consumer Financial Protection Bureau. However, real teeth in the enforcement of consumer protection is usually found in private litigation, where plaintiffs use state and federal laws, as well as class actions, to seek redress for fraudulent practices and statutory violations found in the marketplace. Indeed, many state and federal laws empower consumers to act as “private attorneys general” in the policing of markets and enforcement of consumer protection laws. This is particularly true where the statutes provide for attorneys’ fees and costs, in addition to damages for the harm caused by the illegal business practice.
- In one of the most important developments in consumer protection in nearly a century, Congress in 2010 created a second federal consumer protection agency, the Consumer Financial Protection Bureau (CFPB). 12 U.S.C. §§ 5481–5552. This agency is housed within the Federal Reserve Board but is mostly self-sufficient. In contrast to the FTC, the CFPB has a single director, appointed by the President for a five-year term, rather than a multi-member commission. It is also self-funding out of Federal Reserve banking fees, rather than being dependent on Congress for its yearly budget. Its jurisdiction is limited to consumer financial products or services, but does include banks as well as non-bank providers of such products or services.
- The CFPB now holds the authority to issue or amend regulations under the federal consumer credit statutes, as well as to enforce those statutes through litigation and/or through the bank examination process. The 2010 legislation also lessened federal preemption of state consumer financial protection laws, making the federal law a floor or minimum, with the states free to enact laws that are more protective of consumers.
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Chapter Five Credit Reports, Identity Theft, and Equal Access to Credit 117 results (showing 5 best matches)
- The common law is not a very useful source of legal protection for consumers injured by inaccurate credit reports. Prior to federal legislation in 1970, lenders did not even have to disclose the fact that a credit report had been obtained or which agency provided the report, making it difficult for consumers to even know that there were harmful mistakes in such reports. Even if a consumer had knowledge of an inaccurate report, her common law remedies were still hindered by other legal obstacles.
- Effective in 2018, the FCRA also requires that all consumers have the option of placing a “security freeze” on their credit records, free of charge. . A security freeze, once placed by the consumer, is very strong protection against identity theft as it prohibits the CRA from releasing a credit report to anyone unless the consumer “unfreezes” their credit record. This prevents would-be imposters from obtaining credit in the consumer’s name because any creditor being used by the imposter would not be able to obtain a credit report in the victim’s name. There are exceptions to the impenetrability of the security freeze for existing creditors who are monitoring an account, law enforcement investigations and for the fulfillment of a credit monitoring subscription, among other things. The 2018 amendments also establish the availability of a security freeze for persons under the age of 16, and incapacitated persons, or persons for whom a guardian or conservator has been appointed.
- In 1970, Congress passed the Fair Credit Reporting Act (FCRA), Title III of the Consumer Credit Protection Act. This Act was significantly revised in 1996 and again in 2003 to provide further protection for consumers. The FCRA is aimed at protecting both the accuracy and the privacy of consumer credit reports, as well as helping consumers prevent and correct the special problems associated with identity theft.
- The Equal Opportunity Act is one title of the Consumer Credit Protection Act. Regulations under the Act were originally promulgated by the Federal Reserve Board, and are now under the jurisdiction of the Consumer Financial Protection Bureau (CFPB). The ECOA regulations are known as Regulation B and are codified at 12 C.F.R. Part 1002. Banks, finance companies, retail stores, credit card issuers, and generally, anyone who regularly extends credit is subject to the regulations. In addition, the law may apply to those who arrange financing, such as real estate brokers or automobile dealers. Also, unlike the Fair Credit Reporting Act, there is no question that the Equal Credit Opportunity Act does apply to business credit. Other federal anti-discrimination statutes that apply to consumer credit in the housing area include the Fair Housing Act, the Community Reinvestment Act and the Home Mortgage Disclosure Act, but these laws are beyond the scope of this volume.
- The Fair Credit Reporting Act, discussed below, helped consumers in many ways, but it also granted immunity from these common law actions to credit bureaus, users or furnishers of information in a consumer report unless false information was furnished with malice or intent to injure the consumer. . This provision makes it even more difficult for consumers to succeed in challenging information in their credit report under common law.
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Chapter Four Consumer Privacy 47 results (showing 5 best matches)
- Legal protection of consumer privacy in the United States is widely seen as being “sectoral” in nature. That is to say, there is no overarching law or legal doctrine of consumer privacy, but instead there are a series of laws regarding the protection of consumer privacy each focused on particular business sectors or on particular media or types of communication or solicitation. For instance, the protection of consumer financial information collected and distributed by private consumer reporting agencies is governed by the Fair Credit Reporting Act, a federal law that has been on the books since the early 1970s. That statute is discussed at length in Chapter Five, in their own homes. The privacy protecting measures that apply to these types of marketing methods were covered in Chapter Three, . Consumers’ personal health information, a topic that is beyond the scope of this volume, is protected by the Health Insurance Portability and Accountability Act or HIPAA, and the disclosure of
- The discussion in this chapter will focus on the remaining aspects of consumer privacy not covered elsewhere in this volume. First, there are some limited tort causes of action that have been used to protect consumer privacy. These common law approaches have not been very successful for consumers. Second, as consumers have flocked to the Internet for shopping, information gathering, and social interactions, the ability of commercial interests to gather and use or resell personal information has also increased dramatically. The Federal Trade Commission has taken the lead in protecting consumers’ online privacy, which often involves behavioral profiling and tracking. The FTC has also acted to force companies to stop using intrusive computer software unbeknownst to the consumer. The FTC’s actions thus far have been based on its own general authority to police unfair and deceptive trade practices, in the absence of any general federal legislation protecting internet privacy. Note that...
- The FTC has at various times pushed for either federal legislation, industry self-regulation and/or a general framework for dealing with consumer privacy issues on the national level. The FTC favors the implementation of “Fair Information Practice Principles,” which include Notice, Choice, Access and Security. This “notice and consent” model has been criticized for leading to the proliferation of complex and incomprehensible privacy policies that are more aimed at protecting the information collectors than the consumer. The “notice and consent” approach also burdens the consumer to read notices and take action. In a 2012 report, the FTC encouraged the online information industry to provide better and more consumer-friendly statements disclosing their data collection practices and to allow consumers to control the collection and use of their own information. This report also recommended a “Do-Not-Track” option permitting consumers to opt out of online tracking. “Privacy by Design” is...
- Consumers may also seek to assert an invasion of privacy with regard to certain activities of debt collectors, but they have not been very successful due to the extremely high burden of proof needed to prevail on these types of claims. Consumer protection in the debt collection area will be discussed in Chapter Eleven,
- Privacy has always been an elusive concept. It includes the “right to be let alone” as well as the right to keep certain aspects of one’s life shielded from public view. In the consumer protection context, the right of privacy is focused on the consumer’s interest in shielding personal information, financial and otherwise, from being seen and shared by marketers and other commercial entities except with the consumer’s consent. The privacy interest of the individual vis-à-vis the government in the criminal and national security contexts are beyond the scope of this volume.
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Chapter Ten Holder in Due Course and Warranties 101 results (showing 5 best matches)
- Unlike the situation for consumer products, there is very little statutory warranty protection for consumers who purchase residential real estate. In this area, caveat emptor, or “buyer beware,” still has some sway as a legal doctrine. This is somewhat dismaying, since as it is often said, a home is usually the largest single purchase that most consumers will make in their lifetime. Nonetheless, home buyers must rely on builders to voluntarily offer a homeowners’ warranty, or on the judicial conferring of an “implied warranty of habitability,” a doctrine that emerged from the slow process of common law development.
- In response to consumer concerns and the gap in statutory protections, at least 22 states have enacted statutes that cover mobile home warranties. These state laws typically require that the manufacturer issue an express warranty covering major defects. Enforcement of the warranties can still be an issue, however. The warranties can be enforced by the consumer and many statutes provide attorney’s fees if the buyer prevails in a breach of warranty suit, which should be helpful to consumers who could not otherwise afford to litigate. On the other hand, mobile home contracts often contain mandatory arbitration clauses, which may pose an obstacle to the consumer seeking to enforce a warranty in court.
- Warranties accompanying the sale of consumer products are governed by the Uniform Commercial Code (UCC). The UCC applies to both commercial and consumer transactions, and is premised on the philosophy of freedom of contract between equal parties. State and federal law has overlaid some special protections for consumers with regard to warranties, but the UCC, a uniform state law that has been enacted in every state, remains the foundation.
- For a detailed treatment of UCC warranties, lemon laws and the Magnuson-Moss Warranty Act,
- The inclusion of the FTC-required “notice” in the contract basically eliminates the holder-in-due course shield by agreement. The FTC Rule was adopted specifically to prevent the seller from making the consumer’s obligation to pay independent of the seller’s obligation to perform the contract and comply with consumer protection laws. The FTC supported the Rule with the explanation that if the seller was out of business or sold defective merchandise, then, as between the consumer and the assignee-lender, the latter was in the best position to protect itself against dealer misconduct, thus policing the consumer marketplace. Lenders had better access to information regarding the dealer and could resort to reserve or recourse agreements with the dealer in the event the consumer raised a legitimate defense. In crafting the dealer agreement, the lender could require the dealer to buy back the note if the consumer raised a defense to payment. Because the lender could transfer back to the...
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Chapter Twelve Credit and Debit Cards and Other Modern Consumer Payments 95 results (showing 5 best matches)
- In the 21st century American consumer economy, plastic has replaced cash or paper checks as the preferred payment methods. The term “Plastic” in this context usually refers to either credit cards or debit cards. The special consumer protections applicable to credit cards were discussed above. Debit cards, also known as ATM cards or bank cards, are quickly outpacing credit cards as the preferred method of payment for most consumer transactions. The consumer protection law applicable to this type of payment will be discussed in this section. Stored value cards, as well as prepaid replenishable cards, are a third type of “plastic” that is increasing in importance and will be discussed in a subsequent section. Ultimately, payments may become totally electronic, either internet based or mobile device based, thus eliminating the “plastic” altogether.
- Based on consumer complaints about excessive “overdraft protection” fees associated with debit card use, Regulation E was amended effective in 2010 to require that consumers must “opt-in” to receive fee- based overdraft protection from their financial institutions. . This issue came to a head when, during the early 2000s, consumers began using their debit cards as a cash substitute to make numerous small purchases or cash withdrawals during a short time period, such as a single day. At the same time, banks offering debit/ATM cards were routinely enrolling these customers into their “overdraft protection” plan, under which the bank would cover the purchase or cash withdrawal even if the consumer had insufficient funds in their account, but would charge a fee for each such transaction. As consumers used their debit cards for a series of relatively small purchases, such as a $3.00 cup of coffee, or a $10 meal, the fees of around $30 or more per transaction could far exceed the amount by...
- The response by the Federal Reserve Board was to issue a new regulation requiring financial institutions to give consumers the right to “opt-in” or affirmatively consent to overdraft protection, along with its concomitant fees, rather than making this part of their standard form contract. The regulation does not ban either overdraft protection or high-to-low posting, however. . The regulation applies to ATM and one-time debit card transactions, but does not apply to check transactions or recurring debits. The regulation provides safeguards designed to inform consumers of the nature of the “overdraft protection service,” as well as the fees involved, prior to the opt-in decision. The consumer must be allowed to opt out or revoke their consent at any later time even after they have chosen to opt in.
- Credit cards became an increasingly dominant form of consumer payment for goods and services in the second half of the twentieth century. Bank cards, such as Visa and Master card, came into common use beginning in the 1960s. Credit card debt has also exploded with the increasing availability and use of credit cards for everyday purchases. The Truth in Lending Act disclosure requirements for credit cards were discussed in Chapter Seven, . The ability of credit card holders to assert against the card issuer claims and defenses they might have against the seller is a variation of the holder in due course issue, and was discussed in Chapter Ten, . In this chapter, we will discuss some other special substantive protections for consumers using credit cards as a payment method, including limitations on liability for unauthorized use, and procedures for asserting billing errors. In the twenty-first century, credit card use may well be surpassed by debit cards, prepaid cards not associated...
- These EFTA provisions have been applied in government enforcement cases. One example is the failure of internet-based companies who receive recurring payments from consumers via electronic fund transfer to obtain the consumer’s written authorization in advance and failure to notify the consumers in advance if the amount of a particular transfer will vary from the pre-authorized amount or range of amounts. For example, AOL, an internet service provider, was targeted by an FTC investigation because they would debit a consumer’s account $9.95 one month and $38.95 another month for miscellaneous fees without proper authorization. Some online payday lenders have been accused by the Consumer Financial Protection Bureau of violating this section of the EFTA by putting money into consumers’ accounts without authorization, and then deducting fees by preauthorized EFTs, also without prior written authorization. Such lenders have also been accused of illegally requiring preauthorized... ...as a...
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Chapter Six Credit Disclosures: Truth in Lending Overview and Closed-End Transactions 131 results (showing 5 best matches)
- Further changes in TILA were brought about in response to the subprime mortgage foreclosure crisis, the stock market plunge and the “great recession” of 2007–2008. The Credit CARD Act of 2009 contained significant reforms in credit card disclosures, and also contained substantive limits on certain unfair and deceptive credit card practices. In 2010, Congress passed the historic Dodd-Frank Wall Street Reform and Consumer Protection Act. This Act resulted in the creation of the Consumer Financial Protection Bureau, which took over the administration and enforcement of TILA from the Federal Reserve Board and other bank regulatory agencies. The FTC remained as an enforcing agency for non-bank creditors within their jurisdiction, however. Dodd-Frank also contained within it the Mortgage Reform and Anti-Predatory Lending Act, which amended TILA in significant ways with regard to residential mortgage loans. This law requires a unified mortgage loan disclosure that combines the previously...
- The “Truth in Lending Act,” or “TILA,” is the popular name for Title I of the Consumer Credit Protection Act, codified at , et seq. The Consumer Credit Protection Act is an umbrella statute that contains not only TILA, but also the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act and the Electronic Fund Transfer Act. These other federal consumer credit laws are discussed elsewhere in this volume.
- In 1988, TILA was amended to add the Fair Credit and Charge Card Disclosure Act, which requires cost disclosures at the time of solicitation and application for a credit card. Prior to that change, credit card issuers did not need to provide the TILA comparative cost disclosures until just prior to the consumer’s first transaction using the credit card, a time which would obviously be too late to be useful for comparison shopping. These solicitation disclosures must be given in readable tabular form, and have come to be known as the “Schumer Box,” referring to Senator Charles Schumer, one of the sponsors of the legislation. TILA’s 1988 amendment also included the Home Equity Loan Consumer Protection Act, which is concerned with open-end lines of credit secured by the consumer’s principal dwelling. This part of the law is aimed at educating consumers on the costs and details of so-called “Home Equity Lines of Credit,” or HELOCs, and requires specific disclosures on applications and...
- the purposes of TILA. This function is now vested in the Consumer Financial Protection Bureau, which was created to consolidate consumer financial regulation and eliminate the prior situation of multiple federal bank regulatory agencies regulating consumer credit based solely on the type of entity involved. In 1969, the Federal Reserve Board published a comprehensive set of regulations in 12 CFR Part 226, commonly known as “Reg. Z.” These regulations are now contained in 12 CFR Part 1026. Regulation Z restates many of the TILA sections, but is generally a more thorough statement of the law. There is also an Official Staff Commentary, which is to Regulation Z, what Regulation Z is to TILA. The Official Staff Commentary makes TILA more user-friendly, with comments and examples that clarify the law. In analyzing any TILA section, both the Regulation Z provision and the corollary Official Staff Commentary should be reviewed.
- In 1994, sparked by abuses in subprime home-secured loans made to low income home owners, often in connection with shoddy home repair services, Congress amended TILA to include the Home Ownership and Equity Protection Act (HOEPA). These loans were high cost compared to the traditional lending market and carried a high risk of foreclosure. For this category of loans, consumers were given additional disclosures, a cooling-off period, and some substantive protections against particularly oppressive terms, such as balloon payments, negative amortization and prepayment penalties. The scope and protections of HOEPA were later broadened by the 2010 Dodd-Frank Act.
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Chapter Seven Credit Disclosures: Open- End Credit and Real Estate Secured Transactions 113 results (showing 5 best matches)
- The 2009 Credit CARD Act also contained major consumer protection reforms. This law focused on rate increases, credit card fees, payment and billing practices, and the use of credit cards by young consumers. These substantive limits on credit cards are covered in Chapter Twelve, . At about the same time, the Federal Reserve Board launched an overhaul of the formatting of open-end credit card disclosures, to improve their readability and utility to consumers.
- Under the law, any solicitation or application to open a credit card account under an open-end consumer credit plan that is mailed or sent electronically to consumers shall disclose the following information, in tabular format:
- Home equity lines of credit emerged as a popular alternative in the consumer credit market in the late 1980s, possibly due to changes in the tax laws that favored real-estate secured interest payments as tax deductions. Yet there were some pitfalls for consumers who took on this type of credit obligation. First, open end creditors, such as credit card issuers, are allowed to change the terms over the course of the relationship, which when occurring in the context of a HELOC, could result in unexpected hardship to consumers with large balances secured by their homes. Many HELOCs also featured a “draw” period during which only interest is paid, followed by a balloon payment of the balance, which could be quite large. If the consumer could not pay or refinance a large balloon payment, the result could be the loss of the home. Also, the common use of variable interest rates in HELOCs posed some uncertainty about future payments. Congress felt that HELOC consumers should get special...
- Fourth, also under the 2010 legislation, TILA now contains more substantive limits on home-secured credit transactions. These include a duty for creditors to determine that their potential borrowers have an ability to repay their obligations, combined with a “qualified mortgage” package that contains many pro-consumer provisions and also gives creditors a safe harbor for fulfilling the ability to repay requirements. Loan originators are banned from steering consumers into unfavorable loans, and broker-compensation through “yield-spread premiums” is also limited. Mortgage servicing and appraisals, businesses associated with residential mortgage credit, have also been brought under special consumer protection regulations.
- TILA, as amended, also restricts the method of compensation that mortgage originators may use. As the regulation states: “in connection with a consumer credit transaction secured by a dwelling, no loan originator shall receive and no person shall pay to a loan originator, directly or indirectly, compensation in an amount that is based on a term of a transaction. . . .” . Thus, the practice of taking “yield spread premiums,” (YSPs) from lenders is prohibited, with some limited exceptions. With YSPs, the broker was paid a bonus by the lender for bringing in a loan that had a higher interest rate than the “par” or otherwise available rate. The objections to this previously prevalent method of compensation for mortgage brokers were twofold. First, by keying the broker’s compensation to the interest rate, the broker had an incentive to steer the consumer into higher interest loans, while the consumer may have qualified for a lower rate. Second, the average consumer was under the ...in...
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Chapter Eight Truth in Lending Enforcement and Related Statutes 106 results (showing 5 best matches)
- Dormant: The Consumer Financial Protection Bureau’s Law Enforcement Program in Decline
- As noted in the Chapter Seven, mandatory pre-dispute binding arbitration clauses are banned in credit contracts secured by an interest in the consumer’s home. . They are also banned in certain loans made to military service members.
- The Consumer Financial Protection Bureau (CFPB), the agency established by the 2010 Dodd-Frank Act, is charged with both rulemaking and enforcement of the Truth in Lending Act, as well as related consumer credit laws. its authority, concurrent with the CFPB, to enforce the federal consumer credit laws as to entities within the FTC’s jurisdiction, which excludes banks but includes retailers who sell on credit and commercial lenders other than banks. The FTC also retains sole jurisdiction over motor vehicle dealers, which are exempt from CFPB oversight.
- Prior to 2010, federal enforcement of TILA was shared by various bank regulatory agencies, the Federal Reserve Board and the FTC. The Federal Reserve Board had the sole rulemaking authority. The consolidation of both rulemaking and enforcement power under the CFPB was meant to strengthen the protection of consumers by not splitting the authority among multiple agencies, most of which did not have a focus on consumer protection.
- Private consumer actions under historically have been the most effective method of enforcing the disclosure requirements of Truth in Lending. To recover, a consumer must establish: (1) the transaction comes within the Truth in Lending regime; and (2) the creditor failed to comply with the Act or Regulation Z. The consumer need not show that the creditor’s violation resulted in any injury or that it led to the consumer’s decision to enter into the credit transaction. Nor must the consumer show that the creditor intended or knew about the violation or that the consumer was deceived. Furthermore, even the slightest, technical violation may be actionable. Note that in recent years, the number of private consumer actions enforcing TILA have been somewhat reduced by the prevalence of mandatory arbitration clauses and class action waivers contained in consumer credit contracts, as well as federal standing requirements and the doctrine of detrimental reliance. TILA violations give rise to...
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Chapter Nine Regulating the Cost of Credit 51 results (showing 5 best matches)
- The OCC’s restrictive federal preemption policies were superseded by the provisions of the Dodd-Frank Act passed in 2010. That Act created the Consumer Financial Protection Bureau or CFPB, and empowered that agency with the authority, through rulemaking, enforcement and oversight, to regulate banks and other financial service providers that may be engaged in unfair, deceptive or abusive practices. The law also cut back on the federal preemption of state consumer financial laws, stating that such laws can be preempted only if the application of a state consumer financial law would have a discriminatory effect on national banks. 15 U.S.C. § 25b(b). Furthermore, nonbank subsidiaries of federally chartered banks no longer automatically enjoy any preemption from state law that the parent institution may have. ...It remains to be seen how this more state-friendly preemption approach may affect the future of state usury laws which, as noted above, had been considered effectively...
- But some usury laws remain and are as controversial now as they were long ago. The issue of whether to impose usury laws has long been debated. A detailed history of usury laws, however, is beyond the scope of this nutshell. Nonetheless, there are two important influences on usury laws that aid in understanding the current status of usury laws.
- State legislatures have historically favored usury laws because these laws gave them power over the credit industry, and voters tend to favor usury laws that keep rates low. High interest rates are easy to hate. Thus, access to affordable credit will always be a popular political platform. In addition, like other advocates of usury laws, legislatures feel that regulation is necessary to prevent economic disaster and consumer exploitation. These laws are necessary to prevent lenders from engaging in such evils as The need for some regulation may be particularly strong where many of the consumers are poor, illiterate and without political power. On the other hand, since the 1980s, many states have deregulated consumer credit prices in an effort to attract large credit card issuers and other consumer lenders to their state. In addition, due to the effect of the U.S. Supreme Court decision in , to be discussed in more detail later in this chapter, many state usury laws have been...
- Effectively, the Uniform Small Loan Law legitimized the consumer finance industry, which included banks, retail stores, and finance companies affiliated with automobile manufacturers. This led to a host of other regulations at both the local and national level. The National Commission on Consumer Finance used the word “hodgepodge” to describe the array of usury laws in place. Thus, as creditors got more creative in their lending policies, the legislator responded with further regulation.
- However, people do not view money and beer in the same way. Were the sale of money viewed by most people as the sale of six-packs, we would not have the mountain of consumer credit regulations we have today, including some of the usury laws that regulate the cost of credit. When it comes to money, people generally do not like high rates and are tolerant of more regulation. However, although it is true that today there are more disclosure requirements in consumer credit than at any other time in our history, many of the laws regulating the cost of that credit have been swept away or preempted by federal laws that moved us to a more deregulated market.
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Chapter Three Inducing Consumer Transactions: Advertising and Marketing 63 results (showing 5 best matches)
- The advertising of consumer credit and other consumer financial services or products is subject to special advertising provisions under federal law. These include the Truth in Lending Act (TILA) and Regulation Z, as well as the general prohibitions against unfair, deceptive or abusive practices under the Consumer Financial Protection Act, and the FTC ban on deceptive or unfair practices.
- Although common law actions may be difficult to prove because of the strict element requirements, common law actions have several advantages for the consumer. First, most fraud actions allow the consumer to seek punitive damages which may be unavailable under other statutory remedies. Secondly, the common law element requirements are less strict in those states which have liberalized and broadened the scope of the intent and factual requirements when the case involves consumers. On the other hand, most consumer cases, especially if litigated individually rather than as a class action, involve such small damages that they may not be economically feasible to pursue in court. The state UDAP statutes discussed in the preceding chapter were meant in part to address this issue.
- Another category related to mail order sales is the attempted sale of unordered goods which are mailed to the consumer without any prior telephone or written contact by the consumer. Although the consumer may assume these goods are free gifts, sellers may try to frame the shipment as an offer to sell. The seller bets on the probability that the consumer will fail to return the goods although such failure, according to the seller, acts as an acceptance and binds the consumer to a financial obligation to pay for the goods. It is very likely that the consumer will not return the goods, considering the expense and associated inconvenience of doing so. Fortunately for consumers, federal law (with some limited exceptions) prohibits the delivery of unordered goods by mail and considers such deliveries as a per se violation of the FTC Act. . Therefore, the consumer may, in fact, treat any unsolicited goods as a free gift.
- The FTC has been a bastion for the protection of consumers against false or misleading advertising since its inception in the early 20th century. The FTC has many tools at its disposal in this regard, including specific statutory provisions, its general authority under Section 5, Policy Statements, the advertising substantiation doctrine, FTC rules and guides, as well as actions for consumer redress, injunctions, cease and desist orders, and disclosure requirements (including corrective advertising). Each of these aspects of the FTC’s policing of advertising will be discussed below.
- In 2010, Congress passed the Restore Online Shoppers’ Confidence Act (ROSCA), to deal with various negative option and “free” trial offer abuses in online sales. 15 U.S.C.A. §§ 8401–8405. This statute makes it illegal to charge a consumer for goods or services sold in an internet transaction through any negative option method, unless the marketer clearly and conspicuously discloses all material terms before obtaining a consumer’s billing information, obtains the consumer’s express informed consent before charging the consumer and provides a simple method for the consumer to stop recurring charges from being placed on their account. ROSCA also addresses offers made by or on behalf of a third party during or just after a transaction with the initial merchant. The FTC is the main government enforcer of this law and has brought many successful cases since its inception. In a notable case against a company selling a credit report service, the company used a marketing affiliate who... ...a...
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Copyright Page 5 results
- Nutshell Series, In a Nutshell
- The publisher is not engaged in rendering legal or other professional advice, and this publication is not a substitute for the advice of an attorney. If you require legal or other expert advice, you should seek the services of a competent attorney or other professional.
- Printed in the United States of America
- © 2016 LEG, Inc. d/b/a West Academic
- © 2020 LEG, Inc. d/b/a West Academic
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Chapter Eleven Default and Debt Collection 126 results (showing 5 best matches)
- In order to protect the consumer’s privacy, the FDCPA strictly limits the collector’s communications with third parties. Under the statute, , no communication with third parties about a debt is allowed without prior consent of the consumer or a court order, with limited exceptions. Communication is specifically allowed with the consumer him or herself. The term “consumer” for purposes of this section is defined by the statute to include the consumer’s spouse, parent (if the consumer is a minor), guardian, executor or administrator. The statute also allows the debt collector to communicate with the consumer’s attorney; a consumer reporting agency; the creditor; the attorney for the creditor; and the attorney for the debt collector. . Thus, a debt collector may not contact the consumer’s employer, even indirectly by sending a letter to the consumer “in care of” the employer at the employer’s address.
- A number of common clauses in consumer credit contracts are aimed at smoothing the way for creditors to collect in the event of default by the consumer. Six specific credit practices based on such clauses were considered unfair or deceptive, and are prohibited by the FTC Trade Regulation Rule Concerning Credit Practices (Credit Practices Rule), 16 C.F.R. Part 444, promulgated in 1985. Finance companies, retailers and other creditors within the jurisdiction of the FTC are subject to the Rule. The Consumer Financial Protection Bureau (CFPB) enforces the Credit Practices Rule, directly or indirectly, with regard to banks and other financial entities within its jurisdiction.
- A complicating factor with time-barred debts is that the statute of limitations (state law) typically bars the initiation of a lawsuit after a certain period of time has passed, but does not prohibit the collection or attempted collection of the underlying debt by means other than filing a lawsuit. This distinction could be confusing to the average consumer. Thus, several states require that any attempt to collect a time-barred debt be accompanied by a disclosure that the consumer cannot be sued and that, where relevant, a partial payment or written acknowledgement of the debt could revive it and effectively wipe out the protection of the statute of limitations. In a supplemental proposal, the CFPB also seeks to require a similar disclosure for time-barred debts and provides a model “safe harbor” form for collectors. Proposed by CFPB Feb., 2020, available at
- For a summary of the state debt collection statutes,
- Without prior consent of the debtor or express permission by the court, a debt collector cannot communicate with a debtor “at any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer.”
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Title Page 3 results
Outline 56 results (showing 5 best matches)
Index 70 results (showing 5 best matches)
Table of Cases 43 results (showing 5 best matches)
West Academic Publishing’s Emeritus Advisory Board 16 results (showing 5 best matches)
- Joanne and Larry Doherty Chair in Legal Ethics & Professor of Law, University of Houston Law Center
- John Deaver Drinko/Baker & Hostetler Chair in LawMichael E. Moritz College of Law, The Ohio State University
- Dean and Joseph L. Rauh, Jr. Chair of Public Interest LawUniversity of the District of Columbia David A. Clarke School of Law
- Robert A. Sullivan Professor of Law Emeritus
- Professor of Law Emeritus, University of San Diego Professor of Law Emeritus, University of Michigan
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- Publication Date: October 22nd, 2020
- ISBN: 9781684674770
- Subject: Consumer Law
- Series: Nutshells
- Type: Overviews
- Description: This reliable source explores traditional and emerging areas in consumer protection law. Federal and state law dealing with consumer transactions is covered, including caselaw and statutes. The volume begins with an overview of public (both FTC and CFPB) and private enforcement actions to regulate the marketplace. The remaining chapters track the legal aspects of consumer transactions in a roughly chronological fashion, starting with advertising and marketing, consumer privacy, credit reports and identity theft, and equal access to credit. The discussion continues with coverage of mandated disclosures as well as substantive protections for consumers under the federal credit laws, especially the Truth in Lending Act (TILA), including installment sales, credit cards and real estate related financing. Special issues relating to TILA enforcement, as well as a discussion of related federal statutes, and regulation of the cost of credit are also covered. Post-transaction issues such as raising claims and defenses against third party financers (Holder in Due Course), warranties, default and debt collection, are included. Last but not least, there is a chapter on the law affecting various forms of payment for consumer transactions, including credit and debit cards.