Chapter 11 Consumer Protection by fanzhongqing

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									Chapter 11: Consumer Protection
Teel Gordon, Ashley Legg, Iliyana Kuneva, Natalie Graf and Angela
Suit, Katy Maestas, Joe Stock, and Courtney Drummond

I. History
        The United States government first began its efforts at consumer protection early
in the 20th century. In 1906, the noted author Upton Sinclair published a book titled The
Jungle, which described the unhygienic and dangerous conditions of the meat-packing
industry in Chicago, Illinois. After publication, President Roosevelt sent a commission to
Chicago to determine the validity of the book’s claims. Discovering that the conditions of
the meat-packing plants were actually worse than the conditions exposed in The Jungle,
the United States Congress passed the first federal consumer protection acts, the Pure
Food and Drug Act and the Meat Inspection Act.
        The two acts were the first federal regulations designed to protect consumers from
hazardous food and dangerous medicines and continue to regulate the food and drug
industry today. Sinclair’s book sparked the beginning of numerous literary exposés of
corruption and consumer abuses, including Lincoln Steffens’s Shame of the Cities and
David Graham Phillip’s Treason of the State. These literary works were instrumental in
the development of federal consumer protection regulations.
        The next major milestone in consumer protection occurred in 1914 with the
creation of the Federal Trade Commission, an important government agency that is
responsible for consumer protection and competition jurisdiction. In the “New Deal”
period of time during President Roosevelt’s presidency, many federal, state, and local
regulatory agencies were also created. Since then, consumer protection has evolved to
include regulations over concerns such as environmental pollution.
        Consumer protection has continued to involve. Many federal, state, and local
regulatory agencies have emerged to help protect consumers from corruption and abuses.
In order to understand the subject fully, we must first further examine the concept of
consumer protection.


II. Definition of a Consumer
        A consumer is a person who buys goods or services for personal use or ownership
rather than for commercial use. Commercial use includes buying items for the purpose of
resale or production. For example, when a person goes to Wal-Mart to buy a camera, he

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or she is a consumer. However, businesses such as Wal-Mart, which buys goods for
resale, would not be considered consumers.


III. Purpose of Consumer Protection Laws
        Consumer protection laws exist with the main purposes of promoting fair
competition and the distribution of accurate information within the consumer market. In
addition, consumer protection laws exist to prohibit businesses that commit fraud or that
practice unfair tactics from gaining an inequitable advantage over competitors. Also, the
laws help protect the weak and those unable to defend themselves. Consumer protection
laws are enacted with the view that consumers are entitled to certain rights in the process
of acquiring goods or services for personal use or ownership.


IV. Agencies Protecting Consumers
     A. Federal Trade Commission (FTC)
        The Federal Trade Commission (FTC) is an independent agency that reports to
Congress on its actions. The FTC is responsible for both consumer protection and
competition regulation. The FTC performs these duties using a number of methods. The
FTC promotes aggressive and effectual law enforcement for consumer protection and
competition regulation breaches, provides its expertise to federal and state governments,
and creates policies and research resources for practical application.
        The FTC consists of three bureaus which provide different services. The FTC’s
three bureaus are: the Bureau of Consumer Protection, the Bureau of Competition, and
the Bureau of Economics. The Bureau of Consumer Protection is responsible for the
enforcement of consumer protection laws passed by Congress as well as regulation rules
enacted by the Commission. The Bureau of Consumer Protection consists of seven
divisions. These seven divisions provide services relating to advertising practices,
consumer and business education, enforcement of federal injunctions, financial practices,
marketing practices, planning and information regarding consumer protection, and
enforcement of consumer privacy. The Bureau of Competition “champions the rights of
American consumers by promoting and protecting free and vigorous competition.” The
Bureau of Competition accomplishes this by 1) reviewing business mergers and
acquisitions, 2) monitoring business practices in the marketplace to find anti-competition
practices, 3) encouraging competition in high-consumer-impact markets, and 4)
providing relevant competition information to lawmakers and users. The Bureau of
Economics supplies economic data to antitrust and consumer protection investigations

Chapter 11: Consumer Protection                                                      Page 2
and regulations. The Bureau of Economics also evaluates the economic effects of
regulation and provides relevant recommendations.


        B. United States Food and Drug Administration (FDA)
        The Food and Drug
Administration (FDA) is an agency            FDA Supreme Court Case:
within the Department of Health and          Wyeth v Levine Nov 2008
Human Services. The FDA regulates
                                             In 2008, a woman in Vermont was given an intravenous (IV)
food, medical devices (pacemakers),
                                             injection of a drug called Phenergan. Her arm began to
biological products, medicines,              develop gangrene and had to be amputated due to the effects
vaccines, veterinary drugs, products         of the drug. Ms. Levine, the patient, argued that the high
emitting radiation, tobacco products,        risk of gangrene was not properly warned on the label.
                                             Levine brought her case against Wyeth Pharmaceuticals to
and cosmetics. The FDA reviews the           the Supreme Court and won her case. The rulings
safety and effectiveness of new              determined that FDA oversight is not specific enough to
products before they reach the market.       provide guidelines for labeling, and that ultimately, the drug
                                             company is responsible for explaining the risk of the drug.
After a product is on the market, the        Wyeth v Levine set a precedent for future cases that clearly
agency oversees its manufacturing and        disadvantaged pharmaceutical companies who face
handling. The FDA also develops the          thousands of lawsuits against them.
standards and regulations that
companies must follow to make safe and
effective products. In addition, the FDA supports litigations for breaches of FDA
standards and regulations.
        New warning labels for tobacco products are going to be required in 2012. The
change is from mere words to a different set of graphics pictures and language.




        C. United States Food and Safety Inspection Service (FSIS)


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        The United States Department of Agriculture’s (USDA’s) consumer protection
body is the United States Food and Safety Inspection Service (FSIS). The FSIS regulates
the safety of meat, poultry, and egg products and the labeling and packaging of these
products. The FSIS’s responsibilities are summarized below.

                                Responsibilities of the USDA:

                 Expand markets and support international agricultural trade

                        Finance more jobs and housing in rural areas

                     Support utilities and infrastructure in rural America

                                 Reduce food-borne hazards

                Provide food assistance and nutrition education and awareness

                            Manage public and private U.S. land

                                From: (http://www.usda.gov/)




        D. United States Consumer Protection Safety Commission (CPSC)
        The Consumer Protection Safety Commission (CPSC) regulates more than 15,000
products which are divided into six major
                                               A very large area of the CPSC’s activity falls under consumer
categories: child products, toys, household product recalls, in which a specific brand and model of a product
products, outdoor products, sports and        is called in by a consumer who deems it dangerous or defective.
recreational products, and specialty             These recalls are published daily and usually imply a strong
products. The CPSC issues standards with         recommendation to cease using the product. A consumer in
                                                 possession of the defective model can send it in to receive a
which industries must comply and also
                                             partial or full rebate, or a replacement. There is no end date to a
does research on potential product hazards.    product recall period. Upon receiving and reviewing a product
Companies are responsible for conducting     recall, standard CPSC policy is to send the complaint back to the
primary research before their goods are      consumer for personal verification of all facts. The complaint is
offered for sale to the public. Though the  then sent to the manufacturer. Investigative research may be done
                                             by the CPSC at the agency’s discretion. They receive thousands
CPSC does not test products before they go
                                               of product recalls and are responsible for over 15,000 different
on the market, the agency does recall items    kinds of products, so it is quite impossible to research them all.
                                                                                (www.cpsc.gov)
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        that are either unreasonably dangerous to the public or violate one of its issued standards.
        The CPSC can also ban products and/or require them to install extra safety features if
        deemed necessary.
                E. National Highway Safety Traffic Administration (NHTSA)
                   The National Highway Safety Traffic Administration
          (NHTSA) is part of the Department of Transportation. The
          NHTSA is responsible for carrying out highway safety and
          consumer programs previously carried out by the National
                                                             Highway Safety
New CAFÉ Standards                                              Bureau. The
                                                                NHTSA regulates
President Obama announced new CAFÉ standards in May             motor vehicles,
of 2009. The new standards project a goal of achieving
35.5 mpg fuel efficiency in the year 2016, four years           child seats, tires, air bags, and brakes. The
earlier than previously required. Stricter guidelines aim to    NHTSA develops and enforces safety
cut greenhouse gas emissions and lessen our dependence
on oil; however, hindering consumer choice is a                 standards for motor vehicles, tests motor
widespread source of concern.                                   vehicles for safety, and licenses vehicle
                                                               manufacturers. The agency is also
          responsible for enforcing the Corporate Average Fuel Economy Act (CAFÉ), whose
          purpose is to encourage the production of fuel-efficient vehicles.



                F. State Attorney General
                The Attorney General’s Office provides
        consumers with assistance for filing complaints
        against businesses that have committed fraud against
        the consumer. The assistance includes providing
        relevant information to consumers and directing them
        to the pertinent agencies. The Attorney General,
        however, does not provide legal services. Missouri’s
        2010 Attorney General is Chris Koster.
                G. Local Prosecutors
                Local prosecutors take legal action against criminally negligent scams on
        consumers. Local prosecutors also act against fraudulent use and procurement of debit or
        credit devices and identity theft. In addition, local prosecutors also fight against
        exploitation of the elderly and disabled among many other issues regarding consumer
        protection at the local level.
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       H. Small Claims Courts
                 Small claims courts are judicial institutions at the
state level that protect consumers by hearing civil claims cases under
a dollar maximum. Small claims courts hear simple cases where the
civil claim does not exceed $3,000. The $3,000 limit does not
include the court costs and interest rate on the $3,000 that may be
awarded by the judge.


                                  V. Consumer Protection in Advertising
                                       A. Deceptive Advertising
                                          There are three standards that determine what
                                  defines a “deceptive” advertisement. First, there must be
                                  a misrepresentation that is likely to mislead consumers. If
                                  the product does not fit the purposes for which it is sold,
                                  then the advertising is considered deceptive. Also, either
                                  the misrepresentation or the omission of fact must cause
                                  customers to form false beliefs for a product’s intended
                                  use. In addition, if services promised under a warranty or
                                  contract are not performed by the company, the
                                  advertisement can also be considered as misrepresenting
the product.
        The second standard is that a reasonable number of consumers must be misled.
The Commission considers numerous questions in deciding whether or not a significant
amount of consumers have been misled. The Commission considers issues such as how
clear the representation is, how conspicuous the information is, and how familiar the
public is with the service or product.
        The third standard is that the representation, omission, or practice must be
material. A material representation or practice is one which is likely to affect the choice
or conduct of an average prudent consumer. Claims involving health, safety, or other
areas with which consumers are concerned are considered material.




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       B. Statistics
        When claims such as
“nine out of ten consumers
                                                              A Word on Advertising…
prefer this product,” “studies
show,” “tests prove,” and etc.           The FTC regulates advertising and labeling of consumer products. In
                                         order for it to be considered legal, the advertising must not be
appear in an advertisement,              deceptive or unfair. The FTC looks for the following in deceptive
then the Commission expects              advertising:

the company to have at least the             -   the actual word choice/content is misleading (or ambiguous)
advertised level of                          -   the advertising is likely to mislead a normal, intelligent
substantiation in the form of                    consumer (not just a dummy)
research. If the advertisement               -   there is proof that a consumer actually acted in ways
contains claims implying to                      consistent with the deceptive claim of the ad
consumers that the company               Here are some standards for advertising:
has some level of support, the               -   Tobacco: Under §1333, any packaging, ads, or billboards
company must have the amount                     regarding cigarettes must include a Surgeon General’s
                                                 Warning label
and type of support that it
actually conveys to consumers.               -   Environmental Labeling: the more specific it is, the less
                                                 likely it will be deceptive. Claims of recycled material must
Consumer surveys and expert                      be very specific (EG: “recycled box” is better than
testimony may be used to                         “recycled material,” which is more ambiguous and more
                                                 open to claims for deception.)
determine the level of
substantiation consumers                     -   Labels: must identify commodity, name and place of
                                                 business of manufacturer/packer/ distributor, and net
expect.                                          quantity expressed in largest whole unit
       C. Endorsements                           (http://www.ftc.gov/>)

        The FTC uses the terms
endorsements and testimonials interchangeably. The FTC defines endorsement as “any
advertising message (including verbal statements, demonstrations, or depictions of the
name, signature, likeness or other identifying personal characteristics of an individual or
the name or seal of an organization) which consumers are likely to believe reflects the
opinions, beliefs, findings, or experience of a party other than the sponsoring advertiser.”
There are three types of endorsements. The first one is consumer endorsements, i.e.
endorsements featuring users of the product or service being sold. Another type is expert
endorsements or the opinions of acknowledged experts qualified in the relevant field of
study. For these types of endorsements, supporting evidence, such as tests, must be
provided. The last type of testimonial is that by an organization. These endorsements
represent the opinions of a group whose collective experience exceeds that of any
individual member.
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        D. Retroactive Advertising
        If a false advertisement runs long enough to become ingrained into the society,
the FTC can order retroactive advertising. Retroactive advertising means that the
company has to correct the mistaken beliefs it has created, or take back what they have
said in a new advertisement.


VI. Consumer Protection in Labeling
        Some sort of labeling is required on
almost everything in today’s market. Labeling
is required on food, clothes, cigarette warnings, new        Large US manufacturers
                                                             participate in a labeling program
automobile stickers, EPA fuel ratings, and used car
                                                             called Smart Choices. This
warranties. The required label on food, for example,         program informs consumers of the
is the nutrition facts. The requirement information on       calories per serving and servings
the nutrition facts includes the serving size, servings      per container on qualified items.
                                                             The check-marked label identifies
per container, and the amount of food per serving.           the food as a healthy selection in
For clothing the labeling is different. Clothing labels      its specific product category, based
require a listing of what the clothes are made of,           on the Dietary Guidelines for
                                                             Americans.
cleaning instructions, and where the clothes are
made.
                                            Cigarette warning labels are different than food
                                    and clothing labels. Cigarette packages must list the
                                    Surgeon General’s warnings. In 1981, Congress passed
                                    the Comprehensive Smoking Education Act. This act
                                    required four specific health warnings on all cigarette
                                    packaging and advertisements. These four warnings are
                                    1) Smoking Causes Lung Cancer, Heart Disease,
                                    Emphysema, and May Harm Pregnancies, 2) Quitting
                                    Smoking Now Greatly Reduces Serious Risks to your
                                    Health, 3) Smoking by Pregnant Women May Result in
                                    Fetal Injury, Premature Birth, and Low Birth Weight,
                                    and 4) Cigarette Smoke Contains Carbon Monoxide.
                                    As mentioned, new more graphic warnings will be
                                    required in 2012.




Chapter 11: Consumer Protection                                                           Page 8
                                                  WARNING: Smoking can kill you.

More than 1,200 people a day are killed by cigarettes in the United States alone, and 50
percent of all long-term smokers are killed by smoking-related diseases. Tobacco use is
the cause of death for nearly one out of every five people in the United States, which adds
up to about 443,000 deaths annually.

         New automobiles have a required sticker label as well. This sticker has the
suggested list prices for the base, the options and the delivery costs. It also states the gas
mileage. The labeling for the EPA fuel ratings must display a car’s estimated mileage on
city streets as well as highways. Used automobiles also have a required label, which
indicates to a buyer whether or not the car has a warranty. If no warranty is listed, it
signifies that the buyer is taking the car as is, or without a warranty of any kind.

VII. Consumer Protection in Sales
      A. Bait and Switch
       A bait and switch occurs when a company advertises a product at a low price to
attract customers in the store. The company then claims that they are out of the product
while trying to convince a customer to buy a different product at a higher price. This
practice is regulated by the FTC or the state attorney general.
       B. Home Solicitation Sales
       Consumers have a three-day cooling off period to cancel transactions made with
door-to-door sellers. This regulation extends to phone and internet sales as well.
       C. Mail, Phone, or Internet Order Rule
        Companies must deliver the product sold within 30
days or the customer has the right to cancel the order. An

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exception to this is when the customer is informed at the time of purchase that the
transaction will take longer than 30 days.
       D. Inflated List Prices
        Inflated list prices occur when companies set prices above the manufacturer’s
suggested retail price. Then, they try to scam customers by "lowering" the price and
calling it a sale. This practice is considered faking a sale price.




       E. A la Carte Pricing for Funeral Homes
        Federal regulations require that funeral homes disclose a full list of detailed prices
for services offered. In the past, funeral homes offered package deals that sometimes
included thousands over what are actual, necessary expenses (for example, a deceased
person who is cremated pays for the price of a casket). Also, families are not required to
buy a casket directly from the funeral home, which in the past, was not made apparent to
consumers. Funeral home packages are an area of concern in the arena of consumer
protection because consumers are in an extremely vulnerable situation at the time of sale.
Family members of a lost loved one are likely not in the mood to “fuss” over fair pricing,
and can easily be taken advantage of.


VIII. Credit
      A. Truth in Lending Act (TILA)
       The Truth-In-Lending Act (TILA) is a federal law that was passed in 1968 that
requires that the terms of the lending agreement and all costs be clearly stated.
For example, lenders and creditors have to give customers the annual percentage
rate (APR) for consumer transactions of $25,000 or less or consumer residential
transactions (real estate). The lenders and creditors can be sued or incur other
penalties if this information is not disclosed.
        TILA also allows for consumers to cancel some credit transactions and
provides a way for fair and timely settlement of credit billing disputes. TILA also
places limitations on some home equity plans. Finally, TILA also disallows some credit
actions that are secured by a consumer’s home.
       B. Credit Card Liability
       If a consumer loses a credit card and reports it before the card is used, he or she
has zero liability. If a consumer reports the credit card stolen after the card has been used,
Chapter 11: Consumer Protection                                                        Page 10
the consumer’s maximum liability is $50. There are also a few other restrictions for credit
card companies. For example, it is illegal to charge more for a credit card payment than it
is to charge for a cash payment unless agreed to before the transaction is completed.
Also, it is illegal to send out an already-activated, non-solicited credit card.
       C. Debit Card Liability
        If a debit card is lost or stolen and is reported before it is used, a consumer has
zero liability. If the debit card is reported within the first two business days, a consumer
has a $50 liability. If the card is reported after two days, a consumer has a $500 liability.
If the card is not reported within sixty days, the cardholder is liable for any amount
charged on the card.
       D. Balloon Payment Clauses
        A balloon payment is a large payment at the end of a payment series that is larger
than the normal monthly payment. This payment usually takes care of the unpaid balance
of the loan at a specified date. It is not automatically illegal, but the balloon payment
clause must be prominently displayed on the lending contract.
       E. Acceleration of Payment Clauses
        A company that gives out a loan has the right to sue for full repayment of the loan
at anytime. However, the company must have adequate justification for the lawsuit. For
example, the customer may have defaulted on payments. Another two examples of
adequate justification is if a customer does not maintain insurance on a car subject to a
car loan or if a borrower is trying to sell a car subject to a loan without telling the lender.
       F. Equal Credit Opportunity Act
        The Equal Credit Opportunity Act is an anti-discrimination law. The act states
that lenders cannot discriminate by race, religion, origin, race, sex, marital status, source
of income, or any other demographic factor when giving out a loan. An example of a
violation of this act is an activity called red lining. Red lining is when banks choose
geographical regions or neighborhoods to always deny loans to.
       G. Fair Credit Reporting Act
         The Fair Credit Reporting Act regulates the collection, dissemination, and use of
consumer credit information. The Fair Credit Reporting Act is the basis for consumer
credit rights. The act protects consumers against false information and abuses in their
credit history reports.
         There are three main credit reporting entities: TransUnion, Equifax, and Experian.
The credit reporting agencies have three main roles. The credit agencies are responsible
for providing accurate credit information to consumers and for notifying consumers of

Chapter 11: Consumer Protection                                                        Page 11
previous negative credit activity if                    How to get your Free Annual Credit Report
the activity is put back into the
                                                 1.   Go to www.annualcreditreport.com
consumer’s credit information.                   2.   Select your state from the drop down menu and click
However, credit reporting entities                    “GET STARTED.”
cannot keep negative information in              3.   Fill out the form with information about yourself.
                                                 4.   Once your form is filled out completely, choose one of the
the credit report for an unreasonable
                                                      “Big 3” agencies, Experian, Equifax, or TransUnion, to
amount of time.                                       process your credit report.
                                                 5.   Print or save your free annual credit report.

        Creditors themselves provide
                                            WARNING: You may only view your credit report for a certain
information to these agencies. The          amount of time for free. Avoid the pop-ups and offers along the
creditors must provide accurate             way that will try to trick you into purchasing other services!
information, investigate and correct
disputes and negative information,
and report to consumers when
negative information will go on to the consumer’s credit report. Many people can access
a consumer's credit report, such as potential employers and other creditors. The creditors
have the duty to let the consumer know if adverse action was taken against them due to
something in a credit report, and the creditors also have to let the consumer know which
of the three agencies the creditor used so that the consumer can verify or contest
information.
        Consumers are given free access to a credit report once a year. Consumers can
dispute false information in their credit reports. Credit agencies must, by law, adopt
reasonable procedures to maximize the accuracy of the report, display only current
information in the report (usually seven to ten years worth depending on the type of
information), and ensure that users of the information are only using it for legitimate
business needs. Often, mistakes exist in credit reports. A consumer has the right to sue in
a state or federal court and recover damages for willful noncompliance with the act by
any parties involved.
                                                           H. Fair and Accurate
                                                      Credit Transactions Act
                                                      (FACT)
                                                               The FACT is a set of
                                                      amendments to the Fair Credit
                                                      Reporting Act which protects
                                                      consumers from identity theft and

Chapter 11: Consumer Protection                                                              Page 12
fraudulent reporting of financial information. Consumers have the right to file reports of
identity theft with credit reporting agencies
and to have the report reflected in the         Zombie Debt
consumer’s credit reports that outside          Zombie debt is years old debt that can come back to
users see. The FACT also requires that          haunt consumers through bill collectors. Many
the FTC and other government agencies           times consumers have debt that is so old that the
                                                debtors have given up on collecting a payment. This
oversee the standard settings in how            happens with debt from a membership at a gym,
companies get rid of customers’ financial       expenses at a health care facility, and even with
information, ensuring that it is done           credit card companies, occasionally. When a
                                                customer fails to pay their bills after a certain
safely.                                         amount of time has passed, these entities sell the
     I. Credit Card                                    debt to collection agencies for pennies on the dollar.
                                                       The statute of limitations has frequently passed on
Accountability, Responsibility,                        collecting these debts. Consumers should educate
and Disclosure Act (Credit                             themselves about which debts they truly owe and
                                                       those they don't.
CARD Act)
         On May 22, 2009, President Barack
Obama signed into the law the Credit Card Accountability, Responsibility, and
Disclosure Act (Credit CARD Act). The new act attempts to improve customer
disclosures and stop some bad-faith practices in the credit card industry. Overall, the
Credit CARD Act introduces 8 major changes in the credit card industry.1
         First, the credit card issuers will no longer be allowed to retroactively raise
interest rates unless the rate increase is triggered by a 60-day payment delinquency or a
promotional rate expiration. In addition, credit card issuers will be forced to lower the
interest rate to the previously lower rate (i.e. if the increase was triggered by a 60-day
payment delinquency). Second, consumers will now get a 45-day notice of rate hikes
before the change occurs. However, the 45-day notice rule only applies to rate hikes and
not to limit changes. Third, overlimit fees will be limited to one per cycle unless a
consumer agrees to allow the credit card company to approve overlimit purchases.
         Next, student consumers must now either show an independent source of income
or provide a co-signer over the age of 21 to get approved for credit. Fifth, the Credit
CARD Act eliminated double-cycle billing. The sixth change is fairer payment allocation
in that monthly payments must be applied to higher-interest charges first. The next
change is that credit card companies must now send statements 21 days (versus the



1
 Leslie McFadden, Bankrate Website: 8 Major Benefits of New Credit Card Law, 2010, Retrieved July 18,
2010, from http://www.bankrate.com/finance/credit-cards/8-major-benefits-of-new-credit-card-law-1.aspx.
Chapter 11: Consumer Protection                                                                  Page 13
    previous 14 days) before a monthly payment is due. The eighth and final change is that
    there are new gift card protections.2


                J. Fair Debt Collection Act
               The Fair Debt Collection Act regulates how bill collectors can interact with
     customers owing money. This Act protects consumers from overly aggressive, deceptive,
     and unfair actions taken by debt collectors. For example, debt collectors can only speak
     with the debtor. Also, debt collectors can only contact a consumer during normal
     business hours and only at home if personal calls are not allowed at the consumer’s place
     of work. Furthermore, the debt collector must stop contact upon receipt of a written
     notification that the debt will not be paid or that the debtor desires to end communication.
     Debt collectors cannot contact debtors if legal counsel represents them, unless the
     attorney has given consent.
                                                             There are three types of practices
                                                            specifically forbidden by this act. The
Bank Overdraft Fee Regulations
                                                            first is harassment, oppression or
Banks are making an estimated 45 billion dollars per        abuse by the debt collector. Violence
year on overdraft fees and the government is cracking
down. Consumers incur overdraft fees of $35 or more
                                                            and inappropriate language are
for a purchase of anything that exceeds their account       examples of this. The second is giving
balance (even if it is a small purchase such as a cup of    false or misleading
coffee). With the current system, banks can charge
                                                            misrepresentations. A debtor cannot
multiple overdraft fees per day, which can add up to
hundreds of dollars in fees before the cardholder is        lie about or make up consequences
notified.                                                   for not paying the debt or information
On July 1, 2010, banks will be required to contact          about the debt to scare the debtor. The
account holders and give them the option to “opt-in” or     last practice forbidden is that debt
“opt-out” of nationally standardized coverage. If they      collectors cannot engage in unfair
opt-in, then the bank will send them guidelines of how
the overdraft fees will work in order to ensure their
                                                            practices like collecting the wrong
complete consent. If they opt-out, overdrawing their        amount of money, making a collect
account will result in the purchase being denied before a   phone call to the debtor on a false
transaction takes place.
                                                            pretense, or making unjustifiable
                                                            claims on the debtor’s belongings and
                                                            property.




    2
        Ibid.
    Chapter 11: Consumer Protection                                                        Page 14

								
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