Chapter 25 - Property and Consumer Law. Flashcards
Marla applies for and receives a three-year loan through Sharkey Lenders for $5,000 at 27% APR.If the loan agreement violates the applicable usury statute, Marla may be able to keep:
Answer
1.
the interest that exceeds the usury limit.
2.
all of the interest on the loan.
3.
the interest and the $5,000.
4.
Any of the answer choices are possible, depending on where the loan was made.
4
John purchased $600 worth of clothes from Clothing Mart. He paid for the clothes with a credit card. When he received his statement, he sent the credit card company a check for $600. The credit card company mistakenly recorded his payment as $60. When John received his next statement, he noticed the $540 error and contacted the credit card company. A few days later when he attempted to use his card to buy gasoline, he was told by the cashier that the card had been canceled and she was instructed to take his card. John was shocked, embarrassed, and angry. When he contacted the credit card company, it pointed out a provision in his initial contract for the card that stated the company could revoke his card privileges at any time with or without cause. Such a provision within the credit card contract is:
Answer
1.
an illegal contract of adhesion.
2.
unconscionable.
3.
valid unless state legislation prohibits such clauses.
4.
not binding, as a person cannot waive the statutory rights granted to him by federal credit card legislation.
4
Grady receives a $12,940 credit card bill in the mail from a company with which he did not open an account. He fears he is a victim of identity theft. Does he have any recourse?
Answer
1.
Yes, under the Fair Credit Billing Act he may call the credit card company to complain about the bill, and the credit card company must investigate and correct any errors.
2.
No, he should have been more careful with his personal information so no one could have applied for credit in his name.
3.
Yes, under the Truth in Lending Act, Grady is liable only for the first $50 in unauthorized charges.
4.
Yes, under the Fair and Accurate Credit Transactions Act (FACTA), Grady can place an alert in his credit files using the National Fraud Alert System.
4
The Fair Debt Collection Practices Act prohibits which of the following practices?
Answer
1.
A debt collector falsely representing himself as a lawyer.
2.
Using neighbors to locate the debtor.
3.
Visiting a debtor at work if the employer permits personal visits.
4.
A debt collector telephoning the debtor at 8:00 a.m.
1
The maximum rate of interest for credit transactions is established by: Answer 1. the Federal Reserve Board. 2. the FTC. 3. state law. 4. federal law.
3
The Consumer Leasing Act requires a lessor to disclose in writing all EXCEPT: Answer 1. lease rates of the competition. 2. number of payments. 3. penalties for late payments. 4. penalties for early termination.
1
John purchased $600 worth of clothes from Clothing Mart. He paid for the clothes with a credit card. When he received his statement, he sent the credit card company a check for $600. The credit card company mistakenly recorded his payment as $60. When John received his next statement, he noticed the $540 error and contacted the credit card company. A few days later when he attempted to use his card to buy gasoline, he was told by the cashier that the card had been canceled and she was instructed to take his card. John was shocked, embarrassed, and angry. When he contacted the credit card company, it pointed out a provision in his initial contract for the card that stated the company could revoke his card privileges at any time with or without cause. What federal law applies to this particular situation? Answer 1. Fair Credit Reporting Act. 2. Fair Credit Billing Act. 3. Equal Credit Opportunity Act. 4. Truth in Lending Act.
2
Under FTC rules, a customer can cancel a door-to-door sales contract within:
Answer
1.
a “reasonable time” after the sale was made.
2.
one calendar week from the date the sale was made.
3.
three business days of the sale.
4.
five business days of the sale.
3
Millie ordered clothes from a mail order catalog. No time was specified as to when the goods would be shipped. In such a case the FTC requires that the company must ship the goods to Millie:
Answer
1.
within 3 business days after receiving the order.
2.
within 10 business days after receiving the order.
3.
within 30 days after receipt of the order.
4.
within a reasonable time and within time lines consistent with industry standards.
3
What does Section 5 of the Federal Trade Commission Act (FTC Act) prohibit?
Unfair and deceptive acts or practices.
Under the FTC Act, when is an advertisement deceptive?
If it contains an important misrepresentation or omission that is likely to mislead a reasonable consumer.
When is an advertisement claim misleading and not puffery?
When the claim is specific and measurable.
What is Bait & Switch?
A practice where sellers advertise products that are not generally available but are being used to draw interested parties in so that they will buy other items.
A merchant may not advertise a product and then disparage it to consumers in an effort to sell a different (more expensive) item. In addition, merchants must have enough stock on hand to meet reasonable demand for any advertised product.
What are three guidelines the FTC established regarding merchandise bought by mail, telephone, or online?
- Sellers must ship an item within the time stated or, if not time is given, within 30 days after receipt of the order.
- If the company cannot ship the product when promised, it must send the consumer a notice with the new shipping date and an opportunity to cancel. If the new shipping date is within 30 days of the original one, and the consumer does not cancel, the order is still valid.
- If the company cannot ship by the second shipping date it must send the consumer another notice. The time, however, the company must cancel the order unless the customer returns the notice, indicating that he still wants the item.
What does the FTC prohibit telemarketers from doing? 3
- Calling any telephone number listed on its do-not-call registry.
- Blocking their names and telephone numbers on Caller ID systems.
- Robocalls from a machine are illegal unless the telemarketer obtains written permission from the person being called.
What does Section 5 of the FTC Act say about unordered merchandise?
Anyone who receives unordered merchandise in the mail can treat it as a gift.
What does the FTC Act say under their door-to-door rules?
Under the door-to-door rules, a salesperson is required to notify the buyer that she has the right to cancel the transaction prior to midnight of the third business day thereafter.
This notice must be given orally and in writing.
The seller must return the buyer’s money within 10 days.
What are usury statutes?
Laws that state pass to limit the maximum interest rate a lender may charge to consumers.
What products do usury statutes not typically apply to? 4
- Credit Card Debt
- Mortgages
- Consumer Leases
- Commercial Loans
What are possible remedies to a buyer under the usury statutes?:
The borrower may be allowed to keep:
- The interest above the usury limit
- All of the interest
- All of the loan and the interest
What does the Trust in Lending Act (TILA) not regulate? 2 What does it regulate? 1
It does NOT regulate: -Interest rates -Terms of a loan It DOES regulate -requiring lenders to disclose the terms of a loan in an understandable and complete manner.
Who must comply to the Truth In Lending Act but not Usury Statutes?
Credit Card Companies
What are three things that the Truth in Lending Act requires of companies?
1) The disclosure must be clean and in a sensible order
2) The lender must disclose the finance charge (amount in dollars the consumer will pay in interest and fees over the life of the loan)
3) The creditor must disclose the APR.
What does the Truth In Lending Act (as amended by the Dodd-Frank Act) require of mortgage lenders? 3
1) Make a good faith estimate to determine whether a borrower can afford to repay the loan.
2) May not coerce or bribe an appraiser into misstating a home’s value
3) Cannot charge prepayment penalties on adjustable rate mortgages.
What is a subprime loan?
A loan that has an above market interest rate because the consumer is high risk.
(First mortgages that have an APR 1.5% or more above the average prime offer rate or second mortgages that have an APR of 3.5% above that index.
What are the Trust In Lending Acts rules regarding subprime loans? 2
- May not make loans that have balloon payments (very large payments at the end of the loan term)
- May not charge excessive late fees.
Under the rules congress passed regarding credit card bill payment, what can companies do or not do? 8
- Cannot increase the interest rate, fees, or charges on balances a consumer already has run up unless she is more than 60 days late in making the minimum payment.
- Must give 45 days notice before increase a card’s APR
- Cannot charge late payment fees of more than $25 (unless one of the consumer’s last six payments was late, in which case the fee may be up to $35)
- Cannot charge late fees that are greater than the minimum payment owed.
- Cannot charge interest on fees or on a bill that is paid on time or during a grace period.
- Must apply any payments to whichever debt on the card has the highest interest rate.
- Must offer consumers the right to set a fixed credit limit. Consumers cannot be charged a fee is the company accepts charges above that limit unless the consumer has agreed to the fee.
- Cannot issue credit cards to people under 21 unless the young person has income or the applicant is co-signed by someone who can afford to pay the bills.
