Chapter 26 - Government Regulation and Property

Question 1

unfair practices

Answer 1

the federal trade commission (FTC) prohibits “unfair and deceptive acts or practices” A practice is unfair if it violates public policy or if it meets all of the following three tests:

• it causes a substantial consumer injury
• the harm of the injury outweighs any countervailing benefit
• the consumer couldn’t to reasonably avoid the injury

Question 2

deceptive advertisement

Answer 2

the FTC considers an advertisement to be deceptive if it contains an important misrepresentation or omission that is likely to mislead a reasonable consumer

Question 3

consumer financial protection bureau (CFPB)

Answer 3

the CFPB is charged with regulating consumer financial products and services, including mortgages, credit cards, and checking accounts. The CFPB has the authority to take action those committing “abusive acts” against consumers

Question 4

bait and switch

Answer 4

FTC rules prohibit bait and switch advertisements. A merchant may not advertise a product and then disparage it (or make it unavailable) to consumers in an effort to sell a different item

Question 5

merchandise bought by mail, by telephone

Answer 5

under FTC rules for this type of merchandise, sellers must ship an item within the time stated or, if no time is given, within 30 days after receipt of the order

Question 6

do not call registry

Answer 6

the FTC prohibits telemarketers from calling or texting any telephone numbers listed on its do not call registry

Question 7

telemarketing

Answer 7

the telephone consumer protection act (TCPA) prohibits telemarketers from making autodialed and/or prerecorded calls or texts to cell phones and prerecorded calls to residential land lines unless the consumer unambiguously consents in writing

Question 8

unordered merchandise

Answer 8

consumers may keep as a gift any unordered merchandise that they receive in the mail

Question 9

door to door rules

Answer 9

under the FTC door-to-door rules, a salesperson is required to notify the buyer that she has the right to cancel the transaction prior to midnight to of the third business day thereafter

Question 10

payday loans

Answer 10

these high-interest-rate loans violate the usury law in some states

Question 11

truth lending act (TILA)

Answer 11

in all loans regulated by TILA, the disclosure must be clear and in meaningful sequence. The lender must disclose the amount financed, the total of payments, the finance charge, and the annual percentage rate

Question 12

mortgages

Answer 12

lenders must make a good-faith effort to determine whether a borrower can afford to repay the loan. they may not coerce or bribe an appraiser into misstating a home’s value. Nor may they charge prepayment penalties on adjustable-rate mortgages

Question 13

qualified mortgages

Answer 13

if lenders give a qualified mortgage, they are deemed to have compiled with TILA

Question 14

home equity loans

Answer 14

in the case of a high rate home equity loan, the lender must notify the consumer at least three business days before the closing that

1. he does not have to go through with the loan (even if he has signed the loan agreement)
2. he could lose his house if he fails to make payments.

If the duration of a high-rate home equity loan is less than five, it may not contain balloon payments

Question 15

rescinding a mortgage

Answer 15

if a lender violates any provisions of TILA, consumers have the right to rescind a mortgage (other than a first mortgage) for three business days after the signing if the lender is not the same as for the first mortgage. If this lender violates the disclosure provisions of TILA, the consumer may rescind for up to three years from the date of the mortgage

Question 16

credit card fees

Answer 16

credit card companies are not allowed ti increase fees and interest rates on any charges already incurred (until a cardholder has missed two consecutive payments). Such increases are only permitted for future purchases and only if the company gives the consumer 45 days notice and permits cancellation of the card

Question 18

Debit and ATM card fees

Answer 18

banks may not overdraw an account and charge an overdraft fee unless the consumer signs up for an overdraft plan

Question 19

prepaid debit card fees

Answer 19

issuers must disclose all fees before a consumer buys a card

Question 20

loss protection for credit cards and Apple Pay

Answer 20

a credit card holder is liable for only the first $50 in unauthorized charges made before the credit card company is notified that the card was stolen

Question 21

loss protection for debit, prepaid, and ATM cards, Venmo, and google pay

Answer 21

if the consumer reports the theft of a debit or ATM card within two days of discovering its the bank must make good on all losses above $50. If the consumer waits more than two days, the bank will only replace stolen funds above $500. if the consumer waits more than 60 days after receipt of the bank statement, the bank is not responsible for any losses.

Question 22

loss protection for gift cards

Answer 22

gift cards have no loss protection

Question 23

credit card disputes with a merchant

Answer 23

in the event of a dispute between a customer and a merchant, the credit card company cannot bill the customer if:

• she makes a good faith effort to receive the dispute
• the dispute is for more than $50, and
• the merchant is in the same state where she lives or is within 100 miles of her home

in practice, the credit card companies typically ignore the requirements that the merchant be in the same state or within 100 miles of the consumer’s home

Question 24

disputes with a credit card company

Answer 24

under the Fair credit billing act (FCBA), a credit card company must promptly investigate and respond to any consumer complaints about a credit card bill

Question 25

electronic funds

Answer 25

a consumer can stop payment on a transfer by oral or written notice up to three business days before the scheduled date

Question 26

errors in electronic fund transfers

Answer 26

if a consumer reports an unauthorized electronic funds withdrawal within 60 days of the date of the bank statement, she is not liable

Question 27

consumer reports

Answer 27

under the fair credit reports act (FCRA):
- a consumer report can be used only for a legitimate business need
- a consumer reporting agency cannot report obsolete information
- an employer cannot request a consumer report on any current or potential employee without the employee’s permission and
- anyone who makes an adverse decision against a consumer because of a credit report must reveal the name and address of the reporting agency that supplies the negative information

Question 28

obtaining credit reports

Answer 28

under the fair and accurate credit transaction act (FACTA), consumers have the right to obtain one free credit report every year from each of the three major reporting agencies. Also, anyone who penalizes a consumer because of her credit score must provide it to her at no charge

Question 29

debt collector

Answer 29

under the Fair Debt Collection Practices Act (FDCPA) a debt collector may not harass or abuse debtors

Question 30

credit discriminators

Answer 30

the Equal Credit Opportunity Act (ECOPA) prohibits any creditor from discriminating against a borrower in the basis of race, color, religion, national origin, sex, marital status, or age or because the borrower s receiving welfare

Question 31

warranties

Answer 31

the Magnuson-Moss Warranty Act requires any seller that offers a written warranty on a consumer product to disclose the terms of the warranty in simple and readily understandable language

Question 32

consumer product safety

Answer 32

the Consumer Product Safety Commission evaluates consumer products and develops safety standards, under the consumer product safety act (CPSA), manufacturers must report all potentially hazardous product defects within 24 hours of discovery