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Chapter 18 - Regulations Protecting Consumer Purchases, Privacy, and Financial Activities
18-9
Emphasize:
N Due to complaints that some debt-collection agencies used techniques of harassment,
deception, and personal abuse to collect debts, Congress in 1978 passed the Fair Debt
Collection Practices Act (FDCPA).
That the act applies the primary business of collecting consumer debts. Included is debt
collection by the Internal Revenue Service and by attorneys. Creditor collection efforts
are exempt from the act.
Table 18.2—“FDCPA’s Regulation on Collection Methods of Collection Agencies”
FDCPA Remedies and Enforcement
Discuss:
V If the consumer debtor desires to stop the debt collector from repeatedly contacting
him or her about payment, the debtor need only notify the collector in writing of this
wish.
Violations of the FDCPA entitle the debtor to sue the debt collector for actual
damages, including damages for invasion of privacy and infliction of mental distress,
plus court costs and attorney’s fees.
Case 18.3—“Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA”
State Laws Regulating Debt Collection
Explain:
Congress specified that the FDCPA does not preempt state laws regulating debt
collections so long as they are stricter than FDCPA standards.
B. Consumer Financial Protection Act
Explain:
How, at the height of the recession in 2010, Congress passed the Consumer Financial
C. Bankruptcy
Emphasize:
Chapter 18 - Regulations Protecting Consumer Purchases, Privacy, and Financial Activities
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That Congress is authorized to establish bankruptcy laws by the Constitution and that
That bankruptcy may be initiated by the debtor filing a voluntary petition or by one
or more creditors filing and involuntary petition. The creditors who sign an
involuntary petition must be owed at least $$2,300.
That two alternatives are possible in a bankruptcy proceeding, Chapter 7 liquidation
and Chapter 13 adjustment.
How Congress amended the bankruptcy law in 2005 to force above median income
earners to adjust their debts rather than have them liquidated.
Trustee in Bankruptcy
Explain:
The trustee in bankruptcy and the powers of the trustee.
The trustee is someone elected by the creditors to represent the debtor’s estate in
taking possession of and liquidating (selling off) the debtor’s property.
Creditor Priority
Discuss:
That under bankruptcy laws, certain creditors receive priority over others in the
Explain:
The significance of bankruptcy discharge and the debts that cannot be discharged.
Also explain the circumstances under which a debtor will be denied discharge.
D. Additional Consumer Protection
Chapter 18 - Regulations Protecting Consumer Purchases, Privacy, and Financial Activities
18-11
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Explain:
Fair Credit Billing Act—administered by the Federal Trade Commission, this act
limits liability on lost, stolen, or misused credit cards to $50. Establishes rules for
resolving billing disputes with the credit card issuer.
Electronic Fund Transfer Act —administered by the Consumer Financial Protection
Bureau this act limits liability on lost, stolen, or misused automatic teller and check
cards (debit cards) to $50 if reported within two business days of consumers’
learning of a misuse.
Additional Matter for Discussion:
Mention the change that began in 2008 with consumer credit spending and debt.
Instructors need to enter into a discussion about the consumer savings rate. People will
spend. According to the New York Times (11/12/08), “For decades—from the 1950s
through the 1980s—Americans spent about 91 percent of their income, on average, and
put away the rest. In the last few years, they have spent close to 99 percent and saved
only about 1 percent.” Observe that a major cause of the 2008 recession was a
tremendous rise in consumer debt, and that when consumers finally stopped spending
the economy went into recession. As production consequently declined, joblessness rose,
and consumer spending declined even more. However, even in this downward spiral,
which Washington tried to bring under control with stimulus packages, debt collection
remained an issue.
In 2005, personal bankruptcies soared to 2 million. However, in the year Congress
amended the bankruptcy law to make it much more difficult to get Chapter 7 liquidation
as opposed to Chapter 13 adjustment of debts. In 2006, bankruptcies declined to
573,000. Since then, however, even under the more stringent requirements, bankruptcies
have been rising again, to over 800,000 in 2007 and over a million in 2008 according to
the American Bankruptcy Institute.
In the early years of the new millennium, rising home prices staved off personal
Chapter 18 - Regulations Protecting Consumer Purchases, Privacy, and Financial Activities
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limit.
The creditor may not threaten your credit rating or report you as delinquent while your
bill is in dispute. However, the creditor may report that you are challenging your bill. In
addition, the Equal Credit Opportunity Act prohibits creditors from discriminating
against credit applicants who exercise their rights, in good faith, under the FCBA.
Simply put, you cannot be denied credit simply because you’ve disputed a bill.”
Discuss the federal law called the Buckley Amendment, which requires that educational
institutions protect student privacy regarding grades and other information. Explain that
the law is relatively toothless in that the only enforcement of it is through the
withdrawal of federal funds from an institution, which has never been done because of
merely accidental disclosure violating student privacy.
Explain that the legal concept of privacy is only about a hundred years old, but that the
concept of the legal fence protecting some object is very old. Once one’s “solitude” is
recognized as an object protected by the legal fence under specific circumstances, one
can look to the state for enforcement. Although we may call this protection “privacy,” it
is merely the extension of the legal fence of property to a new object.
Answers to Review Questions and Problems
The Federal Trade Commission
1. The FTC and Trade Practice Regulation
a. A cease and desist order comes from an administrative law judge and is mandatory. A
2. FTC Penalties and Remedies
3. False and Deceptive Advertising
Chapter 18 - Regulations Protecting Consumer Purchases, Privacy, and Financial Activities
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Consumer Privacy
4. Limitations on Government
Although the government does provide protection against searches, it is to a limited extent.
5. Traditional Business Privacy
6. Electronic and Online Privacy
BigCo may be held responsible for monitoring calls on the office landline phones. This is
7. An online backpack store sells many products that are popular with elementary school
children. The store knows some children under 10 subscribe to the store’s coupon service. Is
8. Should what people say and do on computers be protected by a legal fence, or should these
activities be freely available to businesses wishing to use the information they provide for
Chapter 18 - Regulations Protecting Consumer Purchases, Privacy, and Financial Activities
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monitor and protect all online activity. Businesses can use online materials for marketing
purposes. However, in addition to legal fences, they also need to have their own protection
systems in place.
Federal Credit Regulations
9. The Equal Credit Opportunity Act
10. The Fair Credit Reporting Act
11. The Truth-in-Lending Act
The finance charge includes all charges payable directly or indirectly by the debtor to the
creditor as a condition of the extension of credit. Charges such as interest, service charges,
loan fees, points, finders fees, fees for appraisals, credit reports, and life or health insurance
required as a condition of the loan are included as part of finance charges. Recording fees,
taxes, title insurance, notary fees, and attorney’s fees for preparing deeds are not part of the
finance charges.
Debt Collection and Consumer Protection
12. The Fair Debt Collection Practices Act
Yes, Dan should write a registered letter to the credit bureau refusing to pay the debt and
13. Consumer Financial Protection Act
18-15
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
law greatly affecting individuals and the nation.
14. Bankruptcy
If discharge is given, it means that the debtor is no longer legally required to pay the debts
15. Additional Consumer Protection
Assuming that the spa is in her home state or within a 100 mile radius of her home and that
the contract involves over $50, Janet should write a letter to the last known address of the
spa demanding that the owner make good on the contract and then instruct the credit card
issuer to recredit her account.
Business Discussion #1
Consumer protection laws are related to the broad concept of property because they enforce the
legal fence of what belongs to consumers. These laws mostly prevent consumers from being
defrauded off what belongs to them, usually, their money. It is important for business people to
understand the relationship of property to consumer protection laws because for the most part,
business people support the concept of property, but they have also to grasp that property does
not mean they can do whatever they wish in business. They must observe the legal fences that
protect what is proper to consumers and respect the statutory enforcement of these fences. They
should appreciate that “the buyer needs a hundred eyes, the seller only one.”
