978-0078023859 Chapter 18 Solution Manual Part 2

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Chapter 18 – Regulations Protecting Consumer Purchases, Privacy, and Financial Activities

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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:

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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

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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

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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.”