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2. Dodd-Frank Wall Street Reform and Consumer Protection Act creates new Bureau of Consumer
3. Home Equity Loan Consumer Protection Act
G. Credit cards
1. Unsolicited credit cards prohibited
2. Credit cards for those under the age of 21
3. Surcharge on credit purchases prohibited
4. Unauthorized use
5. Unauthorized purpose distinguished
6. Late payment fees are permitted and regulated; limited
7. Credit Card Accountability, Responsibility, and Disclosure Act (CARD) of 2009
8. Credit card balance transfers
H. Gift cards
1. No expiration
2. Disclosures
I. Payments
J. Preservation of consumer defenses
K. Product safety
1. Consumer Product Safety Commission sets standards and recalls products
L. Credit, collection, and billing methods
1. Equal Credit Opportunity Act (ECOA)
a. Prohibits discrimination on bases of race, color, religion, national origin, sex, marital status, age or
2. Fair Credit Billing Act
3. Improper collection methods controlled
b. Fair Debt Collection Practices Act
i. Can’t threaten lawsuit unless intent is there
ii. Privacy protections on letters
DISCUSSION POINTS: Ethics & The Law
Getting Into Debt and Getting Debt Relief – From the Same Company
When one person or company is making both the loans and handling the climb from debt, they are setting up the
terms of the loans that almost guarantee failure to repay. The interest rates, the repossession, the harsh terms all set
up the borrowers for failure, Then the relief companies take a fee for straightening things out with the lenders, which
would be themselves. There is a no-lose proposition because if they are repaid, they make money. If they are not
repaid – they still make money. The conflict is that in neither situation are they looking out for the best interest of the
borrower, and they should be in one. But, they benefit if the consumer does not repay with higher interest rates or a
longer loan.
M. Protection of credit standing and reputation – Fair Credit Reporting Act
1. Privacy – limits on disclosure
2. Protection from false information
a. Request copy
CASE BRIEF: Smith v. E-Backgroundchecks.com, Inc
--- F. Supp. 3d ----, 2014 WL 1442677 (N.D. Ga.)
FACTS: On September 11, 2012, Tony Smith (plaintiff) applied for a job as a truck driver with Dart Transit
Company through Dart's student driver training program. Dart ordered a criminal background check
on Smith from E-Backgroundchecks.com (BGC). Dart ordered a U.S. OneSEARCH, which is an
automated computer search of BGC's nationwide criminal database programmed to return results
instantaneously. U.S. OneSEARCH reports are prepared by matching identifying information
provided by the end-users to identifiers contained within the public criminal records in BGC's
database, and BGC's practice is to report criminal records that match a consumer's full name and
date of birth.
Dart supplied the name “Tony Willie Smith,” his date of birth, the state within which he works, and
his social security number, though the social security number was not required. BGC's system
identified six criminal records matching plaintiff's first and last name and date of birth, and which did
not contain any middle name.
BGC returned these records to Dart in a two-step process. First, BGC provided Dart with a
summary screen showing basic information about each of the matching records. BGC's system
then required Dart to indicate, based on its review of the summary records, whether any records
did not match plaintiff. Dart did not indicate that any of the records supplied by BGC were not a
match to plaintiff and it, therefore, continued on to the second step of the process, which entailed
BGC providing Dart with a detailed view of the criminal records that carried over from another
screen. Dart was then able to review each record individually and was required to indicate whether
each record would negatively affect plaintiff's employment. Following this step, BGC then
completed and electronically returned the criminal background report to Dart at 4:51 p.m. on
September 12, 2012.
Because the report contained public criminal record information, BGC's system automatically
generated a letter to Smith, advising him that BGC had reported public record information to Dart
and enclosing a copy of the report, a summary of plaintiff's rights under the FCRA, and a dispute
form. The letter was dated September 12, 2012, and was mailed to Smith, which he admits he
received at his home some time after BGC transmitted the report to Dart.
Smith contacted BGC on September 17, 2012, and disputed the contents of the report he had
received from them. Two days later, on September 19th, BGC issued a corrected report removing
all of the previously reported criminal records provided on the September 12th report and showing
that Smith had no matching criminal records. That same day, BGC e-mailed a notice to Dart,
advising Dart that it had updated plaintiff's criminal background report. On September 20, 2012,
Dart approved plaintiff to begin the training program, which he began on September 25th.
On May 20, 2013, Smith filed suit against BGC, alleging BGC inaccurately reported his criminal
history on his consumer report and that in September, 2012, he applied for and was denied
employment with Dart due to the inaccurate information, which included convictions for possession
of a controlled substance by an unregistered person, carrying firearms without a license, and
criminal conspiracy. Smith alleged that BGC “continues to publish and disseminate such inaccurate
information to other third parties” in violation of the FCRA.
ISSUE: Does Smith have a claim under the FCRA?
REASONING: BGC furnished to Dart an indisputably inaccurate report that did not match plaintiff's full name and
social security number that Dart had provided to BGC. Since BGC had in its possession information
that could have been used to demonstrate the inaccuracy of the report it furnished to Dart, there is
a material dispute of fact as to whether BGC's initial search procedures were in fact reasonable in
this instance because “while requiring a [CRA] to go beyond the face of court records to determine
whether [those records] correctly report the outcome of the underlying action may be too much to
ask, requiring a [CRA] to correctly determine which public records belong to which individual
consumers is not.”
Dart provided plaintiff's complete name to BGC, but BGC returned records that only matched
plaintiff's first and last name, a very common name at that, and despite having in its possession
plaintiff's complete name and social security number, BGC took no steps prior to issuing its initial
report to confirm whether the “Tony Smith” criminal records it provided to Dart were associated with
the full name and social security number of plaintiff.
Plaintiff has also pointed to other matching identifiers that did not match his identifying information,
as well as shown that BGC is capable of utilizing social security numbers during the dispute
process to confirm whether the records are in fact a match to the individual. Indeed, [BGC] even
admitted that the automated computer program had no way of differentiating between individuals
with the same name and date of birth, and that after it compiled its initial matching records, it then
placed the burden on the prospective employer to indicate whether any records did not match the
individual.
Accordingly, BGC's motion for summary judgment as to this claim be DENIED.
3. Credit repair organizations
DISCUSSION POINTS: Ethics & The Law
Getting Into Debt And Getting Debt Relief – From The Same Company
When you have companies that are intertwined, as these are, the potential for conflicts is great. The debtor cannot
obtain independent advice because all involved have an interest in referring debt clients to other related entities.
Each entity makes fees as the debtors are shuffled through their system of lending, advice, counseling, and working
out the debt. The companies win no matter what, but the debtors do not receive independent advice.
N. Other consumer protections
1. Real estate development sales
a. Development statement with HUD
2. Service contracts
3. Franchises
4. Automobile lemon laws
ANSWERS TO QUESTIONS AND CASE PROBLEMS
1. Credit reporting. Under the Fair Credit Reporting Act, the agency is liable to “any consumer” for negligence
failure to comply with “any requirement imposed” by the act. One of the requirements imposed by the act is that
The lower court found that the agency was negligent in failing to exercise reasonable care in programming its
computer system and failing to employ reasonable procedures designed to compare the social security numbers
2. Advertising regulation. The commercial made television viewers believe that they were seeing with their own
eyes an actual test, and this would tend to persuade them more than it would if they knew that they were seeing
3. FDCPA. The court held that the application of the FDCPA was not limited to collections rising out of credit
extensions. Any collection of funds, even from a bad check, is covered under the FDCPA. Those who collect on
4. Credit cards. Thomas is correct. The maximum liability that the holder of a credit card has for its unauthorized
use is $50; but in order to impose that liability, certain conditions must be satisfied. The first of these is that the
5. Advertising; deception. A good argument to make is that while all of the ingredients are not strawberries, all of
the listed elements are indeed made from fruit. The huge class action suit continues to rumble through the
6. Franchises. No, IYC was not correct. Federal law requires advance disclosure about all aspects of the franchise
including current operations, financing, earnings, etc. The fact that the mix was available generally as opposed
7. Deceptive advertising. This case is very similar to an unpublished case from the Eastern District of Kentucky. In
that case, the plaintiff purchased a service contract from Best Buy and received a copy of the agreement when
he purchased a television set. Crail v. Best Buy Co., 2007 WL 2726102, at *1 (E.D. Ky. 2007), aff'd, 285 F. Appx.
277 (6th Cir.2008). The agreement contained a provision stating that “[t]his Plan is fulfilled when the product is
In considering the plaintiff's claims, the court found it necessary to dismiss because it was “undisputed that
plaintiff received the benefit of the bargain.... Nowhere in the Plan are there contrary terms that imply that any
The decision in Crail is persuasive. As in Crail, appellants purchased a television set and a service contract from
Best Buy. The set subsequently malfunctioned after the expiration of the manufacturer's warranty, and Best Buy
Appellants offer several additional arguments on the contract issue, none of which has merit. Essentially,
appellants argue that the “Limits of Liability” provision must be read with attention to the repair-and-replacement
Appellants contend that this interpretation of the contract gives respondents “sole discretion” to terminate the
agreement, which is “not what [they] bargained for.” But in fact, this is the exact content of the bargain. The
Appellants further argue that they reasonably interpreted the service contract to be a contract for insurance
under Minn. Stat. § 60A.02, subd. 3 (2010), rather than a service contract under Minn. Stat. § 59B.02, subd. 11
Appellants argue that the district court erred by dismissing their consumer-fraud claims because even though the
statements in the service contract were “technically true,” the service contract was written in “a manner that is
misleading.” But this consumer-fraud argument is a repetition of appellants' breach-of-contract claim, so it fails
8. Use of credit card for unpermitted purposes. No. The use of the card by the clerk was authorized because the
clerk had authority to use the card. The clerk was not authorized to use the card for the purpose for which it was
9. Consumer protection. Judgment for Hyde Athletic Industries, Inc. “Business or property” denotes a commercial
10. FDCPA. The FDCPA does not apply in this situation. An examination of the FDCPA in context reveals that it was
not intended to govern attorneys engaged solely in the practice of law. A contrary result would produce absurd
outcomes. For example, 15 U.S.C. § 1692g(b) provides that collection efforts must cease if, within thirty days of
receiving a communication, the debtor disputes the amount owed. 15 U.S.C. § 1692c(c) provides that all debt
communications must cease once the debtor makes such a request. Read literally, these provisions would mean
11. FDCPA. Classify each of the following activities as proper or prohibited under the various consumer statutes you
have studied.
a. Calling a hospital room to talk to a debtor who is a patient there – violation of FDCPA
b. Calling a hospital room to sell surgical stockings – violation of the TCPA
c. Rolling back the odometer on your car before you sell it privately – violation of federal law that prohibits
d. No TILA disclosures on an instant tax refund program in which the lender takes 40% of the tax refund as a
12. Credit cards; CARD. The 2009 federal law applies. There are limits on such solicitations by colleges and
13. Credit cards; CARD. CARD controls late fees, time of payment, balance transfers, and increases in rate
management system for classroom use.
