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CHAPTER 45
CONSUMER LAW
ANSWERS TO QUESTIONS
AT THE ENDS OF THE CASES
CASE 45.1—QUESTIONS (PAGE 882)
WHAT IF THE FACTS WERE DIFFERENT?
Assume that the defendant had actually conducted scientific studies, which had proved inconclusive.
How might the judge have ruled in that situation? It is unlikely that the judge would have ruled
differently if the defendant’s claims had been based on “inconclusive studies” rather than “bunk” and
“testimonials.” Inconclusive studies are not a reliable “form of proof” either.
THE ETHICAL DIMENSION
Most people have seen infomercials. Does the fact that QT, Inc., used infomercials to make fraudulent
promotional claims mean that all products “pitched” on television are suspect? Why or why not? No. A
CASE 45.2—QUESTIONS (PAGE 885)
THE ETHICAL DIMENSION
Suppose that the defendant automaker had opposed this action solely to avoid paying for a car that had
proved to be a “lemon.” Would this have been unethical? Explain. Arguably, a judgment against the
396 UNIT NINE: GOVERNMENT REGULATION
defendant in this case could have applied to a large number of vehicles—and potentially to other vehicle
makers’ products—and this might have led to a significant payout to many consumers, undercutting
profit. Is it unethical for a business firm to assert a position in litigation solely out of a concern for profit,
rather than out of a belief in the truth or “rightness” of the position? Because of the many stakeholders
to whom a business may owe a duty, there are many circumstances in which a firm could act ethically in
THE LEGAL ENVIRONMENT DIMENSION
What does the interpretation of the law in this case suggest to businesspersons who sell products
labeled with statements mandated by federal or state law? The result of the decision in the Paduano
CASE 45.3—QUESTIONS (PAGE 891)
1A. One of the concerns raised by Carlisle was that if attorneys could be held liable for their
reasonable misinterpretations of the FDCPA’s requirements, it would unleash a “flood of lawsuits”
against creditors’ attorneys by plaintiffs seeking damages and attorney’s fees. Should this concern have
any bearing on the outcome of this case? Why or why not? In the eyes of the Court, this concern was
unfounded. Said the Court, “We do not believe our holding today portends such grave consequences.”
For one thing, noted the Court, “the FDCPA contains several provisions that expressly guard against
abusive lawsuits, thereby mitigating the financial risk to creditors’ attorneys.” Also, any actual damages
sustained for trivial violations would likely be minimal or even zero. Additionally, the Court pointed out
that courts have discretion in calculating reasonable attorney’s fees to award to the defendant if a
CHAPTER 45: CONSUMER LAW 397
FDCPA liability may not always be adverse to his or her client’s interests, because some courts have held
clients vicariously (indirectly) liable for their lawyers’ violations of the FDCPA. In short, the Court had no
difficulty in dismissing the argument that a decision holding debt collectors and their attorneys liable for
mistaken interpretations of law would have such negative consequences.
2A. Jerman’s attorneys contended that if the Court agreed with Carlisle’s argument (that the bona
fide error defense included errors in legal interpretation), ethical debt collectors would be placed at a
disadvantage. Why would this be? According to Jerman’s attorneys, if attorneys could avoid liability
under the FDCPA on the ground that they made a mistaken legal interpretation of the act, this would
give a competitive advantage to debt collectors who press the boundaries of lawful conduct. In other
ANSWERS TO QUESTIONS IN THE REVIEWING FEATURE
AT THE END OF THE CHAPTER
1A. Deceptive advertising
The advertising would mislead a reasonable consumer who would show up at the store expecting the
advertised item to be available. This is a classic example of bait and switch advertising—luring a
customer in with a low priced item (the MetroRider EZ, the bait), then switching his or her interest to a
more expensive item (the MetroRider FX).
2A. Dealer’s duty
Under the FTC’s Mail or Telephone Order Merchandise Rule, as amended to include online sales, the
dealer would be required to notify Sage when the order cannot be shipped on time. If Sage chooses to
cancel her order, then the dealer is required to issue a refund within a specific period of time.
3A. Credit discrimination
4A. Banning authority
398 UNIT NINE: GOVERNMENT REGULATION
The CPSC is the Consumer Product Safety Commission, the organization responsible for setting safety
standards for consumer products. The CPSC has the authority to ban the sale of products, such as
scooters, that it deems potentially hazardous to consumers.
ANSWER TO DEBATE THIS QUESTION IN THE REVIEWING FEATURE AT
THE END OF THE CHAPTER
Laws against bait-and-switch advertising should be abolished because no consumer is ever forced
to buy anything. Just because an advertized item is not available when a consumer goes to buy it does
not mean that sellers should be prevented from “up–selling.” That is to say, sellers should be free to
offer higher-priced version of unavailable lower-priced advertised items. After all, in a free society,
consumers can just say no.
ANSWERS TO QUESTIONS AND CASE PROBLEMS
AT THE END OF THE CHAPTER
45-1A. Unsolicited merchandise
(Chapter 45—Page 886)
45-2A. Credit-card rules
(Chapter 45—Page 888)
The Truth-in-Lending Act (TILA) deals specifically with lost, stolen, and the unauthorized use of credit
cards. For credit cards solicited by the cardholder and then lost or stolen, the act limits the liability of
45-3A. QUESTION WITH SAMPLE ANSWER: Sales
Yes. A regulation of the Federal Trade Commission (FTC) under Section 5 of the Federal Trade
45-4A. Fair Credit Reporting Act
(Chapter 45—Pages 888–889)
The court found that “the only way the defendants could have obtained such a volume of private
financial information from banks and other financial institutions was through the use of deception and
trickery, including impersonation of account holders.” The judge concluded that this violated
Massachusetts state law because “it clashed with the norms established by . . . the Fair Credit
Reporting Act” and other laws. The defendants were held liable for penalties, costs, and fees, for a total
of more than $600,000. The defendants appealed to the Supreme Judicial Court of Massachusetts, the
state’s highest court, which affirmed the judgment of the lower court. The state’s high court explained
45-5A. Food labeling
(Chapter 45—Pages 885–886)
Parents are often aware that doses of medicine are smaller for young children and that portion sizes of
restaurant items, as well as clothing and other things, are differently sized for children. It may be only
45-6A. Debt collection
(Chapter 45—Pages 890–891)
The court issued a summary judgment in favor of Goldman. Cohen appealed to the U.S. Court of Appeals
45–7A. CASE PROBLEM WITH SAMPLE ANSWER: Food labeling
According to the facts set out in the problem, when it comes to restaurant food, the Nutrition Labeling
and Education Act (NLEA) does not regulate nutrition information labeling, and states and local
governments can adopt their own rules. The NLEA, however, does regulate nutrition content claims on
45–8A. Deceptive advertising
(Chapter 45—Pages 881–882)
45–9A. A QUESTION OF ETHICS: Debt collection practices
(a) Check Investors argued that the payors were criminals or tortfeasors because they had
written “bad” checks, and that the amounts of the checks were not “debts” because they arose from
criminal or tortious conduct. For the same reasons, asserted Check Investors, the payors were not
“consumers” entitled to protection under the FDCPA. Check Investors also argued that the FDCPA did
not apply because the firm was collecting NSF checks that it had bought from the original payees. Check
Investors contended that it was acting as a creditor collecting its own obligations, not as a debt collector
collecting obligations owed to a third party.
The court rejected Check Investors’ arguments and held it liable for the entire amount that its
collection efforts had yielded. On appeal, the U.S Court of Appeals for the Third Circuit affirmed the
judgment of the lower court. The appellate court held that an NSF check is a “debt,” reasoning that “[a]s
FDCPA.
To hold that Check Investors was a “debt collector,” the court focused on the status of the debt
at the time it was acquired. “Check Investors acquired the defaulted checks only for collection
purposes.” The court added that “[n]o merchant worried about goodwill or the future of his/her
business would have engaged in the [same] kind of conduct.” In fact, “[n]ot only do we conclude that
Appellants are ‘debt collectors’ rather than ‘creditors,’ we believe that their course of conduct
exemplifies why Congress enacted the FDCPA.”
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charge to the underlying debt unless that charge is authorized by law or the agreement creating the
debt.”
(b) Of course, there are, and likely always will be, persons who willfully refuse to pay
legitimate debts. Recognizing this fact, the U.S. Court of Appeals for the Third Circuit in this case also
pointed out, “Although Check Investors uses broad strokes to paint all of the payors of its NSF checks as
deadbeats, criminals and/or tortfeasors, Congress’s findings in enacting the FDCPA are to the contrary.
Tony did not say that the dealership would have to look at the car first or condition the amount
that Betty would receive on any other factor. Thus, it appears that Tony has made an offer.
ANSWER TO VIDEO QUESTION NO. 45–10
Advertising Communication Law: Bait and Switch
(a) Is the auto dealership’s advertisement for the truck in the video deceptive? Why or
why not? Advertising will be deemed deceptive if a consumer would be misled by the advertising
claim. Although the advertisement contained information that was true (they had the truck for
sale at the listed price), the FTC “Guides Against Bait Advertising,” discussed in the chapter,
prohibits advertising a very low price for a particular item that will be unavailable to the
consumer. In this situation, the dealership only had one truck available at that price, a fact
stated in very small print that the consumer would not likely see.
way to sell the truck to Betty. Only in rare circumstances—if an advertisement is very specific,
for example—will a court interpret an ad to be an offer. In this situation, the ad is general, and
the court will not likely find it to be an offer. It also would not matter that Betty detrimentally
relied on the ad by driving three hours and undergoing difficulties in getting to the dealership.
(c) Is Tony committed to buying Betty’s trade-in truck for $3,000 because that is what he
told her over the phone? Probably, yes. If it is true that Tony told Betty on the phone that he
