This document summarizes a chapter on consumer law from a business law textbook. It discusses laws protecting purchasers, including laws regulating labeling, packaging, advertising and sales. It also covers laws protecting debtors, such as the Truth in Lending Act, Fair Credit Reporting Act, Fair Debt Collection Practices Act and laws governing credit, debt collection, identity theft and electronic fund transfers. The chapter aims to explain this consumer protection regulatory environment.

1. Business Law, Sixth Edition
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Chapter 43:
Consumer Law

2. Business Law, Sixth Edition
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Learning Objectives
• Understand the laws affecting labeling and
packaging.
• Explain the laws regulating advertising.
• Describe the laws governing sales
transactions.
• Discuss the laws protecting the debtor.
• Recognize the new regulatory environment.

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43.0 In the News
Secrets of the Sell and Outsmarting Deceptive
Advertising (1:48) http://bvtlab.com/8aMmE
ABC World News Tonight with David Muir reports on
ways retailers try to lure in consumers to buy their goods
and services.
• What is deceptive advertising?
• What differentiates deceptive advertising from
puffery?
• Do you agree with the outcome of the “photo fake
out”?
• Discuss the “fine print.” Is it deceptive?

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43.1 Protecting the Purchaser

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43.1a Labeling and Packaging
• Dangerous products
• Specific products
• General protection

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43.1b Advertising
• Puffery
• Federal Trade Commission
• Wheeler-Lea Amendment of 1938
• Deceptive advertising defined as an activity
by a business that:
– Involves a material misrepresentation or omission
– Is likely to mislead a potential consumer
– Would mislead a reasonable consumer under the
circumstances

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43.1b Critical Thinking (Slide 1 of 2)
CASE: POM Wonderful:
FTC ruled that POM’s advertisements claiming that
its pomegranate-based products provided health
benefits were deceptive, misleading and
unsubstantiated. Commission ordered at least two
RCT’s were required to substantiate POM’s
efficacy and establishment claims of disease
prevention and treatment. Appellate court upheld
the agency ruling and affirmed FTC order, “insofar
as it requires POM to gain the support of at least
one” RCT.

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43.1b Critical Thinking (Slide 2 of 2)
• What is an “efficacy” claim? What is an
“establishment” claim?
• As a result of this decision, may an
advertiser make claims regarding food
products and dietary supplements? If so,
under what conditions may such assertions
be made in advertisements?

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43.1c Sales
• Door-to-door sales
• Telephone and mail order sales
• Online sales
• Consumer Product Safety Act
– Safety standards for consumer products
– Bans dangerous products
– Created the Consumer Product Safety Commission
• Consumer Product Safety Improvement Act
– SaferProducts.gov website

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43.2 Protecting the Debtor

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43.2a Attaining Credit
Truth in Lending Act
– Applies only to consumer credit
transactions and consumer leasing
– Regulation Z mandates certain disclosures.
– Regulates credit card usage
Equal Credit Opportunity Act
– Prohibits creditors from discriminating
against credit applicants

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43.2a Critical Thinking
CASE: Chase Bank
Class action regarding an issuer of credit cards
was not required to give notice to cardholders of
interest rate increases for delinquencies under
Regulation Z.
• The Court acknowledges McCoy’s position, yet it
decides instead to adopt the view of Chase.
Why?
• Would a reasonable person believe that notice
was not needed under the regulation? Is the
wording of the operative passages ambiguous?
Why?

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43.2b Reporting Credit Information
• General Provisions
– Fair Credit Reporting Act
• Notice
– No consent required to the disclosure
– Situations requiring notification:
• Report for employment purposes
• Denied credit, insurance, or employment
• An investigative report is requested.
• Information

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43.2c Electronic Funds Transfers
• Electronic Funds Transfer Act
• Substantive Provisions
– Controls the flow of funds for consumer
accounts
– Investigates claims of an error made by bank
– Disclosures regarding the terms of the
contract
– Requirements for the types of documentation
• Liability

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43.2d Identity Theft
Fair and Accurate Credit Transaction Act
– Creates a national fraud alert system
– Assists victims of identity theft to rebuild
their credit reputations

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43.2e Collecting the Debt
Fair Credit Billing Act
– Provides a mechanism for consumers to
remedy errors on credit card bills
Fair Debt Collection Practices Act
– Uniform set of guidelines to control debt
collectors
– Prohibits “abusive and deceptive” behavior

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43.2e Critical Thinking
CASE: Brown
Applying the “least sophisticated debtor” standard,
the court found that the letter highlighted two
possible outcomes. The plaintiff should be given
the opportunity to prove that neither of these
outcomes was likely.
• Is the intent of the creditor to pursue promised
actions pivotal in determining whether the FDCPA is
violated?
• What is the “least sophisticated debtor” standard?
• Why did the court side with the debtor?

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43.2f Understanding the
New Regulatory Environment
• The Consumer Financial Protection
Bureau
– New federal administrative agency
– Single point of accountability for various
aspects of consumer financial protection.
• CFPB’s rulemaking authority
• CFPB’s enforcement authority