Business Law Study Set 14

Business

Quiz 45 :

Consumer Law

Quiz 45 :

Consumer Law

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A QUESTION OF ETHICS: Debt-Collection Practices. After graduating from law school-and serving time in prison for attempting to collect debts by posing as an FBI agent-Bany Sussman theorized that if a debt-collection business collected only debts that it owned as a result of buying checks written on accounts with insufficient funds (NSF checks), it would not be subject to the Federal Debt Collection Practices Act (FDCPA). Sussman formed Check Investors, Inc., to act on his theory. Check Investors bought more than 2.2 million NSF checks, with an estimated face value of about $348 million, for pennies on the dollar. Check Investors added a fee of $125 or $130 (more than the legal limit in most states) to the face amount of each check and aggressively pursued its drawer to collect. The firm's employees were told to accuse drawers of being criminals and to threaten them with arrest and prosecution. The threats were false. Check Investors never took steps to initiate a prosecution. The employees contacted the drawers' family members and used "saturation phoning"-phoning a drawer numerous times in a short period. They used abusive language, referring to drawers as "deadbeats," "retards," "thieves," and "idiots." Between January 2000 and January 2003, Check Investors netted more than $10.2 million from its efforts. [ Federal Trade Commission v. Check Investors, Inc., 502 F.3d 159 (3d Cir. 2007)] (a) The Federal Trade Commission filed a suit in a federal district court against Check Investors and others, alleging, in part, violations of the FDCPA. Was Check Investors a "debt collector," collecting "debts," within the meaning of the FDCPA If so, did its methods violate the FDCPA Were its practices unethical What might Check Investors argue in its defense Discuss. (b) Are "deadbeats" the primary beneficiaries of laws such as the FDCPA If not, how would you characterize debtors who default on their obligations
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(a) The Fair Debt Collection Practices Act (FDCPA) protects consumers from overzealous debt collectors. Under this Act, debt collectors are ones that work for an authorized collection agency. These debt collectors cannot contact the consumer at work if the employer objects, contact the debtor at inconvenient times, contact third parties, or harass or intimidate the debtor.
Although CI can claim they are not an authorized collection agency, they are representing themselves as such to debtors. CI also applies usury fees to their collections. Furthermore, they are harassing the debtors by calling them names and calling them frequently. The court will probably will probably find CI in violation of the act.
(b) The FDCPA protects all consumers from possibly unsavory practices of collection agencies. Debtors who have debts that are sent to collection agencies are not necessarily dead beats, nor should they be characterized as such. Some individuals face extenuating circumstances that may make it difficult to pay back debts, despite their best efforts.

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Debt Collection 55th Management Corp. in New York City owns residential property that it leases to various tenants. In June 2000, claiming that one of the tenants, Leslie Goldman, owed more than $13,000 in back rent, 55th retained Jeffrey Cohen, an attorney, to initiate nonpayment proceedings. Cohen filed a petition in a New York state court against Goldman, seeking recovery of the unpaid rent and at least $3,000 in attorneys' fees. After receiving notice of the petition, Goldman filed a suit in a federal district court against Cohen. Goldman contended that the notice of the petition constituted an initial contact that, under the Fair Debt Collection Practices Act (FDCPA), required a validation notice. Because Cohen did not give Goldman a validation notice at the time, or within five days, of the notice of the petition, Goldman argued that Cohen was in violation of the FDCPA. Should the filing of a suit in a state court be considered "communication," requiring a debt collector to provide a validation notice under the FDCPA Why or why not [ Goldman v. Cohen , 445 F.3d 152 (2d Cir. 2006)]
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Yes , the filing of the initial suit should be considered "communication."
When a collection agency contacts a debtor for debt payment, they must provide the debtor with a validation notice within five days of that initial contact. The notice must allow the debtor thirty days to dispute the debt and to request written verification from the collection agency.
Here, the requirement of the validation notice was triggered when the initial debt suit was filed. Since the collection agency failed to provide the validation notice, they could be liable for damages.

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Deceptive Advertising Brian Cleary and Rita Burke filed a suit against the major cigarette maker Philip Morris USA, Inc., seeking class-action status for a claim of deceptive advertising. Cleary and Burke claimed that "light" cigarettes, such as Marlboro Lights, were advertised as safer than regular cigarettes, even though the health effects are the same. They contended that the tobacco companies concealed the true nature of light cigarettes. Philip Morris correctly claimed that it was authorized by the government to advertise cigarettes, including light cigarettes. Assuming that is true, should the plaintiffs still be able to bring a deceptive advertising claim against the tobacco company Why or why not [ Cleary v. Philip Morris USA, Inc., 683 F.Supp.2d 730 (N.D.III. 2010)]
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Analysis whether the plaintiffs still be able to bring a deceptive advertising claim against Tobacco Company:
If a reasonable individual would be misled by an advertisement, this is considered deceptive advertising. When an advertisement purports to be based on facts or presents itself to seemingly be based on facts and a consumer makes decisions based on this characterization, then the company can be charged with deceptive advertising.
In this case, the company may be able to advertise the product. However, they are not allowed to mislead consumers in an effort to coerce them into purchasing the product. Thus, the plaintiffs can bring a charge of deceptive advertising against the company.

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One of the concerns raised by Carlisle was that if attorneys could be held liable for their reasonable misinterpretations of the FDCPA's requirements, there would be a "flood of lawsuits" against creditors' attorneys by plaintiffs seeking damages and attorneys' fees. Should this concern have any bearing on the outcome of this case Why or why not
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VIDEO QUESTION: Deceptive Advertising. Go to this text's Web site at www.cengage.com/blaw/darkson and select "Chapter 45." Click on "Video Questions" and view the video titled Advertising Communication Law: Bait and Switch. Then answer the following questions. (a) Is the auto dealership's advertisement for the truck in the video deceptive Why or why not (b) Is the advertisement for the truck an offer to which the dealership is bound Does it matter if Betty detrimentally relied on the advertisement (c) Is Tony committed to buying Betty's trade-in truck for $3,000 because that is what he told her over the phone
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Fair Credit Reporting Act Source One Associates, Inc., is based in Poughquag, New York. Peter Easton, Source One's president, is responsible for its daily operations. Between 1995 and 1997, Source One received requests from persons in Massachusetts seeking financial information about individuals and businesses. To obtain this information, Easton first obtained the targeted individuals' credit reports through Equifax Consumer Information Services by claiming that the reports would be used only in connection with credit transactions involving the consumers. From the reports, Easton identified financial institutions at which the targeted individuals held accounts. He then called the institutions to learn the account balances by impersonating either officers of the institutions or the account holders. The information was then provided to Source One's customers for a fee. Easton did not know why the customers wanted the information. The state ("commonwealth") of Massachusetts filed a suit in a Massachusetts state court against Source One and Easton, alleging, among other things, violations of the Fair Credit Reporting Act (FCRA). Did the defendants violate the FCRA Explain. [ Commonwealth V. Source One Associates, Inc., 436 Mass. 118, 763 N.E.2d 42 (2002)]
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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
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Food Labeling One of the products that McDonald's Corp. sells is the Happy Meal®, which consists of a McDonald's food entree, a small order of french fries, a small drink, and a toy. In the early 1990s, McDonald s began to aim its Happy Meal marketing at children aged one to three. In 1995, McDonald's began making nutritional information for its food products available in documents known as "McDonald's Nutrition Facts." Each document lists each food item that the restaurant servesand provides a nutritional breakdown, but the Happy Meal is not included. Marc Cohen filed a suit in an Illinois state court against McDonald's, alleging, among other things, that the defendant had violated a state law prohibiting consumer fraud and deceptive business practices by failing to adhere to the Nutrition Labeling and Education Act (NLEA) of 1990. The NLEA sets out different requirements for products specifically intended for children under the age of four-generally, the products' labels cannot declare the percent of daily value of nutritional components. Would this requirement be readily understood by a consumer who is not familiar with nutritional standards Why or why not Should a state court impose such regulations Explain. [ Cohen v. McDonald's Corp., 347 lll.App.3d 627, 808 N.E.2d 1, 283 III.Dec. 451 (1 Dist. 2004)]
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CAS PROBLEM WITH SAMPLE ANSWER: Food Labeling. The Nutrition Labeling and Education Act (NLEA) requires packaged food to have a "Nutrition Facts" panel that sets out "nutrition information," including "the total number of calories" per serving. Restaurants are exempt from this requirement. The NLEA also regulates nutritional content claims, such as "low sodium," that a purveyor might choose to add to a label. The NLEA permits a state or city to require restaurants to disclose nutrition information about the food they serve, but expressly preempts state or local attempts to regulate nutritional content claims. New York City Health Code Section 81.50 requires 10 percent of the restaurants in the city, including McDonald's, Burger King, and KFC, to post calorie content information on their menus. The New York State Restaurant Association (NYSRA) filed a suit in a federal district court, contending that the NLEA preempts Section 81.50. (Under the U.S. Constitution, state or local laws that conflict with federal laws are preempted.) Is the NYSRA correct Explain. [ New York State Restaurant Association v. New York City Board of Health, 556 F.3d 114 (2d Cir. 2009)]
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Unsolicited Merchandise Andrew, a resident of California, received an advertising circular in the U.S. mail announcing a new line of regional cookbooks distributed by the Every-Kind Cookbook Co. Andrew didn't want any books and threw the circular away. Two days later, Andrew received in the mail an introductory cookbook entitled Lower Mongolian Regional Cookbook , as announced in the circular, on a "trial basis" from Every-Kind. Andrew was not interested but did not go to the trouble to return the cookbook. Every-Kind demanded payment of $20.95 for the Lower Mongolian Regional Cookbook. Discuss whether Andrew can be required to pay for the book.
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QUESTION WITH SAMPLE ANSWER: Sales. On June 28, a salesperson for Renowned Books called on the Gonchars at their home. After a very persuasive sales pitch by the agent, the Gonchars agreed in writing to purchase a twenty-volume set of historical encyclopedias from Renowned Books for a total of $299. A down payment of $35 was required, with the remainder of the cost to be paid in monthly payments over a one-year period. Two days later, the Gonchars, having second thoughts, contacted the book company and stated that they had decided to rescind the contract. Renowned Books said this would be impossible. Did Renowned Books violate any consumer law by not allowing the Gonchars to rescind their contract Explain.
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Credit-Card Rules Maria Ochoa receives two new credit cards on May 1. She has solicited one of them from Midtown Department Store, and the other arrives unsolicited from High-Flying Airlines. During the month of May, Ochoa makes numerous credit-card purchases from Midtown Department Store, but she does not use the High-Flying Airlines card. On May 31, a burglar breaks into Ochoa's home and steals both credit cards, along with other items. Ochoa notifies the Midtown Department Store of the theft on June 2, but she fails to notify High-Flying Airlines. Using the Midtown credit card, the burglar makes a $500 purchase on June 1 and a $200 purchase on June 3. The burglar then charges a vacation flight on the High-Flying Airlines card for $1,000 on June 5. Ochoa receives the bills for these charges and refuses to pay them. Discuss Ochoa's liability for the charges.
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