U.c.c. Test #3 (Final)

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FTC

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Federal Trade Commission-- The most significant consumer protection agency.

Purpose: to prevent unfair methods of competition and unfair or deceptive trade acts or practices.

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FTC (3 Standards)

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Unfairness, deception, ad substantiation

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UNFAIRNESS

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Unfairness: To justify the finding of unfairness the injury must satisfy three tests. It must be substantial; it must not be outweighed by any countervailing benefits to consumers or competition that the practice produces; and it must be an injury that consumers themselves could not reasonably have avoided. The standard, therefore, applies a cost-benefit analysis to the issue of fairness

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DECEPTION

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Deception-- (most consumer protection actions have deception as their basis) -- First, there must be a representation, omission, or practice that is likely to mislead the consumer. Second, we examine the practice from the perspective of a consumer acting reasonably in the circumstances. Third, the representation, omission, or practice must be a "material" one. The basic question is whether the act or practice is likely to affect the consumer's conduct or decision with regard to a product or service. If so, the practice is material, and consumer injury is likely because consumers are likely to have chosen differently but for the deception.

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AD SUBSTANTIATION

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This policy requires advertisers to have a reasonable basis for their claims at the time they make such claims. Moreover, in determining the reasonableness of a claim, the commission places great weight upon the cost and benefits of substantiation.

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CONSUMER PRODUCT SAFETY ACT

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Established an independent Federal Safety Act, which established an independent Federal regulatory agency, the Consumer Product Safety Commission (CPSC).

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MAGNUSON-MOSS WARRANTY ACT

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Requires sellers of consumer products to provide adequate information about written warranties.
The FTC administers and enforces the Act, which was enacted to alleviate certain reported warranty problems: (1) Most warranties were not understandable; (2) most warrantors disclaimed implied warranties; (3) most warranties were unfair; and (4) in some instances the warrantors did not live up to their warranties. Through the Magnuson-Moss Act, Congress attempted to make consumer product warranties more comprehensible and to facilitate the satisfactory enforcement of consumer remedies. To accomplish these purposes, the Act provides for:
1.clear and understandable disclosure of the warranty that is to be offered, 2. a description of the warranty as either "full" or "limited,"
3. a prohibition against disclaiming implied warranties if a written warranty is given, and 4. an optional informal settlement mechanism. The Act applies to consumer products with written warranties. A consumer product is any item of tangible personal property that is normally used for family, household, or personal use and is distributed in commerce. The Act does not protect commercial purchasers, who are considered sufficiently knowledgeable, in terms of contracting, to protect thmselves; better able to retain attorneys for their ongoing protection; and able to spread the cost of their injuries in the marketplace.

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STATE "LEMON-LAWS"

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With the enactment of the Magnuson-Moss Warranty Act, many consumers assumed that automobile manufacturers would feel compelled to offer full warranties to buyers of new cars, thereby giving such buyers the option o obtain a refund or replacement without charge for a defective automobile or defective parts. Automobile sellers, however, opted for limited warranties. In response, virtually all of the State legislature enacted "lemon laws" that attempt to provide new car purchasers wit rights that are similar to full warranties under the Magnuson-Moss Warranty Act. Some State have broadened their laws to cover used cars; some also cover motorcycles. There are many different lemon laws, but most define a lemon as a car that continues to have a defect that substantially impairs its use, value, or safety, even after the manufacturer has made reasonable attempts to correct the problem. In most States, the opportunity to repair a defect is considered sufficient if the manufacturer made fur unsuccessful attempts to fix the problem or the car was out of service for more that thirty days during the year it was sold. If a consumer can prove that her car is a lemon, most lemon laws require the manufacturer either to replace the car or to refund its retail price, less an allowance for the consumer's use of the car. In addition, most lemon laws provide that the consumer may recover attorney's fees and expenses if the case goes to litigation.

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CONSUMER RIGHT OF RECISSION

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In certain instances a consumer is granted a brief period of time during which she may rescind (cancel) an otherwise binding obligation

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TRUTH IN LENDING ACT

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Title one of the Federal Consumer Credit Protection Act (FCCPA), also known as the Truth-in-Lending Act, has superseded State disclosure requirements relating to credit terms for both consumer loans and credit sales under $25,000. The Act does not cover credit transactions for business, commercial, or agricultural purposes. Creditors in every State not specifically exempted by the Federal Reserve Board must comply with Federal disclosure standards. The board exempts only those States that have disclosure requirements substantially the same as the Federal requirements and that ensure enforcement of their requirements. The FCCPA does not, however, excuse creditors from compliance with State requirements not covered by, or more stingent than, the FCCPA requirements, so long as the State-required disclosure is not inconsistent with the FCCPA. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, discussed in Ch. 39, made a number of amendments to the Truth-in-Lending Act. Before a consumer formally incurs a contractual obligation for credit, both State and Federal statutes require a creditor to present to the consumer a written statement containing certain information about the contract terms. Generally, the required disclosure concerns the cost of credit, such as interest, sales charges, finder's fees, mortgage guarantee insurance, or any mandatory credit life insurance. An important requirement in the Truth-in-Lending Act is that sales finance charges and interest rates must be quoted in terms of an annual percentage rate (APR) and must be calculated on a uniform basis. Congress required disclosure of this information to encourage consumers to compare credit terms, to increase competition among financial institutions, and to facilitate economic stability. Enforcement and interpretation of the Truth-in-Lending Act was assigned to several agencies, the two most important being the FTC and the Federal Reserve Board, which issued Regulation Z to carry out this responsibility.

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FAIR CREDIT REPORTING ACT

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Consumer credit reports are prohibited from containing inaccurate or obsolete information.

This act went into effect to relieve some of the problems and abuses associated with credit card billing errors. The Act establishes procedures for the consumer to follow in making complaints about specified billing errors and requires the creditor to explain or correct such errors. Billing errors include (1) credit extensions that wer never made or were not made in the amount indicated on the billing statement; (2) undelivered or unaccepted goods or services; (3) incorrect recording of payments or credits; and (4) accounting or computational errors. Until the creditor responds to the complaint, it may not take any action to collect the disputed amount, restrict the use of an open-ended credit account because the disputed amount is unpaid, or report the disputed amount as delinquent.

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CONSUMER CREDIT CARD FRAUD

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Consumer credit card fraud has become an increasingly serious problem and now totals approx. $200 million per year. In 1984, Congress enacted the Credit Card Fraud Act, which closed many of the loopholes in the prior law. The Act prohibits the following practices: (1) possessing unauthorized cards, (2) counterfeiting or altering credit cards, (3) using account numbers alone, and (4) using cards obtained from a third party with his consent, even if the third party conspires to report the cards as stolen. It also imposes stiffer, criminal penalties for violation.
The FCCPA (Federal Consumer Credit Protection Act) protects the credit card holder from loss by limiting to fifty dollars the card holder's liability for another's unauthorized use of the holder's card. The card issuer may collect up to that amount for unauthorized use only if (1) the holder has accepted the card; (2) the issuer has furnished adequate notice of potential liability to the card holder; (3) the issuer has provided the card holder with a statement describing the means by which the holder may notify the card issuer of the loss or theft of the credit card; (4)the unauthorized use occurs before the card holder has notified the card issuer of the loss or theft; and (5) the card issuer has provided a method by which the person using the card can be identified as the person authorized to use the card.

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WAGE ASSIGNMENTS & GARNISHMENT

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Most States limit the amount that may be deducted from an indivdual's wages through either assignment or garnishment.

Wage assignments are prohibited by some States. In most States and under the FCCPA, a limitation is imposed on the amount that may be deducted from an individual's wages during any period. In addition, the FCCPA (Federal Consumer Credit Protection Act) prohibits an employer from discharging an employee solely because of a creditor's exercise of an assignment of wages in connection with any one debt.
Even where wage assignments are prohibited, the creditor may still reach a consumer's wages through garnishment. But garnishment is available only in a court proceeding to enforce the collection of a judgment. The FCCPA (Federal Consumer Credit Protection Act) and State statutes contain exemption provisions which limit the amount of wages subject to garnishment.

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FAIR-DEBT COLLECTIONS PRACTICES ACT

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Abuses by some collection agencies led Congress to pass this act, which makes abusive, deceptive, and unfair practices by debt collectors in collecting consumer debts illegal. The act does not apply to creditors who use their own names in trying to collect debts themselves. Rather, it applies only to those who collect debts for others. This does not mean that creditors are free to use improper methods to collect debts. Most States have laws or common law decisions that prohibit unfair debt collection practices.
Before the Act, many debt collectors contacted third parties, such as relatives, neighbors, or employees, to inquire about the whereabouts or financial condition of the debtor. In doing so, the collectors made sure to tell the third parties who they were and why they were calling. To avoid the embarrassment resulting from such contacts, many debtors would hasten to pay their debts, even questionable ones. To prevent these often unfair and unnecessary disclosures, the Act bars, except in certain narrow circumstances, debt collectors from communicating with third parties about a consumer's debt. The Act does permit debt collectors to contact third parties to ascertain the location of the consumer, but it prohibits them from disclosing that they are debt collectors and from stating that the consumer owes and debt.
The Act forbids other abusive collection practices, including (1) communication with the consumer an unusual or inconvenient hours; (2) communication with the consumer if he is represented by an attorney; (3) harassing, oppressive, or abusive conduct, such as threats of violence or the use of obscene language; (4) false, deceptive, or misleading representations, such as false claims that the debt collector is an attorney or a government official, or that the consumer has committed a crime; or (5) other unfair or unconscionable means to collect or attempt to collect a debt, such as a false threat of a lawsuit.
The Act requires a debt collector, within 5 days of the initial communication with a consumer, to provide the consumer with a written notice that includes (1) the amount of the debt (2) the name of the current creditor; and (3) a statement informing the consumer that she can request verification of the alleged debt.
The Act gives consumers one extremely powerful right in dealing with debt collectors. If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector must stop further communication except to notify the consumer that the creditor or collector may invoke specified remedies such as filing a lawsuit to collect the debt. Consumers have the right to seek damages from debt collectors for violations of the Act. In addition, the FTC (Federal Trade Commission) has authority for administrative enforcement of its provisions.

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SECURITY INTEREST

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An interest in personal property or fixtures which secures payment or performance of an obligation"

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SECURITY AGREEMENT

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An agreement that creates or provides for a security interest.

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COLLATERAL

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The property subject to a security interest or agricultural lien.

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SECURED PARTY

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the person in whose favor a security interest in the collateral is created or provided for under a security agreement.

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DEBTOR

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A person (1) having an interest in the collateral other than a security interest or lien, whether or not the person is an obligor; (2) a seller of accounts, chattel paper, payment intangibles, or promissory notes; or (3) a conignee.

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OBLIGOR

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A person who, with respect to an obligation secured by a security interest in or an agricultural lien on the collateral, (1) owes payment or other performance, (2) has provided property other than the collateral to secure payment or performance, or (3) is otherwise accountable for payment or performance.

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SECONDARY OBLIGOR

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Usually a guarantor or surety of the debt.

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PURCHASE MONEY SECURITY INTEREST (PMSI)

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Is created in goods when a seller retains a security interest in the goods sold on credit by a security agreement.

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GOODS

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All things that are movable when a security interest attaches and include fixtures, standing timber to be cut, the unborn young of animals, crops grown, growing or to be grown, and manufactured homes. Also computer programs.
Subdivisions include: (1) consumer goods, (2) farm products, (3) inventory, (4) equipment, (5) fixtures, and (6) accessions.

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CERTIFICATED SECURITY

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an investment security that is represented by a certificate.

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UNCERTIFICATED SECURITY

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An investment security that is not represented by a certificate.

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SECURITY ENTITLEMENT

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the rights and property interests of a person who holds securities or other financial assets through a securities intermediary such as a bank, broker, or clearing house, which in the ordinary course of business maintains security accounts for others.

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PROCEEDS

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Include whatever is received upon the sale, lease, license, exchange, or other disposition of collateral; whatever is collected on, or distributed on account of, collateral; or other rights arising out of collateral.

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ATTACHMENT

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The Code's term to describe the creation of a security interest that is enforceable against the debtor.

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VALUE

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A term that is broadly defined and includes consideration under contract law, a binding commitment to extend credit, and an antecedent debt.

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RIGHTS IN COLLATERAL

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As a general rule, the debtor is deemed to have rights in collateral that she owns or is in possession of as well as in those items that she is in the process of acquiring from the seller.

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PLEDGE

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The delivery of personal property to a creditor as security for the payment of a debt. A pledge requires that the secured party (the pledgee) and the debtor agree to the pledge of the collateral and that the collateral be Deliverd to the pledgee.

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FINANCING STATEMENT

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Which is filed to give public notice of the security interest, may vary from State to State.

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REAL-PROPERTY-RELATED FILINGS

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(collateral involving fixtures, timber to be cut, or minerals to be extracted), a description of the real property must be included sufficient to reasonably identify the real property.

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PERFECTION

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(of a security interest) occurs when it has attached AND when all applicable steps required for perfection have been satisfied.

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CERTIFICATE OF TITLE

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An official representation of ownership.

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PLEDGE

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It is a possessory security interest, is the delivery of personal property to a creditor, or to a third party acting as an agent or bailee for the creditor, as security for the payment of a debt.

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FIELD WAREHOUSE

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A type of pledge; this common arrangement for financing inventory allows the debtor access to the pledged goods and provides the secured party with control over the pledged property at the same time.
In this arrangement, a professional warehouseman generally establishes a warehouse on the debtor's premises-- usually by enclosing a portion of those premises and posting appropriate signs -- to store the debtor's unsold inventory. The warehouseman then typically issues nonnegotiable receipts for the goods to the secured party, who may then authorize the warehouseman to release a portion of the goods to the debtor as the goods are sold, at a specified quantity per week, or at any rate on which the parties agree.

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PRIORITY

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Precedence in order of right.

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FARM PRODUCTS

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Buyers in the ordinary course of THESE, although not protected by Section 9-320, may be protected by the Federal Food Security Act.

Def. Crops, livestock, or stock used or produced in farming.

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TRUSTEE INBANKRUPTCY

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Representative of the estate in bankruptcy who is responsible for collecting, liquidating, and distributing the debtor's assets.

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LIEN CREDITOR

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A creditor who has aquired a lien in the property by judicial decree ("attachment garnishment, or the like"), an assignee for the benefit of creditors, a receiver in equity, or a trustee inbankruptcy.

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PERFECTED (security interest)

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has priority over lien creditors who acquire their liens after perfection.

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REDEMPTION

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To free the collateral of the security interest by fulfilling all obligations securing the collateral and paying reasonable expenses and attorney's fees.
Unless the debtor has waived his rights in the collateral after default, he has this right at any time before the secured party has collected the collateral, has disposed of the collateral, has entered a contract to dispose of it, or has discharged the obligation by accepting the collateral.

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SURETY

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one who promises to answer for the payment of a debt or the performance of a duty owed to one person (called the creditor) by another (the principal debtor) upon the failure of the principal debtor to make payment or otherwise perform the obligation.

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CREDITOR

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A debt or the performance of a duty owed to one person, that person is called this.

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COSURETIES

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Two or more persons bound for the same debt of a principal debtor.

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ABSOLUTE SURETY

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If the surety is THIS then the creditor may hold the surety liable as soon as the principal debtor defaults.

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CONDITIONAL GUARANTOR OF COLLECTION

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A surety who is liable only upon the creditor's first exhausting his legal remedies against the principal debtor. Thus, this type of surety is liable if the creditor first obtains, but is unable to collect, a judgment against the principal debtor.

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REIMBURSEMENT

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repayment

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EXONERATION

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The right of the surety against the principal debtor is enforceable at equity.

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SUBROGATION

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A process of substitution that confers upon the surety all the rights the creditor has against or through the principal debtor.

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INCAPACITY

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May serve as a defense.

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BANKRUPTCY

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A discharge of the principal debtor's obligation in bankruptcy does not in turn discharge the surety's liability to the creditor on that obligation.

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ACCOMMODATION SURETY

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An uncompensated surety, that will usually be discharged for any material modification made to the contract between the principal debtor and creditor without the surety's assent.