Business Law and Ethics Essay

Dealing with government regulation in business is an integral part of a managers responsibilities. Recognizing what actions might violate particular consumer protection regulations is crucial to protecting the comp either and to insuring its profitable operation. Government regulation is found every twenty- cardinal hour period in the operation of businesses large and small, and once understood, it allows managers to make good conclusivenesss regarding business practices. When you nurse completed this topic, you ordain be able to list the common types of regulations knowing to protect consumers, identify types of illegal consumer acknowledgment practices,describe the warranty protection profferd to consumers, and describe the purpose and role of the federal official Trade Commission (FTC) in consumer protection. memorialise Chapter 40, Consumer LawRead the following chapter in Business Law and the Legal Environment chapter 40 (Consumer Law)Then respond to the following points in your nonebook computerWhat is the role of the FTC?Describe prohibited sales activities under the FTC Act.How is consumer reference book regulated?What is the Magnuson-Moss Warranty Act?What government regulations apply to consumer product skilfulty?Consumer Law-statutes that protect consumers from the unscrupulous.Federal Trade Commission (FTC)=Created by congress in 1915 to regulate business. Most important agency enforcing consumer law. Prohibits unfair deceptive practices.FTC options for enforcing the law1. Voluntary ComplianceWhen the FTC determines that a business has violated the law, it first asks the offender to sign a voluntary compliance affidavit promising to interference2. Administrative hearing and appealsIf the comp all ref recitations to stop voluntarily, the FTC takes the case to an administrative law judge (ALJ) within the agency. The violator may settle the case at this point by signing a acquiesce order.3.PenaltiesFTC can impose a fine for each violation o f a voluntary compliance affidavit, a consent order, a cease and desist order, and an FTC rule. variance 5 of FTC Act-Prohibits unfair or deceptive sales practices.deceptive sales practices=An advertisement is deceptive if it contains an important misrepresentation or omission that is apt(predicate) to misdirect a reasonable consumer.Unfair acts or practices must meet 3 tests to considered unfair acts or practices1. It causes a substantial consumer injury2. Harm of injury outweighs both benefit3. The consumer could not reasonably avoid the injuryFTC can find unfair if violates public policy w/o meeting testsBait and hold advertisement=Merchant may not advertise a product and say bad things about it in order to sell a antithetical item.Telemarketing=prohibits telemarketers from calling anyone on the do-not-call registry. Andthey cannot block their names and telephone number.Do not call registry=prohibits telemarketers from calling telephone numbers listed on the Do not call reg istryMail or Telephone Order Merchandise has the following guidelines essential ship an item within the time verbalize or within 30 age after the receipt of order if it cant ship by that time, they must send the customer a new ship date or the right to cancel order.*unordered merchandise received in the mailConsumers may keep as a giftDoor to Door Rules-Salesperson is required to notify the buyer that the she has the right to cancel the transaction prior to midnight of the third business day thereafterConsumer attribute RegulationsTILA fair play in Lending Act- requires bestowers to disclose the terms of a loan in an comprehendible and complete manner. disclosures must be guide and meaningful.. Must disclose the finance charge and APR. TILA applies when1. Its a consumer loan2. The loan has a finance charge and will be repaid in much than four installments3. The loan is less than $25,000 or secured by a mortgage4. The loan is made by someone in the business of offering cre dit.High charge per unit Home blondness loans-lender must notify consumer at least 3 business long time before closing that1. He does not have to go through with the loan2. He could lose his house if he pop offs to make paymentsHome Equity Loans-Rescission-Can rescind for up to 3 days after signing and after 3 years if the mortgage lender didnt comply with TILA.Right to Rescind=Consumers have the right to rescind a 2nd mortgage for three business days after the signing. If the lender did not comply w/ TILA may rescind for up to 3 yrs.Credit card unauthorized charges- under TILA if consumer extends card stolen w/in 2 days only responsible for $50, after 2 days bank will only reimburse for losses over $500. Wait more than 60 days to incubate bank is not liable at all unclouded end credit(credit card)= credit transaction in which lender makes a series of loans that can be re-payed at once or in installments.open terminate credit required disclosures1. the amount owed at the beg inning of the amounting cycle 2. amounts and dates of all purchases, credits and payments finance charges and late fees 3. the date by which a bill must be paid to avoid these charges 4. either the consequences of making the monthly minimum payment or a toll free number at which to obtain such information.Close end credit(car loan)=One loan, borrower knows the amount and the payment schedule in advancesubprime loansFor subprime loans, a lender(1) Must verify the borrowers ability to repay the loan from income and assets other than the homes value (2) May not charge a prepayment penalty if monthly payments can assortment in the first four years of the loan (3) Must collect property taxes and homeowners insurance for all first mortgagesHome equity LoansHome Equity Loans-Enforcement=FTC generally has the right to enforce Truth in Lending Act and Consumers have a right to file suit.TILA provides additional consumer safe guards if1. APR is more than 10% higher than Treasury securities2 . Consumer pays fees and points at closing more than 8%3. Loans that atomic number 18 less than 5 yrs cannot have balloon paymentsAdvertising= mandate requires lenders to advertise their rates accurately. Cant bait and switch.Bait and Switch=a merchant may not advertise a product and accordingly impose on _or_ oppress it to consumer in an attempt to sell a different item and they must have enough items in stock to meet reasonable demand.Truth in Lending Act (TILA)=passed to ensure that consumers were adequately informed about the credit terms before entering into a loan and can equivalence the cost of the credit.TILA enforcement*FTC generally has the right to enforce TILA.TILA requires disclosuresMust be clear and in meaningful sequence, The lender must disclose the finance charge, and the creditor must as well as disclose the annual percentage rate.TILA advertisements-Under TILA lenders cannot advertise a loan as fixed if in fact its rate or payments will sortIn the result o f a dispute between the customer and and a merchant the credit card company cannot bill the customer if1. customer makes a good faith effort to resolve dispute2. the dispute is for more than $503. the merchant is in the same state or is within one hundred miles of their home sporting Credit Bill Act (FCBA)-Under FCBA a credit card company must promptly investigate and respond to any consumer complaints about a credit card bill *provides additional protection for credit card holders. It allows a customer to dispute an item on their commission statement and demands that the company respond to your dispute.Fair Credit Reporting Act (FCRA)-helps to ensure that consumer credit reports are accurate and regulates the coverage agencies.Under FCRA1. A consumer report can be used only for a legitimate business need 2. A consumer reporting agency cannot report obsolete information 3. An employer cannot predication a consumer report on any current or potential employee w/o the employees per mission 4. Anyone who makes an adverse decision against a consumer because of a credit report must reveal the name and address of the reporting agency that supplied the negative infoFair and accurate credit reporting Act (FACTA)-created to concentrate identity theft by providing consumers with one free credit report per year and making companies update their information. *Permits consumers to obtain 1 free credit report every year from each of the 3 major reporting agenciesFair Debt Collections Practices Act (FDCPA)=a collector must send the debtor a create verbally notice containing the amount of debt, the name of the creditor to whom the debt is owed, and a statement that if the debtor disputes the debt (in writing), the collector will cease all collection efforts until it has sent evidence of the debt. *Debt collectors may not harass or abuse debtorsEqual Credit Opportunity Act (ECOA)=Prohibits any creditor from discriminating against against a borrower on the basis of race, co lor, age, religion, national origin, sex or marital status or because the borrower is receiving welfare.Magnuson-Moss Warranty Act=Requires any supplier that offers a written warranty on a consumer product costing more than $15 to disclose the terms of the warranty in simple and readily understandable language before sale. *Magnuson-Moss Warranty Act does not requiremanufacturers or sellers to provide a warranty on their products.Consumer product safety Commission=Evaluates consumer products and develops safety standards.Consumer Product Safety Act (CPSA)=the goal is to prevent injuries from products.Consumer Leasing Act (CLA)=protects a person when leasing a car. Makes sure that the company discloses all important information in writing, so that the borrower knows what the payments, interest, penalties, rights, and warranties are.Debit Card=This item works like a check because money is taken directly from your account so their is no bill.Rules of a Debit CardIf you report it stolen before any purchases are made, you are not responsible for any amount. If you report it stolen with in two days, you are responsible for $50. If you report it stolen after two days, you are responsible for $500.Chapter Conclusion around no one will go through life without reading an advertisement, ordering from a catalog, borrowing money, needing a credit report, or using a consumer product. It is important to know your rights.Chapter Review1. The Federal Trade Commission (FTC) prohibits unfair and deceptive acts or practices. A practice is unfair if it meets the following three tests It causes a substantial consumer injury. The harm of the injury outweighs any countervailing benefit. The consumer could not reasonably avoid the injury.2. The FTC considers an advertisement to be deceptive if it contains an important misrepresentation or omission that is likely to mislead a reasonable consumer. 3. FTC rules prohibit bait and switch advertisements. A merchant may not advertise a pr oduct and then disparage it to consumers in an effort to sell a different item. 4. The FTC prohibits telemarketers from calling telephone numbers listed on its do-not-call registry.5. Consumers may keep as a gift any unordered merchandise that they receive in the mail. 6. Under the FTC door-to-door rules, a salesperson is required to notify the buyer that she has the right to cancel the transaction prior to midnight of the third business day thereafter. 7. In all loans regulated by the Truth in Lending Act (TILA), the disclosure must be clear and in meaningful sequence. The lender must disclose the finance charge and the annual percentage rate. 8. In the case of a high-rate home equity loan, the lender must notify the consumer at least three business days before the closing that (1) he does not have to go through with the loan (even if he has signed the loan agreement) and (2) he could lose his house if he fails to make payments. If the duration of a high-rate home equity loan is le ss than flipper years, it may not contain balloon payments.9. Under TILA, consumers have the right to rescind a mortgage (other than a first mortgage) for three business days after the signing. If the lender does not comply with the disclosure provisions of TILA, the consumer may rescind for up to three years from the date of the mortgage. 10. Under TILA, a credit card holder is liable only for the first $50 in unauthorized charges made before the credit card company is notified that the card was stolen. If, however, you deferment more than two days to report the loss of a debit card, your bank will only reimburse you for losses in excess of $500. If you fail to report the lost debit card within 60 days of receipt of your bank statement, the bank is not liable at all. 11. In the event of a dispute between a customer and a merchant, the credit card company cannot bill the customer if She makes a good faith effort to resolve the dispute The dispute is for more than $50, and The me rchant is in the same state where she lives or is within 100 miles of her house.12. Under the Fair Credit complaint Act, a credit card company must promptly investigate and respond to any consumer complaints about a credit card bill. 13. Under the Fair Credit Reporting Act A consumer report can be used only for a legitimate business need A consumer reporting agency cannot report obsolete information An employer cannot request a consumer report on any current or potential employee without the employees permission, and Anyone who makes an adverse decision against a consumer because of a credit report must reveal the name and address of the reporting agency that supplied the negative information.The Magnuson-Moss Warranty Act requires manufacturers or sellers to provide at least a limited warranty on all products. (False) AnswerThe Act does not require a warranty, but it does require that any supplier that offers a written warranty on a consumer product that costs more than $15 to disclose the terms of the warranty in simple, understandable language.The federal consumer protection laws are meant to protect consumers from the consequences of bad business decisions. (False) Answer These statutes were passed by Congress and state legislatures to protect consumers from unscrupulous merchants.Under the Truth-in-Lending Act, the consumer is liable for the use of a credit card by unauthorized persons up to $500. (False) Answer The Act makes a consumer liable for only $50.When a borrower uses his home as tribute for a second mortgage, the borrower has the right to rescind for 3 business days. Answer The TILA gives the consumer this right for up to 3 days after the signing.A commercial for basketball shoes included a testimonial from a famous basketball player. If the player does not use the basketball shoes in the adthe ad is deceptive. Answer Under the FTC Act, an advertisement is deceptive if it contains an important misrepresentation that is likely to mislead a reasonable consumer.The Consumer Leasing Act requires a lessor to disclose which of the following? The consumers right to terminate a remove early. Answer Any right to early termination must be disclosed before a lease is signed.