Business Law and Ethics Essay

Dealing with authorities regulation in patronage is an integral part of a carriages responsibilities. Recognizing what actions might violate particular consumer apology regulations is crucial to cling to the comp all(prenominal) and to insuring its profitable operation. Government regulation is found every mean solar day in the operation of businesses large and sm solely, and once understood, it allows managers to make good lasts regarding business practices. When you suck up accomplishd this topic, you will be able to list the plebeian types of regulations designed to protect consumers, identify types of illegal consumer assurance practices,describe the stock-purchase warrant protection provided to consumers, and describe the purpose and role of the Federal great deal deputation (FTC) in consumer protection.Read Chapter 40, Consumer LawRead the pursuance chapter in traffic Law and the Legal Environment chapter 40 (Consumer Law)Then serve to the following points in your nonebookWhat is the role of the FTC?Describe prohibited gross sales activities under the FTC represent.How is consumer assurance regulated?What is the Magnuson-Moss warrantee comport?What government regulations expend to consumer product safety?Consumer Law-statutes that protect consumers from the unscrupulous.Federal Trade Commission (FTC)=Created by congress in 1915 to regulate business. Most most-valuable effect enforcing consumer law. Prohibits unsportsmanlike delusory 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 ban promising to stop2. Administrative hearing and appealsIf the comp some(prenominal) refuses to stop voluntarily, the FTC takes the courting to an administrative law judge (ALJ) within the agency. The violator whitethorn even out the case at this point by signing a swallow regulate.3.PenaltiesFTC can impose a fine for each violation of a voluntary compliance affidavit, a consent order, a cease and abstain order, and an FTC rule.Section 5 of FTC Act-Prohibits cheating(prenominal) or deceptive sales practices.deceptive sales practices=An propoundment is deceptive if it comprises an important misrepresentation or inadvertence that is probably to mislead a average consumer.Unfair acts or practices essential meet 3 tests to considered unfair acts or practices1. It causes a substantial consumer fault2. Harm of injury outweighs any(prenominal) benefit3. The consumer could not reasonably deflect the injuryFTC can find unfair if violates public policy w/o meeting testsBait and switch advertisement=Merchant may not advertise a product and say bad things round it in order to sell a different feature.Telemarketing=prohibits telemarketers from handicraft anyone on the do-not- battle cry registry. Andthey cannot block their summons and telephone offspring.Do not call registry=prohibi ts telemarketers from calling telephone numbers listed on the Do not call registryMail or Telephone Order deal has the following guidelines essential ship an item within the time tell or within 30 old age after the receipt of order if it cant ship by that time, they must send the node a new ship date or the dear to drop order.* ungraded merchandise received in the mailConsumers may concur as a giftDoor to Door Rules-Salesperson is infallible to notify the buyer that the she has the right to cancel the transaction foregoing to midnight of the troika business day thereafterConsumer Credit RegulationsTILA Truth in modify Act- requires loaners to pick up the impairment of a add in an understandable and complete manner. disclosures must be clear and meaningful.. moldiness disclose the pay missionary work and APR. TILA applies when1. Its a consumer loan2. The loan has a finance burster and will be repaid in more than than four installments3. The loan is little than $25 ,000 or secured by a owe4. The loan is made by someone in the business of offering course credit.High rate plateful equity loans-lender must notify consumer at least 3 business days in advance closing that1. He does not hurt to go through with the loan2. He could lose his house if he fails to make paymentsHome Equity Loans-Rescission-Can tump over for up to 3 days after signing and after 3 long time if the mortgage lender didnt comply with TILA.Right to Rescind=Consumers ask the right to rescind a 2nd mortgage for collar business days after the signing. If the lender did not comply w/ TILA may rescind for up to 3 yrs.Credit lineup unauthorised charges- under TILA if consumer authorships batting order stolen w/in 2 days sole(prenominal) responsible for $50, after 2 days stick will only reimburse for losses over $500. Wait more than 60 days to report bank is not liable at all open end credit(credit control panel)= credit transaction in which lender makes a series of lo ans that can be re-payed at once or in installments.open ended credit required disclosures1. the make sense owed at the beginning of the write uping 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 qualification the periodic 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 al-Qaedas value (2) May not charge a prepayment punishment if monthly payments can change in the first four years of the loan (3) Must collect property taxes and berth(a)owners insurance for all first mortgagesHome equity LoansHome Equity Loans-Enforcement=FTC more often than not 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=Statute requires lenders to advertise their rates accurately. Cant bait and switch.Bait and Switch=a merchant may not advertise a product and consequently disparage it to consumer in an essay to sell a different item and they must have enough items in stock to meet commonsensible demand.Truth in Lending Act (TILA)=passed to ensure that consumers were adequately certified close the credit terms before entering into a loan and can comp ar 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 also disclose the annual percenta ge rate.TILA advertisements- low TILA lenders cannot advertise a loan as fixed if in incident its rate or payments will changeIn the event of a dispute between the guest and and a merchant the credit gameboard company cannot bill the customer if1. customer makes a good doctrine effort to resolve dispute2. the dispute is for more than $503. the merchant is in the same state or is within snow miles of their stand somewhat Credit Bill Act (FCBA)- on a lower floor FCBA a credit humour 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 billing statement and demands that the company respond to your dispute.Fair Credit insurance coverage Act (FCRA)-helps to ensure that consumer credit reports be accurate and regulates the reporting agencies.Under FCRA1. A consumer report can be used only for a legitimate business need 2. A consume r reporting agency cannot report obsolete information 3. An employer cannot request a consumer report on any current or potential employee w/o the employees permission 4. allone who makes an inauspicious decision against a consumer because of a credit report must fail the name and address of the reporting agency that supplied the negative infoFair and accurate credit reporting Act (FACTA)-created to reduce identity stealth 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 indite 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 chance Act (ECOA)=Prohibits any creditor from discriminating against against a borrower on the basis of race, color, age, religion, discipline origin, sex or marital status or because the borrower is receiving welfare.Magnuson-Moss Warranty Act=Requires any supplier that offers a written imprimatur on a consumer product costing more than $15 to disclose the terms of the sanction 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 sentry go 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 warranti es are.Debit Card=This item works like a stop over 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 closureVirtually no one will go through spiritedness 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 i mportant 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 product 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 sales rep 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 less than five 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 grip more than two days to report the loss of a calculate card, your bank will only reimburse you for losses in supernumerary 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 merchant is in the same state where she lives or is within 100 miles of her house.12. Under the Fair Credit Billing Act, a credit card company must promptly investigate and respond to any consumer complaints about a credit card bill. 13. Under the Fair Credit reportage 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 produ cts. (False) AnswerThe Act does not require a warranty, unless 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 security for a snatch 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 station included a testimonial from a famous basketball pretender. 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 lease early. Answer Any right to early termination must be disclosed before a lease is signed.