Consumer protection notes (413) 536-1977 1707 N. Hampton St. Hoyoke, MA barbarahyland@donohuehyland.

com exam two essays two hours open supplement, can write whatever you want INTRO: - in consumer law pattern of abuse then a judge makes case law to protect against abuse - common law, statutes, regulations

CHAPTER 1: Deception - Code of mass regulations CMRs - Deception, fraud, nondisclosure, concealment, misrepresentation, - Tort damages price paid minus actual value - Elements of deceit = rep of fact that seller knows or disregards, fact induces buyer and buyers reliance is justifiable and injury ON TOP of pg 7 Jones v west side buick 1936 - Rolled back odometer, lower court found for P, $150 actual damages $2000 punitive - D argued not representation, and trade practice, and that he spun the odometer to more accurately reflect the refurbished value - This is a misrepresentation bc rep is not confined to words or positive assertions - Now there is an odometer rule that says dealer has to give written statement of odometer - Materiality something that would influence buyer in price or decision of whether or not to buy - P is saying that d is not justified to act on basis of odometer statement o Dealer acted with knowledge in spinning odometer o It was false statement of fact o Dont tell consumer bc it will impact the sale - Element of inducement rep of fact made for purpose of inducing buyer - To prove reliance, the p can either testify or it can be inferred - Trouble with justifiable reliance even application to all people o Reasonable person standard - Freedom of contract plus you have Freedom from contract 9/6 King v towns 1960 - cancer pots - salesman is not saying anything about his pots and pans - deception representation of material fact that is false

the misrepresentation is implicit is he justified in relying o are we measuring the consumer - consumer from unsolicited sale is protected more than someone who goes to store o trapped by door to door o in mass door to door contracts have to be rescindable saylor v handley 1961 - agreed on payment of $80 a month then signed blank paper, salesman filled in $88 per month - want to protect the consumer even if they havent acted prudently vokes v Arthur murray 1968 - vokes was widow took dance lessons, convinced time and time again that she was improving and had potential, she was sold 2302 hours of dancing lessons and spent $31,000 - saying she was an excellent dancer was representation of opinion but made by an expert (superior knowledge) o court said that school had fiduciary duty as experts to mrs. Vokes even if they are holding themselves out as experts opinion rises to level of fact o puffing is not actionable parker v Arthur murray 1973 - college educated man goes to dance studio, was in car accident and could not continue dancing - court said that misrepresentation had to deal with present or pre-existing facts ELEMENTS OF DECEPTION: 1. makes representation of 2. present fact 3. that is material and 4. false 5. if the seller knew it was false or 6. made the representation to inducing the buyer and the buyer 7. relied on the representation 8. was justified in relying on it and 9. sustained injury Halpert v Rosenthal 1970 - bought house, told that there were no termites, inspection showed there were termites - innocent misrepresentation of fact warrants granting of a claim for recission (voidable) - merger clause is overridden bc of fraudulent misrepresentation - remedy of putting parties in position as if they had not made contract pumphrey - realtor said walls constructed of tile although they werent - held against realtor but not against seller - speaker/realtor didnt know and didnt care if statement was true ollerman v orourke 1980 (silence) - sold land where buyer was going to build a house, a well was discovered and had to be capped, everyone in community knew about well - seller was in better position to know of the well than the buyer who had no way of finding out (or had special knowledge)

silence is an actionable misrepresentation if the condition is latent, if there is reliance, or if seller has special knowledge (has special knowledge if they are a developer) material fact the buyer may not have bought the lot

9/13/07 - availability of info relieves seller of duty to disclose - elements o latent o buyer acts as if it doesnt exist o is it material - when in doubt disclose (ghosts) if it reduces the value of what is for sale than you were not disclosing it for a reason - if a murder took place in a house have to be able to prove damages davey v brownson (mutual mistake) - p bought motel from ds - diff bt fraud and mutual mistake: o mutual mistake - neither knew o fraud - seller knew - expert testified that the infestation was not apparent - here unlike cases where silence, opinion or other, we had mutual mistake leading to recission CHAPTER 2 FTCA focuses on unfair methods of competition - section 5 is the pertinent section (may have to cite on the exam) - under ftca individuals do not have a cause of action, that is left to state statutes o this is for the ftc to bring actions o ftc acts to protect the public - unfair deceptive act or practice is not defined in act o have to look at prior cases and regulations - deceptive act or practice elements: o 1. there must be representation practice, or omission likely to mislead consumers 2. the consumers must be interpreting the message reasonably under circumstances 3. misleading effects must be material that is likely to affect consumers conduct Charles of the ritz distributors v ftc 1944 - marketing rejuvenescence cream - ftc has cease and desist order against them saying it falsely represents that skin will be restored to youth or appearance of youth - said word rejuvenescence had diff meanings - said reasonable person would be suckered into buying this - cease and desist using the word rejuvenescence - having capacity to deceive is unlawful (dont have to show actual deception) o as standard applied both to advertisement and name of cream

the reasonable consumer moves over time o target audience is going to be the reasonable consumer - what is deceptive in 1944 may not be what is deceptive in 2007 aspercreme case - a representation does not become deceptive simply because it may be unreasonably believe Harvester left off on 9/27/07 Mini FTCs (state consumer protection act) - violation fo the FTCA is violation of section 5 - when you have a violation of Mass chapter 93A it is violation of section 2 o attorney general can write statutes under this section o cannot have business claiming against a consumer in mini FTCs o mass has adopted the mirror image of FTCA o State deception acts (little ftc acts) - 1. FTC has limited resources 2. FTCA confers no private remedy - 3 types of state acts o 1. broadly prohibiting deception o 2. broadly prohibiting deception and specific provisions o 3. consumer fraud acts broadly prohibits deception, fraud, misrep, concealment Searle v exley express - action to recover damages for misrep of condition of truck - lower court found for p - d was in trucking industry offered truck on lease-back arrangement o d was obliged to supply lessor w/refrig trailer and provide hauling jobs and purchaser would receive portion of revenue - sale of truck was not w/in unlawful trade practices act o the stat refers to real estate, goods or services o court finds these to be for personal, family or household purposes stat describes the transaction type not the ultimate intent of purchaser if goods customarily bought by substantial number of purchasers for personal, family or household uses and were in fact bought by p for his resale that stat applies and vice versa notes: - consumer is not a business purchases things for personal use - section 9 says - * consumer purpose personal, family or household - always look at the purchase objectively - *two part test 1. is item customarily used and purchased for household use if yes go to 2. was that purchased for this particular reason

o must do test forward o mixed use if it satisfies the first test and there is a mixed use becomes harder - if it is a consumer purpose then you get protection of the statute (consumers get more protection than businesses) Dick v attorney general - claimed that d was guilty of prescribing medication w.out authorization - stat said that nothing in the chapter shall apply to action or transaction otherwise permitted, prohibited or regulated under laws administered by - petitioner maintains that director of licenses is not regulatory body since pwers are not as comprehensive - intent of the act wsa that if particular practice found to be unfair or deceptive is not regulated even though business is regulated generally the provisions of the act apply - the commissioner had to show what acts were covered by the statute wiegel v ton Tonkin Chevrolet - dealer told consumer car had 260 miles bc it was driven from another dealer o actually another consumer had bought it but their financing fell through - Oregon stat says that unlawful practice when person says goods are new if they are second hand - Court says that what is meant by new is statutory interpretation not for factfinder o Two elements 1. significance of actual physical use 2. significance of prior transactions involving same vehicle Automobile is new even though dealers and potential buyers have driven it Mileage was accurately stated Existence of a prior sales contract alone cannot constitute used; actual use at least to the extent of taking possession is required If automobile is used beyond purposes incident to sales must be disclosed - Unlawful trade practice must be 1. willful and 2. result in loss of money o Difference bt paid price and measurable market value o Or loss of money could be expenditure of funds for goods that are not desired by customer o Statute allows recovery of actual damages or $200 whichever is greater, plus punitive damages etc o Lost money when he paid for product he thought he was getting, or lost benefits of the product he was led to believe he had purchased o That loss does not include diminution of value is immaterial o Even if the loss fell short of $1000 the court or jury is allowed to award the $200 minimum o Notes: - dealer lied about the reason for the mileage bc the price would be different - 1200 miles on car used as demo must be disclosed as demo

- Court says that actual use as to taking possession is required - Must disclose former totaled vehicle, former taxi, former emergency vehicle - Under oregon stat has to be willful and loss of money and property - Losses should be viewed broadly in this case - In Mass you dont even have to have damages, minimum award is $25 Golt v Phillips - ad offered to rent furnished apartment for $135 per month plus utes - apartment was dirty, ensured that it would be cleaned and repaired, paid first months rent and $200 deposit - after moving in learned toilet was outside apartment and shared - some repairs not done - called city and discovered those running apartments did not have license or inspection to operate as multiple dwelling - additional violations were found by inspector - told to remove tenants and cooking unit in one of the three apartments - p was the only one ordered to vacate - denied relief under Maryland consumer protection act bc he had inspected dwelling - CPA applies to this agreement - Court found that advertising and renting unlicensed dwelling violates all 3 parts of CPA o 1. MISLEADS Advertisment and rental of apartment implies it is legal, Phillips could not provide P with unimpeded right to possession o 2. CHARACTERISTIC IT DOES NOT HAVE license is implied to any lease o 3. FAIL TO DISCLOSE MATERIAL FACT THAT DECEIVES failed to disclose fact that they lacked license Does not require scienter, only statement that has propensity to mislead - Inspection of apartment cannot inform tenants that it is unlicensed - DAMAGES o Look only at actual loss or injury o Golt may recover full damage bc unlicensed lessors can realize no benefit at all from illegal lease Also gets cost of moving, plus 60 days at new place bc no 60 day notice given as required as long as new place was similar to premises Notes: - cases like this usually brought bc person has not paid the rent - there are two types of licenses 1. revenue raising 2. meant to protect the public - capacity to deceive unlicensed apartment consumer had right to rely on it and it was a material decision bc it could have effected his decision and he was damaged Fenwick v kay American jeep - rules for motor vehicle advertising practices o failure in any price advertisement to disclose bona fide odometer reading of specifically advertised used car

o friedman owns ad agency and he reps 30-35 auto dealers one ad stated the price but did not say the odometer reading o friedman said that the omission of the odometer reading was his fault it was an oversight o hearing officer found both of them guilty - court found that omission must be intended and nondisclosure must be knowing o nondisclosure of fact unknowingly and by reason of inadvertence does not constitute unlawful practice o original bill was amended so act had to being intended and knowing - attny general may not make rules that run counter to legislation dissent: notes: - Mass motor vehicle advertising requirement have to show odometer and VIN o Private party not governed by this On appeal NJ Sup court said: - attny general has power to make rules to prevent fraud and other deceptive acts o this was w/in authority of attny general o since consumer protection is goal, the standards must be met regardless of intent notes on fenwick: - court cites capacity to mislead sounds like deception - statutory interpretation have to pay attention to commas, ands and ors - legislative history has to be examined to determine the intent of congress o bill passed included that omission of any material fact had to be knowing o this is more important bc it sets precedent for the entire industry - final orders of the division of consumer affairs were reinstated

STOPPED HERE -

Going to start truth in lending act next week, look at the act in the book look at regulation (z)

PREEMPTION Jones v rath packing - ordered certain bacon and flour removed from sale o bc average net wt was less than stated on packages - rath and miller said that he was preempted by federal laws regulating weight - issue whether federal laws governing packaging preclude state from enforing their law - if preemption of historic police powers was the intent of congress o when congress has stated that enactments alone are to regulate a part of congress the state law must fall (explicit or implicit) o state law says average weight shall not be less at time of sale or offer for sale o federal meat inspection act makes sure labels are accurate in plants producing items

includes requirement of accurate statement of quantity and contents o federal meat inspection act expressly states there are to be no other requirements in addition or different to those in the act - with respect to the bacon it is preempted - FDCA and Fair Packaging and labeling act govern flour o Requires accurate statement of quantity o Nothing in the FPLA shall be construed to repeal, invalidate or supersede FDCA Nothing in FPLA explicitly permits any variation bt stated weight and actual weight FDCA does not preempt but the FPLA says express intent of congress to supersede states o Since it would be possible to comply with state law w.out triggering federal enforcement action court says this is not inconsistent w/federal law - Must consider whether state law stands as obstacle to accomplishment and execution o With respect to flour not allowing for reasonable variations would prevent accomplishment and execution of the full purposes and objectives of congress Notes in class: - the state probably did not include variation for moisture bc then it would promote local flour distributors which would not have to worry about loss of moisture due to short distance of travel, out of state flour distributors would be at a disadvantage due to longer travel and more loss of moisture - the federal act says about preemption that you cannot have anything different than fed law - purpose of federal preemption is to protect interstate commerce o out of state flour producers would have to overpack - each state is permitted to make their own laws and federal government is not allowed to occupy what should be left up to the states - federal laws are for the purpose of having states get along - californias refusal to permit any reasonable weight variations puts out of state producer on different footing Kellerman v mci telecommunications corp - ps says that mci advertising violates consumer fraud and deceptive business practices act and uniform deceptive trade practices and deceptive advertising practices are breach of contract - compares costs in commercials but billing practices are different o mci bills for uncompleted calls but at&t does not, plus surcharge where phone rang 6 or more times, plus local charge - claim that advertising falsely represented policies and practice - communications act - d argues that congress intended to occupy the entire field of telephone service or alternately act governs carriers charges, practices and tariffs

act states that provisions of this chapter are in addition to common law and statutes - Illinois case found that state law claims alleging common law fraud and violations of deceptive trade and consumer fraud acts were not preempted by the act - Reasonable to presume that state laws that interfere with congress intent to creat rapid, efficient communication service would be preempted - Should preserve State law causes of action for breaches of duties not covered by the act - Ps dont argue about quality of service they just allege deceptive advertising Notes in class: - rate regulation = had to negotiate with the commission and they would approve you so you were good o consumer could not say that the rates were not reasonable - p argues that - federal preemption: o act is comprehensive in nature o if there is a federal interest in dominating and precluding state action o where there is a same purpose - here reason for fed law was to provide greater service to the most people - state law did nothing to interfere with what the federal government has done - where the duties of the state are in some way distinguishable from the duties of the federal governmtn then there will be no preemption - the consumer would not be able to bring any federal charges for rate, court thinks they should have remedy under state law on the deceptive practice - consumers trying to bring deceptive act claims are not obstacles to what the federal government is trying to do - preemption has more to do with the 3 standards listed above rather than the specific language of the statute 10/4/07 - Mass state statute - If we talk about a mini ftca it will be the mass state statute TRUTH IN LENDING ACT - this is a disclosure statute that applies to loans and sales - applies to open ended and closed ended transactions - not a regulatory act it is a disclosure act o there are other statutes that regulate interest rates o this just regulates disclosure - 1967 mass became the first state to require interest rates disclosed in transactions - 1978 simplified truth in lending act was passed - 1988 truth in lending act amendment to add something - Reg z is regulation dealing with truth in lending o FRB writes regulations - Have to be able to cross reference TRLB and reg Z - Reg z has official commentary * it is really important

First thing when you look at a credit transaction have to ask does the truth in lending act apply (if any of these factors does not apply dont have to look at truth in lending act): o Status of the debtor o business of the creditor o whether there is a finance charge o the purpose of the loan is o the amount - Amount: o 104 says what transactions are exempted and shows was is included If it is under $25000 and not a permanent dwelling Cross reference to 226.3(b) Use table of contents to see where cross references are o Have to be talking about personal, family and household (consumer purchase) - Status of the debtor o Must be a natural person - Creditor o Must be person who in 1. ordinary course of business 2. regularly extends credit (professional creditor) *appliance guy who lends credit not always obvious - credit has to be payable by agreement in 1. more than four installments or for which the payment of a finance charge is or may be required and 2. is the person to whom the debt is payable - Regular extension of credit is more than 25 times in the preceding calendar year with exception of principal dwelling which number is set at 5 Finance charge (not just the interest rate read 226.4 carefully) o Must be payable by written agreement in more than four installments Purpose: Dwelling: - duplex if you live in it is covered - duplex solely as investment not covered open ended v. closed ended credit different disclosures apply - open ended where there is expectation of repeated transactions - anything that is not openended is closed (ie. car loan) - all disclosures must be clear and conspicuous, in writing and in some format that consumer can keep - 226.5 has disclosure requirements - APR and finance charge must be more conspicuously disclosed than other finance charges 10/18/07 Benion v bank one

- ds moved for summary judgment - superior satellite was selling systems in sams club - agreed to purchase for 4297.52 - plus one year of programming cost 996.00 - salesman suggested that she apply for echostar revolving charge plan o did not read the charge plan and signed it - charge account opened for $4500 - the credit card was offered by bankone - once the account is opened for a consumer they are allowed to make purchases at any echo authorized dealer or to order television programming directly from echo - superior satellite was an authorized dealer - bank one periodically imposes a finance charge on outstanding balances - when enrolling in the plan consumers are supposed to receive all disclosures required by TILA for open-end credit plans o ps state they did not receive such disclosures - issue whether in deciding to structure echostar plan as credit card plan bankone viewed repeat sales as goal of the plan and genuinely believed that the credit card would encourage repeat sales to relatively captive consumer base o bankone planned to encourage such sales through advertising enclosed with monthly account statements and other promotions - in 1994 12.3% of all purchases were repeat purchases o it was only 2.3% of income - closed ended disclosures must be made unless credit qualifies as an open end plan o closed end disclosures have to include total amount financed including both sale and total amount of interest, length of time over which payments may be made, amount of each installment and intervals bt payments and amount of finance charge o must be made at point of sale - open ended account disclosures may be given bf account is opened telling annual percentage rate of interest, and nature and amount of any finance charges - open ended credit account: o creditor reasonably contemplates repeated transactions o creditor may impose finance charge from time to time on outstanding unpaid balance o amount of credit that may be extended to consumer during term of plan is made available to extent that outstanding balance is repaid *dispute is over the first aspect - reasonably contemplate repeated transactions = credit plan must be usable from time to time and creditor must legitimately expect that

LEASES -

there will be repeat business rather than one time transaction, msut expect repeated use under credit plan as a whole not particular feature, fact that particular consumer does not return doesnot prevent plan from being openended have to consider nature of creditors business and relationship bt creditor and consumer bc they sell wide array of products that expire or need to be regularly renewed repeat sales are likely o large number of echo approved dealers also makes repeat purchases more likely o bankone also tried hard to encourage repeat business o dont have to focus on the size of the price tag o although credit card requires you to make large one time purchase to open it does not remove the account from the category o legitimate expectation of repeat sales not probability of repeat sales d granted summary judgment leases may be either closed or open ended o closed= consumer agrees to pay fixed rent for fixed period of time at the end they surrender property (no risk of depreciation to consumer) o open = transfers risk of loss to consumer fixed rental for fixed term agreement says value that lessor expects property to have at the end of the term if value is less the consumer must pay the difference if higher lessor will pay excess extension of credit is implicit in leases lessor allocates each payment first to financing costs, then to depreciation portion of the payment allocable to financing costs is larger in early months of the lease than it is in later months o result is that earlier in the lease that termination occurs, larger the amount of damages liability for early termination is included in lease, limited by 183

RENT TO OWN - when consumer leases goods for fixed term and acquires ownership by completing monthly lease payments, the transaction is functionally equivalent to a sale - rent to own is neither a credit sale nor a consumer lease - states have required disclosures, ny requires that certain disclosures be posted on the item itself CLARITY - states may pass laws regarding clarity but it is up to the federal reserve board to determine whether those laws are consistent

Fair credit reporting act - allowed to check credit report for free once a year bc credit bureaus were being inaccurate - FCRA passed in 1970 purpose to protect consumers from inaccurate info, to make sure info is up to date, relevant, accurate and make sure info is kept confidential o Only so many instances in which someone may request your credit report - FCRA 603(d) defines consumer report - Consumer reporting agency definition 603(f) o Somebody for 1. some compensation, 2. must be regular engagement in business and 3. purpose must be of furnishing reports to third parties - Reports that are excluded 603(d)(2) - Investigative consumer report 603(e) obtained through personal interviews o Dont use your credit card in bars or package stores - 1996 congress made amendments to FCRA o Credit reporting agencies were obligated to ensure info was accurate (businesses have obligation to give info that is correct) - If info is inaccurate you challenge the reporting agency o As consumer challenge all incorrect transactions at once, the reporting bureau will have to delete all that you challenge (if they cant verify or if too burdensome to verify) - Do we have a credit reporting agency, do we have a credit report, do we have a consumer, other important player is the creditor who has to supply correct info - When challenging credit report examine two things: 1. content and 2. use - 607 compliance procedures refers you to 604 and 605 o 607(b) addresses the accuracy of report maximum possible accuracy PERMISSIBLE PURPOSES - permissible purposes - credit transactions, employment, insurance, license, investment, any other legitimate o agency may deny request if it feels not for permissible purposes o special requirements if credit report to be used for employment purposes strict standard 613(a)(2) - 607 requires disclosure of investigative consumer reports consumer must know that they are going to have investigative report prepared on them (has to be in writing no more than three days after the report was requested) - 614 restrictions on investigative reports procedures for verifying info - Requires that reporting agencies show respect for consumers right of privacy

615 requirements on users of consumer reports - must show that you are using report for one of the permissible reasons o Must provide consumer with the report with no cost to them o If user is extended credit for personal use and adverse action is taken against consumer have to tell consumer info on which it is based (adverse action may be a partial denial under 603(k) even an increase in % rate is adverse action) - Second largest group of users of credit reports are employers - User of report has to use it for permissible use - 609 disclosures to consumers if consumer asks for report they entitled to all sources and all people that have requested to see your report, any adverse info on report you are entitled to know what that adverse info is, o Inquiries only have to be kept for a year o All other info there for good - 611 in the event a consumer disputes accuracy: o Agency has obligation to reinvestigate and verify w/in 30 days of request o From reporting agencys view it is sometimes easier to just delete They will go back to provider of info to verify it to them *things that consumer should watch out for: closed accounts (if you have closed an account make sure it appears as closed by you and not by issuer, if you have paid off an account and have not told them to close it tell them to close it otherwise negative), make sure that there is nothing older than seven years on credit report (no activity for seven years get rid of it, runs from date of last activity, bankruptcies may remain for ten years, dont initiate activity if it should be off), makes sure bankruptcies reported correctly, - FTC is responsible for administering enforcement of FCRA, o if violation of FCRA it is also violation of section 5 of FTCA o also potential for criminal liability (info obtained under false pretenses results in fines and imprisonment of up to two years) if you are officer or employee of reporting agency and you knowingly and willfully offer info that is not authorized you to are open to crim prosecution civil liability one who willfully fails to comply with any requirements person who requests report can be held liable for employees even with apparent authority to act o if you are negligent in failing to comply may be liable for out of pocket costs and attneys fees - 607 just have to follow reasonable procedures

615 allows user to discharge duty to consumer by notification requirements??? Issue of identity theft Have to ask do I have a consumer, do I have a consumer reporting agency, do I have a permissible use This act is meant to regulate the reports and permissible use but your creditor can do what they want when it comes to granting credit (disparate treatment would fall under equal credit opportunity)

greenway v information dynamics - ps seek prelim injunction - IDL is defendant that collects data on check cashing histories - Idl gives merchants info that allows merchants to ascertain name, drivers license number and checking account - Merchants get names of everyone who has had check returned by members of idl - When congress came up with FCRA they noted that reporters of credit should respect consumers right to privacy - Court concludes that the reports here fall within this section - Consumer reporting agency may disseminate report o To a person which it has reason to believe Intends to use it for credit transaction with the consumer o Or otherwise legitimate business need in connection with a transaction involving the consumer - Dissemination only allowed to third party who require it for transaction with that consumer o IDL fails to comply - Purpose for furnishing the report must exist at the time the request for the report is made - Check to make sure it meets the definition under 603 then Look at 604 and permissible purposes - This case involves 604(a)(3)(F) has to involve the consumer for which info is being provided - Reporting agency says that its for a subscriber for business purpose - Problem of overdissemination - Have to have one user one consumer and one transaction - Mortgage lender may however review your credit report every once and a while - 603 will tell you if you have a consumer, a report then 604 will tell you if it is a permissible use - Permissible purpose must exist at the time of the request - The consequences of this case are that now the reporting agency will only issue info upon request and they will decide if it is a permissible use Belshaw v credit bureau

law firm requested info credit bureau allowed it saying only that it was a permissible use

NEXT CLASS LOOK AT PROBLEM 6 P232 PROLBEM 6, 8 AND PROBLEM 9 Problem 6 a. is a consumer report under belshaw, they said a consumer report is anything that could be used for one of the purposes enumerated not a consumer report under henry the report has to be procured for the certain purpose 603(d) says it should be used or expected to be used b. - credit bureau does violate the FCRA bc they did not take reasonable steps to verify the use under 607(a), nor was the purpose certified using argument in the alternative under 604(a)(4) request from head of state for purpose of child support c. - Andrews does violate the act by asking for the report there is no evidence that Andrews is using it for any of the purposes outlined unter 604 - 619 provides for fines and imprisonment Problem 8 - 604(f) provides for other legitimate business need Problem 9 - any authorization of extension of credit

Austin v bankamerica service corp - p applied for credit but was outright denied the first time and told to come into the bank to discuss the type of account - credit bureau of Atlanta reported to the bank that the p was named as a d in a lawsuit o in that lawsuit he was a d due to his official capacity o p contends that there is a difference bt his personal and official capacity - credit bureau of Atlanta moves for summary judgment saying since the fact was true and that failure to note what capacity he was named a defendant as does not constitute a violation - court said that requiring anymore than the d had done would be beyond the intended scope - act does not impose strict civil liability for agencys inaccuracy or incompleteness - court finds that p has failed to state a cause of action Notes: - 607(b) reasonable procedures ensuring max possible accuracy

Have to define accuracy o Technical accuracy is all that matters o Accuracy v. complete It was accurate but he is arguing that it is not complete - Court is saying that the standard is met - Misleading info - P239 number 4 all are true and fine according to Austin case koropoulos v credit bureau inc - koropoulos defaulted on a loan with Virginia National Bank but ended up paying it back to Nationwide credit corp - then he couldnt get credit bc CBI was reporting that he was an I9 - ps say this was misleading - district court granted sum judgement for CBI bc VNB did lose 40% on the loan and - consumer can bring suit only for inaccuracy - credit bureau have to have procedures that for meeting the needs of commerce for consumer credit - this court does not believe in maximum accuracy - agency must follow reasonable procedures to assure such accuracy - find that there is a genuine issue of fact as to whether the report was sufficiently misleading so as to raise the issue of whether CBIs procedures for assuring max possible accuracy were reasonable - another issue is whether using classification for all bad debts whether ultimately paid or not renders the report of the VNB loan sufficiently incomplete - report must be reasonably complete - ps dont complain for reinvestigation, they just criticize the methods - under moore case balancing test weighing potential that info will crete misleading impression against availability of more accurate info and burden of providing such info - summary judgment was improper bc the only looked at the technical accuracy of the info - ps argue that cbis reporting method is so imprecise that it fails to constitute a reasonable procedure o whether using 9 for all bad debts renders the report sufficiently incomplete o report must be reasonably complete regardless of the fact that it is not misleading o bc different types of bankruptcies have to be noted 607(b) does include some types of incomplete info o imprecise or incomplete reports that are not misleading, although undesirable, are not noxious as erroneous and misleading ones o no evid that potential creditor would deny credit to an individual who has failed to pay back a loan , but would grant it to one who repaid the loan after it was referred for collection

notes: -

and 2. the burden imposed on agencies by requiring a distinction bt skips, loans never repaid etc up to distict court to determine if it is unreasonable per se allowed to send info on Mr. K as long as it has bearing on Mrs. K o but here lord and taylor did not request info on Mr. nor did they get only Mr. Ks info that dealt with Mrs. K the 0 balance can sometimes mean that it was written off not necessarily paid off trial court allowed summary judgment under Austin saying it was technically accurate 607(b) maximum possible accuracy Peller case said that accuracy of report was absolute defense If someone was denied credit for the same factor over and over again Mrs. Koropoulos This case changed the test on 607(b) to the balancing

EQUAL CREDIT OPPORTUNITY ACT - often these three acts are linked together - ECOA and reg b - 1974 ECOA was enacted and amended in 1976 o Prohibits discrim on basis of race, color, religion, national origin, sex, age, marital status, and fact that all income is from public assistance - Regulated by the fed reserve system o Fed reserve board has passed reg b - Anyone who regularly extends credit is subject to the act o Sometimes extends to those who arrange financing as well - This act protects consumers and also applies to extension of business credit - Does not regulate content of information o Cannot ask about sex, color, child bearing, race, religion o Has model forms dont have to use them but should to protect yourself - Credit worthiness is evaluated objectively o And there is statistical analysis (credit scoring) - Rules concerning taking of applications - Credit score is tied up with fair credit reporting act it has to be accurate - Credit scoring system can and does use age as system o Base it on the stream of income - 701(d) requires creditors to provide - 202(9) says notification must include certain info and when notifications are given o 202.9(a) governs content of the notification

Civil liability in this act for actual and punitive damages Two years to bring an action under this Discrimination = any adverse treatment on a class regardless of individual merit o Drawing of distinctions on individuals concerning credit o Characteristics relevant to credit worthiness Look at whether we have a creditor, and whether we have an applicant, not just a consumer applicant (not just personal family or household) o Consumers only are covered under TILA and FCRA EOCA applies to certain class of individuals (have to belong to class to be discriminated against) o If discriminates against someone outside of protected class may have action elsewhere Credit system can be used to create a discriminatory pattern o If you have one that provides credit to disproportionate number of men you have violated 202.5(a) content is important but if you are not advertising to a protected class the content is not acting to discourage the protected class Preemption occurs if there are inconsistencies but not if it offers more protection

Markham v colonial mortgage service co - couple that applied for loan was engaged o would not aggregate incomes of unmarried couple - 70? Says cannot discriminate on basis of marital status - If you are married and spouse incurs a debt and does not pay ECOA two thrusts prohibition of discrim on specified bases and requirement that the creditor inform applicant of reasons - If action is adverse creditor must either inform applicant of reasons or inform them of right to request statement of reasons 701d Fischl v general motors acceptance - creditor would not extend credit for car bc person had not had many loans for same duration - creditor said credit references were insufficient - court said credit references are insufficient relates a different meaning o did not signal the nature of deficiency nor did it give address of credit reporting bureau - fischl could not improve his credit application, correct any misinformation in credit record, or guard against discrim - this vague language thwarted both educational and protective objectives of ECOA Higgins v jc penney inc - denied app bc applicant did not have checking account, bank credit card or oil company credit card

letter informing consumer said as reasons for denial type of bank accounts and type of credit references - court said must evidence sufficient deference to agency regulatory expertise required in this circuit o agency said creditors need not describe how or why a factor affected applicant - court also said although statement required some investigation by p it is okay bc she knows about her financial status us v Montgomery ward - scoring systems and specificity requirement cannot coexist ENFORCEMENT - if agency believes litigation is necessary it refers matter to dept. of justice - person injured by failure to comply with the act may recover actual and punitive damages o punitive damages recoverable even if no actual damages o one factor to consider is extent to which failure was intentional o successful p entitled to costs and attny fees mcpherson v commerce bank - offending creditor should not be permitted to look for payment to parties who, but for ecoa violation would not have incurred personal liability on the underlying debt in the first instance - spouse whom creditor wrongfully requires to sign a debt instrument may assert violation by way of recoupment as defense to liability even after stat of lim cherry v Amoco oil - white woman resides in predominately nonwhite residential area - Amoco uses computer system to figure out applications, says that zip codes with high rate of delinquency gets low points, white and black zip codes included - Evid showed that if p lived in higher rated zip code she would have gotten the credit - P lived in black neighborhood - Says she has had to divulge denial on other credit applications - Amoco witnesses said that did not prove anything about relationship bt use of zip code ratings and rejection of black credit applicants o Unsupported assumption that applicant pool for zip code reflected racial composition - Not required for p to prove actual damages to be entitled to relief o Cost and attny fees added to any damages awarded o Power to award punitive damages where no actual damages exist - Effects test effect of disparate impact was enough to make out prima facie case o Hard to prove effects test with a creditor that does not know the race of applicants

o Here the p tried to show that disparate impact on black people by showing that percentage of applicants rejected in various low-rated zip code areas correlated to percentatage of black population in each of said areas This is not a prima facie case - This method of proof does not test the single criteria but rather all 38 and it does not deal with actual applicant pool or with one which could reasonable be assumed to possess approx characteristics of applicant pool - If housing is such that whites live in neutral or high rated zips and virtually all black persons live in low rated areas then zip code criterion becomes suspect - Here most low rated zips are predominantly white Williams v first federal savings - court said that since the second loan for which she was approved was at a higher rate of interest and was based on more complete info than p had supplied to d, p failed to make out prima facie case PREEMPTION main preemption provision of ECOA is 705f displaces state law only to extent that it is inconsistent with the act

CHAPTER 7 Quality standards - warranty developed along torts and contracts lines UCC and contractual modification of quality standards - warranty liability exists for loss other than physical injury to person or property - privity of contract is an element if consumer seeks to recover for breach of implied warranty of fitness but not if consumer seeks to recover for breach of express warranty o mixed if concerning breach of implied warranty of merchantability o courts do not want to extend ability to recover for purely economic loss o some states legislatures have said that lack of privity is no defense berg v stromme 1971 pre ucc case - p tried to return car for refund, dealer said that there was no warranty of quality and that p had waived all warranties in writing - superior court ordered dismissal saying p had signed disclaimer of warranty o court of appeals affirmed - this court reverses

issue: whether buyer despite disclaimer was entitled to car that would operate with reasonable efficiency, safety and comfort - presumption that buyer would not in sales agreement negate and udo bargain by disclaiming right to car of merchantable quality - the disclaimer was on the back and at the bottom of page o said things like: verbal promises not binding, that dealer did not warrant correctness of speedometer, mileage, year or model, that if buyer failed to complete purchase forfeited trade in or down payment o disclaimer said there is no guarantee on automobile unless a separate one was written also no warranties, express or implied have been made by seller unless endorsed hereon in writing - to follow the old rule means that buyer nullifies all things to which he has just bargained - should not be bound to it unless he has agreed to be bound by it with same degree of explicitness that he bound himself to the other vital conditions of the contract purchase - seller must show just which defects or conditions the buyer is waiving o with the sale of brand new automobile there exists an implied warranty of fitness o must be reasonably fit for and adapted to the purposes for which it is purchases carry passengers with reasonable safety, efficiency and comfort - strict liability (liability w/out proof of negligence) should be applied to the dealer bc he impliedly warrants that the car is of merchantable quality concurrence: too restrictive to say that waiver of warranty must be negotiated notes: merger clause means that everything in the contract is it nothing outside of the contract - merchantability 2-314 for ordinary purpose - contract of adhesion one with all that boilerplate (no negotiation) - fitness for particular purpose seller has to know what buyer is going to use it for sell the item and buyer has to rely on sellers expertise - mass 2-316a says consumer purchase cannot disclaim implied warranty of merchantability - mutual agreement of the parties - lemon laws allow consumers to get replacement or refund after trying to rectify the problem - good faith defined three times in ucc - this was a pre ucc case knipp v weinbaum -

notes: -

trike had been assembled by a bike enthusiast then traded to three other people bf getting to ds shop, bill of sale said CYCLE SOLD AS IS, same day p lost control of trike bc of defective weld lower court granted summary in favor of ds appellant said as is was not intended to operate as disclaimer of implied warranties of merchantability and fitness for particular purpose issue: whether law implies no warranties at all on these facts o whether implied warranties of merch and fitness have viability in this action o effect of words as is in personal injury action implied warranties may be imposed on sale of used goods when seller knows purpose for which it is sold limiting damages for injury to person in case of consumer goods is prima facie unconscionable o clause in statute saying unless circumstances indicate otherwise as is can replace all implied warranties seller may disclaim all warranties as long as the buyer understands this is being done understanding of as is is in dispute no summary judgment dealers in mass cant sell inoperable cars since it wont perform its ordinary purpose has to be sold under salvage license 2-316 fits into this bc warranty was disclaimed but it says unless the circumstances indicate otherwise 2-316b ought to have discovered in examination As is understanding of the defect is part of the basis of the bargain As is suffices in a commercial setting but in consumer setting you arent going to be able to use this to disclaim merchantability and fitness for a particular purpose Warranties negotiated for may be more than those required by the law

overland bond v howard - cannot be inherently dangerous murray v d and j motor company - as is disclaimer is ineffective due to fraudulent representations or misrepresentations concerning condition, value, quality, characteristics or fitness of goods sold murray v holiday rambler 1978 - in first 7 months of owning motor home it was taken in for repairs 9 or 10 times, final repair was going to require the murrays to go to Indiana, they revoked acceptance of motorhome and demanded money back - issues:

o does limited warranty together with disclaimer preclude revocation of acceptance o were ps entitled to revoke acceptance o were ps entitled to recover damages for loss of use of motorhome ds say that limited express warranty prevents ps from revoking acceptance o under ucc seller may 1. disclaim or limit warranties or 2. may limit buyers remedies for breach of warranty disclaimer of warranties limits sellers liability (number of circumstances in which seller will be in breach) limitation of remedies - restricts remedies available to buyer once breach is established limitation of implied warranties must be conspicuous and otherwise consistent with provision and not unconscionable in light of contract o said in bold to read what was on the back bf signing, said in two places on the back in caps no warranties express or implied court said that language constitutes a warranty that the product was free of defects at time of delivery ucc disfavors limitations of remedies where their deletion would deprive a party of reasonable protection against breach o any clause limiting remedies in an unconsciouable manner will be deleted making ordinary ucc remedies available allowance to repair or replace any part is not unconscionable where limited remedy fails its purpose it is disregarded fails when cumulative effect of all nonconformities substantially impairs value of the goods right to revoke is found in ucc remedies jury decision disturbed only if there is no credible evidence that fairly admits of inference supporting their verdict murrays claims of problems were not incredible, satisfaction with repairs was conflicting the goods were not restored to nondefective condition w/in reasonable time acceptance may be revoked where nonconformities substantially impair the value of the goods to the buyer and where acceptance is revoked within reasonable time and bf any substantial change in condition of the goods

notes: -

o have to consider all money spent on repairs and consequential costs o jury could have found that there was no substantial change in motor home since time of acceptance only reason in delay of revocation of acceptance is p was allowing d to minimize damages as required by ucc damages for loss of use since limited remedy failed its purpose ps allowed to recover any damages under ucc o loss of use damages allowed where p relied on sellers assurance that defects will be cured o if something cannot be repaired limited warranty of repair is inapplicable when exclusive contractual remedy fails, buyer may recover consequential damages only evidence of how much the motor home would have been used was the trip that was cut short for a week limited warranty was for repair 2-316 Purpose of limitation of remedies is to give buyer a working product Seller may be fulfilling the repair or replace warranty but buyer is losing use of the rv (should have been repaired w/in reasonable period of time) All remedies under ucc are available if limited remedy fails under contract Parties must receive benefit of their bargain Not in good faith/unconscionable good contract arguments Dealer said revocation was not w/in reasonable period of time or substantial change in value (mileage on motorhome) Court said that since the motorhome did not conform in the first place and it was dealers fault that the delay occurred Court used irs allowance for mileage Use of miles is a valid defense Consequential damages 2-719

article 2 LEMON LAW MMA USED CARS -

within 12 months or 12,000 miles must be able to remedy problem or manufacturer replace or refund section 108 says implied warranties exist as long as there is an express warranty if you claim under mma the warranty must be in writing

NEXT CLASS CHAPTER 8 Sale Credit purchase item and defer payment through installment sales contract Loan credit borrow form lending institution Carper v Kanawha banking 1974 Fairmont says that Carper was offered mobile home at cash price of 6,180 or credit price of 9144 Carper says he agreed on 6180 with 1000 down and 5180 left paid in 96 payments o Carper says he was told that interest of 6.5% would be calculated on the 5180 balance Explicit sales contracts carries on its face 9144 Fairmont called the 3128 a finance charge and when calculated interest came out to be 11.23% Bank officer said that the finance charge if calculated at 6.5% if considered interest would be in excess of statutory limit Issue: whether the questioned commercial transaction and the conditional sales contract sued upon containing finance charges which, if interest, exceeded the lawful rate allowable by law in WVa were subject to the usury laws of the state Statute said all contracts made directly or indirectly for loan or forebearance at greater rate than 6%, shall be void A forebearance is subsequent agreement entered bt debtor and creditor to secure repayment of debt previously created Fairmont argues that sale of property is not loan or forebearance o 1774 Precedent shows that seller was allowed to offer credit price or cash price and interest rate could exceed usury rate Immaterial if time price exceeded the cash price by more than the statutory allowance for interest on a loan for the same duration 1861 case adopted the time-price doctrine 1892 cases said: if what is called interest or what is aimed at on the basis of a certain rate of interest is in fact part of purchase-money or price of tract of land sold, and not mere cover for loan or forbearance of money it is not usurious 1895 case said: patently usurious where lender negotiated with borrower new loans at usurious rates Whether transaction was usurious or bona fide sale saved by time-price is question in fact If negotiation bt seller and buyer involves bona fide quotation of both cash price and credit price transaction does not involve usury even if credit price exceeds cash price plus lawful interest thereon o The credit interest, the contract, may also be assigned to a lending institution Court notes that reference is made to the word bona fide

o If any device is attempt to avoid usury laws jury may find o If price is really cash estimate and amount is assumed to be paid greater than cash price with legal interest transaction may be usurious o 1. have to examine whether both cash and credit price were presented and buyer given choice o 2. examine closeness of relationship bt seller and lender o 3. when credit terms expressed to buyer-borrower are couched and calculated in terms of interest or percentage Evidence though disputed demonstrated that sale of trailer and financing arrangements to pay for it was conducted in manner to call for app of usury laws o Jury resolved all factual conflict in carpers favor