A. Consumer Credit Protection Act
The Consumer Credit Protection Act, 15 U.S.C. Â§Â§ 1601-1667, includes the
Truth in Lending Act and establishes disclosure and other requirements when
credit is extended, advertised, and billed to consumers. The Act also deals
with disclosures and other requirements for consumer leases. The FTC is
responsible for enforcing those requirements imposed under this Act that
are not committed to another agency. See 15 U.S.C. Â§ 1607(c).
A violation of any requirement under the Consumer Credit Protection Act
is deemed a violation of a requirement imposed under the FTC Act. Id. All
the functions and powers of the FTC under the FTC Act are thus available
to the FTC in enforcing compliance with this Act. Regulations M (consumer
leases, amended in 1996 specifically to include a focus on auto leasing)
and Z (truth in lending), 12 C.F.R. Â§Â§ 213 et seq. and 226 et seq., respectively,
set forth regulations issued by the Federal Reserve Board under the Act,
and include sample forms and disclosures.
CPB's enforcement responsibilities include criminal cases under 15 U.S.C.
Â§ 1611 and civil penalty cases based on orders and trade regulation rules
issued by the FTC.
1. Civil Penalty Cases
Civil penalty actions are referred to CPB and handled in the same way
as other civil penalty actions under the FTC Act.
2. Criminal Cases
Knowing and willful violations of the Consumer Credit Protection Act are
misdemeanors, as provided in 15 U.S.C. Â§ 1611.
B. The Fair Credit Reporting Act
This Act, 15 U.S.C. Â§ 1681, requires consumer reporting agencies to adopt
certain procedures relating to consumer credit, personnel, insurance, and
other information to ensure the confidentiality, accuracy, reliability and
proper verification of the information in accordance with the Act. The FTC
is responsible for administrative enforcement of compliance with the Fair
Credit Reporting Act ("FCRA"), except to the extent that enforcement responsibility
is specifically committed to another agency under 15 U.S.C. Â§ 1681s(a).
A violation of any requirement or prohibition imposed under the FCRA is
treated as a violation of the FTC Act. Id. The FTC may thus use all of the
procedural, investigative, and enforcement powers available to it under
the FTC Act as if they were part of the Fair Credit Reporting Act.
Some significant recoveries under the FCRA and other Acts include United
States v. Tower Loan of Mississippi, Inc., Civ. No. J90-0447(L)
(S.D. Miss.) ($175,000 civil penalty and over $1.3 million in consumer
redress for violations of ECOA and FCRA, with additional $100,000 civil
penalty and $240,000 consumer redress in 1997 action related to order
violations); United States v. Academic International, Inc., No.
1-91-CV-02738 (N.D. Ga., November 26, 1991) ($150,000 civil penalty
for violations of ECOA, FDCPA and FCRA).
Criminal cases under the Fair Credit Reporting Act can be brought when
a person knowingly and willfully obtains information on a consumer from
a consumer reporting agency under false pretenses. 15 U.S.C. Â§ 1681q. In
1998, CPB obtained the conviction of an individual in Colorado who had fraudulently
obtained a credit report to use in a political campaign. Criminal charges
also lie where a consumer reporting agency knowingly and willfully provides
information concerning an individual to a person not authorized to receive
that information. 15 U.S.C. Â§ 1681r. The criminal provisions of the FCRA
are only enforced by the Department of Justice.
C. The Credit Repair Organizations Act
The Credit Repair Organizations Act (CROA), 15 U.S.C. Â§ 1679-1679j, regulates
those offering "credit repair" services, especially "credit repair organizations."
Those are defined to include any person, including an attorney, who uses
interstate commerce or the mails to sell or provide services for the express
or implied purpose of improving any consumer's credit history. 15 U.S.C.
Â§ 1679a(3). Violations of CROA are treated as a violation of the FTC Act,
making all of the enforcement powers of the FTC available. 15 U.S.C. Â§ 1679h(b).
The statute became effective in 1997. In 1998, CPB brought a series of cases
that led to injunctive relief against several firms for CROA violations
that involved misleading practice and other violations.
Commonly, credit repair organizations promise to "repair" the credit of
consumers by employing the verification provisions of the FCRA. The FCRA
requires that if a credit reporting agency cannot verify a challenged item
on a credit report, the credit reporting agency must delete the item. 15
U.S.C. Â§ 1681i(a). CROA prohibits misrepresentations of services a credit
repair organization can provide. 15 U.S.C. Â§ 1679b(a)(3). Common misrepresentations
include claims that such organizations can remove negative items from credit
reports due to alleged difficulties in the verification process. However,
verification is usually automated, and most debts may remain on a consumer's
report for seven years, 15 U.S.C. Â§ 1681c (a) (2) - (6), and bankruptcies
for ten years, 15 U.S.C. Â§ 1681c (a) (1). Thus, claims that most consumers
can get such items removed from credit reports frequently violate CROA.
CROA also prohibits requiring payments in advance of the completion of
delivery of the promised services. 15 U.S.C. Â§ 1679b(b). Thus, credit repair
organizations cannot lawfully promise to "repair credit" and collect money
for their services before accomplishing that goal.
CROA also prohibits "file segregation" schemes, which are advertised as
a way of creating a new credit identity. File segregation operators advise
the consumer to apply to the IRS for an Employer Identification Number ("EIN").
Consumers are told to use the EIN in lieu of their Social Security Number
when applying for credit, in order to create a completely new credit file
in which the old debts will not appear. The scheme essentially involves
an attempt to hide one's identity from creditors by getting credit with
the EIN and a name and address that differ slightly from accurate identifiers.
Both the person selling such a scheme and consumers who follow the scheme
are violating the law. CROA bars any person from making or counseling any
consumer to make any untrue or misleading statement whose intended effect
is to alter the consumer's identification to hide accurate credit information.
15 U.S.C. Â§ 1679b(a)(2). Consumers following such advice may be committing
felonies. See 42 U.S.C. Â§ 408(a)(7)(B) (falsely representing a number to
be the social security account number); 18 U.S.C. Â§ 1014 (false statement
on credit application). In 1999, CPB brought a series of cases seeking injunctions
and civil penalties against businesses that offered "file segregation" schemes.
D. Equal Credit Opportunity Act
This Act, 15 U.S.C. Â§ 1691, also part of the Consumer Credit Protection
Act discussed above, requires that financial institutions and other firms
engaged in the extension of credit make that credit equally available to
all credit-worthy customers. The Federal Trade Commission is responsible
for administrative enforcement of compliance with the Equal Credit Opportunity
Act ("ECOA"), except to the extent that enforcement responsibility is specifically
committed to another agency under 15 U.S.C. Â§ 1691c(c). A violation of any
requirement of the ECOA is treated as a violation of the FTC Act, and enforced
in the same manner as if the violation had been a violation of an FTC trade
regulation rule. Id.
CPB's enforcement responsibility includes civil penalty cases, e.g.,
J.C. Penney Company, Inc. (E.D. N.Y. 1996) (civil penalty of $225,000),
and BarclaysAmerica Corporation (W.D. N.C. 1991) (penalty of
$265,000). The Civil Rights Division also has authority under 15 U.S.C.
Â§ 1691e(h) to bring a civil action seeking injunctive relief when it
has reason to believe that the defendant is engaged in a "pattern or
practice" in violation of this Act. Regulation B, 12 C.F.R. Â§ 202 et
seq., contains the regulations issued by the Federal Reserve Board
under the Act, and includes sample forms and disclosures.
E. Fair Debt Collection Practices Act
This Act (the "FDCPA") prohibits the use of abusive and harassing debt
collection practices by debt collectors. The term "debt collector" generally
does not cover creditors collecting their own debts. See 15 U.S.C. Â§
1692a(6). The Supreme Court has held that the term does cover attorneys
regularly engaged in consumer debt collection litigation on behalf of
a creditor client. Heintz v. Jenkins, 115 S. Ct. 1489 (1995).
The FTC is responsible for administrative enforcement of compliance
with the FDCPA, except to the extent that enforcement responsibility
is specifically committed to another agency under 15 U.S.C. Â§ 16921.
A violation of the FDCPA is treated as an unfair or deceptive act or
practice in violation of the FTC Act. Civil penalty cases can be brought
pursuant to 15 U.S.C. Â§ 16921(a). That section provides that
the FTC may use all of its functions and powers under the FTC Act, including
the power to enforce the FDCPA in the same manner as if the violation
had been a violation of an FTC trade regulation rule.
CPB's enforcement responsibility includes civil penalty and injunction
cases. Civil penalties and FDCPA injunctions were obtained against major
debt collection companies in United States v. National Financial
Services, 98 F.3d 131 (4th Cir. 1996) (affirming trial court's decision
on summary judgment, which found that defendants had -- in millions
of computer-generated collection notices that made both false threats
to sue debtors and failed to comply with the Act's validation notice
requirements -- violated the FDCPA repeatedly and deliberately; the
court assessed a civil penalty of $500,000 against National Financial
Services and its president, and $50,000 against an attorney); United
States v. Payco American (E.D. WI. 1995) (consent decree for injunctive
relief -- barring violations of FDCPA by harassing consumers in collecting
money on behalf of creditors, and requiring Payco to advise consumers
and Payco's employees of consumers' rights under the Act -- and to pay
civil penalties of $500,000); and United States v. Trans Continental
Affiliates, et al., 1997 WL 26297 (N.D. Cal. 1997) (granting partial
summary judgment and imposing injunction against further violations
by officers who had authority to control violative acts).
F. Wool Products Labeling Act, Fur Products Labeling Act, and Textile Fiber
Products Identification Act
These three statutes (15 U.S.C. Â§Â§ 68-70) establish federal requirements
for the labeling of wool, fur, and textile products. Such labeling, under
the statutes and implementing regulations, must include information regarding
the country of origin and a breakdown of the fiber content of the products.
The Federal Trade Commission (FTC) is responsible for administrative enforcement
of the Acts. A violation of these Acts is considered to be a violation of
the FTC Act.
The Department of Justice has enforcement authority that includes
seizures (15 U.S.C. Â§ 68e and Â§ 69g), injunctions (15 U.S.C. Â§ 68e,
Â§ 69g and Â§ 70f), civil penalty cases and criminal actions (15 U.S.C.
Â§ 68h, Â§ 69i and Â§ 70i). CPB has brought several actions on behalf of
the FTC against companies violating these statutes. For example, under
the Textile Fiber Products Identification Act, 15 U.S.C. Â§ 70, CPB obtained
a $100,000 criminal fine against a firm which misrepresented the correct
fiber content of carpets it sold. Diamond Rug, Cr. No. 1-95-CR-539
(N.D. Ga., February 29, 1996). CPB also obtained civil penalties of
$130,000 from K-Mart in connection with misrepresentations of the cotton
content of shirts. K-Mart Corporation (Wishbone Trading Co.),
Civ. No. 91-2223 (C.D. Ca., April 30, 1991).
G. Magnuson-Moss Warranty Act
This Act, 15 U.S.C. Â§Â§ 2301-2312, requires that persons who sell products
with written warranties must "fully and conspicuously disclose in simple
and readily understood language the terms and conditions of such warranty."
15 U.S.C. Â§ 2302. The FTC has promulgated a rule concerning the specific
items that must be included in a written warranty. 16 C.F.R. Part 700. The
FTC and the Attorney General both have the authority to bring actions under
the sections. Such an action may be brought to restrain a warrantor from
making a deceptive warranty or to restrain any person from violating either
the sections or a rule promulgated under them. There is also specific provision
for the issuance of a temporary restraining order or preliminary injunction.
15 U.S.C. Â§ 2310(c). There are no criminal penalties for violations. The
Magnuson-Moss Warranty Act does, however, provide for private remedies.
15 U.S.C. Â§ 2310(d).
H. Telephone Disclosure and Dispute Resolution Act, Telemarketing and
Consumer Fraud and Abuse Prevention Act
These statutes (15 U.S.C. Â§Â§ 5701 and 6101) deal with the conduct of
business by telephone, and each statute authorizes both FTC and state
attorney general enforcement actions. First, to deal with abuses arising
from the proliferation of pay-per-call (900 number) services, Congress
enacted the Telephone Disclosure and Dispute Resolution Act, and provided
that the FTC was to issue regulations of the industry's advertising
practices, pay-per-call service standards, and billing and collection
practices. Violations of these FTC rules (16 C.F.R. Â§ 308 et seq.) are
treated as if they were violations of the FTC Act, and the Commission
has all the same functions, powers and penalties as are available under
the FTC Act. The first 900 number case resulted in a negotiated civil
penalty of $500,000, along with a $2 million consumer redress fund.
United States v. American TelNet, No. 94-2551-Civ (S.D. Fl.,
decree entered December 12, 1994).
Second, to address abusive telemarketing practices, Congress enacted the
Telemarketing and Consumer Fraud and Abuse Prevention Act, and directed
the FTC to prescribe rules to prohibit these practices. Violations of those
FTC rules (16 C.F.R. Â§ 310 et seq.) are similarly treated as if they were
violations of the FTC Act. The FTC has all the same functions, powers and
penalties as are available under the FTC Act.
In addition, the Telemarketing Act encourages the bringing of criminal
contempt actions for violations of orders for injunctive relief that the
FTC has obtained in district court pursuant to 15 U.S.C. Â§ 53(b). In order
to bring such an action, the FTC is authorized to request that the Attorney
General appoint an FTC attorney to be a Special Assistant United States
Attorney to prosecute the case, and the Attorney General must act on that
request within 45 days of receipt. See 15 U.S.C. Â§ 6107.
These requests for special appointment are made to the Attorney General
and reviewed within CPB. If CPB believes the request to be warranted,
it will contact the appropriate United States Attorney's Office and
help arrange for the appointment. For a discussion of factors to be
considered in determining whether such a request is appropriate, see
F.T.C. v. American National Cellular, 868 F.2d 315 (9th Cir. 1989).
CPB attorneys will normally handle these cases personally, in conjunction
with the FTC attorney appointed as a Special Assistant.