Consumer Protection Branch

OTHER ACTS ADMINISTERED BY THE FTC


A. Consumer Credit Protection Act

The Consumer Credit Protection Act, 15 U.S.C. §§ 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. § 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. §§ 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. § 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. § 1611.

B. The Fair Credit Reporting Act

This Act, 15 U.S.C. § 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. § 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. § 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. § 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. § 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. § 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. § 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. § 1681i(a). CROA prohibits misrepresentations of services a credit repair organization can provide. 15 U.S.C. § 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. § 1681c (a) (2) - (6), and bankruptcies for ten years, 15 U.S.C. § 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. § 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. § 1679b(a)(2). Consumers following such advice may be committing felonies. See 42 U.S.C. § 408(a)(7)(B) (falsely representing a number to be the social security account number); 18 U.S.C. § 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. § 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. § 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. § 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. § 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. § 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. § 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. § 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. §§ 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. § 68e and § 69g), injunctions (15 U.S.C. § 68e, § 69g and § 70f), civil penalty cases and criminal actions (15 U.S.C. § 68h, § 69i and § 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. § 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. §§ 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. § 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. § 2310(c). There are no criminal penalties for violations. The Magnuson-Moss Warranty Act does, however, provide for private remedies. 15 U.S.C. § 2310(d).

H. Telephone Disclosure and Dispute Resolution Act, Telemarketing and Consumer Fraud and Abuse Prevention Act

These statutes (15 U.S.C. §§ 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. § 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. § 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. § 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. § 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.

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Updated October 20, 2014

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