law school outline: consumer protection

Consumer Protection
I. Fraud & Misrepresentation
A. Common Law Fraud
1. Representation
a) Need not be verbal (odometer case).
b) Nonfeasance (silence) is ok, but malfeasance (partial disclosure "fraudulent suppression") is not. Exceptions:
(1) Duty
(2) Buyer makes inquiry and seller responds (duty to speak entire truth)
(3) Seller actively conceals or prevents investigation
(4) Seller makes partial disclosure to create false impression
(5) Fiduciary relationship
(6) Superior knowledge of material facts not available to consumer, as opposed to public knowledge.
(7) Expectation of disclosure where seller takes advantage of ignorant buyer�s ignorance to such a degree that it shocks the ethical sense of the community and amounts to swindling.
(8) When required by statute (i.e. mandatory disclosures).
2. Of present fact: Not an opinion, expression of value, prediction or expectation.
3. Material (not mere puffery)
4. False (i.e. presenting oneself as being with a government agency)
5. Seller knew or reckless disregard (scienter)
6. Purpose of inducing reliance
7. Buyer justifiably relied
a) Does not exist when consumer fails to exercise care for own protection which is easily within his power (reasonable investigation).
b) Showing reliance is difficult.
8. Injury (determines damages)
a) Punitive not available for K action, unless independent tort (fraud) present with maliciousness. Large amounts often knocked down by appellate courts.
b) Actual damages ($paid - FMV)
c) Attorney fees can be added by judge, usually only in fraud cases.
d) Class Action
(1) Ascertainable class so numerous that joinder is impracticable
(2) Common questions of law and/or fact
(3) Represented parties claims are typical of the class
(4) Represented parties will fairly and adequately protect interests of class
(5) Class action is superior to other available methods of adjudication
e) Common fund: Single-party plaintiff sues D , and lawsuit creates pool of money in escrow for other p �s who haven�t yet come forward. Attorney gets 25% of entire pool.
f) Fee shifting: Generally each party pays their own legal costs. When fees are shifted, that can be a very strong bargaining chip for settlement. Exceptions to general rule:
(1) Private attorney general actions, where p acting on behalf of society. Litigation must have very strong social importance.
(2) Statute-specific exceptions, such as FTC acts, Truth-in-Lending Act, Consumer Product Safety Act, Equal Credit Opportunity Act, Fair Debt Collection Practices Act, which state that in certain circumstances, D pays attorney fees.
(3) Class action
(4) Contract clause: CC�1717 says that attorney fee shifting clause must operate both ways in creditor/debtor situations.
B. FTC (15 USC �41)
1. Undisclosed material fact necessary to correct reasonable false expectation held by substantial body of consumers. Reliance not required. Intent (scienter) not required.
a) "Discount" product sold at substantially above local retail price of comps.
b) "Easy credit" when in fact the terms were harsh.
c) TV commercial using trick photography.
d) Claim without substantiating proof.
2. Standard of "reasonableness": Ignorant, unthinking person.
3. Remedies
a) No private right of action. Must look to state statute for damages (i.e. Cal. B&P �17200, which would give actual damages and attorney�s fees)
b) Cease & desist order
(1) These orders can be construed quite broadly.
(2) Can require company to use certain remedial language (disclosure) in their ads to remedy and correct for past harm, and prevent past harm from lingering into future ads. Usually available only when a deceptive advertisement has played a substantial role in creating or reinforcing false and material belief.
(a) Not a First Amendment problem because commercial speech can be regulated, so long as requirements are reasonably related to State�s interest in preventing deception.
(3) Civil penalty of $10k for violation of C&D, including to nonparties who have actual notice of C&D order who violate it.
c) Disgorgement of ill-gotten benefits.
II. Unfair Business Practices
A. FTC Unfair business acts or practices (FTC Act �5).
1. Unjustified consumer injury (primary consideration)
a) Substantial ($, injury, safety risks)
b) Outweighs consumer or competitive benefits (cost/benefit analysis)
c) Not reasonably avoidable (quantity of information available; fraud)
2. Violation of public policy
3. Unethical or unscrupulous
4. Remedies: See above under Fraud & Misrepresentation. Generally, must look to state statutes, except for cease & desist order.
B. Cal B&P �17200: Unfair business practices & competition
1. Broadly prohibits unfair competition, including any unlawful, unfair, or fraudulent business act or practice (as defined by underlying state or federal statutes, such as TILA) and unfair, deceptive, untrue or misleading advertising.
2. Standing is broad, and includes a quasi-class action process.
3. Remedies include rescission, actual or statutory damages (even when underlying statute doesn�t permit), injunctions and preventive relief. Stronger remedies for seniors and disabled. Punitive damages not available.
4. Class action available
5. Courts have interpreted statute to permit private individuals to sue (Stop Youth Addiction v. Lucky Stores, Inc.) not just DA's and AG's.
C. Cal. Civ Code �1760
1. Consumer Legal Remedies Act (CRLA): Prohibits unfair and deceptive acts, practices, misrepresentations.
2. Standing (�1780): p consumer who has suffered damage as a result of unlawful behavior.
a) Misrepresentation (�1770).
3. �1782: Must give 30 days written notice before suing, giving D a chance to cure.
4. Remedy = actual damages (minimum $1,000), injunction, punitive, attorney fees, costs, restitution.
5. �1781(b)(5): Class action available, and D must pay for notice to potential class.
D. Preemption
1. The police powers of the state are not to be superceded by federal law unless that is the clear (express or implied) and manifest purpose of Congress, or if the state law would prevent the accomplishment of the federal law or regulation (state law inconsistent with federal).
2. Statutes often have preemption sections which state what is preempted, if anything.
III. Topical Statutes
A. Home solicitation sales
1. B&P �17500.3 requires up-front affirmative and express disclosure upon opening of door of certain information, including the fact that the caller is trying to sell something and what is being sold.
2. Three day right of recession. Notice of that right must be verbal and in writing, in the language of the negotiation. Three days from date of sale - not delivery.
a) Creditor shouldn�t do the work within that three day period, unless consumer declares a personal emergency and waives the three-day period by consumer in writing (not form) that she has a "bona fide personal emergency", or if creditor waives the lien.
3. Doesn�t apply where consumer initiates contact, or during emergency.
4. Remedy: p must give written notice of intent to cancel K, D then has 20 days to return $ and pick up goods. No attorney fees, no punitive. p can get 2x sales price, capped at $250.
B. Telemarketing
1. Telephone Consumer Protection Act (47USC227): Prohibits unsolicited prerecorded calls, spamming fax machines; must maintain and observe do-not-call list. Consumer can sue in state court.
2. Telemarketing and Consumer Fraud and Prevention Act (15USC6101): Prohibits deceptive and abusive telemarketing, requires disclosure of specified information, prohibits misrepresentation. Limits calls to 8a-9p. Must promptly disclose identity and purpose of call. Enforcement up to FTC and state AG � no private right of action.
3. FTC telemarketing rules requiring disclosure of material information, especially restrictions or limitations
C. Dance studios (CC�1812.50): Includes criminal sanctions, as do many topical statutes.
D. Health clubs (CC�1812.80): If you get hurt, you can get (some) of your money back.
E. Odometers: 49USC�32701 and similar state laws prohibits tampering with, operating vehicle while disconnected, or sale of device for tampering, and requires sellers to make affirmative disclosures (must exercise reasonable care in regards to investigating; reckless disregard for truth).
F. Real estate transactions mandate certain detailed disclosures.
G. Auto-repair (B&P �9880 et.seq.): Written estimate required. If you ask before hand, they have to give you your parts.
H. Auto purchase: Negotiations for purchase in a foreign language require contract to be in the language of the negotiation and signage posted regarding foreign-language negotiations.
I. Chain referral sales plans: Consumer will receive rebate as inducement for buying product in return for giving supplier names of prospective customers. Prohibited by state law (?).
J. Spanish language K's (CC 1632): If K negotiated in Spanish for a loan, unsecured consumer credit, rental agreement, and attorney fee K, then consumer must be provided with K in Spanish (unexecuted).
IV. Credit
A. Truth-In-Lending Act (15 USC 1601)
1. Failure to comply constitutes an unfair business practice under the FTC Act.
2. Objective: Meaningful disclosure of credit terms so that consumer can compare more readily the various terms available to him and avoid uninformed use of credit.
3. Scope
a) Sales and loan transactions of less than $25,000 (unless secured by home, in which case there is no maximum limit), excluding student loans.
b) Between consumers (natural persons borrowing for personal, family or household purposes) and creditors (regularly extends consumer credit � broad, or has more than 25 times, or more than 5 times for transactions secured by principal dwelling, in last calendar year). If purpose of the loan is both personal and business, best to make a disclosure.
c) Where creditor can defer payment for something which has already been received (as opposed to paying for something in full before or as you receive it).
4. Disclosures
a) Triggered by
(1) Credit offered to consumers by someone who regularly extends such credit
(2) Advertisements
(a) Any commercial messages in any medium that promotes consumer credit transactions. Includes billboards, references on car windshields (i.e. "no money down"), TV ads, phone solicitation, price tags.
(b) Disclosures must be accurate and not misleading.
(c) If the advertisement contains any disclosure re: finance charge or periodic rate OR APR, then it must also contain full disclosures of finance charges, the APR (if discounted, then both time period of discount AND non-discount APR), and if a balloon payment is required,
b) Timing: At time of contract execution, prior to consummation of contract.
c) Content of disclosure
(1) General requirements
(a) Disclosures must be in a form that consumer can keep.
(2) Close-end credit (default; Reg. Z, 12 CFR �226.5)
(a) Single extension of credit in which payments cause steady decline in amount due.
(b) Where consumer obligated to pay finance charge or if written agreement says that consumer has the right to pay in more than four installments.
(c) Disclosure: Finance charge and APR, which must b more conspicuous than other disclosures; total amount financed (complete amount consumer will pay, including principal, prepaid finance charges, and other amounts consumer will pay. Itemization must be separately provided either automatically or upon request), length of time over which payments will be made, interval between payments, and amount of each payment, conspicuous disclosure of creditor�s identity.
(3) Open-end / revolving credit (Reg. Z, 12 CFR �226.17)
(a) Series of transactions in which total amount of debt may not exceed established limit. Formal plan exists for consumer to repay in full or installments. Repayment replenishes available credit.
(i) Creditor must subjectively and objectively contemplate repeated transactions (i.e. Macy�s card), otherwise it�s close-end (one-time purchase, i.e. car). When creditor tries to pass off closed-ended plan as open, it�s called "spurious open ended credit."
(b) Disclosures are less stringent than close-end. Must disclose "rules of the game" information: APR, annual fee, grace period and method of computing balance on which finance charge is assessed at time of solicitation, conspicuous disclosure of creditor�s identity.
(4) Leases (Reg. M, 12 CFR �213.1)
(a) Close-end: Consumer pays fixed rent for fixed period of time (at least four months) and then surrenders possession. Lessor bears risk of depreciation.
(b) Open-end: Fixed rental for fixed term (at least four months), and if actual value at end of term is less than stipulated value, consumer must pay difference (i.e. excess mileage or wear-and-tear). If consumer defaults, he is liable for a lot of money (profits from full performance).
(5) Rent-to-own: Consumer pays for use of property for very short time (week or month). Can renew at end of term. TILA does not apply, but state statutes usually do.
(6) Credit insurance
(a) Often not in consumer�s best interest because it is more costly than alternative insurance (which may not be available), coverage may be excessive, certain risks are excluded (e.g. preexisting ailments), delay of payments, etc.
(b) Creditor can make insurance a requirement for extending credit.
(c) Must be disclosed as a �finance charge� unless:
(i) Not required by creditor and that fact is clearly disclosed in writing; and
(a) Optional nature of insurance may be defeated by burying the fact that the insurance is optional in fine print � that violates the Act because it practically precludes consumer�s free choice.
(ii) Consumer gave specific affirmative written indication of desire to purchase insurance after written disclosure of cost.
(d) If fiduciary relationship exists between creditor/debtor, creditor must disclose facts related to inflated premiums and kickbacks, and if other insurance would be better in debtor�s interests. Agency law would apply.
(e) State restrictions (possible): Limit on premiums, loss ratio limits, opposing creditor compensation.
(f) When creditor refinances the credit, the insurance may also have to be repurchased, although that can lead to dual coverage.
(g) Casualty insurance: Creditor who requires debtor to maintain insurance on property can impose their own insurance if debtor fails to insure property, often at very high rates. Casualty insurance on property can often be duplicative of existing or cheaper insurance.
d) Finance charge defined
(1) Direct or indirect cost of credit required by creditor.
(a) Discount for payment by cash is a finance charge because a credit payor is paying more (a finance charge) for the privilege of paying over time. Exception for discount for cash when other option is going on an open-end plan.
(2) Exceptions
(a) Late payment charges for actual unanticipated late payments. Anticipated late payment occurs when creditor doesn�t follow-up on bill and lets the amount due ride, accruing late payment charges, in which case the late payment is not exempt. Late payment charge must be enforced, otherwise it�s a finance charge.
(b) Returned check fees.
e) Form
(1) Strict compliance with regulations is required, but use of standard form = compliance, and protects from liability. Creditors don�t have to use the form, but most do.
(2) Disclosures must be clear and conspicuous, in a reasonably understandable form.
5. Remedies
a) Consumer must give written notice to prevent D from correcting error.
b) Administrative remedies through FTC and FRB.
c) Criminal liability for willful and knowing violations
d) Withhold payment, if p has made good-faith attempt to resolve.
e) Rescission
(1) Consumer has three days to rescind credit transaction actually secured by principal dwelling, from date of 3-day notice given or consummation of transaction, whichever later. Includes mechanics liens.
(a) Creditor shouldn�t do the work within that three day period, unless consumer declares a personal emergency and waives the three-day period by consumer in writing (not form) that she has a "bona fide personal emergency", or if creditor waives the lien.
(2) Failure to disclose this right to consumer or faulty disclosure of material fact gives consumer right to rescind anytime before 3 year statute of limitations ends. Time begins running at consummation of K, receipt of disclosures, or serving notice of rescission, whichever is first.
(3) Within 20 days written notice of rescission, creditor must remove security interest and return money already received. Consumer not liable for any finance charges. Consumer must return property or value to creditor.
f) Damages
(1) Double the finance charge, minimum $100 up to $1,000
(2) Actual damages capped at 1% of net worth or $500k, whichever is less.
(3) Punitive damages
(4) Attorneys fees and costs (reasonable), unless waived by consumer (one-way).
g) Creditor assignees are liable only if violation was apparent on the face of the disclosure statements (contract).
B. Fair Credit Reporting Act
1. False information does not give defamation or invasion of right to privacy (act preempts common law, but not state law so long as not contrary), so FCRA enacted to give remedy.
2. Credit reporting agency
a) Regularly engages in the practice of assembling or evaluating information on consumers for the purpose of furnishing consumer reports to third parties.
(1) Limitation on distribution: Information on a particular consumer may be provided to a TP who requires it in connection with a specific transaction between that party and that particular consumer. No mass distribution of information permitted (i.e. a fraudulent check listing).
(2) Agency must have reasonable procedures to ensure that the information is being used for permissible purposes (credit, employment, insurance, other legitimate business need).
b) Consumer has right to learn all information in his file.
c) Content: Limitations on how long certain information can remain in report.
d) Agency must follow reasonable procedures to assure [maximum possible] accuracy of report.
(1) Consumer can sue for inaccurate (sufficiently misleading or incomplete) information due to agency violation that was willful or negligent.
(2) Test is balancing of factors: Availability of information vs. how misleading lack of information is.
(3) Damages include actual damages (mental, reputation, embarrassment, lost opportunity, etc.), costs, attorneys fees, and punitive for willful noncompliance.
e) Upon notification by consumer that information is inaccurate, agency must reinvestigate with originating company and make necessary corrections, and notify consumer of results along with copy of new credit report.
(1) Inaccurate or unverifiable information must be deleted or modified.
(2) If consumer still believes report is inaccurate, consumer can file 100 word statement to that effect.
(3) Agency must take reasonable procedures to prevent reappearance of deleted information.
3. Creditors
a) If creditor requests investigative report (moral character type), consumer must be informed by creditor of right to request disclosure of nature and scope of investigation.
b) With all consumer reports, creditor can only request report for permissible uses (credit, employment, insurance, other legitimate business need in connection with business transaction initiated by consumer).
(1) Criminal offense to request credit information for impermissible use.
c) If creditor takes adverse action against consumer, must inform consumer of the fact, why the credit was denied, and the name and address of agency who prepared the report.
d) Prohibited from reporting inaccurate information after consumer has notified creditor of inaccuracy, and obligation to notify consumer reporting agency of correct information.
4. Repair organizations
a) Using Employer Identification Number on credit application (or someone else�s SSN) in place of SSN is fraud and violation of federal law under identity theft statutes.
b) Credit Repair Organizations Act requires pre-contract disclosure, prohibits false or misleading statements. Three day cooling off period; no compensation until services performed.
C. Equal Credit Opportunity Act
1. Protects against discrimination on the usual protected classifications, including marital status and public benefits, in any aspect of credit transaction.
a) Prohibits even asking for such information.
b) Use of model forms gives immunity.
c) Unmarried couple applying jointly must be treated the same as if they were married.
d) Adverse impact analysis is available.
(1) Giving certain high-minority zip codes a low rating may be discriminatory, unless legitimate business objective (accurate prediction of creditworthiness). However, FTC and DOJ have said that zip code scoring is racially discriminatory.
(2) Must show disparate impact between % of minorities in applicant pool and % of minorities among those who received credit. Impossible to show because no demographic information can be collected.
2. Disclosure of reasons for adverse action
a) Purpose is to guard against discrimination being the reason.
b) Creditor must inform applicant (formal) of reasons for denial of credit.
(1) Federal Reserve has a list of approved reasons.
(2) Reasons must be given with enough specificity that consumer can understand the reason.
(3) FCRA has similar disclosure requirement, and the two disclosures can be combined.
3. Remedies: Administrative and private (actual plus punitive); attorneys fees.
V. Warranty
A. Tort
1. Restatement 2nd: Seller engaged in business of selling product is liable for defective condition which is unreasonably dangerous and which causes physical injury to any user or consumer of the product. No reliance required. Disclaimers are ineffective. Consumer must given reasonable notice to seller of injury. SOL determined by state law, CA is 1 yr.
2. Manufacturer must use reasonable care in production of product.
3. Strict liability for personal injury and property damage resulting from unreasonably dangerous defects which should have been reasonably known to manufacturer, or without adequate reasonable warnings or instructions to consumer.
a) No privity needed.
b) Assumption of risk is a defense.
c) Risk-utility balancing test (was there a reasonable alternative that, at a reasonable cost, would have reduced foreseeable risks of harm?).
4. Economic loss: Not available without personal injury. Must use K theory.
1. Implied (2-314)
a) Implied warranty of fitness: Seller has actual knowledge that consumer plans to use item for a particular purpose, buyer is relying on retailer�s skill or judgment, and by selling the item to the consumer, impliedly warrants that the item is fit for that purpose. Privity of contract is necessary.
b) Implied warranty of merchantability: Merchant of goods (manufacturer and retailer) is liable for goods which are not merchantable, i.e. not fit for ordinary purpose. Reliance not required. Limitation of consequential damages for injury is prima facie unconscionable. Buyer must give reasonable notice after discovery. Buyer can recover consequential damages resulting from breach including injury to person or property proximately resulting from breach of warranty. Includes any person who may reasonably be expected to use, consume or be affected by the goods.
2. Express (2-313): Seller makes affirmation of fact or promise which becomes part of the basis of the bargain.
a) Express warranties can increase the protections already provided by implied warranties.
b) Affirmations of fact vs. puffery.
c) "Sale by model" where consumer says "I want one just like this" and the one purchased is different.
3. Disclaimers and limitations of remedies (2-316)
a) Express warranty trumps boilerplate "no warranties, express or implied", but seller can give an express warranty while taking away implied warranties.
b) Disclaimer of implied warranties will be effective only when it isn�t hidden in the boilerplate language, and clearly part of the bargain. Buyer must reasonably understand that the disclaimer is disclaiming warranties.
c) Disclaimers and limitations are void and UCC remedies available when:
(1) Disclaimer of implied warranties must be:
(a) Conspicuous (distinct on font and type size) and in proper language (for fitness and merchantability). Acceptable language includes express disclaimer, "as is", and "with all faults".
(b) In writing (for fitness).
(2) Remedy is unconscionable, particularly if personal injury and no recovery. Effectively deprive a party of reasonable protection against breach.
(3) Exclusive or limited conscionable remedies fail in its essential purpose (2-719), in which case p has other UCC remedies available. Occurs when seller is given reasonable opportunity to correct the defect, and product nevertheless fails to operate as it should (Song-Beverly).
(4) Drives either party of the substantial value of bargain.
d) UCC remedies still available when the express remedy is not "exclusive" and/or the implied remedies are not expressly disclaimed or limited.
4. Remedies for nonconforming goods
a) Accept goods
(1) Pay full price
(2) Revoke acceptance, if nonconformity substantially impairs the value of the goods, within reasonable time after discovering defect and before any substantial change in condition of goods (2-608).
(a) If beyond reasonable time and therefore can�t revoke acceptance, keep item and sue for damages.
(b) Argue that p relied upon D �s promises to fix, and therefore didn�t revoke or reject earlier.
(3) Damages
b) Reject goods not yet accepted
(1) Reject goods for any defect (perfect tender rule), within reasonable time after delivery.
(2) Subject to right of seller to cure
(3) Damages
c) Damages
(1) Price paid � FMV
(2) Consequential damages (personal injury and economic loss)
C. Song-Beverly (California) "Lemon Law"
1. All new consumer products sold or leased in retail to consumers primarily for personal or household use (substantive � actual use by p ) contain implied warranties, unless disclaimed.
a) Small business use exception: If business owns <6 vehicles, statute still applies b/c assumes that small business, like consumers, doesn�t have the bargaining power of a large business.
2. Waiver of implied warranties requires (�1792.4):
a) Conspicuous
b) Attached to goods
c) Provided to consumer before sale.
d) Language includes "as is" or "with all faults" and that all risk is with buyer, and buyer assumes entire cost of servicing or repair.
e) Language must be stated "simply and concisely"
3. Product which has an express warranty:
a) Cannot waive, limit or modify implied warranties (which extend to both retailer and manufacturer).
b) Express warranties must be in readily understood language.
c) Manufacturer must maintain service and repair facilities reasonably close to place of sale, and must provide service facility with sufficient service literature and replacement parts to make repairs during express warranty period. Buyer must tender nonconforming goods to location for service disclosed in warranty, or if impractical to deliver (piano), manufacturer must make arrangements at no cost to buyer.
(1) Time in repair tolls warranty period (goods $50 or more). Warranty period is also tolled between the time of first repair and the time the problem is finally fixed (?).
(2) Repairs and installations must be done in a workmanlike manner.
d) Lemon Law (�1793.2): After reasonable number of attempts to repair nonconformity, in a reasonable amount of time.
(1) Nonconformity: Did not conform to express warranty, and substantially impairs use, value or safety of vehicle.
(2) Automobile lemon law presumption (�1793.22):
(a) Reasonable number of attempts to repair new car and cars sold with remainder of new vehicle warranty presumed if within first year or 12k miles, has to have the same nonconformity repaired 4x (even if repair shop is unable to find problem), or out of service for more than 30 days.
(b) Four year statute of limitations.
(c) Automobile which is bought-back by manufacturer or dealer must have its title inscribed with "Lemon Law Buyback". Future buyers must acknowledge.
(3) Must give D manufacturer notice and opportunity to correct.
(4) p has to go through arbitration process [if D specifies in K].
e) Clothing or consumables which have an express warranty can be returned to retailer within 30 days, or specified time limit, whichever is longer. Remedy is replacement or reimburse purchase price. (�1793.35).
4. Mobilehome: Unwaivable mandatory one year express warranty, supported by manufacturer and seller. Applies to structure, plumbing, heating, electrical, appliances, other installed equipment.
5. Remedy (�1794): Consumer choice of either replacement of defective item with comparable new item (no charge "dealer assist"); or refund of purchase price plus taxes and 2x price in civil damages (for intentional willful violations of the law). Plus attorney�s fees and costs, incidental and consequential damages.
6. Class actions are available (see above criteria).
D. Magnuson-Moss (Federal)
1. Sellers (those normally in the business of selling this product) must fully and conspicuously disclose in simple and readily understood language the terms and conditions of the warranties for products normally (customarily/objectively) used for personal, family or household use.
2. Retailer must make copies of warranties readily available in the stores for consumers to view before buying the item.
3. Warrantors must label warranties (if any provided) as either:
a) "Full": Cannot charge for repair labor or return shipping. Warrantor must remedy defect within reasonable time. No limits on implied warranties.
b) "Limited"
4. If a written warranty is provided, implied warranties of merchantability and fitness cannot be limited or disclaimed, except in duration.
a) Limitation on duration must be reasonable and conscionable.
b) Must be set forth in clear and unmistakable language
c) Must be prominently displayed on the face of the warranty.
d) Time limitation is based on how long consumers legitimately can expect to enjoy the use of a product �worry-free�.
5. Remedies: p must give D notice and opportunity to comply. p must submit to arbitration. Refund or replacement after reasonable attempts to cure defects (SB says 4 attempts or 30 days). Allows for additional enforcement of UCC and Song-Beverly COA�s, including costs, expenses, reasonable attorneys fees (one-sided). Agents of manufacturers (dealers) can be held liable.
6. Preemption: Does not preempt state laws which are not contrary or which conflict. State laws which regulate labeling and which conflict with MM are preempted.
7. Class action is available, but only in Fed. Ct. which requires $50k amt in controversy and at least 100 p �s.
E. Service contracts
1. These statutes apparently do not prevent retailer from disclaiming all implied warranties, and then selling a service contract which basically acts as an express warranty. [???]
2. Service contracts are regulated by Department of Consumer Affairs Bureau of Electronic and Appliance Repair and State Department of Insurance. Which contracts are regulated by which agency is difficult to determine. Agency can fine nonconforming companies with up to $2k fine, and take away their business license.
F. Services
1. Tort: Consumer must prove negligence (reasonable care under the circumstances). Strict liability would only apply to the goods � not the service.
2. Express warranties may exist in the contract
3. Implied warranties: Generally not available.
a) Increasingly, courts are imposing a strict liability implied warranty that the service provided in a workmanlike fashion.
b) Song-Beverly Act �1796 protects installation and repair of goods.
VI. Financing
A. Problem: What happens when consumer has a problem with the product, and stops paying for it?
1. Consumer default can result in repossession, sale, and liability for deficiency judgment.
2. Defense = unconscionable K (CC 1672 allows judges to not enforce unconscionable K).
B. Consumer contracts with seller for credit, who then assigns or negotiates (promissory note) credit to a closely connected finance company (usually at a discount).
1. Common law: Finance company could escape liability by having consumer waive claims and defenses, or by negotiating a promissory note ("holder in due coarse").
a) Consumer waiver of claims and defenses against finance company are usually not valid in these types of consumer contracts by state law.
b) p can still reach finance company if FC and dealer are closely connected such that court considers them one. Factors: Immediate assignment, discount, FC receives all of dealer�s K�s, dealer led p to FC (dragging the body).
2. FTC "Holder in Due Course Rule"
a) Customer�s obligation to pay financer for personal, family or household goods is dependent upon seller�s performance.
b) Seller must include notice (term) in K stating that any holder of the K is subject to all claims and defenses which debtor could assert against seller, limited to the amount paid by debtor to finance company (state agency law may allow for greater remedies). Failure to include that notice is an unfair business practice by the seller, and K is not enforceable.
c) If seller has gone out of business, consumer can go after finance company if state law considers the companies so closely related that the deal really consists of one transaction (see above), and provides a separate COA.
C. Consumer contracts directly with TP finance company
1. Common law: Consumer�s obligation to pay is never dependent upon seller�s performance because the transactions are (supposedly) separate.
2. FTC: If the loan is "dealer assisted" (regular referral, affiliation), then the above FTC Holder in Due Course Rule applies. Otherwise, finance company not liable for dealer breach.
D. Credit card (Reg Z, 12 CFR �226.13 and 15 USC �1666):
1. Consumer must make good faith attempt to resolve dispute with seller.
2. Transaction must be more than $50, and within same state and within 100 miles of cardholder residence.
3. Consumer can make non-tort claims and defenses against credit card company, which can then reverse the charges against retailer.
4. Remedy limited to amount of money not yet paid as of time notice is given to credit card company.
E. Financer is always liable for his own misconduct.
F. CCP �1021.5: Gives attorneys fees when case would result in a public benefit, and public policy wants to encourage such suits, when significant pecuniary or nonpecuniary benefit has been conferred on general public or large class, and the necessity and financial burden of private enforcements are such that an award of attorneys fees would be appropriate, and such fees should not be paid out of the recovery (public policy).
VII. How do people get sucked in?
A. Ad: Claims must be substantiated (FTC & state law).
B. Bait & Switch: Offer is made which is not bona fide in that the seller has no intention to sell the advertised product at the advertised price, but is using advertisement as a bait in order to sell higher priced or different product. Seller disparages the bait product to get buyer to switch to other product. D must show that seller bought higher priced product as result of free choice.
C. Contract: Adhesion or take-it-or-leave-it K�s give sellers power to overreach consumers, and this has led to governmental and nongovernmental organization interference.
D. Quality
1. Mutual mistake: When the parties bargain for X and actually get Y, mutual mistake can rescind the contract.
2. Selling a used item as a new item: Requires actual "use" beyond uses incidental to the sales process. Practice must be willful; damages limited to actual losses subject to statutory minimum. [state consumer protection acts]
VIII. Consumer protections
A. Disclosure
B. Prohibitions
C. Regulation/Licensing/Certification
D. Enforcement
1. Public
2. Private
3. Civil
a) Attorneys must have financial incentive, i.e. class action and/or punitive damage awards.
4. Criminal
E. Federal/state/local
F. Case law / statutes and regs
G. Broad/narrow
H. Effectiveness
IX. Arbitration
A. Voluntary: Agreed to after dispute arises.
B. Mandatory: Agreed to before dispute arises.
1. Courts generally enforce these provisions.
2. Waives Constitutional right to jury trial.
3. Not upheld if unconscionable (i.e. prohibitively expensive fees, limiting substantive rights and remedies.
C. Federal Arbitration Act: Can�t attack entire contract � have to attack the individual arbitration clause.
D. Arbitration limits remedies and scope of discovery.
E. TILA provides for a private cause of action and class action, and therefore in conflict with arbitration clauses, because it takes away a right you otherwise have. Unsure how this gets resolved.
X. Debt Collection
A. Standard: Least sophisticated consumer.
B. State Law
1. Coverage: Debt collectors and original creditors
2. Permits class-action lawsuits.
3. Requirements, prohibitions and remedies are the same as federal.
C. Federal Law (15 USC 1692)
1. Coverage: Debt collectors.
2. Requirements & Prohibitions
a) Communication limits
(1) Before 8am and after 9pm
(2) If represented by attorney, must communicate only with attorney.
(3) With employer if debt collector knows employer prohibits such calls.
(4) Limits on ability of collector to contact TPs and family: Cannot contact anyone other than consumer, spouse, attorney, creditor, creditor�s attorney. But collector can communicate with ANY TP to confirm location of debtor, in which case collector can disclose that he is a debt collector only if asked, and cannot disclose that consumer owes a debt. Must cease such contact if consumer represented by attorney.
(5) Gives consumer the right to demand in writing that collector cease contact. After that, collector can only contact to tell consumer that collection is being terminated, or what remedies are being invoked.
(6) Prohibits disclosure of private information when no legitimate business need exists.
(7) Envelope return address must not indicate collection agency.
b) Harassment: Obscene language, threats, ringing phone, publicity of name of debtor, not disclosing identity when calling.
c) False, deceptive, misleading:
(1) Misrepresent involvement of attorney.
(2) Simulating legal or judicial process (i.e. implying connection with government).
(3) Misrepresenting amount or nature of debt.
(4) Threatening remedies which will not happen, i.e. arrest, garnishment, lawsuit, unless remedy is lawful and debt collector intends to pursue (past history indicates intent).
d) Unfair/unconscionable practices
(1) Collection of any amount (fees, interest, expenses) not expressly authorized by agreement creating debt.
(2) Collect telephone calls.
(3) Threatening to take possession of property when no right and intent exists to do so.
(4) Envelope which discloses that it is from a debt collector.
e) Validation:
(1) Initial contact, or within 5 days, must disclose amount of debt, name of creditor, right to request validation,
(2) Collector must give consumer written notice w/in 30 days of start of collection that consumer has right to request validation (denying that the debt is valid), and if claim is no good, collector must stop. Copy of verification of debt must be sent to consumer upon this request.
3. Remedies
a) Named plaintiff can get actual damages, plus additional damages up to $1,000.
b) Class action: Actual damages, plus additional damages up to the less of $500k or 1% of net worth.
c) Attorneys fees, costs.
d) Collectors are licensed, so state can revoke license
D. IIED, if severe emotional distress resulting from extreme and outrageous conduct, hoping for punitive damages or large settlement.

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