“Introduction to
Consumer Law”
Coverage

What makes a consumer statute a consumer
statute?
• Requires that individual(s) entered into the
transaction (purchase, loan, lease, etc.) primarily
for personal, family or household use.
• Excludes transactions for commercial use
Coverage

Joan works for a landscaping service and
buys a car to get to and from work. It is a
consumer purchase

• Joan is the sole proprietor of
Joan’s Landscaping Service and purchases a
truck primarily for use in the business. It is
NOT a consumer purchase.
Coverage

Most of the statutes referenced here also require
that the seller / lender be ‘in the business’ of
selling or lending (check each statute to see if
there are particular numeric requirements), so
that transactions between private parties are not
covered
Coverage recap




1) the individual bought (borrowed, leased, etc)
for personal as opposed to business use
2) the other party to the transaction was ‘in
the business’
&
3) the other party must be a private (nongovernmental) party
Consumers Legal Remedies Act,
(CLRA) Cal. Civil Code §1750 et seq.

applies to most ‘consumer transactions’ for
goods or services
 Exclusions:
insurance, pure credit (financial
instruments?)

excludes real property sale and
construction contracts
CLRA

enumerates 24 prohibited practices at Cal. Civil Code §1770(a)(123). The most generally applicable / commonly used of which
are prohibitions on:
 representing that goods or services have . ..characteristics
..[or]. benefits .. ..quantities which they do not have . . .. (a)(5)
 advertising goods or services with intent not to sell them as
advertised. (a)(9)
 representing that a transaction confers or involves rights,
remedies, or obligations which it does not have or involve, or
which are prohibited by law. (a)(14)
CLRA Remedies
 Civil
Code §1780(a) provides for:

• actual damages*

• injunctive relief

• restitution (and presumably
rescission)

• punitive damages*
CLRA Remedies

a penalty of up to $5,000 if the victim was a
senior citizen or disabled person and suffered
significant economic, physical or emotional
harm
one-way attorney fees provision

Pro-class action provisions

CLRA Procedures

In order to be eligible for damages, the
consumer (or her attorney) must send the seller
a letter “demanding rectification”. The seller
has thirty days from receipt of the letter to make
rectification, after which the consumer can
institute an action for damages
UNFAIR COMPETITION LAW (UCL)

Cal. Bus. & Prof. Code §17200 et seq.

Not just a consumer statute

Three primary ‘wrongs’

‘Unlawful’


Most useful
Any Federal, State, Local Statute, Regulation, Ordinance, etc.
UCL ‘wrongs’

Fraudulent

Likely to mislead a reasonable person


(proof of reliance technically not required but…)
Unfair

Last resort; as of this date no settled test
UCL Standing (Prop 64)
 Plaintiffs
must show they lost money
or property as a result of the unfair
competition
UCL Remedies

Restitution

Injunctive relief

Four year statute of limitations
Consumer = Car Cases

Tips: get ALL the documents
Dealer docs; lender docs (NOI)
• Start from the beginning

Motor Vehicle Advertising


§11713.1(e) provides that “advertised vehicles
shall be sold at or below the advertised total
price ... regardless of whether the purchaser has
knowledge of the advertised total price”
Dealers may not sell used vehicles as “certified”
under many circumstances (‘as is’ sales, lemons,
salvaged, frame damage, etc). Cal. Vehicle Code
§ 11713.18
Automobile Sales Finance Act (‘ASFA’, Civil Code
§2981 et seq.; a.k.a ‘Rees-Levering’)

Coverage:
must be a ‘consumer transaction’
 only applies to financed sales of motor vehicles
 motor homes are covered, mobile homes and trailers
are not
 the seller must arrange or assist in the financing of
the vehicle.
 if a consumer independently obtains her own
financing (such as, by going to her credit union),
such a loan is NOT covered

ASFA

The most common sale-related violations of the ASFA stem
from the conflicting interests of the dealers and lender-assignees.
The lender wants to see that
 that the consumer has paid a significant ($2000 or so) down
payment
 that the primary driver has an acceptable credit score
***
The dealer tends to be more interested in selling the contract at
all costs. This leads to manipulations of the down payment
figure, disguising co-signers as buyers, and ‘kinking’ credit
applications
ASFA


Civil Code §2981.9: the One Document Rule
“Every conditional sale contract subject to this
chapter shall . . . contain in a single document all
of the agreements of the buyer and seller with
respect to the total cost and the terms of
payment for the motor vehicle, including any
promissory notes or any other evidences of
indebtedness.”
ASFA


Civil Code §2981.9: the One Document Rule
This rule is most commonly violated when the parties
make agreements (which may or may not be reflected in
separate documents) which contradict the terms of the
purchase contract. The two forms of ‘extracontractual’ agreements most commonly found are:
 agreements to allow the consumer to defer all or
part of her down payment
 agreements to trade-in vehicles with negative
equity
ASFA
Deferred Down Payment Agreements
 There is nothing INHERENTLY illegal about deferred
down payment agreements.
 However, when the parties agree to a deferred down
payment arrangement, but that arrangement is not
reflected in the contract (with the down payment being
listed as ‘cash’), the dealer violates multiple sections of
the ASFA: CC §2981.9 and CC §2982(a)(6)(D).

Caselaw
ASFA

Deferred down payment agreements can be:
in the form of ‘Hold Check(s) Agreements’
 separate written agreements or promissory notes
 merely oral agreements
 in some cases, the consumer provides the dealer
with post-dated checks


Long story short: ASK about the down payment,
consumer will not volunteer this information
ASFA

Remedies for violations of CC §§2981.9 &
2982(a)(6)(D)

essentially Rescission: see CC §2983



No offset for use
attorneys fees and costs: see CC §2983.4
These cases may be attractive to private
attorneys, depending on other issues in the case
ASFA

Negative Equity not Disclosed on Face of
Contract
occurs when trade-in is ‘under water’
 Dealer ‘inflates’ value of trade-in to equal payoff.
Dollar amount of inflation is called an
‘overallowance’
 Dealer does not take a loss by giving an
overallowance. Dealer ‘rolls’ overallowance amount
into purchase price

ASFA

Overallowances which are rolled into the
purchase price actually penalize the consumer
Increased taxes
 Increased license fees
This Practice violates multiple subsections of the
ASFA
Practice also violates TILA (1 year s/o/l)

ASFA

Remedies for negative equity roll-ins not
disclosed on face of contract
essentially Rescission: see CC §2983
 attorneys fees and costs: see CC §2983.4


These cases are attractive to private attorneys.
Spot Delivery / Yo-yo Sales



Refers to delivery of vehicle prior to finance
approval
Permitted by contract and statute
Violations stem from
Misrepresenting consumer’s rights when financing
does not go through
 TILA violations from back-dating contract

Spot Delivery / Yo-yo Sales


Both the standard car contract and the ASFA
(see California Civil Code §2982.5(d)(5)) require
that the consumer receive a complete refund if
financing falls through
Representing to the consumer that s/he is
obligated to sign a new contract, or that s/he
will lose a portion of payments already made
violates the CLRA
ASFA
Car Buyers Bill of Rights Provisions
 Used Car purchasers must be offered an
optional cancellation option (if under $40k)
 Consumer has just 2 days to cancel IF consumer
PAYS for the right to cancel
 Option to cancel costs $75 to $400, depending
upon price of car
 Actually canceling will cost another $100 or so
ASFA
Car Buyers Bill of Rights Provisions
 Anti-packing provision requires written
disclosure of monthly payment with and without
optional products
 Dealer participation in Finance Charges capped
at 2-2.5 %
More car disclosure statutes

The ‘Red Tag’ Law

Cal. Veh. Code §11713.26
Dealer must run all used cars through the National Motor
Vehicle Title Information System (NMVTIS)
 If vehicle shows up as junk, salvaged, or title branded,
place a large red tag disclosure in the window
 Regardless of NMVTIS output, dealer must make report
available to consumers upon request

Buy Here Pay Here Dealers

They assign less than less than 90% of their
paper (they carry at least 10% of their sales)
We are left to guess here, but I’d assume if they selffinanced your client, they are BHPH
 See Cal. Veh. Code

BHPH Laws

Must supply warranty with used car sale

Minimum coverage 30 days / 1,000 miles

See Cal. Civil 1795.51
BHPH Laws


Can’t use GPS to track consumer, disable
vehicle
Must display Kelley or other ‘recognized’ pricing
guide on the window of used car
The Federal Truth in Lending Act (TILA), 15 U.S.C.
§1601 et seq


‘consumer transaction’ requirement
applies to most consumer credit transactions




virtually all consumer mortgage loans
other closed-end consumer loans where the loan amount is
$50,000 or less
open-end credit arrangements (credit cards, etc)
idea is to promote the informed use of credit and
promote comparison shopping by requiring uniform
disclosures which must be provided pre-consummation
Truth in Lending

Finance Charge

• includes not only interest, but any other
required charge which is imposed in credit
transactions but not in cash transactions (see 15
U.S.C. §1605(a)).

example: credit application fee
Truth in Lending




Annual Percentage Rate
• a measure of how much finance charges are
paid on a certain loan amount (‘amount
financed’) over a period of time
• annual percentage rates must be accurate
within 1/8 of 1% (.125%) (15 U.S.C. §1606(c))
• finance charge disclosures must be accurate
within $100 (15 U.S.C. §1605(f)(1))
Truth in Lending

Most common TILA violations in car
transactions
Negative equity roll-ins
 Back-dating a second or third sales contract in a yoyo sale to the date of the first contract, which leads
to an over-stated APR. This practices violates TILA
if the APR is off by more than .125%.
 Failing to make disclosures ‘available’ pre-sale
(tough to prove)

Truth in Lending


A note about spurious open-end credit
There are two kinds of disclosures contemplated by
TILA:



‘closed-end disclosures’, designed for a single extension of
credit, such as a car loan
‘open-end disclosures’, designed for a line of credit which will
be used many times, such as a credit card agreement
Unless the lender can ‘reasonably contemplate repeated
transactions’, it violates TILA by giving only open-end
disclosures
Truth in Lending





TILA Remedies (see §1640)
• any actual damages
• a statutory damage amount, which is
capped at (and typically amounts to) $1,000
• one-way attorneys fees
• specifically provides for class actions
Repossessions and Deficiencies

Repo man cannot breach peace meaning
No physical confrontation
 Can’t proceed over verbal objection
 Can’t trespass (cut a lock; break into garage, etc.)
 Citations in materials

Repo Man’s Duty to Send Notice re
Possessions in Vehicle

Repo men have a duty under Bus. & Prof. Code
§§ 7507.9-.10 to provide notice to the
consumers that they have this property prior to
disposing of it. These notices are rarely sent.
Although there is no private right of action
under the B&P Code sections, consumers could
seek compensation through the Unfair
Competition Law, Bus. & Prof. Code §17200 et
seq. Disposing of the property could also
constitute a violation of the Rosenthal Act.
Back to the ASFA




Back to the ASFA: Required Notice of Intent to
Dispose (NOI)
Contrary to many consumers’ expectations, there is
no requirement of notice of any kind prior to
repossession. However, the finance company must
provide notice to the consumer of its intent (NOI) to
dispose (resell) the vehicle
• within 60 days of the repossession
• at least 15 days prior to resale (20 days if the
notice is coming from out of state)
Required Notice of Intent to Dispose
(NOI)


The NOI must contain all the disclosures
required by Cal. Civil Code §§2983.2(a)(1-9).
Among the disclosures required is the
consumer’s right to ‘redeem’ by paying the
balance of the loan.
Strict compliance is required with these
requirements: if the secured creditor fails to
strictly comply, it will be absolutely barred from
collecting any deficiency. .
Required Notice of Intent to Dispose
(NOI)

if the sale was negotiated in a language covered
by Cal. Civil Code §1632, the NOI must be in
that language. Compliance with this
requirement is quite low
Required Notice of Intent to Dispose
(NOI)
Generally, the secured creditor must give the consumer the
right to reinstate. EXCEPTIONS follow




the consumer provided false information on the credit
application
in order to avoid repossession, the vehicle was concealed or
removed from the state
the consumer has threatened to destroy the vehicle, or allowed
it to become substantially impaired in value
the consumer has threatened or assaulted the repo man
Required Notice of Intent to Dispose
(NOI)
Generally, the secured creditor must give the
consumer the right to reinstate. EXCEPTIONS
follow
the consumer has used the car to commit a crime, or
allowed it to be used for criminal purposes
 the vehicle has been seized under Federal drug laws or
other statutes that prohibit reinstatement
 the consumer has already reinstated twice, or
reinstated once in the past year (Civil Code
§2983.3(b))

Required Notice of Intent to Dispose
(NOI)

Secured creditors violate the ASFA when they
deny the right to reinstate for any other reason
(e.g. ‘refusal to make payments’, ‘abandonment
of vehicle’). Such an improper refusal results in
a forfeiture of the right to reinstatement, and
may give rise to a claim for conversion. .
Cal. Civil Code §1632

Applies to the following types of ‘consumer
transactions’:
retail installment sales of goods or services to
consumers by retail sellers (Unruh)
 transactions covered by the Automobile Sales
Finance Act
 transactions covered by the Vehicle Leasing Act
 unsecured consumer loans

Cal. Civil Code §1632

Applies to the following types of ‘consumer
transactions’:
consumer loans secured by something other than
real property
 leases of dwelling units for longer than one month
 mortgage loans negotiated by independent brokers
 attorney fee agreements
 Reverse mortgages / foreclosure consulting
contracts

Cal. Civil Code §1632

• The requirements of §1632 are triggered if the
negotiations were conducted in one of five
languages*
Spanish
 Vietnamese
 Korean
 Chinese
 Tagalog

Cal. Civil Code §1632

In order to trigger §1632's requirements, the
negotiations must have taken place “primarily”
in one of five languages
no case law on the meaning of ‘primarily’
 If the dealership provides a translator, the
negotiations will have been deemed to have taken
place in the consumer’s language

Cal. Civil Code §1632

In order to trigger §1632's requirements, the
negotiations must have taken place “primarily”
in one of five languages
minor translator exception (CC §1632(h))
 incompetent translator exception (CC §1632(h))

Cal. Civil Code §1632

The primary obligation triggered by 1632 is the
requirement that the consumer be given a translation in
his/her language prior to executing the English language
contract.
 timing is crucial, but translation provided after
signing presents proof problems
Cal. Civil Code §1632

issue regarding ‘Acknowledgement of Receipt’
 Poorly written Spanish text on Acknowledgement
reads: “With antecedence of the signature of the
copy in English that was completely filled out
before our contract or agreement, the client
acknowledges the receipt of this contract of
agreement translated to the Spanish language, as
required by law”. Therefore, this so-called
acknowledgement should not be treated as
determinative of the issue.
Cal. Civil Code §1632

What documents must be provided to the
consumer?
the statute states “the document creating the rights
and obligations of the parties and includes any
subsequent document making substantial changes in
the rights and obligations of the parties.” See Civil
Code §1632(g)
 sales slips, monthly billing statements, etc. are
expressly excluded

Cal. Civil Code §1632

What documents must be provided to the
consumer?
the only case interpreting CC §1632 held that a
Notice of Intent to Dispose of Motor Vehicle is a
type of document for which a translation must be
provided.
 for used cars, a Buyer’s Guide is part of the contract,
and therefore a translation should also be provided

Cal. Civil Code §1632

Does a translation of a form contract with the
prices, interest rates, and other sale-specific
terms left blank satisfy the requirements of the
Act?

the answer is pretty clearly ‘no’ - statute amended in
2004 to require “a translation of every term and
condition in that contract or agreement”. §1632(i)
regarding ‘retention’ of numerals was also added.
Cal. Civil Code §1632

Remedies for Civil Code §1632 cases:
Rescission (CC §1632(k))
 If the contract provides for attorneys fees for the
enforcement of the contract (as is the case in motor
vehicle contracts), attorneys fees will be available
under CC §1717


These cases are generally appealing to private
consumer attorneys
A VERY BRIEF OVERVIEW OF
MOTOR VEHICLE LEASING
Statutory violations to look out for in leasing transactions:
 Representing that the consumer is actually buying in
violation of the CLRA
 Representing that leasing is ‘just like renting’ and that
the consumer can return the car at any time. In reality,
all leases provide for harsh early termination penalties.
Again, this violates the CLRA
A VERY BRIEF OVERVIEW OF
MOTOR VEHICLE LEASING



The VLA also has a one document rule (CC
§2985.8(a)) similar to the ASFA.
• if the vehicle has been repossessed, the
consumer is entitled to a notice which complies
with Cal. Civil Code §2987(d)
CC §1632 applies to leases
A Very Brief Overview of California
Lemon Law



Only applies to new consumer goods (except
BHPH provision)
Covers defects arising during the warranty
period which substantially impair the use, value
or safety of the vehicle
If manufacturer cannot cure the defect after a
‘reasonable number of attempts’, consumer can
obtain refund or replacement vehicle
A Very Brief Overview of California
Lemon Law
New Motor Vehicle ‘Presumptions’
If, in first 18 months or 18,000 miles (whichever
comes first):
• There have been 2+ unsuccessful attempts to
fix a serious safety defect
• There have been 4+ unsuccessful attempts to
fix any defect
• The vehicle has been in the shop for more
than 30 days due to any combination of defects
A Very Brief Overview of California
Lemon Law


Always advise consumer to check their owners
manual for manufacturer’s address and to write
to manufacturer directly regarding the defect
These cases are attractive to private attorneys
Used Vehicle Warranty Issues




A few come with express warranties
Commercial Code IWM exists unless properly
disclaimed
Buyers Guide must be used
If a dealer ‘enters into’ a service contract or
provides an express warranty, any attempt to
disclaim the IWM is ineffective
The Co-signer Rules




State statute is at Cal. Civil Code §1799.90 et seq.
Applies to most credit contracts
Requires a ‘warning notice’ to any person who
does not ‘in fact’ receive the goods or services
Notice is required to be given to any ‘nonrecipient’ any time more than one person signs a
consumer credit contract (unless they are
husband and wife)
The Co-signer Rules



Failure to provide the notice to the co-signer
acts as a complete defense for the co-signer
Problem arises when ‘non-recipient’ is the only
signatory
Federal Trade Regulation Rule is similar and
arguably would require notice to sole signatory
non-recipient: 16 C.F.R. §444 et seq.
Door to Door Sales

Three Day Right to Cancel Notice?

Cal. Home Solicitation Sales Act: Cal. Civil Code
§1689.5 et seq.

People v. Toomey says telephone sales are covered. 157
Cal.App.3d 1 (1984)

See also Travelers Ins. Co. v. Workmen's Comp. App. Bd. (1967) 68
Cal.2d 7, 14

ONGOING RIGHT TO CANCEL UNTIL DISCLOSURES
ARE DELIVERED
Seminar Sale?



Gives consumers purchasing “goods” or
“services” the right to cancel until three days
after receiving compliant cancellation notice
“seminar setting” = premises other than buyer’s
residence (??) (§1689.24(b))
Cal. Civil Code §1689.20 et seq.
Debt Collection Defense
LRS Modest Means Panel a great referral for BK
issues: (408) 971-6822
Does your client need BK?
• consumer defense?
• statute of limitations defense?
• is your client Judgment Proof (JP)?
Debt Collection Defense

Your client is probably JP if s/he is:
a person not likely to re-enter the workforce, due to age or
disability
 who rents (owns no real property)
 whose bank account, if any, gets direct deposit from a source
listed above, and whose balance is within the limits stated in
the materials (e.g. Social Security for one person = $2,425)
Such a person has no real need to file for Bankruptcy, and can
deal with harassment by creditors and debt collectors by sending
one of the ‘judgment-proof / no contact’ letters in the materials.


Law Governing Debt Settlement

FTC Telemarketing Sales Rule 16 CFR 310

Call could be inbound or outbound, but do need a
call

No fee prior to settlement §310.4(a)(5)(1)

No private right of action but….
Federal FDCPA
Covers the following types of ‘debt collectors’, so
long as they ‘regularly’ collect debts
• collection agencies
• attorney collectors (including attorneys
engaged in litigation activity)
The Act does not cover original creditors or those
acquiring obligation before default
Federal FDCPA




Covers most ‘consumer debts’
No ‘credit’ requirement: NSF checks covered
Must be ‘money’ debt; mere enforcement of
security interest not covered
Consensual transaction requirement

Excludes shoplifting obligations, signal piracy
obligations, towing company debts, etc.
Federal FDCPA

The ‘g’ or ‘validation’ notice
Within five days of the initial communication with the
consumer (in practice, always the first letter), the debt
collector must send a notice with five disclosures:

1) the amount of the debt
• must state the exact amount as of the date of the notice; FDCPA is
violated if the consumer cannot determine the amount without calling
the debt collector
2) the name of the creditor
Federal FDCPA

3) a statement that unless the consumer, within thirty days after
receipt of the notice, disputes the validity of the debt, or any portion
thereof, the debt will be assumed to be valid by the debt collector
• this disclosure must be complete. For instance, omission
of either italicized phrase will lead to liability .

demands for payment in a period of less than 30 days, or threats to take
adverse action [such as litigation or negative credit reporting] within a
period of less than 30 days, violate this section by
‘overshadowing/contradicting’ the disclosure, unless the debt collector
provides additional information about the consumer’s g(b) rights so that
even the ‘least sophisticated consumer’ would not be confused about their
rights to dispute the debt and cease collection activity
Federal FDCPA

4) a statement that if the consumer notifies the debt collector in writing
within the thirty-day period that the debt, or any portion thereof, is disputed,
the debt collector will obtain verification of the debt or a copy of a judgment*
against the consumer and a copy of such verification or judgment* will be
mailed to the consumer by the debt collector; and

5) a statement that, upon the consumer's written request within the
thirty-day period, the debt collector will provide the consumer with the name
and address of the original creditor, if different from the current creditor.*

* the debt collector need not make reference to a judgment if there is no
judgment. The debt collector need not make the g(5) disclosure if the
creditor listed in the g(2) disclosure is the original creditor
Federal FDCPA



A consumer’s dispute in response to the validation
notice
Although the consumer’s rights under §g(b) need
not be disclosed, they are important. If a consumer
sends a dispute within the 30 day period, the debt
collector must cease all collection activity (including
litigation and credit reporting activity) until it responds
with the requested validation. The ‘validation’
furnished by the debt collector should be responsive to
the nature of the dispute.
A debt collector need not cease collection activity
in response to a dispute sent after the 30 day period.
Federal FDCPA


The ‘mini-Miranda’: §e(11)
In the first letter the debt collector must
state “This is an attempt to collect a debt, and
any information will be used for that purpose.”
In future communications, the collector must
identify itself as a ‘debt collector’, although case
law suggests that the disclosure can be omitted it
that fact is obvious.
Federal FDCPA



Selected common violations
telephone harassment in violation of §1692d
(but often difficult to prove)
§1692d prohibits any act, the natural
consequence of which is to harass, oppress, or
abuse the consumer
Federal FDCPA
Selected common violations
 discussing the fact that a consumer owes a debt
with anyone other than the consumer or the
consumer’s spouse. While debt collectors are
permitted to contact third parties to learn the
consumer’s residence or workplace contact
information, they are not permitted to discuss
anything more with those persons. See 15 USC
§§ 1692a(7), b, c(b).
Federal FDCPA
Selected common violations
• contacting the consumer at work after the
consumer has indicated it is inconvenient to
receive calls at the workplace, in violation of
§c(a)(1)
• contacting the consumer after the consumer
has sent a letter directing the collector to cease
communications in violation of §c(c).
Federal FDCPA



demands for fees not provided for by statute or
contract §f(1)
false threats of litigation in violation of §e(5)
Any statement which is either objectively false, or
deceptive to the least sophisticated consumer
California Rosenthal Act
Covers the following types of ‘debt collectors’, so
long as they ‘regularly’ collect debts
• collection agencies
• original creditors
• repo men (enforcers of security interests)
The Act does not cover Attorneys
California Rosenthal Act

The Rosenthal Act covers only those debts
arising from ‘consumer credit transactions’
The consumer must have received something
without paying for it
 The term ‘debt’ includes ‘property… which is
..owing’

Rosenthal Act


While the Rosenthal Act does have its own list
of prohibitions, none are more stringent than
the FDCPA’s.
With the following exceptions, any violation of
the FDCPA is a violation of the Rosenthal Act
A creditor need not comply with §1692g
 A creditor need not comply with §1692e(11)

New State Disclosure Requirement


Effective July 1, 2004, a new statute requires a
six sentence disclosure of consumers right under
Federal and California debt collection statutes
(see materials for text)
If a debt collector’s initial oral contact is in a
language other than English, the debt collector
must provide the notice again in the consumer’s
language. Violations are treated as violations of
the Rosenthal Act.
Remedies under FDCPA &
Rosenthal




Actual damages
One-way attorneys fees provision
Statutory damages of between $1,000 - $3,000,
depending on whether you have violations of
just one Act or of both (see Civil Code
§§1788.17, 1788.30 and 15 U.S.C.
§1692k(a)(2)(A)
Class actions expressly provided for
CREDIT REPORTING ISSUES


Generally governed by the Federal Fair Credit Reporting Act, 15
U.S.C. §1681 et seq. (FCRA), which preempts most state law.
The FCRA imposes obligations on three sets of persons:
 credit reporting agencies - (a.k.a CRAs or ‘bureaus’), the
entities that compile consumers credit histories for sale to
third parties
 furnishers - the entities that provide the CRAs with
consumers’ payment and credit histories
 users - the entities that obtain consumer credit files from the
CRAs in order to make a decision regarding the consumers’
credit worthiness.
Federal FCRA

Obligations placed on users


No credit report may be ‘pulled’ without a permissible
purpose (see 15 U.S.C. §1681b(a)). The most common
permissible purposes are in connection with a consumer
credit or employment applications, or in connection with the
collection of a debt.
Users must also provide consumers with information about
the existence of negative information in their credit reports
after having taken an ‘adverse action’. See §1681m(a).
Federal FCRA


Obligations placed on furnishers
Numerous obligations to ensure the
furnishing of accurate information (see 15
U.S.C. §1681s-2). However, a consumer only
has a private right of action under §1681s-2(b),
which arises when a furnisher unreasonably
verifies inaccurate information after a consumer
has submitted a dispute to a credit reporting
agency.
Federal FCRA


Obligations placed on Credit Reporting
Agencies
CRAs are required to adapt procedures to
ensure maximum possible accuracy, even absent
a dispute. See §1681e(b). However, most
litigation against CRAs is based on their
unreasonable failure to delete or modify negative
credit information in response to a consumer
dispute. See §1681i.
Federal FCRA




Remedies under the FCRA
Consumers are entitled to actual damages and
attorneys fees in a case involving negligent
noncompliance. §1681o. Consumers can also collect
punitive damages for willful noncompliance.
§1681n(a)(2).
These cases are attractive to private attorneys only if the
potential defendants have been put on notice of the
error by way of a cogent dispute letter
See materials for sample dispute letter
Identity Theft

Use FTC Fraud Affidavit

Send ‘claimants’ Affidavit and letter in materials

Cal. Civil Code §1798.92 has excellent remedies
including a civil penalty of up to $30,000
Identity Theft

Prevention: See FTC website
http://www.consumer.ftc.gov/articles/pdf-0014identity-theft.pdf
 Check big three credit reports annually at
www.annualcreditreport.com

 Reporting:
 Local
police
 U.S. Secret Service
Unruh Retail Installment Sales Act
(RISA)


Civil Code §1801 et seq
Applies to contracts for consumer goods or
services payable in installments if
There is a finance charge; or
 There is a discount available for cash; or
 Is payable in more than four installments

RISA


Most consumer goods are covered (but autos are
not)
Most consumer services are covered

Some professional services are exempted
RISA



Extensive disclosure requirements
Limitations on finance charges and late fees
Remedies
Contract unenforceable
 Attorneys fees
 Treble damages for willful violations

RISA


These contracts are no longer used at most retail
establishments; credit cards have taken over
These contracts tend to be seen in the following
contexts:
Door – to – door sales
 Gym membership contracts (see also the Health
Studio Services Act)

Use of Incentive to Get Consumer to
Visit Location, Contact Sales Agent


Most commonly seen in the timeshare or
‘vacation membership’ context
Cal. Bus. & Prof. Code §17537.1 et seq. requires
extensive disclosures ‘pre-contact’ regarding
The fact that there will be a sales presentation and
approximate length
 Odds of receiving particular incentives
 Restrictions on incentives

Use of Incentive to Get Consumer to
Visit Location, Contact Sales Agent




Disclosures must be conspicuous
Local sellers do not comply
Remedies include treble damages (?)
Local sellers will rescind in response to a
demand letter pointing out the violation
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Introduction to Consumer Law” April 8, 2005