Mary Smith bought a car from Doug Chapman under an installment sales contract. Smith carried the insurance on the car, as required by the contract. Shortly after Smith purchased the car, it was wrecked in an accident. Smith’s insurance company paid Chapman the installments still owed on the car as well as Smith’s equity in the car. Smith requested a new car from Chapman under an installment plan that was the same as the one under which she purchased the first car. Chapman refused, claiming that the contract for the first car allowed him to retain the equity amount as security interest and that Smith understood this as a term of the contract. The provision relating to the security interest appeared on the back of the contract, although the Truth-in-Lending Act required it to be on the front side. The front side had a notice referring to provisions on the back side. Explain whether Chapman’s contract violates the Truth-in-Lending Act.
2. The Federal Trade Commission (FTC) ordered Warner-Lambert to cease and desist from advertising that its product, Listerine antiseptic mouthwash, prevents, cures, or alleviates the common cold and sore throats. The order further required Warner-Lambert to disclose in future advertisements that “[c]ontrary to prior advertising, Listerine will not help prevent colds or sore throats or lessen their severity.” Warner-Lambert contended that even if its past advertising claims were false, the corrective advertising portion of the order exceeded the FTC’s statutory power. The FTC claimed that corrective advertising was necessary in light of Warner-Lambert’s one hundred years of false claims and the resulting persistence of erroneous consumer beliefs. Explain whether the FTC is correct.
3. Lenvil Miller owed $2,501.61 to the Star Bank of Cincinnati. Star Bank referred collection of Miller’s account to Payco-General American Credits, Inc. (Payco), a debt collection agency. Payco sent Miller a collection form. Across the top of the form was the caption “DEMAND FOR PAYMENT” in large, red, bold-face type. The middle of the page stated “THIS IS A DEMAND FOR IMMEDIATE FULL PAYMENT OF YOUR DEBT,” also in large, red, boldface type. That statement was followed in bold by “YOUR SERIOUSLY PAST DUE ACCOUNT HAS BEEN GIVEN TO US FOR IMMEDIATE ACTION. YOU HAVE HAD AMPLE TIME TO PAY YOUR DEBT, BUT YOU HAVE NOT. IF THERE IS A VALID REASON, PHONE US AT [ . ] TODAY. IF NOT, PAY US— NOW.” The word NOW covered the bottom third of the form. At the very bottom in the smallest type to appear on the form was the statement “NOTICE: SEE REVERSE SIDE FOR IMPORTANT INFORMATION.” The notice was printed in white against a red back- ground. On the reverse side were four paragraphs in gray ink. The last three paragraphs contained the validation notice required by the Fair Debt Collection Practices Act (FDCPA) to inform the consumer how to obtain verification of the debt. Miller sued Payco on the ground that the validation notice did not comply with the FDCPA. Miller argued that even though the validation notice contained all the necessary information, it violated the FDCPA because it contradicted other parts of the collection letter, was overshadowed by the demands for payment, and was not effectively conveyed to the consumer. Discuss whether Payco has violated the FDCPA.
4. Greg Henson sold his Chevrolet Camaro Z-28 to his brother, Jeff Henson. To purchase the car, Jeff secured a loan with Cosco Federal Credit Union (Cosco). Soon thereafter, the car was stolen and Jeff stopped making payments on his loan from Cosco. At the time, Cosco was unsure whether Greg retained an interest in the car, so Cosco sued both Jeff and Greg for possession of the car. The trial court rendered a default judgment against Jeff and ruled that Greg no longer had any interest in the car. The court further entered a deficiency judgment against Jeff in the amount of $4,076. The clerk erroneously noted in the judgment docket that the money judgment had been rendered against Greg as well as against Jeff although the official record of judgments and orders correctly reflected that only Jeff was affected by the money judgment. Two credit agencies, CSC Credit Services (CSC) and Trans Union Corporation (Trans Union), relied on the state court judgment docket and indicated in Greg’s credit report that he owed the money judgment. Greg and his wife, Mary Henson, allege that they then “contacted Trans [Union] twice, in writing, to correct this horrible injustice.” When Trans Union did not respond, the Hensons brought an action alleging violations of the Federal Credit Reporting Act (FCRA). Explain whether the Hensons should prevail.
5. Pantron Corporation and Hal Z. Lederman market a product known as the Helsinki Formula. This product supposedly arrests hair loss and stimulates hair regrowth in baldness sufferers. The formula consists of a conditioner and a shampoo, and it sells at a list price of $49.95 for a three-month supply. The ingredients that allegedly cause the advertised effects are polysorbate 60 and polysorbate 80. Pantron offers a full money-back guarantee for those who are not satisfied with the product. The Federal Trade Commission (FTC) challenged both Pantron’s claims that the formula arrested hair loss and promoted growth of new hair as unfair and deceptive trade practices. The FTC presented a variety of evidence that tended to show that the Helsinki Formula had no effectiveness other than its placebo effect (achieving results due solely to belief that the product will work). The FTC introduced expert testimony of a dermatologist and two other experts who denied there was any scientific evidence that the Helsinki Formula would be in any way useful in treating hair loss. Finally, the FTC introduced evidence of two studies that had determined that polysorbate-based products were ineffective in stopping hair loss and promoting regrowth. In response, Pantron introduced evidence that users of the Helsinki Formula were satisfied that it was effective. It offered testimony of eighteen users who had experienced hair regrowth or a reduction in hair loss after using the formula. It also introduced evidence of a “consumer satisfaction survey” it had conducted. Pantron further provided evidence that more than half of its orders come from repeat purchasers, that it had received very few written complaints, and that very few of Pantron’s customers (less than 3 percent) had redeemed the money-back guarantee. Pantron finally introduced several clinical studies of its own, none performed in the United States or under U.S. standards for scientific studies. The evidence from these studies did show effectiveness, but the studies were not random, blind-reviewed studies and thus did not take into account the placebo effect. Discuss.
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