Category Archives: Consumer Finance

How to Avoid Becoming an Accidental Creditor

SuckerIf you’re playing a poker game and you look around the table and can’t tell who the sucker is, it’s you.

– Paul Newman

Don’t be suckered into giving your customers credit – unless you intend to be a creditor, which requires complying with the large number of consumer credit laws that apply to credit transactions with consumers.  Otherwise, you could find yourself on the wrong side of an expensive life lesson in the form of a regulatory action or  consumer lawsuit for failing to comply with those laws.

Is it really possible to accidentally grant credit to a consumer?

Yes, it is possible to become an accidental creditor. This can happen if you regularly allow your customers to pay in installments or if you impose a late fee that is couched in terms of “interest.” (See this post for more on how to charge late fees legally.) This stems from the definition of “creditor” under federal law, which defines a creditor as someone who: Continue reading How to Avoid Becoming an Accidental Creditor

The Cost of Careless Advertising – FTC’s “Operation Steer Clear”

false advertisingOn Thursday, the Federal Trade Commission (FTC) announced settlements with various automobile dealers in “Operation Steer Clear,” which the FTC touts as a nationwide sweep of false advertising claims against dealers.

What standards did these auto dealers collide with?

The FTC alleged various misrepresentations in its complaints against the dealers (“alleged” because these cases were voluntarily settled, not adjudicated).  These alleged misrepresentations, inaccuracies, and false statements were found in print, Internet, and video advertisements. Wherever you advertise, accuracy and compliance with various consumer protection regulations are advisable.

Many of the alleged violations were for statements that were obviously false, like advertising the vehicle for $5,000 less than the offering price or falsely asserting that consumers had won sweepstakes prizes they could collect at the dealership. Assuming the allegations are true, these merchants had to know their statements were untrue. I’m sure none of my readers commit that type of obvious misrepresentation, so I’ll focus on the advertising violations that are perhaps a bit more dealer

The more subtle (alleged) violations involved requirements found in federal leasing and financing laws – i.e., the Truth in Lending Act and its implementing regulations (Regulation M for consumer leasing and Regulation Z for consumer lending). Under these laws, when certain terms are contained in advertising (so-called “triggering terms”), other terms must necessarily also be included in the ad. Continue reading The Cost of Careless Advertising – FTC’s “Operation Steer Clear”