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Unfair and Deceptive Acts and Practices: 6.9.5 Live Check Solicitations

Many consumers become obligated to pay for goods or services when they deposit or cash checks they receive in the mail from a business. The checks are payable to the consumer for a small amount of money, even though the business owes no money to the consumer. The business then takes the position that depositing or cashing the check constitutes an agreement by the consumer to enter into a contract to purchase goods or services or to take out a loan.

Consumer Banking and Payments Law: 4.10.2 When Cashing a Check Results in a Contract for Goods or Services

Many consumers become obligated to pay for goods or services when they deposit or cash checks they receive in the mail from a business that owes no money to the consumer. The checks are often for a small amount of money and may look like rebate checks. The business then takes the position that depositing or cashing the check constitutes an agreement by the consumer to enter into a contract to purchase goods or services.

Unfair and Deceptive Acts and Practices: 6.10.1 Advantages of UDAP Statute As a Remedy for Debt Collection Abuse

The federal Fair Debt Collection Practices Act (FDCPA),633 other federal statutes, state debt collection acts, and common law tort theories provide a number of remedies for debt collection abuses. Another treatise in this series634 analyzes these remedies in detail and provides a host of sample pleadings. A private UDAP action provides yet another approach in those states where debt collection practices are within the UDAP statute’s scope.635

Unfair and Deceptive Acts and Practices: 6.10.3 Misrepresentations Concerning Identity and Nature of Collector

A debt collector commits a UDAP violation if it misrepresents its affiliation or connection with a court or other government agency.654 Nor can debt collection documents simulate legal process or other government documents.655 A collection agency engages in a deceptive practice when it misrepresents itself as a credit rating organization, thus falsely linking payment of the debt to the debtor’s credit rating.656

Unfair and Deceptive Acts and Practices: 6.10.5 Misrepresentations Concerning Legal Consequences of Debt Nonpayment

Collectors may not misrepresent the legal consequences of nonpayment of a debt.676 Thus, it is deceptive to threaten that nonpayment will lead to garnishment of the debtor’s wages, without disclosing that garnishment requires a judicial order677 or when garnishment is unavailable for other reasons.678 It is deceptive to threaten falsely that goods can be seized679 or that a lien will be placed on ever

Unfair and Deceptive Acts and Practices: 6.10.6 Harassment

Also unfair or deceptive are telephone or personal harassment685 and abusive language.686 Some state UDAP regulations limit creditors’ telephone calls and visits to normal working hours and limit their number at the debtor’s residence and at other places.687 Contacting a consumer known to be represented by an attorney is a UDAP violation.688

Unfair and Deceptive Acts and Practices: 6.10.11 Unfair and Deceptive Means of Obtaining Default Judgments and Other Litigation Misconduct

Another unfair practice is “sewer service,” obtaining a default judgment because the defendant does not actually receive the summons.723 When a debtor contacts a creditor after receiving a summons and agrees to make payment, and the creditor tells the debtor to ignore the summons, it is unfair for the creditor not to file a notice of discontinuance but instead to obtain a default judgment.724 A court has also allowed a UDAP action to proceed challenging default judgments obtained through affidav

Unfair and Deceptive Acts and Practices: 6.11.1 General

An important precedent dealing with unfair remedies used by creditors in enforcing consumer credit contracts is the FTC’s Trade Regulation Rule Concerning Credit Practices.737 The rule has been upheld by the District of Columbia Circuit.738

The rule prohibits six practices:

Unfair and Deceptive Acts and Practices: 6.11.2 Private UDAP Actions Utilizing the FTC Rule

There is generally no private right of action under the FTC Act for a violation of an FTC rule.740 It seems clear, however, that a consumer can challenge an FTC Credit Practices Rule violation under the many state UDAP statutes that prohibit “unfair” or “unconscionable” practices.741 The rule is an official FTC ruling that use of certain creditor remedies is an “unfair” trade practice. This FTC ruling guides courts in interpreting what is unfair under a state UDAP statute.

Unfair and Deceptive Acts and Practices: 6.13.1 Unfair Contract Provisions

Often a seemingly abusive repossession practice is authorized in a consumer credit contract signed by the debtor. A growing body of law finds these contract provisions unfair. The FTC Credit Practices Rule is the most important example, prohibiting non-purchase money security interests in household goods.772

Unfair and Deceptive Acts and Practices: 6.13.4 Unfair or Deceptive Practices Relating to Redemption, Collateral Sales, Deficiencies, and Surpluses

It is a UDAP violation to sell repossessed collateral or to conduct a lien sale without complying with state law.800 Since state repossession requirements are very detailed, with numerous notice requirements, this is a ripe source of UDAP violations. Failure to send a required notice should not only be a per se UDAP violation, but also a deceptive nondisclosure of a material fact.

Unfair and Deceptive Acts and Practices: 6.13.5 Pawnbrokers’ Sale of Pawned Goods

The UDAP principles described in the preceding subsections regarding repossession practices apply to pawnshops as well when they dispose of pawned items. In addition, the FTC has accepted a number of consent agreements dealing with practices of trading posts serving Native Americans. These cases also have applicability to other pawnbroker situations.

Unfair and Deceptive Acts and Practices: 6.14.1 Introduction

Credit repair, credit counseling, debt settlement, and debt elimination providers all purport to help consumers resolve their debts or improve their credit ratings. These providers and the law applicable to them are summarized briefly here, but addressed in detail in other books in this series.

Unfair and Deceptive Acts and Practices: 6.14.2 Credit Repair Organizations

Credit repair organizations promise, for a fee, to improve a consumer’s credit rating or credit record. Generally, these agencies do nothing consumers cannot do for themselves free of charge.820 Sometimes, the “service” provided consists solely of advising consumers to barrage credit reporting agencies with form letters disputing most or all items in their files—letters that the reporting agencies usually ignore as frivolous.

Unfair and Deceptive Acts and Practices: 6.14.3 Credit Counseling and Debt Management Plans

Credit counseling agencies traditionally provided consumer financial education and counseling and offered low-cost debt management plans, by which the consumer paid off the full value of unsecured debts through regular payments to the agency. But the industry grew rapidly in the 1990s, adding players that used aggressive sales techniques to steer consumers into more costly plans or other products.