Research Government Agencies That Provide Consumer Credit

Research government agencies that provide consumer credit protection or that regulate credit card companies, using your textbook, the Argosy University online library resources, and the Internet.

Lori received a credit card in the mail from a company that had taken her name and address from a white pages directory without her knowledge. Upset about the unauthorized use of her name, Lori planned to contact the company to lodge a complaint. Before she could do that, her roommate stole the card and charged thousands of dollars' worth of merchandise to it without Lori's knowledge. The card issuer claimed that Lori was fully responsible for the purchases, while Lori claimed that she should have no liability whatsoever for the purchases. Research government agencies that provide consumer credit protection or that regulate credit card companies, using your textbook, the Argosy University online library resources, and the Internet. Based on the facts of the case and research, respond to the following questions: If the card issuer sues Lori, who might the court rule in favor of and why? Does the Federal Trade Commission (FTC) offer any protection to Lori? What ethical issues are raised by the card issuer's conduct? What can you do to protect yourself from something like this happening to you?

Paper For Above instruction

The case involving Lori highlights critical aspects of consumer credit protection, particularly the importance of regulation and the enforcement mechanisms established by government agencies. In situations like Lori’s, understanding the roles of these agencies can be instrumental in defending consumer rights and ensuring fair treatment.

Regulatory Agencies Overseeing Credit Card Practices

The primary federal agency responsible for protecting consumers in credit card transactions is the Federal Trade Commission (FTC). Established in 1914, the FTC’s mandate includes preventing deceptive, unfair, or fraudulent business practices, particularly in consumer credit and financial services. It enforces a range of laws, including the Fair Credit Reporting Act (FCRA) and the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), both designed to enhance consumer protections and promote transparency in credit practices (FTC, 2023). Additionally, the Office of the Comptroller of the Currency (OCC) regulates national banks that issue credit cards, while the Federal Reserve has authority over the regulations concerning credit card disclosures and interest rate policies (Federal Reserve, 2022). State agencies also play a role in consumer protection, often supplementing federal regulations with their own laws against fraud and unfair business practices.

The Fair Credit Billing Act (FCBA), enforced by the FTC and other agencies, outlines specific protections for consumers against unauthorized charges. It provides that consumers are generally liable for only $50 of fraudulent charges if they report the loss promptly. Many credit card companies have policies exceeding this limit, often offering zero liability for unauthorized transactions, especially when reports are made quickly (FTC, 2023). This legal framework is vital in cases like Lori’s, where unauthorized use is evident.

Likelihood of Court Ruling in Lori’s Favor

If the credit card issuer sues Lori, the courts are likely to examine the circumstances surrounding the issuance and use of the credit card. Since the card was mailed to Lori’s address but without her consent or active application, she can argue that the card was issued through deceptive practices or without her authorization. According to the Truth in Lending Act (TILA), consumers should not be held liable for unauthorized charges if they notify the issuer promptly (Consumer Financial Protection Bureau [CFPB], 2022).

Courts often favor the consumer in cases where the credit card was issued without proper authorization or where the issuer failed to verify the identity of the user. In Lori’s scenario, her claim that her roommate stole the card and made unauthorized charges would likely be accepted, particularly if she can demonstrate that she did not authorize the use. The issue then shifts to whether Lori reported the fraudulent activity in a timely manner, as required by law. Given that the charges were made without her knowledge and before she was aware, a court might rule that Lori bears minimal or no responsibility for the fraudulent charges.

Protection Provided by the Federal Trade Commission

The FTC provides several protections that could support Lori’s case. Under the FTC’s regulations, consumers are generally not liable for unauthorized charges made through the use of a stolen or lost credit card if they report the theft promptly. The CARD Act also requires credit card companies to implement enhanced security measures and transparent disclosure policies, which aim to prevent unauthorized issuance.

Furthermore, the FTC’s enforcement actions target deceptive practices such as obtaining personal information through fraudulent means, including the unauthorized use of directories like the white pages. Since Lori did not authorize the issuance of the card, the FTC would advocate for her protection and likely support her claim of non-liability in the case of unauthorized charges resulting from theft or fraud (FTC, 2023). The agency emphasizes the importance of consumers monitoring their accounts and reporting suspicious activity as soon as possible.

Ethical Issues in the Card Issuer’s Conduct

Several ethical issues arise from the credit card issuer’s handling of the situation. First, issuing a credit card to an individual without sufficient verification or consent raises concerns about responsible lending practices. The practice of mailing unsolicited credit cards, especially when they are obtained from directories without explicit permission, questions the issuer’s respect for consumer privacy and consent.

Second, the issuer’s claim that Lori is fully responsible for charges made by her roommate despite her lack of knowledge raises ethical concerns about accountability and fairness. Companies have an obligation to verify authorized use, and extending liability to the innocent cardholder contravenes principles of ethical treatment and consumer rights.

Third, the issuer’s failure to implement or enforce adequate security measures to prevent unauthorized access constitutes a breach of ethical business conduct. Ethical business practices demand transparent policies, protections against fraud, and prompt resolution of disputes to maintain consumer trust (Laczniak & Murphy, 2021).

Protective Strategies for Consumers

Consumers can take several proactive measures to protect themselves from similar issues. First, signing up for credit monitoring services provides real-time alerts to any abnormal activity on credit accounts. Second, limiting the sharing of personal information and being cautious when exposing data in directories or online prevents unauthorized use.

Third, promptly reporting any lost or stolen credit cards to the issuer can limit liability, in accordance with the provisions of the FCBA. It is also advisable to review credit reports regularly via agencies like Equifax, Experian, and TransUnion to identify unauthorized activity early (Consumer Financial Protection Bureau, 2022).

Moreover, consumers should understand their rights under the law and communicate clearly with credit card companies and regulators when issues arise. Using secure authentication methods, such as two-factor authentication, can reduce the risk of unauthorized access. Finally, staying informed about potential scams and fraudulent practices in the marketplace enhances consumer awareness and protective behavior.

Conclusion

The case involving Lori underscores the importance of strong regulatory oversight, ethical business practices, and informed consumer behavior. Federal agencies like the FTC play a crucial role in safeguarding consumer rights against unfair and deceptive practices. Legal protections generally favor consumers who have not authorized the use of their credit cards, especially when timely reporting occurs. Ethical issues surrounding responsible lending, privacy, and the fairness of liability highlight the need for more transparent and consumer-focused practices by credit providers. Ultimately, consumers must stay vigilant, monitor their accounts, and understand their legal rights to prevent and respond effectively to credit-related fraud. By doing so, they can minimize financial risks and promote ethical standards across the industry.

References

  • Consumer Financial Protection Bureau. (2022). Your credit rights: What you need to know. CFPB.gov.
  • Federal Reserve. (2022). Regulations on credit card practices. FederalReserve.gov.
  • Laczniak, G. R., & Murphy, G. B. (2021). Ethics in Marketing. Routledge.
  • Federal Trade Commission. (2023). Consumer credit and debt: Protecting your rights. FTC.gov.
  • Consumer Financial Protection Bureau. (2022). Unauthorized charges and the Fair Credit Billing Act. CFPB.gov.
  • Levitin, A., & Rachlinski, J. (2017). The Law and Economics of Credit Card Data Security. Journal of Law & Economics, 60(1), 115-149.
  • McKinney, M. (2019). Consumer rights and credit laws: A comprehensive overview. Journal of Consumer Affairs, 53(4), 1525-1554.
  • Walker, D. (2020). Ethical issues in financial services. Journal of Business Ethics, 162(2), 321-331.
  • White, M. J. (2018). Data privacy and consumer trust. Harvard Business Review, 96(3), 78-85.
  • Yeh, A. (2019). Fraud prevention in credit card transactions. Journal of Financial Crime, 26(2), 412-423.

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