The Federal Trade Commission (FTC) was established in 1914 by the Federal Trade Commission Act. The purpose of the FTC is to protect consumers as well as to prevent certain business practices that take advantage of consumers and squeeze other businesses out.
One example of this would be the FTC preventing companies from forming monopolies, or dominating the market. This action is also called antitrust regulation.
The FTC protects both businesses and consumers. The following is a list of the activities the FTC engages in, although it is not an exhaustive list:
- Protecting consumers from false advertising and other forms of fraud;
- Enforcing a variety of laws related to consumer credit;
- Regulating business marketing and warranty practices; and
- Enforcing laws and trade regulation rules, and developing new rules to protect the marketplace.
The main goal of the FTC is to ensure that the markets are efficient, vigorous, and free of restrictions. The FTC works to enforce consumer protection laws that prevent:
- Deception; and
- Unfair business practices.
What Does the Bureau of Consumer Protection Do?
The Bureau of Consumer Protection of the FTC is responsible for enforcing rules that are created by the FTC as well as laws enacted by Congress pertaining to consumer protections. The actions of this agency include:
- Collecting complaints and conducting investigations;
- Suing companies and individuals that break the law;
- Making rules to help maintain a fair marketplace; and
- Educating consumers and businesses regarding their rights and responsibilities.
The Bureau has 8 regional offices in:
- Los Angeles;
- New York;
- San Francisco;
- Atlanta; and
The Bureau also has 8 divisions.
What are the Responsibilities of the Bureau’s Divisions?
The FTC has a broad range of responsibilities. Within the Bureau, there are separate divisions that oversee many concerns, including:
- Division of Privacy and Identity Protection: This division handles issues related to identity theft, consumer privacy and credit reporting;
- Division of Advertising Practices: This division enforces federal truth-in-advertising laws;
- Division of Consumer and Business Education: This division produces educational materials in a variety of formats to help consumers and businesses stay educated on their rights and responsibilities;
- Division of Enforcement: This division litigates and coordinates with law enforcement;
- Division of Marketing Practices: This division enforces consumer protection laws by:
- filing an action on behalf of the FTC to stop a scam;
- preventing scam artists from repeating their fraudulent schemes;
- freezing assets; and
- obtaining compensation for victims;
- Division of Consumer Response and Operations: This division takes data and interprets it in order to determine whether the FTC’s efforts at consumer protection are successful;
- Division of Financial Practices: This division develops policy and enforces laws related to financial and lending practices affecting consumers; and
- Division of Litigation Technology and Analysis: This division works with lawyers and determines the efficacy of technology used in litigation.
How Does the FTC Bring an Action?
The FTC may take action if it receives:
- Letters from consumers or businesses;
- Pre-merger notification filings;
- Congressional inquiries; or
- Articles on consumer or economic subjects.
The FTC’s investigations are typically non-public. This is done to protect the investigation and the companies that are involved. If the FTC believes that a company has violated the law, it may attempt to get voluntary compliance by entering into a consent order with the company. This means that the company agrees to stop its offending practices.
If the FTC cannot obtain such an agreement, it may issue an administrative complaint or seek injunctive relief from a court. If a violation is found, the offending company may be ordered to cease and desist.
The FTC can issue Trade Regulation Rules. During the rulemaking proceedings, the public is permitted to attend hearings and file written comments on proposed rules.
Can the Federal Trade Commission Take Action Against Violators?
Under the Federal Trade Commission Act, the FTC is permitted to issue an order that requires a violator to cease the illegal practice on behalf of the general public.
The FTC has the ability to impose significant fines if a violator does not comply with the order. A violator can appeal the order from the FTC in federal court.
This Act was part of a movement in the early 20th century to supervise and to regular certain types of businesses through special groups. A violation of the Sherman Act also violates the Federal Trade Commission Act.
Therefore, the Federal Trade Commission can act on cases that violate either of these acts. Currently, the Federal Trade Commission Act and both antitrust laws serve the same purpose.
This purpose is to protect the process of competition for the benefit of consumers, ensuring that there are strong incentives for businesses to operate efficiently, keep their prices down, and keep quality high.
In order to curb unfair trade practices, the Commission was authorized to issue cease and desist orders to large corporations. In addition, the Federal Trade Commission Act is also regarded as a measure that protects privacy because it allows the FTC to penalize companies that violate their own policies through false advertising.
Deceptive advertisements and deceptive pricing were some of the unfair methods of competition that were targeted.
What is the Credit Practices Rule?
The Federal Trade Commission’s Credit Practices Rule bars a creditor from including certain provisions in many types of credit contracts. Therefore, any individual who borrows money, buys items on installment credit, or cosigns for another individual’s debt should know about the Credit Practices Rule, also referred to as the Rule.
What Kind of Contracts are Covered?
Consumer credit contracts offered by the following institutions are required to comply with the Rule:
- Finance companies;
- Credit unions; and
The Rule does not apply to:
What is Prohibited under the Rule?
There are certain provisions that cannot be included in a consumer credit contract, including:
- An individual cannot be required to give up their state law protections that allow them to keep certain belongings even if they do not pay their debt;
- An individual cannot be required to use certain personal items as collateral. These items usually have a unique, significant value to the debtor but not much value to the creditor; and
- An individual cannot be required to agree in advance to give up the right to be notified of a court hearing or their right to hire an attorney for representation in the event that they are sued for non-payment.
If an individual believes their creditor is violating the Rule, they can file a complaint with the Federal Trade Commission (FTC).
What about Late Fees?
An individual can be charged a late fee if they do not make their payments on time. An individual, however, cannot be charged late fees simply because they have not paid a late fee that they owe, referred to as pyramiding late fees.
Therefore, a creditor is not permitted to subtract a late fee from an individual’s payment and then charge them another late fee for the current payment. It is advised that an individual brings their account up to date.
Do I Need a Lawyer Experienced with the Rule?
The FTC is responsible for taking legal action based on complaints from consumers and other entities. If you have filed a complaint with the FTC and your complaint has been ignored or the issue was not resolved, then you can decide if you would like to pursue a private civil action.
A qualified credit lawyer can advise you regarding the creditor’s responsibilities and your rights under the Rule. Your lawyer can also advise you what your obligations are and how you can avoid any credit problems.
If you divide to pursue a complaint against a creditor, your lawyer can assist you.