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Flashcards in DTPA Deck (70):
1

Close-End Credit

Anything not “open-end,” specific amount of credit known/established at outset, e.g., home mortgages

2

TILA Consumer

A cardholder or natural person to whom consumer credit is offered or extended. Includes a natural person in whose principal dwelling a security interest is or will be retained or acquired, if that person’s ownership interest in that dwelling is or will be subject to the security interest.

3

Consummation

The time that a consumer becomes contractually obligated on a credit transaction

4

Credit

The right to defer payment of debt or to incur debt and defer its payment

5

Credit sale

A sale in which the seller is a creditor. The term includes a bailment or lease (unless terminable w/o penalty at any time by the consumer

6

Creditor

A person who regularly extends consumer credit that is subject to a finance charge or is payable by written agreement in more than 4 installment.

Regularly extends is defined as extending credit more than 25 times (or more than 5 times for transactions secured by a dwelling) in one calendar year.

7

Open-End Credit

Revolving credit, e.g. credit card.

Transaction in which the creditor reasonably contemplates repeated transaction, a finance charge my be imposed on an outstanding unpaid balance, and the amount of credit extended is generally made available to the extent that any outstanding balance is repaid.

8

Finance Charge

Cost of credit as a dollar amount. It includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit.

9

Amount Finances

Amount of credit provided to you

10

APR

Annualized simple interest percentage—cost of credit expressed as a yearly rate

11

Disclosures required for Open-End Credit

At Account Opening:
APR for purchases, balance, cash advances, and penalty
Grace period, how to avoid paying interests
Minimum Interest Charge
Transaction Fees
Penalty Fees
Other fees

At Periodic Statement Disclosures
Summary of Account Balance
Id of Transactions
Id of APR/Interest Charged
Grace Period
Transaction Fees
Penalty Fees
Other Fees

12

Disclosures Required for Close-End Credit

Disclosures shall be grouped together, shall be segregated from everything else, and shall not contain any information not directly related to the disclosures Required

State the creditor, amount finances, using that term and description,
itemization of amount financed,
finance charge,
APR, described as “the cost of your credit as a yearly rate,”
Variable Rate,
Payment Schedule,
Total Payments,
Demand Feature,
Total Sale Price,
Prepayment information,
late payment information,
Required deposit.

13

When must Open-End disclosures be given?

Creditor shall furnish account opening disclosures before the first transaction is made under the plan

The creditor shall mail or deliver a period of statement for each billing cycle at the end of which an account has a debit or credit balance of more than $1 or on which a finance charge has been imposed.

14

If Credit Card, disclosures must be given

Periodic statements must be mailed or delivered at least 21 days prior to the payment due date disclosed on the statement, and card issuer does not treat as late for any purpose a required minimum payment received within 21 days after mailing or delivery of the periodic statement disclosing the due date of that payment.

15

If Grace Period applies to open-end credit

Periodic statement are mailed or delivered at least 21 days prior to the date on which the grace period expires, and the creditor does not impose finance charges as a result of the loss of the grace period if payment that satisfies the grace period is received by the creditor within 21 day after mailing or delivery of the periodic statement

16

No Grace Period Open-End Credit

Periodic statements are mailed or delivered at least 14 days prior to the date on which the required minimum payment must be received to avoid being treated as late, and the creditor does not treat as late for any purpose the required minimum payment received by the creditor within 14 days after mailing or delivering of the periodic statement.

17

Remedies for TILA violation

Actual damages

Statutory Damages-->(1) open end consumer credit plan that is not secured by real property or a dwelling= 2x(any finance charge in connection with the transaction), with a minimum of $500 and a maximum of $5,000. Higher amount as may be appropriate if establish pattern or practice of such failures.
(2) transaction not under an open end credit plan that is secured by real property or a dwelling= not less than $400 or greater than $4,000

Court costs and attorney’s fees

18

Close-End Credit Right of Recession

In a credit transaction in which a security interest is or will be retained or acquired in a consumer's principal dwelling, each consumer whose ownership interest is or will be subject to the security interest shall have the right to rescind the transaction

To exercise the right to rescind, the consumer shall notify the creditor in writing. The consumer may exercise the right to rescind within 3 business days following whichever occurs last:
(i) consummation,
(ii) delivery of the notice or
(iii) delivery of all material disclosures (annual percentage rate, the finance charge, the amount financed, the total of payments, the payment schedule)

Failure to clearly and conspicuously disclose the Right to Rescind can lead to an extension of the 3 day period to 3 years

Does not apply in emergency situations – if consumer requests goods or services to be furnished without delay. Does not apply to telephone or email solicitations

19

TILA Statute of Limitations

1 Year

20

Bait and Switch

Elements:
(1) An advertisement is made
(2) A plan or scheme of which the ad is a part
(3) The purpose/effect of this plan must be not to sell the product as advertised

Additional requirements
(4) Disparagement of originally advertised product
(5) Low sales of originally advertised product

Found in 17.46(b)(10) of the DPTA laundry list.

21

Referral Sales Plan

Actionable under DTPA laundry list § 17.46(b)(19) “using or employing a chain referral sales plan . . . in connection with the sale or offer to sell of goods, merchandise, or anything of value, . . . which uses the sales technique, plan, arrangement, or agreement in which the buyer or prospective buyer is offered the opportunity to purchase merchandise or goods . . . and in connection with the purchase receives the seller's promise or representation that the buyer shall have the right to receive compensation or consideration in any form for furnishing to the seller the names of other prospective buyers . . . if receipt of the compensation or consideration is contingent upon the occurrence of an event subsequent to the time the buyer purchases the merchandise or goods.”

22

Troublesome Solicitations

consumers can enforce their right to rescind within 3 years if they did not receive the proper disclosures, beginning at the date of receiving such disclosures. a signed written acknowledgement of receipt of TILA disclosures only creates a rebuttable presumption of delivery

23

Usury

Usury statutes set maximum rate of interest that can be charged for loan transaction.

Exportation Doctrine: National Bank Act provides that a national bank may charge interest on any loan at the rate allowed by the laws of the state in which the bank is located

Rule: Non-bank entities which partner with banks in an effort to avoid state usury laws are not entitled to the protection of the federal banking laws

24

Maintaining Cause of Action under DTPA

∏ is a consumer; D committed violation under § 17.50:
(1) Laundry List
(2) Breach of Warranty
(3) Unconscionable Actions
(4) Tie-in Statutes

D’s action was “producing cause” of P’s damages. To establish: ∏ must show D’s DTPA violations were
(1) a substantial factor in bringing about the injury, and
(2) a cause-in-fact of the ∏’s injuries, such that the injury would not have occurred but for the D’s acts or omissions

25

DTPA Remedies

Economic damages always available.

If knowingly, damages = mental anguish + economic, but total damages cannot be more than 3x economic damages.

If Intentionally, damages = mental anguish + economic, but total damages cannot be more than 3x both

26

DTPA Consumer

An individual or entity who seek or acquires, by purchase or lease, any goods or services

27

Seeks or Acquires

(1) Objective to Purchase—The person present himself to the seller as a willing buyer with the good faith intention of purchasing/leasing (Good Faith is the honesty in fact in the conduct or transaction, tested by the actual belief of the party & not the reasonableness of that belief)

and

(2) Capacity to Purchase—Possesses at least some credible indicia of the capacity to consummate the transaction

28

Purchase or Lease

goods or services sought or acquired by the consumer must form the basis of the complaint

For non-buyers/non-lessors: A plaintiff establishes his standing as a consumer in terms of his relationship to a transaction, not by a contractual relationship with the defendant. Includes intended third-party beneficiaries of the original transaction

29

Goods

tangible chattels or real property purchased or leased for use

30

Service

work, labor, or service purchased or leased for use, including services furnished in connection w/ the sale or repair of goods

31

Intangibles

Generally, not goods or services, but:

(1) When a borrower’s objective is to obtain goods/services, and the loan provides the means of doing so, the borrower qualifies as a consumer

(2) Fractional interest in oil and gas and purchase of percentage interest in cattle are goods; must show that:
The basis of the complaint is the asset related to the investment interest; and
The services are not “incidental” to buying the intangible

32

DTPA Exemptions

No bodily injury or wrongful death claims b/c lawmakers didn’t want DTPA to become a personal injury statute


§ 17.49(c) Exemption for Professional Service Providers when the essence of that service is based on providing advice, judgment, or opinion

When professional services not exempt:
(1) express misrepresentations
(2) failure to disclose (laundry list – (b)(24))
(3) unconscionable actions
(4) breach of warranty
(5) (Laundry list – (b)(26) – annuities)

33

Consumer Product Warranties

Has 4 year SOL whereas DTPA has 2 year

§ 17.50(a)(2) DTPA does not define or impose warranties, but recognizes and provides remedies for breaches of warranty recognized by other law.

Analysis:
(1) Does an express or implied warranty exist?
(2) What is the scope of the warranty?
(3) Has it been disclaimed or modified?

To be comprehensive, has the warranty been excluded, modified, disclaimed, or superseded?

34

Express warranties

Any affirmation of fact or promise made by the seller to the buyer that relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise

Express warranties cannot be disclaimed. The fight really is if the warranty—the promise or what was said—actually occurred in contradiction to the evidence available.
If it is written or is told to you, and once it is expressed it cannot be disclaimed.

35

Implied Warranty of Merchantability

Unless excluded or modified, a warranty that the goods shall be merchantable is implied in a K for their sale if the seller is a merchant w/ respect to goods of that kind

For goods, to be merchantable, must at least:
(1) Pass without objection in the trade under the K description; and
(2) In the case of fungible goods, are of fair average quality within the description;
(3) Are fit for the ordinary purposes for which such goods are used;
(4) Run within the variation s permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved;
(5) Are adequately contained packaged, and labeled as the agreement may require and
(6) Conform to the promises or affirmations of fact made on the container or label, if any

Merchant: someone with knowledge or skill peculiar to the practices or goods involved in the transaction

36

Implied Warranty of Fitness for a Particular Purpose

Where the seller at the time of K has reason to know of any particular purpose for which the goods are required; and

The buyer is relying on the seller’s skill or judgment to select or furnish suitable goods, there is, unless excluded or modified, an implied warranty that the goods shall be fit for such purpose

Basically that you told them you were going to use them for a specific reason, and they told you it was good for that, but that was not the case.

37

Implied Warranties can easily be waived by:

(1) Specific and conspicuous language disclaiming warranty. Sufficient if it states, e.g., “there are no warranties that extend beyond the description on the face hereof." For merchantability, must mention merchantability in disclaimer


(2) An “As-is” clause. You are expected to know that you are only getting what you can see without accepting any statements from the seller.

(3) Buyer’s failure to see patent defects. If you could clearly see the problem at first sight, then there is really no way you can have an implied warranty

(4) Course of dealing, course of performance, or usage of trade.

38

Revocation of Acceptance; Return and Refund for Violation of Warranty

(1) Show substantial impairment in value, based on objective evidence of the buyer’s faith or undermine their confidence in the reliability and integrity of the good purchased

(2) Show that non-discovery of defect included either by the difficulty of discovery before acceptance or by the seller’s assurances

(3) Revoke acceptance within a reasonable time after the buyers discovers or should have discovered the defects and before any substantial change.

(3) Refrain from further use of the goods.

Only lies against seller of goods, not against remote manufacturer

39

Reasonable Use Test for Revocation

Reasonable Use Test – whether the continued use of a goods after notification of revocation of acceptance vitiates a revocation is dependent on whether the use was reasonable:
(1) what instructions for returning good were given
(2) business or profession needs compelled use
(3) seller’s assurance in curing would recompense
(4) seller acted in good faith
(5) seller unduly prejudiced by buyer’s use

40

Tex. CL Implied Warranty of Good and Workmanlike Services

Found in repair and modification of tangible goods or property and construction of a new home

“Good and workmanlike” = that quality of work performed by one who has the knowledge, training, or experience necessary for the successful practice of a trade or occupation and performed in a matter generally considered proficient by those capable of judging such work

"Modification": Includes any change or alteration that introduces new elements into the details of the subject matter or cancels some of them but which leaves the general purpose and effect of the subject matter intact.

Can only be waived if superseded by express warranty--if agreement expressly and sufficiently describes manner, performance, or quality of construction

41

Tex. CL Implied Warranty of Habitability in New Home Sales

Exists in new home purchases and residential apartment complexes in TX.

Implied Warranty of Habitability is breached when there’s a defect of a nature which will render the premises unsafe or unsanitary or otherwise unfit for living

Generally, cannot be waived, unless adequately disclosed and buyer has full knowledge of the defects

42

Tex. CL Implied Warranty of Suitability in Lease of Commercial Property

Warranty that at the inception of the lease there are no latent defects in the facilities that are vital to the use of the premises for their intended commercial purpose and that these essential facilities will remain in a suitable condition

Can be waived by “as-is” clause

43

Magnuson-Moss Warranty Act (MMWA) Claims

Right to enforce warranty provisions or sue for damages in state or federal court

Provides for atty fees

Applies to consumer products only-“normally used for personal, family, or household purposes.” § 2301(1)

Only consumers may enforce MMWA-§2302(3): buyers, transferee, etc.

44

MMWA and Written Warranty

Any undertaking in writing in connection with the sale by a supplier of a consumer product to take remedial action with respect to such product in the event that such product fails to meet the specifications set forth §2308(6)

Must be conveyed at the time of the sale and consumer must not give any additional consideration because it is part of the basis of the bargain

Sellers may disclaim any implied warranty that arises under state law, including warranties of merchantability and fitness for a particular purpose, except: When Seller makes written warranty on the product, or when in 90 days it enters in to service contract, it may not then disclaim any implied warranty only limit their durations

45

Service Contract

a contract in writing to perform, over a fixed period of time or for a specified duration, services relating to the maintenance or repair, or both, of a consumer product – requires some consideration in addition to the purchase price of the consumer ≠ written warranty §2301(8)

46

unconscionable action

An act or practice that, to the consumer’s detriment, takes advantage of the lack of knowledge, ability, experience, or capacity of the consumer to a grossly unfair degree.

does not require proof that the D acted intentionally, knowingly, or with conscious indifference

47

Grossly Unfair Degree

Requires a showing that the resulting unfairness was glaringly, noticeable, flagrant, complete and unmitigated

48

DTPA SOL

2 year SOL after the date:
(1) on which the false, misleading or deceptive act or practice occurred or
(2) within 2 years after the consumer discovered or
(3) in the exercise of reasonable diligence should have discovered the occurrence of the practice

Exception: if D caused ∏ to postpone action, then 180-day extension

49

Waiver of DTPA Claims

Generally invalid, but may be valid if:
(1) In bold and at least 10-point font;
(2) Identified as “Waiver of Consumer Rights”;
(3) Follow a prescribed format;
(4) In writing and signed by the consumer;
(5) The consumer is not in a significantly disparate bargaining position; and
(6) The consumer is represented by legal counsel in seeking or acquiring the goods/services

Very unlikely to meet all the requirements, so these waivers usually invalid

50

DTPA Notice Requirement

Consumer shall give written notice . . . at least 60 days before filing suit. Not required if statute of limitations is expiring, or if in counterclaim

Notice must specify “in reasonable detail”:
(1) Specific complaint
(2) Amount of economic damages, calculated reasonably;
(3) Damages for mental anguish, in any; and
(4) Expenses, including attorney’s fees

Consequence of failure to send letter = abatement. Request for abatement by defendant must include what was wrong with the notice. If consumer fails to send letter during abatement = dismissal

Failure to obey abatement order does not warrant dismissal of non-DTPA claims.

51

DTPA Settlement

After receiving pre-suit DTPA notice, if D pays full amount requested within 30 days, it is a defense to a DTPA cause of action.

A D may offer a settlement within 60 days from receiving notice of suit. Must include offer to pay damages, and reasonable and necessary attorney fees

Offer is rejected if both parts are not accepted within 30 days

If D files rejected settlement offer with the Court, and Court later finds that settlement was substantially the same as damages found by trier of fact, Consumer may take the lesser amount of jury award or settlement offer. If this is the case, Court must determine what was reasonable attorney’s fees ONLY up to time of settlement offer. If amount offered in settlement is substantially the same as or more than what Court finds for attorney’s fee, then ∏ may recover only up to the amount offered in the settlement.

52

Economic Damages

Compensatory for pecuniary loss
Three measures
(1) Out-of-Pocket = difference between the Fair Market Value of what plaintiff paid and the FMV of what he received
(2) Benefit of the Bargain = difference between what was promised and what was received. Commonly used in warranty cases
(3) Cost of Repairs = Amount reasonably spent to repair

∏ chooses most favorable of the above

53

Mental Anguish

A high degree of mental pain and distress that is more than a mere worry, anxiety, vexation, embarrassment, or anger, which establishes a substantial disruption in daily routine

54

Knowingly

Actual awareness, at the time of the of the falsity/deception/unfairness of the act/practice giving rise to the consumer’s claim, or actual awareness of the act/condition/defect/practice/failure constituting the breach of warranty.

Actual awareness may be inferred where objective manifestations indicate that a person acted with actual awareness.

55

Intentionally

Actual awareness of the falsity/deception/or unfairness of the act/practice, or the condition/defect/failure constituting a breach of warranty giving rise to the consumer’s claim, coupled with a specific intent that the consumer act in detrimental reliance on the falsity/deception or in detrimental ignorance of the unfairness.

Intention may be inferred from objective manifestations that indicated the person acted intentionally or from facts showing that a defendant acted with flagrant disregard of prudent and fair business practices to the extent that the defendant should be treated as having acted intentionally.

56

Remedies for DTPA

A consumer who prevails gets:
(1) Economic Damages

(2) An order enjoining such acts or failure to act

(3) Order necessary to restore to any party any money or property that may have been acquired in violation of DTPA; and

(4) Any other relief the court deems proper, including appointment of a receiver or the revocation of a license or certificate authorizing a person to engage in business in this state if the judgment has not been satisfied w/in three months of the date of the final judgment

If violation of tie-in statute, claimant may recover actual damages
Usually = economic + mental anguish. If knowing or intentional, get 3x actual damages

57

Attorney's Fees and Court Costs

If court finds the action groundless in fact or law or brought in bad faith, or brought to harass, the court shall award to the D reasonable and necessary attorney’s fees and court costs. groundless or bad faith = not warranted by good faith argument for the extension modification or reversal of existing law

Each consumer who prevails may obtain court costs and reasonable and necessary attorney’s fees.

58

"Reasonable and necessary attorney’s fees” factors

(1) Time and labor required, novelty and difficulty of the issues
(2) Likelihood that working on case will preclude other employment
(3) Fee customarily charged for similar services
(4) Amount involved and results obtained
(5) Time limitations imposed by client or circumstances
(6) Nature and length of professional relationship w/ client
(7) Experience, reputation, and ability of lawyer
(8) Whether fee is fixed or contingent

59

Texas Debt Collection Act

Allows for actual damages. Applies both to original debt collectors and third-party debt collector

Has a 2 year SOL

60

TDCA Remedies

(1) injunctive relief,
(2) actual damages,
(3) attorney’s fees reasonably related to amount of work performed and costs, permitted, but not required unless sought as a DTPA tie-in
(4) Not less than $100 per violation of (bond requirement) (3rd party debt collector files correction) (Threats or Coercion – representing that consumer is willfully refusing to pay when debt is in dispute)
(5) Also a DTPA tie-in per § 392.404

61

Formalities of TILA Disclosures

TILA requires that certain information be disclosed in writing in a form the consumer may keep prior to consummation of the transaction

All creditor has to do for meaningful disclosures is give the borrower an opportunity to review the TILA disclosures, without having to explain them. Can be given just before borrower signs the K and becomes obligated.

62

Scope of MMWA

Applies to Written Warrantied, Implied Warranties, and Service Ks, but not to Oral Warranties

63

Timing and Disclosure of Warranties under MMWA

Pre-Sale Availability: exact text of warranty must be avail to consumers before they buy. Terms of warranties must be fully and conspicuously disclosed in simple and readily understood form/manner

64

2308: Limits on disclaimers of implied warranties

Sellers may disclaim any implied warranty that arises under state law, including warranties of merchantability and fitness for a particular purpose, except:

When Seller makes written warranty on the product, or when in 90 days it enters in to service contract, it may not then disclaim any implied warranty only limit their durations

65

§2304: Full Warranty Designation if:

(1) as a minimum, in the case of defect, malfunction, or failure to conform with such written warranty, fixes consumer product within reasonable time and without charge;
(2) warranty may not impose any limitation on the duration of any implied warranty on the product
(3) such warrantor may not exclude or omit consequential damages for breach of any written or implied warranty on such product, unless cut exclusion or limitation conspicuously appears on the face of the warranty, and
(4) if product contains a defect or malfunction after reasonable number of attempts by the warrantor to remedy defect or malfunction in product, such warrantor must permit consumer to elect either a refund, or replacement without charge.

If it does not fulfill “full” warranty terms, must be designated a “limited” warranty

66

TDCA--Consumer Definition:

Consumer – an individual who has a consumer debt

67

TDCA--Consumer Debt Definition:

Consumer Debt - an (alleged) obligation arising from a transaction for personal, family, or household use

68

TDCA--Debt Collector Definition:

Debt Collector- any person who engages in debt collection

69

TDCA--Third Party Debtor Collector Definition:

Third Party Debtor Collector – a debt collector, but does not include: any attorney collector a debt as an attorney unless the attorney has employees who are regularly engaged in debt collection solicitation, or regularly makes contact with debtors for purpose of collection

70

Failure to Provide Notice of Action

Plea in abatement may be filed 30 days after defendant submits answer.