1.3.1Project: Researching Consumer and Creditor Protection

Your Assignment, Part I

You work in the legal department for Green Credit, a financial institution offering lines of credit to individuals and small businesses that are backed up by ecologically friendly investments. Today, you are approached by one of the managers. She says the company wants to begin offering credit cards as well. She wants you to confirm there are no issues with going forward on this project.

As she is leaving, the manager also mentions that she's been getting harassing calls from Colossus Bank. The company had taken out a business loan to address data storage infrastructure needs, but they've been having trouble making payments because the APR was higher than originally believed. The manager wants to know if there's anything you can do about the threatening calls she's getting.

Review the scenario. Then, answer the following questions about creditors and debtors.

1. How does Green Credit act as a creditor and as a debtor in this scenario? Who would be Green Credit's creditor(s) and debtor(s)?

2. When Green Credit offers a mortgage to customers, is this a secured or an unsecured loan? Why?

3. Why do unsecured loans tend to have higher interest rates than secured loans?

4. Why would Green Credit want to enter into a creditor and a debtor relationship? Why would its customers want to enter this relationship?

5. The term "credit" comes from the Latin word for belief. What kind of belief is necessary from Green Credit when entering into a credit relationship, and why?

6. What protections do Green Credit, as the creditor, and its customers, as debtors, have in a credit relationship?

a) Creditor protections

b) Debtor protections

7. If Green Credit is unable to pay back its loan to Colossus Bank, what options does Green Credit have? Why might Green Credit not want to use these options?

Your Assignment, Part II

Now that you've read the scenario and reviewed the relationship between creditors and debtors, it's time to look into Green Credit's legal options. Research the following consumer protection laws, and explain how each of them could help Green Credit in its position as a creditor and/or debtor. Be sure to give specific examples, and provide sources for your research.

1. Federal Trade Commission Act of 1914

a) What does this law address?

b) How is it enforced?

c) How could this law affect Green Credit?

d) Source:

2. Truth-in-advertising laws

a) What do these laws address?

b) How are they enforced?

c) How could these laws affect Green Credit?

d) Source:

3. Consumer Credit Protection Act of 1968

a) What does this law address?

b) How is it enforced?

c) How could this law affect Green Credit?

d) Source:

4. Fair Credit Reporting Act of 1970

a) What does this law address?

b) How is it enforced?

c) How could this law affect Green Credit?

d) Source:

5. Fair Debt Collection Practices of 1978

a) What does this law address?

b) How is it enforced?

c) How could this law affect Green Credit?

d) Source:

Your Assignment, Part III

Now it's time for you to make some recommendations to your manager based on your research. What should Green Credit do in the following situations? What laws apply to each one, and what actions would you recommend that Green Credit take? Write a report that answers the following questions.

1. Consumer Protection: What does Green Credit need to consider when offering and advertising its new line of credit cards? What actions would you recommend?

2. Creditor Protection: What legal protections apply to Green Credit in its position as creditor? What, if anything, will change if the company begins offering credit cards? What actions would you recommend?

3. Debtor Protection: What legal protections does Green Credit have in its conflict with Colossus Bank? What actions would you recommend?