1. Explain whether Chapman’s contract violates the Truth-in-Lending Act-
Explain whether the
ASSIGNMENTMary Smith bought a car from Doug Chapman under an installment sales
contract. Smith carried the insurance on the car, as required by the contract. Shortly after
Smith purchased the car, it was wrecked in an accident. Smith’s insurance company paid
Chapman the installments still owed on the car as well as Smith’s equity in the car. Smith
requested a new car from Chapman under an installment plan that was the same as the one
under which she purchased the first car. Chapman refused, claiming that the contract for the
first car allowed him to retain the equity amount as security interest and that Smith
understood this as a term of the contract. The provision relating to the security interest
appeared on the back of the contract, although the Truth-in-Lending Act required it to be on
the front side. The front side had a notice referring to provisions on the back side. Explain
whether Chapman’s contract violates the Truth-in-Lending Act.2. The Federal Trade
Commission (FTC) ordered Warner-Lambert to cease and desist from advertising that its
product, Listerine antiseptic mouthwash, prevents, cures, or alleviates the common cold and
sore throats. The order further required Warner-Lambert to disclose in future
advertisements that “[c]ontrary to prior advertising, Listerine will not help prevent colds or
sore throats or lessen their severity.” Warner-Lambert contended that even if its past
advertising claims were false, the corrective advertising portion of the order exceeded the
FTC’s statutory power. The FTC claimed that corrective advertising was necessary in light of
Warner-Lambert’s one hundred years of false claims and the resulting persistence of
erroneous consumer beliefs. Explain whether the FTC is correct.3. Lenvil Miller owed
$2,501.61 to the Star Bank of Cincinnati. Star Bank referred collection of Miller’s account to
Payco-General American Credits, Inc. (Payco), a debt collection agency. Payco sent Miller a
collection form. Across the top of the form was the caption “DEMAND FOR PAYMENT” in
large, red, bold-face type. The middle of the page stated “THIS IS A DEMAND FOR
IMMEDIATE FULL PAYMENT OF YOUR DEBT,” also in large, red, boldface type. That
statement was followed in bold by “YOUR SERIOUSLY PAST DUE ACCOUNT HAS BEEN
GIVEN TO US FOR IMMEDIATE ACTION. YOU HAVE HAD AMPLE TIME TO PAY YOUR DEBT,
BUT YOU HAVE NOT. IF THERE IS A VALID REASON, PHONE US AT [ . ] TODAY. IF NOT, PAY
US— NOW.” The word NOW covered the bottom third of the form. At the very bottom in the
smallest type to appear on the form was the statement “NOTICE: SEE REVERSE SIDE FOR
IMPORTANT INFORMATION.” The notice was printed in white against a red back- ground.

2. On the reverse side were four paragraphs in gray ink. The last three paragraphs contained
the validation notice required by the Fair Debt Collection Practices Act (FDCPA) to inform
the consumer how to obtain verification of the debt. Miller sued Payco on the ground that
the validation notice did not comply with the FDCPA. Miller argued that even though the
validation notice contained all the necessary information, it violated the FDCPA because it
contradicted other parts of the collection letter, was overshadowed by the demands for
payment, and was not effectively conveyed to the consumer. Discuss whether Payco has
violated the FDCPA.4. Greg Henson sold his Chevrolet Camaro Z-28 to his brother, Jeff
Henson. To purchase the car, Jeff secured a loan with Cosco Federal Credit Union (Cosco).
Soon thereafter, the car was stolen and Jeff stopped making payments on his loan from
Cosco. At the time, Cosco was unsure whether Greg retained an interest in the car, so Cosco
sued both Jeff and Greg for possession of the car. The trial court rendered a default
judgment against Jeff and ruled that Greg no longer had any interest in the car. The court
further entered a deficiency judgment against Jeff in the amount of $4,076. The clerk
erroneously noted in the judgment docket that the money judgment had been rendered
against Greg as well as against Jeff although the official record of judgments and orders
correctly reflected that only Jeff was affected by the money judgment. Two credit agencies,
CSC Credit Services (CSC) and Trans Union Corporation (Trans Union), relied on the state
court judgment docket and indicated in Greg’s credit report that he owed the money
judgment. Greg and his wife, Mary Henson, allege that they then “contacted Trans [Union]
twice, in writing, to correct this horrible injustice.” When Trans Union did not respond, the
Hensons brought an action alleging violations of the Federal Credit Reporting Act (FCRA).
Explain whether the Hensons should prevail.5. Pantron Corporation and Hal Z. Lederman
market a product known as the Helsinki Formula. This product supposedly arrests hair loss
and stimulates hair regrowth in baldness sufferers. The formula consists of a conditioner
and a shampoo, and it sells at a list price of $49.95 for a three-month supply. The
ingredients that allegedly cause the advertised effects are polysorbate 60 and polysorbate
80. Pantron offers a full money-back guarantee for those who are not satisfied with the
product. The Federal Trade Commission (FTC) challenged both Pantron’s claims that the
formula arrested hair loss and promoted growth of new hair as unfair and deceptive trade
practices. The FTC presented a variety of evidence that tended to show that the Helsinki
Formula had no effectiveness other than its placebo effect (achieving results due solely to
belief that the product will work). The FTC introduced expert testimony of a dermatologist
and two other experts who denied there was any scientific evidence that the Helsinki
Formula would be in any way useful in treating hair loss. Finally, the FTC introduced
evidence of two studies that had determined that polysorbate-based products were
ineffective in stopping hair loss and promoting regrowth. In response, Pantron introduced
evidence that users of the Helsinki Formula were satisfied that it was effective. It offered
testimony of eighteen users who had experienced hair regrowth or a reduction in hair loss
after using the formula. It also introduced evidence of a “consumer satisfaction survey” it
had conducted. Pantron further provided evidence that more than half of its orders come
from repeat purchasers, that it had received very few written complaints, and that very few
of Pantron’s customers (less than 3 percent) had redeemed the money-back guarantee.

3. Pantron finally introduced several clinical studies of its own, none performed in the United
States or under U.S. standards for scientific studies. The evidence from these studies did
show effectiveness, but the studies were not random, blind-reviewed studies and thus did
not take into account the placebo effect. Discuss.