Guides Against Debt Collection Deception
16 CFR Part 237 · Guides · in the Code of Federal Regulations 1968-1995 (27 annual editions)
Scanned CFR pages, OCR text may contain errors; the linked Library of Congress PDF is the authority. Not legal advice; not affiliated with the FTC. These rules and guides are historical: most were rescinded or replaced, so do not assume any is in force.
Latest edition: Library of Congress, 1995 CFR · Earliest edition: 1968 CFR
Text (1995 edition, OCR)
Federal Trade Commission §2863 Examples of deceptive usage of the word “mill.” Tlustrative situations in which use of “mill” in designating trade status has been found to be deceptive are the following: (a) A corporation which purchased unfinished silk and rayon cloth from weavers or manufacturers, caused such cloth to be dyed, printed, or processed into finished dry goods by others and sold such goods to retailers, members of the cutting up trade and others; ’ (b) A tailor who made made-to-meas- ure suits but did not produce the cloth from which the suits were made; (c) A selling agent who represented a number of suit fabric manufacturers; (d) An independent retailer who claimed to be a ‘‘mill’s outlet.’’ §236.4 Exception to general rule. (a) Under the exceptional cir- cumstances set forth below, the Com- mission may permit a nonmanufacturing concern to continue to use the word ‘mill’ in its trade name provided that it is accompanied by a qualifying phrase which clearly states that the concern is not a mill and does not own or operate a facility which manufactures textiles. This ex- ception only applies if: (1) The name of the concern has be- come a valuable business asset and its loss would result in a substantial hard- ship; and (2) The qualifying phrase will elimi- nate all possibility of deception. (b) Factors to be taken into consider- ation in determining whether a trade name has become a valuable business asset the loss of which would become a hardship are as follows: (1) Extent and period of time during which the name has been used; (2) Funds and efforts expended in es- tablishing and promoting the name; (3) The extent of the goodwill enjoyed by the company; (4) The adverse effect on the company that could reasonably be expected if use of the word ‘mill’? had to be dis- continued. 29 aeuEH 8 § 237.0 PART 237—GUIDES AGAINST DEBT COLLECTION DECEPTION Si 8 .0 Definitions of terms as used in these guides in this part. Deception (general). Disclosure of purpose. Government affiliation. Organizational titles. -5 Trade status. 237.6 Services. AUTHORITY: Secs. 5, 6, 38 Stat. 719, as amended, 721; 15 U.S.C. 45, 46. SOURCE: 32 FR 15539, Nov. 8, 1967, unless otherwise noted. $237.0 Definitions of terms as used in these guides in this part. (a) Industry Member shall) mean any person, firm, partnership, corporation, organization, association and any other legal entity engaged in the prac- tice of collecting or attempting to col- lect any and all kinds of money debts for itself or others, or any person, firm, partnership, corporation, organization, association, or any other legal entity which places in the hands of others through sale or otherwise, or distrib- utes for itself or others, any kind of material used or to be used in connec- tion with collecting or attempting to collect such debts or seeking informa- tion concerning debtors, commonly called skip-tracing. (b) Debt shall mean money which is due or alleged to be due from one to an- other. (c) Debtor shall mean one who owes or is alleged to owe a money debt. (d) Creditor shall mean one to whom a money debt is due or is alleged to be due. (e) Credit Bureau—any person, firm, partnership, corporation, organization, association, or any other legal entity engaged in gathering, recording, and disseminating favorable as well as un- favorable information relative to the credit worthiness, financial respon- sibility, paying habits and character of individuals, firms, corporations, and any other legal entity being considered for credit extension, so that prospec- tive creditor may be able to make a sound decision in the extension of cred- it. § 237.1 (f) Collection Agency—any person, firm, partnership, corporation, organi- zation, association, and any other legal entity which collects money debts for others. §237.1 Deception (general). An industry member shall not use any deceptive representation or decep- tive means to collect or attempt to col- lect debts or to obtain information concerning debtors. Nore: The Commission has found that in the collection of debts some industry mem- bers either disguise the purpose for which in- formation is desired or hold out an induce- ment to debtors to furnish information which is not in their interest to supply and which they normally would not voluntarily furnish. In connection with the collection or attempted collection of debts or the seeking of information concerning debtors, the Com- mission has prohibited, among others, the fol- lowing misrepresentations: 1. That an industry member was seeking information in connection with a survey. 2. That an industry member is in the busi- ness of a casting service for the motion pic- ture or television industry. - 3. That an industry member has a prepaid package for the debtor. 4. That a sum of money or valuable gift will be sent to the addressee if the required information is furnished. 5. That accounts have been turned over to innocent purchasers for value. 6. That debts have been turned over to an attorney or an independent organization en- gaged in the business of collecting past-due accounts. 7. That documents are legal process forms. ' [Guide 1] (32 FR 15539, Nov. 8, 1967, as amended at 3 FR 5661, Apr. 12, 1968) , §287.2 Disclosure of purpose. (a) An industry member shall not use or cause to be used in his behalf in con- nection with the collection of or the attempt to collect a debt or in connec- tion with obtaining or attempting to obtain information concerning a debt- or, any forms, letters, questionnaires, or other material printed or written which do not clearly and conspicuously disclose that such are used for the pur- pose of collecting or attempting to col- lect a debt or to obtain or attempt to . obtain information concerning a debt- or. (This affirmative disclosure also ap- 30 16 CFR Ch. 1 (1-1-95 Edition) plies to all forms of communication, oral or otherwise.) (b) An industry member shall not, through sale or otherwise, place in the hands of others for use in connection with the collection of or attempt to collect a debt or in connection with ob- taining or attempting to obtain infor- mation concerning a debtor, any forms, letters, questionnaires, or other mate- rial printed or written which do not clearly and conspicuously reveal there- on that such are used for the purpose of collecting or attempting to collect a debt or to obtain or attempt to obtain information concerning a _ debtor. (Guide 2] (33 FR 5661, Apr. 12, 1968) $237.3 Government affiliation. An industry member shall not use’ any trade name, address, insignia, pic- ture, emblem, or any other means which creates a false impression that such industry member is connected with or is an agency of government. [Guide 3] §237.4 Organizational titles. An industry member which is not in fact a “Credit Bureau’’ as defined in this part shall not use the term ‘‘Credit Bureau” in its corporate or trade name; nor shall it use any other term of similar import or meaning in its cor- porate or trade name, or in any other manner, as to create the false impres- sion that such industry member is a credit bureau. (Guide 4] (33 FR 5661, Apr. 12, 1968) §237.5 Trade status. In collecting or attempting. to collect debts due him, an industry member shall not, through the use of any des- ignation or by any other means, create the impression that he is a collection agency, unless he is such as defined in this part. [Guide 5] §237.6 Services. In the solicitation of accounts. for collection or for ascertainment of cred- it status, an industry member shall not directly, or by implication, misrepre- sent the services he renders. NOTE: Section 237.6 is general in nature since the varied misrepresentations used in Federal Trade Commission connection with the solicitation of accounts for collection are numerous. Listed below are a few specific examples of representations which have been prohibited by the Commis- sion because they were false or deceptive: 1. That the industry member’s organiza- tion is separated into functional divisions, such as credit reporting, analytical, tracing, and collecting. 2. That the industry member employs local representatives, regional investigators, and lawyers on his personnel staff in various States and throughout the world. 3. That collection fees are less than what the industry member actually charges. 4. That no charges will be made for ac- counts unless they are collected. 5. That the industry member makes per- sonal calis on debtors to collect accounts. 6. That the industry member will furnish credit reports to parties who assign accounts to him for collection. (Guide 6] PART 238—GUIDES AGAINST BAIT ADVERTISING Sec. 238.0 Bait advertising defined. 238.1 Bait advertisement. 238.2 Initial offer. 238.3 Discouragement of purchase of adver- tised merchandise. 238.4 Switch after sale. AUTHORITY: Secs. 5, 6, 38 Stat. 719, as amended, 721; 15 U.S.C. 45, 46. : SOURCE: 32 FR 15540, Nov. 8, 1967, unless otherwise noted. §238.0 Bait advertising defined.) Bait advertising is an alluring but in- sincere offer to sell a product or serv- ice which the advertiser in truth does not intend or want to sell. Its purpose is to switch consumers from buying the advertised merchandise, in order to sell something else, usually at a higher price or on a basis more advantageous to the advertiser. The primary aim of a bait advertisement is to obtain leads as to persons interested in buying mer- chandise of the type so advertised. §238.1 Bait advertisement. No advertisement containing an offer to sell a product should be published 1For the purpose of this part “advertising” includes any form of public notice however disseminated or utilized. 31 § 238.3 when the offer is not a bona fide effort to sell the advertised product. [Guide 1] $238.2 Initial offer. (a) No statement or illustration should be used in any advertisement which creates a false impression of the grade, quality, make, value, currency of model, size, color, usability, or ori- gin of the product offered, or which may otherwise misrepresent the prod- uct in such a manner that later, on dis- closure of the true facts, the purchaser may be switched from the advertised product to another. (b) Even though the true facts are subsequently made known to the buyer, the law is violated if the first contact or interview is secured by de- ception. [Guide 2] § 238.3 Discouragement of purchase of advertised merchandise. No act or practice should be engaged in by an advertiser to discourage the purchase of the advertised merchandise as part of a bait scheme to sell o#her merchandise. Among acts or practices which will be considered in determin- ing if an advertisement is a bona fide offer are: (a) The refusal to show, demonstrate, or sell the product offered in accord- ance with the terms of the offer, (b) The disparagement by acts or words of the advertised product or the disparagement of the guarantee, credit terms, availability of service, repairs or parts, or in any other respect, in connection with it, (c) The failure to have available at all outlets listed in the advertisement a sufficient quantity of the advertised product to meet reasonably anticipated demands, unless the advertisement clearly and adequately discloses that supply is limited and/or the merchan- dise is available only at designated outlets, (d) The refusal] to take orders for the advertised merchandise to be delivered within a reasonable period of time, (e) The showing or demonstrating of a product which is defective, unusable or impractical for the purpose rep- resented or implied in the advertise- ment, (f) Use of a sales plan or method of compensation for salesmen or penaliz-