Law Week 6 Apply Assessment
• Use the following information to answer questions 1–3.
Examine the SEC enforcement actions against violators of the FCPA on the “SEC Enforcement Actions: FCPA Cases” web page. Look at several different examples from the site. Note that detailed information about each case is available if you click on the name of the company.
What are the typical repercussions for violators of the Act?
• jail time
• millions or even billions of dollars in penalties
• being prohibited from doing business
• forced bankruptcy
• What kinds of unlawful activity did the guilty parties participate in? Check all that apply.
• obtaining illicit government licenses
• failure to implement internal accounting controls
• improper payments
• sexual harrassment
• discrimination in employment
• The SEC investigates illegal activity stemming from ________ companies and their representatives.
• both U.S. and foreign
• Use the following information to answer questions 4–8.
David borrows $3,000 from Melanie’s loan company in order to pay for a new car. A few months after the loan takes place, David falls behind on his payments. Melanie begins attempting to collect the money owed from David. She takes the following steps:
Melanie calls David in the afternoon to discuss his payments, but he does not answer. Is this action permitted under the Fair Debt Collection Practices Act (FDCPA)?
Consumers who owe debt are responsible to pay, and creditors may use any lawful means to collect an outstanding debt. Congress realized, however, that some creditors were using “abusive, deceptive, and unfair debt collection practices” against consumers. Therefore, in 1978 Congress passed the Fair Debt Collection Practices Act (FDCPA). That law protects a creditor’s right to pursue payment, but provides new protections for the consumer.
First, FDCPA allows a consumer to demand accurate information about debt validity and payoff amounts and to defer all collection communications to an attorney. Second, the law provides limitations on third-party collectors—credit collection firms—by making some collection practices unlawful. This may include using false information, harassing the debtor, or making threats of litigation or prosecution. The FDCPA also requires the collection agency, in its first contact, to inform the debtor that it is a “debt collector” and outline the specific information about the debt. The creditor may not call the debtor’s home before 8 a.m. or after 9 p.m., may not infer that it is associated with a governmental agency, may not contact a debtor’s family, friends, or employer to discuss the debt, and may not indicate its debt collection efforts on envelopes used to send letters to the debtor.
Melanie calls David in the afternoon to discuss his payments, but he does not answer. This action is permitted.
• Melanie sends a letter marked “urgent” to David’s address, but he sends no reply. Is this action permitted under FDCPA?
Melanie sends a letter marked “urgent” to David’s address, but he sends no reply. This action is permitted because the envelope says “urgent” but does not indicate that the letter is from a creditor.
• Melanie visits David’s house at 6 p.m. on a weekday, but nobody answers the door. Is this action permitted under the FDCPA?
Melanie visits David’s house at 6 p.m. on a weekday, but nobody answers the door. Visiting a debtor’s home is highly irregular, but not unlawful. Because it is before 9 p.m., the action is permissible.
• Melanie emails David’s employer to ask how and when she may contact David. Is this action permitted under the FDCPA?
Melanie emails David’s employer to ask how and when she may contact David. This action is impermissible. A debt collector may not contact a debtor’s employer.
• Melanie leaves a message on David’s answering machine, promising to call the police if he does not pay his debt. Is this action permitted under the FDCPA?
Melanie leaves a message on David’s answering machine, promising to call the police if he does not pay his debt. This action is unlawful, as it is a threat. Moreover, any attempt to use law enforcement as leverage against a debtor is unlawful.
• Imagine that your company is offering securities for the first time and must register with the SEC. If you were to create a registration statement with the SEC, which of the following elements would you need to include? Check all that apply.
• description of the securities being sold
• proposed use of the proceeds
• name and location of the issuer
• description of commerce activities that take place across state lines
• type of business organization of the issuer
• factors that could affect the success of the business venture
• financial condition of the issuer