The Truth in Lending Act is a federal law which sets minimum standards for the information which a creditor must provide in an installment credit contract. The amount being financed, the amount of the required minimum monthly payment, the total number of monthly payments, and the annual percentage rate (APR) must all be provided to the consumer prior to entering into a credit contract. In addition, the Truth in Lending Act regulates the advertising of credit. The Federal Trade Commission (FTC) works to ensure that the nation’s markets are efficient and free of practices that might harm consumers. To ensure the smooth operation of the free market system, the FTC enforces federal consumer protection laws that prevent fraud, deception, and unfair business practices. The Federal Trade Commission Act allows the FTC to act in the interest of all consumers to prevent deceptive and unfair acts or practices. In interpreting the Act, the Commission has determined that, with respect to advertising, a representation, omission or practice is deceptive if it is likely to mislead consumers and affect consumers’ behavior or decisions about the product or service. In addition, an act or practice is unfair if the injury it causes, or is likely to cause, is substantial, not outweighed by other benefits, and not reasonably avoidable.
The FTC’s Bureau of Consumer Protection protects consumers against unfair, deceptive, or fraudulent practices. The Bureau enforces a variety of consumer protection laws enacted by Congress, as well as trade regulation rules issued by the Commission. Its actions include individual company and industry-wide investigations, administrative and federal court litigation, rule-making proceedings, and consumer and business education. In addition, the Bureau contributes to the Commission’s on-going efforts to inform Congress and other government entities of the impact that proposed actions could have on consumers. The Bureau of Consumer Protection is divided into six divisions and programs, each with its own areas of expertise.
Within the Bureau of Consumer Protection are the Division of Advertising Practices and the Division of Enforcement. These entities are the nation’s enforcers of federal truth-in-advertising laws. The FTC Act prohibits unfair or deceptive advertising in any medium. That is, advertising must tell the truth and not mislead consumers. A claim can be misleading if relevant information is left out or if the claim implies something that is not true. In addition, claims must be substantiated especially when they concern health, safety, or performance. The type of evidence may depend on the product, the claims, and what experts believe necessary. Sellers are responsible for claims they make about their products and services. Third parties such as advertising agencies or website designers and catalog marketers also may be liable for making or disseminating deceptive representations if they participate in the preparation or distribution of the advertising, or know about the deceptive claims.