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Chapter 19


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Chapter 19

  1. 1. Chapter Nineteen Consumer Protection
  2. 2. Federal and State Consumer Protection Laws <ul><li>Federal consumer protection law stems from the Federal Trade Commission Act which states that “unfair or deceptive acts or practices in or affecting commerce are hereby declared unlawful.” </li></ul><ul><li>The act applies to businesses involved in interstate commerce, business activity that touches more than one state. </li></ul><ul><li>Intrastate commerce is commerce entirely within the boundaries of one state and has to be covered by state law. </li></ul>19-
  3. 3. <ul><li>Unfair or Deceptive Acts or Practices </li></ul><ul><ul><li>Fraudulent Misrepresentations </li></ul></ul><ul><ul><li>Unordered Merchandise </li></ul></ul><ul><ul><li>Bait-and-Switch Schemes </li></ul></ul><ul><ul><li>Odometer Tampering </li></ul></ul>19- 19-2
  4. 4. <ul><ul><li>Fraudulent Misrepresentations </li></ul></ul><ul><ul><ul><li>statement that has the effect of deceiving the buyer. </li></ul></ul></ul><ul><ul><li>Unordered Merchandise </li></ul></ul><ul><ul><ul><li>It is a violation of postal law and the FTC Act to send merchandise through the mail to people who did not order it. </li></ul></ul></ul><ul><ul><ul><li>may treat it as a gift. </li></ul></ul></ul><ul><ul><li>Bait-and-Switch Schemes </li></ul></ul><ul><ul><ul><li>an alluring but insincere offer to sell a product or service that the advertiser in truth does not intend to want to sell. </li></ul></ul></ul><ul><ul><ul><li>FTC law states “No advertisement containing an offer to sell a product shall be made when the offer is not a bona fide effort to sell the advertised product.” </li></ul></ul></ul>19-
  5. 5. <ul><li>Odometer Tampering </li></ul><ul><ul><li>The federal Odometer Law prohibits people from disconnecting, resetting, or altering the odometer of a motor vehicle to register any mileage other than the true mileage driven. </li></ul></ul><ul><ul><li>If the seller has reason to believe that the mileage reading on the odometer is incorrect, the disclosure statement must indicate that the actual mileage traveled is unknown. </li></ul></ul>19-
  6. 6. The FTC Trade Regulation Rules <ul><li>Used Car Rule </li></ul><ul><ul><li>Requires used-car dealers who sell more than five used vehicles in a twelve-month period to place a window sticker, called a Buyer’s Guide, in the window of each used car they offer for sale. </li></ul></ul><ul><ul><li>The guide becomes part of the sales contract and overrides any contrary provision that may be in the contract. </li></ul></ul><ul><li>Cooling-Off Rule </li></ul><ul><ul><li>Gives consumers an opportunity to change their minds after signing contracts with people who come to their houses. </li></ul></ul><ul><ul><li>Sales of consumer goods or services over $25 made away from the seller’s regular place of business, such as at a customer’s home, may be canceled within three business days after the sale occurs. </li></ul></ul>19- 19-3
  7. 7. The FTC Trade Regulation Rules <ul><li>Negative Option Rule </li></ul><ul><ul><li>applies when consumers subscribe to a magazine, CD club, or other plan that sends products on an ongoing basis. </li></ul></ul><ul><ul><li>sellers must tell subscribers how many selections they must buy, how and when they can cancel, how to notify seller if they do not want a selection, when to return form to cancel shipment, how to get credit for returns, how postage and handling is charged, and how often they will receive announcements. </li></ul></ul><ul><li>Antispam Law </li></ul><ul><ul><li>The Can Spam Act is an attempt by the federal government to reduce the use of unsolicited e-mail. </li></ul></ul><ul><ul><li>Under the law, unsolicited commercial e-mail messages must be truthful and must not use misleading subject lines or incorrect return addresses. </li></ul></ul>19-
  8. 8. The FTC Trade Regulation Rules <ul><li>Antislamming Law </li></ul><ul><ul><li>Slamming is the illegal practice of changing a consumer’s telephone service without permission. </li></ul></ul><ul><ul><li>Consumer protection rules created by the FCC provides a remedy if you’ve been slammed. </li></ul></ul><ul><li>Mail, Telephone, Internet, or Fax Rule </li></ul><ul><ul><li>Sellers must ship orders within the time promised in their advertisement. </li></ul></ul><ul><ul><li>If no time period is promised, sellers must either ship the order within 30 days after they receive it or send the consumer an option notice. </li></ul></ul>19-
  9. 9. <ul><li>Telemarketing Sales Rule </li></ul><ul><ul><li>established the Do Not Call Registry for consumers to reduce the number of unwanted sales calls they get. </li></ul></ul><ul><ul><li>Telemarketing firms must identify themselves on Caller ID technology. </li></ul></ul><ul><ul><li>The Caller ID display must include a phone number that consumers can call and ask that the company no longer call them.  </li></ul></ul><ul><li>900-Telephone-Number Rules </li></ul><ul><ul><li>The 900 telephone number is used in telemarketing because the consumer, rather than the seller, pays the phone charge. </li></ul></ul><ul><ul><li>FTC regulations require that people who dial 900-prefix numbers be warned of the cost of the calls and be given a chance to hand up before being charged. </li></ul></ul>19-
  10. 10. <ul><li>Consumer Product Safety Act </li></ul><ul><ul><li>Consumer Product Safety Commission </li></ul></ul><ul><ul><ul><li>Recall </li></ul></ul></ul><ul><ul><ul><li>Civil Fines </li></ul></ul></ul>19- 19-4
  11. 11. <ul><li>Consumer Product Safety Commission </li></ul><ul><ul><li>The CPSC was established to protect consumers from unreasonable risk or injury from hazardous products. </li></ul></ul><ul><ul><li>The act covers products or component parts, American-made or imported, that are manufactured or distributed for sale to a consumer for personal use, consumption, or enjoyment. </li></ul></ul><ul><li>Orders </li></ul><ul><ul><li>The commission can order recalls of products found inherently unsafe and dangerous. </li></ul></ul><ul><ul><li>The commission can impose civil fines for violations of its standards and cease and desist orders. </li></ul></ul>19-
  12. 12. Consumer and Leasing Act <ul><li>Federal Law </li></ul><ul><ul><li>The act requires leasing companies to inform consumers of all the terms of lease of personal property. </li></ul></ul><ul><ul><li>The law applies only to personal property leased by an individual for a period of more than four months for person, family, or household use. </li></ul></ul><ul><li>Written Statements </li></ul><ul><ul><li>The law requires consumers be given written statements informing them of the full cost of the lease. </li></ul></ul><ul><ul><li>This includes the cost of any necessary licenses, taxes, or other fees. </li></ul></ul>19- 19-5
  13. 13. <ul><li>Consumer Credit Laws </li></ul><ul><ul><li>Truth in Lending </li></ul></ul><ul><ul><li>Equal Credit Opportunity </li></ul></ul><ul><ul><li>Unauthorized Use of Credit Cards </li></ul></ul><ul><ul><li>Fair Credit Reporting </li></ul></ul><ul><ul><li>Fair Credit Billing </li></ul></ul><ul><ul><li>Fair Debt Collection Practices </li></ul></ul>19- 19-6
  14. 14. <ul><li>Truth in Lending </li></ul><ul><ul><li>Lenders must disclose the finance charge, the actual cost of the loan. </li></ul></ul><ul><ul><li>Lenders must also disclose the annual percentage rate, the true rate of interest on the loan. </li></ul></ul><ul><li>Equal Credit Opportunity </li></ul><ul><ul><li>All consumers are given an equal change to receive credit. </li></ul></ul><ul><ul><li>It is illegal for banks and businesses to discriminate against credit applicants because of their sex, race, marital status, national origin, religion, or age or because they get public assistance income. </li></ul></ul>19-
  15. 15. <ul><li>Unauthorized Use of Credit Cards </li></ul><ul><ul><li>Under the Truth-in-Lending Act, credit cardholders are not responsible for any unauthorized charges made after the card issuer has been notified of the loss, theft, or possible unauthorized use of the card. </li></ul></ul><ul><ul><li>Notice may be given by telephone, letter, or any other means. </li></ul></ul><ul><ul><li>Credit cardholders are responsible only for the first $50 of any unauthorized charges. </li></ul></ul><ul><li>Fair Credit Reporting </li></ul><ul><ul><li>The Fair Credit Reporting Act was passed by Congress to ensure consumers are treated fairly by credit bureaus and consumer-reporting agencies. </li></ul></ul><ul><ul><li>A consumer has the right to know all information (other than medical information) that is in its files about that consumer. </li></ul></ul><ul><ul><li>Established the website: </li></ul></ul>19-
  16. 16. <ul><li>Fair Credit Billing Act </li></ul><ul><ul><li>Establishes a procedure for the prompt handling of billing disputes. </li></ul></ul><ul><ul><li>Under the act, when consumers believe an error has been made in a bill, they must notify the creditor within sixty days after the bill was mailed. </li></ul></ul><ul><ul><li>Another provision of the act gives consumers protection when they buy unsatisfactory goods or services with credit cards. </li></ul></ul><ul><li>Fair Debt Collection Practices </li></ul><ul><ul><li>Specific rules must be followed by companies that are in the business of collecting debts for others. </li></ul></ul><ul><ul><li>Debt collectors who violate this law may be sued for actual damages, punitive damages, and attorneys’ fees. </li></ul></ul>19-
  17. 17. Chapter Nineteen End of Chapter