1. Chapter 23 Consumer Protection

2. Introduction • All statutes, agency rules and common laws that protect the interests of consumers are classified as consumer law. • Today, federal and state laws govern consumer law. • This chapter will focus on federal law.

3. §1: Deceptive Advertising • Advertising is deceptive if a consumer would be misled by the advertising claims. • Puffing: Vague generalities and obvious exaggerations are permissible and not considered deceptive. • Bait and Switch: The advertising of a product at an attractively low price to lure customers in to buy more expensive items.

4. FTC Actions Against Deceptive Advertising • The FTC, charged with enforcing federal laws against deceptive advertising, can, in appropriate circumstances: • Issue cease and desist orders. • With respect to a particular product or advertisement • With regard to multiple product orders. • Impose counteradvertising.

5. Telemarketing and E-Advertising • The Telephone Consumer Protection Act (1991) prohibits automated solicitation using automatic telephone dialing system or a prerecorded voice. • Telemarketing and Consumer Fraud and Abuse Prevention Act (1994). • FTC’s Telemarketing Sales Rule (Do Not Call Registry).

6. §2: Labeling and Packaging Laws • Labeling must be accurate, and must use words that are easily understood by the ordinary consumer. • Product labeling and packaging are regulated by: • Wool Products Labeling Act of 1939. • Fur Products Labeling Act of 1951. • Flammable Fabrics Act of 1953. • Fair Packaging and Labeling Act of 1966. • Smokeless Tobacco Health Education Act of 1986. • Nutrition Labeling and Education Act of of 1990.

7. §3: Sales • Forms of Sales: • Door-to-Door Sales. • Mail Order Sales. • Telephone and Mail-Order Sales. • Unsolicited Receipt of Merchandise.

8. Door-to-Door Sales • Most states requires that, for door-to-door sales, consumers have a post-sale “cooling-off” period during which they can cancel their purchase without obligation. • Consumers are given the most favorable benefits of the FTC rule and their own state statutes.

9. Telephone and Mail-Order Sales • Telephone and mail order sellers can be subject to federal mail and wire fraud statutes. • FTC requires mail and telephone merchants to ship orders within the time promised in their catalogues and advertisements, to notify consumers when orders cannot be shipped on time, and to issue timely refunds when orders cannot be shipped. • The Postal Reorganization Act of 1970 provides that unsolicited merchandise sent by U.S. mail may be retained, used, discarded, or disposed of in any manner deemed appropriate, without the recipient’s incurring any obligation to the sender.

10. Online Sales • Federal trade commission is enforcing actions against internet marketing scams. • Some states (e.g.,California) have enacted state law to enforce fraudulent online marketing and sales practices.

11. §4: Credit Protection • Consumer Credit is protected by: • Truth in Lending Act: Protects credit card holders. • Equal Credit Opportunity Act. • Fair Credit Reporting Act.

12. Fair Credit Reporting Act • Issue credit reports to users for only specified purposes. • Whenever consumer is denied credit, consumer must be notified. • Consumer access to information: • If denied, actual damages, plus fees. • Reporting agency must investigate disputed info. • Case 23.1:Johnson v. MBNA America Bank, N.A. (2004).

13. Fair and Accurate Credit Transactions Act • To combat Identity Theft Congress enacted FACT (2003). • Established a national fraud alert system. • Requires major credit card companies to provide consumers with a free credit report every 12 months. • Gives victims tools to rebuild credit.

14. Fair Debt Collection Practices Act • Curbs abuses by collection agencies. • Creditors cannot: • Contact debtors at work. • Contact debtors at odd hours. • Harass or intimidate debtor. • Contact the debtor after debtor informs the creditor the debtor is refusing to pay the debt.

15. Garnishment of Wages • Legal procedure by which a creditor may collect on a debt by directly attaching, or seizing, a portion of the debtor’s assets (such as wages that are in the possession of a third party. • Debtor is entitled to notice and an opportunity to be heard in a process of garnishment. • Wages cannot be garnished beyond 25% of the debtor’s after-tax earnings up to a maximum amount designed to leave the debtor a specified minimum income.

16. §5: Consumer Health and Safety • Federal Food, Drug, and Cosmetic Act. • This statute protects consumers against adulterated and misbranded foods and drugs. • Consumer Product Safety Act. • This act created the Consumer Product Safety Commission which has broad regulatory authority over the safety of consumer products. • Case 23.2: U.S. v. Mirama Enterprises, Inc. (2002).

17. §6: State Consumer Protection Laws • UCC provides some protection. • Magnuson-Moss Warranty Act. • Uniform Consumer Credit Code (not adopted in many states). • State “deceptive trade practice” acts. • Case 23.3: ForSaleByOwner.com v. Zinneman (2004).