MGMT 311 Ch24 -

Consumer law

The body of statutes, agency rules, and judicial decisions protecting consumers of goods and services from dangerous manufacturing techniques, mislabeling, unfair credit practices, deceptive advertising, and other such practices

Traditionally, in disputes involving consumers, it was assumed that the freedom to contract carried with it...

the obligation to live by the deal made

Numerous federal laws have been passed to define the ______of sellers and the _____ of consumers

duties, rights

State consumer protection laws often provide more sweeping and significant protections than...

federal laws

Conservative and democratic states have more laws protecting consumers (T or F)

T

Texas Deceptive Trade Practice Act

Texas Consumer Law protection

Six Areas of Consumer Law

Labeling and Packaging, advertising, sales, food and drugs, product safety, credit protection

One of the most important federal consumer protection laws

Federal Trade Commission Act

Purpose of the Federal Trade Commission

carry out the broadly stated goal of preventing unfair and deceptive trade practices, including deceptive advertising

Deceptive Advertising

Advertising that misleads consumers, either by making unjustified claims about a product's performance or by omitting a material fact concerning the product's composition or performance

Under deceptive advertising, puffery is NOT allowed (T or F)

F - it still is allowed

Categories of deceptive advertising are...

-claims that appear to be based on factual evidence; or

-claims based on half-truths

-bait-and-switch advertising

claims that appear to be based on factual evidence

Advertising that appears to be based on factual evidence but, in fact, is not reasonably supported by evidence will be deemed deceptive

claims based on half-truths

Some advertisements contain "half-truths," meaning that the presented information is true but incomplete and may therefore lead consumers to a false conclusion

Deceptive advertising can be more than just words (T or F)

T - can be pictures

Bait-and-switch advertising

Advertising a product at an attractive price and then telling the consumer that the advertised product is not available or is of poor quality and encouraging her or him to purchase a more expensive item

(violates law, need to have item and show, need to have sufficient stock, fails to promise product in reasonable time, discourages employees to sell)

The bait

low price lures consumer in

The switch

salesperson directs consumer to a different, more expensive item

Congress has passed several laws to protect consumers against...

marketing practices

marketing practices in possible violation

-Telephone solicitation

-Fraudulent telemarketing

The Telephone Consumer Protection Act (TCPA)

-Prohibits telephone solicitation using an automatic telephone dialing system or a prerecorded voice

-Makes it illegal to transmit unsolicited advertisements without the sender having an established business relationship with the recipient or first obtaining the recipient's permission

-Is enforced by the Federal Communications Commission (FCC)

-Gives consumers a right to sue for either $500 for each violation of the act or for the actual monetary losses resulting from a violation, whichever is greater

-FCC can fine up to $11000 per day

-if willfully violated act, can triple it

The Telemarketing and Consumer Fraud and Abuse Prevention Act Purpose

directed the F T C to establish rules governing telemarketing and to bring actions against fraudulent telemarketers

FTC's Telemarketing Sales Rule (TSR) requires a telemarketer to...

i) identify the seller's name, (ii) describe the product being sold, and (iii) disclose all material facts related to the sale (such as the total cost)

The FTC TSR makes it illegal for telemarketers to __________ information or facts about their goods or services

misrepresent

The FTC TSR requires a telemarketer to __________ a consumer's name from its list of potential contacts if the customer so requests

remove

Registry FTC

supposed to not call you if number is on the list

A number of statutes protect consumers by requiring the ___________ in sales transactions and providing rules governing unsolicited merchandise

disclosure of certain terms

In sales, _____ and _______ has regulatory authority in this area

FTC and other federal agencies

"Cooling-off" laws under sales FTC

Laws that allow buyers of goods sold in certain transactions to cancel their contracts within three business days

Cooling off laws protect

trade show sales, home equity loans, internet, door to door

A number of federal and state laws deal specifically with the information given on...

labels and packages

Federal and state law requirements for labeling and packages

-Labels must be accurate.

-Labels must use words that are easily understood by the ordinary consumer.

-In some instances, labels must specify the raw materials used in the product.

-In other instances, the product must carry a warning

The Fair Packaging and Labeling Act requires that food product (also applies to most commodities like detergent, cosmetics, etc) labels identify:

1. The product

2. The net quantity of the contents (and, if the number of servings is stated, the size of a serving)

3. The manufacturer

4. The packager or distributor

Food products must bear labels detailing the nutritional content, including:

-The number of calories that the food contains

-The amounts of various nutrients that the food contains

The Nutrition Labeling and Education Act

-Requires food labels to provide standard nutrition facts

-Regulates the use of such terms as "fresh" and "low fat"

The most important federal legislation regulating food and drugs

Federal Food, Drug, and Cosmetic Act (FDCA)

What does the FDCA do?

-Protects consumers against adulterated (contaminated) and misbranded foods and drugs

-Establishes food standards

-Specifies safe levels of potentially hazardous food additives

-Provides classifications of foods and food advertising

The Consumer Product Safety Act created a comprehensive regulatory scheme over...

consumer safety matters

The Consumer Product Safety Act established the...

Consumer Product Safety Commission (CPSC)

The Consumer Product Safety Act authorizes the CPSC to do the following:

1. Set safety standards for consumer products

2. Ban the manufacture and sale of any product that the Commission believes poses an "unreasonable risk" to consumers

3. Remove from the market any products it believes to be imminently hazardous

4. Require manufacturers to report on any products already sold or intended for sale if the products have proved to be hazardous

5. Administer other product-safety legislation, including the Child Protection and Toy Safety Act and the Federal Hazardous Substances Act

_____________ is one of the more important aspects of consumer protection legislation

Credit protection

Consumer Financial Protection Bureau (CFPB)

agency that oversees the credit practices of banks, mortgage lenders, and credit-card companies

Truth-in-Lending Act (TILA)

comprehensive law that protects consumers with respect to credit

Truth-in-Lending Act (TILA) contains provisions regarding...

credit card companies

The liability of a cardholder is limited to _____ per card for unauthorized charges made before the creditor is notified that the card has been lost

$50

If a consumer receives an unsolicited credit card in the mail that is later stolen, the company that issued the card...

cannot charge the consumer for any unauthorized charges

Credit-card companies must...

disclose the balance computation method that is used to determine the outstanding balance

Credit-card companies must state when...

state when finance charges begin to accrue

Under TILA, procedures are set forth for...

resolving billing disputes with the credit-card company

Amendments to the T I L A's credit-card rules added the following protections:

1. A company may not retroactively increase the interest rates on existing card balances unless the account is sixty days delinquent.

2. A company must provide forty-five days' advance notice to consumers before changing its credit-card terms.

3. Monthly bills must be sent to cardholders twenty-one days before the due date.

4. The interest rate charged on a customer's credit-card balance may not be increased except in specific situations, such as when a promotional rate ends.

A company may not retroactively increase the interest rates on existing card balances unless the account is ____ days delinquent

60

A company must provide ____ days' advance notice to consumers before changing its credit-card terms

45

Monthly bills must be sent to cardholders ___ days before the due date

21

The interest rate charged on a customer's credit-card balance may not be _______ except in specific situations, such as when a promotional rate ends

increased

The Fair Debt Collection Practices Act (FDCPA) attempts to...

curb perceived abuses by collection agencies

The Fair Debt Collection Practices Act (FDCPA) applies only to...

specialized debt-collection agencies and attorneys who regularly attempt to collect debts on behalf of someone else, usually for a percentage of the amount owed

Under the FDCPA, a collection agency may not do any of the following:

1. Contact the debtor at the debtor’s place of employment if the debtor’s employer objects

2. Contact the debtor at inconvenient or unusual times, or at any time if the debtor is being represented by an attorney

3. Contact third parties other than the debtor’s parents, spouse, or financial adviser about payment of a debt unless a court authorizes such action

4. Harass or intimidate a debtor (by using abusive language or threatening violence, for instance) or make false or misleading statements (such as posing as a police officer)

5. Communicate with the debtor at any time after receiving notice that the debtor is refusing to pay the debt, except to advise the debtor of further action to be taken by the collection agency