1. Ch. 7 Consumer Protection

2. “Let the seller beware” Write this statement down and summarize what it means.

3. Consumer Protection Laws apply to transactions between consumers and businesses. FTC (Federal Trade Commission)  governmental agency that promotes free and fair trade competition. Bureau of Consumer Protection  safeguards consumers against unfair and deceptive practices

4. Federal Consumer Protection Law 2 laws that protect consumers in the marketplace: 1.Consumer Product Safety Act 2.Consumer Leasing Act

5. Consumer Product Safety Act protects you from unreasonable risk of injury while using consumer products sold in interstate commerce. a.Manufacturers and sellers must test the quality and reliability of all products before shipping. b.Ex: sticker you find on clothing

6. Consumer Leasing Act requires lease agreements to include certain terms of the lease such as:  required # of payments and their dollar amounts  any penalties for not paying on time  is there a lump-sum payment due at the end of the lease.

7. State and Local Laws Federal government has no control over intrastate commerce. State enact their own set of product liability laws States also have their own Department of Consumer Affairs.

8. Unfair and Deceptive Practices An act that misleads consumers. 2 types: 1.Fraudulent Misrepresentation – any statement that deceives the buyer. Ex: unlawful for a used car dealer to not inform a consumer that the car was damaged in a flood. 2.Bait and Switch – advertise bargains that do not really exist to get customers into the store in hopes that they will buy something more expensive. Ex: Advertise a Flat screen TV for $300, when the consumer gets there tell them you are out of that TV but you can sell them this $1000 Plasma TV.

9. FTC Trade Regulation Rules The following rules were created for interstate commerce to correct wrongdoings in the marketplace.  Negative Option Rule  The Cooling-Off Rule  Telemarketing Sales Rule  Shopping by Mail, Phone, Fax, or Internet

10. Negative Option Rule applies when you subscribe to a magazine, book club, etc.. that plans on sending you things regularly. You have to reply that you do NOT want the item otherwise it will be sent to you automatically.  The Negative Option Rule says that sellers must legally tell you:  how many selections you must buy, if any  how to notify the seller when you do not want the selection  when you can get credit for the return of a selection.  how often you will receive announcement and forms  how and when you can cancel your membership

11. The Cooling Off Rule gives you 3 days to cancel a transaction made away from a seller’s regular place of business (fair, hotel, restaurant, home) Applies to purchases of $25 or more Seller must inform you of:  your right to cancel at the time the sales takes place  seller must give you a cancellation form  and a copy of your contract or receipt. If you cancel the seller must cancel and return any papers you signed refund your money tell you whether any product left with you will be picked up and return any trade-in within 10 days.

12. Telemarketing Sales Rule protects you from abusive people who try to sell you products by phone.  It is illegal for telemarketers to call you : If you have not asked them to call you If they call outside the hours of 8am and 9pm If they don’t notify you in the beginning of the call that they are trying to make a sales call and identify the company they represent. If they don’t tell you the total cost of the products or services offered and any restrictions that apply. Also if they make any false statements about their goods/services.  Do Not Call Registry – helps reduce the number of people that try to sell you stuff over the phone. Do Not Call Registry

13. Shopping by Mail, Phone, Fax or Internet also protected by the FTC  sellers must ship goods within the time they promised in their catalogs or advertisements.  If no time is states, sellers must ship within 30 days after receiving an order.  You have the right to cancel orders and get your money back if the time limits are not met.  Sellers must notify you of any delay in shipment and give you a postcard or other free means of responding to the delay. When buyers are notified of a delay in the shipment of goods, they may either cancel the order and get their money back or agree to a new shipping date.

14. Warranties a guarantee from a seller (private party or merchant) that a product will perform as promised. Important in sales contracts. 2 Types: 1. Express Warranties 2. Implied Warranties

15. Express Warranties an oral or written statement or promise about the quality of a product. Statement of Fact or Promise Description or Sample of the Goods Advertising Express Warranties Magnuson-Moss Warranty Act

16. Statement of Fact or Promise The private party or merchant who sells the goods tells you, the consumer, a fact or a promise about the goods.

17. Description or Sample of the Goods Any description or sample of the goods also create an express warranty. Ex: advertisement/box the product comes in The warranty is that the product will be the same as the description or sample.

18. Advertising Express Warranties Advertisements that state that a product is warranted must tell you how to get a copy of the warranty before you buy the product. If the warranty is for a lifetime, they must fully explain the terms of their promises.

19. Magnuson-Moss Warranty A written warranty on goods in interstate commerce costing more that $10 must disclose whether it is full or limited  Full Warranty – assures you that a defective product will be repaired or replaced without charge within a reasonable time  Limited Warranty – written warranty that does not meet the requirement of the full warranty – some will cover parts but not labor, others cover a product as long as it is owned by the original buyer.

20. Implied Warranties a guarantee of quality imposed by law, It happens automatically! 2 types of Implied Warranties: Warranty of Merchantability – goods are fit for the ordinary purpose for which the goods are sold.  Given whenever items are sold, unless stated otherwise. Warranty of Fitness for a Particular Purpose - goods will be fit for a specific use  Ex: trucks that are meant to haul heavy equipment

21. Warranty of Title All titles are valid! It guarantees that the products have no liens, or claims by other people If you buy stolen goods, the real owner has the right to get their property back, you will have to recover your loss from the seller

22. Exclusions to Warranties to exclude the warranty of merchantability the word merchantability must be mentioned specifically and prominently. The warranty of title CAN NOT be excluded (you must have a valid title) Implied warranties can be excluded or modified with the words, as is or with all faults.

23. Responsibilities of Consumers use a product safely and as intended read any information that comes with a product, such as a warranty notify the seller within a reasonable time if you discover a defect in the product

24. What can you do if you feel cheated by a Business? Consumer Product Safety Commission established safety standards for consumer products. It has the power to recall products and impose fines on violators Where to go?  Contact the business involved  Better Business Bureau - private agency that hear consumer complaints at the local and state levels) – mission is to promote higher ethical standards of companies