CHAPTER 3 CONSUMER PROTECTION Rights, Responsibilities, Resolutions Economic Education for Consumers 4/21/2017 CHAPTER 3 CONSUMER PROTECTION Rights, Responsibilities, Resolutions WHAT’S AHEAD 3.1 Consumer Rights and Responsibilities 3.2 Government and Consumer Protection 3.3 Deception and Fraud 3.4 Resolve Consumer Problems CHAPTER 3

LESSON 3.1 Consumer Rights and Responsibilities GOAL Describe each of your consumer rights and responsibilities. © 2010 South-Western, Cengage Learning

KEY TERMS competition monopoly redress © 2010 South-Western, Cengage Learning

KEY TERMS competition – a contest among sellers to win customers. Competition helps keep prices reasonable. monopoly – a situation in which there is only one company that sells a specific product or service. redress – a right to seek and receive a remedy, such as a refund or other compensation.

A Consumer Bill of Rights Right to . . . Safety Be Informed Choose Be Heard Redress Consumer education A Healthy environment © 2010 South-Western, Cengage Learning

Rights Carry Responsibilities Responsibility to . . . Use products safely Use information Choose carefully Express satisfaction or dissatisfaction Seek redress Be an educated consumer Contribute to a healthy environment © 2010 South-Western, Cengage Learning

Checkpoint 3.1 As a consumer, what rights are you entitled to when dealing with businesses that sell goods and services? What responsibilities do you have in return? © 2010 South-Western, Cengage Learning

Checkpoint 3.1 answer As a consumer, what rights are you entitled to when dealing with businesses that sell goods and services? What responsibilities do you have in return? Businesses should respect consumers’ rights to safety, information, choice, being heard, redress, education, and a healthy environment Consumers have the responsibility to use products correctly and to inform businesses of any problems © 2010 South-Western, Cengage Learning

LESSON 3.2 Government and Consumer Protection GOALS Describe the evolution of the consumer movement. Identify government agencies and laws that help protect consumers. Describe different types of products warranties and how they protect consumers. © 2010 South-Western, Cengage Learning

KEY TERMS consumer movement Federal Trade Commission (FTC) cease-and-desist order Consumer Product Safety Commission (CPSC) Environmental Protection Agency (EPA) warranty full warranty limited warranty implied warranty © 2010 South-Western, Cengage Learning

KEY TERMS consumer movement – seeks to protect and inform consumers by requiring such practices as _________ advertising, product ___________ and improved _________ standards. Federal Trade Commission (FTC) – the most important federal ___________ _____________ agency. cease-and-desist order – Issued by the ______, this order requires a company to stop using a ___________ advertisement. Consumer Product Safety Commission (CPSC) – Agency created to protect consumers from _____________ products.

KEY TERMS warranty - a company’s promise that a product will meet specific ___________ over a given time period or the company will repair/replace or give a ________ . full warranty – a written _____________ the promises the company will repair/replace a defective product within a specified time period at no charge. limited warranty – a written warranty that does not meet the standards of a full warranty because of specified _____________. implied warranty – an unwritten guarantee that the product is of ____________ ____________ to fulfill the purpose for which it was designed.

The Rise of the Consumer Movement A growing concern A growing awareness The consumer movement © 2010 South-Western, Cengage Learning

Government Protection Federal Trade Commission Consumer Product Safety Commission Environmental Protection Agency State and local protection Consumer movement today © 2010 South-Western, Cengage Learning

Warranties The Magnuson-Moss Warranty Act Implied warranties Full warranty Limited warranty Implied warranties © 2010 South-Western, Cengage Learning

Checkpoint 3.2 Why do many people feel that consumers need protection more now than in the past? What federal agencies are charged with protecting consumers from false advertising, dangerous products, and pollution? What differences are there between full and limited warranties? How do warranties benefit businesses that offer them? © 2010 South-Western, Cengage Learning

Checkpoint 3.2 answers Why do many people feel that consumers need protection more now than in the past? Today’s more complicated products make them more difficult to evaluate, leaving consumers vulnerable to poor-quality or even dangerous goods and services © 2010 South-Western, Cengage Learning

Checkpoint 3.2 answers What federal agencies are charged with protecting consumers from false advertising, dangerous products, and pollution? FTC protects consumers from unfair or deceptive business practices CPSC protects consumers from dangerous products EPA is responsible for protecting the environment © 2010 South-Western, Cengage Learning

Checkpoint 3.2 answers What differences are there between full and limited warranties? How do warranties benefit businesses that offer them? Full warranty: promises repair or replacement of defective product over a specific period of time at no cost to the customer Limited warranty: promises repair or replacement of defective product subject to stated limitations Businesses that offer warranties provide an incentive to customers to buy products with the stated protection © 2010 South-Western, Cengage Learning

LESSON 3.3 Deception and Fraud GOALS Explain the meaning of deception and describe how consumers may be harmed by this practice. Identify common types of fraud and explain how consumers may protect themselves against it. © 2010 South-Western, Cengage Learning

KEY TERMS trading up loss leader fraud bait and switch pyramid scheme © 2010 South-Western, Cengage Learning

KEY TERMS trading up – The practice of pressuring consumers to buy a ______ ____________ product than they had intended. loss leader – An item priced ______ ______ to attract you to the store. Fraud - ___________ deception designed to secure unfair or unlawful gain. bait and switch – The practice of “baiting” consumers with an advertised but nonexistent bargain and then “switching” them to a more expensive product. pyramid scheme – a type of financial _______ in which people pay to join an organization in exchange for the right to sell memberships to others.

Deception Trading up Sale price – A sale is only a sale if the price is below the regular price. Sale prices can be deceptive. Suggested retail price – They are sometimes higher than any retailer expects to actually get for the product. Loss leader © 2010 South-Western, Cengage Learning

Fraud Fraud: deliberate deception, designed to secure unfair or unlawful gain. A statement is fraudulent if it meets these two conditions: The person who made the statement must know it is false. The purpose of the statement must be to cause others to give up property that has value, such as money. © 2010 South-Western, Cengage Learning

Examples of Fraud Bait and switch Pyramid schemes Internet and telephone fraud – advantageous to con-artists because you can’t see them. Are they legitimate? © 2010 South-Western, Cengage Learning

Internet and Telephone Fraud Watch out for . . . Deal offered seems too good to be true Credit card/Social Security number requested to verify identity Must buy item to get something else for free No written contract or sales agreement is provided You “must act now” or offer expires No method given to contact the organization Information about organization not available from independent sources © 2010 South-Western, Cengage Learning

The Many Faces of Fraud Examples: Healthcare products that promise to cure incurable diseases Home-improvement contractors who want payment before doing any work Vacation clubs that require money in advance with the promise of inexpensive first-class vacations later Repair work offered for less than the going rate Weight-loss programs that promise unrealistic results © 2010 South-Western, Cengage Learning

Checkpoint 3.3 What is the definition of a deceptive selling practice? How can you protect yourself against fraudulent selling practices? © 2010 South-Western, Cengage Learning

Checkpoint 3.3 answers What is the definition of a deceptive selling practice? Deceptive selling practices are intended to mislead consumers Trading up, false sales, and inflated suggested retail prices can be deceptive © 2010 South-Western, Cengage Learning

Checkpoint 3.3 answers How can you protect yourself against fraudulent selling practices? Learn to be skeptical Check out unfamiliar companies and ask questions Carefully evaluate responses to questions Understand what you are buying and make decisions with your head rather than your emotions Use the decision making process © 2010 South-Western, Cengage Learning

LESSON 3.4 Resolve Consumer Problems GOALS Describe how to successfully complain about a product you purchased. Identify government programs that can help resolve consumer problems. © 2010 South-Western, Cengage Learning

KEY TERMS Better Business Bureau arbitration cooling-off period small claims court © 2010 South-Western, Cengage Learning

Prepare to Make a Complaint Write down the facts The date and location of the transaction A description of the product The product’s price and your method of payment A specific explanation of what is wrong A statement of how you want the problem resolved © 2010 South-Western, Cengage Learning

The Complaint Process Start with the seller Seek help from consumer organizations Better Business Bureau (BBB) Arbitration Media help © 2010 South-Western, Cengage Learning

Government Efforts to Help Consumers Truth in information Enforcement is difficult Use common sense Cooling-off periods Reporting consumer problems Using small claims court © 2010 South-Western, Cengage Learning

Checkpoint 3.4 At which step of the complaint process is an organization such as the Better Business Bureau best able to help a consumer? What are several ways in which the government works to protect consumers? © 2010 South-Western, Cengage Learning

Checkpoint 3.4 answers At which step of the complaint process is an organization such as the Better Business Bureau best able to help a consumer? At the fourth step of the complaint process, organizations such as the BBB are best able to help consumers when they are interacting with managers. © 2010 South-Western, Cengage Learning

Checkpoint 3.4 answers What are several ways in which the government works to protect consumers? The government protects consumers by . . . passing and enforcing laws setting standards licensing businesses requiring labeling providing a court system that consumers may use to protect themselves © 2010 South-Western, Cengage Learning