Copyright © 2004 McGraw-Hill Ryerson Limited 1 PART 5 – SPECIAL CONTRACTUAL RELATIONSHIPS  Chapter 23 – Consumer Protection Legislation Prepared by Douglas H. Peterson, University of Alberta

Copyright © 2004 McGraw-Hill Ryerson Limited 2 CONSUMER PROTECTION LEGISLATION Historical Development Consumer Safety Consumer Information Consumer Product Quality and Performance Protection Consumer Protection related to Business Practices Credit Granting and Credit Reporting Consumer Protection

Copyright © 2004 McGraw-Hill Ryerson Limited 3 INTRODUCTION Government regulates business to protect consumers Federal and provincial governments Historical Development

Copyright © 2004 McGraw-Hill Ryerson Limited 4 HISTORICAL DEVELOPMENT Laissez faire – caveat emptor 20th century complex goods – limited warranties and exclusion clauses 1960s-1970s – Statutory responses begin Modern consumer protection legislation Response to changing technology and marketplace Goods more complex Change to large scale manufacturing No longer face to face with producer of product Statutory duty placed on manufacturers

Copyright © 2004 McGraw-Hill Ryerson Limited 5 HISTORICAL DEVELOPMENT Other developments Credit reporting Credit selling Door to door Types of consumer protection laws Product safety Product quality and performance Credit granting Credit reporting

Copyright © 2004 McGraw-Hill Ryerson Limited 6 HISTORICAL DEVELOPMENT Five approaches to consumer protection Disclosure of information to consumer Expanded consumer rights Minimum standards Safety, quality, performance Control of sellers Registration or licensing requirements Prohibition Unethical business practices

Copyright © 2004 McGraw-Hill Ryerson Limited 7 CONSUMER SAFETY Tort law Sue for injury when duty of care owed But only after injury occurs Governments purpose Prevention more than protection Incentive for manufacturer or seller to take care Requirement of warnings Control of products

Copyright © 2004 McGraw-Hill Ryerson Limited 8 CONSUMER SAFETY Legislation for control of hazardous activities and products Food and Drug Act Hazardous Products Act Overlap of the acts occurs Designed to enhance public’s safety Other Acts Motor Vehicle Safety Act Safety standards for autos

Copyright © 2004 McGraw-Hill Ryerson Limited 9 CONSUMER INFORMATION Related to consumer safety and consumer protection Prohibits unfair or deceptive practices Disclosure about the product or service Prohibition of false or misleading statements Consumer Packaging and Labeling Act Protects from false or misleading packaging or labeling

Copyright © 2004 McGraw-Hill Ryerson Limited 10 CONSUMER PRODUCT QUALITY Product performance protection Prohitibtion of exempting seller from implied conditions of Sales of Goods Act Leglislation provides enhanced protection for the consumer “Lemon Laws” Consumer Produts Warranties Act (Sasketchewan) Expands class of persons protected Imposes heavy burdens for misrepresentation Statutory warranties to sales of consumer goods

Copyright © 2004 McGraw-Hill Ryerson Limited 11 BUSINESS PRACTICES Itinerant Sellers Door-to-door sellers Sale is not initiated by the buyer High pressure, impulse buying Salesperson must be licensed “Cooling-off period” Contract open to repudiation by buyer within fixed period of time In writing If exceeds a specific sum, must be in writing

Copyright © 2004 McGraw-Hill Ryerson Limited 12 BUSINESS PRACTICES Unfair Business Practices Protect consumer and maintian fair competition Both general and specific legislation Lists activites deemed to be unfair business practices Unconscionable transactions Take advantage of physical infirmity, illiteracy, ignorance of consumer Price grossly exceeds value of similar goods Consumer has no reasonable probability of making payment of the obligation in full Administered through government agencies

Copyright © 2004 McGraw-Hill Ryerson Limited 13 BUSINESS PRACTICES Restrictive Trade Practices (Competition Act) Prohibits false and misleading advertising For price and performance Prohibits deceptive practices Bait-and-switch, referral selling Resale price maintenance Monopolies Licensing or Registration Subject business activites to licensing and special rules Securities, real estate, business brokers, mortgage brokers, motor vehicle dealers etc.

Copyright © 2004 McGraw-Hill Ryerson Limited 14 BUSINESS PRACTICES Collection Agencies Controlled through legislation Must be licensed and/or registration Cannot harass or threaten the debtor Use collection methods resembling a summons or official court form Harassing friends or family Communication with debtor’s employer

Copyright © 2004 McGraw-Hill Ryerson Limited 15 CREDIT GRANTING Credit depends upon credit rating Must disclose true cost of borrowing Must be in writing discloses total dollar cost Must include charges, bonuses, interest amounts Applies to consumer debt Real estate mortgage exempted

Copyright © 2004 McGraw-Hill Ryerson Limited 16 CREDIT REPORTING Reporting agencies Provide credit reports and ratings to lenders Potential for error increases with amount of information Laws control the type and use of the information Licensing requirements Limit of access to information Information must be obtained properly and be relevant Sometimes requires debtor’s permission

Copyright © 2004 McGraw-Hill Ryerson Limited 17 SUMMARY Protection exists at: Common law Tort Consumer protection legislation Consumer Protection legislation Protect consumer from deceptive and unfair business practices Accomplished through penalties system and broadening of persons entitled to relief Categories Safety Information