CONSUMER PROTECTION

CONSUMER PROTECTION

Consumer protection laws are federal and state statutes governing sales and credit practices involving consumer goods. Such statutes prohibit
and regulate deceptive or UNCONSCIONABLE
advertising and sales practices, product quality,
credit financing and reporting, debt collection,
leases, and other aspects of consumer transactions.
The goal of consumer protection laws is to
place consumers, who are average citizens engag-
ing in business deals such as buying goods or
borrowing money, on an even par with compa-
nies or citizens who regularly engage in business.
Historically, consumer transactions—purchases
of goods or services for personal, family, or
household use—were presumed fair because it
was assumed that buyers and sellers bargained
from equal positions. Starting in the 1960s, legis-
latures began to respond to complaints by con-
sumer advocates that consumers were inherently
disadvantaged, particularly when bargaining
with large corporations and industries. Several
types of agencies and statutes, both state and fed-
eral, now work to protect consumers.
Consumer Product Safety Commission
In 1972, Congress established the CON-
SUMER PRODUCT SAFETY COMMISSION (CPSC).
It is the job of the CPSC to protect consumers
from faulty or dangerous products by enacting
mandatory safety standards for those prod-
ucts. The CPSC has the authority to ban prod-
ucts from the marketplace or to recall products
(when a product is recalled, it is removed from
the shelves or sales lots, and consumers may be
able to return it to the manufacturer or place of
purchase for repair, replacement, or a refund).
Still, the agency has trouble protecting con-
sumers from hazardous products of which it is
unaware.
In recent years, the CPSC has fallen victim to
FEDERAL BUDGET cuts. Reductions in the
agency’s legal staff have prompted the CPSC to
rely more and more on manufacturers to volun-
tarily recall their defective or hazardous prod-
ucts.When manufacturers do not cooperate, the
CPSC must commence a legal action that may
take years to resolve.

Unfair or Deceptive Trade Practices
The FEDERAL TRADE COMMISSION (FTC),
the largest federal agency that handles consumer complaints, regulates unfair or deceptive trade practices. Even local trade practices deemed
unfair or deceptive may fall within the jurisdic-
tion of FTC laws and regulations when they have
an adverse effect on interstate commerce.
In addition, every state has enacted con-
sumer protection statutes, which are modeled
after the Federal Trade Commission Act (15
U.S.C.A. § 45(a)(1)). These acts allow state
attorneys, along with general and private con-
sumers, to commence lawsuits over false or
deceptive advertisements, or other unfair and
injurious consumer practices. Many of the state
statutes explicitly provide that courts turn to the
federal act and interpretations of the FTC for
guidance in construing state laws.
The FTC standard for unfair consumer acts
or practices has changed with time. In 1964, the
agency instituted criteria for determining unfair-
ness when it enacted its cigarette advertising and
labeling rule.A practice was deemed unfair when
it (1) offended public policy as defined by
statutes, COMMON LAW, or otherwise; (2) was
immoral, unethical, oppressive, or unscrupulous;
and (3) substantially injured consumers. The
FTC changed the standard in 1980. Now, sub-
stantial injury of consumers is the most heavily
weighed element, and it alone may constitute an
unfair practice. Such an unfair practice is illegal
pursuant to the Federal Trade Commission Act
unless the consumer injury is outweighed by
benefits to consumers or competition, or con-
sumers could not reasonably have avoided such
injury. The FTC may still consider the public pol-
icy criterion, but only in determining whether
substantial injury exists. Finally, the FTC no
longer considers whether conduct was immoral,
unethical, oppressive, or unscrupulous.
The FTC has also developed, over time, its
definition of deceptive acts or practices. Histor-
ically, an act was deceptive if it had the tendency
or capacity to deceive, and the FTC considered
the act’s effect on the ignorant or credulous con-
sumer. A formal policy statement made by the
FTC in 1988 changed this definition: currently, a
practice is deceptive if it will likely mislead a
consumer, acting reasonably under the circum-
stances, to that consumer’s detriment.
FALSE ADVERTISING is often the cause of
consumer complaints. At common law, a con-
sumer had the right to bring an action against a
false advertiser for FRAUD, upon proving that
the advertiser made false representations about
the product, that these representations were
made with the advertiser’s knowledge of or neg-
ligent failure to discover the falsehoods, and that
the consumer relied on the false advertisement
and was harmed as a result. In 1911, an advertis-
ing trade journal called Printer’s Ink proposed
model legislation criminalizing false advertise-
ments. Forty-four states enacted statutes based
on this model statute. However, because of the
difficulty in proving BEYOND A REASONABLE
DOUBT an advertiser’s dishonesty, prosecutors
seldom use these criminal laws.More frequently,
the state attorneys general or the FTC regulates
false advertising. For example, the FTC can issue
a cease and desist order, forcing a manufacturer
to stop advertising, or compelling the advertiser
to make corrections or disclosures informing
the public of the misrepresentations.

Truth in Lending Act
Consumer credit—home mortgages, student
financial aid, and credit cards, for example—is
an area fraught with complicated finance terms,
and Congress has designed laws requiring
lenders to fully disclose and explain those terms
to potential borrowers. The CONSUMER CREDIT
PROTECTION ACT of 1968 (15 U.S.C.A. § 1601 et
seq.), also known as the TRUTH IN LENDING ACT,
prohibits lenders from advertising loan terms
that are only available to preferred borrowers. In
addition, advertisements for CONSUMER CREDIT
transactions cannot disclose partial terms; either
all the terms of the transaction or none of them
must be spelled out. Finally, when the terms of
credit provide for repayment in more than four
installments, the agreement must conspicuously
state that “the cost of credit is included in the
price quoted for the goods and services.”
The Truth in Lending Act is designed to pro-
tect society as a whole, and therefore does not
provide the individual consumer with a per-
sonal CAUSE OF ACTION when a lender violates
the law. Nor are publishers of advertising, such
as radio, newspapers, and television, generally
held liable for lenders’ advertisements that vio-
late the act. Finally, the act does not consider
statements made by salespeople in the course of
selling products or services to be advertise-
ments, therefore the law does not apply to those
statements.

Fair Debt Collection Practices Act
The Consumer Protection Act was amended
in 1996 to include the Fair Debt Collection Prac-
tices Act (Public Law 104-208, 110 Stat. 3009 [1996]). Congress passed the law to address the abusive, deceptive, and unfair debt collection
practices used by many debt collectors. Personal,
family, and household debts are covered under
the act. This includes money owed for the purchase
of an automobile, for medical care, or for
charge accounts. A collector may contact a person
by mail, telephone, telegram, or fax. However,
a debt collector may not contact a debtor at
an inconvenient time, such as before 8 A.M. or
after 9 P.M., unless the debtor agrees. A debt collector
also may not contact a debtor at an inappropriate
place. For example, a collector may
not contact a debtor at his place of work if the
collector knows that the debtor’s employer disapproves
of such contacts.
Collectors may not contact debtors if the
debtors send the collectors a letter asking them
to stop. Collectors may not threaten or abuse
debtors nor make false statements. Persons may
sue collectors for violating the law and can collect
up to $1,000 and attorneys’ fees for a violation.
A group of people also may sue a debt
collector and recover money for damages up to
$500,000, or one percent of the collector’s net
worth, whichever is less.
Warranties
Warranties are promises by a manufacturer,
made to the consumer purchasing the manufacturer’s
product, that the product will serve the
purpose for which it was designed. The UNIFORM
COMMERCIAL CODE is a law, adopted in
some form in all states, that regulates sales transactions
and specifically the three most common
types of consumer warranties: express, merchantability,
and fitness.

Express warranties are promises included in the written or oral terms of a sales agreement that assure the quality, description, or performance of the product. Express warranties are usually
included in the sales contract, or are written in a separate pamphlet and packaged with the merchandise sold to the consumer. These warranties
may be less obvious than are product
advertisements. A consumer who relies on a written description of a product in a catalog or on a sample of a product may have a cause of action if the actual product differs. Express warranties
can also be verbal, such as promises
made by salespeople. However, because oral warranties are extremely difficult to prove, they are rarely litigated.
Merchantability and fitness warranties are
both implied warranties, which are promises
that arise by operation of law. A warranty of
merchantability concerns the basic understanding
that the product is fit to be purchased and
used in the ordinary way—for instance, a lamp
will provide light, a radio will pick up broadcast
stations, and a refrigerator will keep food cold.A
warranty of fitness concerns the consumer’s purpose
in purchasing a product, and allows the
consumer to rely on the seller to offer goods
only if they are suitable for that particular purpose.
For example, there may be a breach of the
IMPLIED WARRANTY of fitness if a salesperson
knowingly sells a consumer software that is not
designed for operation on the consumer’s computer.
For a breach-of-implied-warranty claim
to be successful, the consumer must establish
that an implied WARRANTY existed and was
breached, that the breach harmed the consumer,
that the consumer dealt with the party responsible
for the implied warranty, and that the consumer
notified the seller within a reasonable
time. Implied warranties may be disclaimed by
the seller if they are denied expressly and specifically
at the time of the sale.
The MAGNUSON-MOSS WARRANTY ACT (15
U.S.C.A. § 2301 et seq.) is a federal law that
requires sellers to explain, in easy-to-understand
language, the terms of warranties that apply to
written sales contracts for items costing $5 or
more. Under this act, when a product fails to
meet the standards promised by the warranty,
the seller must repair it, replace it, or refund the
purchase price.
Consumer Remedies
Laws protecting consumers vary in the
remedies they provide to consumers for violations.Many federal laws merely provide for public
agencies to enforce consumer regulations by
investigating and resolving consumer complaints.
For example, in the case of a false advertisement,
a common remedy is the FTC-ordered
removal of the offensive advertisements from
the media. In other circumstances, consumers
may be entitled to money damages, costs, and
attorneys’ fees; these remedies can be effective in
a case involving a breach of warranty. Depending
on the amount of damages alleged, consumers
may bring such actions in small-claims
courts, which tend to be speedier and less expensive
than trial courts.
ALTERNATIVE DISPUTE RESOLUTION (ADR)
is another option for consumers. Some states
pass consumer protection statutes that require
some form of ADR—usually ARBITRATION or
mediation—before a consumer can seek help
from the courts. Finally, when a large number of
consumers have been harmed in the same way as
a result of the same practice, they may join in a
CLASS ACTION, a single lawsuit in which one or
more named representatives of the consumer
group sue to redress the injuries sustained by all
members of the group.
In response to public frustration over telephone
solicitations, many states and the FTC
began to set up systems to bar unwanted telephone
sales calls. The FTC, in 2002, amended
the Telemarketing Sales Rule (TSR) to give consumers
the option of placing their phone numbers
on a national “do not call” registry. It will be
illegal for most telemarketers to call a number
listed on the registry. The registry was scheduled
to go into operation in July 2003, but telephone
marketing companies promised a lawsuit to
contest the rules, arguing that they violated the
FIRST AMENDMENT.
FURTHER READINGS
Craft. 1991. “State Consumer Protection Enforcement:
Recent Trends and Developments.” Antitrust Law Journal
59.
Federal Trade Commission. “The ‘Do Not Call’ Registry.”
Available online at (accessed June 3, 2003).
Marsh, Gene A. 1999. Consumer Protection Law in a Nutshell.
St. Paul, Minn.:West Wadsworth.
Pertschuk,Michael. 1984. Revolt Against Regulation: The Rise
and Pause of the Consumer Movement. Berkeley: Univ. of
California Press.
CROSS-REFERENCES
Consumer Fraud; Product Liability.