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Business Law and the Regulation of Business Chapter 45: Consumer Protection

Business Law and the Regulation of Business Chapter 45: Consumer Protection. By Richard A. Mann & Barry S. Roberts. Topics Covered in this Chapter. A. State and Federal Consumer Protection Agencies B. Consumer Purchases C. Consumer Credit Transactions D. Creditors' Remedies.

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Business Law and the Regulation of Business Chapter 45: Consumer Protection

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  1. Business Law and the Regulation of BusinessChapter 45: Consumer Protection By Richard A. Mann & Barry S. Roberts

  2. Topics Covered in this Chapter A. State and Federal Consumer Protection Agencies B. Consumer Purchases C. Consumer Credit Transactions D. Creditors' Remedies

  3. Federal Trade Commission • Purpose - to prevent unfair methods of competition and unfair or deceptive acts or practices.

  4. Standards • Unfairness- requires injury to be (1)­substantial, (2)­not outweighed by any countervailing benefit, and (3)­unavoidable by reasonable consumer action. • Deception- misrepresentation, omission, or practice that is likely to mislead the consumer acting reasonably in the circumstances. • Ad Substantiation- requires advertisers to have a reasonable basis for their claims.

  5. Remedies • Cease and Desist Order- command to stop doing the act in question. • Affirmative Disclosure - requires an advertiser to include certain information in its ad so that the ad is not deceptive. • Corrective Advertising- requires an advertiser to disclose that previous ads were deceptive. • Multiple Product Order- requires an advertiser to cease and desist from deceptive statements regarding all products it sells.

  6. Consumer Product Safety Act • Federal statute enacted to: • Protect public against unsafe products • Assist consumers in evaluating products • Develop uniform safety standards • Promote safety research

  7. Federal Warranty Protection • Applies to sellers of consumer goods who give written warranties. • Presale Disclosure- requires terms of warranty to be simple and readily understood and to be made available before the sale. • Labeling Requirement- requires warrantor to inform consumers of their legal rights under a warranty (full or limited). • Disclaimer Limitation- prohibits a written warranty from disclaiming any implied warranty.

  8. The Magnuson-Moss Act Consumer Product? No Implied Warranties May Be Disclaimed Yes No Written Warranty? Yes Implied Warranties May NOT Be Disclaimed

  9. State “Lemon Laws” • State laws that attempt to provide new car purchasers with rights similar to full warranties under the Magnuson-Moss Warranty Act.

  10. Consumer Right of Rescission • In certain instances a consumer is granted a brief period of time during which she may rescind (cancel) an otherwise binding obligation.

  11. Door-to-Door Credit or Cash Law Rescission Period Solicitation Required State “cooling-off” Varies Yes Varies FTC trade Within 3 days of Yes Both regulation signing contract Consumer Credit Within 3 days of No Credit only Protection Act signing contract ( CCPA ) Interstate Land Within 7 days of No Both Sales Full signing contract Disclosure Act Consumer Rescission Rights

  12. Consumer Credit Transactions • Definition - any credit transaction involving goods, services, or land for personal, household, or family purposes. • Access to the Market- discrimination in extending credit on the basis of gender, marital status, race, color, religion, national origin, or age is prohibited. • Truth-in-Lending Act- requires creditor to provide certain information about contract terms, including annual percentage rate (APR), to consumer before he incurs the obligation.

  13. Consumer Credit Transactions • Contract Terms- statutory and judicial limitations have been imposed on consumer obligations. • Consumer Credit Card Fraud Act- prohibits certain fraudulent practices and limits a card holder's liability for unauthorized use of a credit card to $50. • Fair Credit Reporting- consumer credit reports are prohibited from containing inaccurate or obsolete information.

  14. Creditors' Remedies • Wage Assignments and Garnishment - most States limit the amount that may be deducted from an individual's wages through either assignment or garnishment. • Security Interest- seller may retain a security interest in goods sold or other collateral of the buyer, although some restrictions are imposed. • Debt Collection Practices – unfair, abusive, and deceptive practices by debt collectors in collecting consumer debts are prohibited by the Fair Debt Collection Practices Act.

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