Consumer Protection

1. Consumer Protection St. Cloud Times 11/18/10 Should we ban alcoholic drinks that also contain caffeine?

2. Lead and phthalate free products Consumer Health and Safety • The Federal Food, Drug and Cosmetic Act • FDA • Safe and effective • medical devices • Consumer Product Safety Act • Flammable Fabrics Act • Consumer Product Safety Act • Can ban products • Can force recalls • State Consumer Protection Laws Mattel voluntarily recalled this toy in because the Chinese company that made it used lead paint to save money An estimated 6,100 people have been treated in hospital emergency rooms for injuries involving lawn darts from 1978 through present. At least 80 percent of the victims were younger than 15 years old, and more than 50 percent were ten years old or younger. More than half of the victims had injuries to the skull, eye, ear or face.

3. Chapter Objectives 1. Summarize the major consumer protection laws. 2. Explain how the government protects consumers who are involved in credit transactions. 3. List and describe the major statutes that protect consumer health and safety. • Reebok to pay $25 million for EasyTone and RunTone Shoes Sept 2011 • 28% more strength and tone in buttock muscles • 11% more strength and tone in hamstring muscles • 11% more strength and tone in calf muscles • Than regular walking shoes.

4. Link to FTC News Page False Advertising Aspercreme Company sells a cream that is applied to the skin to help with aches and pains. In a commercial a spokesperson holds up a bottle of aspirin and says that Aspercreme contains the healing power of aspirin.… • Deceptive Advertising. Generally, an advertising claim will be deemed deceptive if it would mislead a reasonable consumer. • Puffery • Appear to be based in Fact -- but is not • Bait-and-Switch • Refuses to show item • Fails to have a reasonable stock of item • FTC. Federal Trade Commission (FTC) Actions Against Deceptive Advertising • Cease-and-Desist Order • Couteradvertising • Multiple Product Orders • Case 20.1 – FTC v. QT • Ionized Bracelet • Miraculous cure for chronic pain • “immediate, significant or complete pain relief”… • Benefits wear off in a year or two and a “memory cycle specific to each individual wearer.”

5. Recently expanded to restaurants? Good idea? Potential Problems?

6. Labeling and Packaging Laws • Manufacturers must comply with labeling or packaging requirements for their specific products. • In general, all labels must be accurate and not misleading. “Fresh” “Organic” “Low Fat” Single Ingredient organic 95%-100% organic >70% Organic <70% Organic Start here tues

7. Sept 2010 Recent Examples • Sept. 2010 • Contains 4% maple • Says “All Natural” • Contains: Caramel color, xanthan gum • Spokesperson “The FDA does not define “Natural” • 2010 • New Seal for “natural” products • Whole Foods and Clorox support

8. Telemarketing and Electronic Advertising • The Telephone Consumer Protection Act of 1991 prohibits: • telephone solicitation using an automatic telephone dialing system or a prerecorded voice, as well as the transmission of • advertising materials via fax without first obtaining the recipient’s permission to do so. • Do Not Call List – Started Sept 15, 2002 – names expire after five years Fax at 3:00 am – DO NOT SPAM

9. Sales • door-to-door sales. The FTC requires all door-to-door sellers to give consumers three days (a “cooling-off” period) to cancel any sale. • mail-order sales • unsolicited receipt of merchandise • End-of-Chapter Q 20-3, p. 685. • A salesperson for Renowned Books called on the Gonchars at their home • Gonchars agreed to purchase a 21 volume set of encyclopedias for $299 • Two days later the Gonchars contacted the book company and cancelled. • Renowned said it had a deal and would not cancel. • End-of-Chapter Q 20-1, p. 685. • Andrew received an advertising circular for a new line of regional cookbooks and threw it away • Later, Andrew received an introductory cookbook : Lower Mongolian Regional Cookbook – on a trial basis. • Andrew did not return the cookbook and was charged $20.95.

10. Fair Credit Reporting Act • Free Verification • Fix Mistakes • Right to Include Rebuttal Free Annual Credit Report

11. “Reg Z” box – Required for Loans Subject to TILA The Truth-in-Lending Act • Disclosure Law. A disclosure law that requires sellers and lenders to disclose credit terms or loan terms in certain transactions, including: • retail and installment sales and loans • car loans • home improvement loans • certain real estate loans • Purtle v. Eldridge Auto Sales, Inc • Purtle purchased a Blazer from Eldridge and misrepresented her employment status. • In the credit contract, Eldridge did not fulfill the TILA and its regulations. • When Purtle defaulted and Eldridge repossessed the car, Purtle sued alleging violations of TILA. Court awarded Purtle damages and Eldridge appealed. • Do you think that the greatest number of consumers are protected by strict enforcement of consumer laws?

12. The Truth-in-Lending Act The TILA provides for the following: • Equal credit opportunity —Creditors are prohibited from discriminating on the basis of race, religion, marital status, gender, and so on. • Credit-card protection—Credit-card users may withhold payment for a faulty product sold, or for an error in billing, until the dispute is resolved; liability of cardholders for unauthorized charges is limited to $50, providing notice requirements are met; consumers are not liable for unauthorized charges made on unsolicited credit cards.

13. Fair Debt Collection Practices Act • Contacting the debtor at the debtor’s place of business • Contacting the debtor at an inconvenient time • Contacting third parties • Using harassment or intimidation • Communicating with the debtor at any time after receiving notice that the debtor is refusing to pay the debt • Validation Notice (30 days to dispute) Only applies to specialized debt collection agencies