CONSUMER LAW- Notes



Unit 4- CONSUMER LAW- Notes

|Questions/Main Ideas |Notes |

|Consumer |A person who buys goods and services for personal or household purposes from a seller. |

|Contract |A legal agreement between two parties |

|Caveat Emptor |“Let the consumer beware”. It means that a consumer should check products before buying or be |

| |prepared to face the consequences. That has since changed. |

| |Customers have rights and responsibilities. |

|Influences on Consumers |Smart consumers shop depending on need, not want. |

| |Advertisements/commercials target teenagers for their products. |

| |Federal, state, and local laws protect consumers. |

|Federal Law |It prohibits unfair or misleading trade practices- false advertising. |

| |Sets standards for quality, safety and reliability. |

| |Establishes agencies that enforce consumer laws and helps consumers. |

| |Agencies issue rules to improve the operation of the market place. |

| |Protects consumers against discrimination on the basis of disability (ADA – Americans with |

| |Disabilities Act). |

|State Law |State laws allow consumers to bring complaints into state courts and state agencies. |

| |Often similar to the Federal Trade Commission Act. |

|Remedy |To make up for harm that has been done. |

|Cease and Desist Orders |The agency can require a business to stop a forbidden practice. |

|Consent Decrees |Voluntary agreements to end a practice that is claimed to be illegal. |

|Restitution |An order to refund or repay any money illegally obtained. |

|Local laws |Cities have “Truth in menu” laws. |

|Consumer Rights |Shopping on impulse is unwise. |

| |Research the product before purchase. |

| |Compare prices and products before shopping. |

| |Shop at a store of reputation. |

| |BBB – Better Business Bureau can help. |

| |Check the store’s return policy. |

| |Read the warranty care fully. |

| |Read contract, if required to sign. |

| |Do not believe everything the seller says. |

|What to do after buying a product|Inspect the product for nay defects. |

| |Use products as recommended by the manufacturer. |

| |Misuse of products can also cancel legal rights. |

| |Trying to fix the product can cancel the warranty. |

| |Keep records of all contracts made with the store/company. |

|Tips on writing a consumer letter|Include your name, address, phone number and account number. |

|of complaint |Be brief and to the point. |

| |Include important facts. |

| |Explain the problem. |

| |Include copies of documents. |

| |Send letters to local/sate consumer protection agencies. |

| |Keep a copy of all correspondence made. |

| |Mail it with proof of receipt. |

|Consumer Protection Agencies and |1, Consumer Groups – Consumer Federation of America, Consumer’s Union |

|organizations |2. Business & Trade associations – BBB |

| |3. Media – “Consumer Affairs”, or action hot lines. Publicity is a powerful weapon |

| |4. Professional Associations – Business and professional people belong to associations that act |

| |on behalf of the entire profession. E.g. Problem with attorney- contract the American Bar |

| |Association |

| |5. State and Local Governments |

| |Have consumer protection groups |

| |State Boards can revoke licenses for violation of established standards. |

| |Mediation centers help consumers solve problems before going to court. |

|Taking your case to court |Criminal Court |

| |If the seller’s action is criminal, he can be prosecuted for criminal fraud. E.g. If a |

| |salesperson knowingly mistakes or misrepresents an important fact, with the intent to defraud |

| |cause harm. |

| |Civil Court |

| |Sue for damages |

| |Rescission and restitution (cancel the contract and order a refund) |

| |Specific performance (Ask the court to order a seller to carry out the specific terms of the |

| |agreement). |

| |Small Claims Court |

| |Can sue for small sums of money. |

| |Maximum award money differs from state to state. |

| |Very inexpensive |

| |Attorneys are not required. |

|Door to Door telephone sales |Use high-pressure tactics to sell their products |

| |The Federal Trade Commissions requires door-to-door salesperson to tell customers about the right|

| |to cancel. |

| |Do not give credit card numbers on the phone. |

|Advertising and the Consumer |The First Amendment protects advertising (free speech) |

| |The government can regulate and even prohibit certain advertisements E.g. Tobacco- no ads on |

| |radio or TV. |

| |Ads appeal to emotion. |

| |Federal and state govt. has laws that prohibit false advertising. |

| |Puffing- exaggerating-legal |

| |Ads that mislead are illegal. |

|Bait and Switch |Insincere offers to sell a product on terms that sound too good to be true. |

|Mail-order sales |If no shipping date is mentioned the seller should ship within 30 days of the order can be |

| |cancelled. |

|Repairs and Estimates |Get a written estimate |

| |The repair shop can place a lien on your repaired item if you do not pay for repairs. |

|Elements of a Contract |Offer made by one and an acceptance by another. |

| |It is a mutual agreement |

| |It is an exchange of consideration- something of value given for something in return. |

| |A person must be legally competent to sign a contract. |

| |Every contract should be read before signing. |

| |In most places minors need an adult to cosign. |

|Written and Oral Contracts |Contracts may be written or oral. |

| |Law favors written contacts. |

|Illegal contracts |Those contracts cannot be enforced in a court of law. |

|Warranties |It is a promise or guarantee made by a seller concerning the quality or performance of a product.|

| |Warranties give consumers important rights. |

| |Warranties are of two types-express and implied. |

|Express Warranty |Statement that is written or oral or by demonstration concerning a product. |

|Implied Warranty | Unwritten promise created by law, that a product will do what it’s supposed to do. |

|Disclaimer |It is an attempt to limit the seller’s responsibilities should anything go wrong with the |

| |product. |

|Credit |Buying goods or services now in exchange for a promise to pay in the future. |

|Creditors |Provide credit |

|Debtors |Those that borrow money or buy on credit. |

|Finance charge |Additional money owed to a creditor based on interest and other fees. |

|General types of credit |Unsecured credit- Credit extended in exchange for promise to repay in future. E.g. credit card |

| |store card charges. |

| |Secured credit- Credit for which the consumer must put up some property of values called |

| |collateral. A borrower who does not make the required payments is said to default. |

|Credit cards and charge accounts |It is used for purchases and cash advances from banks. |

| |Some banks issue credit cards for free; some charge an annual fee. |

| |Consumers are given a credit limit based on their credit history. |

| |Credit card companies send out monthly statements giving details on transactions made on the |

| |card. |

| |Always find out about APR before getting a credit card. |

| |Sometimes goods and services are difficult to obtain without a credit card. – Car rental. |

| |Always report a lost or stolen card immediately. |

|EFT (electronic funds transfer) |These are not credit cards. |

|and Debit cards |It allows one to withdraw from a personal checking account using an ATM. |

| |If you do not report a lost or stolen card within 2 days, you are liable to pay a fine of up to |

| |$500. |

|Billing Errors |Always save receipts and check stubs to compare with statements billed. |

| |Call if there are questions. |

|When to use Credit |Many American families are seldom out of credit. |

| |Consumers who spend more than 20% of their take-home salary to pay off debts (excluding |

| |mortgages) are using too much credit. |

|Interest rates |If lenders charge interest above the legal limit it is called usury. |

| |Very high interest rates charged are liable for criminal and civil penalties. |

|Costly credit arrangements |Loan Sharking- High interest rates |

| |Balloon payments- small monthly payments, big last payment. |

| |Acceleration clause- Allows creditors to accelerate the loan, making all payments due |

| |immediately, if debtor the debtor fails to make payment. |

| |Bill consolidation- Combining all debts into one. It may require payments over a longer period of|

| |time. Interest rates can be higher. A fee charged for loans. |

|Truth in lending |Lender must furnish details about APR, finance charges etc. in writing. |

| |A disclosure form containing all the credit information must be provided. |

|What lenders want to know |Is the consumer reliable? |

| |Does the consumer have a steady income? |

| |Is the income enough? |

| |Does the consumer have a record of paying off loans? |

|What to do if denied credit |Investigate credit record. |

| |Pay off outstanding loans to clear credit. |

|Credit can be denied if |One has a poor credit history. |

| |If a person is at financial risk. |

| | |

| |Financial and personal information can be passed on to other agencies. The fair Credit Reporting |

| |Act provides that creditors must give the name and address of the credit bureau that provided |

| |information leading to credit denial. |

|Reasons for Default |Consumer is deep in debt. |

| |Unexpected unemployment, illness. |

| |Unable or unwilling to pay. |

|What to do in case of default |Work within a budget. |

| |Ask for term of debt to be extended. |

| |Get free or low cost financial counseling. |

| |Seek help from family, friends. |

|Bankruptcy |Procedure where a person places assets under the control of a federal court in order to be |

| |relieved of debt. |

| |Chapter 13: A wage earner can make an arrangement supervised by a federal court to pay off debts.|

| |Chapter 7: Federal court takes control of most of the debtor’s assets, sells them and pays off as|

| |much debt as possible. |

| |Long term consequences for the debtor – not all debts will be repaid – taxes, alimony, child |

| |support and student loans should be repaid. |

|Credit Collection Practices |It is reasonable for creditors to take action to recover money or property owed to them. |

| |Unreasonable harassment by phone or letters is prohibited. |

|Types of Collection Practices |Repossession : |

| |Consumers sometimes post collaterals when taking out loans. The creditor can repossess those |

| |collaterals if consumers default on their loans. |

| |Once repossessed, the creditor can sell it to compensate for money owed. |

| |Debtors are charged for any costs incurred in repossession or sale. |

|Court Action: |As last resort creditors can sue debtors, often in small claims court. |

| |Consumers can have legitimate defenses. |

| |Summons to court must not be ignored. |

| |If the defendant does not show up- a default judgment for plaintiff can be ruled on against the |

| |defendant. |

|Garnishment and Attachment: |It is a court order that forces the debtor’s employer to withhold part of the debtor’s wages and |

| |pay it directly the creditor. |

| |The Federal Wage Garnishment Act limits the amount to 25% of the debtor’s take-home pay. |

|Cars and the Consumer: |The following should be considered: safety, price, quality, and warranty and fuel economy. |

| |Federal law requires dealers to provide safety pamphlets |

| |Test-drive the car. |

| |No one should pay the sticker price for a new or used car. |

| |New cars have warranties covering most parts, except batteries and tires, against defects for |

| |12,000 miles or 12 months. |

| |Some dealerships offer multi-year bumper-to-bumper warranties. |

| |If a used car is sold as is, no warranty is provided. |

| |Warranties become ineffective if one fails to perform proper maintenance or misuse. |

|Financing a Car: |Most buyers purchase on credit |

| |Select a repayment period |

| |The longer the payment plan, the lower the monthly payment, but higher the interest. |

| |Financing is available from dealerships, banks and credit unions or other finance companies. |

|Read terms carefully: |Will there be a refund of finance charges if loan is paid in full ahead of time? |

| |Will there be fair warning in case of repossession? |

| |Is there penalty for late payments? |

| |Will there be acceleration clause in case payment is skipped? |

| |Above the price of the car, the following should be considered: fuel, repairs, license, |

| |registration fees and insurance. |

|Auto Insurance depends on the |The type of car |

|following: |Where you live |

| |How much you plan on driving the car |

| |Your driving record |

| |Your age |

| |The company that sells you insurance |

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