Chapter 17: Consumer Protection

Caveat Emptor(Latin)- let the buyer beware. “Then”.

Caveat Venditor(Latin)– let the vendor or merchant beware. “Now”.

Federal Trade Commission was created to develop and enforce consumer protection laws.

UCC “Uniform Commercial Code”

I. What is meant by Consumer Protection?

• Laws created to protect consumers from faulty merchandise and dangerous merchandise, fraud, deception, false advertising, mail order fraud, and the enforcement of warranties.

II. Unfair and Deceptive Practices:

1. Deceptive Pricing
   1. Seller raises a price with the intent to lower, claiming a sale.
   2. Seller cannot claim prices are whole sale when they are not.
   3. Deceptive two for one sale.
2. Fraudulent Referral Schemes– Special discounts, money offers if you can refer a list of potential sales to the merchant.
   1. Pyramid Scheme
      1. A scheme where people put in a deposit in hoping to get to the top to cash out
         • ILLEGAL
3. Deceptive Service Estimates:
   • All costs associated with any service repair must be expressed and authorized by the customer.
4. Door to Door: Due to the pressure of door to door sales, the FTC and the UCC states that the consumer has 3 business days to cancel the order.
   • Sales person MUST, under FTC rules, explain all of their rights, including all cancellation.
   • Under FTC Rules (known as the Cooling Off Rule): Seller must provide the following within 10 days:
     1. Return any papers to the client or customer.
     2. Refund
     3. Pick up any left product
     4. Return any trade-ins
5. Fraudulent Misrepresentation:
   1. Any false statements made by the seller that deceives the buyer:
      1. Durability/construction
      2. Reliability
      3. Safety
      4. Strength
      5. Life expectancy

III. False Advertising:

The FTC Regulates all advertising on the national level. The FTC has the power and the authority to issue a “Cease and Desist Order” to anyone who misleads the public.

1. Advertising of Guarantees:
   1. The product or service that is specifically guaranteed.
   2. Time limit for the guarantee
   3. How to make a warranty claim.
   4. How claims are settled
   5. Identification of who is making the warranty.
2. Advertising of Consumer Credit:
   • “No money down” “No payments till 2016″…
     1. When a merchant advertises consumer credit offers, the must disclose all information:
        1. Interest rate
        2. Credit score needed
        3. Any additional financial requirements
     2. Open ended credit offer: credit card
     3. Closed ended credit offer: installment loans
3. Bait and Switch Advertising:
   • An alluring but insincere invitation to customers to buy as product or service that the seller has no intentions of selling.
     1. Refusal to show product advertised.
     2. Discovering the purchase of a product.
     3. Claims that the product is out of stock.

IV. Product Liability Laws: Manufacturers are responsible for the safety of the products they put to market.

1. They are responsible even if:
   1. The manufacturer was not negligent in the care of preparation of the product. (Strict Liability)
   2. The person who bought it was not the injured party.
2. How to prove product liability:
   1. It was sold in a defective form.
   2. It was reasonably dangerous to users.
   3. The defect actually caused the injury.
   4. The user sustained injuries.
3. The mitigation of damages- “remedy”
   • Safety Recall Notifications

V. Food, Drug, and Cosmetic Act:

• Following FTC regulations