CHAPTER 3
CONSUMER PROTECTION
Consumer Bill of Rights
Proposed by JFK in 1962
Lesson Objective: Know the 7 Consumer
Rights & Responsibilities
Government Agencies set up to protect
those rights.
Consumer Bill of Rights
1. Right to Safety
 Products must not endanger consumer’s lives or
health
2. Right to be Informed
 Businesses must provide accurate information
in advertising, labeling and sales
3. Right to Choose
 Consumers should have a variety of goods and
services from which to choose
 Competition
Consumer Bill of Rights
3. Right to Choose (cont’d)
• Bill of Rights aimed at making products safe and
competition fair
• Competition results in the following two factors:
– Lower Price
– Improved Product Quality
• Unfair Competition
– Monopolies (Sherman Anti Trust Act, Microsoft)
– Price Fixing: all companies agreeing to charge the same
price thus no choice
Consumer Bill of Rights (4-7)
4. Right to be Heard
 The government must consider consumer interests
when creating laws
5. Right to Redress
 Consumers must be able to remedy problems
6. Right to Consumer Education
 Sufficient information available for consumers
7. Right to a Healthy Environment
 Businesses should avoid polluting and contribute
to the welfare of their community
Consumer Protection Agencies
• Federal Trade Commission (FTC)
– Protects consumers from unfair business
practices
• Consumer Product Safety Commission (CPSC)
– Tests and bans hazardous products
• Environmental Protection Agency (EPA
– Makes sure businesses dispose of hazardous
waste, monitors air and water quality
• Federal Communication Commission (FCC)
– Monitors the radio and television airwaves
- $550,000 fine, delay increased to 10 seconds
Consumer Protection Agencies
• Securities & Exchange Commission (SEC)
– Monitors & controls stock market
– Insider Trading Legal / Insider Information Illegal
• Securities Investors Protection Corporation (SIPC)
– first line of defense if a brokerage firm fails that owes
customers cash and securities missing from their
accounts
• Food & Drug Administration (FDA)
– recalls, alerts, and warnings of foods, drugs, medical
devices, and cosmetics
Consumer Protection Agencies
• Federal Aviation Administration (FAA)
– responsible for the safety of civil aviation
• Federal Deposit Insurance Corporation (FDIC)
– Insures investor’s deposits up to $250,000 until
December 2013 (then back to $100,000)
• BBB
– Private organization that gathers information and
reviews on businesses
The Importance of a Warranty
Warranty – company’s promise that the product will meet specific standards over a
given time period, or the company will repair or replace it, or give a refund
Magnuson-Moss Warranty Act in 1975
• Established how warranties could be advertised/written
• All warranties are divided into either a full warranty or limited warranty
Full warranty – very specific, repair or replace a defective product within a coverage
time period at no charge, how to file a claim and return the product, promise a
solution within a reasonable time period
Limited warranty – specific limitations outlined, within a coverage time period a
solution must be found, explains how to make a claim
Implied Warranty – unwritten guarantee that the product is of sufficient quality to
fulfill the purpose for which it was designed
Deception
(Legal)
• Trading Up
• Sale Prices
• Suggested Retail Price
• Loss Leader
Fraud
•
Fraud - is deliberate deception, designed to secure unfair or
unlawful gain; cheating the consumer
A statement is fraudulent if it meets the following two criteria:
1. The person who made the statement must know it is false.
2. The purpose of the statement must be to cause others to give
up property that has value such as money.
Your best protection against fraud is to avoid it – be savvy.
Examples of Fraud
• Bait and Switch – baiting consumers with an advertised, but nonexistent,
bargain and then switching then to a more expensive product
• Pyramid Schemes – type of fraud where people pay to join an organization
in exchange for the right to sell memberships to others (sells no legitimate
product)
People at the top of the pyramid get a big payoff, the other individuals
receive nothing – waste money
Chain letters and Airport are two examples of pyramid schemes
Telephone Fraud
 An offer seems just to good to pass up
Too good to be true, it probably is
 A person asks for your credit card or social security number to verify your
identity
 You must buy something to get something else of greater value for free
 A person refuses to send you written copy of a sales agreement before you
agree to buy
Tips to Identify Telephone Fraud, Continued
 The salesperson demands that you act now or the offer will
expire
 The person refuses to identify themselves or their
organization
 The person refuses to provide a telephone number and
address where you can reach their organization
How to Protect Yourself from Deception and Fraud
1.
2.
3.
4.
5.
6.
7.
Learn to recognize fraud when you see it
Educate yourself about fraud
Realize it can happen to anyone
Be skeptical of most if not all things
Ask questions
Use the Decision Making Process
Avoid Unnecessary Risks
Resolve Consumer Problems
1. Start with the store (bring receipts)
Talk with a department salesperson
Then speak with a manager (if needed)
2. If the manager cannot help, write to the
manufacturer
3. If a resolution still does not exist, write or speak with a
Consumer group or professional organization
(BBB, or local chamber or commerce)
4. Last resort – file a lawsuit
Helpful Consumer Organizations
Better Business Bureau
1. Helps resolve disputes between consumers and sellers
2. Keeps a file of complaints against local businesses
and
supplies this information to consumers who ask for it
3. Educates consumers by providing information in printed tip
sheets and booklets and on the Internet
4. Promotes honest advertising and selling practices
Other Consumer Resources
• Arbitration
• Media
• Government
• Small Claims Courts