Consumer Law
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About Consumer Protection
Consumer Protection, term applied to the efforts of government, public-interest organizations, individuals, and businesses to establish, protect, and enforce the rights of people who buy products such as food and automobiles or services such as health care and insurance. The basic rights of consumers, as set forth by U.S. President John F. Kennedy in his 1962 message to Congress on consumerism, are the following: (1) the right to safety; (2) the right to be informed; (3) the right to choose; and (4) the right to be heard. Each of these rights is of major importance in the objectives of the consumer-protection movement.
THE RIGHT TO SAFETY
Products offered for sale should not pose undue risk of physical harm to consumers or their families; yet in a recent year, for example, some 33 million people in the U.S. were reported injured-and 30,000 were killed-in product-related accidents. Products that cause injuries include impure food, defectively manufactured automobiles and tires, drugs that have harmful side effects, and unsafe appliances.
The U.S. federal government agency responsible for ensuring the safety of most products is the Consumer Product Safety Commission (CPSC). The CPSC was established in 1973 to protect the public from unreasonable risk of injury caused by consumer products; to assist consumers in comparing the safety of various items; to develop uniform safety standards; and to promote research about the causes and prevention of product-related deaths, illnesses, and injuries. It has broad authority to create and enforce safety standards for more than 10,000 consumer products and can ban hazardous items or recall them from the marketplace. The CPSC is responsible for enforcing the Flammable Fabrics Act (1953), which requires fabrics to meet standards of fire resistance, as well as the Poison Prevention Packaging Act (1970), and the Hazardous Substances Act (1960), which ban the use of certain dangerous substances and require warnings and safety information on the labels of others. The CPSC does not have authority over food, drugs, or motor vehicles.
The Food and Drug Administration (FDA) is charged with ensuring that processed foods, drugs, medical devices, and cosmetics are safe and properly labeled; that foods are wholesome; and that drugs are effective. It has the power to seize unsafe products and to criminally prosecute businesses that violate safety laws and standards. The FDA inspects food-processing plants to be sure that foods are made and packaged under sanitary conditions. The agency must approve the safety and efficacy of all new prescription drugs before they can be marketed. The FDA also sets safety standards for radiation-emitting products such as microwave ovens.
Motor-vehicle safety is regulated by the National Highway Traffic Safety Administration (NHTSA), which sets highway safety standards, investigates reported safety-related motor-vehicle defects, and enforces laws regarding the correction of such defects. NHTSA can require the recall of defective automobiles or automotive parts; in fact, since 1966 manufacturers have recalled more than 118 million vehicles.
THE RIGHT TO BE INFORMED
Consumers need sufficient information in order to choose wisely among the competing products and services available. The marketplace, however, contains a great many different and complex products, and advertising is usually not informative enough for consumer purposes. Therefore, consumers often lack the information required to compare the quality of various products and services, to determine their true cost, or to be assured of their suitability or safety.
To ensure that consumers have the information they need to buy wisely, the federal and many state governments have passed several important laws directing businesses to disclose necessary information. The federal Fair Packaging and Labeling Act (1966), for example, requires that packages be labeled truthfully with such basic facts as quantity and ingredients. The federal Truth in Lending Act (1968) requires that consumers be told in clear, accurate, and uniform terms how much it costs them to borrow money from a lender. Unit-pricing laws in some states require supermarkets to show the cost of an item per pound, quart, or count (for paper goods), so that shoppers can compare the cost of different sizes of products. Many states require the dating of perishable foods to enable buyers to choose fresh foods.
Many consumer problems are caused by incorrect or fraudulent information. The Federal Trade Commission (FTC) bears the primary responsibility for making sure that advertising and labeling are not false or misleading.
Consumers often need more than just the information sellers disclose. For instance, firms rarely volunteer information about the shortcomings of their products. To provide essential comparative information, several private, independent organizations test products and report their findings to interested consumers. The largest such organization is Consumers Union of United States, Inc., the nonprofit publisher of Consumer Reports. Each issue of Consumer Reports rates various products by brand names according to the results of laboratory and use tests, provides advice on services such as banking and insurance, and reports on recalled items. Consumers Union accepts no advertising and pledges that its reports are free from bias and any commercial ties.
In recognition of the importance of consumer information, many states now require elementary and secondary schools to provide consumer education to their students. In addition, schools, government agencies, and public-interest organizations often have consumer-education programs for adults.
THE RIGHT TO CHOOSE
The structure of the American economic system is based on the belief that, generally, competition is the best regulator of the marketplace. According to this theory, when many companies are selling a product, the effort of each to attract more customers keeps prices at the lowest level that allows businesses to cover costs and make a fair profit. When a market is not competitive, sellers can set the price as high as they wish, up to the level where consumers simply will not buy the product. To preserve competition in the marketplace, federal laws make it illegal for businesses to monopolize an industry, restrain trade, or fix prices. The FTC and the U.S. Department of Justice share the responsibility for enforcing these laws.
THE RIGHT TO BE HEARD
A consumer who has been cheated or who has bought a product or service that does not perform properly has a right to seek a refund, replacement of the product, or other remedy. Sometimes, however, a buyer finds that the manufacturer or seller will not cooperate in resolving the complaint. In recent years laws have been passed to help dissatisfied consumers. Some laws declare certain deceptive business practices illegal and give consumers the right to sue a business believed to be violating the law. A consumer who wins such a suit can sometimes collect up to three times the amount of the damages. Federal, state, and local governments have established offices or agencies to help protect consumers or to resolve disputes between consumers and businesses. The communications media-newspapers, television, and radio-often aid consumers through services such as "action lines." Some business-sponsored agencies such as the Major Appliance Consumer Action Panel can sometimes help those who have a complaint about a product, service, or business practice. The Better Business Bureau, a business association, makes information about complaints it has received against businesses available to interested parties.
For consumers who want to pursue their complaints further, small claims courts exist in most states to handle cases involving relatively small sums of money (generally between $500 and $1500). Lawyers are not usually needed, and procedures are relatively simple.
Problems with credit and billing can also affect consumers. The Fair Credit Billing Act establishes a procedure creditors must follow in responding to consumers' complaints about their credit-card bills and requires that creditors correct billing errors promptly. See also Credit; Credit Card.
The right to be heard also means that the needs of consumers should be considered when government decisions affecting them are made. Under President Gerald Ford, for example, executive agencies and departments were ordered to establish procedures to consider the views of consumers in certain policymaking areas.
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Consumer Credit: an overview
Credit allows consumers to finance transactions without having to pay the full cost of the merchandise at the time of the transaction. A common form of consumer credit is a credit card account issued by a financial institution. Merchants may also provide financing for products which they sell. Banks may directly finance purchases through loans and mortgages.
The law of consumer credit is primarily embodied in federal and state statutory laws. These laws protect consumers and provide guidelines for the credit industry.
States have passed various statutes regulating consumer credit. The Uniform Consumer Credit Code has been adopted in seven states and Guam. It purpose is to protect consumers obtaining credit to finance their transactions, ensure that adequate credit is provided, and govern the credit industry in general.
Congress passed the Consumer Protection Act in part to regulate the consumer credit industry. It requires creditors to disclose credit terms to consumers. The Consumer Protection Act also protects consumers from loan sharks, restricts the garnishing of wages, and established the National Commission on Consumer Finance to investigate the consumer finance industry. Credit card companies and credit reporting agencies are also regulated by the Act. The Act also prohibits discrimination based on sex or marital status in the extending of credit. The Act also regulates certain debt collectors.
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