chapter 3 consumer protection rights, responsibilities ... 03.pdf · economic education for...

ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3

WHAT’S AHEAD

3.1 Consumer Rights and Responsibilities

3.2 Government and Consumer Protection

3.3 Deception and Fraud

3.4 Resolve Consumer Problems


LESSON 3.1

Consumer Rights and Responsibilities

GOAL ►Describe each of your consumer rights and

responsibilities.

© 2010 South-Western, Cengage Learning Slide 2


A Consumer Bill of Rights ►First pioneered by John F. Kennedy in 1962

►Designed to protect consumers in a newly changing

economic environment

►Protects against the businesses that are not working to

meet consumer expectations



A Consumer Bill of Rights ►Safety

►Products must not endanger a consumer’s health

►Be informed

►Businesses must provide accurate information in

advertising, labeling, and sales practices



A Consumer Bill of Rights ►Choose

►There should be a variety of choices available

►Competition is the contest among sellers to win

customers

►Monopoly is a situation where there is only one company

that sells a specific product or service



A Consumer Bill of Rights Right to . . .

►Be heard

►Consumer interests must be considered when laws

are created

►Redress

►To seek and receive a remedy, such as a refund or

other compensation

►Consumers should be able to obtain fair remedies to

problems



A Consumer Bill of Rights Right to . . .

►Consumer education

►Enough information is needed for consumers to

make informed decisions when buying products

►A healthy environment

►Businesses should avoid polluting the environment

and should contribute to the welfare of the

community in which they operate



Rights Carry Responsibilities ►Use products safely

►Consumers must follow manufacturer’s

recommendations for product use

►Use information

►Consumers are responsible for using the

information to evaluate product choices

►Choose carefully

►Take advantage of product variety by considering

many options and making rational choices



Rights Carry Responsibilities ►Express satisfaction or dissatisfaction

►Tell elected officials opinions on consumer

issues and inform them of improper business

practices

►Seek redress

►Inform businesses of unfair practices and

pursue remedies



Rights Carry Responsibilities ►Be an educated consumer

►Take advantage of opportunities to gather

information and learn how to make rational

buying decisions

►Contribute to a healthy environment

►Support businesses that operate responsibly

and report environmental abuses to authorities



As a consumer, what rights are you entitled to

when dealing with businesses that sell goods

and services? What responsibilities do you have

in return?



As a consumer, what rights are you entitled to

when dealing with businesses that sell goods

and services? What responsibilities do you have

in return?

• Businesses should respect consumers’ rights to safety,

information, choice, being heard, redress, education, and

a healthy environment

• Consumers have the responsibility to use products

correctly and to inform businesses of any problems



LESSON 3.2

Government and Consumer Protection

GOALS ►Describe the evolution of the consumer movement.

►Identify government agencies and laws that help

protect consumers.

►Describe different types of products warranties and

how they protect consumers.



The Rise of the

Consumer Movement ►A growing concern

►In the past, products were simple and easy to understand

and fix

►Not so anymore

►A growing awareness

►People are writing books that depict problems in

business

► The Jungle, Silent Spring, Unsafe at any Speed



The Rise of the

Consumer Movement ►The consumer movement

►Seeks to protect and inform consumers by requiring

practices like honest advertising, product warranties,

improved safety standards

►Grew out of consumers’ desire to have the government

intervene on their behalf



Government Protection ►Federal Trade Commission

►Created in 1914

►Protects consumers from unfair or deceptive business

practices

►Consumers can complain to the FTC about a product

►If it finds a company is using deceptive advertising, it

can issue a cease-and-desist order

► Order requires a company to stop using an advertising practice



Government Protection ►Consumer Product Safety Commission

►Created in 1972

►Protects consumers from dangerous products

►First agency to have power over all consumer products

►Responsible for product recalls

►Can set standards for any consumer product and ban

those that it considers hazardous



Government Protection ►Environmental Protection Agency

►Created in 1970

►Enforces laws that protect our environment

►Makes sure that businesses dispose of hazardous waste

properly

►Sets standards for air and water quality, monitors these

standards

►To comply, businesses may need to add extra, costly

equipment

► This cost is usually passed on to the consumer



Government Protection ►State and local protection

►Generally control the more local issues like regulating

when lawns are mowed to control dispersion of emissions

►Consumer movement today

►Consumer Reports is a great magazine to look into before

you make a major purchase

►They test big ticket items and apply ratings to these items

for quality, price, etc.



Government Protection ►Federal Trade Commission

►Consumer Product Safety Commission

►Environmental Protection Agency

►State and local protection

►Consumer movement today



Warranties ►A warranty is a company’s promise that a product will

meet certain standards over a given time period

►Often done to gain trust of the consumer

►The Magnuson-Moss Warranty Act

►1975, regulated the way warranties were written

►Full warranty- a specific written guarantee

►Limited warranty – a written warranty that does not meet

the standards of a full warranty because of specified

limitations

►Implied warranties – unwritten guarantee that the

product is of sufficient quality to fulfill the purpose for

which it was designed © 2010 South-Western, Cengage Learning Slide 21


Why do many people feel that consumers need

protection more now than in the past?

What federal agencies are charged with protecting

consumers from false advertising, dangerous

products, and pollution?

What differences are there between full and limited

warranties? How do warranties benefit businesses

that offer them?



Why do many people feel that consumers need

protection more now than in the past?

Today’s more complicated products make them more

difficult to evaluate, leaving consumers vulnerable to

poor-quality or even dangerous goods and services



What federal agencies are charged with

protecting consumers from false advertising,

dangerous products, and pollution?

• FTC protects consumers from unfair or deceptive

business practices

• CPSC protects consumers from dangerous products

• EPA is responsible for protecting the environment



What differences are there between full and

limited warranties? How do warranties benefit

businesses that offer them?

• Full warranty: promises repair or replacement of defective

product over a specific period of time at no cost to the

customer

• Limited warranty: promises repair or replacement of

defective product subject to stated limitations

• Businesses that offer warranties provide an incentive to

customers to buy products with the stated protection



LESSON 3.3

Deception and Fraud

GOALS ►Explain the meaning of deception and describe how

consumers may be harmed by this practice.

►Identify common types of fraud and explain how

consumers may protect themselves against it.



Deception ►Sometimes products don’t meet your needs or they fall

short of your expectations

►Sometimes this is because of deceptive or fraudulent

sales practices

►Advertising becomes deceptive when it misleads

►When taken to unlawful extremes, it is fraud

►Legitimate sales practices are not deceptive, they are

just designed to sway your purchase to that company

►Grossly exaggerated claims and misleading pricing

policies can be illegal



Deception ►Trading up

►The practice of pressuring consumers to buy a more

expensive product than they had originally intended to

buy

►Not illegal

►Although salespeople can be helpful in getting you

information on products, be careful that you make a

rational buying decision and are not pressured



Deception ►Sale price

►A sale is only a sale if it is lower than normal

►Stores often mark up the price of a product right before

they put the item on sale



Deception ►Suggested retail price

►Common in car dealerships

►Manufacturer expects you to haggle

►Never pay MSRP

►Also beware of the salesperson who says that they are

the lowest prices in town



Deception ►Loss leader

►An item priced below cost to get you to come into the

store

►If you only purchase the loss leader, the retailer will lose

money.

►Goal is to draw you in then have you purchase more

items at regular price



Fraud ►Fraud

►Deliberate deception, designed to secure unfair or

unlawful gain.

►A statement is fraudulent if it meets these two

conditions:

►The person who made the statement must know it is

false.

►The purpose of the statement must be to cause others to

give up property that has value, such as money.



Examples of Fraud ►Bait and switch

►Baiting consumers with an advertised, but nonexistent

bargain then switching you to a higher priced in-stock

product

►Illegal

►Pyramid schemes

►A type of financial fraud in which people pay to join an

organization in exchange for the right to sell

memberships to others



Internet and Telephone Fraud Watch out for . . .

►Deal offered seems too good to be true

►Credit card/Social Security number requested to verify

identity

►Must buy item to get something else for free

►No written contract or sales agreement is provided

►You “must act now” or offer expires

►No method given to contact the organization

►Information about organization not available from

independent sources



The Many Faces of Fraud

Examples:

Healthcare products that promise to cure incurable

diseases

Home-improvement contractors who want payment

before doing any work

Vacation clubs that require money in advance with the

promise of inexpensive first-class vacations later

Repair work offered for less than the going rate

Weight-loss programs that promise unrealistic results



What is the definition of a deceptive selling

practice?

How can you protect yourself against fraudulent

selling practices?



What is the definition of a deceptive selling

practice?

• Deceptive selling practices are intended to mislead

consumers

• Trading up, false sales, and inflated suggested retail

prices can be deceptive



How can you protect yourself against fraudulent

selling practices?

• Learn to be skeptical

• Check out unfamiliar companies and ask questions

• Carefully evaluate responses to questions

• Understand what you are buying and make decisions with

your head rather than your emotions

• Use the decision making process



LESSON 3.4

Resolve Consumer Problems

GOALS ►Describe how to successfully complain about a product

you purchased.

►Identify government programs that can help resolve

consumer problems.



KEY TERMS

cooling-off period

small claims court



Prepare to Make a Complaint ►Resolving the problem

►Don’t be angry, work to get complaint resolved

►Need to have documentation

► Sales receipts

► Warranties

► Save receipts for items that you buy that you might have to

document proof of purchase



Prepare to Make a Complaint Write down the facts

►The date and location of the transaction

►A description of the product

►The product’s price and your method of payment

►A specific explanation of what is wrong

►A statement of how you want the problem resolved

►Also list how you would like the problem to be resolved



The Complaint Process ►Start with the seller

►Most businesspeople are honest and want to satisfy

the customer

►Follow this process:

► Return to the store and explain the problem, documenting who you

spoke to and their actions

► Ask for a manager if the salesperson can’t help you

► Proceed on to the manufacturer or the company’s home office

► Proceed to consumer groups like the Better Business Bureau

► As a last resort, you can sue



The Complaint Process ►Seek help from consumer organizations

►Better Business Bureau (BBB)

► A nonprofit organization that does the following:

► Helps resolve disputes between consumers and sellers

► Keeps a file of complaints against local businesses and

supplies this information to consumers who request it

► Educates consumers by providing information in printed tip

sheets and booklets on the Internet

► Promotes honest advertising and selling practices



The Complaint Process ►Seek help from consumer organizations

►Arbitration

► An impartial third party who listens to both sides of a dispute

then makes a decision

► Automobile manufacturers and appliance makers use

arbitration a lot

►Media help

► Getting the word out about bad business practices can be

damaging to a business’ reputation. Use this avenue

cautiously.



Government Efforts

to Help Consumers ►Truth in information

►Require businesses to supply accurate, honest

information about their products to consumers

►Enforcement is difficult

►Illegal actions must first be identified

►Individuals must rely on governments to prosecute

dishonest businesses – enormous task

►Use common sense

►If information looks suspicious, check it out further

before you buy



Government Efforts

to Help Consumers ►Cooling-off periods

►A specified period of time in which a consumer can back

out of an agreement to buy something

►Known as the Right of Rescission

►Often is three days

► FTC has the three day rule for purchases signed in a home



Government Efforts

to Help Consumers ►Reporting consumer problems

►Complaints can be registered with the Attorney General’s

office or a consumer affairs office

►Big thing that these do is to force a business to clean up

its act and operate honestly

►You may not receive much retribution, but your complaint

may help others



Government Efforts

to Help Consumers ►Using small claims court

►Exist in all states for lawsuits ranging from $0 - $1000

and all the way up to $10,000

►Court costs are low

►You don’t need a lawyer

►Most cases are resolved quickly

►To begin a suit, you need to file with a clerk at the

courthouse

►Be sure that this is a last resort option

►The court will not collect the judgment for you



At which step of the complaint process is an

organization such as the Better Business Bureau

best able to help a consumer?

What are several ways in which the government

works to protect consumers?



At which step of the complaint process is an

organization such as the Better Business Bureau

best able to help a consumer?

At the fourth step of the complaint process, organizations

such as the BBB are best able to help consumers when

they are interacting with managers.



What are several ways in which the government

works to protect consumers?

The government protects consumers by . . .

• passing and enforcing laws

• setting standards

• licensing businesses

• requiring labeling

• providing a court system that consumers may use to

protect themselves


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