Transcript Chapter 045- Consumer Protection

Consumer Protection
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Caveat Emptor
“Let the buyer beware” – the
traditional guideline of sales
transactions.
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Consumer Protection Laws
• Federal and state statutes
and regulations that
promote product safety and
prohibit abusive, unfair, and
deceptive practices.
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Federal Food, Drug, and Cosmetic
Act
• Provides the basis for the regulation
of much of the testing,
manufacture, distribution, and sale
of foods, drugs, cosmetics, and
medicinal products and devices in
the United States.
• Administered by the Food and Drug
Administration (FDA).
• The FDA is empowered to regulate
food, food additives, drugs,
cosmetics, and medicinal devices.
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Regulation of Food
• The FDCA prohibits the shipment,
distribution, or sale of adulterated
food.
• The FDCA prohibits false and
misleading labeling of food
products.
• It mandates affirmative disclosure
of information on food labels.
• A manufacturer may be held liable
for deceptive labeling or
packaging.
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Food Labeling
• Nutrition Labeling and Education
Act
– Requires food manufacturers to
place labels on foods that
discloses nutritional information
about the food.
• Number of calories
• Amount of fat
• Dietary fiber
• Cholesterol
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Regulation of Drugs
• The FDCA gives the FDA the
authority to regulate the testing,
manufacture, distribution, and
sale of drugs.
• The Drug Amendment to the
FDCA gives the FDA broad powers
to license new drugs in the United
States.
• The manufacture, distribution, or
sale of adulterated or misbranded
drugs is prohibited.
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Regulation of Drugs (continued)
• The law requires all users of
prescription and
nonprescription drugs to
receive:
– Proper directions for use
– Including method and duration
of use
– Adequate warnings about any
related side effects
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Regulation of Cosmetics
• The FDA has issued regulations
that require cosmetics:
– To be labeled
– To disclose ingredients
– To contain warnings if they are
carcinogenic or otherwise dangerous
to a person’s health
• The manufacture, distribution, or
sale of adulterated or misbranded
cosmetics is prohibited.
• The FDA may remove from
commerce cosmetics that
contain unsubstantiated claims.
– Preserving youth
– Growing hair
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Regulation of Medicinal
Devices
• The Medicinal Device
Amendment to the FDCA gives
the FDA authority to regulate
medicinal devices and
equipment.
• The mislabeling of medicinal
devices is prohibited.
• The FDA is empowered to remove
“quack” devices from the market.
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Other Acts Administered by FDA
Pesticide Amendment of
1954
Authorizes the FDA to
establish tolerances for
pesticides used on agricultural
products.
Food Additives
Amendment of 1958
Requires FDA approval of new
food ingredi-ents or articles
that come in contact with food
(e.g., wrapping and packaging
materials)
Color Additives
Amendment of 1960
Requires FDA approval of
color additives used in food,
drugs, and cosmetics.
Animal Drug Amendment
of 1968
Requires FDA approval of any
new animal drug or additive to
animal food.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Other Acts Administered by FDA
Biologies Act of 1902
Gives the FDA power to regulate
biological products. This
includes: vaccines, blood, blood
components and derivatives,
and allergenic products.
Section 361 of the Public Gives the FDA power to regulate
Health Service Act
and set standards for sanitation
at food service establishments
and on interstate carriers.
Section 354 of the Public
Health Service Act and
the Radiation for Health
and Safety Act of 1968
Empowers the FDA to regulate
the manufac-ture, distribution,
and use of X-ray machines,
microwave ovens, ultrasound
equipment, and other products
that are capable of emitting
radiation.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Consumer Product Safety Act
• Federal statute that regulates
potentially dangerous consumer
products.
• Created the Consumer Product
Safety Commission (CPSC).
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Consumer Product Safety
Commission
Independent federal
regulatory agency
empowered to:
1.
2.
3.
Adopt rules and regulations to
interpret and enforce the
Consumer Product Safety Act.
Conduct research on safety.
Collect data regarding injuries.
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Lemon Laws
• Provide a procedure for
consumers to follow to correct
recurring problems in vehicles.
• Establish an administrative
procedure that is less formal than
a court proceeding.
• Require that an arbitrator decide
the dispute between a consumer
and car dealer.
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Unfair and Deceptive Practices
• Prohibits unfair and
deceptive practices
including:
– False and deceptive
advertising
– Bait and switch
– Abusive sales tactics
– Consumer fraud
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False and Deceptive
Advertising
• Section 5 of the FTC Act
describes false and
deceptive advertising as:
– Containing misinformation or
omitting information that is likely
to mislead a reasonable
consumer, or
– Makes an unsubstantiated
claim.
– Proof of actual deception not
required.
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Bait and Switch
• Seller advertises low-cost item
to attract customers.
• Seller pressures buyers to
upgrade.
– Often refuses to show
advertised merchandise.
– Discourages employees from
selling advertised merchandise.
– Fails to have adequate
quantities on hand.
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Door-to-Door Sales
• Many states have enacted
statutes that permit consumers to
rescind contracts made at home
with door-to-door sales
representatives within a set period
after signing the contract.
• Must send required notice of
cancellation to seller.
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Truth-in-Lending Act
(TILA)
Federal
ConsumerDebtor
Protection
Laws
Fair Debt Collection
Practices Act
Consumer Leasing
Act
Fair Credit & Charge
Card Disclosure Act
Equal Credit
Opportunity Act
Fair Credit
Reporting Act
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Federal Consumer Laws
Truth-in-Lending Act
(TILA) of 1968 (as
amended)
Requires creditors to make certain
disclosures to debtors in consumer
transactions that do not exceed
$25,000 and real estate loans of any
amount on the debtor’s principal
dwelling.
Consumer Leasing Act
An amendment to the TILA. Extends
the TILA’s coverage to lease terms
in consumer leases.
Fair Credit and Charge
Card Disclosure Act of
1988
Amendment to the TILA. Requires
disclosure of certain credit card
terms on credit- and charge-card
solicitations and applications.
Provides the following protections:
(1) Un-solicited credit cards, (2)
Faulty products purchased with
credit cards, (3) Lost or stolen credit
cards.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Federal Consumer Laws (continued)
Equal Credit Opportunity
Act (ECOA) of 1975
Prohibits discrimination in the
extension of credit based on: sex,
marital status, race, color, national
origin, religion, age, or receipt of
income from public assistance
programs.
Fair Credit Reporting Act
of 1970
An amendment to the TILA.
Protects customers who are
subjects of a credit report by
setting out guidelines for credit
bureaus.
Fair Debt Collection
Practices Act (FDCPA) of
1977
Protects consumer-debtors from
abusive, deceptive, and unfair
practices used by debt collectors.
Prohibits certain contact by the
creditor with third parties and the
debtor.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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