Unit 5 Goal 7.5 Consumer Protection Identify ways consumers can protect themselves from fraud.

Consumer protection is a group of laws and organizations designed to ensure the rights of consumers as well as fair trade competition and the free flow of truthful information in the marketplace.

I: A host of government agencies work to insure consumer protection. A: FTC: Federal Trade Commission: Independent Agency founded in 1914. Enforces anti-business practices like monopolies. Enforces the Sherman Anti-Trust Act and the Clayton Anti-trust Act. Investigates fraud and deceptive practices. The Federal Trade Commission works to prevent fraudulent, deceptive, and unfair business practices. They also provide information to help consumers spot scams.

Consumers can take their names off telemarketers list by registering with the national Do Not Call List. A:How does it work? The Federal Trade Commission (FTC) amended the Telemarketing Sales Rule (TSR) to give consumers a choice about whether they want to receive most telemarketing calls. As of October 1, 2003, it became illegal for most telemarketers or sellers to call a number listed on the National Do Not Call Registry.

The Fair Credit Reporting Act (FCRA) requires each of the nationwide credit reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months.

CPSC: Consumer Product Safety Commission Independent agency created in 1972 under the Consumer Protection Act that regulates and enforces safety on products sold in the US.

What? do they do CFPB: Consumer Financial Protection Bureau Conduct rule-making, supervision, and enforcement for Federal consumer financial protection laws Restrict unfair, deceptive, or abusive acts or practices Take consumer complaints Promote financial education Research consumer behavior Monitor financial markets for new risks to consumers Enforce laws that outlaw discrimination and other unfair treatment in consumer finance. CFPB: Consumer Financial Protection Bureau: Independent Regulatory Agency that Congress established. The Bureau of Consumer Financial Protection (CFPB) through the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Acts as a watchdog and advocate for consumers who have complaints about financial institutions. Congress established the CFPB to protect consumers by carrying out Federal consumer financial laws. Created over 400 new regulations/which critics claim is one reason the economy is not recovering. Too restrictive.

Only one private owned consumer advocacy agency. C: BBB: Better Business Bureau: Private Corporation founded in 1912 that gathers information on the business practices of local and national businesses. Acts as a self- regulating agency. Businesses can join local chapters and use the BBB for consumer disputes. Holds no authority over businesses and does not endorse businesses. Consumers can call and file complaints on businesses or check on a business’s reputation through the BBB. The BBB alerts members on complaints and helps them address them.

F: Ponzi Schemes F: Ponzi-Schemes: A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and they use the money for personal expenses, instead of engaging in any legitimate investment activity.

Pyramid Scheme Ponzi Scheme F: What are some of the similarities and differences between Ponzi and pyramid schemes? Ponzi and pyramid schemes are closely related because they both involve paying longer-standing members with money from new participants, instead of actual profits from investing or selling products to the public. Here are some common differences: Pyramid Scheme Ponzi Scheme Hook: Earn high profits by making one payment and finding a set number of others to become distributors of a product. The scheme typically does not involve a genuine product. The purported product may not exist or it may only be “sold” within the pyramid scheme. Payment/Profits: Must recruit new distributors to receive payments. Interaction with original promoter: Sometimes none.  New participants may enter scheme at a different level. Source of Payment: From new participants – always disclosed. Collapse: Fast.  An exponential increase in the number of participants is required at each level. Hook: Earn high investment returns with little or no risk by simply handing over your money; the investment typically does not exist. Payment/Profits: No recruiting necessary to receive payments. Interaction with original promoter: Promoter generally acts with all participants Source of Payment: From new participants never disclosed. Collapse: May be relatively slow if participants reinvest money

What are Multi-Level Marketing Companies. Are they Pyramids What are Multi-Level Marketing Companies? Are they Pyramids? NO How are they different? I: Companies like Herbalife, Amway, Mary Kay, Avon, Pampered Chef etc.. Are not pyramids. They do not require people to buy starter kits. Salespeople are called independent business owners (IBO) and generally work from their homes. MLM’s are also known as network marketing firms.

Companies like Tupperware have been in business for years and are legitimate. In 1979 the FTC ruled that Amway the largest MLM was not a pyramid but a legitimate MLM.

One of the hottest pyramid schemes continues to be the penny stock scams that are promoted through spam e-mail messages. The e-mails tout "incredible investment opportunities" to get in "on the ground floor" on a stock that's about to "take off!“ Eventually someone in the pyramid decides to investigate or research the stock and finds out the real value- the price plummets and everyone loses money. Bottom line to remember: 1. If it is too good to be true-then it probably is fraud. 2. Do your own research on the firm, and the person running it. 3. Call the BBB and see if there are complaints. 4. You can also call the NC Dept. of Justice and check their website for unethical businesses and tips on avoiding fraud, identity theft etc. http://www.ncdoj.gov/