1. WHAT’S AHEAD Consumer Rights and Responsibilities Government and Consumer Protection Deception and Fraud Resolve Consumer Problems Unit 7: Consumer Rights and Responsibilities & Protection from Fraud

2. Directions to Play Video Clips… As you go through the slides be sure to view it from Slide Show mode so that you can also see the video clips that are hyperlinked As you scan through each slide, be sure to run your mouse over the graphics/clip art on each slide. If there is a hyper link the mouse pointer will switch to a hand.

3. Consumer Rights and Responsibilities & Protection from Fraud Consumer Protection Week

4. © 2010 South-Western, Cengage Learning Slide 4 Consumer Rights and Responsibilities GOAL ► I know and understand each of my consumer rights and responsibilities.

5. Consumerism Consumerism as a social and economic order and ideology encourages the acquisition of goods and services in ever-increasing amounts. Simply put…the belief that it is good for people to spend a lot of money on goods and services; the actions of people who spend a lot of money on goods and services

6. If the deal sounds too good to be true, it probably is Remember that price is not always an indicator of quality either! Caveat emptor Buyer Beware …

7. Consumer Bill of Rights Consumer Bill of Rights refers to a group of consumer rights which was introduced by the U.S. President, John F. Kennedy in 1962. Consumer Bill of Rights consists of 4 basic consumer rights which includes: the right to safety, the right to be informed, the right to choose, and the right to be heard

8. Consumer Bill of Rights are extended In 1985, the United Nations added four more rights to protect consumers: the right to satisfaction of basic needs, the right to redress, the right to consumer education, and the right to a healthy environment

9. Better Business Bureau The Better Business Bureau (BBB), founded in 1912, is a nonprofit organization focused on advancing marketplace trust, [2] consisting of 112 independently incorporated local BBB organizations in the United States and Canada, coordinated under the Council of Better Business Bureaus (CBBB) in Arlington, Virginia. nonprofit organization [2]United StatesCanada Arlington, Virginia The BBB collects and provides free business reviews on more than 4 million businesses to over 123 million requests from consumers in 2013, helping make the BBB's website rank among the top 300 most-visited websites in the United States. The BBB serves as an intermediary between consumers and businesses, handling over 885,000 consumer disputes against businesses in 2013, of which close to 78% were settled.

10. The FTC is a bipartisan federal agency with a unique dual mission to protect consumers and promote competition. For one hundred years, our collegial and consensus-driven agency has championed the interests of American consumers. As we begin our second century, the FTC is dedicated to advancing consumer interests while encouraging innovation and competition in our dynamic economy.

11. Food and Drug Administration FDA is responsible for protecting the public health by assuring the safety, efficacy and security of human and veterinary drugs, biological products, medical devices, our nation's food supply, cosmetics, and products that emit radiation.

12. This agency coordinates federal activities on behalf of the consumer. It stops unfair, deceptive and fraudulent business practices by collecting complaints and conducting investigations, suing companies and people that break the law, developing rules to maintain a fair marketplace, and educating consumers and businesses about their rights and responsibilities. Bureau of Consumer Protection

13. Consumer Rights The right to…. Safety Information Choice Be Heard Redress Education A Healthy Environment Have Basic Needs Met But what do they all mean….?

14. Safety Right Protection from products and services that are hazardous to their health. Responsibility: Use the product safely, following all Safety instructions and remaining alert for future warnings.

15. Information Right Have provided for them information that ensures all product statements are accurate and truthful. Responsibility: Analyze and use information about products wisely.

16. Comparison Shopping the practice of comparing the price of products or services from different vendors before buying.

17. Choice Right A wide selection of goods and services at a fair price Responsibility: Choose Carefully

18. Comparison Shopping for Food Shopping for food involves many considerations, including brands, sizes, quantities, unit prices, freshness, the availability of coupons and store location When comparison shopping you need to decide not only what to buy but where to buy it If you spend too much time looking around, the additional costs of time and transportation would outweigh any potential savings

19. Comparison Shopping for Food Deciding what food to buy involves numerous trade- offs Food shopping is usually done at grocery stores or in club warehouse stores (carries limited number of brands and items in large quantities and is less expensive than grocery stores) which offer savings and purchase is in bulk Occasionally, you may use a convenience store which carries limited selection of brands at relatively higher prices

20. Comparison Shopping for Food When you shop, alternatives to brand name items are private-labeled products which are lower-priced carried by supermarkets and warehouse chains There is a trade-off between quality and price in the products you buy The larger the quantity of an item you buy, the lower the unit-price

21. Comparison Shopping for Food Many manufacturers give price of coupons, but you have to decide if the savings is worth the time of collecting and matching them Store discount cards are another option—critics say they simply save the customer from inflated prices instead of offering a discount---These cards are also used to track spending habits for marketing purposes

22. Comparison Shopping for Clothing Clothing value depends on style, durability, and cost of care, as well as purchase price Comparison shopping is important to buying cloths wisely—Clothing values depends on three factors- Style or the latest trend The durability of an item which includes its service flow (amount of use a person gets from an item over time and the value a person places on its use) Cost of care is the money and effort you put into maintaining the item like dry cleaning

23. Comparison Shopping for Clothing Consumers have many alternatives to buying clothing at full retail price Ways to save when buying clothing- Visit a consignment store which sells used clothing at lower prices Buy clothing on sale, or on layaway Shop online Make a list of clothing you really need so you do not buy impulsively

24. Be Aware of Selling Practices Businesses will often use tricks and manipulation to “sell” a product or service to a customer Watch for popular methods such as those on the following slides.

25. Bait & Switch A very low advertised price gets you into the store. When there, they won’t sell it to you and try to sell you something else! Ex – You see a very good advertised price on a car. You get there and it is either in some obscure place or they tell you it was just sold and try to sell you another vehicle.

26. Status Making you think a higher priced item provides status appeals to vanity and sense of self-worth Ex – A fine handsome young man like you would look terrific in that red convertible. You are an up and coming young businessman, you need a vehicle that adds the look of success.

27. Competitive Advertising Competitive advertising is an effort by at least one company to create a contrast between its product and the same or similar product offerings by competitors.

28. Informative Advertising is carried out in an informative manner. The idea is to give the ad the look of an official article to give it more credibility. Also, informative ads tend to help generate a good reputation.informative In some circumstances a business might be required to run informative advertising as part of resolving a lawsuit. Tobacco companies are one of the more notable examples of this. lawsuitTobacco Alcohol producers have been running advertisements with the general message being don't drive drunk. Alcohol

29. Brand Name brand name. a word, name, symbol, etc., especially one legally registered as a trademark, used by a manufacturer or merchant to identify its products distinctively from others of the same type and usually prominently displayed on its goods, in advertising, etc.

30. Generic Brands A type of consumer product that lacks a widely recognized name or logo because it typically isn't advertised. Generic brands are usually less expensive than brand-name products due to the lack of promotions, which can inflate the cost of a good or service.

31. Be Heard Right A voice in the creation of laws and the development of good and services Responsibility: Express concern to those who can help

32. Redress Right Request money or other benefits as fair compensation for a company’s mistake Responsibility: Make an effort to seek compensation for a wrong

33. Consumer Education Right Sufficient information to make a rational buying decision Responsibility: To acquire knowledge and skills needed to make informed, confident choices about goods and services

34. A Healthy Environment Right Live and work in an environment that does not damage their health Responsibility: Make choices that minimize the environmental impact of your purchase on others. Would this happen in the US?

35. Have Basic Needs Met Right Fundamental right to access food, water, and shelter Responsibility: Consume sustainable so as not to prevent others form meetings their own needs.

36. Sources of Information For Consumers: Family & Friends Advertising Sales & Informational Brochures Catalogs Magazines & Newspaper Articles Consumer Product-Testing

37. © 2010 South-Western, Cengage Learning Slide 37 Review Questions ► What is the Latin term for “Buyer beware”? ► What are the sources of information for consumers? ► What type of deceptive sales practice tries to make you feel sorry for a salesperson? ► Which consumer right deals with protection from products and services that are hazardous to their health?

38. © 2010 South-Western, Cengage Learning Slide 38 Government and Consumer Protection GOALS 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.

39. © 2010 South-Western, Cengage Learning Slide 39 KEY TERMS  Federal Trade Commission (FTC)  Consumer Product Safety Commission (CPSC)  Environmental Protection Agency (EPA)  Food and Drug Administration (FDA)  US Dept of Agriculture (USDA)

40. © 2010 South-Western, Cengage Learning Slide 40 The Rise of the Consumer Movement ► The Consumer Movement (Consumerism) ► Seeks to protect and inform consumers by requiring such practices as honest advertising, product warranties, and improved safety standards ► Consumers had a desire to have government intervention

41. © 2010 South-Western, Cengage Learning Slide 41 Government Protection ► Federal Trade Commission  Responsible for protecting consumers from unfair or deceptive business practices  If company is using a deceptive advertising they issues a cease and desist order  Enforces truth in advertising  Protects against predatory or discriminatory lending or unfair loan servicing  Do NOT Call Registry and mail fraud  Works to prevent identity theft -- including Fair Credit Reporting Act

42. © 2010 South-Western, Cengage Learning Slide 42 Government Protection ► Consumer Product Safety Commission ► Protect consumers from dangerous products ► First agency with power over all consumer products ► Environmental Protection Agency  Created to protect human health and environment  Ensures business dispose of waste properly

43. © 2010 South-Western, Cengage Learning Slide 43 Government Protection Food and Drug Administration Responsible for protecting the public health by assuring the safety and security of: human and veterinary drugs biological products medical devices our nation’s food supply cosmetics products that emit radiation

44. © 2010 South-Western, Cengage Learning Slide 44 Government Protection US Dept. of Agriculture Keeps our food sources safe Inspect fruit & plants imported from foreign countries National School Lunch Program Inspects meat, poultry, and eggs Sets nutritional guidelines (Food Pyramid)

45.  State and local protection  Health and sanitation standards  Division of Weights and Measures  Better Business Bureau  Consumer movement today  Consumer Reports  Local newspapers/TV stations Government Protection

46. © 2010 South-Western, Cengage Learning Slide 46 Warranties and Guarantees ► Have you ever bought something that did not work as it was suppose to? ► What was it? ► Did it have a warranty? ► Were you able to return it?

47. © 2010 South-Western, Cengage Learning Slide 47 Warranties ► The Magnuson-Moss Warranty Act ► Specifies how warranties must be carried out ► Full warranty- written guarantee of to replace a defective product in a certain amount of time ► Limited warranty- a written warranty that does not meet the standards of a full warranty because of specific limitations ► Implied warranties-an unwritten guarantee that the product is of sufficient quality to fulfill the purpose for which it was designed.

48. © 2010 South-Western, Cengage Learning Slide 48  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 Review Questions

49. © 2010 South-Western, Cengage Learning Slide 49 Review Questions ► Which government agency is responsible for the inspection of meat and poultry? ► Which type of warranty is not written? ► The Division of Weights and Measures is at what level of government? ► Cosmetics are regulated by which government agency? ► Which government agency protects consumers from dangerous products?

50. © 2010 South-Western, Cengage Learning Slide 50 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.

51. © 2010 South-Western, Cengage Learning Slide 51 Deception ► Trading up ► Practice of pressuring consumers to buy a more expensive product that they intended to ► Sale price ► When current price is below the regular price ► Suggested retail price (MSRP) ► Not always true price ► Usually negotiable ► Loss leader ► Sell below cost and take a loss of revenue ► Gets you in the store hoping you buy more

52. © 2010 South-Western, Cengage Learning Slide 52 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.

53. © 2010 South-Western, Cengage Learning Slide 53 Examples of Fraud ► Bait and switch ► Pyramid schemes ► Internet and telephone fraud

54. Pyramid Scheme A type of financial fraud in which people pay to join an organization in exchange for the right to sell memberships to other people.

55. Ponzi Scheme Closely related to a pyramid scheme but the promoter generally has no product to sell and pays no commission to investors who recruit new members.

56. Affinity Fraud A type of scam that targets members of a specific demographic. Perpetrators may attempt to relate to or exploit characteristics common to the demographic. Targeted groups can include the elderly, ethnic groups, and religions.

57. Sympathy Ploy The seller make you feel sorry for him/her. Ex – The sales person says “ I have 10 children and could sure use a sale tonight. In fact, I have not made a sale in 2 weeks.”

58. © 2010 South-Western, Cengage Learning Slide 58 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

59. © 2010 South-Western, Cengage Learning Slide 59 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

60. © 2010 South-Western, Cengage Learning Slide 60  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 Deceptive Selling

61. © 2010 South-Western, Cengage Learning Slide 61  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 Deceptive Selling

62. © 2010 South-Western, Cengage Learning Slide 62 Resolve Consumer Problems GOALS ► Describe how to successfully complain about a product you purchased. ► Identify government programs that can help resolve consumer problems.

63. © 2010 South-Western, Cengage Learning Slide 63 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 ► Document, Document, Document

64. © 2010 South-Western, Cengage Learning Slide 64 The Complaint Process ► Start with the seller ► Seek help from consumer organizations ► Better Business Bureau (BBB) ► Helps resolve disputes between sellers and customers ► Keeps and supplies information on complaints ► Educates consumers ► Promotes honest advertising and selling practices

65. © 2010 South-Western, Cengage Learning Slide 65 The Complaint Process ► Arbitration ► Impartial third-party will hear both sides of a dispute and will make a decision ► Binding ► Non-binding ► Media help ► Action News ► Newspaper

66. © 2010 South-Western, Cengage Learning Slide 66 Government Efforts to Help Consumers ► Truth in Information ► Enforcement is difficult ► Use common sense ► Cooling-off periods ► A specified period of time within which a consumer can back out of an agreement to buy something.

67. © 2010 South-Western, Cengage Learning Slide 67 Government Efforts to Help Consumers ► Reporting consumer problems ► Attorney General ► Office of Consumer Affairs ► Using Small Claims Court ► Do not need a lawyer ► Court costs are low, usually under $250 ► Most cases are resolved quickly

68. © 2010 South-Western, Cengage Learning Slide 68  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.

69. © 2010 South-Western, Cengage Learning Slide 69 In Review ► Reporting consumer problems ► Attorney General ► Office of Consumer Affairs ► Using Small Claims Court ► Do not need a lawyer ► Court costs are low, usually under $250 ► Most cases are resolved quickly

70. © 2010 South-Western, Cengage Learning Slide 70  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 In Review

71. In Review: Consumption, Income, and Decision Making  Know the characteristics of a consumer based upon what you have learned in this unit and the Module in EverFi.  Disposable and Discretionary Income know the definition. (Hint: Think about Needs and Wants)  What are the factors you learned about in the EverFI Module 5: Higher Education that help determine a person’s potential earning power?  Based on Module 8 and what we have discussed, what are the three decisions consumers have to make?

72. In Review: Consumption, Income, and Decision Making  Think back to the first Chapter we covered in this course when we talked about scarce resources. Which one is directly involved in your making a purchase? (Hint: What doesn’t grow on trees?)  Decision Making unit forced you to make decisions about resources, and again about the need for higher education, but now let’s look at it from the principal of being the consumer. Why do we decide to buy a higher priced over a lower priced item/service?  What is the economists’ definition of rational choice? You will need to think how this relates to our Decision Making Unit! (Economic theory is based on several important concepts. One of those concepts is that people make choices in their best self-interest. This is known as the Rational Choice Theory.)