1. Chapter 23

2.  The traditional guideline of sales transactions  Caveat emptor – “Let the buyer beware”  Consumer protection laws: Federal and state statutes and regulations that:  Promote product safety and prohibit abusive, unfair, and deceptive business practices 23-2 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

3.  U.S. Department of Agriculture: A federal administrative agency that is responsible for:  Regulating the safety of meat, poultry, and other food products  The USDA  Conducts inspections of food processing and storage facilities  Can initiate legal proceedings against violators 23-3 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

4.  Food, Drug, and Cosmetic Act (FDCA or FDC Act): A federal statute that provides:  The basis for the regulation of much of the testing, manufacture, distribution, and sale of foods, drugs, cosmetics, and medicinal products  Food and Drug Administration (FDA): The federal administrative agency that:  Administers and enforces the federal Food, Drug, and Cosmetic Act and other federal consumer protection laws 23-4 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

5.  FDCA prohibits shipment, distribution, or sale of adulterated food  Food labeling  FDCA prohibits false and misleading labeling of food products  Nutrition Labeling and Education Act (NLEA): A federal statute that requires food manufacturers to disclose on food labels nutritional information about the food 23-5 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

6.  A United Nations–sponsored protocol  Requires signatory countries to place the label “May contain living modified organisms” on all genetically engineered foods 23-6 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

7.  Drug Amendment to the FDCA: A federal law that gives the FDA broad powers to license new drugs in the United States  Gives the FDA broad powers to license new drugs in the United States  Requires all users of prescription and nonprescription drugs to receive proper directions for use and adequate warnings about any related side effects 23-7 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

8.  The FDA’s definition of cosmetics includes  Substances and preparations for cleansing, altering the appearance of, and promoting the attractiveness of a person  The FDA has issued regulations requiring cosmetics  To be labeled  To disclose ingredients  To contain warnings if they are carcinogenicor otherwise dangerous to a person’s health 23-8 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

9.  Medicinal Device Amendment to the FDCA  Enacted by Congress  Gives the FDA authority to regulate medicinal devices, such as heart pacemakers, kidney dialysis machines, defibrillators, surgical equipment, and other diagnostic, therapeutic, and health devices 23-9 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

10.  Consumer Product Safety Act (CPSA): A federal statute  Regulates potentially dangerous consumer products and that created the Consumer Product Safety Commission  Consumer Product Safety Commission (CPSC)  A federal administrative agency empowered to ▪ Adopt rules and regulations to interpret and enforce the CPSA ▪ Conduct research on the safety of consumer products ▪ Collect data regarding injuries caused by consumer products  It issues product safety standards for consumer products that pose unreasonable risk of injury 23-10 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

11.  Many employees and their dependents are covered by health insurance that is provided by their employers  Health Care Reform Act: A 2010 federal statute that:  Increases the number of persons who have health care insurance in the United States  Provides new protections for insured persons from abusive practices of insurance companies 23-11 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

12.  Federal Trade Commission (FTC): A federal administrative agency empowered to:  Enforce the Federal Trade Commission Act and other federal consumer protection statutes  Section 5 of the FTC Act: A provision in the FTC Act that prohibits unfair and deceptive practices  Gives the FTC the authority to bring an administrative proceeding to attack a deceptive or unfair practice 23-12 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

13.  Under Section 5 of the FTC Act, advertisements that  Contain misinformation or omits important information that is likely to mislead a “reasonable consumer”  Make an unsubstantiated claim  Bait and switch – A type of deceptive advertising under Section 5 of the FTC Act  Occurs when a seller advertises the availability of a low- cost discounted item to attract customers to its store ▪ Once inside the store, the seller pressures the customer into buying more expensive merchandise 23-13 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

14.  To protect consumers from ill-advised decisions  Many states have enacted laws that give the consumer a certain number of days to rescind a door-to-door sales contract  Do-Not-Call Registry  A registry created by federal law on which consumers can place their names and free themselves from most unsolicited commercial telephone calls 23-14 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

15.  To protect consumer-debtors  The federal government has enacted a comprehensive scheme of consumer financial protection laws concerning the extension and collection of credit  Dodd-Frank Wall Street Reform and Consumer Protection Act: A federal statute that:  Regulates the financial industry and provides protection to consumers regarding financial products and services 23-15 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

16.  A federal administrative agency  Responsible for enforcing federal consumer financial protection statutes  Consumer Financial Protection Act of 2010: A federal statute  Requires increased disclosure of credit information and terms to consumers  Regulates consumer credit providers and others 23-16 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

17.  A federal statute that:  Eliminates many abusive mortgage loan practices and mandates new duties and disclosure requirements on mortgage lenders and others  The act  Is particularly designed to regulate the subprime mortgage market  Puts the burden on lenders to verify that a borrower can afford to repay the loan for which they have applied  Provides civil remedies for borrowers 23-17 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

18.  A federal statute that:  Requires creditors to make certain disclosures to debtors in consumer transactions and real estate loans on the debtor’s principal dwelling  The TILA covers only creditors that regularly  Extend credit for goods or services to consumers  Arrange such credit in the ordinary course of their business  Regulation Z: A regulation that sets forth detailed rules for compliance with the Truthin-Lending Act (TILA) 23-18 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

19.  A federal statute that extends the coverage of the Truth-in-Lending Act (TILA) to lease terms in consumer leases  Fair Credit Billing Act (FCBA): A federal statute which requires that creditors to  Acknowledge in writing consumer billing complaints  Investigate billing errors  Afford consumer-debtors other protection during billing disputes 23-19 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

20.  A federal statute that protects a consumer who is the subject of a credit report by:  Setting rules for credit bureaus to follow  Permitting consumer to obtain information from credit reporting businesses  Credit report: Information about a person’s credit history that can be secured from a credit bureau reporting company 23-20 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

21.  A consumer may request the following information at any time  The nature and substance of all the information in his or her credit file  The sources of this information  The names of recipients of his or her credit report  Fair and Accurate Credit Transactions Act of 2003  Gives consumers the right to obtain one free credit report each year from the credit reporting agencies  Permits consumers to place fraud alerts in their credit files 23-21 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

22.  A federal act that:  Protects consumer-debtors from abusive, deceptive, and unfair practices used by debt collectors  Expressly prohibits  Harassing, abusive, or intimidating tactics  False or misleading misrepresentations  Unfair or unconscionable practices  The FDCPA limits the contact that a debt collector may have with third persons other than the debtor’s spouse or parents 23-22 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

23.  A federal statute that 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  Applies to all creditors that extend or arrange credit in the ordinary course of their business  Violation of ECOA  The consumer may bring a civil action against the creditor and recover actual damages 23-23 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

24.  An amendment to the Truth-in-Lending Act (TILA)  Requires disclosure of certain credit terms on credit card and charge card solicitations and applications  Direct written solicitation to a consumer must display  The APR  Any annual membership fee  Any minimum or fixed finance charge  Any transaction charge for use of the card for purchases  A statement that charges are due when the periodic statement is received by the debtor 23-24 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

25.  A federal statute that  Requires disclosures to consumers concerning credit card terms  Adds transparency to the creditor–debtor relationship  Eliminates many of the abusive practices of credit card issuers 23-25 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

26. 23-26 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.