consumer protection(redirected from Fair Debt Collection Practices Act)
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Consumer protection laws are federal and state statutes governing sales and credit practices involving consumer goods. Such statutes prohibit and regulate deceptive or Unconscionable advertising and sales practices, product quality, credit financing and reporting, debt collection, leases, and other aspects of consumer transactions.
The goal of consumer protection laws is to place consumers, who are average citizens engaging in business deals such as buying goods or borrowing money, on an even par with companies or citizens who regularly engage in business. Historically, consumer transactions—purchases of goods or services for personal, family, or household use—were presumed fair because it was assumed that buyers and sellers bargained from equal positions. Starting in the 1960s, legislatures began to respond to complaints by consumer advocates that consumers were inherently disadvantaged, particularly when bargaining with large corporations and industries. Several types of agencies and statutes, both state and federal, now work to protect consumers.
Consumer Product Safety Commission
In 1972, Congress established the Consumer Product Safety Commission (CPSC). It is the job of the CPSC to protect consumers from faulty or dangerous products by enacting mandatory safety standards for those products. The CPSC has the authority to ban products from the marketplace or to recall products (when a product is recalled, it is removed from the shelves or sales lots, and consumers may be able to return it to the manufacturer or place of purchase for repair, replacement, or a refund). Still, the agency has trouble protecting consumers from hazardous products of which it is unaware.
In recent years, the CPSC has fallen victim to Federal Budget cuts. Reductions in the agency's legal staff have prompted the CPSC to rely more and more on manufacturers to voluntarily recall their defective or hazardous products. When manufacturers do not cooperate, the CPSC must commence a legal action that may take years to resolve.
Unfair or Deceptive Trade Practices
The Federal Trade Commission (FTC), the largest federal agency that handles consumer complaints, regulates unfair or deceptive trade practices. Even local trade practices deemed unfair or deceptive may fall within the jurisdiction of FTC laws and regulations when they have an adverse effect on interstate commerce.
In addition, every state has enacted consumer protection statutes, which are modeled after the Federal Trade Commission Act (15 U.S.C.A. § 45(a)(1)). These acts allow state attorneys, along with general and private consumers, to commence lawsuits over false or deceptive advertisements, or other unfair and injurious consumer practices. Many of the state statutes explicitly provide that courts turn to the federal act and interpretations of the FTC for guidance in construing state laws.
The FTC standard for unfair consumer acts or practices has changed with time. In 1964, the agency instituted criteria for determining unfairness when it enacted its cigarette advertising and labeling rule. A practice was deemed unfair when it (1) offended public policy as defined by statutes, Common Law, or otherwise; (2) was immoral, unethical, oppressive, or unscrupulous; and (3) substantially injured consumers. The FTC changed the standard in 1980. Now, substantial injury of consumers is the most heavily weighed element, and it alone may constitute an unfair practice. Such an unfair practice is illegal pursuant to the Federal Trade Commission Act unless the consumer injury is outweighed by benefits to consumers or competition, or consumers could not reasonably have avoided such injury. The FTC may still consider the public policy criterion, but only in determining whether substantial injury exists. Finally, the FTC no longer considers whether conduct was immoral, unethical, oppressive, or unscrupulous.
The FTC has also developed, over time, its definition of deceptive acts or practices. Historically, an act was deceptive if it had the tendency or capacity to deceive, and the FTC considered the act's effect on the ignorant or credulous consumer. A formal policy statement made by the FTC in 1988 changed this definition: currently, a practice is deceptive if it will likely mislead a consumer, acting reasonably under the circumstances, to that consumer's detriment.
False Advertising is often the cause of consumer complaints. At common law, a consumer had the right to bring an action against a false advertiser for Fraud, upon proving that the advertiser made false representations about the product, that these representations were made with the advertiser's knowledge of or negligent failure to discover the falsehoods, and that the consumer relied on the false advertisement and was harmed as a result. In 1911, an advertising trade journal called Printer's Ink proposed model legislation criminalizing false advertisements. Forty-four states enacted statutes based on this model statute. However, because of the difficulty in proving Beyond a Reasonable Doubt an advertiser's dishonesty, prosecutors seldom use these criminal laws. More frequently, the state attorneys general or the FTC regulates false advertising. For example, the FTC can issue a cease and desist order, forcing a manufacturer to stop advertising, or compelling the advertiser to make corrections or disclosures informing the public of the misrepresentations.
Truth in Lending Act
Consumer credit—home mortgages, student financial aid, and credit cards, for example—is an area fraught with complicated finance terms, and Congress has designed laws requiring lenders to fully disclose and explain those terms to potential borrowers. The Consumer Credit Protection Act of 1968 (15 U.S.C.A. § 1601 et seq.), also known as the Truth in Lending Act, prohibits lenders from advertising loan terms that are only available to preferred borrowers. In addition, advertisements for Consumer Credit transactions cannot disclose partial terms; either all the terms of the transaction or none of them must be spelled out. Finally, when the terms of credit provide for repayment in more than four installments, the agreement must conspicuously state that "the cost of credit is included in the price quoted for the goods and services."
The Truth in Lending Act is designed to protect society as a whole, and therefore does not provide the individual consumer with a personal Cause of Action when a lender violates the law. Nor are publishers of advertising, such as radio, newspapers, and television, generally held liable for lenders' advertisements that violate the act. Finally, the act does not consider statements made by salespeople in the course of selling products or services to be advertisements, therefore the law does not apply to those statements.
Fair Debt Collection Practices Act
The Consumer Protection Act was amended in 1996 to include the Fair Debt Collection Practices Act (Public Law 104-208, 110 Stat. 3009 ). Congress passed the law to address the abusive, deceptive, and unfair debt collection practices used by many debt collectors. Personal, family, and household debts are covered under the act. This includes money owed for the purchase of an automobile, for medical care, or for charge accounts. A collector may contact a person by mail, telephone, telegram, or fax. However, a debt collector may not contact a debtor at an inconvenient time, such as before 8 a.m. or after 9 p.m., unless the debtor agrees. A debt collector also may not contact a debtor at an inappropriate place. For example, a collector may not contact a debtor at his place of work if the collector knows that the debtor's employer disapproves of such contacts.
Collectors may not contact debtors if the debtors send the collectors a letter asking them to stop. Collectors may not threaten or abuse debtors nor make false statements. Persons may sue collectors for violating the law and can collect up to $1,000 and attorneys' fees for a violation. A group of people also may sue a debt collector and recover money for damages up to $500,000, or one percent of the collector's net worth, whichever is less.
Warranties are promises by a manufacturer, made to the consumer purchasing the manufacturer's product, that the product will serve the purpose for which it was designed. The Uniform Commercial Code is a law, adopted in some form in all states, that regulates sales transactions and specifically the three most common types of consumer warranties: express, merchantability, and fitness.
Express warranties are promises included in the written or oral terms of a sales agreement that assure the quality, description, or performance of the product. Express warranties are usually included in the sales contract, or are written in a separate pamphlet and packaged with the merchandise sold to the consumer. These warranties may be less obvious than are product advertisements. A consumer who relies on a written description of a product in a catalog or on a sample of a product may have a cause of action if the actual product differs. Express warranties can also be verbal, such as promises made by salespeople. However, because oral warranties are extremely difficult to prove, they are rarely litigated.
Merchantability and fitness warranties are both implied warranties, which are promises that arise by operation of law. A warranty of merchantability concerns the basic understanding that the product is fit to be purchased and used in the ordinary way—for instance, a lamp will provide light, a radio will pick up broadcast stations, and a refrigerator will keep food cold. A warranty of fitness concerns the consumer's purpose in purchasing a product, and allows the consumer to rely on the seller to offer goods only if they are suitable for that particular purpose. For example, there may be a breach of the Implied Warranty of fitness if a salesperson knowingly sells a consumer software that is not designed for operation on the consumer's computer. For a breach-of-implied-warranty claim to be successful, the consumer must establish that an implied Warranty existed and was breached, that the breach harmed the consumer, that the consumer dealt with the party responsible for the implied warranty, and that the consumer notified the seller within a reasonable time. Implied warranties may be disclaimed by the seller if they are denied expressly and specifically at the time of the sale.
The Magnuson-Moss Warranty Act (15 U.S.C.A. § 2301 et seq.) is a federal law that requires sellers to explain, in easy-to-understand language, the terms of warranties that apply to written sales contracts for items costing $5 or more. Under this act, when a product fails to meet the standards promised by the warranty, the seller must repair it, replace it, or refund the purchase price.
Laws protecting consumers vary in the remedies they provide to consumers for violations. Many federal laws merely provide for public agencies to enforce consumer regulations by investigating and resolving consumer complaints. For example, in the case of a false advertisement, a common remedy is the FTC-ordered removal of the offensive advertisements from the media. In other circumstances, consumers may be entitled to money damages, costs, and attorneys' fees; these remedies can be effective in a case involving a breach of warranty. Depending on the amount of damages alleged, consumers may bring such actions in small-claims courts, which tend to be speedier and less expensive than trial courts.
Alternative Dispute Resolution (ADR) is another option for consumers. Some states pass consumer protection statutes that require some form of ADR—usually Arbitration or mediation—before a consumer can seek help from the courts. Finally, when a large number of consumers have been harmed in the same way as a result of the same practice, they may join in a Class Action, a single lawsuit in which one or more named representatives of the consumer group sue to redress the injuries sustained by all members of the group.
In response to public frustration over telephone solicitations, many states and the FTC began to set up systems to bar unwanted telephone sales calls. The FTC, in 2002, amended the Telemarketing Sales Rule (TSR) to give consumers the option of placing their phone numbers on a national "do not call" registry. It will be illegal for most telemarketers to call a number listed on the registry. The registry was scheduled to go into operation in July 2003, but telephone marketing companies promised a lawsuit to contest the rules, arguing that they violated the First Amendment.
Craft. 1991. "State Consumer Protection Enforcement: Recent Trends and Developments." Antitrust Law Journal 59.
Federal Trade Commission. "The 'Do Not Call' Registry." Available online at <www.ftc.gov/bcp/conline/edcams/donotcall/index.html> (accessed June 3, 2003).
Marsh, Gene A. 1999. Consumer Protection Law in a Nutshell. St. Paul, Minn.: West Wadsworth.
Pertschuk, Michael. 1984. Revolt Against Regulation: The Rise and Pause of the Consumer Movement. Berkeley: Univ. of California Press.