Chapter 3: Consumer Protection

1. Chapter 3: Consumer Protection

2. Chapter 3.1: Consumer Rights and Responsibilities

3. Consumer Bill Of Rights • As an America Consumer…. • You expect the product you purchase to work properly • You expect to be treated fair and honestly by a merchant • You expect products you buy to be reliable and safe • If there is a problem, you expect to be able to exchange or return the item and get a refund

4. Consumer Bill Of Rights • A set of consumer rights and responsibilities was established to protect consumers. • President John F. Kennedy established four in 1962 • The United Nations added four more in 1985 • Ongoing revisions • as change occurs in the United States and globally, consumers rights and responsibilities change

5. Rights & Responsibility Right To Safety Responsibility to Use Products Safely Consumers are responsible for following the manufacturers’ instructions for proper use and maintenance of the products. • Products must not endanger consumers’ lives or health.

6. Rights & Responsibility Right To Be Informed Responsibility To Use Information Consumers are responsible for using the information to evaluate product choices. • Businesses must provide accurate information in advertising, labeling, and sales practices.

7. Rights & Responsibility Right To Choose Responsibility To Choose Carefully Consumers should take advantage of product variety by considering many options and making rational choices. • Consumers should have a wide variety of goods and services from which to choose.

8. Vocabulary: Monopoly What is the objective of the game Monopoly? • Your Turn: What do you think the term monopoly means? Write the definition

9. Monopoly • A situation in which a single company or group owns all or nearly all of the market for a given type of product or service. • Most believe that, with few exceptions, the system just doesn't work when there is only one provider of a good or service because there is no incentive to improve the product to meet the demands of consumers. • Legal Monopoly: A business or group that owns a patent on a particular product or service • License that gives the holder exclusive rights to a process, design or new invention for a designated period of time. (~20 years) • This time frame is often used for research and development • United States Postal Service • Federal law prohibits anyone but the Postal Service from delivering first-class mail.

10. Rights & Responsibility Right To Be Heard Responsibility to Express Satisfaction or Dissatisfaction Express concerns to those who can help. Consumers should tell their elected officials their opinions on consumer issues and inform them of improper business practices. • The government must consider consumers interests when creating laws.

11. Rights & Responsibility Right To Redress Responsibility To Seek Redress Consumers should inform businesses of product defects and unfair practices. Consumers should pursue remedies. • Consumers should be able to obtain fair remedies to consumer problems

12. Right To Redress • Remedy to a problem • Refund or other compensation • You should seek redress when you are dissatisfied • Write a complaint letter to a company • Most companies want to fix a problem • protect their reputation • want to stay in business • If you can’t work out a solution, you have the right to sue • Used as a last resort • When physical harm by the product or service has taken place • A lawyer is usually necessary

13. Rights & Responsibility Right To Consumer Education Responsibility to Be an Educated Consumer Consumers should take advantage of opportunities to gather information and learn how to make intelligent buying decisions. • Sufficient information should be available for consumers to make rational decisions.

14. Rights & Responsibility Right To A Healthy Environment Responsibility To Contribute To a Healthy Environment Consumers should support businesses that operate responsible and report environmental abuses to authorities. • Businesses should avoid polluting the environment and should contribute to the welfare of the community in which they operate.

15. Rights & Responsibility Right To Basis Needs Responsibility to consumer sustainably Consume sustainably, so as not to prevent others from having their needs met. • People have access to adequate food, clothing, shelter, health care, educations, public utilities, water and sanitation.

16. Interesting Fact • World Consumer Rights Day • March 15th • Date of Kennedy’s speech

17. Think, Pair, Share: Consumer Bill Of Rights Ongoing revisions • as change occurs in the United States and globally, consumers rights and responsibilities change • Individually, think of changes that are occurring or will occur in the future that will affect consumer rights and responsibilities. Write down at least two. • With your partner compare ideas. • Share ideas with whole class.

18. Your Turn: Consumer Rights Questions Which consumer rightprotects you if: • 1. The teddy bear that you bought your little sister has an arm that pulls off easily. • 2. One company has a monopoly on cable and so they can set any price they want for the service. • 3. You bought a used car and the dealer did not reveal numerous flaws on the vehicle. You have been dealing with that problem for eight months.

19. Your Turn: Consumer Responsibility Questions • It is your consumer responsibilityto: • 4. When you know that something should be recalled because you see a dangerous safety issue. • 5. When you are going to purchase a major appliance. • 6. When someone has contracted with you to provide a service and they have fallen far short of what was agreed to in your contract.

20. Your Turn: Consumer Report Activity • Name the product you are researching in the consumer report magazine • Looking at your product of choice, what are 5 different brands that were rated? • On your consumer report chart, look at the test results. List the different criteria that were used to test your product of choice. • Examine the ranking of your products by brand. Identify why that particular brand is rated #1. Look at the test results, what do you think really made the top products shine over the others. • Look at the price of each brand. How does price play a factor in how each item ranked? Are the better rated products always more expensive? • What kinds of information did you find in Consumer Reports that would help you be a more effective consumer? Identify at least three.

21. Consumer Report Assignment

22. Chapter 3.2: Government & Consumer ProtectionChapter 3.3: Deception & Fraud

23. Consumer Movement • Also called: Consumerism • Seeks to protect and inform consumers by requiring such practices as honest advertising, product warranties, and improved safety standards. • Grew out of consumers’ desire for government intervention on their behalf.

24. Federal Trade Commission (FTC) • Created in 1914 • Responsible for protecting consumers from unfair or deceptive business practices, such as misleading information in advertising or on product labels.

25. Cease-and-desist order • Issued by the FTC if it has discovered a company is using deceptive advertising • This order requires the company to stop using the advertisement. • Continued use of the ad would result in a stiff fine.

26. Environmental Protection Agency (EPA) • Created in 1970 • Enforces laws that protect our environment. • Makes sure businesses safely discard hazardous waste produced during manufacturing. • Also sets standards for air quality • Example: • BP Oil Spill- well blew out • In response to the BP oil spill, EPA monitored air, water, sediment, and waste generated by the cleanup operations.

27. Consumer Product Safety Commission (CPSC) • Created in 1972 to protect consumers from dangerous products. • Has power over ALL consumer products. • They can set safety standards for any consumer product and ban those that it considers to be hazardous. • CPSC Web Site • Names products that have been recalled • Lists hazardous products based on data collected from emergency rooms • Recalls- News Story • Product Recalls • http://www.youtube.com/watch?v=Fli-5yI0CU4&list=UUeoiFCC2wVc0f8dScwtvsgw&feature=c4-overview

28. What you don’t know about fires can kill you! • http://www.youtube.com/watch?v=ult6Biaf7oM • http://www.youtube.com/watch?v=mvyItuuXbLM&list=UUeoiFCC2wVc0f8dScwtvsgw • http://www.youtube.com/watch?v=6Bvwtr6mdF0 • http://www.youtube.com/watch?v=Doyg3QJVXzA&feature=c4-overview&list=UUeoiFCC2wVc0f8dScwtvsgw • http://www.youtube.com/watch?v=Hw4uIiXUCY4

29. Consumer Protection • Ever changing due to changes in the world. • Example of a current change: • The Wall Street Reform and Consumer Protection Act of 2009

30. The Wall Street Reform and Consumer Protection Act of 2009 • Today: • Your Turn: Read the article. Refer to the list of eight Consumer Rights and Responsibilities and identifywhere those consumer rights and responsibilities can be found throughout the handout • Monday: • Socratic Seminar: Discuss how this act affects consumers.

31. Rights, Responsibilities: Scams Pepsi Top 5 Consumer Complaints Lottery Letters

32. Warranties • A company’s promise that their product will meet specific standards over a given time period, or the company will repair it, replace it, or give you a refund. • Warranty Fraud

33. Type of Warranties • Full Warranty • Specific written guarantee. • Must promise that it will repair or replace a defective product within a specified time period at no charge. • Explains how to file a claim and how to return the product to the business. • Limited Warranty • Written warrant that does not meet the standards of a full warranty because of specified limitations. (explained in warranty) • Must specify coverage period • Explain how to make a claim, and promise a solution within a reasonable time period.

34. Implied Warranty • Unwritten guarantee that the product is of sufficient quality to fulfill the purpose for which it was designed. • Example: • If you buy a hammer, you expect that it wont break when you hammer a nail into wood. • If it does break, you have the right to return it, even if the hammer came with no written warranty.

35. Scams Internet Job Scams! – part 1(6:13 Minutes)

36. Trading Up • Pressuring consumers to buy a more expensive product than they intended. • Example: You see an advertisement for a very low priced DVD player. So you go to Wal-Mart to buy the DVD player and when you get there the sales associate tells you the product isn't really that good and tries to convince you to buy a more expensive model.

37. Loss Leader • Item priced below cost to attract you to the store. Sometimes a retailer’s goal is to simply get you into the store. They will price an items below manufacturers price. • If you only buy that item, the retailer will lose money on that one item, but if you buy more… they gain! • How many times have you gone to the store for that one item and left with 12 items? I know I have!

38. Fraud • Deliberate deception designed to secure unfair or unlawful gain • Cheating the consumer • A statement is fraudulent if it meets these two conditions: • 1. The person who made the statement must know it is false. • 2. The purpose of the statement must be to cause others to give up property that has values, such as money, without fair compensation.

39. Bait & Switch • A sales practice in which a retailer advertises a product at a bargain price and does not intend to sell a customer that item but rather tries to persuade the customer to buy another item at a higher price. • Bait and Switch is against the law. • Example: You go into Best Buy to buy an advertised DVD player. You are told by the sales associate that the item is out of stock or sold out. Then, the sales person leads you over to a much better, more expensive, available DVD player.

40. Pyramid Scheme • Type of financial fraud in which people pay to join an organization in exchange for the right to sell memberships to others. • People at the top of the pyramid convince new people to send money to join. • Those people then have to recruit others and are promised large sums of money. • At the end the pyramid falls apart and the only people who get the big payoff are the people at the top. • Pyramid schemes are illegal.

41. Internet & Telephone Fraud • Contact is NOT done in person, so it becomes hard to tell if the people behind the scam are legitimate or not. • Clues to watch out for when an offer is made to you online or over the telephone: • The deal offered seems too good to be true • You are asked for your credit card or SS# to verify your identity • You must buy something to get something else of greater value for free • You are not offered a written contract or sales agreement before you buy • You are told you must act immediately or the offer will expire • NO method is provided to contact the organization • NO information about the organization’s business record is available from independent sources

42. Internet Fraud… • Job Scams – part 2 • Job Scams – part 3

43. PROTECT YOURSELF! 1. RECOGNIZE IT! 2. Check out unfamiliar companies before buying 3. Ask questions about offers that seem too good to be true 4. Understand the product or service you were buying 5. Make decisions with your head, not your emotions 6. Use the Decision Making Process to evaluate options

44. Chapter 3.4: Resolve Consumer Complaints

45. Purpose of Complaint • Resolve the problem, NOT to demonstrate anger • Being rude and disrespectful will not get you anywhere! • How you will be successful and most likely get a resolution: • Have your facts straight • Have documentation (sales receipts, warranty) • Write down facts about the problem • Have a resolution in mind

46. List of Facts • Date and location of transaction 2. Description of what you bought, including model number, color, size, and so on. 3. Product’s price and your method of payment: credit card, check, cash… 4. A specific explanation of what is wrong with the product 5. A statement of how you want the problem resolved. • Repaired, replaced, refund? • It should be fair to both parties

47. Complaint Process • Return to the store • Describe problem clearly and honestly to a sales person in the appropriate department or customer service department • If that doesn’t work, ask to speak to a manager • If that doesn’t work, write to the manufacturer • The next step would be to contact a consumer group or professional organization such as the BBB • If all else fails you may want to consider a lawsuit

48. Better Business Bureau • Organizations that help consumers resolve problems • Nonprofit organization • The BBB helps consumers in the following ways: • Helps resolve disputes between consumer and sellers • Keeps a file of complaints against local businesses and supplies this information to consumers who ask for it • Educated consumers • Promotes honest advertising and selling practices

49. Arbitration • An impartial third-party will hear both sides of a dispute and will make a decision • When consumers sign binding mandatory arbitration (BMA) agreements, they give up their right to sue if they have a dispute with the firm. They must accept the decision of the arbitration board no matter what it is.

50. Cooling Off Period • Specified period of time within which a consumer can back out of an agreement to buy something. • Usually 3 days from the day the purchase was made • The FTC made a rule that consumers can cancel contracts they have signed within 3 days of signing. • Protects consumer from • High pressure situations and door to door salespeople