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About Consumer Protection
Consumer Protection, term applied to the efforts of government,
public-interest organizations, individuals, and businesses to
establish, protect, and enforce the rights of people who buy products
such as food and automobiles or services such as health care and
insurance. The basic rights of consumers, as set forth by U.S.
President John F. Kennedy in his 1962 message to Congress on consumerism,
are the following: (1) the right to safety; (2) the right to be
informed; (3) the right to choose; and (4) the right to be heard.
Each of these rights is of major importance in the objectives
of the consumer-protection movement.
THE RIGHT TO SAFETY
Products offered for sale should not pose undue risk of physical
harm to consumers or their families; yet in a recent year, for
example, some 33 million people in the U.S. were reported injured-and
30,000 were killed-in product-related accidents. Products that
cause injuries include impure food, defectively manufactured automobiles
and tires, drugs that have harmful side effects, and unsafe appliances.
The U.S. federal government agency responsible for ensuring the
safety of most products is the Consumer Product Safety Commission
(CPSC). The CPSC was established in 1973 to protect the public
from unreasonable risk of injury caused by consumer products;
to assist consumers in comparing the safety of various items;
to develop uniform safety standards; and to promote research about
the causes and prevention of product-related deaths, illnesses,
and injuries. It has broad authority to create and enforce safety
standards for more than 10,000 consumer products and can ban hazardous
items or recall them from the marketplace. The CPSC is responsible
for enforcing the Flammable Fabrics Act (1953), which requires
fabrics to meet standards of fire resistance, as well as the Poison
Prevention Packaging Act (1970), and the Hazardous Substances
Act (1960), which ban the use of certain dangerous substances
and require warnings and safety information on the labels of others.
The CPSC does not have authority over food, drugs, or motor vehicles.
The Food and Drug Administration (FDA) is charged with ensuring
that processed foods, drugs, medical devices, and cosmetics are
safe and properly labeled; that foods are wholesome; and that
drugs are effective. It has the power to seize unsafe products
and to criminally prosecute businesses that violate safety laws
and standards. The FDA inspects food-processing plants to be sure
that foods are made and packaged under sanitary conditions. The
agency must approve the safety and efficacy of all new prescription
drugs before they can be marketed. The FDA also sets safety standards
for radiation-emitting products such as microwave ovens.
Motor-vehicle safety is regulated by the National Highway Traffic
Safety Administration (NHTSA), which sets highway safety standards,
investigates reported safety-related motor-vehicle defects, and
enforces laws regarding the correction of such defects. NHTSA
can require the recall of defective automobiles or automotive
parts; in fact, since 1966 manufacturers have recalled more than
118 million vehicles.
THE RIGHT TO BE INFORMED
Consumers need sufficient information in order to choose wisely
among the competing products and services available. The marketplace,
however, contains a great many different and complex products,
and advertising is usually not informative enough for consumer
purposes. Therefore, consumers often lack the information required
to compare the quality of various products and services, to determine
their true cost, or to be assured of their suitability or safety.
To ensure that consumers have the information they need to buy
wisely, the federal and many state governments have passed several
important laws directing businesses to disclose necessary information.
The federal Fair Packaging and Labeling Act (1966), for example,
requires that packages be labeled truthfully with such basic facts
as quantity and ingredients. The federal Truth in Lending Act
(1968) requires that consumers be told in clear, accurate, and
uniform terms how much it costs them to borrow money from a lender.
Unit-pricing laws in some states require supermarkets to show
the cost of an item per pound, quart, or count (for paper goods),
so that shoppers can compare the cost of different sizes of products.
Many states require the dating of perishable foods to enable buyers
to choose fresh foods.
Many consumer problems are caused by incorrect or fraudulent
information. The Federal Trade Commission (FTC) bears the primary
responsibility for making sure that advertising and labeling are
not false or misleading.
Consumers often need more than just the information sellers disclose.
For instance, firms rarely volunteer information about the shortcomings
of their products. To provide essential comparative information,
several private, independent organizations test products and report
their findings to interested consumers. The largest such organization
is Consumers Union of United States, Inc., the nonprofit publisher
of Consumer Reports. Each issue of Consumer Reports rates various
products by brand names according to the results of laboratory
and use tests, provides advice on services such as banking and
insurance, and reports on recalled items. Consumers Union accepts
no advertising and pledges that its reports are free from bias
and any commercial ties.
In recognition of the importance of consumer information, many
states now require elementary and secondary schools to provide
consumer education to their students. In addition, schools, government
agencies, and public-interest organizations often have consumer-education
programs for adults.
THE RIGHT TO CHOOSE
The structure of the American economic system is based on the
belief that, generally, competition is the best regulator of the
marketplace. According to this theory, when many companies are
selling a product, the effort of each to attract more customers
keeps prices at the lowest level that allows businesses to cover
costs and make a fair profit. When a market is not competitive,
sellers can set the price as high as they wish, up to the level
where consumers simply will not buy the product. To preserve competition
in the marketplace, federal laws make it illegal for businesses
to monopolize an industry, restrain trade, or fix prices. The
FTC and the U.S. Department of Justice share the responsibility
for enforcing these laws.
THE RIGHT TO BE HEARD
A consumer who has been cheated or who has bought a product or
service that does not perform properly has a right to seek a refund,
replacement of the product, or other remedy. Sometimes, however,
a buyer finds that the manufacturer or seller will not cooperate
in resolving the complaint. In recent years laws have been passed
to help dissatisfied consumers. Some laws declare certain deceptive
business practices illegal and give consumers the right to sue
a business believed to be violating the law. A consumer who wins
such a suit can sometimes collect up to three times the amount
of the damages. Federal, state, and local governments have established
offices or agencies to help protect consumers or to resolve disputes
between consumers and businesses. The communications media-newspapers,
television, and radio-often aid consumers through services such
as "action lines." Some business-sponsored agencies
such as the Major Appliance Consumer Action Panel can sometimes
help those who have a complaint about a product, service, or business
practice. The Better Business Bureau, a business association,
makes information about complaints it has received against businesses
available to interested parties.
For consumers who want to pursue their complaints further, small
claims courts exist in most states to handle cases involving relatively
small sums of money (generally between $500 and $1500). Lawyers
are not usually needed, and procedures are relatively simple.
Problems with credit and billing can also affect consumers. The
Fair Credit Billing Act establishes a procedure creditors must
follow in responding to consumers' complaints about their credit-card
bills and requires that creditors correct billing errors promptly.
See also Credit; Credit Card.
The right to be heard also means that the needs of consumers
should be considered when government decisions affecting them
are made. Under President Gerald Ford, for example, executive
agencies and departments were ordered to establish procedures
to consider the views of consumers in certain policymaking areas.
Consumer Credit: an overview
Credit allows consumers to finance transactions without having
to pay the full cost of the merchandise at the time of the transaction.
A common form of consumer credit is a credit card account issued
by a financial institution. Merchants may also provide financing
for products which they sell. Banks may directly finance purchases
through loans and mortgages.
The law of consumer credit is primarily embodied in federal and
state statutory laws. These laws protect consumers and provide
guidelines for the credit industry.
States have passed various statutes regulating consumer credit.
The Uniform Consumer Credit Code has been adopted in seven states
and Guam. It purpose is to protect consumers obtaining credit
to finance their transactions, ensure that adequate credit is
provided, and govern the credit industry in general.
Congress passed the Consumer Protection Act in part to regulate
the consumer credit industry. It requires creditors to disclose
credit terms to consumers. The Consumer Protection Act also protects
consumers from loan sharks, restricts the garnishing of wages,
and established the National Commission on Consumer Finance to
investigate the consumer finance industry. Credit card companies
and credit reporting agencies are also regulated by the Act. The
Act also prohibits discrimination based on sex or marital status
in the extending of credit. The Act also regulates certain debt
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