The United States’ large and complex economy offers perhaps the broadest potential for products and services in history, but with such opportunities come the risk of scams, fraud, and outright theft. The principle of caveat emptor or “buyer beware” in modern parlance, still applies as much as it has since the dawn of commerce. In today’s economy, however, a consumer can fall victim to a seller of goods or services, a bank, a debt collector, or another business that takes advantage of its position to engage in deception or fraud. We have devised ways, in the form of both common law and federal and state statutes, to protect consumers’ rights and interests.
The Federal Trade Commission Act (FTCA), first enacted in 1914, is an important federal consumer protection statute. It created the Federal Trade Commission (FTC), which is charged with enforcing antitrust statutes and promoting consumer protection. The FTC’s Bureau of Consumer Protection investigates consumer complaints regarding deceptive trade practices and other violations of consumer protection statutes.
States also have their own consumer protection statutes that guard against deception and fraud by businesses and individuals that sell goods or services. California’s Consumers Legal Remedies Act is one of the most comprehensive consumer protection statutes in the country. It prohibits various forms of false advertising, such as misrepresenting the source or quality of goods, or falsely representing used or deteriorated goods as “new.”
State and federal laws protect consumers from improper debt collection activities. The federal Fair Debt Collection Practices Act (FDCPA) broadly defines a “debt collector” as anyone using mail or other instruments of interstate commerce to attempt to collect a debt, through indirect or direct means, for another. Its protection is limited to personal, family, and household debts, and it therefore does not include business debts or individual debts incurred for business purposes. It sets limits on the times of day during which debt collectors may contact consumers, and it requires them to cease communicating with consumers, except through litigation, upon receipt of a written request. The FDCPA also provides a 30-day period during which the consumer may dispute the validity of the debt and request verification.
A person’s credit score has become a critically important piece of information, which has an impact not only on his or her ability to purchase a home or a car, but also on employment prospects in many cases. Credit reporting agencies (CRAs) are private entities with little transparency or oversight, so several statutes protect consumers against false or inaccurate credit reporting. The Fair Credit Reporting Act (FCRA) requires CRAs to provide consumers with information contained in their files on that consumer, and to verify any information disputed by a consumer. A 2003 amendment to the law, the Fair and Accurate Credit Transactions Act, allows consumers to obtain one credit report every year, free of charge.
The Truth in Lending Act (TILA) protects consumers against deceptive or unfair practices by banks and other creditors. It requires banks and other lenders to disclose the total cost of a loan, including all interests and other costs expected to be paid over the life of the loan, at the time a consumer signs the promissory note. For loans that create a lien on the consumer’s residence, such as a home mortgage refinance, the law allows a three-day right of rescission, meaning that the consumer may cancel the loan with no penalty.
The Real Estate Settlement Procedures Act (RESPA) prohibits certain deceptive practices in real estate transactions, including payments of kickbacks between real estate agents, construction companies, mortgage brokers, and lenders. Lenders are required to provide a good-faith estimate of a loan’s costs, similar to the disclosures required by TILA. A consumer purchasing real estate is also entitled to a comprehensive statement, known as a HUD-1, showing how the purchase price is to be disbursed at closing.
The security of consumers’ personally identifiable information (PII) is critically important as a means of guarding against identity theft and other forms of fraud. Numerous statutes regulate how certain industries handle and store consumer PII. One of the most comprehensive laws is the Health Insurance Portability and Accountability Act (HIPAA), which sets national standards for medical recordkeeping in order to protect consumers’ “protected health information.”
Another type of consumer privacy protection is the National Do Not Call Registry (DNCR), which was created by the FTC to comply with the Do-Not-Call Implementation Act of 2003. Consumers may sign up for the registry online, and telemarketers have 31 days from the date of registration to stop calling that phone number. Many telemarketing firms maintain their own do-not-call lists. More than a decade before the DNCR went live, the U.S. prohibited unsolicited faxes with the Telephone Consumer Protection Act of 1991.
The Highway Safety Act of 1970 created the National Highway Traffic Safety Administration (NHTSA), which is partly charged with enforcing consumer safety laws with regard to automobiles. At the state level, lemon laws protect consumers against false or misleading practices by used car dealers.
In addition to the FTCA, federal laws like the Consumer Product Safety Act (CPSA) and the Federal Food and Drug Act (FFDA) require consumer products, particularly food, drugs, and cosmetics, to meet various safety standards. The Consumer Product Safety Commission and the Food and Drug Administration enforce many of these laws and regulations.
Most consumer protection statutes related to product safety are aimed at preventing injuries from occurring. If a consumer is injured by a defective product, the common law doctrine of products liability allows them to sue for damages. Most states recognize at least three types of defects that could support a claim: a design defect, when a product is inherently unsafe, a manufacturing defect, when the defect occurs during the production process, or a marketing defect, when a product is advertised or promoted for an improper use that causes an injury.
