Private Claims Against Governments; Recogni- tion of States; and Treaties. The society meets annually. CONSULS Governmental representatives stationed in foreign countries who oversee economic and other interests of their home country and its citizens in those countries. Consuls are not generally considered diplo- matic agents, they therefore do not enjoy (unless a treat states otherwise) diplomatic immunities and privileges. However, their consular immuni- ties exempt them from local laws and jurisdic- tions as they exercise their official functions. CROSS REFERENCE Ambassadors and Consuls. CONSUMER An individual who purchases and uses products and services in contradist inction to manufacturers who produce the goods or services and wholesalers or retailers who distribute and sell them. A member of the general category of persons who are protected by state and federal laws regulating price policies, financing practices, quality of goods and services, credit reporting, debt collection, and other trade practices of U.S. commerce. A purchaser of a product or service who has a legal right to enforce any implied or express warranties pertaining to the item against the manufacturer who has introduced the goods or services into the marketplace or the seller who has made them a term of the sale. CONSUMER CREDIT Consumer credit refers to the short-term loans made to enable people to purchase goods or services primarily for personal, family, or house- hold purposes. Consumer credit transactions fall into several different classes: Installment credit involves credit that is repaid by the borrower in several periodic payments; loans repaid in one lump sum are classified as noninstallment credit. Installment credit has expanded in popularity, with an increasing number of consumers buying goods on credit in order to spread repayment of the purchase price and the interest owed on the principal borrowed over an extended time. Originator and Holder The originator of credit is the person or company who originally extended the credit, whereas the holder is the individual or business who obtained the debt at a discounted price in order to collect payments at a subsequent time. Auto dealers are credit originators at the time a consumer purchases an auto on credit, but many loans are subsequently assigned by them to banks or sales finance companies, which become credit holders. Commercial banks buy many consumer installment loans from car dealers and depart- ment stores and also participate in all aspects of consumer credit transactions both as origina- tors and holders. The portion of the consumer credit market attributable to banks has greatly increased due in large part to widespread use of bank credit cards. In addition, two types of finance companies are active in the consumer credit industry. The first type is the small loan company, which has contact with consumers as originators and makes loans to them directly. The other type is the sales finance company, which does not deal directly with consumers; it purchases and holds consumer installment debts related to the sale of durable goods on time. The distinction between the two decreases in importance as consumer finance companies diversify and engag e in business on both levels. Vendor and Lender The law might regard credit differently, depend- ing on whether it is offered by a vendor (seller). When an appliance store gives credit to customers who buy such items as washing machines and refrigerators and pay for them over a certain period of time, this action is known as vendor credit. When a consumer borrows funds from a finance company to pay for appliances, this action is known as lender credit, since the finance company lends but does not sell. Some states exempt vendor credit transac- tions from the provisions of state USURY laws. A vendor or a lender can charge the consumer interest (a fee for the use over time of borrowed money). In the past, usury statutes restricting the legal interest rate have ordinarily been applied only to lender credit. The difference in the treatment of lender credit and vendor credit is based upon the assumption made by law that GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 148 CONSULS vendors are able to adjust their prices to allow for the period during which they await payment. If, for example, the vendor’s time price was excessive in that it allowed for a high interest rate, then the consumer could opt for payment of the cash price. Courts believe that competitive pricing will prevent vendors from charging too much interest when they extend credit. It is the seller’s right to determine how to reduce the time price to encourage consumers to pay cash for goods. Some courts have found since 1970, how- ever, that these principles have no application to REVOLVING CHARGE accounts because depart- ment stores do not charge consumers less for paying for items in cash. There is one uniform purchase price, regardless of whether the sale is a credit or cash transaction. Both finance charges and tax are computed on the basis of the cash price. In cases where courts have indicated that state usury laws must necessarily be applied in the vendor credit extended through revolving charge account customers, state legislatures have enacted statutes to increase the legal rate of interest that may be charged on such accounts. Most consumer credit cannot exist within the usury law limits; therefore, the pattern has been to enact laws that permit special higher finance rates for vendor credit to consumers. Licensing Creditors Banks, savings and loan associations, and finance companies ordinarily must be licensed under state or federal statute. Credit companies that purchase retail installment debts from sellers are also subject to governmental licensing regulations. When the licensing requirement is primarily a revenue-raising device, potential licensees often need only file the appropriate forms and pay the required fee to obtain a license. However, when the licensing provisions require the applicant to be reputabl e and reliable, the public is protected only if the licensing agency has the energy and resources to investigate the applicant’s qualifications. Credit Reports When a consumer makes an application for credit, the creditor must decide whether the applicant is a good risk. Most creditors regularly order a credit report on an applicant rather than undertake a costly investigation on their own. Files are retained by two types of credit agencies. Credit Bureaus Credit bureaus publish reports that are primarily used by merchants who are attempting to decide whether to allow con- sumers to purchase merchandise financed by credit that will be repaid on time. Such reports ordinarily disclose financial information, such as the location and size of an individual’s bank accounts, charge accounts, and other debts and the person’s bill-paying habits, income, occupa- tion, marital status, and lawsuits. Credit bureaus supply such information to a group of subscribers who, in exchange, provide them with information for their files. All the information obtained is filed in case it is requested by someone in the future. Nonsub- scribers can ordinarily obtain information through the payment of a fee. A majority of credit bureaus are members of the Associated Credit Bureaus of America, which regulates public information for them. It keeps members apprised of finan cial transac- tions that might cause people to be unable to meet their obligations. Credit Reporting Bureaus Credit reporting bureaus formulate financial reports on indivi- duals for purposes not directly related to the extension of credit. Such reports are used by employers to evaluate job applicants, by insur- ance companies to assess the risk in relation to a prospective policy buyer, and by landlords to avoid renting to tenants likely to cause damage to the property or disturb other tenants. Bureaus of this type compile data and provide it upon request to interested parties. These reports contain personal information about the subjects and their fam ilies that is obtained from interviews with neighbors, associates, and co-workers. Information is kept for possible future investigation requests. Problems In the late 1960s, Congress investi- gated abuses in the collection and dissemination of information by credit bureaus and deter- mined that such bureaus compiled files on more than 50 percent of the people in the United States. These information files, however, fre- quently contain inaccurate, misleading, or irrelevant facts and were not kept confidential. The most frequent error was to confuse two individuals having the same name or similar GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION CONSUMER CREDIT 149 names. The possibility of committing this error increased as the area covered by the bureau became larger. Supervision Many states have enacted statutes to regulate the business practices of credit bureaus. However, the need for national unifor- mity led to the enactment of federal laws dealing with consumer credit information. The FAIR CREDIT REPORTING ACT, which is Title VI of the CONSUMER CREDIT PROTECTION ACT (15 U.S.C.A. § 1601 et seq.), was enacted in 1970. This congressional enactment affects and reg- ulates businesses that regularly obtain consumer credit information for other businesses, either for payment or in a cooperative exchange. The law covers any report by an agency if it is related to a consumer’s credit worthiness, credit standing or capacity, character, general reputation, personal characteristics, or mode of living. Further, the law applies to any such report when employed or expected to be used for evaluating a consumer for one of four purposes: credit or insurance for personal, family, or household use; employment; licenses to operate particular businesses or practice a profession; and any other legitimate business need. The requirements of the Fair Credit Report- ing Act affect (1) the CREDIT BUREAU; (2) the businesses that use the credit reports compiled by credit bureaus; (3) the rights of consumers who are the subjects of such reports; and (4) how the consumer can enforce his or her rights when errors are discovered in such reports. Credit bureaus are required to have standard procedures for determining and updating the accuracy of the information in their files. There is a seven-year limit on the information on file, except where the file discloses that the party was bankrupt within a period of ten years. Data relating to an individual’s character, reputation, or lifestyle that are obtained through personal interviews with neighbors and friends cannot remain in a file unless it is verified every three months. While the Fair Credit Reporting Act does not prohibit the collection and compilation of information unrelated to finance—such as appearance, political tenets, and sexual orienta- tion—such information must be accurate and not obsolete. The law does, however, restrict credit bureaus to furnishing reports for reasons of credit, insurance, employment, obtaining a government license or other benefit, or other legitimate business needs related to business transactions with the consumer. Credit bureaus are required to investigate new clients to ascertain that they are using reports solely for one of these five permitted purposes. In addition, prospective clients are required to file a statement with bureaus certifying the purpose for which the reports will be used and agreeing not to use them for any other purposes. Consumers are legally entitled to ascertain that no inaccurate or obsolete information is kept in files on them and to be notified when a creditor relies upon a report issued by a credit bureau, so the consumer can see the type of information kept on file and correct all mistakes in it. A consumer, however, has no right to examine the actual file kept on him or her by a credit reporting agency. Anyone who has been refused credit on the basis of a report can discover the nature and substance of all but medical information contained therein, as well as the source of the information, except investigations based on comment from neigh- bors and associates. The consumer can also find out the identity of anyone who has received the report for employment purposes during the last two years or any other purpose during the last six months. A consumer who discovers inaccurate or misleading information in his or her file can request that the agency reinvestigate his or her credit background and submit a brief statement that either explains or corrects the information. The agency must include such information in the consumer’s file and notify recent users of the changes in the consumer’s file upon the consumer’s request. Federal agencies, such as the FEDERAL TRADE COMMISSION (FTC), can issue orders for the enforcement of this law. Officers and employees of the credit bureau who willfully or inten- tionally violate this law are subject to criminal prosecution. Both a fine and imprisonment for each violation can be imposed upon conviction. A credit bureau that fails to treat a consumer in the manner required by this law can be sued by the consumer who must prove that the credi t bureau or the business that used the report did not properly maintain reasonable procedures to ensure compliance with the law. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 150 CONSUMER CREDIT The consumer must also show that such failure to maintain was negligent or careless and that he or she incurred personal or financial injury from this failure. If a business uses a consumer’s credit report but fails to notify the consumer, then the consumer may be able to recover damages. The consumer is entitled to actual damages when the business is negligent in failing to provide notice. However , if the business has willfully or recklessly failed to provide notice, the consumer may recover actual, statu tory, and PUNITIVE DAMAGES . The Supreme Court, however, has held that when a business uses a consumer’s credit score without notice but does not take an adverse action, the consumer may not recover damages under the act (Safeco Insurance Co. of America v. Burr, 551 U.S. 47, 127 S. Ct. 2201, 167 L. Ed. 2d 1045 [2007]). Credit Discrimination Discriminatory practices in the granting of credit led to the enactment of legislation to ensure that all qualified applicants have the same opportunity to receive credit. Sex In the past, women were systematically denied credit regardless of whether they would be able to repay their loans. It was not uncommon for bankers to refuse to consider a married woman’s income when a couple applied for a loan or a mortgage. Banks made the assumption that a woman of childbearing age was an automatic credit risk. Single women had greater difficulty than single men in obtaining credit, particularly home mortgages. Creditors were also reluctant to extend credit to married women in their own names and refused to count a woman’s income when calculating the creditworthiness of a married couple. Women also had a difficult time reestablishing credit upon DIVORCE or widowhood. In 1974 Congress enacted the Federal Equal Credit Opportunity Act (15 U.S.C.A. § 1691 et seq.), which prohibits credit discrimination based not only upon sex and marital status, but also upon race, RELIGION, and national origin. It has, however, very detailed prohibi- tions against discrimination based upon sex and marital status. Creditors are not permitted to (1) assign a value to sex or marital status in calculating an applicant’s creditworthiness; (2) assign a value to having a telephone in the name of the applicant; (3) question a married couple’s childbearing plan; (4) alter the terms of credit or require a reapplication when there is a change in an individual’s marital status; (5) re- fuse to consider the total income of the couple who are making the application; (6) delay action on an application or refuse to consider it; or (7) discourage an individual from making an application for credit. Federal agencies such as the FTC can guard against violations of this law through the issuance of restraining orders. In addition, consumers can commence an action against creditors who have denied them an equal opportunity to acquire credit. Where credit discrimination is prohibited by a state law also, the consu mer can choose whether to pursue the state or the federal remedy. Other Types of Discrimination Subsequent amendments to the Equal Credit Opportunity Act were concern ed with race and age discrimi- nation. The act provides that a creditor can take an applicant’s age into consideration only in a situation where older people are given a preference or where a specific type of credit is allowed someone because that person is elderly. The law also requires that public assistance benefits be counted by creditors as a portion of an applicant’s income. The race of an applicant cannot be used as a ground for the denial of credit. Disclosure of Terms Until the late 1960s, there was considerable variety as to the information given consumers about their credit arrangements. The greatest lack of uniformity was in the statement of the rate of interest charged. Some creditors did not disclose the rate of interest, telling consumers only the number and amount of monthly payments. Those creditors that did state the rate of interest stated it in a variety of ways. In response, Congress enacted the TRUTH IN LENDING ACT as Title I of the Consumer Credit Protection Act of 1968. The law is essentially a disclosure statute, offering little substantive protection to consumers. A creditor is free to impose any charges for credit permitted by state law. In addition, the statute does not restrict or confine the terms and conditions of the extension of credit. All that the Truth-in- Lending Act requires is that the consumer be informed of the terms and conditions of the credit transaction. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION CONSUMER CREDIT 151 Under the statute and FTC regulations, the creditor must describe the credit terms clearly and conspicuously in a disclosure statement. At the time of disclosure, the creditor must furnish the customer with a copy of the statement. The disclosure requirements of the act are detailed and complex, because they deal with many types of credit transactions. In general, the creditor must disclose the amount financed, the ANNUAL PERCENTAGE RATE , and any finance charges associated with the extension of credit to the consumer. Any charges payable in the event of late payment must also be disclosed. FURTHER READINGS Bangert, Sharon J., Robert A. Cook, and Joseph D. Looney. 2002. “Unfair and Deceptive Advertising of Consumer Credit.” The Maryland Bar Journal 35 (March–April): 8–13. Hammond, Bob. 1996. Life after Debt: How to Repair Your Credit and Get Out of Debt Once and For All. Franklin Lakes, N.J.: Career. Hynes, Richard, and Eric A. Posner. 2002. “The Law and Economics of Consumer Finance.” American Law and Economics Review 4 (spring): 168–207. Leonard, Robin, and Deanne Loonin. 2002. Credit Repair, edited by Kathleen Michon, 6th ed. Berkeley, Calif.: Nolo. Medoff, James C. 1996. Indebted Society: Anatomy of an Ongoing Disaster. New York: Little, Brown. National Consumer Law Center. 2002. Fair Credit Reporting. Boston: National Consumer Law Center. Paris, James L. 1995. Living Financially Free. Eugene, Ore.: Harvest House. Suit, Christopher. 2001. How to Stop Telemarketers, Junk Mail, and Fix Your Credit. Vancouver, Wash.: Streetlight. CROSS REFERENCES Damages; Restraining Order; Truth in Lending Act CONSUMER CREDIT PROTECTION ACT The Cons umer C redit Protection Act (15 U.S.C.A. § 1601 et seq. [1972]) is a feder al stat ute designed to protect borrowers of money by mandating complete disclosure of the terms and conditions of finance charges in t ransactions; by limiting the GARNISHMENT of wages; and b y regulating the use of charge accounts. The CONSUMER CREDIT Protection Act was the first general federal consumer-protection legis- lation. Title I of this law, known as the Truth- in-Lending Act (15 U.S.C.A. § 1601 et seq. [1968]), requires that the terms in consumer credit transactions be fully explained to the prospective debtors. Title VI of the Consumer Credit Protection Act, known as the FAIR CREDIT REPORTING ACT (15 U.S.C.A. § 1601 et seq. [1978]), applies to businesses that regularly obtain consumer credit information for other businesses. Its purpose is to ensure that consumer reporting activities are conducted in a manner that is fair and equitable to the affected consumer. Whereas the Consumer Credit Protection Act is a federal law, states have also passed many statutes regulating consumer credit. For exam- ple, the UNIFORM CONSUMER CREDIT CODE (UCCC) is an initiative that was drafted by the National Conference of Commissioners on Uniform State Laws in 1968 to help provide consistency among the variety of consumer credit laws that exist throughout state jurisdictions. The pur- pose of the UCCC is threefold: to protect consumers who are obtaining credit to finance transactions; to ensure that adequate credit is provided; and to govern the credit industry generally. As of 2009, the UCCC had been adopted in only five states and Guam. Many states, however, continue to enact legislation that would provide consumer debtors with similar protections contained in the provisions of the UCCC. CONSUMER FRAUD Deceptive practices that result in financial or other losses for consumers in the course of seemingly legitimate business transactions. Many think that consumer fraud only affects unwitting people who are all too willing to be duped. In truth, even the savviest customer can fall victim to FRAUD. It may be as simple and seemingly innocuous as getting stuck paying a higher rate for a magazine subscription, or it may be as devastating as having one’s identity stolen. According to the FEDERAL TRADE COMMISSION (FTC), consumers reported $1.2 billion in losses from fraud in 2007. In addition to those who are unwittingly defrauded, there are a number of consumers who share at least a degree of culpability in their losses. People who try to save money on their income taxes by purchasing a new SOCIAL SECURITY number or wage statement may become victims of fraud, but chances are that they understood that their actions were illegal, which makes them guilty of fraud as well. Consumer fraud can take place in person, by telephone or mail, or over the INTERNET. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 152 CONSUMER CREDIT PROTECTION ACT As technology has continued to improve, INTERNET FRAUD has risen faster than other types. With or without technology, however, consu- mers can protect themselves against fraud by following a few simple, common-sense mea- sures such as not revealing personal information to strangers. The following are some of the most common types of consumer fraud. Identity Theft IDENTITY THEFT accounts for more than 30 percent of all fraud complaints reported to the FTC. All identity theft is serious, but even in its mildest form it can involve, for instance, the theft of a consumer’s long-distance access code. The thief sells the code to individuals who use the code to charge long-distance calls all over the world. In its most serious form, a thief gains access to the victim’s Social Security number. With this number, and some other basic information, a thief can create a double of the victim. The victim’s information can be used to make purchases, to rent an apartment, or to take out bank loans. Often, victims of identity theft first find out their misfortune when they receive credit card bills totaling thousands of dollars, even though they did not open the accounts or make the purchases. Identity thieves can gain access to their victim’s information by copying it off forms (for example, if they work in an office where such information is kept), by stealing a wallet or personal papers, or by otherwise exploiting a careless individual. (Fraud experts warn people never to give their Social Security or bank account numbers to someone who has phoned them, even from a seemingly legitimate busi- ness.) Often identity thieves work in large rings that span several states, which makes it difficult to track them down. Thus, even when a theft ring is cracked, others quickly crop up to take its place. Telephone and Mail Solicitations To most people, junk mail and telemarketer calls are merely a nuisance, but unscrupulous companies can use both the mail and the telephone to part innocent (and not merely gullible) people from their money. Applications for credit cards or personal loans promise easy credit, but the fine print promises exorbitant interest rates. Sweepstakes promising millions in winnings await the lucky recipient, who often feels compelled to send an order for several magazines along with the prize receipt. Charities use telemarketing and mass mailings to ask for donations; while some of those charities are established and legitimate, others are dubious. Many phony charities assume names that sound like better-known organizations in the hope of fooling consumers. Every day, people are contacted by tele- phone and mail with phony offers. Despite warnings from consumer-advocacy groups, people continue to provide credit card num- bers, bank information, and even Social Security numbers to those whom they do not know. The elderly are a common target, in part because once they find that they have been defrauded they are likely not to report the crime because they are embarrassed. Groups such as the Federal Trade Commission, the National Con- sumers League (NCL), and Consumers Union provide information to the ge neral public in an effort to curtail fraud. In 2002 several states initiated “do-not-call” programs that allow people to store their telephone numbers in a centralized database that telemarketers are prohibited from calling. A telemarketer who calls a prohibited number faces stiff fines. Consumer Fraud Complaints, by Consumer Age, in 2007 a Percent Age 19 and under 20–29 30–39 40–49 50–59 60–69 70 and over 2% 16% 21% 23% 20% 9% 9% a Percentages are based on the total number of fraud complaints where consumers reported their age (126,659). 23% of consumers reported their age. SOURCE: Federal Trade Commission, Consumer Fraud and Identity Theft Complaint Data, January–December 2007, Februar y 13, 2008. 0 5 10 15 20 25 ILLUSTRATION BY GGS CREATIVE RESOURCES. REPRODUCED BY PERMISSION OF GALE, A PART OF CENGAGE LEARNING. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3 RD E DITION CONSUMER FRAUD 153 Internet Fraud The growth of the Internet as a communication tool has also meant its growth as an instrument of fraud. Internet fraud grew so rapidly through the 1990s and early 2000s that the FEDERAL BUREAU OF INVESTIGATION (FBI) and the National White Collar Crime Center (NW3C) launched the Internet Fraud Complaint Center, now known as IC3, which compiles data and offers tips on ways to avoid being defrauded. Accord- ing to the IC3 Annual Report for 2008, complaints of Internet fraud accounted for $265 million in losses, a 33.1 percent increase over the previous year. The average individual loss was $931 per victim. One of the most common types of fraud, accounting for over 25 percent, is Internet- auction fraud. Although there are a number of legitimate online auction houses, many are simply scams. Consumers who purchase items on these sites find that the goods they bid for never existed or that the goods are stolen or that the seller has added numerous hidden charges. The seller might even act as a shill by placing false bids. (Some consumers jump on the fraud bandwagon, as well, by using aliases to place multiple phony high bids in order to deter low or moderate bidders.) The Internet is also home to credit card scams, investment scams, and home-improvement scams. These may appear on Websites, or they may be sent in the form of unsolicited commer- cial email (UCE), better known as “spam.” One well-known spam message is the “Nigerian Letter,” in which a person who claims to be a former high official, usually from the Nigerian government, seeks help in converting millions of dollars in funds. The consumer is asked to provide bank account information so that the funds can be transferred to that account. The perpetrators then empty the bank account and disappear before the consumer knows what has happened. Because the perpetrators are usually located in a foreign country and are practically impossible to locate, the victim loses all of the funds that were in the account. Income Tax Fraud The INTERNAL REVENUE SERVICE (IRS) warns taxpayers to be on guard against tax scams that can result in loss of funds and, in some cases, legal difficulties. Some con artists make money at their victims ’ expense by claiming that they can help to secure tax refunds for their clients. Invariably, the clients must pay a fee upfront. One example of this is a company that claims it can help taxpayers find legal loopholes that will allow them to stop paying taxes. Another is a company that offers to help people submit claims for nonexistent credits. (Some African Americans have been targeted by a “reparations” scam in which they are told they can apply for a slavery-reparations credit simply by paying a fee. No such credit exists.) If the taxpayer knowingly engages in a scheme that is illegal (for example, signing up for a new Social Security number), he or she may face fines or imprisonment. Combating Fraud Education is essential for combating consumer fraud. The FTC, FBI, NCL, Consumers Union, and Direct Marketing Association, all work to educate the public and to identify fraudulent businesses. The Better Business Bureau is also a useful tool for consumers who wish to get information about specific companies. FURTHER READINGS Bertrand, Marsha. 1999. Fraud! How to Protect Yourself from Schemes, Scams, and Swindles. New York: AMACOM. Stark, Debra Pogrund. 2008. “Does Fraud Pay? An Empiricle Analysis of Attorney’s Feeds Provisions in Consumer Fraud Statutes.” Cleveland State Law Review. 56. U.S. Federal Trade Commission. 1997. Fighting Consumer Fraud: The Challenge and the Campaign. Washington, D.C.: U.S. Federal Trade Commission. CROSS REFERENCES False Advertising; Federal Trade Commission; Internet. CONSUMER PRICE INDEX A computation made and issued monthly by the Bureau of Labor Statistics of the federal Labor Department that attempts to track the price level of designated goods and services purchased by the average consumer. The consumer price index (CPI) is an indicator of the rate of inflation in the economy because it measures changes in the cost of maintaining a particular standard of living. CONSUMER PRODUCT SAFETY COMMISSION The CPSC was established to protect the public against unreasonable risks of injury from consumer products; to assist consumers in GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 154 CONSUMER PRICE INDEX evaluating the comparative safety of consumer products; to develop uniform safety standards for consumer products and minimize conflict- ing state and local regulations; and to promote research and investigation into the causes and prevention of product-related deaths, illnesses, and injuries. The commission is an independent federal regulatory agency, established by the Act of October 27, 1972 (86 Stat. 1207). It makes information available to the public through its Web site, http://www.cpsc.gov. The Consumer Product Safety Commission (CPSC) has primary responsibility for establish- ing man datory product safety standards in order to reduce the unreasonable risk of injury to consumers from consumer products. It also has the authority to ban hazardous consumer products. The Consumer Product Safety Act (15 U.S.C. 2051 et seq. [1972]) authorizes the CPSC to conduct extensive research on consumer product standards; to engage in broad con- sumer, industry information, and education programs; and to establish a comprehensive injury-information clearinghouse. The CPSC has the authority to regulate the sale and manufacture of more than 15,000 different consumer products, from cribs to all- terrain vehicles, and from barbecue grills to swimming pools. Products not under jurisdic- tion of the CPSC include those specifically named by law as under the jurisdiction of other federal agencies; for example, automobiles are regulated by the National Highway Traffic Safety Administration (NHTSA); guns are regulated by the BUREAU OF ALCOHOL, TOBACCO, FIREARMS, AND EXPLOSIVES (ATFE); and drugs are regulated by the FOOD AND DRUG ADMINISTRATION (FDA). Recently, the CPSC has taken action against suppliers of chemicals that could be used to manufacture fireworks. In addition to the authority created by the act, the CPSC assumes responsibility for the Flammable Fabrics Act (67 Stat. 111; 15 U.S.C. 1191), the Poison Prevention Packaging Act (84 Stat. 1670), the Hazardous Substances Act (74 Stat. 372; 15 U.S.C. 1261), and the Act of August 2, 1956 (70 Stat. 953; 15 U.S.C. 1211 ), which prohibits the transportation of refrigera- tors without door-safety devices. The act also provides for petitioning of the CPSC by any interested person, including consumers or consumer organizations, to commence proceed- ings for the issuance, amendment, or revocation of a consumer product safety rule. In 1999 the CPSC introduced a new interactive section for children on its Web site. Geared toward children between the ages of eight and twelve, it features games and puzzles that are designed to test children’s knowledge of safety and to teach them safety facts. On May 5, 2009, President BARACK OBAMA announced that he would nominate Inez Tenenbaum to head the CPSC. CROSS REFERENCE Consumer Protection. CONSUMER PROTECTION Consumer protection laws are federal and state statutes governing sales and credit practices involving consumer goods. Such statutes prohibit and regulate deceptive or unconscionable advertis- ing and sales practices, product quality, credit financing and report ing, debt collection, leases, and other aspects of consumer transactions. The goal of CONSUMER PROTECTION laws is to place consumers, who are average individuals engaging in business deals such as buying goods or borrowing money, on a 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 t he 1960s, legislatures began to respond to complaints by consumer advocates that consumers were in- herently disadvantaged, particularly when bar- gaining 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 Con g ress established the CONSUMER PRODUCT SAFETY COMMISSION (CPSC). The CPSC aims 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. It has also faced increased challenges w ith respect to the g rowing GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION CONSUMER PROTECTION 155 number of imports in the United States, particularly from toy m a nufacturers. It has attempted to address this difficulty by imple- menting the Import Safety Initiative in 2008, but there remain significant impediments to the CPSC achieving its mission of protecting con- sumers from all f aulty or dangerous products. In the 1990s and early 2000s, 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 cooper- ate, 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 com- plaints, regulates unfair or deceptive trade practices. Even local trade practices deemed unfair or deceptive may fall within the JURISDIC- TION of FTC laws and regulations when they have an adverse effect on interstate commerce. In addition, every state has enacted con- sumer protection statutes, which are modeled after the Federa l 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 state sta- tutes explicitly provide that courts turn to the federal act and interpretations of the FTC for guidance in construing state la ws. The FTC standard for unfair consumer acts or practices has changed with time. In 1964 the agency instituted criteria for determining un- fairness 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 unscrupu- lous; 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 com- petition, or consumers could not reasonably have avoided such injury. The FTC may still consider the public policy criterion, but only in determining whether substa ntial injury exists. Finally, the FTC no longe r considers whether conduct was immoral, unethical, oppressive, or unscrupulous. The FTC has also developed, over time, its definition of deceptive acts or practices. Histor- ically, 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. 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 repre- sentations about the product, that these repre- sentations 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 the advertising trade journal Printer’s Ink proposed model legislation crimi- nalizing false advertisements. Forty-four states enacted statutes based on this model statute. However, because of the difficulty in proving beyond REASONABLE DOUBT an advertiser’s dis- honesty, 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 In 2003 the Federal Trade Commission’s Bureau of Consumer Protection introduced the National Do Not Call Registry, which allows consumers to opt out of receiving phone calls from telemarketers. MARK WILSON/ GETTY IMAGES GALE ENCYCLOPEDIA OF AMERICAN LAW, 3 RD E DITION 156 CONSUMER PROTECTION 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 advertise- ments; therefore, the law does not apply to those statements. Fair Debt Collection Practices Act The Cons umer Protection Act was amended in 1996 to include the Fair Debt Collection Practices Act ( PUBLIC LAW 104-208, 110 Stat. 3009 [1996]). Congress passed the law to address the abusive, deceptive, and unfair debt collection practices used by many debt collec- tors. Personal, family, and household debts are covered under the act, which includ es 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 or make false statements. Despite these restrictions, the FTC’s annual report to Con- gress in 2009 reflected that it received nearly 79,000 complaints about third-party debt col- lectors in 2008. 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 may also sue a debt collector and recover money for damages up to $500,000, or 1 percent of the collector’s net worth, whichever is less. Warranties Warranties are promises by a manufacturer made to the consumer purchasing the manu- facturer’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 perfor- mance 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, be- cause 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.Awarranty of merchantability concerns the basic understand- ing 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 GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION CONSUMER PROTECTION 157 . 2007, Februar y 13, 2008. 0 5 10 15 20 25 ILLUSTRATION BY GGS CREATIVE RESOURCES. REPRODUCED BY PERMISSION OF GALE, A PART OF CENGAGE LEARNING. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3 RD E DITION CONSUMER. of the extension of credit. All that the Truth-in- Lending Act requires is that the consumer be informed of the terms and conditions of the credit transaction. GALE ENCYCLOPEDIA OF AMERICAN LAW, . credit. The difference in the treatment of lender credit and vendor credit is based upon the assumption made by law that GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 148 CONSULS vendors are able