Bohol Northern Star College

College of Business and Accountancy

Corre, Mary Mae S. MICROECONOMICS

BSA-1 Mr. Vincent Boysillo

ASSIGNMENT - LESSON 9 THE ROLE OF GOVERNMENT

1. Consumer protection is the practice of safeguarding buyers of goods and services,

and the public, against unfair practices in the marketplace. Consumer protection
measures are often established by law. Such laws are intended to prevent businesses
from engaging in fraud or specified unfair practices in order to gain an advantage
over competitors or to mislead consumers. They may also provide additional
protection for the general public which may be impacted by a product (or its
production) even when they are not the direct purchaser or consumer of that
product. For example, government regulations may require businesses to disclose
detailed information about their products—particularly in areas where public health
or safety is an issue, such as with food or automobiles.

Consumer protection is linked to the idea of consumer rights and to the formation of
consumer organizations, which help consumers make better choices in the
marketplace and pursue complaints against businesses. Entities that promote
consumer protection include government organizations (such as the Federal Trade
Commission in United States), self-regulating business organizations (such as the
Better Business Bureaus in the US, Canada, England, etc.), and non-governmental
organizations that advocate for consumer protection laws and help to ensure their
enforcement (such as consumer protection agencies and watchdog groups).

2.

Deceptive Trade Practice Statutes

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.

Debt Collection Statutes

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.

Banking and Credit Statutes

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.

Real Estate Statutes

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.

Privacy Statutes

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.
Automobile Statutes

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.

Product Safety Laws

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.

Products Liability

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.

3.

Right to Safety

The assertion of this right is aimed at the defense of consumers against injuries
caused by products other than automobile vehicles, and implies that products should
cause no harm to their users if such use is executed as prescribed. The Consumer
Product Safety Commission (CPSC) has jurisdiction over thousands of commercial
products, and powers that allow it to establish performance standards, require
product testing and warning labels, demand immediate notification of defective
products, and, when necessary, force product recall.

Right to Be Informed

This right states that businesses should always provide consumers with enough
appropriate information to make intelligent and informed product choices. Product
information provided by a business should always be complete and truthful. This
right aims to achieve protection against misleading information in the areas of
financing, advertising, labeling, and packaging.

Right to Choose

The right to free choice among product offerings states that consumers should have
a variety of options provided by different companies from which to choose. The
federal government has taken many steps to ensure the availability of a healthy
environment open to competition through legislation, including limits on concept
ownership through Patent Law, prevention of monopolistic business practices
through Anti-Trust Legislation, and the outlaw of price cutting and gouging.

Right to Be Heard

This right asserts the ability of consumers to voice complaints and concerns about a
product in order to have the issue handled efficiently and responsively. While no
federal agency is tasked with the specific duty of providing a forum for this
interaction between consumer and producer, certain outlets exist to aid consumers
if difficulty occurs in communication with an aggrieving party. State and federal
attorney generals are equipped to aid their constituents in dealing with parties who
have provided a product or service in a manner unsatisfactory to the consumer in
violation of an applicable law.

Right to Satisfaction of Basic Needs

To have access to basic, essential goods and services: adequate food, clothing,
shelter, health care, education, public utilities, water, and sanitation.

The Right to Redress

To receive a fair settlement of just claims, including compensation for

misrepresentation, shoddy goods or unsatisfactory services.

Right to Consumer Education

To acquire knowledge and skills needed to make informed, confident choices about
goods and services, while being aware of basic consumer rights and responsibilities
and how to act on them.

Right to a Healthy Environment

To live and work in an environment which is non-threatening to the well-being of

present and future generations.