ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
WHAT’S AHEAD
3.1 Consumer Rights and Responsibilities
3.2 Government and Consumer Protection
3.3 Deception and Fraud
3.4 Resolve Consumer Problems
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
LESSON 3.1
Consumer Rights and Responsibilities
GOAL
►Describe each of your consumer rights and
responsibilities.
Slide 2
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
A Consumer Bill of Rights
►First pioneered by John F. Kennedy in 1962
►Designed to protect consumers in a newly changing
economic environment
►Protects against the businesses that are not working to
meet consumer expectations
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
A Consumer Bill of Rights
►Safety
►Products must not endanger a consumer’s health
►Be informed
►Businesses must provide accurate information in
advertising, labeling, and sales practices
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
A Consumer Bill of Rights
►Choose
►There should be a variety of choices available
►Competition is the contest among sellers to win
customers
►Monopoly is a situation where there is only one company
that sells a specific product or service
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
A Consumer Bill of Rights
Right to . . .
►Be heard
► Consumer
interests must be considered when laws
are created
►Redress
► To
seek and receive a remedy, such as a refund or
other compensation
► Consumers should be able to obtain fair remedies to
problems
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
A Consumer Bill of Rights
Right to . . .
►Consumer education
► Enough
information is needed for consumers to
make informed decisions when buying products
►A healthy environment
► Businesses
should avoid polluting the environment
and should contribute to the welfare of the
community in which they operate
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Rights Carry Responsibilities
►Use products safely
►Consumers must follow manufacturer’s
recommendations for product use
►Use information
►Consumers are responsible for using the
information to evaluate product choices
►Choose carefully
►Take advantage of product variety by considering
many options and making rational choices
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Rights Carry Responsibilities
►Express satisfaction or dissatisfaction
►Tell elected officials opinions on consumer
issues and inform them of improper business
practices
►Seek redress
►Inform businesses of unfair practices and
pursue remedies
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Rights Carry Responsibilities
►Be an educated consumer
►Take advantage of opportunities to gather
information and learn how to make rational
buying decisions
►Contribute to a healthy environment
►Support businesses that operate responsibly
and report environmental abuses to authorities
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
As a consumer, what rights are you entitled to
when dealing with businesses that sell goods
and services? What responsibilities do you have
in return?
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
As a consumer, what rights are you entitled to
when dealing with businesses that sell goods
and services? What responsibilities do you have
in return?
• Businesses should respect consumers’ rights to safety,
information, choice, being heard, redress, education, and
a healthy environment
• Consumers have the responsibility to use products
correctly and to inform businesses of any problems
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
LESSON 3.2
Government and Consumer Protection
GOALS
►Describe the evolution of the consumer movement.
►Identify government agencies and laws that help
protect consumers.
►Describe different types of products warranties and
how they protect consumers.
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
The Rise of the
Consumer Movement
►A growing concern
►In the past, products were simple and easy to understand
and fix
►Not so anymore
►A growing awareness
►People are writing books that depict problems in
business
►
Slide 14
The Jungle, Silent Spring, Unsafe at any Speed
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
The Rise of the
Consumer Movement
►The consumer movement
►Seeks to protect and inform consumers by requiring
practices like honest advertising, product warranties,
improved safety standards
►Grew out of consumers’ desire to have the government
intervene on their behalf
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Government Protection
►Federal Trade Commission
►Created in 1914
►Protects consumers from unfair or deceptive business
practices
►Consumers can complain to the FTC about a product
►If it finds a company is using deceptive advertising, it
can issue a cease-and-desist order
►
Slide 16
Order requires a company to stop using an advertising practice
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Government Protection
►Consumer Product Safety Commission
►Created in 1972
►Protects consumers from dangerous products
►First agency to have power over all consumer products
►Responsible for product recalls
►Can set standards for any consumer product and ban
those that it considers hazardous
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Government Protection
►Environmental Protection Agency
►Created in 1970
►Enforces laws that protect our environment
►Makes sure that businesses dispose of hazardous waste
properly
►Sets standards for air and water quality, monitors these
standards
►To comply, businesses may need to add extra, costly
equipment
►
Slide 18
This cost is usually passed on to the consumer
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Government Protection
►State and local protection
►Generally control the more local issues like regulating
when lawns are mowed to control dispersion of emissions
►Consumer movement today
►Consumer Reports is a great magazine to look into before
you make a major purchase
►They test big ticket items and apply ratings to these items
for quality, price, etc.
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Government Protection
►Federal Trade Commission
►Consumer Product Safety Commission
►Environmental Protection Agency
►State and local protection
►Consumer movement today
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Warranties
►A warranty is a company’s promise that a product will
meet certain standards over a given time period
►Often done to gain trust of the consumer
►The Magnuson-Moss Warranty Act
►1975, regulated the way warranties were written
►Full warranty- a specific written guarantee
►Limited warranty – a written warranty that does not meet
the standards of a full warranty because of specified
limitations
►Implied warranties – unwritten guarantee that the
product is of sufficient quality to fulfill the purpose for
which it was designed
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
 Why do many people feel that consumers need
protection more now than in the past?
 What federal agencies are charged with protecting
consumers from false advertising, dangerous
products, and pollution?
 What differences are there between full and limited
warranties? How do warranties benefit businesses
that offer them?
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Why do many people feel that consumers need
protection more now than in the past?
Today’s more complicated products make them more
difficult to evaluate, leaving consumers vulnerable to
poor-quality or even dangerous goods and services
Slide 23
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
What federal agencies are charged with
protecting consumers from false advertising,
dangerous products, and pollution?
• FTC protects consumers from unfair or deceptive
business practices
• CPSC protects consumers from dangerous products
• EPA is responsible for protecting the environment
Slide 24
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
What differences are there between full and
limited warranties? How do warranties benefit
businesses that offer them?
• Full warranty: promises repair or replacement of defective
product over a specific period of time at no cost to the
customer
• Limited warranty: promises repair or replacement of
defective product subject to stated limitations
• Businesses that offer warranties provide an incentive to
customers to buy products with the stated protection
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
LESSON 3.3
Deception and Fraud
GOALS
►Explain the meaning of deception and describe how
consumers may be harmed by this practice.
►Identify common types of fraud and explain how
consumers may protect themselves against it.
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Deception
►Sometimes products don’t meet your needs or they fall
short of your expectations
►Sometimes this is because of deceptive or fraudulent
sales practices
►Advertising becomes deceptive when it misleads
►When taken to unlawful extremes, it is fraud
►Legitimate sales practices are not deceptive, they are
just designed to sway your purchase to that company
►Grossly exaggerated claims and misleading pricing
policies can be illegal
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Deception
►Trading up
►The practice of pressuring consumers to buy a more
expensive product than they had originally intended to
buy
►Not illegal
►Although salespeople can be helpful in getting you
information on products, be careful that you make a
rational buying decision and are not pressured
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Deception
►Sale price
►A sale is only a sale if it is lower than normal
►Stores often mark up the price of a product right before
they put the item on sale
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Deception
►Suggested retail price
►Common in car dealerships
►Manufacturer expects you to haggle
►Never pay MSRP
►Also beware of the salesperson who says that they are
the lowest prices in town
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Deception
►Loss leader
►An item priced below cost to get you to come into the
store
►If you only purchase the loss leader, the retailer will lose
money.
►Goal is to draw you in then have you purchase more
items at regular price
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Fraud
►Fraud
►Deliberate deception, designed to secure unfair or
unlawful gain.
►A statement is fraudulent if it meets these two
conditions:
►The person who made the statement must know it is
false.
►The purpose of the statement must be to cause others to
give up property that has value, such as money.
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Examples of Fraud
►Bait and switch
►Baiting consumers with an advertised, but nonexistent
bargain then switching you to a higher priced in-stock
product
►Illegal
►Pyramid schemes
►A type of financial fraud in which people pay to join an
organization in exchange for the right to sell
memberships to others
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Internet and Telephone Fraud
Watch out for . . .
►Deal offered seems too good to be true
►Credit card/Social Security number requested to verify
identity
►Must buy item to get something else for free
►No written contract or sales agreement is provided
►You “must act now” or offer expires
►No method given to contact the organization
►Information about organization not available from
independent sources
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
The Many Faces of Fraud
Examples:
 Healthcare products that promise to cure incurable




diseases
Home-improvement contractors who want payment
before doing any work
Vacation clubs that require money in advance with the
promise of inexpensive first-class vacations later
Repair work offered for less than the going rate
Weight-loss programs that promise unrealistic results
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
What is the definition of a deceptive selling
practice?
How can you protect yourself against fraudulent
selling practices?
Slide 36
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
What is the definition of a deceptive selling
practice?
• Deceptive selling practices are intended to mislead
consumers
• Trading up, false sales, and inflated suggested retail
prices can be deceptive
Slide 37
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
How can you protect yourself against fraudulent
selling practices?
• Learn to be skeptical
• Check out unfamiliar companies and ask questions
• Carefully evaluate responses to questions
• Understand what you are buying and make decisions with
your head rather than your emotions
• Use the decision making process
Slide 38
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
LESSON 3.4
Resolve Consumer Problems
GOALS
►Describe how to successfully complain about a product
you purchased.
►Identify government programs that can help resolve
consumer problems.
Slide 39
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
KEY TERMS
 cooling-off period
 small claims court
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Prepare to Make a Complaint
►Resolving the problem
►Don’t be angry, work to get complaint resolved
►Need to have documentation
Sales receipts
► Warranties
► Save receipts for items that you buy that you might have to
document proof of purchase
►
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Prepare to Make a Complaint
Write down the facts
►The date and location of the transaction
►A description of the product
►The product’s price and your method of payment
►A specific explanation of what is wrong
►A statement of how you want the problem resolved
►Also list how you would like the problem to be resolved
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
The Complaint Process
►Start with the seller
►Most businesspeople are honest and want to satisfy
the customer
►Follow this process:
► Return to the store and explain the problem, documenting who you
spoke to and their actions
► Ask for a manager if the salesperson can’t help you
► Proceed on to the manufacturer or the company’s home office
► Proceed to consumer groups like the Better Business Bureau
► As a last resort, you can sue
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
The Complaint Process
►Seek help from consumer organizations
►Better Business Bureau (BBB)
►
Slide 44
A nonprofit organization that does the following:
► Helps resolve disputes between consumers and sellers
► Keeps a file of complaints against local businesses and
supplies this information to consumers who request it
► Educates consumers by providing information in printed tip
sheets and booklets on the Internet
► Promotes honest advertising and selling practices
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
The Complaint Process
►Seek help from consumer organizations
►Arbitration
An impartial third party who listens to both sides of a dispute
then makes a decision
► Automobile manufacturers and appliance makers use
arbitration a lot
►
►Media help
►
Slide 45
Getting the word out about bad business practices can be
damaging to a business’ reputation. Use this avenue
cautiously.
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Government Efforts
to Help Consumers
►Truth in information
►Require businesses to supply accurate, honest
information about their products to consumers
►Enforcement is difficult
►Illegal actions must first be identified
►Individuals must rely on governments to prosecute
dishonest businesses – enormous task
►Use common sense
►If information looks suspicious, check it out further
before you buy
Slide 46
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Government Efforts
to Help Consumers
►Cooling-off periods
►A specified period of time in which a consumer can back
out of an agreement to buy something
►Known as the Right of Rescission
►Often is three days
►
Slide 47
FTC has the three day rule for purchases signed in a home
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Government Efforts
to Help Consumers
►Reporting consumer problems
►Complaints can be registered with the Attorney General’s
office or a consumer affairs office
►Big thing that these do is to force a business to clean up
its act and operate honestly
►You may not receive much retribution, but your complaint
may help others
Slide 48
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
Government Efforts
to Help Consumers
►Using small claims court
►Exist in all states for lawsuits ranging from $0 - $1000
and all the way up to $10,000
►Court costs are low
►You don’t need a lawyer
►Most cases are resolved quickly
►To begin a suit, you need to file with a clerk at the
courthouse
►Be sure that this is a last resort option
►The court will not collect the judgment for you
Slide 49
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
At which step of the complaint process is an
organization such as the Better Business Bureau
best able to help a consumer?
What are several ways in which the government
works to protect consumers?
Slide 50
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
At which step of the complaint process is an
organization such as the Better Business Bureau
best able to help a consumer?
At the fourth step of the complaint process, organizations
such as the BBB are best able to help consumers when
they are interacting with managers.
Slide 51
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3
What are several ways in which the government
works to protect consumers?
The government protects consumers by . . .
• passing and enforcing laws
• setting standards
• licensing businesses
• requiring labeling
• providing a court system that consumers may use to
protect themselves
Slide 52
© 2010 South-Western, Cengage Learning