Consumer Protection Law
US consumer protection laws are a group of statutes designed to protect the interest of consumers and promote fair competition by requiring that businesses provide accurate information about their products or services and operate honestly and transparently.
Seven main issues that the federal consumer protection laws address are:
False advertising — Advertising that misrepresents the true nature of a product or service either by giving deceptive descriptions, pricing, measures, or quantities or by making false comparisons.
Predatory lending — High-interest fees, hidden charges, and other deceptive, unfair, or abusive lending terms.
Unfair debt collection — Harmful debt collection practices, such as harassment and threats.
Product safety — Defective products and deceptive business practices, such as not meeting food safety standards or regulations on children’s toys.
Privacy rights — How businesses collect and use personal information.
Consumer education — Information provided by businesses to help consumers make informed decisions about their goods or services.
Consumer warranties and service contracts — Warranties are guarantees that a product meets certain quality and performance standards. Service contracts are agreements that the customer purchases separately from the product to cover the costs of certain repairs beyond the warranty period.
In this guide, we will answer what is consumer protection law and discuss in-depth consumer warranties and service contracts. We will provide an overview of US consumer protection laws that also touches on other aspects of consumer protection law.
Consumer Warranties and Service Contracts
As a federal consumer protection law requirement, every product purchase comes with a warranty guaranteeing the product will serve the consumer for some time. The warranty may be accompanied by a service contract, which outlines terms and conditions for service if the consumer needs to repair some part of the product to restore proper functionality.
Express and Implied Warranties
According to US consumer protection laws, there are two main types of consumer warranties as follows:
Express warranty — An oral or written warranty that a new or used product will perform according to consumer protection laws for a specified period.
Implied warranty — While not all products should have an express warranty, all products do have an implied warranty. According to consumer protection law, an implied warranty is an unwritten guarantee that an average product will perform for ordinary purposes. Though it may differ across states, an implied warranty can last up to four years. For example, when you purchase a car, it is implied that the vehicle will function as a car of its nature and class ought to function.
Service Contracts
According to federal consumer protection law, a service contract is a written warranty agreement between the consumer and a repair or regular maintenance service provider, not the seller. The agreement articulates the circumstances under which the consumer can take the product for repair or maintenance, the cost implications, and the contract duration.
While this definition primarily applies to maintenance warranties on products like vehicles or electronics, consumers also frequently enter broader service agreements in everyday scenarios — from household repairs to professional services. For those cases, a customizable service contract template can help outline terms clearly, ensuring transparency between the consumer and service provider, and reducing the risk of disputes.
Dealing With a Warranty Breach
Consumer protection laws require that, when a product doesn’t perform according to the specifications, standards, or description of the manufacturer, it is considered a breach of express warranty. However, if a standard product fails to function according to design, such non-performance is considered a breach of implied warranty.
Breach of warranty, according to US consumer protection law, can be categorized into two types: material and immaterial breaches. For example, if a refrigerator arrives with a minor cosmetic dent on the side that doesn’t impede its performance or functionality, this constitutes an immaterial breach. The damage is superficial and doesn’t affect the applicant's ability to fulfill its purpose. However, if the refrigerator fails to cool food or ceases to function entirely, this is a material breach, as it represents a failure in the product’s essential function.
In consumer protection law, addressing these breaches requires different approaches as follows:
- Immaterial breaches — While an immaterial breach doesn’t impact the product’s core functionality, it may still be worth contacting the seller or manufacturer to report the issue. They may offer compensation, such as a discount or an option to exchange the product. Businesses can support this process by clearly outlining their terms using a written return policy template to set customer expectations and minimize misunderstandings.
- Material breaches — Material breaches, being more severe, may warrant more aggressive actions. Contact the manufacturer or seller immediately to inform them of the issue. Be sure that you have documented the problem thoroughly, and be prepared to provide evidence.
For both types of breaches, take time to first understand the terms of the warranty, whether express or implied, extended by the business that served you. Next, communicate the breach in a calm and respectful manner, expressing the fact that you seek an amicable resolution of the matter. If a material breach is not handled in a way that meets your expectations, consider contacting an attorney or reporting the matter to the relevant US consumer protection law agency.
Key Consumer Protection Laws
Several federal consumer protection laws establish a variety of agencies and statutes to enforce the protection of consumers against unfair business practices. In the United States, consumer protection laws include federal and state laws, each governing one or more of the seven aspects of consumer protection law listed above. The Federal Trade Commission (FTC) is the government agency with the mandate to oversee the implementation of US consumer protection laws and champion consumer rights.
Federal Securities Act
The Securities Act of 1933 is a federal consumer protection law enacted after the stock market crash of 1929. It promotes transparency in the financial market and requires investors to get accurate and comprehensive information on investment contracts known as securities available for public sale. The Act also prohibits misrepresentation and fraud in securities trade. A key provision of this consumer protection law is that it requires the registration of securities sold in the United States. During registration, companies provide the following information:
A description of its properties and business;
A description of the securities being offered; and
Certified company financials and details of management.
Later, the Securities Act of 1934 established the Securities and Exchange Commission (SEC), the autonomous agency responsible for enforcing federal securities laws.
Fair Credit Reporting Act
This federal consumer protection law regulates access to consumer credit reports. It gives you access to your own credit records and promotes fairness and accuracy of credit information compiled by credit reporting agencies (CRAs).
Before the FCRA, people did not have the right to access their own credit information and, therefore, did not know the type of information banks and other institutions leveraged to make decisions about them. The main provisions of this consumer protection law include:
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Notice of the credit information that was used against your interest (e.g., information that made the basis of a denial of a loan or work opportunity);
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Limitations on who can access your credit data;
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The right to remove old negative information;
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Free access to your credit information once a year;
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Access to your credit score; and
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The right to dispute incomplete or inaccurate credit information.
Dodd-Frank Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act is a consumer protection law passed in response to the financial crisis of 2007–2008 to make the financial system safer for consumers. Some of the key provisions of this Act are:
Financial oversight and regulatory agencies — The Act established the Financial Stability Oversight Council and the Orderly Liquidation Authority. The FSOC monitors the stability of the “too big to fail” financial institutions, such as the Bank of America Corp. or The Goldman Sachs Group, Inc. The OLA, on the other hand, was established to provide a fund to facilitate the dissolution of companies under receivership.
The Volcker Rule — Named after former Federal Reserve Chairman Paul Volcker, this rule prohibits banks from investing for their profits. It also restricts the extent to which banks can engage in speculative trading.
Whistleblower incentives and protections — The Act provides whistleblower incentives, such as cash payments, and offers protection to employees who report fraudulent business practices.
Fair Housing Act
The Fair Housing Act is a consumer protection law prohibiting consumer discrimination in any commercial activities in the housing market. The Act seeks to prevent discriminatory practices on the basis of sex, gender, race, disability, nationality, or religion.
The Fair Debt Collection Practices Act (FDCPA)
The FDCPA is a consumer protection law that prohibits unfair, abusive, deceptive, personal, family, or household debt collection methods. To achieve this, the Act mainly prohibits certain kinds of communication practices. For instance, debt collectors should not contact debtors before 8 a.m. or after 9 p.m. Further, they cannot use social media to embarrass debtors by posting details about their debt.
Section 5 of the Federal Trade Act
Section 5 is one of the critical statutes to enforce consumer protection law groups. It prohibits actions by businesses engaged in commercial activities, including banks. Other practices addressed by this section are:
- Unfair or deceptive practices likely to cause harm to consumers; and
- Deceptive acts like false representation or omission of information to mislead.
Telephone Consumer’s Protection Act (TCPA)
The TCPA, a consumer protection law, protects consumers from unwanted phone solicitations (a.k.a. telemarketing). The Federal Communications Commission (FCC) is responsible for the enforcement of the Act. Some of its major provisions are:
National Do Not Call Registry — Allows individuals to register their phone numbers in the registry if they do not want to receive unsolicited phone calls.
Use of auto-dialers and pre-recorded messages — Within the ambit of consumer protection laws, it is the TCPA that prohibits using auto-dialers and pre-recorded messages for telemarketing without the recipient’s express consent.
Identification requirements — Requires telemarketers to give their number, the business they work for, and their official contact information while engaging consumers.
Penalty — The Act outlines penalties if a business violates a person’s rights through unfair trade practices.
The CAN-SPAM Act
CAN-SPAM stands for Controlling the Assault of Non-Solicited Pornography and Marketing. This consumer protection law was passed in 2003 and gives consumers the right to stop businesses from using their email. The Act requires companies to identify themselves in the “From” and “Reply-To” fields of emails. Further, it requires:
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Use of the non-deceptive subject lines;
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Emails to be appropriately marked as promotional or advertisements;
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The sender to include a physical postal address; and
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A way for the recipient to opt out.
The Gramm-Leach-Bliley Act (GLBA)
The GLBA is a consumer protection law that requires companies that offer financial services, including insurance, to protect sensitive customer data and explain their data-sharing practices. Some of the key provisions of this Act include:
Repeal the Glass-Steagall Banking Act of 1933 and the Bank Holding Company Act of 1956 — By repealing these consumer protection laws, banks, securities companies, and insurance companies could consolidate and affiliate to offer comprehensive financial services to consumers.
Privacy — Financial service companies are required to publish privacy policies and practices.
Data security — This consumer protection law requires institutions to publish written security plans indicating how they intend to protect consumer data.
Ethics of getting consumer information — Financial institutions should obtain consumer information honestly and not under the pretense of using any fraudulent means.
The Children’s Online Privacy Protection Act (COPPA)
As the name suggests, the primary objective of this consumer protection law is to protect the privacy of children under 13 online. This Act achieves its aim mainly by requiring verifiable parental consent before children can access online services and create accounts with online platforms. Further, the Act allows parents to review and delete any information collected from their children.
Be Aware of Scams and Fraud
Beyond the safety net provided by US consumer protection laws, consumers must remain vigilant and informed about scams and fraud. Scams are cunning ploys engineered to defraud unsuspecting individuals of their money. With the rise of technology and social media, criminals have become adept at employing social engineering and phishing techniques to extract sensitive information. Such information can be exploited to access bank accounts or to deceive individuals into making payments to fraudulent entities instead of legitimate businesses.
Fraud, on the other hand, encompasses a broader spectrum of deceitful tactics geared toward financial enrichment through deception. A prevalent example of fraud in consumer protection law is lottery scams. In these scams, individuals receive messages proclaiming that they have won a lottery or sweepstakes. However, these “winners” are required to remit a processing fee to claim their winnings, which are nonexistent.
Investment fraud, such as Ponzi schemes, is another fraudulent method. Unscrupulous individuals lure investors by promising exorbitantly high returns. They create a facade of profitability. However, instead of genuine profits, the returns are paid from the capital contributions of new investors. Eventually, when the scheme can no longer attract new investors, it collapses, and many people lose their money.
How To Avoid Scams
While consumer protection laws play an integral role in safeguarding consumers, people need to understand their responsibility to protect themselves from fraud. You must be vigilant and skeptical, especially when sending and receiving online communication. Critical ways to avoid scammers include the following:
- Practice digital safety and security to avoid phishing scams. Practicing digital safety and security is vital in deterring phishing scams. One common technique cybercriminals use involves hacking a person’s email and awaiting an impending payment. At this point, they may send an email redirecting the person to an alternative payment link or method that is entirely fraudulent. To enhance your digital safety, use secure WI-FI networks and always verify payment information and the security of web links.
- Educate yourself. Keep yourself educated on the latest fraud techniques and security systems by subscribing to online resources or working with a qualified consultant for regular system audits.
Consider consulting with an attorney from a consumer protection law firm for additional insights into securing your digital presence and transactions.
How To Get a Free Credit Report
The Fair and Accurate Credit Transactions Act (FACTA) is a federal consumer protection law that entitles you to get one credit report once every year from each of the three major credit companies, Experian, Equifax, and TransUnion. Request your free credit report or review it online through AnnualCreditReport.com or call (877) 322-8228.
What Are Online Consumer Protection Laws?
Online federal consumer protection laws safeguard consumers’ rights during digital interactions and transactions. Their fundamental aim is to enhance online safety, deter fraudulent practices, protect consumer privacy, promote equitable trade, and boost transparency in information disclosure. The Restore Online Shoppers’ Confidence Act is one example. It is a consumer protection law that places stringent restrictions on third-party payment processors’ sale of user data, ensuring a more secure and private online shopping experience for consumers.
How Do Consumer Protection Laws Apply to Mortgage Lending?
US Consumer protection laws protect borrowers against discrimination, predatory lending, and unfair debt collection practices. Individuals and businesses often turn to consumer protection law firms that are experienced in this area to navigate the complex landscape. These consumer protection law groups have a thorough understanding of the vast array of mortgage protections available, such as the following:
- The Truth in Lending Act (TILA) entitles borrowers to clear and accurate legal information about mortgage terms and conditions.
- The Real Estate Settlement Procedures Act (RESPA) requires lenders, including mortgage companies, to provide accurate disclosures about the costs of the real estate settlement process.
- The Fair Housing Act (FHA) is a consumer protection law that seeks to promote fairness in the housing market by prohibiting discrimination based on race, color, national origin, religion, sex, and disability.
- The Equal Credit Opportunity Act (ECOA) prohibits credit discrimination based on color, religion, national origin, sex, age, and marital status.
- The Dodd-Frank Wall Street Reform and Consumer Protection Act establishes the Consumer Financial Protection Bureau (CFPB), which makes rules for lenders like mortgage companies to ensure a fair and transparent market for consumer financial products like loans and other services.
What Are Consumer Protection Laws for Bankruptcy?
The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 amended the US Bankruptcy Code and is one of the main federal consumer protection laws on bankruptcy. The Act provides stringent eligibility requirements to make it more difficult for debtors to file a Chapter 7 bankruptcy through which most debts can be discharged and, instead, force them to file a Chapter 13 bankruptcy, which involves a debt repayment plan. Some of the key provisions of this consumer protection law include the following:
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The legislation introduced a “means test” to evaluate whether the debtor’s income was low enough to qualify for Chapter 7 bankruptcy. If a debtor’s income exceeds the state median income, the debtor may be forced to file a Chapter 13 bankruptcy instead.
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The law also requires debtors to undergo credit counseling with an approved agency within 180 days before filing for bankruptcy. This particular consumer protection law imposed stricter residency requirements to prevent debtors from “forum shopping” for more favorable bankruptcy exemptions.
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Consumer protection laws made it harder for individuals to file for bankruptcy repeatedly as a stalling tactic. They must wait eight years from a prior Chapter 7 discharge or two years from a prior Chapter 13 discharge.
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The statute increased the priority of child support and alimony payments over other creditors.
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The BAPCPA required more detailed disclosures by debtors of their financial affairs.
What Are Consumer Protection Laws That Protect Your Privacy?
The US consumer protection laws that guard privacy control how companies gather, manage, and utilize consumer information. They include the following:
The Children’s Online Privacy Protection Act (COPPA) is tailored for children under 13 and oversees the methods of collecting information about them.
The Electronic Communications Privacy Act (ECPA) restricts unauthorized governmental access to private electronic communications.
The Fair Credit Reporting Act (FCRA) promotes the accuracy, fairness, and privacy of the data held by consumer reporting agencies. It also necessitates consumer consent before credit reports can be shared with employers.
The Gramm-Leach-Bliley Act (GLBA) mandates financial institutions to disclose their practices regarding information sharing to their customers and to safeguard delicate data.
The Health Insurance Portability and Accountability Act (HIPAA) sets out federal consumer protection laws for individual health data managed by covered entities and provides patients with certain rights concerning this information.
The Privacy Act of 1974 offers a regulatory framework that directs federal agencies on collecting, maintaining, utilizing, and disseminating personally identifiable information about individuals.
The Bottom Line
In the dynamic landscape of federal consumer protection law, consumer protection law firms play an essential role in enforcing these regulations and supporting consumer rights. Consumer protection laws effectively deter unethical practices among businesses, fostering a climate of trust within various marketplaces. The balance between ethical conduct and trust fuels economic expansion, as consumers feel confident in their spending decisions. As societal, technological, and business landscapes shift, consumer protection laws undergo necessary amendments to accommodate change and support continuous growth.
US consumer protection laws are not static. These consumer protection laws adapt to ensure that the balance between business operations and consumer rights remains fair and advantageous.
The contribution of consumer protection law firms goes beyond litigation and advocacy. Lawyers experienced in consumer protection laws play a significant role in shaping the discourse around consumer protection law, pushing for reforms where necessary and ensuring that the consumer protection law protects consumers effectively in an ever-changing marketplace. Their work helps to uphold fairness and transparency, thus ensuring that federal laws support the cornerstone of the US economy.