Preparing for Consumer Choices

Chapter 1

Consumer Powers and Protections

You Are a Consumer

• Consumer – someone who uses goods and services.– Goods – physical objects that are produced– Services- actions that are performed for

someone.

• Roles in economic life- earning, spending and managing

• Consumer, worker and citizen are the 3 major economic roles that most people play.– Consumer – you are a consumer when you use

goods & services, even if you are not the ones paying for them

– Worker- if you earn money at any kind of job or do volunteer work. Workers produce goods and perform services.

– Citizen – use public service, pay for them through taxes, have the right to vote.

Consumer Power

• Purchasing decision made by consumers have an impact. Affect which goods are produced and which services are offered.

• Marketplace- all of the goods and services available for sale to the general public.

• Retailers- those who sell goods and services directly to consumers, strive to offer the right mix of products and to provide helpful services.

• Teens are very active consumers.

Technology

• Web sites to learn about product, read customer recommendations, compare prices, ask questions and make purchases.

• How do you sort all of the information?

• Technology makes it easier to impulse buy.

Effective Consumers

• Set goals

• Think critically

• Do their research

• Manage everyday finances

• Plan for financial security

Protecting Consumers’ Rights

Consumer Movement

• Based on the idea that the power of consumers can balance the economic and political power of business and industry.

• Led by consumer advocates- people or organizations who work on behalf of consumers– The Jungle

Consumer Rights and responsibilities

• 4 basic rights of consumers were identified by Pres. Kennedy – 1962

• Consumer Bill of Rights

• See page 29

• Redress – remedy for a wrong or a loss

• Congress has passed laws or statutes to protect consumers (pg 30)

Federal Agencies

• FTC- Federal Trade Commission

• Consumer Product Safety Commission

• USDA• Food and Drug

Administration

• Federal Communications Commission

• NTIA• Federal Consumer

Information Center

Other Consumer Assistance

• Consumer Groups – focus on education, protection, advocacy.

• Consumers Union independent testing agency that has long been a champion of consumer rights. I.e. Consumer Reports

Business & Industry

• BBB-Better Business Bureau – provide reliability reports on local businesses and allow consumers to file a complaint.

• Consumer Affairs Departments – communicate with customers about their rights and needs – large companies may offer toll free #

• Consumer Action Panels – formed by trade associations to address consumer complaints.

Media

• Media- channels of mass communications. Play an important role in warning consumers.

• Help resolve complaints

Protecting Your Credit Identity

Identity Theft

Identity Theft• The dollar loss suffered because of

identity theft from consumers was 343 million in 2002.

Federal Trade Commission

• The number of identity theft complaints filed in 2002 was 380,000 almost double from the 204,000 complaints in 2001.

Federal Trade Commission

• Consumers spent 26 billion dollars online.

IDENTITY THEFT occurs when someone wrongfully acquires and uses a consumer’s personal identification, credit, or account information.

Identity Theft

• Name• Address and Telephone Number• Social Security number• Driver’s license number• Bank account numbers• Credit card numbers• Passwords• Bills

Personal Identification Information Includes

• Wallet/Purse Loss or Theft - Information is taken from a lost or stolen wallet/purse (most common method).

• Mail and Phones - Information is taken from mailboxes, a change of address form is completed, or personal information is solicited by phone.

• “Dumpster Diving” - Personal information is discarded carelessly either at home or by businesses and thieves remove it from the trash.

• “Insider Access” - Dishonest employees steal the information and either sell it or use it.

• Internet - Personal data taken off the Internet• Credit Reports – A credit report containing personal

information may be obtained fraudulently.

Ways Identity Thieves Acquire Information

• To apply for a new driver’s license

• To open new bank accounts

• To apply for credit cards or store credit accounts

• To obtain cash with bank cards

• To get a job

• To rent an apartment

• To make retail purchases

How Information Can Be Used

Identity Theft

How Identity

Theft Occurs

& Prevention

Credit Reports

How Theft Occurs:• Thief fraudulently orders a credit report.

– Credit Reports – include all the accounts a person has, social security number, & personal information.

Prevention:• Check credit report once per year.• Don’t leave reports lying around.

Equifax P.O. box 105873 Atlanta, GA 30348

Report order:

1-800-685-1111

Fraud Hotline: 1-800-525-6285

www.equifax.com

Experian P.O. Box 2104

Allen, TX 75013-2104

Report Order: 1-888-397-3742

Fraud Hotline:

1-888-397-3745

www.experian.com

Trans Union P.O. Box 390

Springfield, P.A. 19064-0390 Report Order:

1-800-888-4213

Fraud Hotline: 1-800-680-7289

www.tuc.com

3 Credit Reporting Agencies

Mail

How Theft Occurs:• Thief steals mail to learn account numbers and

personal information.

Prevention:• Deposit outgoing mail in post office collection

boxes not unsecured mailboxes.• Promptly remove mail from mailboxes.• If on vacation, put a hold on mail.

Wallets and Pocketbooks

How Theft Occurs:• Thief steals a wallet or pocketbook containing a

wealth of personal information.

Prevention:• Don’t leave it in plain site.• Don’t hang from chair at public place.• Use a purse which closes securely.• Carry only what is absolutely needed.

Bills

How Theft Occurs:• A thief may steal bills containing consumer’s

name, address, phone number, bank or credit account numbers, or social security.

• May use information to open new accounts.Prevention:• Don’t leave statements lying around.• Pay attention to billing cycles and follow up if

bill does not arrive on time.

Calling Cards

How Theft Occurs:• If a thief has a calling card and personal

identification number, it may be used to make long distance calls anywhere.

Prevention:• Use only cards which require a personal

identification number.• Block numbers from others view while dialing.

Passwords

How Theft Occurs:• If a thief has access to passwords, he/she can

access accounts, send messages, and sell or purchase items.

Prevention:• Don’t give password to anyone.• Don’t write passwords down where others may

find them.• Create unique passwords using a combination

of numbers and letters.

Work Records

How Theft Occurs:• A thief who has access to work records may

have a person’s personal information, social security numbers, or bank information.

Prevention:• Ensure personal records are locked securely

with limited access by employees.

Pre-Approved Credit Cards

How Theft Occurs:• A thief may activate credit cards using pre-

approved credit card offers and have the statements sent to a different address.

Prevention:• Shred any credit card offers received and not

used.• Cut up any pre-approved credit cards not

used.

Bank Account Information

How Theft Occurs:• If a thief has a person’s bank account and

routing number, he/she may create fake checks, withdraw money, or access savings accounts.

Prevention:• Don’t leave statements lying around.• Use passwords.• Don’t have checks mailed home. Pick them up

at the bank.

Social Security Number

How Theft Occurs:

• A social security number is the key to a person’s identity. It opens new accounts, obtain driver’s license, file bankruptcy, etc.

Prevention:

• Never give our social security number.

• Ask for alternate number on driver’s license, insurance cards, and other materials.

• Do not carry social security card unless necessary.

ATM, Credit, and Debit Cards

How Theft Occurs:• A thief may withdraw money with both an

ATM card and PIN number.• Credit and debit cards are easy to use

because most stores do not compare cards with another form of identification.

– Can easily be used to purchase merchandise over the phone or internet.

ATM, Credit and Debit Cards

Prevention:• Don’t leave cards lying around.• Carry only those which will be used.• Use debit cards which require a PIN number.

– Do not write PIN number down in same place debit card is kept.

• Carry cards in separate holder from wallet.• Sign back of cards stating “Please see I.D.”

ATM, Credit and Debit Cards

Prevention cont.:• Have a list of all cards and account numbers.• Don’t give out account number unless making

a purchase.• Keep track of all receipts.• Destroy papers with card numbers on them.• Check statements for unauthorized charges.

Identity Protection

Shopping

Online

Why People Shop Online and Risks

Why• Order products from around the world.• Easily research items and compare prices.• Can be done at any time in the convenience of

own home.Risks• Personal information including credit card

numbers, social security number, financial records, and bank numbers can be used.

Safety Tips for Shopping Online

1. Know the real deal• Get all details before buying including prices,

delivery time, warranty information, and return policies.

2. Look for clues about security• Make sure the browser states “https” or “shttp”

indicating it is secure.

3. Use a credit card• Credit cards are the safest way because a person has

the legal right to dispute charges.

Safety Tips for Shopping Online

4. Use an escrow service• An escrow service will hold a person’s money until

confirmation of the product or services has been received.

5. Keep proof handy• Print and file all information in case needed later.

6. Ask about “substitute” or “single use” card numbers

• Allows a person to use his/her credit card number without putting the real account number online.

7. Get the scoop on the seller• Check complaint numbers at the state or

local consumer protection agency and Better Business Bureau.

Safety Tips for Shopping Online

Identity Theft

What to Do if Identity

Theft Happens

Immediate Steps

1. Act immediately!2. Keep a detailed record of correspondence and phone

records.3. Contact the three major credit bureaus and request a

“fraud alert.”1. Follow with a letter sent by certified mail.

4. Close all accounts which have been tampered with or opened fraudulently.

5. File a police report.6. File a complaint with the Federal Trade Commission.

Credit Card Liability

• Truth in Lending Act limits liability for unauthorized charges to $50.00 per card.– A letter must be received within 60 days of the first

bill containing the error.

– The dispute must be resolved within 90 days of the creditor receiving the letter.

ATM & Debit Cards, Electronic Transfers

• The Electronic Funds Transfer Act provides protection.

• The amount a person is liable depends upon how quickly the loss is reported.– Within two days is a maximum of $50.00.– Within sixty days is a maximum of $500.00.– After sixty days a person may be liable for everything.

• To report a loss call the financial institution and follow up in writing.

• Get new bank numbers, personal identification numbers, and passwords.

Check Liability

Checks• Contact the financial institution and stop

payment.• Notify the check verification service.• Most states hold the financial institution

responsible for losses of a forged check.

STAY ALERTBE CAREFULBE SMART

Identity Theft

Recognizing Deception & Fraud

Let the Buyer Beware

Deceptive Advertising

• Advertising that is likely to mislead consumers through false statements, omitted information or other unfair means.

• Bait and Switch- a retailer advertises a product that it has no intention of selling, hoping to persuade customers to buy another product at a higher price.

• False promise of free gifts- to avoid deception, the ad might say “gift with purchase”

• Deceptive pricing

• Hidden Catches- extra charges such as processing fee.

Fraud

• Fraud-deceitful conduct designed to manipulate another person for some gain

• Also occurs when consumers are led to buy a good or service that the seller knows, or should know, is unlikely to perform as claimed or to meet the consumer’s needs as promised.

Pyramid Scheme

• An illegal get rich quick plan

• Each person who pays a sum of money to join, then recruits several other people.

• Multilevel marketing plan – in legitimate multilevel marketing plans, distributors sell a product to consumers and receive income based on the amount of those sales.

Chain letters

• A message sent by postal mail or email that instructs the recipient to send copies to a certain number of people.

• If you start such a chain letter or even send one you are committing a federal crime.

Resolving Consumer Problems

Registering a Complaint

• In order to register a complaint, you must be able to state the problem clearly. Decide what sort of outcome you desire.

• Gather up any reciepts and product information related to the purchase. If you want to return or exchange an item, be sure you know the store’s policies.

Contacting the Merchant

• If your complaint is about a service, talk to the person who did the work.

• If is is about a purchased item, talk to the salesperson, or the customer service desk.

• Be polite• Record the name of the person you spoke

with, the date of your conversation and what actions or remedies were discussed.

Writing a letter of complaint

• You may need to write a formal letter of complaint.

• Enclose copies, not originals, of your sales receipts and any other supporting documents. Keep copies of the letters you write and those you receive so that you have a record of what has happened.

Dispute Resolution

• Mediation – a process in which two parties try to resolve a dispute with the help of a third party. Mediator

• Arbitration – the procedure in which a neutral person or panel listens to both sides of a dispute, weighs the evidence and reaches a decision.

• Binding arbitration – both parties agree in advance that the arbitrator’s decision will be final.

Legal Action

• If all else fails• It is essential to have a written record of all the

steps take to resolve the matter.• Small Claims Court – court of law in which

disputes involving sums under a certain amount are resolved by a judge.

• Lawsuit – hire a lawyer and file a lawsuit• Class Action suit – A lawsuit filed on behalf of a

group or people who all have the same complaint.