Consumer contract laws provide consumers protection in the general marketplace by ensuring that they have the information they need about a product or service. This will allow consumers to make informed decisions. Federal laws and state statutes mandate that all the information and facts regarding a transaction be fully disclosed. The primary intent behind these laws is to promote balance between consumers and sellers in the marketplace. This is accomplished by mandating the seller to reveal any terms or conditions that apply to the sale of goods or services.
Federal Trade Commission
The Federal Trade Commission is the primary agency for protecting U.S. consumers from fraudulent, deceptive and unfair business practices. One of the main objectives of the FTC, as it relates to consumer contract laws, is to promote consumer confidence in the marketplace by the enactment and strict enforcement of federal laws regarding consumers. The FTC also has the mission of providing no-cost information to consumers to educate them on their rights and what they can do to avoid becoming victims of fraud and misleading advertising and pricing tactics. The Federal Trade Commission encourages consumers to file complaints related to fraud and identity theft.
State Contract Laws
Nearly every state has consumer contract laws and regulations that are designed to provide safeguards to consumers in the marketplace. Many states based their codes on FTC laws. State statutes often provide protection that exceeds the conventional breach of warranty cases and typically cover a wide spectrum of industries. Regulations cover transactions ranging from airlines and automobiles to sweepstakes and utilities.
The language of the statutes varies by state, but all have the expressed purpose of protecting consumers against unfair business practices related to the sale or lease of property, services or goods.
Misleading Advertising
Federal and state consumer contract laws make it illegal for sellers to deceive or mislead consumers. Deceptive ads can lead to serious legal consequences for the seller, whether consumers are harmed or not. Regulatory agencies examine the overall impression of the ad, not whether it is technically true or not.
The FTC has taken action to protect consumer against many firms practicing false and deceptive advertising. Most states allow consumers to file suit against advertisers under consumer contract laws or join in class action suits.
Deceptive Pricing
Sellers are not permitted to make inaccurate price comparisons with other businesses. They are also prohibited from making similar comparisons to their own prices or advertise something as free, but there is a hidden cost.Businesses are in violation of the law if they advertise a price reduction from the normal price, but the "normal" price they advertise is not the usual price of the product. This type of advertising is misleading and is designed to lure the customer into believing he is receiving a discount.
Punitive Damages
Sellers who violate the consumer contract laws may pay a stiff penalty for violations. In some states, consumers can be awarded compensatory damages, which is the cost of the product or services, and punitive damages that may be many times the actual cost. Often the seller must foot the legal fees. Businesses owners must be knowledgeable about consumer protection laws and educate their employees about practices that could lead to legal repercussions. Punitive damages may be assessed even in cases where the seller had no desire to mislead the buyer.
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