Consumer Protection Laws

How To Avoid Problems With Consumer Protection Laws

Local businesses consider regulations a major challenge to their operations, and they expect it to get worse, according to The Mechanics Bank Business Optimism Survey.

State and federal consumer protection laws comprise one of the largest areas of regulation affecting businesses, generating thousands of suits annually. If a business is sued successfully, it may be subject not only to compensatory damages, but punitive damages and attorneys’ fees as well. Suits have proliferated in recent years, because the potential for large verdicts gives buyers and their lawyers a strong incentive to complain.

Here are some important tips for avoiding problems:

There are no “honest mistakes”: Most laws affecting business make little or no distinction between clearly intentional violations and those that result from mistakes. Business owners need to know the laws and make sure their employees do, too. Employee actions can leave a business liable unless the actions explicitly violated company policy that was explained to all workers.

Follow the legal procedure: Many consumer protection laws set up procedural requirements for response to a complaint, and businesses can fall afoul of the law by violating them, even if they didn’t do anything wrong. An example is the Fair Credit Reporting Act, which requires you to respond to a disputed billing within 30 days. Don’t miss the deadline, or you risk being fined. Businesses also are required to send customers periodic mailings advising them of their rights under the act.

Accuracy counts: You can be sued for things that may not seem like a big deal. Examples include:

Advertising a product as U.S.-made when, in fact it was made elsewhere
Offering something that is supposedly “free” but in fact has a cost
Running out of an advertised product and not offering a “rain check” or comparable product substitute
Making incorrect (misleading) price comparisons with other merchants or with the business’s own "regular" prices
Offering a reduction from the “usual” selling price for “special merchandise” that never was or will be sold at that original price.

Know your obligations regarding product warranties: Whether or not a business expressly guarantees a product, state consumer laws create an “implied warranty," that says that the goods or services sold will accomplish what they are supposed to, and that there is nothing significantly wrong with the product. Businesses make this promise every time they complete a sale.

You also create a warranty anytime you give advice to a customer regarding how a product may be used for a specific purpose. For example, if you say that certain dishware is “dishwasher safe” and it isn’t, the warranty has been breached.

Implied warranties don’t promise longevity, nor do they cover problems caused by improper use, abuse, ordinary wear or lack of maintenance. But a judge will look at the “normal durability” of the product in question in determining fault. The state statute of limitations for breach of warranty is four years from date of purchase.

Put it in writing: If you don’t offer a written warranty, you can disclaim implied warranties—but only by putting it in writing. Be clear that you will not take responsibility if the product doesn’t work and that the consumer is taking on the entire product risk. Consult with an attorney to make sure your disclaimer meets legal specifications.

Even “as is” products carry liability: Even a product sold “as is” does not eliminate liability in some instances; for example, if it proves to be defective or dangerous and causes personal injury to someone.

Take contracts seriously: A myriad of factors can prevent a business from carrying out a successful contract with a customer, resulting in a lawsuit or small claims court action. Examples include:

Failure to deliver an order on time
Inability to deliver the product that was promised
Unwillingness to provide the product or service at the price quoted

A contract is a promise, and in business, broken promises usually cost money. Damages can depend on how significant or “material” the breach and subsequent harm to the customer was.

For example, you promised a printing job to a client by close of business Thursday, but delivered it first thing Friday morning. The damages may not be “material”—but suppose that the pamphlets needed to be on Thursday night’s flight to Hong Kong in order to meet a deadline? Significant damages may be in order.

Your problem is not their problem: Businesses sometimes try to back out of a promise to provide a product or service at a quoted price. They may have a very good reason—such as an unexpected price hike from a supplier. However, under contract law, you have an obligation to “perform” as agreed.

Be generous; try to resolve amicably: The reality is that almost every business will find itself in a customer dispute at some point. No matter how strongly you feel that you are in the right, lawsuits are costly, and may harm your business reputation. They take time, energy and focus away from your business. Your best strategy is to avoid lawsuits; make sure you and your staff comply with applicable laws. Unless you believe a complaint is fraudulent, be generous in interpreting and meeting your obligations. After all, a satisfied customer is your best form of advertising.

To get more information about consumer protection statutes, contact the Federal Trade Commission (www.ftc.gov) , and the California State and Consumer Services Agency (http://www.scsa.ca.gov/)

For more information about the Fair Credit Billing Act, visit:

http://www.nolo.com

For more information on what constitutes deceptive advertising, visit: http://www.ftc.gov/bcp/guides/guides.htm

For more information about warranties, visit: http://www.ftc.gov/bcp/conline/pubs/buspubs/warranty.htm

For more information on contract law, visit: http://www.law.cornell.edu/topics/contracts.html

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