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Consumer Protection
BACKGROUND[APRIL 1, 2002] Federal, state, and local governments regulate businesses to protect consumers from unfair practices and unsafe conditions and products. At the state level in Michigan, the Department of Attorney General (AG) is responsible for enforcing most consumer-protection laws. The Department of Consumer and Industry Services (MDCIS) regulates professions, corporations, and nursing homes. Michigan created the nation's first state-level consumer-protection agency: the Consumer Protection Division, established in the AG's office in 1962. Early legislation to protect Michigan consumers covers unlawful trade practices and prohibits false representation and misleading use of words in selling, governs eviction procedures and rental agreements, regulates unsolicited merchandise, and delineates buyers' rights in home solicitation sales. Later legislation includes the landmark Consumer Protection Act of 1976, which prohibits a variety of specific misrepresentations in commerce and advertising, regulates the return of down payments and conditions of signing agreements and service contracts, and requires sellers of business opportunities to file notice with the AG. It allows the AG to bring a class action on behalf of Michigan residents and for a person to seek a judgment, injunction, or damages against a violator of the act. Also enacted in 1976 was the item-pricing law, which requires prices to be clearly marked on individual items for sale (with certain exceptions), the volume and availability of advertised items to be posted, and a rain check offered if an advertised item is not available. Under this law, if an automatic checkout system (scanner) charges a price higher than that on the item, the buyer is entitled to the lower price plus 10 times the amount of the difference. Consumer-protection legislation regarding automobiles includes a law that prohibits unfair and deceptive practices in motor-vehicle service and repair (1974) and the “lemon law” (1986); the latter provides legal remedies for buyers of new cars that do not conform to their warranty and cannot be fixed. Product liability is a consumer-protection area pertaining to (1) damages or injuries that manufactured products may cause to users and (2) penalties and remedies imposed for such damage or injury. In the mid-1990s, business interests successfully championed a number of changes in product-liability law, among them statutes that
In the late 1990s, consumer groups and trial lawyers tried but failed to achieve legislative repeal of the above changes. In other consumer-protection areas, recent legislation
At the federal level, the Federal Communications Commission's (FCC) recent “truth-in-billing” guidelines require new telephone charges to be highlighted and clearly organized to prevent cramming—placing unauthorized or misleading charges on phone bills, a practice that has been the subject of growing consumer complaint. Slamming—switching consumers to another long-distance phone company without their direction—also is prohibited. DISCUSSIONHistorically, Michigan has been a leader in consumer protection, but consumer advocates assert that a pronounced business-oriented climate in state government during the 1990s blunted the protections, favoring industry over customers. Business interests respond that the earlier environment was too consumer oriented and discouraged businesses from coming to or expanding in Michigan; they believe that the changes of the last few years, particularly in product liability, put Michigan on equal footing with other states. The AG's office, where consumers direct their complaints about unfair business practices and charities, reports that the vast majority of businesses deal fairly with consumers. Roughly 126,000 complaints were filed on a variety of businesses in 2001, and most were resolved without court action. In the past, grievances most frequently concerned motor-vehicle repair and item pricing. More recently, complaints about telemarketing top the list, followed by grievances about natural and propane gas service and the Internet. Other complaints concern the actions of retail companies, gasoline merchants, mail-order companies, banks, automobile manufacturers, credit-reporting agencies, and contractors. Pending LegislationConsiderable consumer-protection legislation is pending in the Michigan Legislature. Among the most significant are bills that would
TelemarketingCurrently, federal law requires telemarketers to maintain a “do-not-call” list of consumers who have given notice to the individual calling company that they do not wish to be contacted. The Federal Trade Commission (FTC) currently is holding hearings on a plan to establish a nationwide do-not-call registry. Opponents in marketing and advertising argue that such a list would use taxpayer money to restrict First Amendment rights and, further, cause extensive job and sales losses. In Michigan, a provision for a do-not-call registry was passed by the House, but removed from telemarketing legislation by the Senate. Critics argue that a Michigan registry would not prevent out-of-state or foreign telephone solicitation. Many consumers support such a list, and the AG, in cooperation with the Michigan AARP (American Association of Retired Persons) office, has produced new complaint forms in the absence of state legislation. According to the AG, about one-third of the telemarketing-fraud victims are senior citizens. A recent FBI report estimates that about 14,000 illegal telemarketing operations bilk consumers nationwide of about $40 billion annually, and half the victims are aged 50 and older. Telemarketing fraud has increasingly become an international problem as American telemarketers respond to U.S. law enforcement and move operations elsewhere, often to Canada. Internet Sales and Identity TheftThe Better Business Bureau, a private, business-sponsored organization, reports that
The FTC reports that nationally, identity theft was the leading consumer-fraud complaint in 2000, exceeding grievances about Internet sales/auctions and services. Thefts of someone's identity information, such as credit card or Social Security numbers, to steal money or commit fraud are rapidly increasing. Privacy advocates say that as many as 750,000 people may be victimized annually. The FTC has developed an ID theft affidavit that a victim may use when an account has been opened fraudulently in his/her name, eliminating the need for the consumer to file separate paperwork with each company with which s/he does business. Item PricingThe current item-pricing law is favored by consumers, the AG, and the AARP but opposed by retailers who must mark items individually even when, for example, they are in a bin under a sign stating the price. Pending legislation would remove item pricing from all goods except food and nonprescription drugs and increase penalties for scanner error from 10 times the error amount to 20 times. Supporters of the change say the 26-year-old item pricing law negates the benefit of advancing technology. The AG's annual accuracy survey of scanners at major retailers shows an error rate of 3.2 percent in 2001, a marked improvement over 16.9 percent in 2000. InsuranceRecent hearings on the “good faith” insurance claim-payment legislation produced horror stories from consumers who said their claims had been delayed or denied without cause. Anecdotal evidence, insurers say, obscures the fact that hundreds of thousands of claims are resolved every year, and that settling claims amicably is what keeps insurers in business. The insurance commissioner is investigating automobile insurers' practice of considering the customer's credit history in setting rates. Companies say that credit standing is an accurate predictor of loss, but consumer and agent groups say driving records should determine rates. Lending PracticesTestimony in hearings on predatory-lending legislation suggests that the number of unscrupulous financial professionals is small, but the impact is sizable. Elderly consumers, first-time home buyers, and low-income people often are the victims of lending scams, fraud, and misrepresentation. Opponents say that the bills mistakenly focus on banks, credit unions, and savings and loans, whereas most predatory lending is engaged in by unscrupulous used-car dealers, home contractors, payday lenders, and others. They also contend that people who have poor credit are a high risk and lenders should be entitled to charge them a higher interest rate than other borrowers. Plain LanguageThe proposal to require plain language in contracts has wide consumer support. Business groups support the concept of plain language and note that common marketplace sense dictates the need for informed consumers. They oppose the legislation, however, arguing that there is no consensus on what constitutes “plain” language, and a government agency or some other third party should not be dictating the language that will be used in a particular field of business. See also Privacy; Telecommunications. FOR ADDITIONAL INFORMATIONAmerican Association of Retired Persons Better Business Bureau Consumer Information Bureau Federal Trade Commission Michigan Bankers Association Michigan Chamber of Commerce Michigan Department of Attorney General Michigan Insurance Federation Michigan Manufacturers Association Michigan Retailers Association 
CONTENT CURRENT AS OF APRIL 1,
2002
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