Download Unit 7 Consumer Protection Notes

Consumer Protection
Laws and Agencies that Provide Financial Safeguards
Consumer Protection Laws
 Who provides these laws?
 Federal, state and local laws
provide safeguards for personal
finances
 Laws are monitored and
enforced by different
government organizations
 Securities and Exchange
Commission (SEC)
 Federal Trade Commission
(FTC)
 Consumer Product Safety
Commission (CPSC)
Credit C.A.R.D. Act 2009
 C ard
 A ccountability
 R esponsibility
 D isclosure
Also called :
“Credit Cardholders Bill of Rights”
Credit C.A.R.D. Act 2009
C.A.R.D. ACT PROVISIONS
 Card issuers will be prohibited from marketing credit
cards on campus (1,000 ft. barrier) (can not be at college
sponsored events)
 bans card issuers from offering pizza, T-shirts, hats and
other freebies in exchange for signing up for a credit
card
 Under age 21 must have co-sign OR proof of ability to
pay
………………………………..BUT…………
They can still send mail offers to students living on college
campus
They can still offer “freebies” IF it does not require
signing up for the card
CARD ACT PROVISIONS
 Do Not need to know the following provisions
 Can no longer raise rates - *unless for specified reasons




under the law
More advance notice of rate hikes – was 15 days , now 45
days
Fee restrictions
Under age 21 must have co-sign OR proof of ability to
pay
must send statements 21 days before a payment is due.
Current law requires a mere 14 days' notice.
 The Securities and Exchange Commission (SEC) regulates the financial markets
(stocks/bonds etc) and strives to create a fair and orderly market environment.
 The SEC is a law enforcement agency
 What would be a violation or criminal activity that the SEC would investigate?
 Misrepresentation or omission of important information about stocks
 Manipulating the market prices of securities (stocks)
 Stealing customers' funds or stocks
 Insider trading (violating a trust relationship by trading on material, non-public
information about a security)
 Selling unregistered stocks
 Insider trading is the buying or selling of a security by someone who
has access to material nonpublic information about the security.
Insider trading can be illegal or legal depending on when
the insider makes the trade. It is illegal when the material information
is still nonpublic; trading while having special knowledge is unfair to
other investors who don't have access to such knowledge.

Illegal insider trading includes tipping others when you have any sort
of nonpublic information. Legal insider trading happens when
directors of the company purchase or sell shares, but they disclose
their transactions legally. The Securities and Exchange Commission
(SEC) has rules to protect investments from the effects of insider
trading.
 Congress saw the need for substantial reform of the banking
system, which eventually came in the Banking Act of 1933,
or the Glass-Steagall Act.
 separated commercial banking from investment banking.
Senator Glass was the driving force behind this provision.
Basically, commercial banks, which took in deposits and
made loans, were no longer allowed to deal in securities,
while investment banks, which dealt in securities, were no
longer allowed to have close connections to commercial
banks
 Following the passage of the act, institutions were given a
year to decide whether they would specialize in commercial
or investment banking.
 Only 10 percent of commercial banks’ total income could
stem from securities
 Another important provision of the act created the Federal
Deposit Insurance Corporation (FDIC), which insures bank
deposits with a pool of money collected from banks.
 1999 the Gramm-Leach-Bliley Act repealed the provisions of
the Banking Act of 1933 that restricted affiliations between
banks and securities firms.
 The Glass-Steagall Act's repeal in 1999 is believed
in some circles to have contributed to the 2008
global credit crisis.
 Commercial banks, around the world, were
saddled with billions of dollars in losses due to
the excessive exposure of their investment
banking arms to derivatives and securities that
were tied to U.S. home prices.
 'Sarbanes-Oxley Act Of 2002 - SOX‘- was enacted in response to the
accounting scandals in the early 2000s. Scandals such as Enron, Tyco, and
WorldCom shook investor confidence in financial statements and required
an overhaul of regulatory standards.
What did they do wrong? - these companies lied about their profits and
misled investors about the value of the stocks.
 to protect investors from the possibility of fraudulent accounting activities
by corporations. The SOX Act mandated strict reforms to improve
financial disclosures from corporations and prevent accounting fraud. The
SOX Act was created in response to accounting malpractice in the early
2000s, when public scandals such as Enron Corporation, Tyco International
plc, and WorldCom shook investor confidence in financial statements and
demanded an overhaul of regulatory standards.
Federal Trade Commission
 Provide financial safeguards
 Includes the Bureau of
Consumer Protection
 Protects consumers against
unfair, deceptive or
fraudulent practices
 Enforces consumer
protection laws enacted by
Congress
 Regulates financial practices
 The Federal Trade Commission (FTC) is an independent
federal agency whose main goals are to protect consumers
and to ensure a strong competitive market by enforcing a
variety of consumer protection and antitrust laws. These laws
guard against harmful business practices and protect the
market from anti-competitive practices such as
large mergers and price-fixing conspiracies.
Federal Trade Commission
 Originally created
as a way for the
federal government
to engage in “Trust
Busting”
 Still enforces
antitrust
regulations
 Protects consumers
from fraud
Consumer Product Safety Commission
 Issues recalls on
products
available for
purchase
 NOT food
(FDA)
 Publishes
information about
product safety
 Publishes annual
list of “safe
holiday toys”
Other Organizations
Better Business Bureau
• Allows a person to:
• Research companies
• File a complaint about a company
• Provide information about types
of scams
• Is both national and local –
Cleveland has a branch
Ohio Consumer’s Council
•“Residential utilities consumer
advocate”
• Educates consumers about
utility issues
• Acts as a representative for
Ohio residents in court against
utility companies
• Electric, Water, Natural Gas,
Telephone