CLEP Introductory Business Law Test Prep / Course / Chapter

What Is Consumer Protection Laws

Lilly Evie, Ashley Dugger
  • Author
    Lilly Evie
  • Instructor
    Ashley Dugger

    Ashley has a JD degree and is an attorney. She has extensive experience as a prosecutor and legal writer, and she has taught and written various law courses.

Learn about consumer protection law. Understand what consumer protection, consumer law, and consumer protection law are. Also, see an example of consumer protection. Updated: 05/10/2022

Table of Contents


What is Consumer Protection?

Consumer protection may be defined as ensuring that consumers who purchased goods and services are protected from defective products and any unfair or deceptive business practices by producers and suppliers. The concept of consumer protection became a rising need in America as its economy modernized and gave way to the age of mega-corporations. Consumer protection laws fall under consumer affairs, which are defined as an established system aimed at the protection of consumers. Without consumer protection, these corporations exercised unfair advantage over consumers in the form of pricing and bargaining powers. As a result, practices like adhesion contracts, which denied consumers any bargaining power became an issue, compelling the federal government to step in and enforce various consumer protection laws. These laws amalgamate different federal and state legislation that regulates every consumer product in the U.S.A. Furthermore, the federal government established the Federal Trade Commission in 1914 to enforce consumer welfare and investigate antitrust practices among large corporations. The commission acts on behalf of consumers to investigate and punish violations of consumer protection, thus saving the consumer time and money that would otherwise be spent litigating against more resourceful organizations.

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What is Consumer Law?

Consumer law refers to all the relevant regulations and legislation passed to ensure that consumer bargaining power is upheld in the marketplace. The typical consumer needs protection against profit-motivated corporations, manufacturers, and sellers who often have more significant resources and visibility in the market. Thus, it is essential to have consumer laws to level the playing field and ensure the cliche of "the customer being right" stands. Consumer laws also protect intellectual property rights and copyright against theft or misuse by other parties. Consumer laws can be found at the state and federal levels and include regulations against false advertising and defective products. They also provide simple mechanisms for consumers to seek legal respite for any unfair practices by sellers.

Some of the most common cases in consumer law include:

  • Predatory lending. Predatory lending involves providing easy credit at exorbitant repayment rates or adding hidden fees and penalties to the fine print of lending contracts. Such abusive lending behavior might leave the consumer financially vulnerable, hence requiring consumer laws to regulate such behavior. The Truth in Lending Act (TILA) of 1968 requires that all financial lenders exhaustively disclose their lending terms and associated borrowing costs to all prospective loan consumers.
  • Aggressive debt collection. More often than not, an individual may run low on cash streams, forcing them to miss a debt servicing obligation. Unfortunately, some creditors may opt to pressure the debtor to pay up by calling them incessantly or threatening them with penalties and even harm. Such aggressive behavior negatively affects debtors, thus the need to ensure that they are shielded. The Fair Debt Collection Practices Act (FDCPA) of 1978 prohibits these manipulative tactics and proposes a statutory award of $1000 plus legal fees to victims should they decide to prosecute.

What is Consumer Protection Law?

Consumer protection laws are a select group that offers individual consumer protection against unfair market practices by sellers, such as selling hazardous and defective products. Note that consumer protection laws are a part of consumer laws, while consumer laws range from consumer protection to trading standards and copyright protection. These laws help deter sellers and manufacturers from dangerous and unethical business practices, thus protecting consumer wellbeing overall. Some of the most critical consumer protection laws include:

  • The Federal Securities Act of 1933. This law was enacted in the aftermath of the Great Depression and sought to crack down on fraudulent transactions in the stock market. It prohibits activities such as insider trading and suspicious financing when trading securities. The law also established the Securities and Exchange Commission, which regulates the U.S. securities markets and investigates and punishes violators of the law.
  • The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2008. The Dodd-Frank Act was enacted in 2008 after the Great Recession. In addition to increasing oversight over large financial corporations, the law established the Consumer Finance Protection Bureau, which regulates and restricts subprime mortgages to prospective house buyers. These mortgages were primarily to blame for the crisis, and the nature of their handing out and collection constituted predatory lending practices.
  • The Fair Credit Reporting Act of 1970. This law protects consumers against unfair reporting of their credit status and allows them to contest any incorrect credit information. Therefore, lenders are not allowed to share inaccurate or outdated consumer credit data, giving consumers a fair chance at accessing mortgages and loans.

Consumer protection laws are essential because they protect consumers from any dishonest and unexpected practices by sellers that may lead to financial, physical, and emotional risks.

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Frequently Asked Questions

Why is consumer law important?

Consumer law is important because it levels manufacturer and supplier power with consumer interests. This means that the more resourceful sellers and makers do not abuse their power to present fraudulent or defective products at the expense of the consumer.

What is consumer protection in simple words?

Consumer protection refers to the ongoing process of shielding consumers from deceptive and fraudulent business practices by sellers and manufacturers and from defective products that they consume. Consumer protection is enacted through consumer protection laws, regulations, and agencies such as the Federal Trade Commission.

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