CONSUMER PROTECTION

Consumer protection is a new area of law; hence, the term does not appear in classical sources of Jewish law. The meaning of the concept is implied in the term itself: our generation is one of abundance, with great demands, numerous consumers, and extensive consumption. The consumers are not organized; each one consumes for himself and his household. On the other hand, there are large producers and distributors: manufacturers, monopolies, chain stores, merchants, suppliers, and agents of various kinds who are familiar with the markets and dictate its terms, including, inter alia, the consumer culture itself. Consequently, the consumer requires legal protection, as he does not always receive fair value for his money, both in terms of price and quality of goods.

This question is not confined to the sphere of commerce, but arises in the context of services as well. Contemporary society regards services as a commodity, and the service provided is not always commensurate with the price received for it.

But the term consumer protection is not only a matter of the relationship between consumer and supplier, or consumer and service provider, in terms of the contract between them and its execution. Consumer protection must be considered as part of the overall economic system. Does the economic system protect or even benefit the consumer? This question extends beyond the scope of our discussion, and we will only touch upon it briefly.

Although, as mentioned, the term consumer protection does not appear in our sources, Jewish law does deal with these problems. Some of the laws in the field relate to the overall economic system and the maintenance of fair trade, while others are designed to protect various weak parties, including the consumer. Most of the laws mentioned below also appear in the context of other entries, such as *Ona'ah (overreaching or misrepresentation), *Hafka'at She'arim (profiteering), and *Mistake; hence, we will treat those topics more briefly, referring the reader to the aforementioned entries for fuller discussion.

The Economic System

There are two major contemporary economic systems, albeit on a practical level each one includes elements of the other.

The first system, capitalism, advocates a free, competitive market, functioning according to the principles of supply and demand, without governmental involvement. The second, socialism-communism, espouses governmental involvement in the market economy, through the setting and supervising of prices, distribution and direction of the means of production, even to the extent of nationalization.

Each system has its advantages and drawbacks. The former system, practiced in the West, and most notably in the United States, is attractive and alluring, but does not ensure wealth and happiness to all; there are many indigent people in need of welfare services. The latter system, in its extreme form, collapsed in the U.S.S.R. A number of reasons contributed to its collapse, among them the indomitable human spirit, man's yearning for freedom, including freedom of initiative, business, and property rights.

Jewish law takes the middle road. It accommodates initiative and competition, but in a limited fashion, thereby assuring the possibility of acquiring wealth, but without excessively impinging upon the poor and weak. This approach is manifested in a series of different laws. Given the casuistic nature of Jewish law, which deals with the particular and the concrete, inductive reasoning is necessary in order to infer general principles from the particular cases.

We will briefly mention a few pertinent laws in this field.

Interest-Bearing Loans

One who gives a loan fulfills a positive commandment (Ex. 22:24; and Rashi loc. cit.). Loans are also a vital element in economic development. One person has capital, while another has initiative and productive abilities, but requires capital by way of a loan in order to realize these potentials. Thus far, the loan serves the borrower's interest: if he is poor, it provides him with his immediate needs; if he has initiative, it provides him with the means for setting up a factory or business. However, the loan is also in the interest of the loaner. In addition to the kindness involved, he hopes to profit from the interest to be accrued. The risk involved is that the benefit attained by the borrower will instead become a source of damage, as the borrower who does not succeed in his business will need to pay back the principal and interest without any economic justification,. which the lender receives unconditionally, at no personal risk. The lender thus becomes enriched at the borrower's expense, while the latter becomes impoverished. Biblical law intervenes and forbids the taking of interest, thereby preventing the widening of the gap between the two. Biblical law thus protects the interest of the borrower, who is also a consumer. Other laws promote freedom and initiative, on the one hand, and concern for the poor and weak, on the other. These include the sabbatical and jubilee laws, and in particular the cancellation of debts in the sabbatical year, various forms of charity, limits on commercial competition and against unjustified withholding of wages, the right of the worker to terminate his service before the completion of work, and others.

Hafka'at She'arim (Profiteering)

A number of laws are intended expressly for the consumer's protection. They are intended to ensure fair prices within the framework of a free market, where there is an accepted, standard market price. Whoever deviates from the market price without the other's knowledge transgresses the prohibition on deceit, as explained below. Jewish Law also intervenes in the setting of prices. In a free market, there is a danger that manufacturers and merchants will employ artificial means to influence prices. Jewish Law therefore prohibits profiteering. The Talmud (Meg. 17b) states that the blessing in the Shemoneh Esreh prayer for the year's produce was instituted by the sages against "profiteers," on the basis of the verse, "Break the arm of the wicked," which Rashi explains there as referring to "those who overprice produce and inflate prices." In other words, they artificially hike up prices in order to profit at the expense of the poor. For example: merchants who hoard their wares in order to market them at exorbitant prices when there is a shortage. There are also merchants who market their wares through agents, thereby increasing the price paid by the consumer (bb 90b). The Talmud further states (ibid., 90a): "A merchant should not make a profit of more than one sixth." However, these laws only refer to those goods which are considered essential or "life supporting," and the authorities dispute whether this category includes all foodstuffs or only some of them (see Maggid Mishneh and Kesef Mishneh on Maimonides, Yad, Hilkhot Mekhirah 14:2; Me'irat Einayim on Ḥm 231:36). Regarding all other goods, the market is free and "he can charge as much as he likes" (Maimonides, ibid.).

Another category of articles subjected to regulation includes items required for the fulfillment of positive commandments, such as shofar, lulav, tefillin, matzah, etc. With respect to this category the sages adopted supply-promoting measures that lead to price reductions: inter alia, by issuing lenient halakhic rulings (see Mish., Ker. 1:7 concerning the post-natal mother's sacrifice, and Suk. 34b regarding pruned myrtles on Sukkot). For details of the laws on this subject, see *Hafka'at She'arim (Profiteering).

The Services Market

In addition to protecting consumers of commodities Jewish Law also protects consumers of services from paying in excess of the value of the services rendered. Here, too, the tendency is to provide the consumer with the opportunity to receive essential services at reasonable prices. The policy of ensuring cheap prices for religious commodities also applied to religious services.

The Talmud (Ned. 37a) interprets the verse: "'God commanded me at that time to teach you … just as I [teach you] free, so shall you [teach others] for free." In other words, there is a positive obligation to teach Torah gratis. Similarly, the Mishnah states (Bek. 4:6) that payment is not to be accepted by persons fulfilling a positive commandment, such as a judge, witness, or one who prepares the waters of ritual purification (mei ḥatat) or sprinkles them on the ritually impure. The Talmud distinguishes, however, between wages paid for the actual performance of a commandment, and those paid for various preparatory labors involved in its performance. It is thus permitted to accept wages for transporting the ashes of the red heifer or for filling up the water used in that ritual. Similarly, the Mishnah states that one who, in order to perform a commandment, is compelled to take time off from work, may accept compensation for time lost. Thus, in the case of a judge adjudicating a legal dispute (even where there was no prior agreement to that effect), we estimate what proportion of a person's wages he would be prepared to forgo (in accordance with the wage level and the difficulty of his work) in order to fulfill a commandment rather than working (see Sh. Ar., Ḥm 9:5). This method enables those who spread Torah, such as rabbis, judges, teachers, as well as doctors, to receive payment for their work. According to another view, it is permitted to take payment when paid by the community rather than by individuals (see Tos. citing R. Tam, Ket. 105a).

The level of the judge's wage is "enough for his livelihood" (Ket., ibid.). The Talmud does not consider the possibility that he might demand more than this. Maimonides adds: "Their livelihood: for them, their wives, their children, and the members of their households" (Maim., Yad, Shekalim 4:7).

Regarding the fulfillment of commandments by the consumer, such as one who requires the services of a scribe to write a Torah scroll, tefillin, or mezuzah for him, mention should be made of the appeal made by the Tiferet Yisrael, based on the Mishnah (Bek., ibid.) "… that it is not fitting to burden people [monetarily] too much in matters of Torah and mitzvot," i.e. special care is required not to financially burden people with respect to items they need to purchase for the performance of commandments.

Wage Rates in Private Sector

In general, wages in the free market are fixed according to supply and demand. Nevertheless, in two situations Jewish Law does intervene:

(a) Determination of fees by service providers. A professional association can determine a price for services provided by its members to the public. The danger is that the price may be excessively high, without economic justification. Jewish Law responded to this situation by requiring the approval of "an important person" to protect the consumers' interests (bb 9a; and Sh. Ar, Ḥm 231:28).

(b) Where a private person charges more than the accepted price for his services. In certain cases, the consumer pays a higher price due to his ignorance of the accepted price (see the discussion of overreaching, below). On other occasions, he is aware of the accepted price but may be forced to pay an exorbitant price. This issue is discussed in Yevamot 106a:

If he [an escapee] was fleeing from prison and reached a ferry and he said [to the ferryman]: "Take a dinar [which is an inflated price] and take me across," he [the ferryman] is entitled only to his [normal] wage.

The Talmud explains that the person who undertook to pay can say to the ferryman: "I was fooling with you [and did not intend to pay the inflated price]" (see Maim. Yad, Hilkhot Gezelah ve-Avedah 12:7; Sh. Ar., Ḥm 264:7). However, the exemption is dependent on the fulfillment of two conditions: first, that the service provider inflated the price due to the customer's distress; second, that the service provider had other work at that time, which he lost because of the client.

Accordingly, the Shulḥan Arukh (Ḥm 264:7) rules: "In addition, someone fleeing from prison … he [the service provider] receives only his [normal] wage, and if he [the service provider] was a hunter and he [the client] said to him: 'Stop hunting and help me across,' he must pay him whatever they agreed upon, and this applies to other similar cases." The Rema adds: "Some authorities contend that the ruling that he [the service provider] is only entitled to his [normal] wage applies exclusively to instances in which it is not customary to pay a high price, but where a high price is the norm – for instance, with swearing by demons (to find a lost article) or for medical treatment – he must pay him whatever they agreed upon."

Ona'ah (Overreaching)

This is another rule that protects the consumer, although the original intention was to protect both sides: the seller and the buyer. The Torah states (Lev. 25:14): "When you sell an item to your friend, or buy from your friend, do not defraud each other." The sages derived the law of overreaching from this verse. That is, if it transpires that the price of the transaction deviated from the accepted price by one-sixth of its value or more, the aggrieved party has the option of imposing a sanction upon the offender, irrespective of whether he acted intentionally or accidentally (see Sh. Ar., Ḥm 227; and *Ona'ah).

Nowadays, due to the aforementioned market conditions, it is usually the consumer who is the overreached party, and the laws of ona'ah are intended to protect him from exaggerated prices.

Mistaken Transactions

We have thus far focused on issues of pricing, but at times the problem relates to the nature or identification of the transaction. In this context, Jewish Law protects the consumer in a variety of fields.

mistaken identity: In some cases the contract may be legally executed, but at the time of performance a discrepancy emerges between what was agreed upon and the concrete situation. In this context, the Mishnah states (bb 5:6): "He sold him … olive wood and it turned out to be sycamore … both are entitled to cancel the deal." This is a case in which both parties make a mistake.

a mistake in the object of the transaction: Sometimes the object of the transaction is transferred as required, but the consumer claims that there is a mistake related to the object of the transaction. We may distinguish between two different situations:

a. A Mistake relating to Quantity:

Sometimes the seller permits himself a small deviation in terms of measure, weight, or quantity from a large number of customers, to "compensate himself" for his small profit margin. Therefore, the Torah warns (Lev. 19:35): "Do not defraud, in measurements, in weights, or in measuring; fair scales …" The in judgment sages' exegesis of this verse indicates the extremity of the measures taken in order to prevent the offense: first, extreme accuracy is required: the Talmud (bm 61b; bb 89b) interprets the verse as follows: "'In measurements' [of an] area of land – he must not sell to one during the summer and to another during the winter." This is because the rope used for measuring length is not the same length in the summer as in the winter. 'In weight' he should not dip the weights in salt. [Tosafot, in the name of Rabenu Tam, explained that this is because "salt lightens the weights").] 'In measure' [teaches] that one must not cause [the liquid] to foam. This means that it is forbidden for the seller to pour the wine from a height into the client's measuring vessel, because it foams … and appears full" (see Rashbam on bb, ibid.).

The passage clearly proves that the margin of accuracy required is ¹/₆₃ of a log, and the Shulḥan Arukh (Ḥm 231:6) rules: "Even if [the measure] is very small, so that the foam is not worth one penny." Secondly, there are restrictions that extend beyond the strict scope of the prohibition: Not only is defrauding forbidden, but there is an a priori obligation to ensure the accuracy of the scales. Therefore: "Weights must not be made of tin, lead, or other types of metal, because they wear" (bb, ibid.). Moreover, based on the verse "you shall not have in your pocket …" the rabbis deduced that it is forbidden to possess an inaccurate measure in your house, so that it does not become an inadvertent stumbling block (Sh. Ar., ibid., 3). The court is responsible for taking precautions, by appointing inspectors charged with ensuring the accuracy of weights and measures (ibid., 2). Thirdly, in case of doubt, the seller must err in favor of the customer. This is derived from the verse (Deut. 25:15) "A full and righteous stone [weight] …" According to rabbinic exegesis: "Be righteous from yourself and give to him" (Sh. Ar., ibid., 14)

What remedy does the consumer have when he receives less than the agreed quantity of goods?

The Talmud (Kid. 42b) rules that the transacted object is returned. The authorities disagreed over the meaning of this ruling. Some hold that the transaction is annulled (Tos., bb 104a). Some distinguish between real estate and chattel: only with real estate must the defrauder supplement the amount or reduce the price as appropriate (Rashbam, bb, ibid.). Others distinguish between situations in which he can make up the lack, as with a shortfall in the weight or amount of a given product, and others which cannot be corrected, such as a house which is smaller than the agreed-upon size, in which case the transaction is annulled (see Naḥmanides on bb 103b; Sh. Ar., Ḥ.m. 232:1; Me'irat Einayim 4 and the novel-lae of the Gaon of Vilna, ad loc.). According to some authorities, if the transaction was made on the understanding that it is complete, but turns out to be deficient, the transaction is annulled. If, however, a sale of 100 eggs is agreed upon and it turns out that some are missing, the lack must be made up (Rabad's glosses on Maim., Hilkhot Mekhirah 15:2). According to another view, the transaction is always upheld, and the seller must make up the amount or, if this is not possible, reduce the price (Rashba, bb 103b).

b. a mistake relating to quality

The Mishna (bb 5:6) states: "If he sold him good wheat and it turned out to be bad, the purchaser may renege." Here, there is no remedy of supplementing the transaction, the only remedy is the annulment. Maimonides gives the following explanation (Mekhirah 15:2):

We do not calculate the loss of value due to the fault … If the fault reduces its value by an issar [a negligible amount] he returns the vessel, and the seller cannot say to the buyer, "Take an issar in compensation for the loss of value" because the buyer can say to him, "I want a perfect item."

But not every change in the attributes or quality of goods annuls a transaction. Some changes are small, in which case the remedy lies in compensation or repair. Thus, for example, the Shulḥan Arukh rules in accordance with R. Asher regarding someone who sells a house in a different city, where it transpires that before the sale was complete Gentiles destroyed the windows and doors. In such a case, the transaction is not annulled. This is considered a "passing fault" that can be repaired. Therefore: "He [the seller] reduces the payment so that the buyer can restore the house to its previous state" (Sh. Ar., Ḥm 232:5). There is also the case of a fault that is extraneous to the transaction and which can be remedied. For instance, if it transpires that a canal runs by the house, or another party has a right of passage through the house, the seller must remove this "obstacle," and the transaction is not annulled (Rema, ibid.).

What are the criteria for determining a mistaken transaction?

The more the customer details his original demands, the greater his opportunity to claim a mistaken transaction in the case of disagreement over the interpretation of the contract. A prior condition can serve to illuminate the parties' intentions (see Sh. Ar, Ḥm 214:1). But regarding an actual fault, no prior stipulation is required: "It is assumed that any buyer wants a perfect article with no faults." In this context, a fault includes: "anything that the local residents agree is a fault, such as annuls a transaction of this kind" (Maim. Yad, Hilkhot Mekhirah 15:5; Sh. Ar., Ḥm 2:6).

It follows that the local custom establishes the limits for a claim of mistaken transaction. The designated use of the item also influences the result of the consumer's claim. If a customer purchases a slave with a hidden blemish which does not prevent him from carrying out his work, such as a wart, he cannot claim this as a blemish, because the slave is intended for work and for no other purpose (Sh. Ar., ibid., 10). But if the item can serve several purposes, and the buyer failed to stipulate the purpose of his purchase, then even if the majority of consumers purchase it for the purpose he claims "we do not follow the majority in monetary matters." Hence, if someone purchases an ox, and it turns out to be a goring ox suitable for slaughter only and not for plowing, he cannot annul the transaction on the grounds of mistaken purchase (Sh. Ar., ibid., 23). In some instances, the claim of mistaken purchase is contingent on the behavior of the purchaser: (a) If he knew in advance that the concrete reality did not conform with the terms of the agreement, the claim of nonconformity is not accepted, unless he made a condition to that effect (Rema, Ḥ.m. 220:10; Gra, ibid.); (b) If the purchaser used the item after seeing the fault he is considered "as if he has waived [his claim], and it is not annulled" (Sh. Ar., ibid., 3). Some hold that it is the purchaser's responsibility to check the item so that he can later claim that it is unsuitable (see Maggid Mishneh on Maim., Hilkhot Mekhirah 5:3). Others, however, limit this obligation to specific circumstances (see Netivot ha-Mishpat on Ḥ.m. 232:1; Pitḥei Teshuvah ad loc.).

The seller, for his part, can protect himself from the claim of mistaken transaction if he makes an appropriate condition in advance to the effect that the buyer waives his right to annul the transaction in that particular instance (see Sh. Ar., Ḥm 232:7–9).

Commercial Advertising

The principal requirement of the seller relates to his presentation of the goods. He must be careful not to mislead the buyer. Not only is lying forbidden: concealing relevant information and misleading the buyer are similarly prohibited. Thus Maimonides rules (Yad, Hilkhot Mekhirah 18:1): "It is forbidden to defraud people in business or to mislead them. This applies equally to Gentiles and Jews. If he is aware of a fault in his merchandise, he must inform the buyer."

There are various kinds of actions that amount to misleading, but for our purposes we shall quote Maimonides (De'ot 2:6):

It is forbidden to sell a Gentile the meat of a carcass instead of ritually slaughtered meat, or a shoe made from [the skin of] a carcass rather than one made from [the skin of] a slaughtered animal … rather [you should have] truth in speech, an honest spirit, and a heart which is pure of all deceit and wrong-doing.

Even if there is no difference between the price of slaughtered meat and the price of a carcass, the Gentile is grateful to him for selling him what he assumes to be slaughtered meat, which is considered of a higher quality.

At times the law depends on the behavior of the seller. Hence the ruling:

It is forbidden to apply color [or apply makeup] to a person (i.e., a Canaanite slave), or an animal, or to vessels; for example, to dye the beard of a slave about to be sold to make him look young; or to give an animal bran water to drink, which causes it to swell and its hair to stand on end, so that it looks fat … (Sh. Ar., Ḥm 228:9).

This does not mean that all advertising is forbidden. Improving the external appearance of merchandise without concealing faults is permitted. The Mishnah (Ar. 6:5) states: "… although they ruled that a slave sold with clothes is worth more, so that if you buy him a cloak worth 30 dinars, it increases his value by a maneh [i.e., 100 dinars]." Rashi explains that this is so "… because good clothing enhances them and adds to their value."

In his gloss on the Mishnah, Tiferet Yisrael adds that coloring the merchandise with intent to deceive is forbidden, but "… to wash and anoint him [the slave] to encourage the buyers to purchase him is permitted."

In certain instances, the seller's presentation of the product can be interpreted in different ways, and if the purchaser fails to verify the true significance, he has only himself to blame. The Talmud (Hul. 94b) gives the example of an announcement for the sale of meat to Gentiles. Here it is the responsibility of the gentiles to conclude that the meat is terefah (not ritually slaughtered in accordance with Jewish Law).

In principle, advertising directed at the emotions and imagination is permissible. The Mishnah therefore rules (BM 4:12):

R. Judah said: a shopkeeper must not distribute parched corn or nuts to children, because he thereby accustoms them to come to him; the sages permit it. Nor may he reduce the price; but the sages say, he is to be remembered for good.

The ruling is in accordance with the sages' view. This demonstrates that free competition is more important than the possibility of deceiving people. However, it is still necessary to beware of overly seductive advertising, which obscures relevant information. The same Mishnah states: "One must not sift pounded beans: This is the view of Abba Saul. but the sages permit it." The sages ruling was accepted as the binding rule. In other words, the assumption is that the buyer will not be deceived into overrating the importance of the removal of the debris. However, the Mishnah continues:

… but they agree that he may not remove the debris from the face of the dish only, because this amounts to creating a deceptive appearance. (This ruling was codified in the Shulḥan Arukh, Ḥm 228:17.)

The Tosafot YomTov accurately point out that the phrase "creating a deceptive appearance" (literally "stealing the eye") implies that, even if the seller informs the buyer that he only sifted the top layer, he may nevertheless be deceived by the sight of clean merchandise, and receive the wrong impression.

An additional concern pertinent to the kind of commercial advertising common today is the use of immodest pictures and signs, etc. Similarly, one must beware of applying subliminal pressure to buy unnecessary merchandise, even to the extent of turning consumption itself into a value. This contravenes the words of Naḥmanides on the verse "You shall be holy …" (Lev. 19:2), where he states: "… that we should remove ourselves from luxuriousness."

The Legal Position in Israel

There are a number of laws relating to fair trade and the required agreement between a contract and its execution. We shall mention a few of these: the Standards Law, 5713 – 1953; the Sales Law, 5728 – 1968; the Contracts (General Part) Law, 5733 – 1973; the Standard Contracts Law, 5724 – 1964; the Contracts (Remedy for Breach of Contract) Law 5731 – 1971.

However, of special significance for our purposes is the Consumer Protection Law, 5741/1981. In the introduction to the explanatory note of the bill (Haẓa'ot Ḥok, 5780 p. 301), it was emphasized that "the proposal is deeply rooted in Jewish law, which provides extensive protection for the consumer within the framework of the laws of deception and fraud." In addition to some of the sources cited above, the words of the amora R. Levi are quoted: "The punishment for [false] measures is more rigorous than that for [marrying] forbidden relatives" (bb 88b).

The words of the Tosefta (bk 7:2) are also quoted: "There are seven types of thieves. Foremost among them – he who deceives people." The principles of Jewish Law pertaining to the topic are also quoted, as detailed above.

bibliography:

Elon, Ha-Mishpat ha-Ivri (1988), i, 113, 642; ii, 1078, 1106; idem, Jewish Law (I994), I, 127; ii, 795; iii, 1300, 1330; M. Elon and B. Lifshitz, Mafte'aḥ ha-She'elot ve-ha-Teshuvot shel Ḥakhmei Sefarad u-Ẓefon Afrikah 1 (1986), 213f.; B. Lifshitz and E. Shohetman, Mafte'aḥ ha-She'elot ve-ha-Teshuvot shel Ḥakhmei Ashkenaz, Ẓarfat ve-Italiyah (1997), 160f.; A. Levin, Free Enterprise and Jewish Law (1980); "Haganat ha-Ẓarkhan le-Or ha-Halakhah," in: Tehumin 1 (5740), 444; Tehumin 2 (5741), 470; Tehumin 3 (5742), 334; Keter, Mehkarim be-Kalkalah al pi ha-Halakhah (2004), pts. 1 & 2; N. Rakover, Ha-Misḥar be-Mishpat ha-Ivri, (1988), 17–49; M. Tamari, "Jewish Law and Economic Laws," in: Niv ha-Midrashiyah (1969), 127–32; S. Warhaftig, Dinei Misḥar ba-Mishpat ha-Ivri (1990), 51–115.

[Itamar Warhaftig (2^nd ed.)]

CONSUMER PROTECTION

Older consumers are just like all other consumers in many ways. They want to get fair treatment in the market place and avoid unscrupulous or sharp business dealings.

Consumer expectations

A fair marketplace supports several general rights. An important right is the opportunity to make informed choices among a variety of goods or services. To make informed choices, consumers need to receive complete and accurate information about their purchases. This information might include the product's content (for example, if the product contains nuts for those who may have an allergic reaction), safety warnings (the flammability of a garment), and product care instructions (temperature for safely storing an aerosol product). Obviously, this information needs to be written in plain language that will inform, rather than confuse, the consumer. It should be printed in a readable type size.

All consumers also expect a fair price. A price is fair if it reflects the actual cost of manufacture or providing the service without exorbitant mark up. They also want to be able to buy the item in the store at the price mentioned in an advertisement. They want to know if online price comparison services accept payment from advertisers to list their products more prominently. Consumers have a right to know all costs associated with a purchase, such as shipping and handling, and to get the same price as other consumers without discrimination.

Consumers also expect to be able to get someone to pay attention to their concerns about a product or service. Older consumers are particularly concerned about receiving personal service and individual attention from shopkeepers and financial institutions. They need to know with whom they are dealing, how to communicate with a company, and how to obtain refunds. They want access to effective remedies, such as enforcement of regulations, prosecution of criminal violations, and adjudication of private and class action lawsuits.

With the advent of new marketing media, from the telephone to the Internet, and the capacity of computers to collect and store massive amounts of information, consumer privacy is a growing concern. All consumers have a right to personal privacy. Older consumers especially want to be able to reject intrusive marketing practices, such as unsolicited contact by telephone, fax, or e-mail, and to control how and to whom personal information is given.

Older consumers at risk

The older population is growing rapidly. The aging of the "baby boomers," those born between 1946 and 1964, will accelerate this growth. The thirty-five million persons who were age sixty-five or older in 2000 make up a substantial force in the marketplace and have a significant impact on the economy. The economic status of older people has improved markedly over the past few decades. Compared to their parents, they have greater net worth and financial security. Between 1984 and 1999, the median net worth of households headed by older persons increased by about 70 percent. Fifteen percent of householders age fifty-five to fifty-nine have annual household incomes of $100,000 or more, as do 11 percent of those age sixty to sixty-four.

Householders age fifty-five to sixty-four, who generally are still working and enjoying peak earnings, spend more than young adults in most product and service categories. As better-educated and more affluent generations of Americans reach retirement age, they are projected to be more willing to spend in their older age than their Depression-era parents.

Moreover, several characteristics of the older population put them at special risk as consumers. Retirees living on Social Security or savings have less opportunity to recover financially if they lose their savings to an investment scam. A poor financial decision can have a greater impact on the older person than on a younger wage earner who can get another job and has time to replenish savings. Unfortunately, memory impairment or other cognitive losses for older adults can make them especially vulnerable to financial exploitation.

With money to spend, invest, and possibly leave to heirs, older consumers are at risk that someone will try to take advantage of them financially.

Controlling 70 percent of the nation's household net worth, persons over the age of fifty are prime targets for financial exploitation. Among the most vulnerable consumers are those over age seventy-five. Studies of consumer behavior of persons over fifty by the AARP (formerly American Association of Retired Persons) show that they expect honesty in the marketplace, are less likely to take action when they are defrauded, and are less knowledgeable about their rights in an increasingly complex marketplace (AARP, 1999). Frequently retired, they are more likely to be at home when a home repair contractor, who just happens to be in the neighborhood, knocks on the door. Telemarketers know they are home during the day to answer telephone solicitations.

The list of potential exploiters is long. They can be telemarketers, door-to-door salespersons, home repair contractors, finance companies, funeral directors, and financial advisors, as well as friends and family. All means of deception can be used to separate older consumers from their money. Con artists work their trade at the front door, on the street, in the office, or over the phone. Wherever they meet their victims, they rely on psychology, rather than force, to control their victims. Typically, the best players of these mind games have perfected the basic techniques of a confidence crime. First, they grab the potential victim's attention through some promise to make or save money. Using fast talk and impressive wording, they build confidence and trust. Next, to keep the victim's attention, they demonstrate an authoritative manner, pleasing personality, and empathy for the victim's needs or concerns. By playing on the victim's emotions and moving quickly through the pitch, the clever con artist gains control. Once the victim loses control of the transaction, or the conversation, they are likely to be rushed into making decisions, so they cannot check with others or use common sense.

Seventeen percent of consumers age eighteen and over report in the 1999 AARP survey of consumer behavior that they were the victim of a major consumer fraud or swindle. In AARP studies of telemarketing fraud more than half (57 percent) of persons over age fifty report getting at least one telemarketing call each week. And those calls work. Fourteen percent of respondents said that they had sent money, given their credit card number, entered a contest, made an investment, or donated to a charity in response to a phone solicitation.

Because of appreciation in home values and paid-off mortgages, the home is where the money is for older consumers. More than 80 percent of households headed by persons age fifty and older own their homes. Almost 60 percent of that group owns those homes free of any mortgage. Older homeowners are more likely to live in an older home that needs repairs, but less likely to be able to do the repairs on their own or to have money on hand for major repairs. This combination of factors puts them at risk for home repair fraud. To further compound the fraud, the contractor may steer the homeowner to a high cost home loan. Predatory mortgage lending practices in some communities threaten the stability of home ownership for older Americans. When loans are based on the equity in a home, rather than the homeowner's ability to repay the loan, the risk of foreclosure is greatly increased. The number of foreclosures in the United States has tripled since 1980, from over 150,000 to almost 459,000 in 1995. The consequences of foreclosure for an older homeowner can be shattering. It represents more than a loss of shelter; it could be the loss of the home a family has occupied for decades. As a result of foreclosure, some older homeowners may have to move into a nursing home.

Older persons who are concerned about passing their estates on to heirs may fall prey to investment counselors, insurance sales presentations, and living trust purveyors who falsely promise risk-free investments and exaggerate the costs of probate. Parties on both sides of a viatical settlement can be exposed to fraud. A viatical settlement is the sale at a discount of a life insurance policy. Insured persons, called viators, can obtain cash by selling a life insurance policy to a viatical settlement company. The viatical settlement company, in turn, sells the policy to a third-party investor. The investor continues to pay the premiums on the policy and collects the face value of the policy after the original policy-holder dies. While in some instances this financial transaction can produce much needed money for medical or nursing home expenses, unscrupulous promoters can defraud both the viator and investor.

Protections available

Legislative and regulatory protections are provided when abuse occurs in the marketplace. Most consumer protections are available to all consumers, regardless of age. The major group of consumer protection laws falls within state statutes called generically "unfair and deceptive acts and practices" (UDAP). Most UDAP statutes are very broad, and can be used to challenge a wide range of fraudulent, abusive, or deceptive activities. Some state statutes apply generally to the sale of goods and services. Other statutes target specific commercial activities, such as mobile home parks or timeshare properties. State UDAP statutes can vary in the specifics of who can sue, who can be sued, what practices are prohibited, and what relief is available. Most allow many different types of relief, including actual, treble, or punitive damages, injunctive relief, class actions, and in some cases, attorney fees. A public librarian could be of assistance in locating UDAP provisions in a state code.

UDAP statutes might be used to challenge billing practices of nursing homes that charge residents extra money for services covered by Medicaid payments or provide substandard care. The statute could be used to contest unfair terms in an assistive living facility's admission contract or misleading advertising about costs. These laws could be useful obtaining an injunction against a scam artist who tried to steal the equity from a senior homeowner.

Federal laws protect all consumers by requiring specific disclosures in credit transactions through the Truth in Lending Act (TILA). TILA provisions mandate that credit card companies have a process to correct billing errors and allow borrowers to get out of loans if lenders do not make certain disclosures about the cost of the loan. TILA protections can be particularly valuable to the older homeowner who becomes the victim of predatory home mortgage lending practices. Similarly, the Home Ownership and Equity Protection Act (HOEPA) is a useful tool to protect older homeowners. HOEPA was enacted in an effort to crack down on the use of high-interest, high-fee loans that strip the equity an older homeowner has built up. TILA and HOEPA are used to halt foreclosures. Under TILA, when the loan is secured by the equity in a home, the borrower's three-day unconditional right to get out of the loan can be extended to three or possibly more years, if the lender failed to make required disclosures. Violation of the HOEPA protections gives the homeowner the right to sue for damages, as well as to seek cancellation of the loan in certain circumstances.

Other consumer protection laws are of special interest to older consumers.

• The Consumer Leasing Act, created to address abuses in car leasing, and the FTC Used Car Rule, requiring a prominent sticker describing the car's warranty terms, protect older consumers on the go.
• The Fair Debt Collection Practices Act curbs harassing practices by debt collectors. The older debtor, who may fall prey to misleading statements or scare tactics by creditors, can use this provision to obtain damages for personal humiliation, embarrassment, mental anguish, and emotional distress.
• The Equal Credit Opportunity Act specifically protects against discrimination in the granting of credit because of age. This protection may come into play when a recently widowed person first applies for credit in her own name after her husband dies.
• The Federal Telephone Consumer Protection Act and the Telemarketing and Consumer Fraud and Abuse Prevention Act require callers to give consumers basic information identifying who is making the call. Telemarketers cannot make calls before 8:00 a.m. or after 9:00 p.m. They may not call persons who have asked to be placed on the calling company's "do not call" lists.
• The Federal Trade Commission Mail or Telephone Merchandise Rule requires merchants to deliver items ordered by phone or mail within thirty days. Older consumers who may have difficulty getting out to do their shopping need this protection to make sure what they order from home will be delivered as promised.
• The Federal Trade Commission Regulation for Door-to-Door Sales specifically gives relief to consumers pressured into buying something at home. The salesperson must tell consumers they can change their mind and cancel the entire transaction. By notifying the company within three business days of the sale, consumers can cancel and get a refund of any purchases made at their home or other temporary locations.

Sources of help

At the federal level, the Federal Trade Commission (FTC) has the primary responsibility to protect the interests and rights of consumers. Through enforcement actions, the commission can order parties to stop practices that violate federal consumer protection statutes and to pay fines. The FTC encourages people to file complaints about problems with deceptive or unfair practices through its online complaint process at www.ftc.gov/. While it cannot resolve individual complaints, the commission relies on its complaint database to track problems and initiate investigations. Other federal agencies involved with consumer issues include the Consumer Product Safety Commission and the Consumer Information Center. The United States Postal Inspectors investigate mail fraud and work closely with U.S. Attorneys in prosecuting cases.

At the state level, the attorney general has similar enforcement responsibility over state consumer protections. The attorney general may have a staff of investigators and prosecutors who concentrate on elder consumer issues. Many states have consumer protection offices either within the attorney general's office or as a separate state agency. These offices receive complaints, investigate and prosecute state fraud violations, and provide consumer education.

Many other state agencies have consumer protection responsibilities. The utilities commission may regulate the cost of residential gas and electricity. The department of weights and measures checks grocery store scanners and gasoline pumps for accuracy. Licensing of home contractors, hearing aid dispensers, and funeral directors offers a measure of protection when a service problem develops. Insurance commissioners determine what insurance products can be sold in the state.

As with any other type of legal problem, consumers can go to court with consumer claims. However, private litigation in the consumer area is not that commonplace. With claims involving smaller amounts of money, small claims courts may offer a practical solution for the individual consumer. A group of aggrieved consumers can band together to bring a class action suit, particularly if a company's practice has affected a large number of people. In between small claims court and class actions, the individual consumer may have difficulty finding a private attorney to handle the consumer dispute. The cost to bring the case may be higher than the potential recovery. The losing party generally does not have to pay the other side's attorney's fees unless the consumer protection statute expressly authorizes recovery of attorneys fee to the successful consumer. The consumer runs the chance of losing the case and having a large bill from legal counsel, if the lawyer will take the case in the first place. The American Bar Association reports that the number of private lawyers with a strong practice focus in consumer law may stand at about two thousand. Many of these attorneys built their practice on prior experience handling consumer matters as legal services attorneys or assistant state attorneys general.

The future

The emerging global economy presents many opportunities and challenges for consumers. Computer and communications technology advances place powerful tools in the hands of consumers. While online, consumers can access a brokerage account, buy a clock directly from a German artisan, compare the prices of cell phone service, and research eighteenth-century passenger manifests—all from the home computer. These same technologies allow businesses to collect an unprecedented amount of information about the purchase patterns and financial holdings of consumers. As e-commerce becomes a driving market force, new problems will need to be addressed about how best to protect consumers of all ages. At the same time, all consumers need to be alert that frauds and scams can just as easily, and certainly more rapidly, happen electronically.

Sally Balch Hurme

See also Consumption and Age; Retail and Older Adults.

BIBLIOGRAPHY

American Association of Retired Persons (AARP). Consumer Behavior, Experiences and Attitudes. Washington, D.C.: AARP, 1999.

American Association of Retired Persons (AARP). Consumer Home Equity/Home Improvement Lending Survey. Washington, D.C.: AARP, 2000.

American Association of Retired Persons (AARP). Findings from a Baseline Omnibus Survey on Telemarketing Solicitations. Washington, D.C.: AARP, 1996.

Federal Interagency Forum on Aging Related Statistics. Older Americans 2000: Key Indicators of Well-Being, 2000.

Loonin, D. "Consumer Law and the Elderly: Using State Unfair and Deceptive Practices Statutes to Protect and Preserve the Financial Independence of Seniors." Bifocal 20, no. 3 (fall 1999): 1–10.

Wasik, J. "The Fleecing of America's Elderly." Consumers Digest 39, March Report (2000): 77.

Yntema, S., ed. Americans 55 and Older: A Changing Market. 2d ed. Ithaca, N.Y.: New Strategist Publications, Inc., 1999.

INTERNET RESOURCES

American Association of Retired Persons: www.aarp.org

Consumer Information Center: www.pueblo.gsa.gov

Consumer Product Safety Commission: www.cpsc.gov

Federal Trade Commission: www.ftc.gov

National Association of Consumer Advocates: www.naca.net

National Consumer Law Center: www.consumerlaw.org

National Senior Citizens Law Center: www.nsclc.org

United States Postal Inspectors: www.usps.com/postalinspectors