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 . 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.