About Consumer Law

Characters
Before we start talking about the actual substance of consumer law, it will be useful to identify the major participants in typical consumer transactions. There are several major roles, and a particular participant may have more than one role.

Buyer
In a public interest or legal services office, the Buyer is almost always the client. She or he is someone who has bought or wants to buy some goods or services from someone else.

Seller
The Seller is the person or organization that wants to sell or has sold the goods or services to the Buyer. If Sellers are in the business of selling the type of goods in question, they are a particular kind of Seller called a "merchant"; being a merchant is sometimes important. Often Sellers also extend credit, in which case they are Lenders as well as Sellers.

Debtor
If buyers buy goods on credit, they also become "Debtors". We will refer to them in this way when talking about the consequences of owing money.

Creditor
In many consumer transactions, Buyers do not have enough cash to pay Sellers the full value of the goods or services at the time of purchase. In such a case, it is common for the goods to be sold on credit. Buyers then will pay the full price over a period of time, rather than all at once at the time of sale. Almost always, there are charges, explicit or hidden, for the extension of credit. In fact, a major area of consumer law involves the requirement that hidden charges be made explicit.

The person to whom the money is owed is called the "Creditor". If one of the terms on which creditors extend the credit is that they can repossess the goods (or some other goods) if the Buyer fails to pay, they are called Secured Creditors. If they cannot repossess, they are called Unsecured Creditors.

Because there are various ways that both secured and unsecured credit is extended, there are several different classes of creditors.

Seller-Lender
Sometimes Sellers themselves extend credit. For instance, many people maintain small charge accounts at department stores or similar places. In such a case, all dealings are directly between the Seller and the Buyer, and the repayments of the credit and interest are directly to the Seller. This kind of arrangement is common mostly when the amount of the credit extended is small, and the period in which it must be repaid is relatively short.

Third-Party Lender
In many other situations, the Seller does not wish to be the one who extends credit. One possibility is for the Seller to tell Buyers that they must arrange their own financing. For instance, when someone goes to a bank to borrow money to buy a car, the Bank becomes the Lender. The Buyer takes the money from the Lender and pays it to the Seller. This is also the case in the normal purchase of a home. This arrangement's distinguishing feature is that there is no direct connection between the Seller and the Lender.

Assignee (pronounced "ass-ah-KNEE")
This involves a more complex but very common method of extending credit. Here, the Seller initially extends the credit. The Buyer signs a contract with the Seller in which he or she promises to pay the Seller the balance due together with interest and other charges in installments over a period of time. So far, this is just like the Seller-Lender situation. But then the plot thickens. The Seller transfers or "assigns" the contract or note that is the evidence of the consumer's indebtedness (often called the "paper") to another institution that is in the business of lending monies for long periods of time. This institution is often a bank, a finance company, or an independent organization like the General Motors Acceptance Corporation (GMAC).

This institution, called the "Assignee", then becomes the Creditor, and has the right to collect all monies due from the Buyer. In order to get this right, the assignee has paid the Seller a sum of money that approximates the principal amount of the credit extended. The Assignee's profit over the period of the loan is the amount of interest that was part of the original paper.

At one time, such assignments of paper caused serious problems for consumers. Most paper contained a clause stating that if the paper was assigned, the consumer could not assert against the assignee any defenses that it might have against the Seller. Thus, if the consumer had problems in the way the goods were being serviced, and decided to withhold the payment, the creditor would come after the consumer for a payment. The consumer would say to the Creditor "the goods do not work", and Creditor would respond: "That's not my problem."

Now however, the law is different, at least as to consumer transactions. Under federal law, any Assignee who buys consumer paper is subject to the same defenses or claims as the Seller would have been. 16 C.F.R. §433. Thus, the Assignee has to listen to the consumer's complaints, not just collect the money.

Even though the Buyer can treat the assignee and seller the same, an important relationship exists between the Seller and the Assignee. There is very likely to be a clause in the contract between the Seller and the Assignee that the Seller will reimburse the Assignee for any losses that the Assignee has because of the Buyer's claims relative to the goods. Thus, a claim against the Assignee will end up causing a fight between the Seller and the Assignee, who rely on each other's business in a continuing way. The desire to keep such fighting to a minimum often makes them give the Buyer a good settlement.

Collector
Someone who is collecting a debt from the Debtor, on behalf of the Creditor, is called a "Collector". The Collector may be part of the Creditor's organization, or it may be independent. The degree to which the Collector's practices are regulated by law will differ according to this distinction.

Transactions
A useful way to understand consumer law is by considering the chronological stages of the most common consumer transaction: the sale of goods. The key concept is a particular point exists when the prospective buyer and the perspective seller make a deal. At this point, which we will call the Agreement Stage, the rights of the parties become fixed. It is decided what the buyer is buying, and for how much, and what promises the seller is making relative to the goods. It also becomes clear at this stage how the goods
are to be paid for, and from whom and on what terms the credit, if any, will be obtained.

Before this, at the Pre-Agreement Stage, the buyer is looking for goods at a favorable price, and the seller wants the buyer to buy the seller's goods. They are negotiating to see if they can reach agreement. The most common unfair seller tactics at this stage involve false or misleading statements or representations that the seller, of goods or of credit, may make to the buyer in order of induce the buyer to close the deal.

The Agreement Stage may involve either an oral or a written contract and sometimes involves both. The major problems for consumers are unclear terms and unfair terms that they have been forced to accept because of poor bargaining power.

The Post-Agreement Stage is the stage at which each party has to perform. Typically, the seller must deliver the goods and be responsible for them operating properly, at least for a short period of time. The buyer's major duty is to pay for the goods.

In analyzing a client's case, remember that a client can take advantage of rights from all preceding stages of the transaction. For instance, a Post-Agreement client who has purchased a television set which has proven to be defective may have rights based on false statements made by the seller to induce the sale (Pre-Agreement Stage), and on warranties which have become part of the contract (Agreement Stage), and on unfair debt collection practices (Post-Agreement Stage). Thus you must always look at the whole consumer transaction.

Remember also that there are often two aspects to a transaction: the purchase of goods and the purchase of credit. Often the seller of consumer goods either arranges for or produces the credit as well. Thus both goods and credit aspects exist at each stage.

Several subjects to not fit neatly into this pattern of organization and are treated separately. For instance, many states have laws against "unfair and deceptive acts and practices" (UDAP). The list of practices that have been found to be unfair and deceptive is extremely lengthy, and always changing. There are some UDAPs at each of the three stages.