Rights of a Consumer
All consumers in the United States have rights. However, consumers also
have responsibilities.
Always make sure you understand the terms of any agreements you make when it involves your money. Most lenders can be trusted.
Predatory Lending (discussed more below) is when a lender makes you agree to higher interest rates or unnecessary fees. You should comparison shop and research the institution you give your money to so that you can avoid agreeing to paying more than necessary.
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The 8 Basic Rights of a Consumer:
The right to satisfaction of basic needs – to have access to basic, essential goods and services such as adequate food, clothing, shelter, health care, education, public utilities, water and sanitation.
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The right to safety – to be protected against products, production processes
and services that are hazardous to health or life.
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The right to be informed – to be given the facts needed to make an informed
choice, and to be protected against dishonest or misleading advertising and
labelling.
The right to choose – to be able to select from a range of products and services, offered at competitive prices with an assurance of satisfactory quality.
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The right to be heard – to have consumer interests represented in the making
and execution of government policy, and in the development of products and services.
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The right to redress – to receive a fair settlement of just claims, including
compensation for misrepresentation, shoddy goods or unsatisfactory services.
The right to consumer education – to acquire knowledge and skills needed to
make informed, confident choices about goods and services, while being aware of basic consumer rights and responsibilities and how to act on them.
The right to a healthy environment – to live and work in an environment that
is non-threatening to the well-being of present and future generations.
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True and False Quiz
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Mrs. Aboud notices a store has mistakenly advertised a $30 refrigerator instead of $300. Does the store have to sell her the fridge for $30, as advertised?
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Mario buys a stereo on his credit card, but he doesn’t like it, so he disputes the purchase with his credit card company. Can the credit card company sue him for the price of the stereo?
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Flores buys a hairdryer with a 30 day warranty. On day 31, it breaks. Flores cannot get a refund because the warranty is expired.
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Predatory Lending
Borrowing money can be tricky. You can borrow money to pay for big purchases or to help with emergency expenses. But you want to make sure you are using a trusted source. Most institutions, like banks and credit unions, are not trying to hurt you, but some other lenders do take advantage of people. You should be aware of predatory lending so you can protect
yourself.
Predatory Lending is any lending practice that imposes unfair or abusive loan terms on a borrower.
Predatory lending ignores the ability of the borrower to pay back the money. This can lead to serious financial issues if you fall victim to it.
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A common predatory lending practice involves the use of payday loans. Payday loans generally have very high fees and are designed to cost more than you can afford. For information on the dangers of payday loans, watch the video here:
https://www.youtube.com/watch?v=3rOVmUnUM7A
Some other practices of predatory lending include:
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False disclosure - lenders may hide, or even lie, about the costs and risks of a loan
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Inflated fees and charges - predatory lenders charge much higher fees than other lending sources. They often hide fees and charges in fine print.
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Loan Flipping - A lender convinces you to refinance a loan into a higher one with more fees and higher interest
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Balloon mortgages - a lender convinces you to refinance a mortgage for lower payments first, then very high payments later (“balloon”).
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Tips for Avoiding Predatory Lending
Be careful, especially when you feel that you need cash in a hurry. Stay informed of negative practices and look out for unfair loan terms.
Try to use only trusted organizations - your bank, other banks, and credit unions. Know what interest rates these tend to have for credit cards and mortgages.
Check the rating of any lender on the Better Business Bureau’s website.
Beware of offers that you get in the mail, over the phone, or via text message.
Beware of any loan or mortgage offer that says you will be automatically approved. Lenders that you can trust will check your credit history and ability to repay before giving you money.
Read ALL TERMS before applying for loans or credit cards, including the fine print! Ask someone you trust to read through the terms if there is something you are not sure about.
Take your time. If someone is rushing you to sign an agreement to borrow money, they may be trying to trick you into something you can’t afford.
If an offer seems too good to be true, it probably is and you should avoid it!
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Recognizing Scams and Predatory Lending Practices
1. Read the following scenarios and decide whether each is safe or a scam:
a. You receive a phone call from the IRS asking for your ITIN to verify your identity, and they say that if you don’t give it to them you will owe $2000 to the United States in taxes. This is your first time being contacted by the IRS.
b. You receive an email from someone who works at a bank. They say that you owe $10,000 on your credit card, which you didn’t actually spend. They say that if you don’t pay off at least $500 worth of the credit card balance to them via wire transfer to their personal account that they will contact the police and send you to jail.
c. Someone offers you $1000 for a job (first time working, contacted by email). They tell you they will send you a check for $1500, and then you will send them back $500.
d. You’ve been scammed in the past, and you lost $1000. A company contacts you saying they can help you recover the $1000 you lost if you pay them $100.
Watch the following video on predatory lending: https://edpuzzle.com/media/5ff11f57718247424df38023
2. Read the following lending scenarios and decide whether each is safe or predatory:
a. You receive an email from your bank saying that you’ve been pre-approved for a credit card, and that you can sign on to the mobile banking site to sign up for the card if you wish.
b. A lender tells you that you’ve been approved for a mortgage to buy a home that you did not apply for. The home seems out of your budget.
Answers:
Understanding rights as a consumer:
Predatory Lending:
Recognizing scams and predatory lending:
1. a. Scam, the IRS will always try to reach you by mail first.
b. Scam, you’ll never have to pay off your credit card balance by wire transfer to a personal account, even if the balance is past due. If you ever receive an email or phone call like this, call your bank or other credit card issuer to confirm that this was a scam.
c. Scam, do not accept money for jobs from people you haven’t met or for jobs you haven’t actually applied for. This is a very common scam, the checks are fake.
d. Scam, legitimate agencies that can help you will not ask for a fee.
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2. a. Not a scam, the bank is telling you about a credit card that you are approved for,
butit’s up to you whether you get it or not.
b. Scam, if you want to get approved for a mortgage to buy a home you ALWAYS have
to apply first. If you haven’t applied, then it’s not real and someone is trying to scam you.
True/False Quiz
1. False. They do not have to sell it at the advertised price
2. True. Even if the credit card company refunds you, your credit card company can sue you for the purchase. This is why you should always settle the dispute with the merchant first.
3. False. In most states the product must last a reasonable amount of time, so even if the product is out of warranty, you should contact the company because you may still qualify for a refund.