Consumers in the United States benefit from a host of laws designed to protect their interests against those of manufacturers, producers, and other providers of goods and services who may seek to take advantage of them. Fair trade practices and laws passed on the federal and state level have been in existence since 1848, when chemical analysis was performed on agricultural products within the U.S. Patent Office.
Passage of the Pure Food and Drugs Act of 1906 (in reaction to Upton Sinclair’s exposé of the Chicago stockyards in his book The Jungle) led to laws governing nearly every aspect of American life. From consumer credit to lending and borrowing, manufacturing to agriculture to housing, consumer protection laws have been created to help consumers when no other redress is available. The question of whether consumers are too protected is one of scale and, although it can be argued that many of the laws are duplicative of other legal recourse available to consumers, it can also be argued that certain standards should remain in order to discourage bad practices.
Purpose of Consumer Protection Laws
Consumer protection laws become necessary in times where businesses create risks that do harm to consumers and the American economy. For example, during the heyday of the mortgage boom in the U.S. (2001-2005) subprime mortgages and hybrid securities known as credit default swaps were created by the mortgage industry. These products and the type of lending that banks and other lenders engaged in during this period led to a mortgage crisis in 2007 unprecedented in history and that served as a precursor to the Great Recession of 2008-09.
The lending practices of the industry created consumer risk that they were unaware of and could not comprehend. Although consumers share in some of the blame for entering into lending arrangements they were not properly qualified for, ultimately lenders and industry officials bear the responsibility for their practices and the effect they had on the economy. The actions of certain lending institutions and individuals would lead to the creation of the Consumer Financial Protection Bureau.
Are there Too Many Laws?
Some argue that there are too many state and federal laws on the books that protect consumers to the detriment of businesses and the economy. The question of whether the existence of these laws hampers economic growth and causes businesses to avoid certain behaviors that would be beneficial to the economy depends on perspective. For the business community, the answer is that consumer protection laws inhibit economic growth. Laws that are duplicative of other statutes in their intent to protect consumers should be repealed, provided that a balance can be created between the needs of businesses to function and consumers not to be abused as a result of business practices.
What Protections Are Necessary for Consumers?
In a free market society it is accepted that consumers assume a certain amount of risk with respect to any product or service they purchase. This risk includes a product not working as advertised or not performing to the expectations of the consumer.
Laws that are formed under what are known as unfair and deceptive acts and practices (UDAP) serve a purpose and are hard to argue against. If a business or an industry colludes to control prices, restrict access for certain consumers, or produce and sell products that are defective or potentially dangerous (i.e. asbestos or nicotine) such practices should be prohibited and subject to sanction. However, a common sense approach should be taken in regards to legislation that does not create unnecessary burdens for business or stifle growth.
In addition to commercial and labor law, Carl Millikan writes on tobacco litigation, asbestos litigation, complex mesothelioma litigation and other areas as well; for more information on the latter Carl encourages readers to visit www.yourmesotheliomalawfirm.com.