• Consumer Protection Law
  • Purchasing an Automobile
    • Lemon Law
    • Used Vehicles
  • Automobile Repair
  • Vehicle Repossession
  • Telemarketing Fraud
  • Debt Collection
  • Health Studios
  • Home Solicitation
  • Resources

Although most businesses operate in a fair and legal manner, thousands of Californians lose money every year due to unscrupulous business practices and consumer fraud. There are a variety of state and federal laws protecting consumers from unscrupulous business practices. When making any sort of commercial transaction, it is important for consumers to be aware and informed of any rights they may have. This chapter outlines some of those rights as well as a number of points to keep in mind when making any commercial transaction. Related information may be found in the Personal Injury Law Chapters and the Contract Law Chapter.

For most consumers, buying a new automobile is a large investment. It is essential, therefore, that consumers be adequately prepared when making final purchase decisions. Among other things, a consumer should (1) have a realistic estimate of his or her budget; (2) visit several car dealerships; (3) be prepared to negotiate; (4) not permit himself or herself to be pressured; (5) ask questions about anything that is confusing; (6) be wary of any add-on charges; (7) understand the terms of any dealer or manufacturer warranty; and (8) carefully read the purchase contract before signing it.

Lemon Law

In addition to any dealer or manufacturer warranty, California's Tanner Consumer Protection Act, also known as the "Lemon Law," protects consumers who buy or lease new automobiles from being stuck with obviously defective vehicles. The Law applies whenever a new car, van, or truck is sold or leased for personal use with a manufacturer's written warranty. The Law also applies to the sale or lease of used vehicles that still are covered by the manufacturer's original warranty. The Law requires a manufacturer to correct or repair defects so that the vehicle is in compliance with the terms of the warranty. If, after a "reasonable" number of attempts to repair the defect, the problem still exists, the Law requires the manufacturer to replace the car or take it back and refund the purchase price, minus a reasonable fee for the use of the car. The Law defines a "reasonable" number of repair attempts to be four or more attempts to repair the same problem, or the vehicle has been out of service for a total of 30 days for repairs for any number of problems. The four repair attempts or the 30 days loss of use must occur within the first 12 months or 12,000 miles after the consumer takes delivery of the automobile, whichever comes first. In addition, the repairs must be for items covered under the warranty, and the problem(s) must substantially reduce the value, use, or safety of the vehicle. Also, the consumer must directly notify the manufacturer of the need for repair at least once (in addition to giving notice to the dealer or repair shop) in order to qualify for protection under the provisions of the Lemon Law. If all of these factors are met, the Law presumes that the car is a "lemon" and the consumer is entitled to a replacement or a refund.

In the event that reasonable attempts are unsuccessful in resolving a repair problem, the consumer should follow certain steps to seek assistance. First, the consumer should carefully read the warranty booklet and owner's manual to determine if there are additional requirements for notice, arbitration, etc. that he or she must follow. The consumer should first attempt to resolve the problems directly with the dealer, and then the manufacturer or the manufacturer's representative. If the manufacturer fails to fix the problem, and the situation fits the factors described above, the consumer is entitled to file for arbitration. Arbitration is an informal process for resolving disputes between manufacturers and consumers. The dispute is heard by a neutral arbitrator. There can be no charge to the consumer for arbitration; manufacturers pay the cost of this process. If the manufacturer participates in a certified arbitration program, the consumer is required to submit to the arbitration before he or she can utilize the presumptions of the Lemon Law in any future court case.

The arbitrator usually will hear evidence from both sides and will review any relevant documents (i.e. the warranty, repair bills, records of loss of use of the car). The arbitrator must issue a decision within 40 days after receiving the application for arbitration. If the arbitrator finds that the new vehicle is a "lemon", the manufacturer will be required to replace the vehicle, or to take the vehicle back and refund the purchase price, minus a fee for the use of the car. The decision of the arbitrator is binding on the manufacturer. If, however, the arbitrator finds that the car is not a "lemon", the consumer is not bound by that decision and may still sue the manufacturer in civil court. Before taking this step, however, a consumer should consider consulting an attorney. Any consumer having problems with repairs should keep copies of all service records and repair orders, and should document all contacts with the dealer or representative, as well as keep a record of the lost use of the car due to repairs in the event the problems fall within the protections of the Lemon Law. Any correspondence with the dealer or manufacturer should be sent by certified mail.

Used Vehicles

Most used vehicles are not covered by California's Lemon Law, because the law covers only those still under the manufacturer's original warranty. The only warranties that accompany a used vehicle are those expressly provided by a dealer or an unexpired manufacturer's warranty. Therefore, it is extremely important that a consumer thoroughly inspects a used automobile before purchase. A consumer should closely inspect the tires, suspension, engine, drive train, steering, brakes, and interior. In fact, it is probably wise to have a mechanic conduct the inspection.

In addition, the buyer should examine the Buyers Guide, which by federal law must be displayed on the window of any used vehicle for sale. The Buyers Guide will indicate if the dealer is offering any written warranty on the car, or if the car is being sold "as is"--without any warranty. It is legal for a car to be sold without warranty so long as this is clearly stated in the Buyers Guide. The Used Car Rule of the Federal Trade Commission provides that it is deceptive for any used car dealer to misrepresent the mechanical condition of any used car, to misrepresent the terms of any warranty offered on a used car, or to represent that a used car is being sold with a warranty when no warranty is in fact provided.

A consumer also may wish to determine if the vehicle has ever been the subject of a recall due to safety defects. This information is available from the National Highway Safety Administration (see Resources section for further information). A consumer also should ask to see the seller's title and registration before buying a vehicle. These documents must disclose if the vehicle has a "salvage" title, meaning that the car has previously been declared a "total loss" because of damage. If the buyer has concerns that a car may have been "salvaged" it would be especially important to have the vehicle checked over carefully by a qualified expert. In any event, a consumer may wish to get a printed history of ownership from the local Department of Motor Vehicles (DMV) before purchasing any used car. The DMV also can determine if the registration is current. If the registration is not current, the purchaser may be required to pay late fees and penalties. The registration will reveal whether the vehicle was returned to the manufacturer as a "lemon". The seller must ensure that the vehicle meets the California vehicle emission (smog control) standards and must provide a "smog certificate" showing this compliance.

Because used vehicles are "used", the number of miles a vehicle has been driven is important. Vehicles with lower mileage typically are more valuable than those with higher mileage. Under California law, a vehicle's odometer cannot be altered, disconnected, or tampered with in any way. If the odometer reading seems suspect, check the odometer statement that the current owner received when the vehicle was purchased or call the California Department of Motor Vehicles Bureau of Investigations.

Finally, consumers should be aware that the three-day "cooling off" period that allows a buyer to cancel a contract within three days does not apply to the purchase of new or used cars. Because the contract cannot be canceled under this consumer protection provision, a buyer should exercise caution before signing any contract for the purchase of a used car.

According to the Department of Consumer Affairs, problems associated with repairing an automobile consistently rank as the number one consumer complaint. Under California law, all repair shops must register with the Department of Consumer Affairs' Bureau of Automotive Repair, and must post a sign informing consumers of their rights. The repair shop must provide the consumer a written estimate before any work is performed. The consumer should, however, ask ahead of time if he or she will be charged for the preparation of the estimate. Upon receiving the estimate, the consumer can choose to have the work done at that shop or may elect to go elsewhere. Once the consumer agrees to have work done, the technician will ask for authorization to do the work and to incur costs up to a certain amount. A consumer should never sign a blank work order. Additional work cannot be done without the consent of the consumer. If the consumer gives a verbal authorization for additional work, the technician must make a notation of this on the written estimate, including the date and time the authorization was given, and the name and phone number of the person authorizing the work. After any repair work is completed, the repair shop must provide a legible copy of the repair invoice showing all work done, including work covered under warranty. The invoice also must itemize parts and labor separately, must list the parts used and must indicate if reconditioned or rebuilt parts were used. Repair shops are not required to guarantee their work, but many shops do offer some guarantees. Any guarantee given must be in writing and must include the name and address of the company making the guarantee, what the company agrees to do if a problem develops (i.e., repair, replace, refund), what the consumer must do to have the guarantee honored (i.e., bring the car back to original place of service, pay service fees), the terms of the guarantee, the items covered and whether the guarantee can be transferred with the sale of the car.

Disputes over repairs that cannot be resolved between the consumer and the repair shop may be addressed through the Department of Consumer Affairs' Bureau of Automotive Repair. A consumer may file a formal complaint with the Bureau, which will be reviewed by a supervisor. A Bureau representative will attempt to mediate with the repair shop on behalf of the consumer. For further information see the Resources section.

When buying a new vehicle, and sometimes when buying a used vehicle, many consumers will make the purchase on credit. A consumer should remember that the creditor retains significant rights over the vehicle if the consumer does not abide by the loan agreement. If a consumer defaults on his or her loan, the creditor has legal authority to enter the consumer's property and seize the vehicle at any time and without prior notice, so long as this can be done without a "breach of the peace." A creditor may not, however, enter a private building or a secured area without the consent of the owner. Within 48 hours after repossession, the repossessor must serve the consumer with a Notice of Seizure. The Notice of Seizure may be served by regular mail sent to the last known address of the consumer, and must state the name, address, phone number and legal representative of the repossession agency; the name, address, phone number and legal representative of the creditor; and a statement about regulation of repossession agencies. The Notice must also include an inventory of any personal items found in the vehicle at the time of repossession, and must include information advising the consumer how to reclaim this property. Items not claimed after 60 days may be disposed of by the repossession agency.

After repossession a creditor may keep the vehicle as compensation for the unpaid debt or resell it. In either case, the creditor must inform the consumer. The consumer has the right to demand that the vehicle be sold and that any money received from the sale beyond the amount of the debt be returned to the consumer. If the vehicle is to be sold at a public auction, the consumer must be notified of the date at least five days in advance. In the case of a private sale, the consumer is notified after the sale. However the vehicle is sold, the sale must be conducted in a "commercially reasonable manner" and the price must approximate the vehicle's fair market value. Of course, the creditor also may reinstate the consumer's loan or allow the consumer to buy the vehicle back.

Telemarketing fraud is a billion dollar business in the U.S. A fraudulent telemarketer will call a consumer with some sort of fictitious product, service, or prize; talk with the consumer for awhile; then get the consumer to divulge his or her credit card number or a checking account number. Later, the fraudulent telemarketer may make unauthorized charges or withdrawals against the consumer's account. Senior citizens are favorite targets of fraudulent telemarketers. While people over age 65 comprise only 12 percent of the national population, they make up 30 percent of telemarketing fraud victims.

Once a consumer has lost money to a fraudulent telemarketer, it is difficult to get it back. Telemarketing con artists are quick to close up shop and move to another city or state to avoid the police. The best way for a consumer to protect himself or herself is to be able to identify fraudulent telemarketers before becoming a victim. A telemarketer may be a con artist if:

• The telemarketer uses high-pressure tactics

• The offer sounds too good to be true

• The consumer must act "now"--or the offer will no longer be good

• The telemarketer is unwilling to provide references or written material to back up his or her claims

• The telemarketer asks for a credit card or checking account number for any reason other than to make a purchase

Consumers should not allow themselves to be pressured and should take the time to make prudent decisions. A consumer also should request written information about the product or the company before making any purchases. If the telemarketer refuses, it is wise not to buy. If the telemarketer asks for a contribution to charity, the consumer should check with the Office of the California Attorney General to be sure the charity is listed in the Registry of Charitable Trusts. Registration alone does not, however, mean that the business is legitimate. If the telemarketer is selling investments in gold, oil, gas, real estate or precious gems, the consumer should ask if the investment is registered with the California Department of Corporations, the Securities Exchange Commission, or the Commodity Futures Trading Commission. The company also should be willing to provide a prospectus outlining the investment. In general, a consumer can check with the local office of the Better Business Bureau to see if a complaint has been filed against the company; and ask what recourse is available should the product be unsatisfactory. If necessary, a consumer should simply hang up the phone if he or she suspects the caller of fraud.

California law requires that a telemarketer who calls a consumer at home must state his or her first and last name and the name of the business on whose behalf the telemarketer is calling, and the name of the product. If the telemarketer intentionally fails to give this information and the consumer buys something, the consumer may be able to later sue the company for twice the amount of the sale, or $250, whichever is more. A note of caution, however: fraudulent firms will often change names to avoid detection. Any contract made as a result of a telephone sales call is not valid and enforceable against a consumer unless the contract is reduced to writing; identifies the same goods or services discussed on the telephone; contains the name, address, and telephone number of the seller; states the total price; and includes the following statement: "You are not obligated to pay any money unless you sign this contract and return it to the seller." The consumer may cancel any mail order or phone sales contract within 30 days as long as the order under the contract has not yet been filled. This "cooling-off" period allows a consumer to withdraw from a contract that may have resulted from the high-pressure tactics of a telemarketer. To cancel a contract the consumer must notify the seller in writing of the decision to cancel, and must return or offer to return anything received from the seller. As a general rule, the seller must return the buyer's money within ten days of receiving the cancellation notice. The written contract may, however, state a different time period for refunds, which, if reasonable, would then control.

California has very specific guidelines regulating what debt collection agencies can and cannot do when attempting to collect unpaid debts. Under the California Debt Collection Practices Act it is unlawful for a debt collector to do any of the following in an attempt to collect a debt:

• Simulate a law enforcement officer, attorney, consumer reporting agency, or representative of the government

• Use any form of communication that falsely gives the appearance of legal process

• Use or threaten to use violence, physical force or any other criminal means to cause harm to the debtor, his or her reputation, or to property

• Threaten to falsely accuse the debtor of criminal acts

• Threaten an unlawful garnishment of wages or seizure of property

• Communicate or threaten to communicate with a debtor's employer prior to obtaining a final judgment against the debtor, unless the communication is "necessary for the collection of the debt". A "necessary" contact includes the need to verify employment, locate a debtor, legally garnish wages, or determine if medical insurance is available to satisfy a medical debt.

• Unjustifiably disclose to a person other than the debtor or the debtor's family information affecting the debtor's reputation

• Publicize a list of debtors or advertise a debt for sale by naming the debtor

• Harass the debtor or the debtor's family with frequent or annoying communication

• Use profane, obscene, vulgar, or abusive language

• Misrepresent the reason for contacting the debtor

• Threaten to turn information about the debt over to a consumer reporting agency

• Threaten that the amount of the debt will be increased to cover attorney, investigation, or services fees; or finance charges, except for those lawfully imposed

The Federal Fair Debt Collection Practices Act also governs debt collection practices, specifically regulating those collectors who work for professional debt collection agencies and attorneys hired to collect debts. While similar to the California law, the federal statute also provides that these collectors cannot:

• Communicate with a debtor at unusual or inconvenient times, generally before 8 a.m. or after 9 p.m., without consent of the debtor

• Call the debtor at work if the debtor notifies the collector that the debtor's employer does not permit such calls

• Continue to communicate with a debtor after being notified to direct all communications to the debtor's attorney

• Use a postcard to communicate with a debtor about the debt

• Call the debtor without disclosing the identity of the caller and the nature of the call

• Falsely represent the amount, nature, or legal status of the debt, or use any other false or deceptive practices either to collect the debt or to get information about the debtor

• Apply a payment to a disputed debt without permission of the debtor if more than one debt is owed

A consumer who disputes a debt should send written notice to the debt collector detailing the nature of the dispute. The debt collector must then provide the consumer with information on how to contest the debt, and, upon request, must assist the consumer in completing the necessary forms. The debt collector must respond to a consumer's request within 30 days after receiving the written notice of the dispute, and must correct any improperly reported item. A consumer who feels a debt collector is using improper, harassing, or fraudulent collection methods should notify the collector in writing that he or she wants to stop all further contact from the collector. The consumer should keep a copy of the letter and mail the original to the collector by certified mail. A consumer also may seek a civil injunction and damages against a collector, and/or may report violations to the Office of the Attorney General to determine if civil or criminal actions may be taken against the collector.

Due to past abuses, California now regulates the conduct of health studios. A health studio is any business that provides exercise instruction, training, body building, reducing, figure development, and other similar services, as well as the use of exercise facilities to the public. Services provided by persons licensed in the healing arts, nutritionists, and schools are not subject to the law. Under California law, every contract for the sale of health studio services must be in writing and must contain the following:

• The name and address of the seller, the date on which the buyer signs, and a copy of the contract to the buyer

• A three-day penalty-free cancellation period. If the buyer cancels the contract, the health studio must refund all payments within ten days, minus reasonable fees for the consumer's use of the health studio prior to cancellation

• A right to cancel the contract and receive a prorated refund if the buyer moves more that 25 miles from the facility

• A refund if the health studio goes out of business or moves more than five miles

• A prorated refund if the consumer dies or becomes physically unable to use the health studio's facilities

• If the health studio is not yet open at the time of the contract, the contract must provide that the club will open within six months of the date of the contract

Furthermore, no health studio contract can exceed 36 months, and may not require total payments in excess of $1000, excluding finance charges. Any complaints concerning a health studio should be directed to the California Department of Consumer Affairs, the California Attorney General's Office, the local Better Business Bureau, or the local Chamber of Commerce.

Home solicitation, or "door-to-door" sales, means the sale, lease, or rental of consumer goods or services whereby the seller visits the consumer at a his or her home or at any place other than the seller's fixed business location. If the sale is for more than $25, and the items or services purchased are for personal, family, or household use, California law provides consumers a number of protections.

The consumer must be alert to the practices of unscrupulous door-to-door sales representatives and should be aware of his or her rights when dealing with these salespeople. For example, a home seller is required to provide a consumer with a "Notice of Cancellation" form whenever a sale is made and/or a contract is signed, and must verbally inform the consumer of his or her right to cancel the contract. To cancel a sale or contract the consumer must simply sign and date the Notice of Cancellation form and mail it back to the seller. To ensure a full refund, this must be done before midnight of the third business day after the sale or signing of the contract. If the seller failed to provide the Notice of Cancellation form as required, the consumer has even longer to cancel the contract. Until the consumer receives the Notice of Cancellation form, he or she may cancel the contract at any time. The consumer's cancellation should be in writing and either delivered to the seller or the post office. Certified mail is recommended for all cancellation notices. Once the contract is canceled, the seller may not require the consumer to pay to return the goods. If the seller fails to ask for return of the merchandise within 20 days of cancellation, the consumer cannot be forced to return the goods. In any event, a consumer may retain purchased goods until he or she has recovered moneys spent and/or any signed contract or note.

Resources

General Consumer Information

A consumer with a product or service complaint should first contact the person or company who sold him or her the item or performed the service. Complaints usually can be resolved at this level. If not, call or write the consumer complaint department at the company's headquarters. Whenever filing a complaint, remember to maintain records of any correspondence, persons spoken to, dates and times, and do not send any original documents.

The State of California Department of Consumer Affairs publishes a number of helpful pamphlets on a variety of consumer protection issues. For a copy of the publications list, contact the Department of Consumer Affairs, Publications Department, P.O. Box 310, Sacramento, CA 95814, or call (800) 952-5210. Many publications also are available in Spanish. The Department of Consumer Affairs also maintains a Consumer Assistance Office, 400 R Street #1040, Sacramento, CA 95814, (916) 445-0660, TDD (916) 322-1700, which can assist with many consumer and contract issues. For a free fact sheet on Spanish-language contracts, write the Department of Consumer Affairs, Spanish Language Contracts, P.O. Box 310, Sacramento, CA 95814. The Department of Consumer Affairs also operates a toll-free Consumer Infoline that provides recorded information on sales tactics and other consumer topics (i.e. landlord-tenant issues). The Infoline number is (800) 344-9940.

The Complaint Mediation Division of the Department of Consumer Affairs processes complaints for the Bureau of Security and Investigative Services, the Bureau of Automotive Repair, and other services. The Division attempts to resolve disputes through the informal mediation process. Mediation Centers are located in Sacramento, South El Monte, Riverside, and Hayward. To locate the nearest Mediation Center, or for information on mediation assistance, call (800) 952-5210.

Another consumer resource is the local Better Business Bureau (BBB). BBBs are non-profit organizations, sponsored by local businesses, meant to promote good relations between consumers and businesses. Though BBBs have no legal authority, they may contact businesses involved in disputes and offer some form of arbitration to settle the matters. Check the white pages of the phone book for the nearest office.

The federal government maintains a Consumer Product Safety Commission, which provides public information on consumer products. The toll-free number is (800) 638-2772.

Automobiles

Several publications about the California Lemon Law are available from the Department of Consumer Affairs, including an outline of the law and instructions for getting through the arbitration process. Additional information is available from Consumers for Auto Reliability and Safety (CARS), 1500 West El Camino Avenue #419, Sacramento, CA 95833-1945, (916) 759-9440.

Information about a manufacturer's or dealer's past failure to honor a warranty or extended warranty is available from the New Motor Vehicle Board, 1507 21st Street #330, Sacramento, CA 95814, (916) 445-1888.

The Department of Consumer Affairs, Bureau of Automotive Repair is located at 10240 Systems Parkway, Sacramento, CA 95827, (800) 952-5210. The Bureau of Automotive Repair publishes A guide for the Used Car Buyer, with helpful tips to follow when considering a used car purchase, A Consumer's Guide to Automotive Repair in California, and a guide to dealing with the smog check when buying a used car.

The California Auto Body Association operates a referral services to provide consumers with the names of qualified experts who will inspect used cars. Their toll-free number is (800) 454-3368.

To register a safety complaint or obtain recall information, contact the National Highway Safety Administration, 400 Seventh Street S.W., Washington, D.C. 20590, or call the Auto Safety Hotline at (800) 424-9393. Information on auto safety also is available through the Center for Auto Safety, 2001 S Street N.W. #410, Washington, D.C. 20009, (202) 328-7700.

Automobile dealers who sell on credit frequently utilize the services of repossession agencies, or handle repossession themselves in the event a customer defaults on an automobile purchase contract. Repossession agencies are regulated by the Bureau of Security and Investigative Services, Department of Consumer Affairs, Sacramento, CA 95814.

Offices of the California Department of Motor Vehicles have information about a car's registration, history of ownership, and odometer readings. Check the phone book for the nearest office, or contact the main office at 2415 1st Avenue, Sacramento, CA 95818, (916) 657-6940.

Telemarketing, Home Sales, Debt Collection

Consumers may have their phone numbers removed from many national telephone sales lists by writing to: Telephone Preference Services, c/o Direct Marketing Association, P.O. Box 9008, Farmingdale, NY 11735-9008.

For problems with mail-order businesses, contact the local United State Postal Inspector. Look in the white pages of the phone book for the nearest office. The complaint will be forwarded to the postal inspector in the San Francisco office. The Postal Service can take civil action against a company that may have defrauded a consumer, or may refer the case to the United States Attorney's Office for criminal prosecution.

Consumer Credit Counseling Service is a non-profit group offering advice and debt management programs for little or no charge. For more information or to locate the nearest office, contact the National Foundation for Consumer Credit, Inc., 8611 Second Avenue #100, Silver Springs, MD 20910, (301) 589-5600 or (800) 388-2227.

The Federal Trade Commission (FTC) deals with fraud and deceptive business practices and enforces federal consumer protection laws. The FTC has legal authority enabling it to file lawsuits and freeze company assets. Although the FTC will not intervene in individual disputes between debtors and creditors, it can proceed against creditors if there is a pattern of law violations. To report a possible federal law violation write to: Correspondence Branch, Federal Trade Commission, 6th Street & Pennsylvania Avenue N.W., Washington, D.C. 20580. The FTC also provides information to consumers on a variety of credit and debt collection subjects. For information or to order free copies of these publications, contact: Public Reference Branch, Federal Trade Commission, Sixth Street and Pennsylvania Avenue N.W. , Washington, D.C. 20580, (202) 326-2222.

Information concerning company and brand name information can be obtained from the Consumer Resource Handbook. To receive the handbook, write to the Consumer Information Center, Pueblo, CO 81009. Their Web Site address is http://www.gsa.gov/staff/pa/cic/cic.htm.

For general information, referral services, or assistance in filing a complaint, call the National Fraud Information Center at (800) 876-7060.

Most consumer protection issues are handled by the Public Inquiry Unit of the California Department of Justice, Office of the Attorney General, 1300 I Street, Sacramento, CA 95814, (916) 322-3360 or (800) 952-5225.