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

Although most businesses operate in a fair and legal manner, thousands of Texans lose money every year due to unscrupulous business practices and consumer fraud. When making commercial transactions, it is important for consumers to be aware and informed of any rights they may have. In Texas, the majority of consumer transactions are governed by the Deceptive Trade Practices-Consumer Protection Act. There are also a variety of additional state and federal laws protecting consumers from unscrupulous business practices in specific transactions. 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: General Chapter and the Contract Law Chapter of this Guide, and the Commercial Collections Law Chapter.

For most consumers, buying a new automobile is a large investment. It is essential, therefore, that consumers be adequately prepared when making any final purchase decisions. Among other things, a consumer should (1) have a realistic estimate of his or her budget and features needed in a car; (2) visit several car dealerships; (3) be prepared to negotiate; (4) not permit him- 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, the Texas Motor Vehicle Commission Code, also known as the "Lemon Law," provides new automobile buyers protection from obviously defective new automobiles. The law provides that after reasonable attempts to repair a defect have been unsuccessful, the consumer may notify the manufacturer and seek assistance from the Texas Motor Vehicle Commission. The determination of a "reasonable" number of attempts at repair differs, depending on the type of defect. For most problems, the consumer has made a reasonable effort if there have been four or more unsuccessful attempts to repair the defect (two within the first 12 months or 12,000 miles after taking delivery, and two more within 12 months or 12,000 miles of the second repair attempt). If, however, the defect creates a serious safety hazard (i.e. a "life-threatening" defect that would cause the car to go out of control or catch fire), then the consumer is considered to have made reasonable efforts to have the problem corrected after two or more unsuccessful repair attempts (at least one of which was within the first 12 months or 12,000 miles and a second within 12 months or 12,000 miles of the first). If, after these reasonable attempts to correct the defect, the problem still exists, the consumer should notify the manufacturer in writing of the defect, and should do so before the express warranties on the vehicle expire.

If these efforts are unsuccessful, the consumer may wish to seek the assistance of the Texas Motor Vehicle Commission. The consumer must send a written complaint to the Commission, outlining the problem and the history of attempts at repair. The Commission will forward a copy of the complaint to the manufacturer and the dealer, asking for their response. If it appears that the problem can be resolved without a hearing, the Commission officer may bring the parties together for mediation to try to reach a settlement. In cases in which a hearing is needed, all parties are notified at least 20 days in advance of the hearing of the time and place for the proceedings. The hearings are informal and parties need not be represented by attorneys, but a party may chose to have an attorney present. During the hearing, each party will be allowed to present testimony and any other evidence, such as documents and repair records, and each will be subject to questioning by the other side. The car owner also will be expected to make the car available for inspection. The hearing officer must file a written decision within 150 days of the filing of the initial complaint, although there are some provisions for extending this period.

If the Commission officer finds that the defect in the car cannot be corrected, he or she may order the manufacturer to replace the car with a comparable vehicle, or may order the manufacturer to take the vehicle back and refund the purchase price, minus a reasonable cost for the use of the car. If the Commission determines that the car is not subject to repair or replacement, the complaint may be dismissed, but the manufacturer still may be ordered to repair the car so it meets the warranty specifications. While the Texas Lemon Law is designed to assist parties in resolving disputes without going to court, either party may seek judicial review of the Commission's decision by filing for review in Travis County district court in Austin within 30 days of the final decision.

All new car dealers in Texas must provide purchasers with information about the complaint procedures under this law.

Used Vehicles

Used vehicles are not covered by the Texas Lemon Law, but used car purchases are governed by the Deceptive Trade Practices - Consumer Protection Act. For example, it is illegal under the Act for a car dealer to entice customers to buy cars by falsely advertising that the dealer is going out of business. It also is illegal for the dealer to make false or misleading statements regarding the reasons for a price reduction. A dealer also may not try to get a consumer to buy a vehicle by failing to disclose information about the car which, if known, would make the consumer unwilling to buy the car. For example, any car that was returned to a manufacturer after a hearing under the Lemon Law must include a notice providing this information to any potential buyer.

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 for a consumer to thoroughly inspect a used automobile before purchase, and discuss whether the car is covered by any warranty. Federal law requires that all used cars sold through dealers must indicate on the buyer's guide or window sticker whether the car is being sold with or without a warranty. The buyer's guide should clearly state whether the vehicle is being sold "as is" (without any warranty) or "warranty" (with the specific provisions of the warranty listed on the window sticker). Consumers 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.

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. Federal and state laws prohibit a seller from rolling back or changing the number of miles on an odometer. Under Texas law, the seller of a used vehicle is required to state on the title assignment the total number of miles the vehicle has traveled. A consumer should get a copy of the odometer statement before signing a contract and if the odometer reading seems suspect, he or she should check the odometer statement that the current owner received when the vehicle was purchased.

Automobile Repair

According to the Texas Attorney General's Office, problems associated with repairing an automobile consistently rank as the number one consumer complaint. Texas does not have a comprehensive law specifically governing car repairs, but the Texas Deceptive Trade Practices-Consumer Protection Act includes several sections dealing with repairs. Under the Act, it is illegal for an auto repair dealer to: 1) knowingly make false or misleading statements about the need for parts, replacement, or repair service; 2) falsely represent that work or services have been performed on a car, or that parts have been replaced; (3) claim that replacement parts are original or new when in fact they are used, second-hand, or refurbished; (4) advertise goods or services with the intent not to sell them as advertised. When selecting a repair shop, a consumer may wish to contact the Better Business Bureau or the Office of the Texas Attorney General to ask if anyone has complained about the shops the consumer is considering.

When buying a new vehicle, and sometimes when buying a used vehicle, a consumer often will make the purchase on credit. A buyer should remember that the creditor retains significant rights over the vehicle if the buyer does not abide by the loan agreement. If a consumer defaults on a loan, the creditor has legal authority to enter the consumer's property and seize the vehicle at any time and without prior notice to or consent of the consumer, even in the middle of the night, so long as it is done peaceably. After repossession, the 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 him or her. If the vehicle is to be sold at a public auction, the consumer must be notified of the date in advance (in cases 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. It is especially important for the consumer to keep loan documents in a safe place, and to get in writing any agreement that allows for a change in the terms of payment.

Telemarketing fraud is a billion dollar business in the United States. 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, a fraudulent telemarketer may make unauthorized charges or withdrawals against the consumer's account. Senior citizens are a favorite target 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 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 (i.e. for "verification" purposes, to pay shipping and handling, redemption fees, gift taxes, etc, on a purportedly "free" gift or prize)

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; check with the Texas Attorney General's Consumer Protection office or the local Better Business Bureau to see if any complaints have been filed against the company; and ask what recourse is available should the product be unsatisfactory. Under Texas law, companies are required to be registered and bonded as telemarketers. Consumers may check with the Texas Secretary of State to determine if a company has met these requirements. A consumer also may contact the local Chamber of Commerce to see if the telemarketer is a member, or may contact the Assumed Names division of the local county clerk's office to see if the telemarketer has registered its business name. If necessary, a consumer should simply hang up the phone if he or she suspects the caller of fraud.

Under Texas law a telemarketer may not call consumers at home before 9 a.m. or after 9 p.m. on a weekday or Saturday, or before noon or after 9 p.m. on Sundays. The law also requires that a telemarketer provide the consumer with the name, street address, and phone number of the business for whom the telemarketer is calling, as well as the name of the person calling and the names and titles of those in charge of the business. A note of caution, however: fraudulent firms often will 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 put in writing; fully describes the same goods or services discussed on the telephone; contains the name, address, and business telephone number of the seller; and sets out in full the total price, and any terms and conditions affecting the sale. Texas law further provides that a telemarketer (except a public charity) must offer a full refund for all undamaged and/or unused goods returned by the consumer within seven days after the consumer received the goods or services. The seller must process the refund within 30 days after the consumer returns the merchandise or cancels an order for undelivered goods.

Consumers can protect themselves from disreputable telemarketers by requesting full information before completing any transactions. If the telemarketer refuses to comply with these requests, simply hang up.

Texas has very specific guidelines regulating what debt collection agencies can and cannot do when attempting to collect unpaid debts. Most of these regulations are set forth in the Deceptive Trade Practices-Consumer Protection Act. Under Texas law debt collectors cannot:

• Falsely accuse the debtor of fraud or other crimes

• Use or threaten to use violence or other criminal acts to collect the debt

• Threaten arrest of the debtor, or threaten to repossess or seize property of the debtor without proper court proceedings

• Make collect telephone calls to the debtor without disclosing the true name of the caller before the charges are accepted

• Harass the debtor or the debtor's family with frequent communication, by calling anonymously, or making frequent or continuous calls

• Use profane or obscene language

• Mail any documents to the debtor that falsely appear to be from a court or other official agency

• Misrepresent the amount of the debt or falsely claim that legal action has been taken.

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 Texas law, the federal statute also provides that these collectors cannot:

• Communicate with a debtor before 8 a.m. or after 9 p.m.

• Call the debtor at work if the collector has reason to know that the debtor's employer does not permit such calls

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 in marketing and contracting for services, Texas now regulates the conduct of health spas. A health spa is any business that provides memberships for exercise instruction, training, or use of exercise facilities to the public. Under Texas law, every contract for the sale of health spa services must be in writing, must be signed by the purchaser and the seller, must contain the entire agreement, and must contain the following:

• A three-day penalty-free cancellation period

• A provision for cancellation of the contract and a refund if the health spa goes out of business or moves more than ten miles, unless the member has access to other facilities of the company within ten miles

• A provision for a prorated refund if the consumer dies or becomes physically unable to use the health spa's facilities

If the contract is for a health spa not yet open for business, the contract must clearly state the date when the health spa is expected to open. If the health spa fails to open or fails to remain open for 30 days, the member is entitled to a full refund, unless the member has access to facilities at another of the company's locations within ten miles of the new spa. Furthermore, no health spa contract can exceed three years, except an installment contract, which may not exceed five years. Texas law requires that all health spas register with the Secretary of State and post a proof-of-registration certificate at each business location. Any complaints concerning a health spa should be directed to the Office of the Secretary of State, Statutory Documents Section. When choosing a health spa, a consumer may wish to contact the local Better Business Bureau or the local Chamber of Commerce.

Home solicitation, or "door-to-door" sales, are regulated under the Texas Home Solicitation Transaction Act, as well as the more general Deceptive Trade Practices-Consumer Protection Act and a variety of federal laws. Under the Texas Home Solicitation Act, a door-to-door sale is defined as a purchase of goods or services for $25 or more (in cash or installments) that takes place at a location other than the seller's place of business. A few business transactions exempted from the Act are: the sale of insurance and farm equipment; certain real estate sales, when an attorney or broker assists in the sale; phone sales; and those sales resulting from prior negotiation at the seller's place of business. 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. To cancel a sale or contract the consumer must simply sign and date the 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 proper cancellation form as required, the consumer still can cancel the contract by sending a cancellation notice to the seller within the three-day time period. The consumer's notice of cancellation must be in writing and either delivered to the seller or the post office within the cancellation period.

If a consumer cancels a home solicitation purchase within the three-day period, within ten business days of the cancellation the seller must return to the consumer any payments made and any notes or other evidence of indebtedness. The seller then is entitled to reclaim any merchandise in the consumer's possession, and must notify the consumer within ten days of the cancellation whether he or she intends to retrieve the goods. 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 monies spent and/or any signed contract or note.

To contact the Texas Motor Vehicle Commission regarding the Lemon Law call (515) 505-5100 or write to P.O. Box 2293, Austin, TX 78768-2293.

More information concerning the Lemon Law, the Deceptive Trade Practices - Consumer Protection Act, the Home Solicitation Transactions Act, and other consumer protection issues is available from the Texas Attorney General's regional Consumer Protection Division Offices:

Austin, P.O. Box 12548, Austin, TX 78711, (512) 463-2070; Dallas, 714 Jackson Street #800, Dallas, TX 75202, (214) 742-8944; El Paso, 6090 Surety Drive #113, El Paso, TX 79905, (915) 772-9476; Houston, 1019 Congress #1550, Houston, TX 77002, (713) 223-5886; Lubbock, 916 Main Street #806, Lubbock, TX 79401, (806) 747-5238; McAllen, 3201 North McColl Road Suite B, McAllen, TX 78501, (210) 682-4547; San Antonio, 115 East Travis Street #925, San Antonio, TX 78205, (210) 225-4191.

The Attorney General's Office publishes a number of free consumer protection pamphlets, which may be ordered from any of the regional offices. Topics include: Duties & Responsibilities of the Office of the Attorney General; Business Opportunities; Car Repair; Charitable Raffles; Credit Cards & ATM Cards; Debt Collection; Door to Door Sales; Get Satisfaction; Home Improvement; Mail Order Sales; Telemarketing Fraud; Timeshares; and Your Tenant Rights.

A consumer with a product or service complaint first should contact the person or company who sold 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.

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 a business involved in a dispute and offer some form of arbitration to settle the matter. Look in the phone book for the nearest BBB.

The Texas Secretary of State handles complaints in a number of areas. Office of the Secretary of State, P.O. Box 13697, Austin, TX 78711, (512) 463-5701.

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

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. The Commission's Web Site address is http://www.gsa.gov/staff/pa/cic/cic.htm.

The National Foundation for Consumer Credit has a toll-free reference line to locate an area member office of Consumer Credit Counseling Services, non-profit groups offering advice and debt management programs for little or no charge. To locate the nearest office, call (800) 388-2227.

The Federal Trade Commission (FTC) deals with fraud and deceptive business practices, and has the legal authority to file lawsuits and freeze company assets. The FTC has a number of consumer protection publications available by writing to the FTC, Public Reference Branch, Sixth Street and Pennsylvania Avenue, NW, Washington, D.C. 20580 or by calling (202) 326-2222.

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

Consumers may have their phone number 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.