Part I. Buying Smart

Protecting Yourself

Consumers are faced with a marketplace full of decisions. Ask the right questions before and after you buy and avoid consumer fraud and rip-offs.

Before You Buy

After You Buy

Red Flags of Fraud

Consumer protection offices urge consumers to be aware of the red flags of fraud. Walk away from bogus offers. Toss out the mail or hang up when you hear:

Remember, the smart consumer always looks at the total price before deciding and checks out the company and product before buying.

Stay away from telemarketers who want to:

Complaining Effectively

Save all purchase-related paperwork in a file. Include copies of sales receipts, repair orders, warranties, canceled checks, contracts, and any letters to or from the company. When you have a problem:

Allow time for the person you contacted to resolve your problem. Keep notes of the name of the person you spoke with, the date and what was done. Save copies of all letters to and from the company. Don't give up if you are not satisfied.

Writing a Complaint Letter

Whom To Contact

What To Say

What To Do Next

  • describe purchase
  • name of product, serial numbers
  • include date and place of purchase

  • state problem
  • give history

  • ask for specific action
  • enclose copies of documents

  • allow time for action
  • state how you can be reached

    Keep copies of your letter and all related documents.
  • Consumer Tips

    A number of suggestions are included here to help you become a smarter consumer. They cover a broad range of topics. If you are repairing, leasing, or buying a car; buying a home; investing in commodities or securities; or purchasing any number of products or services in the marketplace, the tips offer ways to make the best decisions and to be alert to fraud or scams. Covered also are the various marketing schemes, such as telemarketing, mail order, and door-to door sales.

    Check with your local consumer protection office and Better Business Bureau for other consumer information on a variety of topics. Their addresses and phone numbers are listed on pages 71 and 34, respectively.

    Car Repair, Purchase, Renting and Other Concerns

    Car Repair

    Some states, cities and counties have special laws that deal with auto repairs. For information on the laws in your state, contact your state or local consumer protection office.

    Buying a Used Car

    Buying from a Private Individual

    Generally, private sellers have less responsibility than dealers for defects or other problems.

    Buying from a Dealer

    Check the complaint records of car dealers with your state or local consumer protection agency or Better Business Bureau.

    To order a free publication on buying a used car, contact the Federal Trade Commission, Public Reference Section, 6th and Pennsylvania Avenue, N.W., Room 130, Washington, DC 20580, 202­326­2222.

    Buying a New Car

    Credit and Sublease Brokers

    A new and rapidly growing area of consumer fraud involves con artists who prey on people who have bad credit and who are having problems getting loans to buy cars. There are two main schemes:

    To protect yourself:

    To order a free publication on how to buy a new or used car, contact the Federal Trade Commission, Public Reference Section, 6th and Pennsylvania Avenue, N.W., Room 130, Washington, DC 20580, 202­326­2222.

    Car Leasing

    To order a free publication on car leasing, contact the Federal Trade Commission, Public Reference Section, 6th and Pennsylvania Avenue, N.W., Room 130, Washington, DC 20580, 202­326­2222.

    Lemon Laws

    Almost every state has a new car "lemon law" that allows the owner a refund or replacement when a new vehicle has a substantial problem that is not fixed within a reasonable number of attempts. Many specify a refund or replacement when a substantial problem is not fixed in four repair attempts or the car has been out of service for 30 days within the first 12,000 miles/12 months. If you believe that your car is a lemon:

    If the problem isn't resolved, you might have the option of participating in an arbitration program offered by the manufacturer or your state. Contact your state or local consumer protection office for information.

    Lemon Law Summary is available upon request by sending a self-addressed, stamped (55 cents) envelope to the Center for Auto Safety, 2001 S Street, N.W., Suite 410, Washington, DC 20009.

    Vehicle Repossessions

    When you borrow money to buy a car, you should know that:

    If you know you're going to be late with a payment, talk to the lender to try to work things out. If the lender agrees to a delay or to modify the contract, be sure you get the agreement in writing.

    Some states have laws which give consumers additional rights. Contact your state or local consumer protection office for more information.

    To order a free publication on vehicle repossessions, contact the Federal Trade Commission, Public Reference Section, 6th and Pennsylvania Avenue, N.W., Room 130, Washington, DC 20580, 202­326­2222.

    Renting a Car

    Federal law does not cover short-term car and truck rentals. However, there are state laws that do. You should contact your state or local consumer protection office for more information on laws in your area.

    Mail Orders

    Federal mail order rules require companies that take consumers' orders by mail to:

    To report violations of the Federal mail order rule, contact the Federal Trade Commission. For information on your state laws, contact your state or local consumer protection agency. To report a problem with mail order, contact the U.S. Postal Inspection Service or the Postal Crime Hotline at 800­654­8896.

    Mail Fraud

    Be suspicious of "free gifts" that require a "tax payment" or "registration fee;" sweepstakes requiring an entry fee or purchase; employment or work-at-home opportunities requiring a fee; offers requiring your credit card number or bank account number; loans that require you to pay a fee in advance; mailings that look like they are from official government agencies when they are not; and prize notices requiring you to call a 900 number.


    While many legitimate businesses use the telephone to make their sales, it's easy for fraudulent companies to abuse the phone. Beware of the con artists who promise anything and deliver nothing, or at least not what customers thought they were getting.

    Tips for Smart Telephone Shopping

    Telephone Order Rights

    Some states have telemarketing laws that require written contracts, automatic cancellation periods or registration of telemarketing companies. Contact your state or local consumer protection agency. Federal telephone order rules require companies that take consumers' orders by phone, computer or fax to:

    Use Caution and Common Sense

    Blocking Telemarketing Calls

    You have the right under Federal law:

    Some states do not allow telemarketers to call people who do not want to receive calls. Contact your state or local consumer protection agency to check your state's rights.

    To reduce telephone calls you do not want, you can sign up with the free Telephone Preference Service operated by the Direct Marketing Association, a private trade group. To join, write to the Telephone Preference Service, P.O. Box 9014, Farmingdale, NY 11735­9014.

    To report violations of the telephone order rule, contact the Federal Trade Commission. If you made the telephone transaction in response to a postcard or other mailing, contact the U.S. Postal Inspection Service or the Postal Crime Hotline at 800­654­8896 (toll free). For information on the laws in your state, contact your state or local consumer protection agency.

    Calls That Cost: 900 Numbers and
    Other Pay-Per-Call Services

    Unlike 800/888 numbers which are free, you pay a fee when you call a 900-type number. The company or organization you're calling sets the price, not the telephone company. Most states do not regulate the cost of these calls. Charges can vary from less than a dollar to more than $50. Federal law requires that:

    Protect yourself from fraud by avoiding:

    Hang up if you're being switched from an 800/888 number to a 900 number without your prior consent.

    What You Need To Know About 800/888 Numbers

    Generally, you cannot be charged for 800/888 numbers. New rules prohibit charging callers to toll-free numbers for conveyance of information without explicit authorization through either a written agreement or payment by direct remittance; prepaid account; or debit, credit or calling card. The rules specify particular information that must be:

    Further, all presubscription arrangements must be done in writing or through direct remittance; prepaid account; or debit, credit, charge or calling debt card. Charges for resubscribed information services must be displayed separately from charges for local and long distance service.

    Your Rights and Recourse

    Door-to-Door Sales

    Cancellation Rights

    Home Improvement

    Home Financing

    Home Equity Credit Lines

    Reverse Mortgages

    For more information or to file a complaint, contact:

    Department of Housing and Urban Development
    Office of Single Family Housing 451 Seventh Street, S.W.,
    Room 9272
    Washington, DC 20410

    State and Local Consumer Protection Offices (See list beginning on page 71.)

    Selecting a Financial Institution

    Select a financial institution carefully by comparing the terms and prices of all of the services you need.

    If a financial institution is federally insured, you will see one of the following official signs posted at the entrance of the institution

    For banks:

    For savings associations:

    For credit unions:

    Truth in Savings Act

    Checking Accounts


    Information and Assistance

    Agencies responsible for carrying out consumer protection laws that cover financial services also provide information and assistance to consumers. For more information or to file a complaint, contact:
    Federal Deposit Insurance Corporation (FDIC)
    Office of Consumer Affairs
    550 17th Street, N.W.
    Washington, DC 20429
    Toll free: 800­934­3342
    (Regulates state chartered banks that are not members of the Federal Reserve System.)

    Board of Governors of the Federal Reserve System
    Division of Consumer and Community Affairs
    20th and C Streets, N.W.
    Mail Stop 800
    Washington, DC 20551
    TDD: 202­452­3544
    (Regulates state chartered banks and trust companies that are members of the Federal Reserve System.)

    Comptroller of the Currency
    Customer Assistance Unit
    250 E Street, S.W.
    Mail Stop 3­9
    Washington, DC 20219
    (Regulates banks with national in the name or N.A. after the name.)

    National Credit Union Administration
    Office of Public and Congressional Affairs
    1775 Duke Street
    Alexandria, VA 22314­3428
    (Regulates federally chartered credit unions.)

    Office of Thrift Supervision
    Division of Consumer and Civil Rights
    Office of Community Investment
    1700 G Street, N.W.
    Washington, DC 20552
    Toll free: 800­842­6929
    (Regulates Federal savings and loans and Federal savings banks.)

    State Banking Authorities
    (See Consumer Assistance Directory, page 89.)
    State and Local Consumer Protection Offices
    (See Consumer Assistance Directory, page 71.)

    Using a Debit Card

    Many consumers are familiar with automated teller machine (ATM) cards issued by banks and credit unions. These cards can be used to access cash, make deposits, transfer funds and verify balances in checking and saving accounts. Now, consumers are learning that certain types of ATM cards, commonly called debit cards, can be used to purchase goods and services as well.

    Credit Access and Use

    Equal Rights

    The Equal Credit Opportunity Act guarantees you equal rights in dealing with anyone who regularly offers credit, including banks, finance companies, stores, credit card companies and credit unions. A creditor is someone to whom you owe money. When you apply for credit, a creditor may not:

    You have the right to:

    You also have a right to know how much it will cost to borrow money. The Truth in Lending Act requires a lender to inform you of the cost to borrow so that you have the opportunity to compare the cost and terms of credit offered by various lenders.

    Credit Cards

    Choosing a Credit Card

    Credit card issuers offer a wide variety of terms. Consider and compare all the terms, including the following, before you select a card:

    Shop around for the terms that are best for you. Before giving money to a company that promises to help you get a credit card:

    For a small fee, you can purchase a list of the most competitive interest rates and credit cards in the country and find out how to qualify for the lowest rate possible by contacting:

    Bankcard Holders of America
    524 Branch Drive
    Salem, VA 24153

    Using a Credit Card

    Know your credit card protections. When you have used your card for a purchase and you don't receive the goods or services as promised, you might be able to withhold payment for the goods or services. Card issuers must investigate billing disputes. (See the section on Credit Billing and Disputes, page 22.)

    If your card is lost or stolen, you are not liable for any charges if you report the loss before the card is used. If the card is used before you report it missing, the most you will owe is $50.

    Protect your credit record. Pay bills promptly to keep finance charges low and to protect your credit rating. Keep track of your charges and don't exceed your credit limit. Report any change of address prior to moving, so that you receive bills promptly.

    If you cannot pay off your full credit card balance each month, a lower interest rate will save you money. If you do pay off your balance in full each month, choose a card with no annual fee.

    Preventing Credit Card Fraud

    Credit Reporting

    The Fair Credit Reporting Act controls how your credit history is kept, used and shared among lenders.

    The three biggest credit reporting agencies, TRW, Equifax and Trans Union, have millions of credit files on consumers nationwide. Their toll-free numbers are:

    You can find other credit bureaus in your area by looking in the yellow pages under Credit Bureaus or Credit Reporting.

    If you apply for credit, insurance, a job or to rent an apartment, your credit record might be examined. You can make sure yours is accurate.

    In response to your complaint, the credit bureau:

    If you are dissatisfied with the results of the re-investigation, you can have the credit bureau include a 100-word consumer statement giving your version of the disputed information. You also can contact the source of the disputed information and try to resolve the matter.

    If there is an error on a report from one credit bureau, the same mistake might be on others as well. You might want to contact the three major bureaus, as well as any local bureau listed in the yellow pages of your telephone book.

    Credit bureaus sometimes sell your name to banks or others who want to send you offers for credit cards or other forms of credit. If you don't want your name included on such lists, write or call the three major credit bureaus and tell them not to release your name.

    Credit Repair

    You might see or hear ads from companies that promise to "clean up" or "erase" your bad credit and give you a fresh start. They charge high fees, usually hundreds of dollars, but do not deliver on their promises.

    If you are thinking of paying someone to "repair" your credit, remember this:

    Some credit repair companies promise not just to clean up your existing credit record but also to help you establish a whole new credit identity. Remember, it is illegal to make false statements on a credit application or to misrepresent your Social Security number. If you use such methods, you could face fines or even prison. Beware of any company or method that:

    You can rebuild your good credit by handling credit responsibly. You might want to contact a Consumer Credit Counseling Service (CCCS) office. This is a non-profit organization that will provide help at little or no cost to you. For a CCCS office in your area, call 800­388­CCCS (toll free).

    Credit Billing and Disputes

    The Fair Credit Billing Act applies to credit card and charge accounts and to overdraft checking. It can be used for:

    Protect Your Rights

    If you follow these requirements, the creditor or card issuer must acknowledge your letter in writing within 30 days after it is received and conduct an investigation within 90 days.

    While the bill is being disputed and investigated, you need not pay the amount in dispute. The creditor or card issuer may not take action to collect the disputed amount, including reporting the amount as delinquent, and may not close or restrict your account.

    If there was an error or you do not owe the amount, the creditor or card issuer must credit your account and remove any finance charges or late fees relating to the amount not owed. For any amount still owed, you have the right to an explanation and copies of documents proving you owe the money.

    If the bill is correct, you must be told in writing what you owe and why. You will owe the amount disputed plus any finance charges. You may ask for copies of relevant documents.

    Debt Collection

    The Fair Debt Collection Practices Act applies to those who collect debts owed to creditors for personal, family and household debts, including car loans, mortgages, charge accounts and money owed for medical bills. A debt collector is someone hired to collect money owed by you. A debt collector may not:

    If you are contacted by a debt collector, you have a right to a written notice, sent within 5 days after you are first contacted, telling you:

    If you believe you do not owe the money or don't owe the amount claimed, contact the creditor in writing and send a copy to the debt collection agency with a letter telling them not to contact you.

    If you do owe the money or part of it, contact the creditor to arrange for payment.

    For more information:

    Contact the Federal Trade Commission, Public Reference Section, 6th and Pennsylvania Avenue, N.W., Room 130, Washington, DC 20580, 202­326­2222.

    To file a complaint:

    Contact your state or local consumer protection agency, your state attorney general or your Better Business Bureau.

    Investment Fraud


    Do your detective work before you invest: Call toll free 800­676­4632.

    There are often similarities in sales pitches used to promote fraudulent commodity investments, and knowing these can help you protect yourself from being the next victim. Prospective investors are approached through a variety of methods, such as:

    Deceptive or fraudulent sales pitches often use misrepresentations and material omissions of fact to promote fantastic profits with little risk, and these sales pitches involve persistent, high-pressure contacts allowing little or virtually no time for reflection or investigation by the investor.

    Proceed with caution when a salesperson:

    After you invest, be aware of the following warning signs of trouble:

    Use the toll-free Consumer Protection Hotline before considering a commodity investment. Exchange-traded futures contracts and options on futures can be offered and sold to the public lawfully only through commodity brokers that are registered with the U.S. Commodity Futures Trading Commission (CFTC), the Federal regulatory agency for the futures and options markets.

    To verify information about a register firm or individual, the National Futures Association (NFA), a CFTC-designated self-regulatory organization, maintains a toll-free Hotline at 800­676­4NFA (4632) to check/verify the registration status and disciplinary history (including customer complaints) concerning registered futures/options firms and registered salespersons (from outside the United States, reach the Hotline on 312­781­1410).

    Check out free consumer protection information on CFTC's website (, including how a customer can file a complaint to institute reparations proceedings against commodity professionals registered with the CFTC and how a customer can e­mail information about a suspect firm or broker to CFTC's Division of Enforcement.

    For additional information, contact CFTC's Office of Public Affairs at 202­418­5080; for information on how to file a customer complaint, call the Office of Proceedings on 202­418­5506. See page 107 for CFTC's mailing address.


    Consumer Privacy

    How To Reduce Unwanted Solicitations and Guard Your Privacy

    Review Files That Contain Information About You

    The Medical Information Bureau (MIB) is a data bank used by insurance companies. You might want to obtain a copy of your file and make sure the information it contains is correct. Write to the Medical Information Bureau, P.O. Box 105, Essex Station, Boston, MA 02112.

    Credit bureaus keep records about your credit history. You should review periodically your credit reports for accuracy. (See the section on "Credit Report-ing" on page 21.)

    To limit mail or telephone calls you do not want, you can sign up at no cost for a service that tells some of the telephone or mail marketing companies not to contact you. (See the sections on Telemarketing and Mail Orders, pages 13 and 12, respectively, for more information.)

    Many states have their own privacy laws concerning telemarketing; employment; the use of Social Security, credit card or checking account numbers; medical records; mailing lists; credit reports; debt collection; computerized communications; insurance records and public data banks. Check with your state or local consumer agency about specific privacy rights or a referral to the appropriate agency.

    Advance Fee Scams

    Be wary of ads promising guaranteed jobs, guaranteed loans, credit repair, debt consolidation or similar claims. Many of these offers are only a way to get you to send money in advance in exchange for little or no service.

    Special Contracts

    Health Clubs

    When you are considering whether to join a health club, be cautious of:

    Before you sign, be sure to:

    Dating Clubs/Matchmakers

    When you choose to deal with a dating service, be sure to check:


    To order a free publication on timeshares and health clubs, contact the Federal Trade Commission, Public Reference Section, 6th & Pennsylvania Avenue, N.W., Room 130, Washington, DC 20580, 202­326­2222.

    Travel Scams


    Although buying in a rent-to-own transaction sounds like a simple solution when you are short of cash, rent-to-own can be expensive. The rental charge can be three or four times what it would cost if you paid cash or financed the purchase at the highest interest rate typically charged in installment sales.

    Before signing a rent-to-own contract, ask yourself the following questions:

    If you decide that rent-to-own is the best choice for you, here are some questions you should ask before you sign on the dotted line.

    Comparison shop among various rent-to-own merchants. Contact your local or state consumer protection agency or Better Business Bureau to find out if there are any complaints on record against the business. Check for any specific state laws. Read the contract carefully and make sure you understand all the terms and get all promises in writing.

    Remember, know what you are paying. Compare the cash price plus finance charges in an installment plan with the total cost of a rent-to-own transaction.

    Long-term rent-to-own contracts cost so much more than installment plans that you could rent an item, make a number of payments, return the item, buy it on an installment plan and still come out ahead.

    Product Safety and Recalls

    Knowing how to use products correctly, reading instructions and being alert to hazards will help to ensure a safe environment around you. You also should pay attention to product recalls in the news and consumer magazines. Several Federal government agencies provide recall information on a variety of products, including toys, cars, child safety seats, food, and health and beauty aids.

    For consumer education material or to file a complaint, contact:

    (consumer products, other than cars, food or drugs)
    U.S. Consumer Product Safety Commission (CPSC)
    Washington, DC 20207
    Product Safety Hotline:
    Toll free: 800­638­CPSC; 800­638­2772
    TDD toll free: 800­638­8270
    Fax-on-Demand: 301­504­0051 (dial from handset of fax machine)

    (For more information about CPSC's Product Safety Hotline and Fax-on-Demand services, see page 107.)

    (vehicles, child safety seats and other motor vehicle equipment)

    National Highway Traffic Safety Administration (NHTSA)
    Washington, DC 20590
    Auto Safety Hotline and Fax-on-Demand:
    Toll free outside DC: 800­424­9393
    TDD: 202­366­7899
    TDD toll free outside DC: 800­424­9153

    (food, drugs, medical devices, such radiological products as microwave ovens, televisions and sunlamps)

    U.S. Food and Drug Administration
    Recall and Emergency Coordinator

    Refer to the white pages of your local telephone book for your regional FDA office.

    Item 595Z
    Pueblo, CO 81009

    (Write to this address to receive a free publication prepared by the U.S. Office of Consumer Affairs that explains which Federal agencies issue consumer product recalls, the kinds of products each of them covers, how to report product safety problems, and how to find out about warnings or recalls that have been announced.)

    State and Local Consumer Protection Office (See page 71.)

    Nutrition Labeling

    The new food label format offers more complete, useful and accurate nutrition information than has been available in the past. Shoppers are now able to compare the nutritional value of every packaged food on the grocery shelf.

    Nutrition Labeling Panel--Content

    The revamped nutrition panel on each food product is called "Nutrition Facts" and lists the following mandatory dietary components:

    Voluntary dietary components that can be listed on the label include calories from saturated fat, polyunsaturated fat, mono-unsaturated fat, potassium, soluble fiber, insoluble fiber, sugar alcohol, other carbohydrates, and essential vitamins and minerals.

    Nutrition Labeling--Format

    All nutrients must be stated as a percentage of their "Daily Value" (the daily nutrient intake level recommended by public health authorities) to show how much of a day's ideal total of a particular nutrient a consumer is getting. For example, if a serving of soup contains half the amount of sodium that is recommended for consumers daily, the food label shows the "Daily Value" of sodium in that soup as 50%. These percentages are based on a daily intake of 2,000 calories.

    Serving Sizes

    Serving sizes have been standardized and reflect more closely the amount of food usually eaten at one time. The serving size for similar products from different manufacturers are comparable.

    Nutrient Content Descriptors

    Food manufacturers are required to use standardized definitions when making claims concerning the nutrient contents of foods, for example, "light," "low-fat," "free," "reduced calories" and "high fiber."

    Health Claims

    Product claims about the relationship between a nutrient or food and the risk of a disease are limited to specific types of claims in seven areas. For example, if a product makes a health claim related to the link between calcium and osteoporosis, the product must contain at least 200 milligrams of calcium and must be a form of calcium that can be absorbed easily by the body.

    The claims must be stated so that the consumer can understand the relationship between the nutrient and the disease.

    For more information, contact:

    Food and Drug Administration
    Consumer Affairs and Information
    Department of Health and Human Services
    5600 Fishers Lane
    Room 16­75 (HFE­88)
    Rockville, MD 20857
    301­443­3170 or
    Toll free: 800­532­4440

    Department of Agriculture
    Center for Nutrition Policy and Promotion
    1120 20th Street, N.W.
    Room 200
    Washington, DC 20036


    Part II. Consumer Assistance Directory
    Handbook Contents