Online Consumer Protection - Term Paper Example

Online Consumer Protection Online Consumer Protection has become one of the most important areas demanding special consideration so as to protect the rights of e-consumers. This report is a discussion about the consumer protection and respective legislations. First of all, an introduction has been given which gives a better understanding of what does consumer protection mean and why it is important. Then, there is a brief description of electronic commerce being carried out between the consumers and the internet marketplace along with its requirements for protecting the consumers’ information. Afterwards, different laws, legislations, regulations and Acts have been described in detail so as to give a full view of what measures are being taken to ensure the consumers’ protection in the online community. The idea of educating the consumers has also been emphasized upon so that they can play their part in protecting their own as well as their children’s identities from the cyber criminals. Some lines have been dedicated to explain how to shop safely online and how to engage in secure transactional activities with the retail companies, and later on, scams have been discussed which have become a great curse in the online world confusing and attracting the e-consumers for the purpose of cheating them. How to avoid and spot the scams has been discussed in detail. And, in the end, the report is concluded to give a summarized view of the whole concept. Keywords: consumer, internet, online, protection, business, e-commerce, computer, fraud, vendor, seller, legislation, regulation, information, scam, Act, electronic, activity, commercial Introduction Online consumer protection has become one of the most important and controversial issues that have been raised since the wide use of internet started on the globe. Internet has sped up the development of online businesses, commerce, commercial services and marketing, providing the consumers a much interacting environment with the companies. Many laws and legislations have been passed, since the new millennium started, regarding the protection and privacy of consumers or, in other words, internet users. This has helped in bringing order and standardization in the internet marketplace. These legislations will, of course, keep on getting adjusted according to the ever changing needs, demands and contributions of internet marketing so as to guarantee the consumers’ protection at all costs. Along with the growing trend of trading over the internet, “many unusual consumer issues have arisen that have required both regulatory agencies such as the FTC and the legislative branches to pass new rules and laws” (eNotes, 2009). On one hand, consumers choose the modern fashion of interacting with the world through the internet commerce and telecommunication, and on the other hand, they are also concerned about having their important information protected and not disclosed. For example, consumers do not want their personal information, addresses, phone numbers and credit card numbers to be given out to wrong authorities when they make online transactions with wholesale and retail companies that offer various commercial services. Simple disputes between the consumers and companies can be resolved through telecommunication but in case of fraudulent transactions, the customers need to be protected. Some companies store the consumers’ information on so-called databases. These companies, considering those databases as their own asset, can illegally sell or disclose the information to other companies which can make wrong use of it. Thus, consumers have to be made sure that they are safe online and can trade and interact with companies and corporations with the guarantee that their privacy will not be compromised upon. Also, the consumers want their children to be protected from the unsuitable and inappropriate substance that is easily available in the online community such as violence, gambling and pornography. For this purpose, state and federal laws have been designed “through a framework of domestic and international statutory regulation” (Office of Communications, 2006) so as to protect the rights of consumers. On the other hand, it is also very important to educate the consumers how to connect to the online community in a safer way and manage the risks associated. Whether they are the consumers of e-commerce, or they are simply receiving e-mails, the privacy and protection has to be satisfied. Some of the risks and fraudulent activities associated with the online community include malicious virus propagation, phishing, identity theft with the use of harmful softwares, hidden true identities of fraudulent authorities, and the easy availability of inappropriate content for young children. There are many regulatory solutions devised for consumers’ protection like the information can be watched and supervised at the server and access to websites inappropriate for young children can be restricted at the search engine as well as at one’s desktop. National internet service providers can play a very important role by providing their customers filtering tools with the use of which they can filter and block the unwanted and harmful emails thus decreasing the amount of spam emails. Consumers themselves should also know which softwares to use to protect themselves from virus spams and getting hacked. Still, however, the solution regulator authorities keep on getting complaints from the consumers regarding phishing and identity theft, which is becoming a serious concern. For example, “the Information Commissioner’s Office, the regulator charged with oversight of data protection regulation in the UK, received over 19,000 data protection complaints from the general public in 2004” and up to “16,882 unique attacks in November 2005” (Office of Communications, 2006) have been reported to the Anti Phishing Working Group. Therefore, the need arose for establishing such foundations that are able to identify and report the harmful content in the online community and bring the issue in the notice of ISPs which are already given details about inappropriate websites and have the authority to block the access to these websites. These foundations also try to establish the consumers’ trust in carrying out commerce in the online community by devising measures like data encryption and decryption (cryptography) through the use of http protocols. This method is, nowadays, being adopted by online banks and wholesale and retail commercial websites to gain the customers’ trust. Moreover, the padlock symbol that appears on the browser, when the consumers are carrying out e-commerce, is a great effort towards consumer protection over the internet. E-Commerce and Consumer Protection Consumers throughout the world engage in e-commerce, selling and buying over the internet, phone or mail orders. “Such transactions are covered generally by normal buying and selling legislation, but they are also covered by special Distance Selling Regulations” (Department for Business Innovation and Skills, 2009). According to Distance Selling Resolutions, the consumers are guaranteed protection from credit card frauds, and their rights are reserved such as they should receive appropriate information about the goods and services they are going to buy and are legible to a cooling-off period in which they can return the item they bought in case they have complaints. The Consumer Minister, McCartney (2006, September 12), states in a press release: Consumers deserve protection whether they are buying from their local shop or online. But businesses need to have a clear idea of where the law stands. Thats why this joint guidance will support businesses in their efforts to operate distance sales and give consumers the protection they deserve. There are numerous e-commerce regulations that have been designed to carry out the contracts and transactions over the internet, to inform the consumers about the details of distance selling and to resolve the local as well as cross-border disputes among the consumers and the business. These laws and legislations will be discussed in the coming paragraphs. Consumer Protection Regulations and Legislations Here, we discuss some very important rules, regulations and legislations that have been designed to guarantee that the consumers remain safe while interacting with the online markets. Internet Sales Contract Regulations The Internet Sales Contract Regulations have specifically been designed for the consumers who are either the residents of Alberta or engage in e-commerce with companies located inside Alberta. This contract deals with only those goods and services which are worth more than $50 bought or sold for personal use. The regulation deals with formal business transactions within companies and not with a single individual. There are certain disclosure statements stated in the regulations that instruct the online vendor or seller to provide certain information to the consumer before making the transaction. This information includes the name of the business, the address, the telephone number, a brief and accurate description of the product requested, terms and conditions of the transaction, the amount of taxes and shipping/delivery charges, custom charges, brokerage fees if any, the currency in which the payment is to be made, the mode of payment, the refund or exchange policies, the method to cancel the order, the correct date and time for the shipping of the product, and the arrangements made for the delivery. This information is very vital for the consumer’s satisfaction so that he knows that he is entering into a safe and protected contract with the company and that there is no chance of any fraudulent activity. This information is to be printed on the website. The company is liable to provide the consumer with a copy of the contract made either in the electronic form or in paper, according to the consumer’s requirement. Cancellation of internet sales contract. According to the Internet Sales Contract Regulations, the consumer retains the right to cancel the sales contract at any time if: he feels that the disclosure requirements are not being met by the company he is not given the chance to accept or decline the contract he does not receive a copy of the contract by mail or fax he cannot download and save a copy of the contract by printing it he feels that the copy of the contract sent to him by the company does not contain appropriate and complete disclosure information he does not receive the product he purchased within the number of days agreed upon in the contract he finds out that the delivery/shipping date is not mentioned in the copy of the contract The consumer, however, cannot cancel the contract if the shipping has been made by the company and he is not available to receive it. But, if any of the above situations occur, then he should inform the seller company that the contract is to be cancelled, through mail, fax or e-mail, and should also let the company know the reason for cancellation. After the cancellation occurs, the company is liable to refund the money that has been taken in advance from the consumer within 15 days. The Act also states that if the consumer, even after the cancellation of the product, receives it (as it has happened in many cases), then it is his ethical duty to return the product to the company within 15 days. Refund in case of credit card. If the consumer paid for the product by means of credit card and he does not receive a refund of the money in case he cancels the order, then he must “request to cancel or reverse the credit card charge” (Government of Alberta, 2009) along with providing the information about the credit card (name, number, expiry date), the name of the vendor company, the date of entering into the contract and the date of cancellation of the order, total payment made, and a note that the refund has not been made. Consumer Protection Legislation The EU’s consumer protection legislation consists of several Acts that ensure the protection of consumer guaranteed from the seller’s side. These Acts include Fair Trading Act 1973 (ensures fair e-commerce), Supply of Goods (Implied Terms) Act 1973 (deals with hire-purchase contracts), Sale of Goods Act 1979 (describes the rights of the seller), Supply of Goods and Services Act 1982 (describes the responsibilities of the seller), Consumer Protection Act 1987 (deals with product liability, consumer’s safety and misleading prices), Data Protection Act 1984 (deals with the protection of information saved on computers), and Sale and Supply of Goods Act 1994 (deals with the seller’s responsibilities). Consumer Protection from Unfair Trading Regulations 2008 (CPRs) The CPRs were brought into existence on 26 May, 2008, so as to efficiently cope with unwarranted trading and fraudulent business activities by providing a widespread scaffold. These CPRs “transpose into UK law the EU Unfair Commercial Practices Directive (UCPD)” (Department for Business Innovation and Skills, 2009). The CPRs framework basically deals with restricting the traders to get involved in any illegal activity which has the target to use the consumer and his information without his consent, or to provide the consumer with incorrect information about the product. The rules put forth in CPRs target at misleading actions and unfair or aggressive commercial practices, and apply a penalty (fine or imprisonment) upon the rogue traders who, according to the Consumer Protection from Unfair Trading Regulations 2008 (2008, May 26), provide “unclear, unintelligible, ambiguous or untimely” information to the consumers about the “existence or nature of the product” and its main characteristics, and hide the motives and nature of the commercial activities and sales process which leads to either disabling the consumer “to take an informed transactional decision” or forcing the consumer to take a decision which he would not have taken otherwise. This is referred to as aggressive commercial practices which are strictly dealt with under the CPRs. These regulations also emphasize upon giving the authority to an enforcement agency to carry out transactions with the traders and enter into an agreement with them so as to make sure that the regulations are being followed completely, and give the authorized officers permission to enter into the premises of the business with a warrant. Computer Fraud and Abuse Act (CFAA) CFAA was designed in 1984 and deals with penalties for the intruders who gain access to sensitive information stored in a computer without authorized access. Computers have to be protected when the consumers carry out commercial activities, engage in cross-border e-commerce, and make online business transactions and email communications with online traders. It is illegal for anyone to get access to the transactional information without the consent of the party involved. The term protected computer is used in the Act to refer to those computers which is being used by financial institutions for the purpose of carrying out national or international e-commerce. The Act applies penalties upon the abusers starting from 10 years to 20 years of imprisonment. Electronic Communications Privacy Act (ECPA) ECPA was designed in the 1980s and enacted by the Congress. It applies penalties upon the persons who gain access to and make illegal use of the sensitive information that has been exchanged between the consumers and the online vendors through electronic communication techniques such as electronic mails, text messages, video conferences, chatting, and etcetera. Title I of ECPA deals with the protection of electronic communication that is transferred through voice, wire, sounds or signals; whereas, Title II, which is also referred to as Stored Communications Act (SCA), deals with the protection of stored communication like text messages and chats. Title III deals with the prohibition of using trap and trace devices that could record the electronic communication going on between the two parties without obtaining a search warrant for doing so. It is also obligatory for the Police to take the consent of the party involved prior to using his taped conversation. ECPA is said to have restricted the concept of online consumer profiling. Consumer profiles are made by the websites by the use of cookies which tend to store the consumer’s information when they visit a specific website. This information can then be illegally used by the websites which make online profiles of the consumers and make illegal use of their transactional information. The only exception here involved is that the consumer’s information can only be used with his consent. Children’s Online Privacy Protection Act (COPPA) COPPA was designed in 1998 and became effective on April 2000. It aims at restricting the companies to distribute inappropriate information over the internet which the children under the age of thirteen years can get easy access to. COPPA put forward rules and regulations that are to be applied on the commercial website owners and internet service providers who know which websites are being used by children and collect personal information from them with or without their parents’ consent. They are checked how they make use of this information. The operators are told to maintain a privacy policy on their websites and on every such page where personal information is being collected from young children. They are required to take the parental consent before collecting the information and are under the obligation of keeping that information confidential and safe. COPPA ensures that the parents are provided a description of the personal information collected from their children along with the confirmation that the information has not been disclosed or sold to any third party so that they may decide to let their children keep using the website or block it. “In 2000, the Federal Trade Commission filed its first action under COPPA, against a website called Toysmart” (eNotes, 2009) which started selling the information collected from children after its bankruptcy. However, Toysmart was afterwards allowed to sell its database only to an authorized buyer and only under the regulations put forward by COPPA. Federal Trade Commission holds the responsibility to regularly check that COPPA regulations are being followed effectively or not. Federal Trade Commission Act (FTCA) FTCA was passed in 1914 by the Federal Trade Commission which is a consumer protection agency. FTC “collects complaints about companies, business practices, identity theft, and episodes of violence in the media” (Federal Trade Commission, 2008). FTCA regulations guarantee inquiries and investigations if a complaint is received from the consumer. It makes sure that unfair trade practices do not take place and that the ISPs follow the consumer privacy and protection regulations. According to FTC (2008), all complaints that are entered into a “Complaint Sentinel” which is an online database of complaints and various law enforcement agencies have access to this sentinel. FTC Bureau of Consumer Protection directly deals with the consumers online and records their complaints in no time so that the consumer gets satisfied that his problem will be dealt with. Anticybersquatting Consumer Protection Act (ACPA) ACPA was passed in 1999 and is also referred to as Trademark Cyberpiracy Prevention Act (TCPA). It has the aim of providing protection to trademark holder companies by applying penalties and lawsuits upon the cybersquatters who register with, misspell, use or resell domain names that are nearly similar or indistinguishable from those domain names which are being used by famous companies as trademarks, with the purpose of gaining financial profit from the trademark’s goodwill, confusing the consumers or damaging the fame of the claimant company. These illegal activities are given the name of bad faith in the Act. Let us consider that McDonald’s, the worlds largest chain of fast food restaurants, does not hold a website. If somebody or some company creates a website with the domain name www.mcdonalds.com with the purpose of misusing the domain, or selling the website to gain profit from doing so, or confusing the consumers, then that cybersquatter company is liable to penalty under the ACPA regulations. ACPA also diminishes the consumers’ confusion about the real trademark company and the cyberpirates because ACPA makes sure that a consumer who visits www.mcdonalds.com should be viewing the actual MaDonald’s details and not something else. The cybersquatter can be sued and the court is liable to cancel or transfer the domain registration and order to pay back to the plaintiff company if it has suffered from money damages. Electronic Signatures in Global and National Commerce Act (ESIGN) We all know that a signature is a formal requirement when an agreement takes place between two parties. It is also an essential requirement in the online world of e-commerce where electronic agreements are taking place between the consumers and the internet market. For this purpose, the ESIGN Act was passed on 30 June, 2000 by the Congress, which proposed ways to do electronic signatures in order to validate the online agreements and transactions (e-commerce) which may be utilizing electronic forms or electronic records for the agreement purpose. Under this Act, the electronic signatures have the same legality and authentication as is of a hand signature on a paper document. An electronic signature may be an electronic symbol or sound or some course of action that is rationally connected to the agreement or the electronic document and works as a signature or a stamp. It is up to the involved consumers and business parties whether to carry out the transactions electronically or in paper and what kind of electronic signatures they adopt in case of electronic commerce. According to the Act, the consumers have the right to get a copy of the agreement and records of information in paper as well if he has consented affirmatively to such activity for which electronic records will have to be used. The companies engaged in e-commerce with the consumers must provide, before taking the consumer’s consent, must inform the consumer about all the options of having provided the information or records in writing and must make sure whether the consent relates to a single record or the whole agreement. The consumers are given the right to withdraw the consent at any time and are informed about the course of action they should use to withdraw their consent. This is what is called the disclosure statement which also provides information to the consumer about the hardware and software required to access the electronic records. A community Banker, John Kromer (2001, January) states that “the E-SIGN act is expected to have a profound impact on the banking industry, providing the legal tools for banks to not only initiate transactions online, but also to conclude them electronically” as the regulations put forth by this Act is said to have significantly reduced the time and cost spent on e-commerce carried out by banks with the secondary market, the reason being that it provides an easier and more user-friendly method for the disclosure of information to the concerned customers with their privacy and protection guaranteed through electronic signatures. How to Shop Safely Online The internet has devised new ways and methods of shopping online while sitting in the comfort of one’s home. But, along with this ease, many concerns are also there which the consumers must consider if they want to enter into protected and secure transactions with the seller companies without any security risks involved. They must watch what information they are going to share with the companies online. Companies might ask them to give their personal data like name, address, phone number, e-mail address, spouse’s name, name of parents and children, social insurance number, bank account number or credit card number. Consumers should make sure that the seller companies have a privacy policy mentioned on their websites and that the security of their credit cards or any other mode of payment is also guaranteed. They should give special consideration to the concern that the vendors should have a protected transaction scheme which will keep their financial information private and secured. If the credit card number has been given, then the statement must be checked regularly so as to make sure that there are no unknown charges that are not in the consumer’s knowledge because there have been cases in the past regarding fraudulent activities associated with the credit cards. It is also a sensible idea to keep a copy of all agreements, transactions and communications that have been carried out with the online vendors so that a proof is always there in case of complaints- minor or severe. Scams Scams are businesses that attract the consumers with mind-catching and striking offers like a big prize or gift hampers that will be delivered after the consumers pass on to them their personal information. Some of them might be legitimate but most are fake trying to use the consumers. Whitfield (2009) states: Internet opens new horizons, brings us loads of opportunities and vast possibilities of all kinds. As everything, it has two sides: it can be a dangerous weapon for anyone not knowing how to handle it right, and a great, helpful and obedient servant for everyone knowing how to use it. Most Common Scams in the Online Community Some of the most common scams that the consumers should be cautious about are work-at-home jobs (as described above), business opportunity scams (that tell a consumer to start a business with the company that will make him rich overnight), e-mail scams, loan or credit scams (that offer loan and never answer after the consumer has paid the initial fee), prize award scams (that tell the consumer that he has won a prize for which he has to pay a small fees), and so on. The thumb rule that the consumer must keep in his mind while surfing is that he should keep away from websites who promise him money without doing work. How to Avoid Scams? One should always do some research before falling for such offers by studying online reviews by other people and searching for any scam reports that the company might be having. For example, there are a lot of work-at-home jobs being offered at the internet with offers like lotteries or gifts or bonuses, most of which are just a scam trying to get the consumer’s personal information leading to their online profiling. Thus, it is very important to do some research work before giving out one’s curriculum vitae or resume which definitely contains all private information. It is also important to install an up-to-date anti-virus software program so as to protect the computer from scams and viruses that might travel to the system through malicious code. The e-mails must also be scam protected. The key sentence is that one should never give out one’s identity without making sure that the second party is a legitimate one. How to Spot a Scam? Scams can be spotted if the website the consumer is visiting contains addresses which are not accurate or which contains only post office box number and no street addresses does not show any real person’s name contains telephone numbers that cannot be connected contains inaccurate references so as to satisfy the customers that a lot of people have been using the website for long gives offers like getting the consumer rich overnight does not give money back guarantee Conclusion Putting everything together, it is very important for the consumers to remain alert while they are interacting with the online community. In spite of so many laws, legislations and Acts that have been passed to ensure the consumers’ protection online, still cases happen where they can become a victim to fraudulent activities and scams put forward by retail companies and vendors. Though, there are numerous true and honest companies out there which are carrying out e-commerce in a sincere and straightforward fashion, but still, it is always a sensible idea to protect one’s identity and personal information before giving it out. It is vital to educate the e-consumers about their rights of protection so that they do not get trapped in the hands of criminals. The more the awareness about the consumer protection, the lesser will be the fraudulent activities taking place in the online world. References Consumer Protection from Unfair Trading Resolutions 2008. (2008, May 26). Misleading actions. Part 2: Prohibitions (Publication No. 1277). Retrieved from Office of Public Sector Information Online: http://www.opsi.gov.uk/si/si2008/uksi_20081277_en_1 Department for Business Innovation and Skills. (2009). Consumer protection regulations. Buying and Selling. Retrieved from http://www.berr.gov.uk/whatwedo/consumers/buying-selling/CPRs/page52554.html Department for Business Innovation and Skills. (2009). Distance selling regulations. Consumer Issues. Retrieved from http://www.berr.gov.uk/whatwedo/consumers/buying-selling/distance-selling/index.html eNotes. (2009). Consumer rights and protection. Encyclopedia of Everyday Law. Retrieved from http://www.enotes.com/everyday-law-encyclopedia/consumer-rights-and-protection.html Federal Trade Commission. (2008, June 9). Before you submit a complaint. Consumer Protection. Retrieved from https://www.ftccomplaintassistant.gov.html Government of Alberta. (2009). Consumer tipsheet - internet shopping. Tipsheets- Consumer Information. Retrieved from http://www.servicealberta.gov.ab.ca/1020.cfm Kromer, J. (2001, January). ABCs of the E-SIGN act for community Banks. Goodwin Procter. Retrieved from http://www.goodwinprocter.com/~/media/C5FF83C2F90A4471BF00888384FB5B39.ashx McCartney, I. (2006, September 12). OFT issues guidance on distances selling regulations, [Press release]. London: Office of Fair Trading. Office of Communications. (2006, June). Online protection: A survey of consumer, industry and regulatory mechanisms and systems. Retrieved from Ofcom Office of Communications Online: http://www.ofcom.org.uk/research/telecoms/reports/onlineprotection/report.pdf Whitfield, I. (2009). Can you avoid scam? yes, of course. PowerHomeBiz.com. Retrieved from http://www.powerhomebiz.com/vol84/scam.htm Read More