Minnesota Consumer Protection
Consumer Protection
o Automobile Buyer Protection
Minnesota Lemon Law
Automobiles Covered
Coverage
Exceptions to Coverage
Minnesota Used Car Warranty Law
Automobiles Covered
Automobiles Excluded
Warranty
Warranty Providers
o Telephone and Mail Fraud
Telemarketing Fraud
Credit Card Scams
Prize Mailings
o Home Solicitations
Door-To-Door Sales
Insurance Fraud
Three-Day Cooling Off Law
o Get-Rich-Quick Schemes
Work-at-Home Scams
Pyramid Schemes
o Specific Businesses
Hearing Aid Sales
Funerals, Burial, and Cremation
Debt Collection Agencies
Consumer Reporting Agencies
Truth in Repairs Act
o Minnesota Prevention of Consumer Fraud Act
o Resources
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Consumers enter into transactions every day. From buying a car to contracting for lawn care services, it is important that consumers be smart shoppers to avoid being taken advantage of. Every year thousands of Minnesotans lose money to consumer frauds. Consumer complaints are as varied as the people who make them, but most consumer problems could be avoided if consumers made more informed decisions. This chapter covers the most common consumer complaints and laws designed to protect consumers.
Automobile Buyer Protection
Automobiles are one of the most common consumer purchases. Purchasing an automobile is one of the most expensive transactions most consumers ever make aside from a house purchase. Yet, despite the frequency of car sales and the large amount of money spent on cars each year, most consumers know very little about the vehicles they buy. The average car today is too complex, with too many systems and parts, for the consumer to master. Add to this the wide variety of models available, and most consumers are forced to rely on the seller's representation that a car is in good working order. Recognizing that car buyers are often at the mercy of car sellers, the State of Minnesota has enacted two principal laws to protect car buyers.
Minnesota Lemon Law
Minnesota's Motor Vehicle Warranty Law, commonly known as the Minnesota Lemon Law, protects consumers who buy or lease new cars, pickup trucks, and vans in Minnesota. The law contains no warranties of its own. Instead, it puts teeth into the warranties manufacturers and dealers provide by giving consumers a remedy if a dealer or manufacturer fails to honor its written warranties.
Automobiles Covered
The Minnesota Lemon Law covers new cars, pickup trucks, and vans purchased in Minnesota. A new vehicle is also covered if it is leased for at least four months. The vehicles must be used at least 40 percent of the time for personal, family, or household use.
Coverage
The law applies to any written express warranty on the vehicle for the length of the warranty or for the first two years, whichever is shorter. If the warranty has already expired, the Lemon Law does not apply. The manufacturer or dealer must repair a vehicle in accordance with the warranty if the defect or problem is covered by the warranty and the owner reports it within the warranty period or two years after delivery of the vehicle, whichever comes first. As long as the problem is reported within the warranty period or two years after delivery, the manufacturer or dealer must make repairs, even if the warranty subsequently runs out.
The law has special provisions for vehicles with serious problems -- the real lemons. If the dealer or manufacturer is unable to repair a vehicle's problem after a reasonable number of attempts, the buyer or person leasing the vehicle has a right to go to the manufacturer's arbitration program or to court and seek a full refund of the purchase or lease price. What constitutes a reasonable number of attempts depends on the problem. A reasonable number
is four or more unsuccessful attempts to correct the same problem, more than one
unsuccessful attempt to correct a problem that causes a complete failure of the steering or braking system if the defect is likely to cause death or serious bodily harm, or any warranty repairs that cause the vehicle to be out of service for repairs for 30 or more business days.
Exceptions to Coverage
The Minnesota Lemon Law does not apply to problems that do not substantially impair either the use or market value of the car. The law does not cover problems resulting from abuse, neglect, or unauthorized alterations to the car.
Minnesota Used Car Warranty Law
Minnesota has one of the strongest Used Car Warranty Laws in the country. The Minnesota Used Car Warranty Law requires that Minnesota used car dealers provide basic warranty coverage for most used cars and small trucks sold in Minnesota.
Automobiles Covered
To be covered, a car or small truck must be purchased primarily for personal or household use. The terms and length of the warranty depend on the car's mileage when purchased. For cars with fewer than 36,000 miles, the warranty applies for 60 days or 2500 miles, whichever comes first. Parts covered under the warranty for these cars include:
•Engine •Transmission •Drive axle •Brakes •Steering •Water pump
•Externally-mounted mechanical fuel pump •Radiator
•Alternator, generator, and starter
For cars with between 36,000 and 75,000 miles, the warranty applies for 30 days or 1000 miles, whichever comes first. For cars in this category all of the parts listed above are covered except:
•Steering rack •Radiator
•Alternator, generator, and starter Automobiles Excluded
The following vehicles are excluded from coverage: •Cars with 75,000 miles or more
•Cars sold for less than $3000
•Custom-built or custom-modified cars •Cars eight years of age or older
•Cars purchased primarily for use in a business or farm •Vehicles with gross vehicle weight above 9000 pounds •Vehicles manufactured in very small quantities •Vehicles not meeting federal emission standards •Diesel engine cars
Warranty
If a part covered by the used car warranty malfunctions during the warranty period, the dealer must repair or replace the part at no charge to the buyer. The buyer must promptly notify the dealer and arrange for the automobile to be taken to the dealer for inspection and repair. The dealer has the choice to correct the defective part or to refund the purchase price of the vehicle minus a reasonable deduction for use of the vehicle. The buyer does not have the right to demand a refund. If a part is repaired under the warranty, the warranty for that part is extended for an additional warranty period. The warranty does not cover any problems if:
•Problem is the result of normal wear and tear.
•Problems result from collision, abuse, negligence, or lack of adequate maintenance. •Part is covered by an original factory warranty.
•Manufacturer agrees to repair the part at no charge.
If the dealer refuses to fix a problem covered by the warranty, the buyer can bring a lawsuit against the dealer within one year after the warranty expires. The consumer may bring this action in Conciliation Court, where procedures are relatively informal and the consumer need not be represented by an attorney.
A consumer can waive the warranty for a specific part if the dealer discloses in writing that the part has a defect, malfunction, or repair problem and the buyer circles the statement and signs next to it.
Warranty Providers
The warranty described above applies only if the consumer buys from a used car dealer. Anyone in the business of selling used cars who sells more than five used cars a year is considered a dealer and is required to get a license from the state. If someone sells more than five used cars a year but does not get a license from the state, they are still considered a dealer even though unlicensed. The warranty does not apply if the consumer buys a used car from:
•His or her employer
•A bank or other financial institution
•A company that previously leased the car to the consumer •Any branch of the state, a county, or a city in Minnesota
•An auctioneer selling the car in connection with the sale of other property or land Telephone and Mail Fraud
While many reputable firms use the telephone and the postal service to do business, these tools may be used to defraud consumers. The following scams frequently cross many lines. For example, telephone frauds can use promises of prizes, or mail frauds can attempt to get consumers' credit card numbers. The important lesson is for consumers to be aware of attempts to defraud them.
Telemarketing Fraud
It is wise to be skeptical about offers made over the telephone, because the telephone can be used for a variety of scams. Often, telemarketing scams are versions of other scams described in this section. Legitimate businesses using the telephone to reach customers should be willing to take the time to explain the product or service and to send information in the mail if a consumer is truly interested in an offer. Sure signs that an offer is not legitimate include pressuring a consumer to act quickly, offering to send someone to the consumer's home to pick up a check or cash immediately, insisting on a credit card number or checking account number, and offering prizes only after the consumer buys a product from the company. Credit Card Scams
Credit cards are popular with shoppers because they provide a convenient, easy way to make purchases without carrying money. Unfortunately, credit card holders are also an easy target for fraud. Anyone who obtains a credit card number can instantly use that number to defraud its owner and the credit card issuer, so it is wise to guard one's credit card numbers at all times. A common method used by crooks to get credit card numbers is to convince innocent cardholders to give the numbers over the telephone. To combat telephone credit card fraud, a person should never give out a credit card number over the telephone unless he or she initiates the call and is purchasing something.
The office of the Minnesota Attorney General reports that a very common credit card scam is for con artists to phone a home telling the person who answers that he or she has won a prize and need only provide a credit card number to verify his or her identity. Another common scam is for a con artist to phone a consumer and claim to be an employee of a credit card company seeking cooperation from the cardholder to catch a con artist. In this scam, the caller claims to be investigating credit card scams and asks for the victim's credit card number in order to set a trap to catch the con artist. Of course, no credit card company actually does this, and no one should ever give his or her credit card number to anyone using this scam.
Prize Mailings
Every year thousands of Minnesotans receive letters telling them they have won a prize in a contest. These letters often sound too good to be true and probably are. The letters usually seem quite believable since they are printed on good stationery, sound very convincing, and have senders with official-sounding names. What the victim does not realize is that, in order to claim a prize, he or she must pay inflated delivery costs or processing fees, give out a credit card number, or make an expensive long-distance telephone call. Often the prizes are either nonexistent or of very little value. A legitimate prize has no strings attached
whatsoever. Home Solicitations
While legitimate businesses use home solicitations to reach new customers, this method of doing business may attract unscrupulous people.
Door-To-Door Sales
The intent behind many door-to-door cons is to pressure the consumer into an impulse purchase. Anyone trying to con a consumer does not want the consumer to think about an offer or to compare prices. Most door-to-door salespeople can be politely refused. No one should feel obligated to let a stranger into their home simply because the stranger appears at the door claiming to be selling a product. If someone wants to do business with a door-to-door salesperson, it is best to get all the terms of the deal and any guarantees in writing.
Insurance Fraud
Every year the State of Minnesota receives many complaints about fraudulent insurance agents who visit their victims' homes. To sell insurance legally, a person must have a license from the state and an appointment from a legitimate insurance company. Some of the worst scams occur when a person who was formerly a licensed and appointed agent attempts to swindle consumers and disappears before the fraud is discovered. These frauds are convincing because the seller has legitimate experience selling insurance policies legally. When such persons decide to operate outside the law, they seem virtually indistinguishable from a legitimate agent.
Anyone suspecting that they may not be dealing with a legitimate insurance agent should check with both the state and the insurance company about the agent's status. In Minnesota, questions about insurance fraud should be directed to the Enforcement and Licensing Division of the Department of Commerce at 133 East Seventh Street, St. Paul, MN 55101, (612) 296-2488.
Three-Day Cooling Off Law
In response to the fraud so commonly associated with home solicitations, Minnesota has passed laws that protect consumers from home solicitation fraud. The most important of these is commonly called the three-day cooling off law. This law covers anyone offering consumer goods or services away from their traditional place of doing business. This includes
traditional door-to-door solicitations and other sales made at temporary locations, such as county fairs or in hotel or motel rooms. Phone solicitations and person-to-person solicitations may also be covered. Sales persons covered by this law are required to tell the consumer, before they say anything else, their name, the name of the company they represent, and the product or service they are selling. It is against the law to misrepresent their identity as a salesperson. They cannot misrepresent the true purpose of the deal or the true identity of the company and they cannot misrepresent the true cost of the good or service by failing to mention additional hidden but required costs. The seller is required to provide a copy of any contract the consumer signs and must give notice of the buyer's right to cancel the contract (if for more than $25) within three business days. To cancel the contract, the buyer must give written notice to the seller within three days. The Minnesota Attorney General's Office
recommends that any written notice of cancellation be sent by certified mail with return receipt requested so that the consumer has proof that the cancellation was sent and
received. The three-day cooling off law does not apply to real estate, insurance, securities, or motor vehicle sales.
Get-Rich-Quick Schemes
Many scams take advantage of the get-rich-quick dream with very little effort. Work-at-Home Scams
Minnesotans are frequently the victims of work-at-home schemes that promise to pay a lot of money in return for easy, no-experience-required work that can be done at home, such as light assembly or addressing labels. Senior citizens and the disabled are especially vulnerable to such scams because the scams appear to offer a way to supplement one's income without leaving home. Many work-at-home schemes are frauds requiring the victims to purchase expensive materials from the company with no guarantee that the finished product will be purchased. Often they are pyramid schemes as described below. Anyone interested in work at home should first contact the Minnesota Attorney General's Office or the Better Business Bureau.
Pyramid Schemes
A pyramid scheme is an illegal plan in which a large number of people at the bottom of a pyramid pay money to relatively few people at the top. New participants are recruited with the promise that, if they pay now, they can move up the pyramid and profit from later
recruits. Pyramid schemes are illegal and deceptive because they are mathematically doomed to failure. No matter how long the scheme continues, eventually the majority of participants are cheated.
Most people are smart enough to stay away from pure pyramid schemes that ask new recruits to pay money to be included in a pyramid. To hide the true nature of the rip-off, pyramid creators often hide a pyramid scheme behind what looks like a legitimate business. Rather than simply ask a new recruit to pay money to join a pyramid, a recruiter might claim to be selling a product to the new recruit. In exchange for paying an inflated price for a product, the new recruit is given the chance to become a dealer or distributor of the product. In this way, the new recruit winds up paying money to the people at the top of the pyramid and recruiting others for the lower level of the pyramid. The distinguishing feature of these scams is that those at the top of the pyramid make more money from their own distributors than
from the sale of products. The emphasis in such organizations is on maintaining a steady stream of new dealers and distributors rather than actually marketing a product.
Specific Businesses
There are many different ways to make money legitimately in Minnesota. Unfortunately, certain businesses have been particularly plagued by unscrupulous business practices. While the majority of people involved in the following businesses are honest, the State of Minnesota has passed special legislation to curb abuses in these businesses.
Hearing Aid Sales
Minnesota has laws specifically designed to protect consumers of hearing aids against fraud. Anyone selling hearing aids must hold a permit from the Minnesota Department of Health. Prohibited practices include engaging in conduct likely to deceive or defraud, fee-splitting, abusive or fraudulent selling procedures, and high-pressure sales tactics. Buyers must have a recommendation or a prescription to purchase a hearing aid. The seller of hearing aids in Minnesota must provide a written 30-day money-back guarantee that permits the buyer to cancel the sale for any reason during that time. Anyone repairing a hearing aid must provide the consumer with an itemized bill. Penalties for violating hearing aid sales laws include criminal prosecution and civil penalties.
Funerals, Burial, and Cremation
Minnesotans spend millions of dollars on funeral services each year, making the funeral business a very big industry. Yet for all the money spent each year on funeral goods and services, the average consumer knows very little about the goods and services offered or the laws regulating their sale. It is wise to shop around for burial and funeral services just like any other consumer purchase. Most funeral directors in Minnesota are hard-working professionals who strive to provide a needed service to their customers for a fair price. Unfortunately, the industry has attracted a few unscrupulous people who take advantage of people at a time when they are particularly vulnerable. The Federal Trade Commission's Funeral Practices Trade Regulation Rule, as well as a number of Minnesota state regulations, regulate this industry. These laws are designed to prevent fraud by making members of the general public better educated consumers of funeral goods and services. The federal rule is complicated, but there are some important points to know. Funeral directors must make their prices available over the phone and a general price list available at the start of any
discussions with a consumer. At the conclusion of discussions, a funeral director must provide an itemized statement reflecting the goods and services chosen by the consumer.
Embalming is not required under Minnesota law unless the deceased died of a communicable disease or if the body will take more than 18 hours to reach its final burial destination, will not be buried or cremated within 72 hours of death, or is to be publicly transported outside the state. Unless required by law, a funeral director must first obtain permission before embalming. A funeral director may not require a casket before a cremation, although a simple container is required. The federal rule forbids a funeral director from representing
that state or local laws require embalming or a casket for cremation when they do not. It is an unfair or deceptive act for a provider of funeral goods and services to fail to furnish price information on each of the specific goods or services offered.
Debt Collection Agencies
State and federal laws limit the kinds of activities that a collection agency can engage in as it tries to collect a debt. These laws only apply to third-party collection agencies and not to in-house collections. That is, if the XYZ Dress Shop tries on its own to induce its delinquent customers to pay overdue bills, it is not required to obey the laws governing collection agencies. But if XYZ's owner turns collection matters over to ABC Collection Agency, ABC's employees must follow the rules outlined below.
Collection agencies are usually paid on commission and only make money if they collect from debtors. Collection agencies typically keep between 30 and 50 percent of what they collect. There is a powerful incentive to be very aggressive in trying to induce someone to pay an overdue bill. Debt collection laws are designed to ensure that an agency's natural
aggressiveness does not cross over the line into harassment or manipulation.
Anyone weary of a collection agency's efforts can stop future contact by writing the agency a letter stating that he or she no longer wishes to be contacted about the debt. The agency must stop contacting the debtor, except to tell the debtor that it is stopping its collection efforts or that it will sue to collect the debt. A major drawback to taking this route is that it might cause the agency to initiate legal action, in which case the debtor may have to pay court fees and attorney fees in order to defend himself or herself. If a debtor disputes the amount of money owed, he or she can write the collection agency requesting that it provide proof of the debt. The agency must then verify the debt before it can resume efforts to collect the debt.
Debt collectors must be discreet when contacting a debtor about a debt. The debtor can ask debt collectors not to call at work. If a collector calls someone at work, the collector cannot tell a boss or leave a message with a secretary that he or she is trying to collect a debt. A Minnesota law passed in 1993 prohibits collectors from contacting a debtor's neighbors and asking them to tell the debtor to call the collection agency. Finally, debt collectors cannot harass a debtor, for example, they cannot call in the middle of the night, use vulgar language, or threaten physical harm to someone.
Most collection agencies know these laws and obey them because the penalties for not doing so are rather severe. Anyone with good evidence that a collection agency has violated any of these laws can sue the agency. If the debtor wins, the court can make the collection agency pay the debtor the money lost as a result of the agency's illegal actions. In addition, the court can punish the agency by making it pay up to $1,000. The court may even make the agency reimburse the debtor for the money spent to hire an attorney.
Consumer Reporting Agencies
Many consumer reporting agencies collect and disseminate information on an individual's credit history, arrest record, and whether the person has ever filed for bankruptcy. The most common type of consumer report is the credit report. Consumer reports can be used by creditors, insurers, and employers in deciding whether to extend credit, underwrite insurance policies, or to employ a job applicant. The Minnesota Access to Reports Act and the Federal Fair Credit Reporting Act give consumers rights in dealing with consumer reporting agencies. Both of these laws are designed to curb abuses in credit reporting and enable individuals to have mistakes in their credit reports corrected. The federal law is more extensive than the state law and provides greater protection for the consumer. The federal law limits who can receive copies of reports, limits what reports can be used for, and provides federal civil penalties for non-compliance.
Under the federal law, if a consumer application for credit is denied, the creditor must tell the applicant if the application was denied because of information contained in a credit report. The creditor is required to tell the consumer which reporting agency issued the
report. In many situations, the consumer can get a copy of the information in his or her report and the sources of that information. If employment, credit, or insurance is denied on the basis of information contained in a consumer report, the consumer has a right to receive a copy of the report free of charge. The consumer is given an opportunity to dispute items contained in a consumer report. Under the state law, the consumer has a right to request a copy of his or her report once every 12 months. The consumer can be required to pay for reasonable copying charges, not to exceed eight dollars, and has a right to dispute items in the report. The primary benefit of the state law is that it gives consumers a state cause of action for non-compliance.
Truth in Repairs Act
Shops in Minnesota doing repairs on automobiles, appliances, and dwellings which are used primarily for personal or household purposes are governed by the Truth in Repairs Act. To be governed by the law, a repair must cost more than $100 but less than $2000 and not be for a business or agricultural purpose. The law gives consumers a right to request a written
estimate for repair work and prohibits shops from charging more than ten percent over their estimate unless the consumer expressly gives his or her authorization. Shops can fulfill their obligation to provide a written estimate if they provide an oral estimate before getting authorization to work and they provide a written estimate on completion of the repairs. The law prohibits unnecessary or unauthorized repairs and requires a shop to provide a customer with an invoice whenever work performed costs more than $50 or is performed under a manufacturer's warranty, a service contract, or pursuant to an insurance policy. If, after commencing an authorized repair, a shop discovers the need for additional repairs, the shop must notify the consumer of the additional repairs, give a written estimate, and receive authorization to make those repairs.
In many instances, a consumer can get his or her car or appliance back without paying an entire bill if that bill includes unauthorized repairs or charges that exceed the estimate by more than ten percent. If the shop refuses to return the item, a consumer or the Attorney
General can file a lawsuit to recover the item, reasonable attorney fees, and consequential and punitive damages.
Minnesota Prevention of Consumer Fraud Act
The Minnesota Prevention of Consumer Fraud Act prohibits a number of activities including: •Fraud
•False pretenses •False promises •Misrepresentation •Misleading statements •Referrals or chain selling
Remedies generally available include injunction against the fraudulent practice, but the law provides additional penalties if the violation is against a senior citizen or disabled person. An additional fine up to $10,000 per violation can be imposed at the discretion of the court, and private citizens victimized by the fraud are authorized to sue for damages, legal costs, attorneys fees, and other equitable relief.
Resources
