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Unfair and Deceptive Acts and Practices: 11.3 Retroactive Application of Statutory Provisions

A second timing issue is the extent to which a UDAP statutory provision applies to practices that occurred before the effective date of the statutory provision. In the 1970s, a major impediment to private UDAP actions was that UDAP statutes often did not exist at the time of the deceptive practices. Today the continual amending of UDAP statutes has led to a more common problem: which version of the legislation should be used—that in effect at the time of the challenged practice, or that in effect at the time the consumer brings the claim?

Unfair and Deceptive Acts and Practices: 11.4.1 Introduction

In some jurisdictions, state legislatures or courts hesitate to allow any consumer who wishes to complain about any deceptive practice to have immediate access to the state courts. This may be interpreted as a prejudice against cluttering the courts with “unimportant” matters or as a desire that consumers first attempt to settle disputes informally. These concerns are manifested in such preconditions to a UDAP action as a requirement that the consumer have suffered damage, that the action be in the public interest, or that the consumer first attempt to settle the dispute informally.

Unfair and Deceptive Acts and Practices: 11.4.2.1.1 Nature of damage precondition

Most, but not all, UDAP statutes require proof of some sort of damage or injury as a precondition of a private UDAP claim. A damage precondition in a UDAP statute should be, like the rest of the UDAP statute, interpreted liberally in favor of consumers.138 Courts may borrow contract principles to evaluate whether a consumer has met a damage precondition.139

Unfair and Deceptive Acts and Practices: 11.4.2.1.3 Can an organization bring suit when its members have suffered injury?

An interesting issue is whether an organization can bring an action in its own name where the organization itself is not directly injured by the practice. A New York court has held that where legislation protects a class, a bona fide and nationally recognized organization may represent the class of persons who can claim to be aggrieved under the legislation. In the alternative, the organization need only fall within the zone of interest to be protected by the statute.150

Unfair and Deceptive Acts and Practices: 11.4.2.1a.5 Traceability

Another one of Article III’s standing requirements is that the injury must be fairly traceable to the alleged deceptive practice.200 Traceability can be based on the defendant’s indirect control over the unfair or deceptive practice.201 Traceability is a relatively modest standard that does not require a showing of proximate causation, even if that would be required for proof of the claim on its merits.

Consumer Warranty Law: 7.3.8.3 Article III Constitutional Standing

Cases filed in federal court in which a defect has not yet caused a malfunction may also raise the question whether the plaintiff has suffered a concrete injury, as required for standing under Article III of the United States Constitution.288 Both tangible and intangible injuries can be concrete,289 but the injury must be “ ‘real and immediate,’ not ‘conjectural’ or ‘hypothetical.’ ”

Unfair and Deceptive Acts and Practices: 11.4.2.3 Injury Requirements Under California’s UDAP Statutes

Until 2004, one of California’s two UDAP statutes, the Unfair Competition Law, allowed suit for injunction, restitution, and other equitable remedies by “any person acting for the interests of itself, its members, or the general public.”218 A private plaintiff need not have been directly harmed by the defendant’s practices in order to bring suit.219 The court could order restitution to all injured individuals without the formality of class certification.220

Unfair and Deceptive Acts and Practices: 6.1 Introduction

The previous chapters discussed the coverage of UDAP statutes, the general approach to determining whether a practice is a UDAP violation, the meaning of the terms “deceptive,” “unfair,” and “unconscionable,” and the application of UDAP statutes to general practices such as bait-and-switch and deceptive billing. This chapter analyzes the application of UDAP statutes to the extension of credit, the collection of consumer debt, bank accounts, other payment methods, security interests, repossession, and foreclosure.

Unfair and Deceptive Acts and Practices: 6.2.1 Overview of Regulation of Loan Brokers

Misdeeds by loan brokers are often at the root of unfair or deceptive lending. If a loan broker’s compensation is based on the volume, size, or terms of the loans generated, the broker will bear little or none of the risk that the borrower will default.11 As a result, knowing that they will not bear the consequences if the consumer is unable or refuses to pay, unscrupulous brokers use deceptive and unfair tactics to bind consumers to loans.12

Unfair and Deceptive Acts and Practices: 6.3.3 Applying General UDAP Prohibitions to Improvident Extension of Credit

Even without a specific statutory prohibition, improvident extension of credit violates general UDAP principles of unfairness and deception.70 For example, a Connecticut appellate court held that it was an unfair practice under the state UDAP statute to lend at an arbitrarily high annual percentage rate while knowing that the borrower could not repay the loan unless it was refinanced by a second loan, and refusing to allow the borrower an opportunity to discuss or evaluate the terms of the second loan.71

Unfair and Deceptive Acts and Practices: 6.3.4.3 Computing the Consumer’s Damages

The court may initially be inclined to view the creditor rather than the consumer as the victim, with the consumer suffering no damage. However, the consumer should be able to establish damage if the income falsification caused the consumer to be locked into an unaffordable transaction.112 The main consumer injury is that the consumer has obtained a loan where there is a higher probability than normal that the consumer will default.

Unfair and Deceptive Acts and Practices: 6.4.1 Truth in Lending Violations

The federal Truth in Lending Act and the Consumer Leasing Act require specific disclosures in consumer credit transactions. These laws afford a private cause of action for actual damages and attorney fees. Nonetheless, a UDAP statute’s double or treble damages provision may be a better remedy.

Unfair and Deceptive Acts and Practices: 6.6.1 Misrepresentation of Credit Terms

Misrepresentation that a creditor offers easy credit terms is deceptive if the seller does not extend credit to persons below prevailing standards of creditworthiness, the down payment or repayment periods are less favorable than ordinary, the credit cost is higher than average, the seller’s mark-up on the underlying goods is higher than usual, or the seller has a more vigorous debt collection policy than usual.217

Unfair and Deceptive Acts and Practices: 3.2.7.3.4 Florida’s UDAP statutes explicitly sets forth a per se approach

Florida’s UDAP statute defines “a violation of this part”—the phrase used in the subsections creating a private cause of action and authorizing attorney general enforcement61—as “any violation of this act or the rules adopted under this act.”62 It goes on to provide that such a violation “may be based upon any of the following as of July 1, 2017: (a) Any rules promulgated pursuant to the Fed. Trade Commission Act, 15 U.S.C. ss.

Unfair and Deceptive Acts and Practices: 3.2.7.3.9a Minnesota's private cause of action may extend to violations of other laws

By statute, Minnesota extends a private cause of action to any consumer who is injured by a violation of ten enumerated statutes plus other Minnesota laws “respecting unfair, discriminatory, and other unlawful practices in business, commerce, or trade.”76 The reference to “other unlawful practices” is a clear indication that violations of a wide range of other statutes may be privately actionable under this provision.