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Unfair and Deceptive Acts and Practices: 2.2.1.6 Derivative Liability Under FTC Holder Rule Regardless of UDAP Statute’s Coverage

Even if a UDAP statute exempts creditors, this should only insulate creditors from UDAP liability for their own misconduct. The FTC’s Holder Rule subjects assignees and related creditors to claims and defenses, including UDAP claims, that arise from the seller’s misconduct.395 The fact that the creditor is exempt from the UDAP statute has no bearing on its derivative liability for UDAP claims against the seller.396

Unfair and Deceptive Acts and Practices: 2.2.2.1.1 Statutes that apply to trade or commerce

The term “trade or commerce” includes post-sale activities, and not just practices designed to induce a sale.573 Thus, when a UDAP statute applies to conduct “in trade or commerce,” there is usually little question that it can be used to challenge debt collection activities.574 At one point, the North Carolina Supreme Court ruled that the term “in the conduct of any trade or commerce” did not include debt collection, but instead only applied to activities surrounding the formation of the sales c

Unfair and Deceptive Acts and Practices: 2.2.2.1.2 Statutes that apply to goods, services, or merchandise; “in connection with”

Other UDAP statutes apply to transactions involving goods or services. In these states, courts typically ask both whether the underlying transaction involved goods or services, and whether the debt collection was closely enough connected to the underlying transaction to fall within the statute’s scope. Statutes that apply to transactions involving “merchandise” raise similar issues.

Unfair and Deceptive Acts and Practices: 2.2.2.1.3 Statutes that apply to “suppliers”

The Ohio UDAP statute applies to “suppliers,” a defined term.588 The Ohio Supreme Court has ruled that a debt buyer and the law firm it hired to collect a debt meet this definition, because their efforts to obtain payment from the debtor amounted to solicitation of a consumer transaction.589 The court distinguished a 2013 decision590 that had held the UDAP statute inapplicable to mortgage servicers.

Unfair and Deceptive Acts and Practices: 2.2.2.1.4 Privity-type issues

Another issue that sometimes arises in debt collection cases is whether the fact that the debt collector has not contracted with the consumer precludes application of the UDAP statute. Most states recognize that the concept of privity has no application to UDAP claims.596 Some UDAP statutes make this principle particularly clear, by providing that a practice is unlawful whether it occurs “before, during, or after” the sale.

Unfair and Deceptive Acts and Practices: 2.2.3.2 Repossession

A number of decisions hold that repossession practices are within the scope of a UDAP statute that applies to trade or commerce.761 The Tennessee Supreme Court has, however, held that a bank’s sale of a repossessed vehicle did not affect “advertising, offering for sale, lease or rental, or distribution” of goods, services, or other property, so did not fall within the UDAP statute’s definition of trade or commerce.762 The court did not describe its rationale in any detail, and focused primarily

Unfair and Deceptive Acts and Practices: 2.2.4.1 Solicitations and Unconsummated Offers

A sale need not be completed for liability to attach under a UDAP statute, particularly where statutory language specifically defines a covered consumer transaction to include “solicitations to supply products”807 or applies the statute to someone who “seeks” to purchase goods.808 However, a California court interpreted this language not to apply to a consumer who received an unsolicited spam e-mail advertisement, as they neither purchased nor sought to purchase anything.

Unfair and Deceptive Acts and Practices: 2.2.4.2 Refusal to Contract

Some courts hold that the UDAP statute is inapplicable to activity that prevents rather than results in a transaction.819 A federal court held that Minnesota’s UDAP statute did not apply to a company’s negotiation of an agreement that prevented an individual from exercising stock options for a period of time after an initial public offering, because of an insufficient nexus to any sale.820 A consumer did not have a UDAP claim where their damages were caused by a government board’s actions that p

Unfair and Deceptive Acts and Practices: 2.2.4.4 Barter and Lease Transactions

A barter transaction, in which something of value other than money is exchanged, should fall within the UDAP definition of “sale” unless the statute specifies that a sale must involve the payment of money.856 In addition, some UDAP statutes define sale to include “transfers” or “other distributions,” making it particularly clear that barter transactions are included.857 New York’s UDAP statute, which applies to “any business, trade, or commerce or . . .

Unfair and Deceptive Acts and Practices: 2.2.4.5 Transactions That Are Void on Other Grounds

The fact that a contract is void due to other state law violations does not make the UDAP statute inapplicable to the transaction.864 Consumers caught up in a yo-yo sale, who traded in a vehicle and had possession of the newly purchased car for a short period, qualified as purchasers under the state UDAP statute even though they eventually returned the new car to the dealership.865 Whether a binding contract was created was irrelevant.

Unfair and Deceptive Acts and Practices: 2.2.4.6 Where Goods or Services Are Provided Without Charge

Where goods or services were provided free of charge, some courts have held UDAP statutes inapplicable because there was no “purchase.”866 For example, the UDAP statute was inapplicable where a dealer loaned a car to the consumer free of charge,867 where a contractor did not charge for services performed by mistake,868 and where an investigator for the state real estate commission gave advice to the sellers of a home without charge.

Unfair and Deceptive Acts and Practices: 2.2.4.8 Where Someone Other Than Consumer Pays

One can be a consumer of services even if someone else pays for them.889 Where a father bought a manufactured home for his daughter, both could bring UDAP claims against the seller under North Carolina’s UDAP statute, which allows “any person” to sue, even though only the father’s name appeared on the contract.890 But another court held that a vehicle purchaser’s fiancé, who did not participate in the purchase of the vehicle, was not a “consumer” and could not assert a UDAP claim.

Unfair and Deceptive Acts and Practices: 2.2.4.9 Collection of Subrogated Claims

Some courts hold UDAP statutes applicable to a collection agency’s or attorney’s attempts to collect an insurance claim from a consumer on behalf of the other driver’s insurance company.905 An Illinois court held that a person who was dunned by the other party’s insurer for damages caused by a collision was not a consumer with respect to the insurer, but may still be able to bring a UDAP claim under the Illinois UDAP statute if the matter implicates consumer protection concerns.906

Unfair and Deceptive Acts and Practices: 2.2.4.10 Mistaken Identity and Identity Theft

A creditor who took negative action against an identity theft victim was covered by the Kentucky UDAP statute even though only the imposter had actually entered into the transaction, since the creditor treated the victim as the purchaser.907 Similarly, a person whose name was forged by a dealership on a consumer contract has standing to bring a claim under the Illinois UDAP statute.908 Even though they did not actually contract with the dealership, the dealership’s conduct implicated consumer pr

Unfair and Deceptive Acts and Practices: 2.2.4.11 Misappropriation and Theft

Some courts hold that a person whose work or likeness was misappropriated can bring a UDAP claim.913 Likewise, a court held that the owner of gasoline debit cards could assert a UDAP claim against a company whose employees stole the card numbers and used them to make their own purchases.914 The court held that these acts were “in connection with the sale or advertisement” of merchandise because the card numbers were stolen as part of sales, and the later fraudulent transactions were also sales e

Unfair and Deceptive Acts and Practices: 2.2.4.12 Charitable Solicitations and Sweepstakes

A charitable solicitation is covered by a UDAP statute that applies to “the distribution of anything of value,” at least where a sweepstakes or a gift to the donor is involved.919 Similarly, the sale of advertising space and promotional items by a charitable organization brings it within the UDAP statute.920 A deceptive sweepstakes offer is made “in connection with the sale of merchandise” and relates to the “character or quality” of goods within the meaning of Minnesota’s Consumer Fraud Act and

Unfair and Deceptive Acts and Practices: 2.2.4.13 Tort-Like Claims

A shopper injured by a gunman at a mall did not have a UDAP claim against the mall because they had not entered into any consumer transaction with the mall.925 A car buyer’s relative who was verbally abused by a repossession agent could not assert a UDAP claim under Connecticut’s UDAP statute.926 But another court held that a landlord could invoke the Connecticut UDAP statute, which applies broadly to trade or commerce, against a satellite-based television programming company and its contractor

Unfair and Deceptive Acts and Practices: 2.2.4.14 Other Non-Sale Transactions

A court allowed a hospital to assert a UDAP claim against a vendor that supplied defective claim reimbursement software to the state health department, causing delays in reimbursement to the hospital.935 An Arkansas court allowed a physician to proceed with a UDAP claim against a hospital that discharged the physician for refusing to violate the UDAP statute by ordering unnecessary tests for vulnerable patients.936 A son who was induced to deed his share of a home to his mother so she could obta