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1.6.1 Transactions Amenable to a UDAP Approach

Whenever a client comes to an attorney with a consumer problem, the attorney should consider whether there is a UDAP “angle”—there usually is. The attorney should look for UDAP approaches to “non-consumer” cases as well, such as landlord-tenant cases,50 migrant farm worker cases,51 nursing home, health insurance, assisted living facility cases,52 manufactured home park cases,53 and the provision of unregulated fuels54 or utility service.55

Automobile and manufactured home repair, warranty, sale, and lease practices are typically covered by UDAP statutes.56 So are home improvement scams,57 door-to-door sales,58 mail order problems,59 telemarketing,60 unsolicited goods,61 extensions of credit,62 debt collection,63 insurance sales, and refusals to pay insurance benefits.64 Real estate sales, campground resorts, shell homes, timeshares, and other realty related practices are usually also covered.65

UDAP statutes usually apply to a host of abuses at the default or collection stages of a credit transaction:

  • • Collection practices by a collection agency or creditor;66
  • • Collection suits in inconvenient venues;67
  • • Sewer service or other abuse of process;68
  • • Repossession;69 and
  • • Foreclosure.70

UDAP statutes also usually apply to innumerable abusive credit practices:

  • • Credit terms;
  • • Finance company or bank practices;
  • • Mortgage lending and servicing;
  • • Credit finders and credit repair companies;
  • • Loan brokers;
  • • Appraisal fraud;
  • • Consumer reporting agencies;71
  • • Pawnbrokers;
  • • Credit card practices;
  • • Loan flipping;
  • • Refinancings;
  • • Fraudulent credit counseling or debt adjusting and foreclosure rescue scams.72

Some courts have held that federal banking law preempts at least some state UDAP claims regarding credit transactions. The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act73 scales back the scope of federal preemption significantly, making the application of state UDAP statutes considerably more likely.

UDAP statutes may apply to contracts written in an overly complex manner or in a language not spoken in the sales transaction, warranty and contract misrepresentations, and even breaches of contract or warranties.74 Attorneys should pay special attention to harsh terms found in standard form contracts. The FTC and the courts have developed an unfairness theory that prohibits many overreaching terms in consumer contracts.75 Thus forfeiture of deposits or harsh cancellation penalties may be unfair.76

UDAP counterclaims are often a consumer’s best defense to a creditor’s collection action on a health club, membership campground, buying club, or other future-service related contract77 as well as loans and credit sales. Employment agency scams, phony employment opportunity offers, or overinflated business opportunity, franchise, or investment schemes can often be remedied by a UDAP claim.78