HOW TO ANALYZE A CONSUMER CASE

Transcription

1 Michael A. Ferry* Chapter 1 HOW TO ANALYZE A CONSUMER CASE I. ( 1.1) Introduction II. ( 1.2) What Type of Transaction Is It? A. ( 1.3) Sale of a Motor Vehicle B. ( 1.4) Sale of Goods C. ( 1.5) Sale of Services D. ( 1.6) Sale Involving Credit E. ( 1.7) Lease or Rental F. ( 1.8) Loan III. ( 1.9) What Is the Source of the Problem? A. ( 1.10) Was the Client Misled or Given Incorrect or Incomplete Information? B. ( 1.11) Was Credit Information Given Properly? C. ( 1.12) Is There a Problem With Billing? D. ( 1.13) Is There a Problem With the Client s Credit Record? E. ( 1.14) Has the Other Party Failed to Meet Expectations? F. ( 1.15) Is the Problem Auto-Related? G. ( 1.16) Is the Problem With a Buyers Club or Service? H. ( 1.17) Is There a Lien? I. ( 1.18) Is the Client in Default? J. ( 1.19) Is the Problem With Mail-Order Merchandise? K. ( 1.20) Is the Problem With Unsolicited Merchandise? L. ( 1.21) Is a Public Insurance Adjuster Involved? M. ( 1.22) Are Abusive Collection Tactics Involved? N. ( 1.23) Has the Client s Property Been Wrongly Taken? O. ( 1.24) Was a Door-to-Door Sale Involved? *Mr. Ferry received his B.A., 1975, from Washington University; M.A., 1976, from the University of Illinois; and J.D., 1979, from New York University. He is the executive director of Gateway Legal Services, Inc. 1 1

2 1.1 HOW TO ANALYZE A CONSUMER CASE P. ( 1.25) Is the Problem With a Credit Doctor? Q. ( 1.26) Are There Any Defenses to a Contract? IV. ( 1.27) Other Considerations A. ( 1.28) Class Action Potential B. ( 1.29) Arbitration C. ( 1.30) Bankruptcy as an Alternative D. ( 1.31) Attorney Fees V. Other Sources of Help for Attorneys A. ( 1.32) National Consumer Law Center B. ( 1.33) National Association of Consumer Advocates VI. ( 1.34) Conclusion I. ( 1.1) Introduction The first problem faced by most practitioners when confronting a consumer law problem is deciding where to start. The purpose of this chapter is to help counsel figure that out. Some consumer-related statutes are relatively well-known (e.g., Article 9 of the Missouri Uniform Commercial Code Secured Transactions, et seq., RSMo Supp. 2010). Others are pretty obscure unless counsel happens to have run into them before, and maybe even then (e.g., the Missouri buyers club law, , RSMo 2000). There are at least two useful perspectives from which a consumer law problem can be viewed. The first focuses on the type of transaction involved. The second focuses on characterizing the source of the problem. This chapter takes each perspective in turn, states various permutations commonly found in consumer situations, and lists one or more statutes, regulations, and causes of action that may apply. II. ( 1.2) What Type of Transaction Is It? Deciding what type of transaction is being dealt with is a broader way to analyze a case than focusing on the source of the problem, but it may help counsel find claims or defenses that might not have been readily apparent using the other method. 1 2

3 HOW TO ANALYZE A CONSUMER CASE 1.3 Note: When using this method, counsel should bear in mind that various categories may overlap; for example, real estate under one statute may be merchandise under another. Caveat: Any issues involving interest limits must be reviewed not only in light of state law but also in light of federal law that may have preempted state laws, and also in light of Supreme Court decisions that have allowed exportation of one state s interest rate limits (or lack thereof) to other states. A. ( 1.3) Sale of a Motor Vehicle If the transaction is the sale of a motor vehicle, some possibilities include (but are not limited to, as lawyers like to say): Unlawful merchandising practices, , RSMo Uniform Commercial Code express and implied warranty provisions, , RSMo 2000 Magnuson-Moss Warranty Federal Trade Commission Improvement Act (Lemon Law), 15 U.S.C Missouri Lemon Law, , RSMo 2000 and Supp Title transfer law, , RSMo 2000 Safety inspections and junk affidavits, , RSMo 2000 State odometer law, et seq., RSMo 2000 Federal odometer law, 49 U.S.C Motor vehicle time sales law, Chapter 365, RSMo Cancellation of auto insurance, , RSMo Truth in Lending Act, 15 U.S.C et seq., and Regulation Z, 12 C.F.R. pt

4 1.4 HOW TO ANALYZE A CONSUMER CASE Interest on motor vehicle time sales, , RSMo Supp Holder-in-due-course rule elimination, 16 C.F.R ; see also , RSMo 2000 Notice of default and right to cure, , RSMo Fraud Contract voidable because of mental or physical condition Mistake Duress Undue influence Breach of contract Sale of goods B. ( 1.4) Sale of Goods If the transaction is a sale of goods, some possibilities include: Unlawful merchandising practices, , RSMo Uniform Commercial Code express and implied warranty provisions, , RSMo 2000 Magnuson-Moss Warranty Federal Trade Commission Improvement Act (Lemon Law), 15 U.S.C Retail credit sales, et seq., RSMo 2000 and Supp Interest on retail credit sales, , RSMo

5 HOW TO ANALYZE A CONSUMER CASE 1.5 Interest on retail charge agreements, id. Interest on lender-originated credit cards, , RSMo 2000 Interest, general rate, , RSMo 2000 Mail-order merchandise, 16 C.F.R. pt. 435 Unsolicited merchandise, , RSMo 2000 Holder-in-due-course rule elimination, 16 C.F.R ; see also , RSMo 2000 Home solicitation sales, , RSMo 2000 Buyers clubs, et seq., RSMo 2000 Pyramid sales, , RSMo 2000 Time-sharing regulations, , RSMo 2000 and Supp Fraud Contract voidable because of mental or physical condition Mistake Duress Undue influence Breach of contract C. ( 1.5) Sale of Services If a transaction is a sale of services, some possibilities include: Unlawful merchandising practices, , RSMo 1 5

6 1.5 HOW TO ANALYZE A CONSUMER CASE Magnuson-Moss Warranty Federal Trade Commission Improvement Act (Lemon Law), 15 U.S.C (service contracts) Pyramid sales, , RSMo 2000 Preneed funeral contracts, , RSMo Supp Interest on retail credit sales, , RSMo 2000 Interest on retail charge agreements, id. Interest on lender-originated credit cards, , RSMo 2000 Interest, general rate, , RSMo 2000 Public adjusters, Chapter 325, RSMo Home solicitation sales, , RSMo 2000 Holder-in-due-course rule elimination, 16 C.F.R ; see also , RSMo 2000 Buyers clubs, et seq., RSMo 2000 Health spas, , RSMo 2000 Time-sharing regulation, , RSMo 2000 and Supp Credit service organizations, , RSMo 2000 Fraud Contract voidable because of mental or physical condition Mistake Duress Undue influence Breach of contract 1 6

7 HOW TO ANALYZE A CONSUMER CASE 1.7 D. ( 1.6) Sale Involving Credit If the transaction is a sale involving credit, some possibilities include: Truth in Lending Act, 15 U.S.C et seq., and Regulation Z, 12 C.F.R. pt. 226 Equal Credit Opportunity Act, 15 U.S.C et seq. Interest on retail credit sales, , RSMo 2000 Interest on retail charge agreements, id. Interest on lender-originated credit cards, , RSMo 2000 Interest, general rate, , RSMo 2000 Notice of default and right to cure, , RSMo Interest on motor vehicle time sales, , RSMo Supp E. ( 1.7) Lease or Rental If the transaction is a lease or rental, the possibility that the transaction is actually a disguised sale should be considered. Other possibilities include: Unlawful merchandising practices, , RSMo Consumer Leasing Act of 1976, 15 U.S.C et seq., and Regulation M, 12 C.F.R. pt. 213 Article 2A of the Missouri Uniform Commercial Code, 400.2A-101 et seq., RSMo Magnuson-Moss Warranty Federal Trade Commission Improvement Act (Lemon Law), 15 U.S.C Holder-in-due-course rule elimination, 16 C.F.R ; see also , RSMo

8 1.8 HOW TO ANALYZE A CONSUMER CASE Time-sharing regulation, , RSMo 2000 and Supp Motor vehicle rentals and subleasing, , RSMo Rent-to-own (rental-purchase agreements), et seq., RSMo 2000 Fraud Contract voidable because of mental or physical condition Mistake Duress Undue influence Breach of contract F. ( 1.8) Loan If the transaction is a loan, some possibilities include: Truth in Lending Act, 15 U.S.C et seq., and Regulation Z, 12 C.F.R. pt. 226 Interest, general rate, , RSMo 2000 Small loans, , RSMo Second mortgage loans, , RSMo 2000 and Supp Unsecured loans of $500 or less, , RSMo Supp Holder-in-due-course rule elimination, 16 C.F.R ; see also , RSMo

9 HOW TO ANALYZE A CONSUMER CASE 1.10 Fraud Contract voidable because of mental or physical condition Mistake Duress Undue influence Breach of contract III. ( 1.9) What Is the Source of the Problem? From this perspective, counsel would focus on the source of the client s problem, e.g., the car will not run, the contractor will not finish the work, the client was wrongly denied credit. A. ( 1.10) Was the Client Misled or Given Incorrect or Incomplete Information? Unlawful merchandising practices, , RSMo Truth in Lending Act, 15 U.S.C et seq., and Regulation Z, 12 C.F.R. pt. 226 Consumer Leasing Act of 1976, 15 U.S.C et seq., and Regulation M, 12 C.F.R. pt. 213 Safety inspections and junk affidavits, , RSMo 2000 State odometer law, et seq., RSMo 2000 Federal odometer law, 49 U.S.C Motor vehicle time sales law, Chapter 365, RSMo 1 9

10 1.11 HOW TO ANALYZE A CONSUMER CASE Pyramid sales, , RSMo 2000 Retail credit sales, et seq., RSMo 2000 and Supp Rent-to-own (rental-purchase agreements), et seq., RSMo 2000 Buyers clubs, et seq., RSMo 2000 Article 2A of the Missouri Uniform Commercial Code, 400.2A-101 et seq., RSMo Motor vehicle rentals and subleasing, , RSMo Home solicitation sales, , RSMo 2000 Fraud Intentional infliction of emotional distress Mistake Breach of contract B. ( 1.11) Was Credit Information Given Properly? Unlawful merchandising practices, , RSMo Consumer Leasing Act of 1976, 15 U.S.C et seq., and Regulation M, 12 C.F.R. pt. 213 Motor vehicle time sales law, Chapter 365, RSMo Retail credit sales, et seq., RSMo 2000 and Supp Small loans, , RSMo 1 10

11 HOW TO ANALYZE A CONSUMER CASE 1.14 Fraud Mistake C. ( 1.12) Is There a Problem With Billing? A possibility includes the Fair Credit Billing Act, 15 U.S.C et seq., and Regulation Z, 12 C.F.R. pt D. ( 1.13) Is There a Problem With the Client s Credit Record? Fair Credit Reporting Act, 15 U.S.C et seq. Fair Debt Collection Practices Act, 15 U.S.C et seq. Credit service organizations, , RSMo 2000 Intentional infliction of emotional distress E. ( 1.14) Has the Other Party Failed to Meet Expectations? Uniform Commercial Code express and implied warranty provisions, , RSMo 2000 Magnuson-Moss Warranty Federal Trade Commission Improvement Act (Lemon Law), 15 U.S.C Breach of contract 1 11

12 1.15 HOW TO ANALYZE A CONSUMER CASE F. ( 1.15) Is the Problem Auto-Related? Is it title related? Transfer of title, , RSMo 2000 Fraud Breach of contract Is it warranty related? Uniform Commercial Code express and implied warranty provisions, , RSMo 2000 Magnuson-Moss Warranty Federal Trade Commission Improvement Act (Lemon Law), 15 U.S.C Safety inspections and junk affidavits, , RSMo 2000 Fraud Breach of contract Was there a mileage rollback? State odometer law, et seq., RSMo 2000 Federal odometer law, 49 U.S.C Is there a problem with repossession or resale? Uniform Commercial Code repossession and resale provisions, , RSMo Supp Notice of default, , RSMo 2000 and Supp Conversion 1 12

13 HOW TO ANALYZE A CONSUMER CASE 1.17 Is the problem with repair? Uniform Commercial Code express and implied warranty provisions, , RSMo 2000 Magnuson-Moss Warranty Federal Trade Commission Improvement Act (Lemon Law), 15 U.S.C Storage and artisans liens, , RSMo Vehicle repair liens, , RSMo Supp Breach of contract Is the problem with cancellation of auto insurance? Cancellation of auto insurance, , RSMo Is the problem with rental or subleasing? Motor vehicle rentals and subleasing, , RSMo Article 2A of the Missouri Uniform Commercial Code, 400.2A-101 et seq., RSMo G. ( 1.16) Is the Problem With a Buyers Club or Service? A possibility includes the buyers clubs law, et seq., RSMo H. ( 1.17) Is There a Lien? Storage and artisans liens, , RSMo 2000 and Supp Vehicle repair liens, , RSMo Supp Warehouse operators liens, and , RSMo 2000 Mechanics and material suppliers (contractors ) liens, Chapter 429, RSMo 1 13

14 1.18 HOW TO ANALYZE A CONSUMER CASE I. ( 1.18) Is the Client in Default? Truth in Lending Act, 15 U.S.C et seq., and Regulation Z, 12 C.F.R. pt. 226 Uniform Commercial Code repossession and resale provisions, , RSMo Supp Notice of default, , RSMo 2000 and Supp Duress Undue influence Breach of contract Requiring the creditor to fully document its case, including its status as the proper party in interest J. ( 1.19) Is the Problem With Mail-Order Merchandise? Unlawful merchandising practices, , RSMo Mail-order merchandise, 16 C.F.R. pt. 435 Breach of contract K. ( 1.20) Is the Problem With Unsolicited Merchandise? Unsolicited merchandise, , RSMo 2000 Unlawful merchandising practices, , RSMo 1 14

15 HOW TO ANALYZE A CONSUMER CASE 1.23 Motor vehicle rentals and subleasing, , RSMo Rent-to-own (rental-purchase agreements), et seq., RSMo 2000 L. ( 1.21) Is a Public Insurance Adjuster Involved? Public adjusters, Chapter 325, RSMo Unlawful merchandising practices, , RSMo Fraud Duress Undue influence Home solicitation sales, , RSMo 2000 M. ( 1.22) Are Abusive Collection Tactics Involved? Fair Debt Collection Practices Act, 15 U.S.C et seq. Intentional infliction of emotional distress N. ( 1.23) Has the Client s Property Been Wrongly Taken? Conversion Uniform Commercial Code repossession and resale provisions, , RSMo Supp

16 1.24 HOW TO ANALYZE A CONSUMER CASE O. ( 1.24) Was a Door-to-Door Sale Involved? A possibility includes the home solicitation sales law, , RSMo P. ( 1.25) Is the Problem With a Credit Doctor? A possibility includes the law addressing credit service organizations, , RSMo Q. ( 1.26) Are There Any Defenses to a Contract? Fraud Contract voidable because of mental or physical condition Mistake Duress Undue influence Requiring the creditor to fully document its case, including its status as the proper party in interest IV. ( 1.27) Other Considerations Recognizing and analyzing potential claims and defenses are only part of what goes into analyzing a consumer case. Practical aspects should be considered as well. Attorneys, of course, routinely consider practical aspects of potential litigation before deciding to undertake representation or recommend options to clients. Sections below do not attempt to review all of those. Instead, these sections simply mention a few considerations that often come up in consumer cases. 1 16

17 HOW TO ANALYZE A CONSUMER CASE 1.31 A. ( 1.28) Class Action Potential Does the case have the potential to be brought as a class action? If an individual consumer claim involves relatively small damages, it may not be economically possible or sensible to pursue. But if wrongdoers who inflict large-scale harm in many small segments are allowed to avoid liability, honest merchants are penalized, and the marketplace policing aspect of consumer law goes unfulfilled. Class actions can be the answer to this problem. On the other hand, class actions bring with them more complexity, add duties to class members, and require the client to agree to protect the interests of others as well as the client s own interests. Class actions should not be entered into without a great deal of thought and planning. B. ( 1.29) Arbitration If the case involves a contract that has an arbitration clause, this may make litigation more difficult and expensive, particularly if a decision is made to fight the application of the arbitration clause. The rise of the use of binding arbitration clauses in consumer contracts of adhesion has probably been the biggest single anti-consumer legal development in the last 30 years. But courts have shown increasing awareness of the unfairness inherent in these clauses and have increasingly been willing to refuse to enforce them. Nevertheless, for the foreseeable future, arbitration clauses can be expected to continue to make it more difficult for consumers to get their day in court, especially in class action situations. C. ( 1.30) Bankruptcy as an Alternative Depending on the consumer s overall financial and legal situation, it may be a more effective and beneficial strategy for the consumer to consider filing a Chapter 7 or 13 bankruptcy rather than spend a lot of time and money litigating one problem among many. In addition, consumer cases can often be litigated within the context of a bankruptcy. D. ( 1.31) Attorney Fees Most state and federal consumer protection statutes contain provisions allowing the prevailing party to recover attorney fees as well as costs. These provisions make it economically feasible for consumers to obtain representation because they make it possible for the consumer s attorney to get paid. Most courts have interpreted 1 17

18 1.32 HOW TO ANALYZE A CONSUMER CASE these provisions to allow prevailing consumer plaintiffs to recover fees as a matter of routine, but to allow prevailing defendants to recover fees only upon a showing of bad faith on the part of the plaintiff. V. Other Sources of Help for Attorneys A. ( 1.32) National Consumer Law Center The NCLC (National Consumer Law Center) is a not-for-profit legal aid program with offices in Boston and Washington, D.C. (In the interest of full disclosure, the author wishes to note that he currently serves on the NCLC s board of directors.) The NCLC began in the 1970s as a backup center for other legal aid programs, designed to serve as a source of expertise that could be called on at need by attorneys in legal aid field programs around the country. On behalf of low-income clients, the NCLC now: monitors legislation and administrative agency activities; engages in impact litigation in conjunction with local counsel; provides expert witness and consulting services; and perhaps most importantly for attorneys, publishes and regularly updates a series of practice manuals for attorneys practicing in the field of consumer law. The author considers these manuals required reading for any attorney practicing in the field. More information about the NCLC and its publications can be found on its website at: B. ( 1.33) National Association of Consumer Advocates The NACA (National Association of Consumer Advocates) is a not-forprofit nationwide association of attorneys and consumer advocates who represent consumers and their interests. It sponsors training events and other activities to help attorneys who represent consumers. A condition of membership is that the attorney may not perform services for a business or commercial client when that 1 18

19 HOW TO ANALYZE A CONSUMER CASE 1.34 client s interests are adverse to the interests of a consumer. More information about the NACA may be found on its website at: VI. ( 1.34) Conclusion Use of this chapter does not guarantee a complete analysis of any consumer problem. It is hoped, however, that for attorneys who do not have significant experience dealing with consumer law problems, this chapter will serve as a helpful starting point. 1 19