Articles Posted in Consumer Protection Laws

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Yes, a business can be considered a consumer under the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA) and can therefore file a suit under this Act. The ICFA allows private plaintiffs, including corporations, to file a suit if they can demonstrate damage due to a violation of the Act. The Act is designed to protect consumers, borrowers, and businesses against fraud, unfair competition, and other unfair and deceptive business practices. Importantly, the Act extends its protections to business entities as well.

The term “consumer” under the ICFA is defined as any person who purchases merchandise “not for resale in the ordinary course of his trade or business”. This means a business can be considered a consumer if it buys goods or services for its use and not for resale. For example, courts have found businesses to be consumers under the Act when they purchased insurance services for their own use. Yes, a business can be considered a consumer under the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA) and can therefore file a suit under this Act. The ICFA allows private plaintiffs, including corporations, to file a suit if they can demonstrate damage due to a violation of the Act. The Act protects consumers, borrowers, and businesses against fraud, unfair competition, and other unfair and deceptive business practices. Importantly, the Act extends its protections to business entities as well. Lefebvre Intergraphics v. Sanden Mach. Ltd., 946 F. Supp. 1358, 1369 (N.D. Ill. 1996) (finding that Plaintiff bought Defendant’s printing press for its own use and not for resale in the ordinary course of its business.); Labella Winnetka, Inc. v. Gen. Cas. Ins. Co., 259 F.R.D. 143 (N.D. Ill. 2009) (finding that Plaintiff is a consumer where it purchased Defendant’s insurance services for its own use and not for resale.); Commonwealth Ins. Co. v. Stone Container Corp., 2001 WL 477151, *4 (N.D. Ill. May 3, 2001) (same).

Please note that the definition of “person” under the Act includes legal or commercial entities such as corporations. This further supports the notion that a business can be a consumer under the Act.

If a business does not meet the definition of a “consumer” under the Act, it must establish a connection to consumer protection concerns in its claim. It needs to demonstrate that the deceptive or unfair practices in question have implications beyond the immediate contractual relationship and could potentially harm other consumers or the market more generally.

To prove a claim under the Illinois Consumer Fraud Act, a plaintiff must show (1) a deceptive act or practice by the defendant; (2) the defendant’s intent that the plaintiff relies on the deception; (3) that the deception occurred in the course of conduct involving trade and commerce; and (4) damages. Note that the Consumer Fraud Act does not authorize a suit by a non-consumer where there is no injury to consumers. Therefore, a business must show actual damage as a consequence of a violation of the Act. Also, to meet the causation element of a claim under the Consumer Fraud Act, a plaintiff must have actually been deceived in some manner by the defendant’s alleged misrepresentations of fact.

It’s essential to understand that the ICFA does not apply to every contract dispute, and failure to fulfill contractual obligations alone does not necessarily constitute a deceptive act or practice. Furthermore, a lawsuit under the ICFA cannot be based on the filing or threat to file time-barred suits without specific allegations of actual damages.

Please note that the definition of “person” under the Act includes legal or commercial entities such as corporations. This further supports the notion that a business can be a consumer under the Act. Continue reading ›

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Several cases in Illinois have awarded punitive damages for auto fraud by used car dealers. One such case is “Gent v. Collinsville Volkswagen, Inc.” where the court upheld punitive damages against the dealership for fraud or gross negligence, though the award was reduced from $12,000 to $3,000 as it was deemed excessive.

In the case “Totz v. Continental Du Page Acura”, punitive damages were awarded to the buyers for misrepresentations about the car’s condition, violating the Consumer Fraud and Deceptive Business Practices Act. This case was referred to in “Pigounakis v. Autobarn Motors”, where the court ruled that punitive damages can be awarded for outrageous conduct, specifically reckless indifference to the rights of others.

The case “Perez v. Z Frank Oldsmobile, Inc.” also awarded punitive damages for fraudulent actions other than misrepresenting a car’s mileage. In “Tague v. Molitor Motor Co.”, a $17,000 punitive damages award was justified due to the dealer’s pattern of bad faith and the danger posed to the customer and others due to unexpected brake failure. Continue reading ›

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Consumer protection is a cornerstone of the legal system, and the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA) plays a pivotal role in safeguarding consumers from deceptive practices. Recent opinions from the Illinois Supreme Court and various state and federal courts in Illinois have provided crucial guidance on the interpretation and application of the ICFA. In this blog post, we will explore some of these significant opinions and their implications for consumers and businesses.

“Here are some recent Illinois consumer fraud decisions and their key holdings:

1. “Cellular Dynamics, Inc. v. MCI Telecommunications Corp.” (Decided on April 12, 1995). The court held that under the Illinois Consumer Fraud Act, a single deceptive act is sufficient to support recovery and the plaintiff’s failure to allege a public wrong is not fatal to its claim [2].

2. “Barbara’s Sales, Inc. v. Intel Corp.” (Decided on November 29, 2007). The court determined that the Illinois Consumer Fraud and Deceptive Business Practices Act applies only to fraudulent transactions which take place primarily and substantially in Illinois [3, 4].

3. “Costa v. Mauro Chevrolet, Inc.” (Decided on July 18, 2005). The court ruled that assignee of retail installment contract for car sale had no derivative liability under the Illinois Consumer Fraud Act . The court also noted that the FTC Holder Notice has been largely superseded by subsequent federal legislation, namely, section 1641(a) of TILA.

4. “Camasta v. Jos. A. Bank Clothiers, Inc.” (Decided on August 1, 2014). The court found that to state a claim under the Illinois Consumer Fraud and Deceptive Business Practices Act, a plaintiff must show: a deceptive or unfair act or promise by the defendant; the defendant’s intent that the plaintiff rely on the deceptive or unfair practice; and that the unfair or deceptive practice occurred during a course of conduct involving trade or commerce. In a private action under this act, the element of actual damages requires that the plaintiff suffer actual pecuniary loss.

5. “Rudy v. Family Dollar Stores, Inc.” (Decided on February 4, 2022. The court emphasized that the Illinois Consumer Fraud and Deceptive Business Practices Act is designed to protect consumers, borrowers, and business persons against fraud, unfair methods of competition, and other unfair and deceptive business practices.

6. “Landau v. CNA Financial Corp.” (Decided on March 26, 2008). This case reiterated that the Illinois Consumer Fraud and Deceptive Business Practices Act does not have extraterritorial effect and does not apply to fraudulent transactions that take place outside Illinois.

7. “Avery v. State Farm Mut. Auto. Ins. Co.” (Decided on August 18, 2005). The court held that the Illinois Consumer Fraud Act could be applied to consumers residing out-of-state if the deceptive acts and practices were perpetrated in Illinois.

8. “Freeman v. MAM USA Corporation” (Decided on March 23, 2021). The court provided a refined explanation of what a plaintiff must allege in order to state a claim under the Illinois Consumer Fraud and Deceptive Business Practices Act.

9. “Dwyer v. American Exp. Co.” (Decided on June 30, 1995). This case added that in order to successfully claim under the Illinois Consumer Fraud Act, plaintiffs must also show how they were damaged.

10. “Troutt v. Mondelēz Global LLC” (Decided on October 31, 2022). This case reiterated the broad prohibitions of the Illinois Consumer Fraud Act against unfair or deceptive acts or practices in the conduct of trade or commerce.

11. “Sneed v. Ferrero U.S.A., Inc.” (Decided on February 15, 2023). The court stated that an accurate ingredient list does not immunize a defendant from a deceptive front label under the Illinois Consumer Fraud Act, but it is relevant to determining whether reasonable consumers would be misled

Implications for Consumers and Businesses

These opinions from Illinois courts highlight the continued significance of the ICFA in protecting consumers from deceptive and fraudulent business practices. For consumers, these opinions underscore their rights to pursue legal action when they believe they have been victims of consumer fraud.

For businesses, these opinions serve as a reminder of the importance of conducting business practices in a transparent and ethical manner. Adhering to the ICFA and avoiding deceptive practices is not only legally required but also crucial for maintaining a positive reputation and avoiding costly legal battles.

In conclusion, the Illinois Consumer Fraud and Deceptive Business Practices Act remains a critical tool for consumer protection in Illinois. Recent opinions from both state and federal courts in Illinois reinforce the Act’s role in safeguarding consumers and promoting fair and honest business practices. It is essential for both consumers and businesses to stay informed about these developments and seek legal guidance when necessary to ensure compliance with the ICFA.

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Introduction

Consumer protection laws play a vital role in safeguarding consumers from deceptive and unfair business practices. In the state of Illinois, the Consumer Fraud and Deceptive Business Practices Act (ICFA) serves as a robust framework for addressing such issues. One essential aspect of the ICFA is the “unfairness doctrine,” which empowers consumers by offering recourse against businesses engaging in unfair practices. In this blog post, we’ll delve into the details of the unfairness doctrine under the ICFA, exploring its significance and how it benefits consumers.

Understanding the ICFA

The Illinois Consumer Fraud and Deceptive Business Practices Act, codified at 815 ILCS 505/1 et seq., provides comprehensive protection to consumers against deceptive and unfair business practices. It encompasses a wide range of activities, from false advertising to fraudulent sales tactics, and it allows consumers to seek remedies for damages and injunctive relief.

The Unfairness Doctrine Explained

The unfairness doctrine within the ICFA prohibits businesses from engaging in practices that are “unfair or deceptive.” While the term “deceptive” generally refers to fraudulent or misleading actions, “unfair” practices may not be as immediately evident. The unfairness doctrine serves as a crucial tool for addressing business practices that, while not necessarily deceptive, harm consumers in an unjust or unreasonable manner.

Key Components of Unfairness

To determine whether a business practice is unfair under the ICFA, Illinois courts consider the following factors:

  1. Substantial Injury: The practice must cause substantial harm to consumers, either financially or otherwise. Minor inconveniences or trivial harms typically do not meet this criterion.
  2. Lack of Countervailing Benefits: Courts assess whether the harm to consumers outweighs any potential benefits or justifications offered by the business. If the practice provides significant advantages, it may be considered less unfair.
  3. Consumer Knowledge: The ICFA recognizes that some practices may be considered unfair if consumers lack sufficient knowledge or understanding of the implications. If a practice takes advantage of consumers’ lack of information, it may be deemed unfair.
  4. Public Policy: Courts consider whether the practice violates established public policy. Practices that contravene societal norms and values are more likely to be deemed unfair.

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The Federal Trade Commission is taking action against motorcycle manufacturer Harley-Davidson and Westinghouse outdoor generator maker MWE Investments for illegally restricting customers’ right to repair their purchased products. The FTC has charged that the companies’ warranties included terms that conveyed that the warranties would be void if customers used independent dealers for parts or repairs. The FTC has ordered that Harley-Davidson and MWE Investments to take several corrective actions including removing illegal terms and recognizing the right to repair in their warranties, making corrective notices to their respective customers, and instituting new policies to ensure that dealers compete fairly with independent third-parties for parts and repair work.

In recent months, the FTC has prioritized its protection of consumers’ right to repair their products. Right-to-repair was part of a sweeping executive order that President Joe Biden signed last summer. The FTC’s primary tool for addressing right-to-repair issues is the Magnuson-Moss Warranty Act (MMWA), which prohibits companies from conditioning warranty coverage on a consumer’s use of any article or service identified by brand name unless it is provided for free.

Harley-Davidson is one of the most recognized motorcycle brands worldwide. MWE Investments sells Westinghouse-brand outdoor power generators and related equipment. The products of both companies come with limited warranties that provide for no-cost repair or replacement in the event the products are defective or suffer from other issues.

According to the FTC’s complaints, the terms of both companies’ warranties violated the MMWA by voiding customers’ warranties if they used anyone other than the companies and their authorized dealers to get parts or repairs for their products. The FTC also alleged that Harley-Davidson failed to fully disclose all of the terms of its warranty in a single document, requiring consumers to contact an authorized dealership for full details. The FTC’s complaints outlined how these terms allegedly harm consumers and competition, including by:

  • Restricting consumer choice regarding who performed service and repair work.
  • Increasing costs to consumers by requiring them to use potentially more expensive OEM options.
  • Depriving independent dealers and manufacturers of aftermarket parts of the ability to compete on a level playing field.
  • Reducing resiliency by leaving consumers at the mercy of branded part supply chains and increasing waste in the form of products that could otherwise be fixed.

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A California state appellate court recently issued an opinion reviving a class-action lawsuit concerning alleged violations of requirements employers must follow when performing employment-related background checks. In its opinion, the Court reversed summary judgment entered in favor of book retailer Barnes & Noble in a class-action lawsuit accusing the retailer of failing to strictly comply with the requirements for obtaining authorization for background checks found in the Fair Credit Reporting Act (FCRA). The Court’s decision breathes new life into the putative class action which was remanded to the trial court for further proceedings.

The FCRA is a federal statute that is meant to protect consumer privacy and promote fair and accurate credit reporting. Part of the law contains a number of requirements that employers must follow when performing employment-related background checks. Two of these requirements are found in 15 U.S.C. 1681b and require an “employer who obtains a consumer report about a job applicant first to provide the applicant with a standalone, clear and conspicuous disclosure of its intention to do so, and to obtain the applicant’s consent.” The FCRA further requires that the disclosure be contained in a document that consists solely of the disclosure.

In 2018, the plaintiff applied to work for Barnes & Noble. During the application process, Barnes & Noble’s consumer reporting agency, First Advantage, emailed the plaintiff a link to a website containing the retailer’s consumer report disclosure and asked her to authorize Barnes & Noble to perform a background check. The plaintiff alleges that she clicked the link, viewed the disclosure, and authorized Barnes & Noble to perform the background check.

First Advantage had prepared the consumer report disclosure statement that appeared on Barnes & Noble’s website. Included with the statement was a footnote that stated:

Nothing contained herein should be construed as legal advice or guidance. Employers should consult their own counsel about their compliance responsibilities under the FCRA and applicable state law. First Advantage expressly disclaims any warranties or responsibility or damages associated with or arising out of information provided herein.

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In a unanimous ruling, the Supreme Court recently came down hard on the Federal Trade Commission by eliminating its ability to seek monetary relief in court under Section 13(b) of the Federal Trade Commission Act (FTC Act). The ruling comes as quite a blow to the FTC which has been recovering monetary penalties from defendants under Section 13(b) of the FTC Act for nearly half a century. The full impact of this ruling remains to be seen and may not become clear for several years.

Section 13(b) monetary relief is among the FTC’s primary tools for obtaining recovery in the cases it pursues, particularly in consumer protection matters. For instance, in fiscal year 2019 alone, the FTC filed 49 complaints in federal court and obtained 81 permanent injunctions and orders, resulting in more than $723 million in consumer redress or disgorgement. The ruling is also likely to affect antitrust enforcement in the pharmaceutical industry where the FTC has pursued disgorgement amounts as high as $1.2 billion. Going forward, the FTC will be limited to injunctive relief in the vast majority of matters unless it pursues other avenues of recovery available under different sections of the FTC Act.

The case, AMG Capital Management, LLC v. Federal Trade Commission, began when the FTC filed a lawsuit in federal court against payday lender AMG Capital Management, its owner, Scott Tucker, and several other entities under Section 5(a) of the FTC Act for allegedly misleading consumers with certain terms of payday loans. A payday loan is a high-interest, short-term loan, typically marketed to low-income consumers in need of quick cash. They generally come with exorbitantly high interest rates and short repayment schedules and have been called predatory by a number of consumer rights advocacy groups, such as the National Association of Consumer Advocates.

In its complaint, the FTC alleged that AMG Capital Management and other related entities engaged in numerous deceptive acts and practices in connection with how it collected loan payments from borrowers, often resulting in consumers paying hundreds or thousands of dollars more than the cost of the loan disclosed in the loan application documents.

The FTC could have initiated the case by using administrative proceedings available to it under Sections 5 and 19 of the FTC Act. Instead, though the FTC skipped these administrative proceedings and initiated the case directly in federal court seeking a permanent injunction and equitable monetary relief in the form of restitution and disgorgement under Section 13(b) of the FTC Act. The district court directed the defendants to pay $1.27 billion in restitution and disgorgement. On appeal from the judgment, the Ninth Circuit affirmed, citing circuit precedent interpreting the statutory text of Section 13(b) broadly to include the authority to award restitution and other forms of monetary relief as “necessary to accomplish complete justice.” Continue reading ›

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Many states have passed laws in the past few years taking aim at automatic renewals in contracts such as subscription-based services. As people have found themselves home more and more during the COVID pandemic, the number of subscription services with automatic renewals have exploded. New York recently passed a law more strictly regulating these automatic subscription renewals. The new law is set to take effect on February 11, 2021.

New York’s new law is meant to replace an existing law concerning automatic renewals which was narrow in scope and applied only to contracts “for service, maintenance, or repair to or for any real or personal property” with a renewal period longer than one month. The scope of the new law is much broader, covering any company offering goods or services to consumers through any kind of subscription plan that automatically renews—which includes free trials, free gifts, and reduced-price trial periods that convert to paid subscriptions automatically charged to consumers’ credit cards. As the press release accompanying the passage of the law explained, the new law is meant to better protect consumers who may not understand how to cancel such subscriptions and to avoid “convoluted renewals [that] have created a public health hazard for New Yorkers during the pandemic, including some who were told they had to visit their gyms in person to cancel memberships.”

New York’s new statute prohibits automatically renewing a contract without a consumer’s “affirmative consent” for the renewal. Absent this affirmative consent, some goods the provider may have sent the consumer can be deemed “unconditional gifts.” Absent from the new law, however, are guidelines for how providers are to obtain this consent.

The new law also requires clear and conspicuous disclosures before enrollment. Specifically, it requires that “automatic renewal terms,” such as the cancellation policy, recurring charges, and length of the renewal term, among other things be presented in a “clear and conspicuous” way and in “visual proximity” to the request for a consumer’s consent. Consumers must also receive an acknowledgment in “a manner that is capable of being retained by the consumer” that includes the automatic renewal terms and information regarding how to cancel the agreement. Providers must also provide a web-based option for cancellation. And if a provider makes any material changes to its renewal terms, those new terms must be provided to consumers in a “clear and conspicuous” notice. Continue reading ›

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Many people have become wary of online forms asking for personal information since many of them prove to be opportunities for dishonest people and institutions to use and share that information for their own purposes. But there are institutions most of us assume to be trustworthy, and for most people, that would include the College Board, the same institution that develops and administers the SAT and ACT exams. According to a new lawsuit, the College Board allegedly collected and sold students’ personal information, including their names, addresses, gender, ethnicity, grades, and citizenship status.

According to a new lawsuit, which has been filed on behalf of the parent of a student of Chicago Public Schools, the College Board allegedly collected this information using a Student Search Survey. The College Board denies having done anything wrong, saying that the survey was optional and free for students to fill out. Legislators say the College Board did ask for students’ consent to distribute their information to colleges, universities, and scholarship providers, but did not mention that the information would be sold to those third parties – that the College Board was profiting off students’ personal information.

The lawsuit alleges that the College Board collected between 42¢ and 47¢ for each student name they sold to other organizations.

The lawsuit further alleges that, after obtaining students’ personal information, the College Board offered the students’ identifying information (including their names and addresses) for sale to third parties in order to promote Student Search Service, the survey they used to collect students’ information. Continue reading ›

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Depending on the state in which they live, consumers sometimes have a hard time recovering the money they may have been deceived into giving to scammers who take their money and disappear, or to buy products that turn out to be harmful. Sometimes they can’t sue because they signed away their right to sue a company in their purchase agreement, or the amount spent is too small to justify the costs of an individual lawsuit. Other times they simply aren’t aware that the company has done something wrong. Regardless of the reason, it can be disheartening to see the number of consumers who are unable to recover funds lost as a result of scams or a company’s bad practices, but there is hope for those consumers.

One of the jobs of a state attorney general is to protect consumers against companies using predatory practices. Earlier this year Mark Brnovich, Arizona’s state attorney general, reported that his office had succeeded in recovering more than $38 million in restitution for consumers in 2019 alone.

Brnovich said the money has been recovered using a combination of out-of-court settlements, lawsuits filed (or backed) by the state, civil penalties, as well as costs associated with matters of consumer protection.

But the office of the state attorney general can’t protect consumers without the help of those same consumers. The state attorney general’s office relies on consumers, not only to notify them of potential scams and/or misconduct perpetrated by companies but also to provide evidence and testimony to help them pursue legal action, especially against large corporations. The Arizona state attorney general’s office reported having processed more than 14,000 written complaints, as well as 40,000 phone calls from consumers.

It’s a lot of information to go through, but it helped the Arizona state attorney general’s office bring legal action against large corporations, including e-cigarette manufacturers and pharmaceutical companies. Continue reading ›

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