New York’s standalone consumer protection statute, General Business Law § 349, may get a makeover. And if this proposal from New York’s Attorney General becomes law, it will be quite easy and economically beneficial for consumers and consumer advocacy groups to initiate litigation over any aspect of consumer-facing business activity.
The proposal to expand GBL 349 will be discussed at the New York City Bar Association’s Consumer Financial Law Institute on May 5 in New York.
The key parts of the proposal are:
- The unfair or deceptive act or practice does not have to cause an injury, it is enough if the activity “is likely to cause . . .. substantial injury which is not reasonably avoidable;”
- Deceptive acts do not have to actually mislead someone, it is enough if the act is “likely to mislead a reasonable person;”
- Abusive acts need only “materially interfere” with a consumer’s “ability to understand a term or condition of a product or service.”
What it simply means is that a consumer does not have to be injured to bring a successful lawsuit. Once you show someone “is likely” to suffer some harm, which never has occurred in the first place, you recover at least $1,000, plus all your attorney’s fees. Of course, you could also recover your “actual damages” too, but since there aren’t any, the $1,000 and attorney’s fees will do just fine.
There is also a special provision for “organizational standing.” Essentially, this means a non-profit can sue for these “no injury needed” claims as well.
For example, imagine that a fictional non-profit called “Coffee Lovers of New York” sues on behalf of its members when it spots an advertisement for “the Best Coffee in New York” from a company it has rated poorly in its own taste tests. The non-profit is dedicated to the “joys of a cup of joe,” including the “fair and accurate dissemination of information on coffee quality by coffee purveyors.” Their own members, they assert, are “likely” to be misled by the fancy packaging, advertised as a “curated collection” and expression of a “language of happiness.” In truth, they allege, it is no different than bargain coffee sold at local supermarkets for far less.
Think such a suit is farfetched? Well “Texas Pete” hot sauce was sued in a class action because it is not made in Texas. A consumer claimed he paid more for it because he thought it was made in Texas. Nothing on the packaging refers to it being made in Texas. As the linked article points out, the same plaintiff had sued several food companies. The U.S. District Court for the Central District of California dismissed the case.
There is plenty more in the proposal to amend GBL 349, but I wanted to focus on this “no injury needed” aspect of the bill for the simple reason that it is promoted as bringing New York’s consumer protection laws in line with “all but a handful of New York’s fellow states.” Yet I’m not familiar with states that have “no injury needed” consumer protection statutes. New Jersey’s Consumer Fraud Act requires a consumer to demonstrate an “ascertainable loss.” So do Pennsylvania and Massachusetts. Perhaps the claim that this proposal would bring New York in line with its “fellow states” might be a bit misleading.
Today GBL 349 only covers “deceptive” acts and practices. Like many other states, a successful litigant can recover attorney’s fees and costs of suit. However, GBL 349 has a twist: to succeed, a consumer must show that the defendant engaged in “consumer-oriented conduct.” This conduct must be “materially misleading,” and the consumer must have “suffered injury as a result of the allegedly deceptive act or practice.”
It is this “consumer-oriented conduct” requirement that poses troubles for consumers. It means that the conduct must not be specific to the consumer but “have a broader impact on consumers at large.” While some forms of deception can have this broader impact, not all do. The deception might be only to a specific consumer. For example, a debt collection letter that misstates the balance of the consumer’s debt would be particular to that consumer.
The proposed amendments to GBL 349 would do away with the consumer-oriented conduct requirement. That alone would make it far easier for consumers to maintain actions because now they can point to how they were deceived, even if the conduct would not have deceived others.
LEARN MORE AT NEW YORK CITY BAR’S CONSUMER FINANCIAL LAW INSTITUTE
On May 5, join me in New York for an in-depth discussion of GBL 349 and more hot topics in consumer finance at the New York City Bar Association’s Consumer Financial Law Institute.
The institute offers a rare opportunity to hear first-hand from industry leaders and regulators who are promulgating changes in consumer financial law and I am honored to serve as program chair of this exciting event.
The agenda includes:
A Look at the Next Four Years: This panel of financial services attorneys will share their analysis of the second Trump administration and its impact on the consumer protection landscape. The discussion will cover changes at the CFPB, FTC, DOJ, prudential banking regulatory agencies and state regulators and what those changes mean for market participants. Panelists will provide thoughts on how businesses may adapt to a pullback in federal oversight while mitigating the risk of state or private actions.
Credit Reporting Highlights: Unpacking Recent FCRA Related Developments: The CFPB has been very active in the FCRA space with rulemaking and recent enforcement activity. This panel, featuring the President & CEO of the Consumer Data Industry Association (CDIA) and a representative from FTI Consulting, will discuss what these developments mean for institutions and how they can best be prepared operationally going forward.
Charting the Future of Buy Now Pay Later: The President & CEO of the Financial Technology Association and other industry leaders from WebBank, Block and Zip will speak about innovations in the BNPL space and its regulatory environment. The panel will touch on the pay-in-four nature of the product, including modernized credit reporting that accurately captures BNPL data.
Cryptocurrency: In light of the current regulatory environment, with federal regulation and enforcement of cryptocurrency waning, New York’s comprehensive licensing and regulatory efforts are drawing more attention. The panel, which includes the Deputy Superintendent of Virtual Currency at the New York State Department of Financial Services, will discuss regulation of crypto platforms and recent developments.
Protecting Consumers in the Age of the Internet: How the Online Marketplace Challenges Regulators, and Ways to Work Within the Tangled (Worldwide) Web: The Deputy General Counsel, NYC Department of Consumer and Worker Protection, will discuss the online marketplace, the challenges of Communications Decency Act limitations, ever-changing content that requires resource-intensive monitoring, jurisdictional challenges, and even court orders as its own obstacle.
General Business Law 349: How Well Does Our General Consumer Protection Law Serve New Yorkers?: The CFPB and the FTC have urged New York to expand General Business Law 349’s ban on deceptive business acts and practices. Proposed legislation seeks to dramatically expand GBL 349. A senior staff attorney from Mobilization for Justice will examine the ins and outs of this law and how well it measures up nationally.
The Consumer Financial Law Institute will be held from 9 a.m. to 5:45 p.m. and includes a networking breakfast and luncheon. The institute is open to nonmembers and will provide at least 6.0 hours of CLE. For more information and to register, click here.
Photo: chaowalit/stock.adobe.com
