2020Directory_FNL_FlippingBook

2020 MEMBERSHIP DIRECTORY & SERVICES GUIDE HOT TOPICS

The meaning of a communication is determined from the perspective of a“reasonable”consumer. It does not mean someone who is highly sophisticated or educated, but where a communication is directed at a particular audience, the inquiry focuses on a reasonable member of that group. Whether an act or practice is material concerns the importance of information to consumers. A material misrepresentation or omission is one which is likely to affect a consumer’s choice or conduct regarding a product or service. All 50 states and the District of Columbia have also enacted their own UDAP laws (state UDAP laws). In addition to these laws authorizing Attorney General actions, many state UDAP laws give consumers a private right of action to obtain injunctions and recover actual damages, court costs, and attorney’s fees. Many of the laws also permit recovery of statutory, punitive, or treble damages as a deterrent to deceptive or unfair business conduct. Some state UDAP laws permit a consumer to bring a lawsuit as a private Attorney General. Most state UDAP laws allow class actions as well. This Topic discusses auto dealer liability risks for UDAP practices under the FTC Act, the Dodd-Frank Act, and state UDAP laws. As these laws are a“catch all”for bad conduct, they present a substantial risk for a variety of misdeeds in selling vehicles to, or financing vehicles for, consumers.

Important Laws and Regulations Section 5 of the FTC Act

Section 5 of the FTC Act prohibits “unfair methods of competition and unfair or deceptive acts and practices in or affecting commerce”against consumers. Enforcement authority is vested in the FTC and the FTC has not hesitated to use its authority, most recently for lax data security practices that it considers to be an unfair act or practice and for deceptive dealer advertising as discussed in Topic 7: The FTC: Marketing and Advertising Vehicles, and Credit Terms. The FTC can bring an administrative enforcement action and, depending on the nature of the violation, bring a court action to seek injunctive relief or damages. States look to FTC lawsuits on UDAP violations or consent decrees as precedent for their own state UDAP actions.

Unfair Trade Practices The FTC has noted that “[u]njustified consumer injury is the primary focus of the FTC Act. As noted above, the FTC’s standard for “unfairness” is: (1) whether the practice creates a substantial consumer injury; (2) whether the injury exceeds any offsetting consumer benefits or benefits to competition; and (3) whether the injury was one that consumers could not reasonably have avoided. The FTC considers “deceptive” practices to consist of a material representation, omission, or practice that is likely tomislead a consumer, as examined from the perspective of a reasonable consumer. An“unfair”practice

178