November 2010 : An Ounce of Prevention
by Michele Shuster, a partner with the law firm of Mac Murray, Petersen & Shuster LLP..
All fifty states have a general consumer protection statute, most modeled after the federal Unfair or Deceptive Acts or Practices (UDAP) statute. These laws prohibit companies from engaging in unfair or deceptive behavior in a transaction with a consumer. By way of example, Ohio's UDAP statute is known as the Consumer Sales Practices Act. Ohio's statute was enacted in 1972 and has been interpreted by the courts to apply to a broad range of transactions and untruthful representation by businesses. Many industries are specifically regulated by the administrative rules interpreting the statute, including retailers, the automobile industry, companies going out of business and any company engaging in a marketing program.
Recently, there has been a significant rise in enforcement actions involving state and federal UDAP statutes. A major contributing factor to this increase is the cooperation that exists between the states and federal agencies. This increased cooperation is leading to more actions being brought and ones that involve multiple states in a single action. Often, these are difficult and expensive actions to defend.
So what can a business do to protect itself? Most importantly, become knowledgeable of the consumer protection laws that apply to your business. Once you know the law, implement policies and procedures that dictate compliance to those laws and train your staff on them. Many companies run afoul of the law because of uninformed employees.
Another effective prevention strategy is to become familiar with how your attorney general's office functions. Most attorney general offices offer a free consumer complaint service. Consumers who feel they have been cheated by a business can file a complaint with the office. The office tracks all complaints received against a company and often decides who they will pursue an enforcement action against based upon the number of complaints received against a company. Smart business will monitor complaints received against them and work to take corrective action once they receive a complaint.
The bottom line for a company is become informed about the regulations that apply to your business and implement an effective compliance strategy.