Stautz Law

Tag: Fraud Victim

  • Turning the Tables: Pre-Suit Conditions and Remedies under the Indiana Deceptive Consumer Sales Act

    I.            Introduction

    Last time we talked about the basics of the Indiana Deceptive Consumer Sales Act (“DCSA”). You can read that article here. I wrote about how the DCSA works, whom the DCSA protects and whom it protects against, and what frauds and scams might be illegal under the law.

    In this, the second article in the series, I’m going to explain how to enforce your rights under the DCSA. So you’ve spotted a violation of the law; you know the sketchy business is guilty; and you want to use the law to help set things right. We’re going to walk through the pre-suit notice condition, how a cure and offer to cure work under the Indiana DCSA, and whether you can sue under the DCSA. Lastly, I’ll talk about the remedies the law provides: in other words, what damages can you win in an Indiana DCSA case and how are damages calculated.

    II.          Cured, Uncured, and Incurable Deceptive Acts

    A.   What is a “Cure” under the DCSA?

    The Indiana DCSA is designed to resolve consumer disputes quickly and fairly. One of the ways it does that is by offering different routes to solve disputes: some disputes are small and can be fixed right away; others are big, or involve really bad behavior, and they need a more serious resolution, even if that takes longer to achieve. To understand how these different routes work, you need to understand the different categories of deceptive acts under the statute.

    The DCSA assumes you have a “deceptive act.” You, the consumer, tried to make a deal with a business, but something about the deal went wrong. (If you remember the first article, you’ll know that under the DCSA terms, the business is called a “supplier” and the deal is called a “consumer transaction.”)

    And what do you want to have happen with the deceptive act? You want it fixed, obviously. That’s what the DCSA calls a “cure.”  A “cure” is when the business (aka “supplier”) fixes whatever went wrong: either by changing the terms of the deal, or letting you back out of it, or paying you for your time, trouble, and damages. Ind. Code § 24-5-0.5-2(a)(%).

    B.   “Curing” Deceptive Acts Gives the Business a Chance to Make Things Right

    If you’re a consumer who’s been the victim of a bad deal, the easiest way to fix things would be for the business to admit it was wrong and set things right. No-brainer. You’d tell the business what it did wrong, the business would admit its mistake, and they’d fix it. Well, guess what? The DCSA makes you try to take that approach.

    For the DCSA to help you, then, the first thing you need to do is try to get the business to fix things straight away. The law says you have to send a written notice to the business that “state[s] fully the nature of the alleged deceptive act and the actual damage suffered therefrom.” Ind. Code § 24-5-0.5-5(a). In other words, you have to tell the business “hey, here’s what went wrong, and here’s how it hurt me.”

    (There’s no real name for the written notice. I call in an “invitation to cure,” but really as you’ll see it’s an invitation of an offer to cure . . . but that’s just unwieldy. We need a better term.)

    But the time limits are strict! Once you find out the problem, you only have six months to send the business that written notice. Ind. Code § 24-5-0.5-5(a). And if a year has passed, you’re too late, even if you didn’t discover the problem. Id. (That’s not very fair . . . but it’s how the law is.)

    Once you’ve sent the written notice, the business has thirty days to respond with how it will fix the problem. Ind. Code § 24-5-0.5-2(a)(7)(B). Its response is an “offer to cure.” The “offer to cure” needs to include both a proposal to make you, the consumer, whole for your losses (which can be a payment of money, a modification of the deal, or anything, really) and an additional payment for attorney fees. Ind. Code § 24-5-0.5-2(a)(6).

    The attorney fee provision is telling. The DCSA assumes that you find a lawyer to represent you, and it makes the business – the perpetrator of the deceptive act – responsible for the cost to you of the lawyer. The attorney fees in an offer to cure are 10% of whatever the rest of the offer is worth, except with a minimum of $500 and a maximum of $4,000. Ind. Code § 24-5-0.5-2(a)(6)(B).

    So the ideal situation under the DCSA is this: a business does you wrong. You find out about it right away, and you promptly send the business a letter explaining what happened. The business responds, also promptly, with an offer to make things right, which you accept, and which pays you for the time and trouble of the whole thing.

    C.   No Dice: Uncured and Incurable Acts

    What happens when that doesn’t work?

    A business that doesn’t offer to cure within thirty days of the written notice (or which does offer to cure, but doesn’t follow through and actually deliver the cure it offered) is in trouble. The deceptive act you wrote about goes from being “curable” to being “uncured.” Ind. Code § 24-5-0.5-2(a)(7).

    The DCSA doesn’t let you sue for a curable act. It says you can’t bring suit unless the “deceptive act shall have become an uncured deceptive act.” Ind. Code § 24-5-0.5-5(a). But once you’ve given notice and the business hasn’t fixed the problem, then it’s game on: there’s no limitation on your ability to sue.

    Alternately, you could be in a situation where the business wouldn’t try to fix its mistake even if you explained it to them. For instance, a case of outright fraud. If the business’ whole scheme is to cheat people, then you’re not going to get anywhere by asking them not to cheat you. The written notice and invitation to cure song and dance is a big waste of time.

    That’s why the DCSA has a separate category of deceptive acts called “incurable” deceptive acts. An “incurable” deceptive act is a deceptive act that is “part of a scheme, artifice, or device with intent to defraud or mislead.” Ind. Code § 24-5-0.5-2(a)(8). Basically, any deliberate fraud. “Incurable” acts don’t need to go through the whole invitation-to-cure process. The DCSA assumes the business wouldn’t cure them even if it had the chance to. So you can go right ahead and sue. § 24-5-0.5-5(a).

    III.        Lawsuits and Remedies under the DCSA

    Once you’ve gone through the invitation-to-cure process (or you’ve bypassed it because the deceptive act is “incurable”), you’re allowed to sue under the DCSA. A DCSA is a civil lawsuit – that means it’s about money, not jail – between you and the deceptive business (again, “supplier” in DCSA terms).

    What you’re going for in your lawsuit is the same as what you were going for in the invitation-to-cure phase: a fix for the actual damages you suffered, and some extra to pay the lawyer you had to hire to get things fixed. Ind. Code § 24-5-0.5-4(a).

    That presupposes a couple things. You have to have “rel[ied]” on the deceptive act. Ind. Code § 24-5-0.5-4(a). And your right is to have your “actual damages” remedied. Id. Those two parts work together: you don’t have actual damages unless something went wrong and hurt you; you weren’t hurt unless you were somehow “relying” on something that turned out to be deceptive.

    The DCSA sets a minimum recovery of $500 for actual damages. So if you were deceived about a pack of gum, your actual damages might be $1. But the fact that you had to bring a lawsuit to fix the deception (when any sane business would have refunded you long ago) is, according to the DCSA, worth $500. The idea is that even small dishonesty should be set right.

    Also, if you win the court can award you extra damages, as something of a penalty against the business, for deceptive acts that are “willful.” Those extra damages can be up to three times your actual damages, or $1,000, whichever is greater. So, to go back to the pack of gum example, you could recover $500 in “minimum” actual damages and $1,000 in willfulness damages, all over a $1 transaction. Those penalties are steep, because the DCSA takes its job seriously.

    Finally, the DCSA lets you get your attorney’s fees paid by the other side if you win. Ind. Code § 24-5-0.5-4(a). This is called a “fee-shifting provision,” and it’s really, really important! Usually, in the United States, each side of a lawsuit pays its own lawyers, win or lose. That’s the “American Rule.” (The British do it differently, hence the name.) If you have to pay your own lawyer, though, you’re not going to get justice for a small fraud, because it’s going to be more expensive to hire a lawyer than the fraud was actually worth.

    Just to give you some idea, an ordinary lawyer might charge $300 or $400 an hour to work on a civil case, and it might take 40 hours to take a simple case to trial. Well, that’s $12,000 in legal fees at least! And if the case is about a car repair that was $800, there’s no way you’d pay to do it. It’d only make sense to pay for 2 hours of lawyer time before you’ve spent more than you’ll recover even if you win. You see the problem.

    Fee-shifting fixes that problem: you can have that $800 case, and the lawyer can try it for you, and if you win, the other side – the bad business – has to pay the fee. So the lawyer will be willing to work on your case, and you’ll be able to get justice on your claim.

    A.   A Side-Note on Fee-Shifting and Ethics

    To ward off the potential for abuse, the DCSA cuts off fee-shifting if you reject a good offer to cure. Ind. Code § 24-5-0.5-4(k). Let’s say your damages are $500, and, after you send your written notice inviting an offer to cure, the business responds with an offer to cure for $1,001: your $500 in damages, the $500 in minimum attorney fees, and $1 for good measure. You should accept that, right? It’s a fair offer! It does what the DCSA is supposed to do: it makes you whole and pays you a little extra for the hassle of finding a lawyer to fix things.

    But let’s say an unethical lawyer tells you not to accept it—even though it’s a good offer for you and he’s supposed to be working in your best interest—in the hopes of running up a huge bill for attorney fees. And that lawyer puts tons of hours into the case, takes it to trial, and a jury awards you . . . $500, just like you were entitled to all along. In that case, the DCSA says, you can’t get your attorney fees paid by the other side. Because you didn’t do better, after all, than the business was willing to give you right away.

    Note that the fee-shifting cut off only applies when you don’t do better in the end. So if a business offers to “cure” your $500 in damages for $100, and you (rightly) reject it, then you’re still allowed your attorney fees if you win $500 at trial, or even just $101. A business can’t cut off the fee-shifting unless it makes a real, honest, substantial offer to cure that actually fixes your problem.

    IV.        Conclusion

    The DCSA has a reasonable and intuitive system for you, the wronged or defrauded consumer, to protect your rights. It starts with a quick, fairly informal process where you ask the business to set things right. If that invitation to “cure” doesn’t work, or if it was going to be futile all along, the DCSA lets you escalate to a civil lawsuit.

    Once in court, your remedies with the DCSA are powerful. You’re entitled to actual damages, penalty damages for willful violations, and attorney fees under the vitally important fee-shifting provision. That triple threat gives you great leverage to negotiate a favorable settlement with a business, scammer, or fraudster, and should help you find justice at trial, if necessary.

    We’ve got two more articles to come in this DCSA series. Next time we’ll talk about holes and gaps in the DCSA, as well as some unresolved questions about the law. Then we’ll talk about practicalities: what it looks like to hire a lawyer for your fraud case, your deceptive business case, or the like.

    As always, you can call Stautz Law for a free consultation about your situation. Indiana consumer protection attorney Andy Stautz is here to field your questions, tell you about your rights, and evaluate your case. You might have a case the firm can take on contingency, with no cost to you up front.

  • Fighting Fraud and Stopping Scammers: The Basics of the Indiana Deceptive Consumer Sales Act

    I.            The Problem: Small Scams

    What do you do when you’ve been scammed? Maybe it’s an auto shop that promised some repairs to your car, took your money, and then never did the work. Maybe it’s a contractor that gave you a contract to sign but never followed it himself. Maybe it’s a debt collector that tries to collect money you don’t owe.

    Can you hire a lawyer? Sure, you can try – but you’ll find out that legal fees quickly become more expensive than the problem you’re trying to solve! So do you just have to let it go, write it off, and leave the scammer or the fraudster out there hurting other people?

    That’s not very fair! Fortunately, there’s a solution. It’s little known, but very powerful: it’s an Indiana law called the Indiana Deceptive Consumer Sales Act, or the “DCSA” and it appears at Indiana Code 24-5-0.5. The DCSA lets lawyers help people who are victims of small scams, because the scammer, and not the victim, has to pay the lawyer’s fees.

    II.          The Solution: Introduction to the DCSA

    The basic idea of the DCSA is simple: businesses shouldn’t defraud their customers. It’s not fair to the customers (obviously!) and it’s also not fair to honest businesses, which have to compete with shady characters who cut corners. So Indiana, like many other states, enacted a law against unfair, deceptive, and abusive practices. These laws are sometimes called “UDAP” statutes. Every state has one; there’s also a “model” UDAP statute for states to copy. The DCSA is Indiana’s UDAP law.

    The DCSA starts by saying that “[a] supplier may not commit an unfair, abusive, or deceptive act, omission, or practice in connection with a consumer transaction.” Ind. Code § 24-5-0.5-3(a). That’s the basic rule: don’t be unfair!

    OK, that’s a good start, but there are two follow-up questions: 1) who can’t be unfair to whom? And 2) what, specifically, counts as “unfair”?

    The DCSA answers both questions.

    III.        Who and Whom: Coverage of the DCSA

    A.   Which businesses are covered by the Indiana DCSA?

    The DCSA rule applies to “supplier[s].” Ind. Code § 24-5-0.5-3(a). “Supplier” is defined elsewhere in the law: a “supplier” is “[a] seller, lessor, assignor, or other person who regularly engages in or solicits consumer transactions, including soliciting a consumer transaction by using a telephone facsimile machine to transmit an unsolicited advertisement. The term includes a manufacturer, wholesaler, or retailer, whether or not the person deals directly with the consumer.” Ind. Code § 24-5-0.5-2(a)(3)(A). So . . . basically every business. An ordinary retail shop, a landlord, a telemarketer, a parts factory – they’re all suppliers under the law!

    B.   Which consumers or customers are covered by the Indiana DCSA?

    The DCSA is a little odd because it doesn’t actually say that business must not defraud people. Instead it says a supplier can’t do unfair things “in connection with a consumer transaction.” Ind. Code § 24-5-0.5-3(a).

    A “consumer transaction” is generally defined as (1) “a sale, lease, assignment, award by chance, or other disposition of an item of personal property, real property, a service, or an intangible” OR “or a solicitation to supply any of these things.” (2) “to a person” (3) “for purposes that are primarily personal, familial, charitable, agricultural, or household.” Ind. Code § 24-5-0.5-2(a)(1). I’ve straightened that paragraph out and added some numbers to make it readable: the real law is a bit harder to read.

    There are three pieces (or, in legal speak “elements”) to that definition. First, the transaction has to be a certain type: a sale, lease, etc. of personal property, real property, etc. That’s very broad! Anything will count. And a “solicitation,” like an offer or advertisement, counts too. Second, “to a person.” Well, a “person” is defined at Ind. Code § 24-5-0.5-2(a)(2) to mean any real person and any corporation, organization, trust, etc. So again, that’s very broad! Anybody counts. Third, then, “for purposes that are primarily personal.” That’s less broad: business transactions don’t count! The Indiana DCSA means what it says in the title: it’s a law against deceptive consumer sales. It’s not for business-to-business disputes.

    (As an aside, or “just in case you weren’t sure,” the DCSA gives us three situations that are definitely consumer transactions, even if they don’t fit neatly into the main definition. So a “consumer transaction” includes transactions of structured settlement rights; unsolicited fax advertisements; and debt collectors’ collections or attempted collections of debt. Ind. Code §  24-5-0.5-2(a)(1)(A)-(C).)

    The definition of “consumer transaction” gives us a good enough idea of who the DCSA covers on the customer, consumer, or victim side. Also, though, the DCSA limits who can sue: only “a person” “relying” on an unfair act can sue, and only for damages suffered “as a consumer.” Ind. Code § 24-5-0.5-4(a). That makes it pretty clear that the DCSA only protects consumers, and only protects the consumer actually involved in the transaction. And that makes sense: the state legislature probably didn’t want to have everybody suing about everything all the time: they wanted defrauded consumers to be able to sue to help fix their own problems.

    C.   Are debt collectors covered by the Indiana DCSA?

    A “debt collector” is a “supplier” and so is covered under the Indiana DCSA. Ind. Code § 24-5-0.5-2(a)(3)(B). OK, and who counts as a “debt collector”? The DCSA says “debt collector” means what 15 U.S.C. 1692(a)(6) says it means. Ind. Code § 24-5-0.5-2(a)(13). So you have to follow up that reference to 15 U.S.C. 1692 (the “U.S.C.” means “United States Code,” which means it’s a federal law, not an Indiana law). If you do, you learn that 15 U.S.C. 1692a is part of the federal “Fair Debt Collections Practices Act” (the “FDCPA”), which is another powerful pro-consumer law that applies to debt collectors. So Indiana’s DCSA borrows its definition of “debt collector” from the FDCPA. Generally, the FDCPA defines a debt collector as someone in the business of collecting debts or who often collects debts “owed another.” 15 U.S.C. 1692a(6). But an original creditor – the person who extended credit / made the debt in the first place – doesn’t (usually) count. 15 U.S.C. 1692a(6).

    What about debt collection law firms? Undre the FDCPA a law firm, even a debt collection law firm, doesn’t count as a “debt collector” when it’s serving legal papers. 15 U.S.C. 1692a(6)(D). (But it can count as a debt collector when it communicates with the debtor in other contexts.) So the FDCPA has a small carve-out for lawyers. Indiana’s DCSA goes a little bit further in protecting debt collection lawyers. It says no Indiana attorney (at least while working as an attorney) counts as a “debt collector,” period, whether serving legal papers or not. Ind. Code § 24-5-0.5-2(a)(13). (It seems like an Indiana lawyer who had a side business as a debt collector, separate from the practice of law, would count as a “debt collector” even under the DCSA, but I haven’t found any cases that say for sure.)

    Indiana’s DCSA also says that a “debt buyer” is a “debt collector” covered by the statute. Ind. Code § 24-5-0.5-2(a)(13). And it points you to the definition of “debt buyer” in a different section of Indiana law, Ind. Code § 24-5-15.5-3. If you follow that reference, you learn that “debt buyer” means “a person that is regularly engaged in the business of purchasing debt for collection purposes,” Ind. Code § 24-5-15.5-3(a), no matter how that person goes about trying to collect the debts. So there’s lots of overlap between that Indiana “debt buyer” definition and the FDCPA “debt collector” definition, but they’re both in the DCSA to ensure broad coverage.

    IV.        What is an Unfair, Deceptive, or Abusive Practice under the DCSA?

    A.   The basic scheme: one definition and 43 examples

    The real question, isn’t it? What is an “unfair, abusive, or deceptive act, omission, or practice” that a supplier “may not commit”? Ind. Code §  24-5-0.5-3(a).

    The DCSA sets up its definition as a two-parter. First it says no “unfair, abusive or deceptive acts” of whatever sort they may be. Just a very broad definition. That’s in Ind. Code § 24-5-0.5-3(a). Then it says “without limiting” that broad definition, here’s a list of acts that are definitely unfair, abusive, or deceptive. And the DCSA lists forty-three (43!) examples of acts that are illegal. (As of this writing: the state legislature adds new acts to the list pretty regularly.) That’s Ind. Code § 24-5-0.5-3(b).

    Here’s a key point, then: an act can be “unfair, abusive, or deceptive,” thus illegal under the DCSA, even though it’s not listed in section 3(b)’s forty-three examples. The statute is very clear about that! (In practice, defendants and judges might be more skeptical of a consumer attorney’s attempt to include unenumerated acts . . . even though the DCSA itself says it should be “liberally construed” to “protect consumers,” Ind. Code §  24-5-0.5-1.)

    B.   The enumerated “unfair practices”

    The consumer is on sure footing with the listed, or enumerated, unfair practices in Ind. Code §  24-5-0.5-3(b). Nobody is going to argue that actions on the 3(b) list aren’t covered by the DCSA. So what’s in the DCSA’s list of explicitly prohibited practices? All sorts of things!

    The first dozen or so examples of what is prohibited by the Indiana DCSA are explained in the law itself, without cross references to other sections. These are all general bad acts—the sort of things that an honest business just doesn’t do. So, for example, it’s illegal for a business to claim its products have features they don’t have, Ind. Code §  24-5-05.-3(b)(1); to lie about the quality of its products, -3(b)(2); to sell something used as “new”, -3(b)(3); to say that something needs a repair when it really doesn’t, -3(b)(5); to lie about whether and which warranties are included, -3(b)(8); to give a false estimate of the cost of repairs, -3(b)(12); to tinker with a product against the customer’s orders, -3(b)(14).

    You can read the whole list here.

    Then, after those first examples, the DCSA starts cross-referencing other Indiana and federal laws. So it says “if you violate this other law, you’ve also breached the DCSA.” That’s important because of how powerful the DCSA remedies are: it’s usually good for the consumer to be able to say that the business violated the DCSA in addition to whatever else the business did.

    Some of the cross-references are major: for instance, 3(b)(20) says any violation of the FDCPA (that federal debt collection law I mentioned earlier) is a violation of Indiana’s DCSA. (The DCSA doesn’t let consumers sue under 3(b)(20), though, which is a problem I’ll address later on). Another big one is 3(b)(23), which incorporates the Indiana law on door-to-door salesmen, Ind. Code §  24-5-10. Also 3(b)(38), a fairly recent addition, which incorporates the Indiana law on what debt buyers need to show in order to collect against debtors in Indiana courts, Ind. Code § 24-5-15.5.

    Some other cross-references are obscure: intrastate inmate calling services, 3(b)(41), or the sale of dogs by retail pet stores, 3(b)(42).

    Now, the practical problem with this cross-reference scheme is that, to know what the DCSA prohibits, you have to follow up the references so you know what the other law prohibits. It does you no good to say “a violation of the debt buyer law is a violation of the DCSA” – you have to know what violates the debt buyer law. And with so many cross-references, that’s quite a job! I doubt there’s a single lawyer in Indiana who knows all the different provisions referenced in the DCSA. The cross-references turn a fairly self-contained set of provisions into a sprawling monster.

    Taken all together, though, it’s safe to say that in general Indiana laws protecting consumers are incorporated into, and actionable under, the DCSA. And the basic initial list of unfair acts contains most, though certainly not all, of the sorts of things that a consumer would find unfair. So the Indiana DCSA protects you, as a consumer, from almost every type of unfair business practice you’re likely to encounter – if you know where to look.

    V.           Conclusion

    In this article, I’ve explained how the DCSA is set up, what it covers, and some of its basic provisions. In the next part of this multi-part series, I’m going to answer the next practical question: if you’ve been the victim of a fraud or a scam, and you know that the business violated the DCSA, what can you do about it? I’m going to write about how to bring an Indiana DCSA lawsuit, who can sue, when, and how.

    That’s coming soon.

    In the meantime, if you or someone you know has been the victim of a fraud, a scam, or other unfair business practices, you can call Stautz Law for a free consultation about your case. Indiana DCSA and consumer attorney Andy Stautz may be able to take your case on a contingency fee basis, with no cost to you upfront.