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DTCI: The sleeping giant - Indiana’s Deceptive Consumer Sales Act

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By Jason Massaro 
 

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Indiana’s Deceptive Consumer Sales Act, I.C. 24-5-0.5 et seq., is a fairly complicated statute clothed in relative obscurity. The DCSA’s complexity is due partly to the way it is written, its scope, and the numerous cross-references to other conduct and statutes that fall within its purview. This article will introduce the statute, discuss its uses, implications, and its application to various types of transactions.

The basics of the DCSA

The purpose of the DCSA is to “protect consumers from suppliers who commit deceptive and unconscionable sales acts” and to “encourage the development of fair consumer sales practices.” I.C. 24-5-0.5-1(b). The DCSA has an occurrence-based statute of limitations of two years, which begins to run after the occurrence of a deceptive act. I.C. 24-5-0.5-5(b). Despite the cross-reference to numerous other statutes – a violation of which constitutes a deceptive act – the DCSA’s statute of limitations controls. Id. An action may be brought by a consumer or the attorney general and class actions are specifically allowed. I.C. 24-5-0.5-4(a)-(c). However, the DCSA has certain notice provisions that are conditions precedent to a consumer’s right to bring an action. These notice provisions impose a sort of statute of limitations themselves that must be complied with or certain causes of action will be barred. I.C. 24-5-0.5-5(a).

“Deceptive Acts” and key players

Section 3 of the DCSA sets out particular conduct that constitutes “deceptive acts” under the statute. I.C. 24-5-0.5-3(a) generally states that a “supplier may not commit an unfair, abusive, or deceptive act, omission, or practice in connection with a consumer transaction.” A “supplier” is defined as a “seller … 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 ... .” I.C. 24-5-0.5-3(a)(3). A supplier “includes a manufacturer, wholesaler, or retailer, whether or not the person deals directly with the consumer.” I.C. 24-5-0.5-2(a)(3).

In turn, a “consumer transaction” is defined as “a sale, lease, assignment, award by chance, or other disposition of an item of personal property, real property, a service, or an intangible, except securities and policies or contracts of insurance issued by [authorized] corporations … with or without an extension of credit, to a person for purposes that are primarily personal, familial, charitable, agricultural, or household, or a solicitation to supply any of these things ... .” I.C. 24-5-0.5-2(a)(1). The term “consumer transaction” also encompasses a transfer of structured settlement payment rights, certain unsolicited advertisements sent by fax, and the collection of or attempt to collect a debt by a debt collector as defined by the Fair Debt Collection Practices Act (hereinafter “FDCPA”). I.C. 24-5-0.5-2(a)(1)(A)-(C).

A more intimate look at scope

While I.C. 24-5-0.5-3(a) generally prohibits deceptive acts in connection with consumer transactions, I.C. 24-5-0.5-3(b) specifically sets forth violations that constitute deceptive acts. As of the date of this article, there are 37 delineated conducts and statutory violations, both state and federal, defined as deceptive acts. The expanse of what constitutes a “consumer transaction” coupled with the myriad ways that the DCSA defines “deceptive acts” makes it clear that the Legislature intended the scope of the DCSA to be both liberally construed and broad in its application. For example, among the conduct defined as “deceptive acts” are Indiana statutory violations, interstate commerce, and violations of certain federal statutes. I.C. 24-5-0.5-3(a)-(b).

To illustrate, it is a deceptive act under the DCSA to violate federal statutes such as the FDCPA and the federal Telephone Consumer Protection Act. I.C. 24-5-0.5-3(a)-(b). Furthermore, it is a deceptive act to violate Indiana statutes pertaining to three-day “Cooling Off Period” notice requirements, Indiana’s Home Improvement Contract Act, and Indiana’s Deceptive Commercial Solicitations Act. A deceptive act is also committed when a supplier attempts to engage in a consumer transaction where the supplier knows or should reasonably know that the purported consumer transaction has approval or characteristics that it does not. I.C. 24-5-0.5-3(b)(1). In addition, it is a deceptive act when the supplier knows or should reasonably know that the subject of the consumer transaction is not of a particular standard or quality. I.C. 24-5-0.5-3(b)(2). Another deceptive act occurs when a supplier references a sponsorship, approval or affiliation that he knows or should know does not exist. I.C. 24-5-0.5-3(b)(7).

Deceptive act cross-reference

I.C. 24-5-0.5-3, entitled “Deceptive Acts,” sets forth numerous acts and statutory violations that constitute deceptive acts under the statute. However, in I.C. 24-5-0.5-10, the statute contains additional conduct that constitutes deceptive acts. Some of the referenced conduct in section 10 relates to certain consumer transactions that require permits or other licenses. I.C. 24-5-0.5-10(a)(1)(A)-(C). Section 10 also discusses deceptive pyramid promotional schemes. I.C. 24-5-0.5-10(a)(3).

Furthermore, section 10 sets forth a “catch-all” regarding solicitations to enter into contracts that are “oppressively one-sided or harsh,” that contain terms that “unduly limit[] [a] person’s remedies,” or that contain a “price [that] is unduly excessive.” I.C. 24-5-0.5-10(b)(1)-(3). However, to violate this portion of the statute, there must be the very nebulous showing that there was “unequal bargaining power that led the person to enter into the contract or agreement unwillingly or without knowledge of the terms ... .” I.C. 24-5-0.5-10(b). A supplier may take advantage of a rebuttable presumption in such circumstances that the consumer had “knowledge of the terms of [the] contract … if the person signs a written contract.” I.C. 24-5-0.5-10(b). The ambiguity of subsection 10(b)(1)-(3) can be very troublesome. In turn, I.C. 24-5-0.5-12 states that making false representations that a supplier has a doctorate or other professional degree in commercial transactions is a deceptive act. I.C. 24-5-0.5-12.

Conditions precedent under the DCSA

Proving a deceptive act is insufficient to give a consumer standing to bring and succeed on certain causes of action. The DCSA provides for two types of actionable deceptive acts. The first is an “uncured” deceptive act. I.C. 24-5-0.5-2(a)(7). The second is an “incurable” deceptive act. I.C. 24-5-0.5-2(a)(8).

“Uncured deceptive act” means a deceptive act where the damaged consumer has given requisite and timely notice to the supplier under I.C. 24-5-0.5-5(a) and, after such notice, there has either been no “offer to cure” by the supplier to the consumer within 30 days after such notice or the deceptive act has not been cured “within a reasonable time after the consumer’s acceptance of the offer to cure.” I.C. 24-5-0.5-2(7). On the other hand, an “incurable deceptive act” is simply a “deceptive act done by a supplier as part of a scheme, artifice, or device within intent to defraud or mislead … .” I.C. 24-5-0.5-2(a)(8).

No intent need be shown with regard to an uncured deceptive act. However, intent is as essential element to proving an incurable deceptive act. Moreover, the notice and cure provisions apply only to an uncured deceptive act in actions brought by individual consumers as opposed to the attorney general. No notice requirements apply to incurable deceptive acts. I.C. 24-5-0.5-2(7), (8); I.C. 24-5-0.5-5(a). What constitutes proper notice is articulated in I.C. 24-5-0.5-5(a). With regard to an uncured deceptive act, not only must a consumer comply with the time limitations set forth by the statute but the “notice shall state fully the nature of the alleged deceptive act and the actual damage suffered therefrom … .” I.C. 24-5-0.5-5(a). In sum, to be an actionable uncured deceptive act, a consumer must give proper and timely notice and the supplier must refuse or fail to offer to cure and actually cure the deceptive act. I.C. 24-5-0.5-2(5)-(8); I.C. 24-5-0.5-5(a).

The definitions of “cure” and “offer to cure” are found in I.C. 24-5-0.5-2(a)(5) and (a)(6), respectively. The terms must be read together; but to rectify the deceptive act, a supplier must make a specific offer, in writing, to, inter alia, adjust or rescind the transaction and also include an offer to pay “a minimum additional amount” of money “as compensation for attorney’s fees, expenses, and other costs that a consumer may incur in relation to the deceptive act.” I.C. 24-5-0.5-2(a)(5). The statute limits the “minimum additional amount” of money necessary to constitute a proper offer to cure to, depending on the circumstances, a minimum of $500 and a maximum of $4,000 per violation. The supplier must then actually cure the deceptive act.

Exemplary application of the DCSA

To illustrate the DCSA’s practical application, we can look to Indiana’s HICA. The HICA requires that a “home improvement supplier” provide a completed “home improvement contract” to a “consumer” before it is signed by the consumer. I.C. 24-5-11-10(a). Under the HICA, the contract must contain certain elements specifically set forth by the HICA. I.C. 24-5-11-10(a). Failure to provide a proper contract constitutes a deceptive act under both the HICA and the DCSA. I.C. 24-5-11-14; I.C. 25-5-0.5-3(b)(24). The DCSA provides the procedures, remedies and penalties associated with committing this deceptive act.

In the example given (and assuming, for simplicity, no attorney general involvement), if the failure to provide the requisite contract was part of a scheme with intent to defraud or mislead, such conduct would be an incurable deceptive act under the DCSA. If there were no such intent, the deceptive act may possibly become an actionable uncured deceptive act if and only if the consumer timely and adequately complies with the notice provisions and statute of limitations set forth in the DCSA. The supplier must then fail to make an offer to cure and actually cure the deceptive act.

Damages under the DCSA

If a consumer has standing, he may bring an action “for the damages actually suffered ... as a result of the deceptive act or [$500], whichever is greater.” I.C. 24-5-0.5-4(a). “Actual damages” means “the difference in value between that which the plaintiff parted with and that which he received.” McCormick Piano & Organ Co. v. Geiger, 412 N.E.2d 842, 853(Ind. App. 1980). A court “may increase damages for a willful deceptive act in an amount not to exceed the greater of…three (3) times the actual damages…or [$1,000].” I.C. 24-5-0.5-4(a)(1)-(2). If the consumer is at least 60 years of age, that is, a “senior consumer,” he may also seek treble damages, if appropriate. I.C. 24-5-0.5-4(i). The court “may [also] award attorney fees” to the prevailing party. I.C. 24-5-0.5-4(a).

In an action brought by the attorney general under I.C. 24-5-0.5-4(c), if the court finds that the supplier “knowingly violated” either section 3 or 10, the court may impose a “civil penalty” of not more than [$5,000] per violation. I.C. 24-5-0.5-4(g). There are other civil penalty provisions available to the attorney general depending on the violation.

Affirmative defenses

The DCSA sets forth certain affirmative defenses available to a supplier. One such affirmative defense requires a showing, by a preponderance of the evidence, that a “bona fide error [occurred] notwithstanding the maintenance of procedures reasonably adopted to avoid the error … .” I.C. 24-5-0.5-3(d). A supplier may also assert that the “alleged deceptive act was one made in good faith … without knowledge of its falsity and in reliance upon the oral or written representations of the manufacturer” or other individual from whom the supplier acquired the product. I.C. 24-5-0.5-3(e). Furthermore, a supplier may assert that the “product has been altered by a person other than the defendant to render the product completely incapable of serving its original purpose.” I.C. 24-5-0.5-3(h). The DCSA contains additional affirmative defenses that relate to other statutory claims and can be found in I.C. 24-5-0.5-3.

Conclusion

An attorney representing businesses, in any capacity, or reviewing claimed contractual violations by consumers, should make it a point to be well-versed in the DCSA. Given its construction and scope, there is a steep learning curve to fully understanding the DCSA. The DCSA seems to be a double-edged sword. On the one hand, it provides numerous traps for an unwary supplier. On the other hand, an uninformed consumer may forever lose significant avenues of redress. Even if one is not an attorney practicing in classic consumer law, the existence of this sleeping giant and the traps and treasures it holds are worthy of study.•

Mr. Massaro is the owner of The Massaro Legal Group LLC in Fishers, Indiana. He is a board member for DTCI and chairs its Business Litigation Section. The opinions expressed in this column are those of the author.
 

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  1. I like the concept. Seems like a good idea and really inexpensive to manage.

  2. I don't agree that this is an extreme case. There are more of these people than you realize - people that are vindictive and/or with psychological issues have clogged the system with baseless suits that are costly to the defendant and to taxpayers. Restricting repeat offenders from further abusing the system is not akin to restricting their freedon, but to protecting their victims, and the court system, from allowing them unfettered access. From the Supreme Court opinion "he has burdened the opposing party and the courts of this state at every level with massive, confusing, disorganized, defective, repetitive, and often meritless filings."

  3. So, if you cry wolf one too many times courts may "restrict" your ability to pursue legal action? Also, why is document production equated with wealth? Anyone can "produce probably tens of thousands of pages of filings" if they have a public library card. I understand this is an extreme case, but our Supreme Court really got this one wrong.

  4. He called our nation a nation of cowards because we didn't want to talk about race. That was a cheap shot coming from the top cop. The man who decides who gets the federal government indicts. Wow. Not a gentleman if that is the measure. More importantly, this insult delivered as we all understand, to white people-- without him or anybody needing to explain that is precisely what he meant-- but this is an insult to timid white persons who fear the government and don't want to say anything about race for fear of being accused a racist. With all the legal heat that can come down on somebody if they say something which can be construed by a prosecutor like Mr Holder as racist, is it any wonder white people-- that's who he meant obviously-- is there any surprise that white people don't want to talk about race? And as lawyers we have even less freedom lest our remarks be considered violations of the rules. Mr Holder also demonstrated his bias by publically visiting with the family of the young man who was killed by a police offering in the line of duty, which was a very strong indicator of bias agains the offer who is under investigation, and was a failure to lead properly by letting his investigators do their job without him predetermining the proper outcome. He also has potentially biased the jury pool. All in all this worsens race relations by feeding into the perception shared by whites as well as blacks that justice will not be impartial. I will say this much, I do not blame Obama for all of HOlder's missteps. Obama has done a lot of things to stay above the fray and try and be a leader for all Americans. Maybe he should have reigned Holder in some but Obama's got his hands full with other problelms. Oh did I mention HOlder is a bank crony who will probably get a job in a silkstocking law firm working for millions of bucks a year defending bankers whom he didn't have the integrity or courage to hold to account for their acts of fraud on the United States, other financial institutions, and the people. His tenure will be regarded by history as a failure of leadership at one of the most important jobs in our nation. Finally and most importantly besides him insulting the public and letting off the big financial cheats, he has been at the forefront of over-prosecuting the secrecy laws to punish whistleblowers and chill free speech. What has Holder done to vindicate the rights of privacy of the American public against the illegal snooping of the NSA? He could have charged NSA personnel with violations of law for their warrantless wiretapping which has been done millions of times and instead he did not persecute a single soul. That is a defalcation of historical proportions and it signals to the public that the government DOJ under him was not willing to do a damn thing to protect the public against the rapid growth of the illegal surveillance state. Who else could have done this? Nobody. And for that omission Obama deserves the blame too. Here were are sliding into a police state and Eric Holder made it go all the faster.

  5. JOE CLAYPOOL candidate for Superior Court in Harrison County - Indiana This candidate is misleading voters to think he is a Judge by putting Elect Judge Joe Claypool on his campaign literature. paragraphs 2 and 9 below clearly indicate this injustice to voting public to gain employment. What can we do? Indiana Code - Section 35-43-5-3: Deception (a) A person who: (1) being an officer, manager, or other person participating in the direction of a credit institution, knowingly or intentionally receives or permits the receipt of a deposit or other investment, knowing that the institution is insolvent; (2) knowingly or intentionally makes a false or misleading written statement with intent to obtain property, employment, or an educational opportunity; (3) misapplies entrusted property, property of a governmental entity, or property of a credit institution in a manner that the person knows is unlawful or that the person knows involves substantial risk of loss or detriment to either the owner of the property or to a person for whose benefit the property was entrusted; (4) knowingly or intentionally, in the regular course of business, either: (A) uses or possesses for use a false weight or measure or other device for falsely determining or recording the quality or quantity of any commodity; or (B) sells, offers, or displays for sale or delivers less than the represented quality or quantity of any commodity; (5) with intent to defraud another person furnishing electricity, gas, water, telecommunication, or any other utility service, avoids a lawful charge for that service by scheme or device or by tampering with facilities or equipment of the person furnishing the service; (6) with intent to defraud, misrepresents the identity of the person or another person or the identity or quality of property; (7) with intent to defraud an owner of a coin machine, deposits a slug in that machine; (8) with intent to enable the person or another person to deposit a slug in a coin machine, makes, possesses, or disposes of a slug; (9) disseminates to the public an advertisement that the person knows is false, misleading, or deceptive, with intent to promote the purchase or sale of property or the acceptance of employment;

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