By Jason Massaro
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.
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.
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.