Will New York catch up to Mississippi in protecting consumers?

by Jeff Sovern

Many states allow their consumers to sue misbehaving companies for unfair practices, including red and purple states like Mississippi, Georgia, North Carolina, Tennessee and West Virginia, states that we normally don't think of as being in the vanguard of consumer protection.  This power can be important in protecting consumers. For example, the CFPB used its own ability to stop unfair practices when it pursued Wells Fargo for opening unauthorized accounts, rather than its power to block deception. But New York has lagged behind these states, as well as its neighbors like Connecticut, Pennsylvania, and Massachusetts, in leaving unfairness out of its UDAP statute. Thus, New Yorkers could not have sued Wells Fargo for unfair conduct in opening unauthorized accounts.

But now that may change. The New York legislature is considering a bill to put the U in its UDAP statute.  The bill would also eliminate New York's requirement that plaintiffs in UDAP cases demonstrate that the offending conduct is "consumer-oriented," a requirement that no other state has adopted and that does not even appear in New York's statute; instead it was added by a court that evidently eschewed textualism as a method of statutory interpretation.

Unfortunately, but predictably, the bill is encountering heavy industry opposition. One argument made against the bill is that it "will open the flood gates for litigation."  But many other states permit consumers to sue for unfair conduct and don't require consumer-oriented conduct and have not experienced a flood of litigation (even assuming there is something wrong with a flood of litigation against bad actors). The items I have listed merely bring the statute into conformity with other states.

The statute currently provides for only $50 in statutory damages. As a number of studies have demonstrated, consumers almost never bring claims for $50.  It just isn't worth it to them.  So preserving $50 as the amount of statutory damages would be essentially the same as having no statutory damages.  The bill addresses this problem by increasing the amount of statutory damages to $2,000, an amount which is more likely to be enough to cause consumers to enforce the statute, though still less than the red state of Kansas, which allows statutory damages of fives times as much, or 200 times what the New York statute currently provides. Of course, businesses object to this too: they prefer that the amount be so low as to render private enforcement virtually nonexistent in the absence of large actual damages.

New York has a chance to offer its consumers not just the protection they need, but that they deserve. It should leap at the opportunity.