Overview of Wisconsin Consumer Protection Law

By David Dudley

Consumer Protection

Law Office

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Bio, Contact Info

• David Dudley– 1914 Monroe Street– 608-661-8855– David.D.Dudley@gmail.com

• Previously– Federal Trade Commission– Wisconsin DOJ, University of Wisconsin

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Outline

1. What is Consumer Law?

2. Importance of Consumer Law

3. Consumer Self-Defense

4. Abusive Debt Collection

5. Payday Loans

6. Auto Title Loans

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Outline (cont.)

7. Rights Under the WCA

8. Federal Telephone Consumer Protection Act

9. Automobile Repossession

10. General Consumer Fraud

11. Auto Fraud

12. Lemon Law

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Outline (cont.)

13. Auto Repair14. Identity Theft15. Home Improvement16. Landlord-Tenant17. Arbitration Clauses18. Other Resources19. Conclusion

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What is Consumer Protection Law?

• Laws that seek to address unequal bargaining power in the marketplace.

• Frequently include fee-shift provisions and/or damage multipliers.

• Enforced at the federal and state level, as well as through private consumer protection lawyers.

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Importance of Consumer Law

• Allows people of limited means to pursue claims against predatory businesses.

• Creates a more transparent marketplace.– E.g., Truth-in-lending disclosures, conflict

of interest disclosures

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Consumer Self-Defense

• Save your documents.

• Keep a journal.

• Bring a witness.

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Consumer Self Defense (cont.)

• Ask questions.

• Don’t believe everything your hear.

• Wait and consider; seek a second opinion.

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Informal (non-legal) negotiations

• Reach someone with decision making authority

• Expand the transaction

• Accentuate the positive

• Make an ally on the inside

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Abusive Debt Collection

• Debt collection industry had the highest number of consumer complaints in 2010.

• But many complaints are not violations of the debt collection law:– E.g., calling 2-3 time per day, every day;– Not accepting partial payment on same terms as

original creditor.

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Prohibited Debt Collection Practices

• Calling with extreme frequency or at unusual times (before 8 am or after 9 pm)

• Threats of force or violence, or harm to property

• Threats of criminal prosecution

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Prohibited Debt Collection Practices (cont.)

• Disclose or threaten to disclose false information harming consumer’s reputation for credit worthiness

• Communicating with consumer’s employer prior to final judgment (except to verify employment status or earnings);

• Disclosing disputed debt without indicating that consumer has disputed it;

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Prohibited Debt Collection Practices (cont.)

• Communicate with consumer at unreasonable times or with unreasonable frequency;

• Engage in other conduct that can reasonably be expected to threaten or harass the consumer or person related to consumer;

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Prohibited Debt Collection Practices (cont.)

• Use obscene or threatening language;

• Attempt to enforce a right with reason to know it does not exist; (esp. useful for counterclaims)

• Simulating legal process;

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Prohibited Debt Collection Practices (cont.)

• Threaten action that is not taken in the regular course of business

• Attempting to collect a larger amount than allowed by law (e.g., adding collection or attorney fees)

• Failing to identify self as debt collector

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Prohibited Debt Collection Practices (cont.)

• Failing to send required notice that includes:

– Amount of the debt– Name of original creditor– Statement that, if consumer disputes debt in

writing, debt collector will obtain verification of the debt and mail it to consumer.

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Potential letter from consumer to debt collector

• Send certified mail, return receipt;

• Dispute owing the debt;

• Demand validation and verification of the debt; and

• Do not contact the consumer except pursuant to formal legal process.

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Abusive Debt Collection: Remedies (state law)

• Actual damages, including emotional distress and mental anguish.

• Twice the finance charge, with a minimum of $100, and capped at $1,000.

• Return of any improperly seized collateral.

• Costs, and actual, reasonable attorney fees.

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Payday Loan Law

• Took effect Jan. 1, 2011.

• Limited to one rollover.

• Caps payday loans at $1,500.

• Cannot leave blanks in loan application.

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Payday Loan Law (cont.)

• False, deceptive, or misleading advertising prohibited.

• Payday lenders cannot threaten or pursue criminal charges for bounced checks or dishonored EFT agreements.

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Payday Loan Law (cont.)

• Remedies:– Statutory damages = the amount of the

payday loan (minimum of $250).

– Costs and reasonable attorney fees.

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Auto Title Loans

• Completely banned (if APR exceeds 18%).

• Statute does not provide its own remedy, so need to rely on Wisconsin Consumer Act.

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Some important Consumer Rights under the WCA

• Right to prepay without penalty.

• Balloon payments prohibited. – The fine print:

• does not apply to seasonal workers, under certain conditions.

• does not apply to mobile home contracts, under certain conditions.

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Important Consumer Rights Under the WCA (cont.)

• Atty fee provisions prohibited.

• Defenses assertable against assignees.

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Consumer Notifications

• Notice of assignment. – Notice that original creditor has assigned rights

to debt collector

– Must be in writing & include information about the original agreement

– Consumer has right to pay original creditor until receipt of notice of assignment

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Consumer Notifications (cont.)

• Notice of Customer’s Right to Cure Default.– Must contain: (1) the name, address, and

telephone number of creditor; (2) statement of nature of alleged default, and (3) information necessary to cure the alleged default.

– A creditor or debt collector who sues without having first sent the notice lacks standing to sue the consumer.

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3-Day Right to Rescind

• Consumer has 3 days to back out of transaction from door-to-door solicitation. – E.g., Kirby vacuum sales; home security systems

• Notice sent by mail. (best practice is to send certified mail, return receipt requested, though not required unless custom made goods).

• Merchant must give consumer written notice of right to cancel.

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Federal Telephone Consumer Protection Act

• Prohibits prerecorded or autodialed calls to a consumer’s cell phone.

• Also prohibits robocalls to a consumer’s landline, unless the consumer has a “preexising business relationship” with the company.

• Damages of $500 to $1,500 per call.

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Automobile Repossession

• Rule modified in 2005. Now, a consumer must demand to be sued, or finance company can repossess vehicle without judicial process. Consumer pays attorney fees if loses in court.

• Improper repossession entitles consumer to the “jackpot remedy”--return of the vehicle, forgiveness of remaining amount of the loan, and return of all amounts previously paid. (only for vehicles where amount financed was less than $25,000)

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General Consumer Fraud

• Wisconsin law prohibits “untrue, deceptive or misleading” sales representations.– Distinguish from “puffery.”– Made to the public

• Can be one person• But does not include post-sale statements

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Auto Fraud

• Typical Scams include:– Misrepresenting prior ownership– Misrepresenting accident/repair history– Misrepresenting vehicle’s current condition

• Check Wisconsin Buyer’s Guide

• Car Fax or other used vehicle history report can be useful.

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Auto Fraud (cont.)

• Some car lots will use “bushing” to help low-income customers qualify for financing.– E.g., overstate the value of a trade-in or

amount of down payment, but net against a larger sales price

– Customer pays more in sales tax

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Lemon Law

• New vehicles only• Car is out of service for 30 days within

the first year of ownership, or out of service four or more times for the same problem during the first year

• “Substantial impairment to the use, value, or safety of vehicle.”

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Lemon Law (cont.)

• Mandatory non-binding arbitration

• Consumer who successfully sues can obtain twice the vehicle’s purchase price, plus costs and attorney fees

• Keeping track of repair orders, documenting days out of service are keys to building case

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Auto Repair

• Written repair order required for any repairs exceeding $50.

• Customer chooses:– Waive estimate.– Authorize repairs up to set amount, but call

and obtain authorization if greater.– Require written estimate.

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Auto Repair (cont.)

• If mechanic accepts prepayment of $250 or more, must provide estimated completion date.

• Mechanic must obtain authorization if repairs:– Include work in addition to previously

authorized; or– Expense of repairs exceeds estimate.

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Auto Repair (cont.)

• Repair invoice– Shop’s name & address;– Customer’s name & address;– Date on which repairs are completed;– Vehicle’s make, model, and VIN number;– Incoming odometer reading;– Price for repairs;– Itemized description of parts & labor;– Description of warranty, if any;– Disclosure of any rebuilt, recycled, or reconditioned parts used;– Name of each individual who worked on the vehicle; and– Statement informing consumer that work is regulated by Wis.

Admin. Code Ch. 132

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Identity Theft

• Difficult to sue perpetrators.– Few assets, often out of state

• Prevention– Caution when using public internet

hotspots– You call us, we don’t call you– Phishing scams

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Identity Theft (cont.)

• Check credit report once per year– Free annual credit reports through FTC

• https://www.annualcreditreport.com– NOT freecreditreport.com

• Wisconsin office of privacy protection– Can help consumers repair damage from

identity theft– Credit freeze

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Home Improvement

• Underbidding, followed by– Cutting corners on actual work/materials,

or– Charging more than original bid.

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Home Improvement (cont.)

• If buyer prepays for all or part of the work, then:– Contract must be in writing;– Must describe work to be done, and

products and materials used;– Total price; and– Dates or time period for completion.

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Home Improvement (cont.)

• Wisconsin Supreme Court has interpreted the Home Improvement law liberally, in favor of consumers--does not require a strict but/for relationship of cause and effect between bad conduct and damages.

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Home Improvement (cont.)

• Notice of Contractor’s right to cure

• Five step process

• 90-day cooling off period

• Wisconsin Dept. of Commerce brochure:

http://www.commerce.state.wi.us/sb/docs/SB-UdcRightCureBrochureV4.pdf

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Landlord-Tenant

• Landlord must not misrepresent anything about the apartment, including using a model that is substantially different from the actual unit rented.

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Security Deposits

• Landlord must provide check-in & check-out sheets.

• Landlord must either refund the entire security deposit, or send a statement of claims within 21 days after tenant vacates.– Can only withhold for damage exceeding ordinary

wear and tear.

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Security Deposits (cont.)

• Violation entitles tenant to double damages, plus costs and attorney fees.– Landlord will often counterclaim for damages

beyond amounts withheld.

• Some landlords try to charge for ordinary cleaning, replacing fully depreciated assets, or even remodeling.

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Wrongful Eviction

• Self-help eviction is not allowed in Wisconsin.

• A landlord must serve either a 5-day pay or quit, or 14-day no right to cure notice on tenant, then go through formal eviction process in small claims.

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Rent Abatement

• Withholding rent for serious problems with apartment.

• Best practice is to contact building inspector, and have problems written up as violations.

• Madison has formal rent abatement procedure; most other jurisdictions are more informal.

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Arbitration Clauses

• Contained in most form contracts.• Customer can cross out, or in certain

instances, customer can send notice to opt-out.

• Statistics have shown that arbitration tends to favor the company, and may make it more difficult for consumer to obtain full relief.

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Other Resources

• Federal Trade Commission: http://ftc.gov

• Wisconsin Department of Agriculture, Trade, and Consumer Protection:http://datcp.wi.gov

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Other resources (cont.)

• Wisconsin Department of Financial Institutions: http://wdfi.org

• National Association of Consumer Advocates: http://naca.net

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Conclusion

• Please contact me with any questions:– David Dudley– 608-661-8855– David.D.Dudley@gmail.com– http://wisc-consumer.com