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Consumer Fraud Acts

If a merchant or a service provider has cheated you, typical legal claims may not actually address the problem. There are limits to the force of contract and common-law fraud claims. Neither, for example, addresses the situation when a seller makes a misrepresentation without knowing it was false. Many states, in response to this loophole, have enacted statutes creating causes of action for “consumer fraud.”

The purpose of consumer fraud acts is to make sure that there is a remedy to persons injured by a fraud related to the sales and provision of goods and services. A claim under a consumer fraud act is different from, and is an additional remedy to, a typical breach of contract claim or common-law fraud claim. One example of a sale covered by a consumer fraud act is where an individual buys a car from a seller who represents it to be in good condition when in fact the car has severe mechanical problems. Although consumer fraud acts were created to address common transactions like this, their scope has also expanded in many states to cover services as accounting and financial planning, legal services, and environmental consulting.

It is easy for a plaintiff to plead a claim under a consumer fraud statute. For example, under the Illinois Consumer Fraud and Deceptive Business Practices Act, a plaintiff must allege and prove only that the defendant engaged in (1) a deceptive act or practice (2) in the course of conduct involving trade or commerce (3) with the intent that the plaintiff rely on the deception. The act is, according to the statute, to be construed liberally, and it applies to any transaction, so long as it is in “trade” or “commerce.” “Trade and commerce” means “the advertising, offering for sale, sale, or distribution of any services and any real property, tangible or intangible, real, personal or mixed.”

Multiple instances of fraud are not necessary for a consumer fraud act to apply-even one instance of fraud can trigger its protection. Given these broad parameters, it is fairly simple to plead all the required elements of a claim. Consumer fraud acts can be especially useful to plaintiffs because both attorneys’ fees and punitive damages are often available.

Some states require a showing of consumer injury, or danger to the public, under their consumer fraud acts. Some states, like Arizona, have acts that are far less broad than the Illinois example. Under some states’ acts, mere expressions of opinion are not actionable as fraud.

An attorney can advise you about any potential claims that you might have under your state’s consumer fraud act.