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Teaching Consumer Credit Law in an Evolving Australian Economy

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y both the federal government <strong>an</strong>d state governments as a result<br />

of a perceived imbal<strong>an</strong>ce of power between consumers <strong>an</strong>d<br />

merch<strong>an</strong>ts. The imbal<strong>an</strong>ce has been attributed to m<strong>an</strong>y factors<br />

such as disproportionate <strong>in</strong>formation, unequal barga<strong>in</strong><strong>in</strong>g power,<br />

repeat player, <strong>an</strong>d general ignor<strong>an</strong>ce or naivety of consumers. 4<br />

The rise of consumerism resulted <strong>in</strong> m<strong>an</strong>y Federal laws such as<br />

the Truth <strong>in</strong> Lend<strong>in</strong>g Act (1968), The <strong>Consumer</strong> Product Safety<br />

Commission Act (1972), Fair <strong>Credit</strong> Report<strong>in</strong>g Act (1974),<br />

The Magnuson‐Moss Warr<strong>an</strong>ty Act (1975), FTC “Holder rule”<br />

(1975), <strong>an</strong>d the Fair Debt Collection Practices Act (1977). 5 The<br />

legislative activism was mirrored <strong>in</strong> the state legislatures as well,<br />

<strong>an</strong>d <strong>in</strong> Texas resulted <strong>in</strong> the DTPA, orig<strong>in</strong>ally only actionable by<br />

the Attorney General. 6 In 1973, however, the DTPA was tr<strong>an</strong>sformed<br />

by the legislature <strong>in</strong>to a consumer protection statute with<br />

a private right of action. 78<br />

The maxim of caveat emptor or “Let the buyer beware” was<br />

replaced by a statute designed to require full <strong>an</strong>d truthful disclosure.<br />

The DTPA rema<strong>in</strong>s Texas’s most powerful consumer oriented<br />

statute despite the remarkable tr<strong>an</strong>sformation it has undergone<br />

s<strong>in</strong>ce its <strong>in</strong>ception <strong>in</strong> 1973. Although the DTPA’s consumer protection<br />

provisions have been lessened, the Act still offers consumers<br />

m<strong>an</strong>y adv<strong>an</strong>tages <strong>in</strong> court, <strong>in</strong>clud<strong>in</strong>g a statutory m<strong>an</strong>date that<br />

the Act:<br />

shall be liberally construed <strong>an</strong>d applied to promote its<br />

underly<strong>in</strong>g purposes, which are to protect consumers<br />

aga<strong>in</strong>st false, mislead<strong>in</strong>g, <strong>an</strong>d deceptive bus<strong>in</strong>ess practices,<br />

unconscionable actions, <strong>an</strong>d breaches of warr<strong>an</strong>ties<br />

<strong>an</strong>d to provide efficient <strong>an</strong>d economical procedures to<br />

secure such protections. 9<br />

Although the recent past has shown a certa<strong>in</strong> level of judicial<br />

activism that appears to be <strong>in</strong> contrast to the legislative m<strong>an</strong>date,<br />

the DTPA is still able to achieve its stated purpose by foster<strong>in</strong>g<br />

a climate that favors a consumer. But <strong>in</strong> the mid 1990s public<br />

sentiment beg<strong>an</strong> to ch<strong>an</strong>ge sharply. No longer were the drums of<br />

consumerism pounded loudly; rather the harsh cries of lawsuit<br />

abuse beg<strong>an</strong> to reverberate throughout legislatures helped <strong>in</strong> part<br />

by stories of “runaway” juries such as the famous McDonald’s cup<br />

of coffee. 10<br />

The most signific<strong>an</strong>t ch<strong>an</strong>ges to the DTPA occurred <strong>in</strong> 1995.<br />

Under the guise of tort reform, the Texas legislature subst<strong>an</strong>tially<br />

amended the DTPA, generally weaken<strong>in</strong>g the statue with the passage<br />

of H.B. 668. 12 H.B. 668 did, however, made one signific<strong>an</strong>t<br />

ch<strong>an</strong>ge that has the potential to subst<strong>an</strong>tially help consumer—the<br />

enactment of subsection 17.50(h) provid<strong>in</strong>g for <strong>in</strong>creased damages<br />

for a violation of a “tie-<strong>in</strong>” statutes. Hav<strong>in</strong>g summarized the<br />

history of the DTPA, a detailed <strong>an</strong>alysis of the tie-<strong>in</strong> provisions<br />

follows.<br />

III. DTPA Gr<strong>an</strong>ts of Power—Tie-<strong>in</strong> Statutes<br />

The tie-<strong>in</strong> statute <strong>in</strong>terplay with the DTPA is <strong>in</strong>novative <strong>an</strong>d<br />

quite brilli<strong>an</strong>t. It allows future legislatures to identify <strong>an</strong>d protect<br />

groups that have unequal power, <strong>an</strong>d <strong>in</strong>corporate them <strong>in</strong>to the<br />

DTPA, without alter<strong>in</strong>g the Act itself. Tie-<strong>in</strong> provisions also allow<br />

additional laundry list type items to be <strong>in</strong>corporated <strong>in</strong>to the<br />

DTPA under limited scenarios, thus giv<strong>in</strong>g the legislature a razorsharp<br />

tool to f<strong>in</strong>e-tune perceived <strong>in</strong>equities.<br />

As is always the case, the statutory right to br<strong>in</strong>g suit<br />

is specifically spelled out <strong>in</strong> the statute, <strong>an</strong>d the DTPA is no<br />

exception to the rule. The DTPA has three dist<strong>in</strong>ct gr<strong>an</strong>ts of<br />

authority to br<strong>in</strong>g lawsuits:<br />

1.The orig<strong>in</strong>al gr<strong>an</strong>t is to the state through the Texas Attorney<br />

General – <strong>Consumer</strong> Protection Division;<br />

2. A direct private gr<strong>an</strong>t is to consumers, which is the<br />

most used method of br<strong>in</strong>g<strong>in</strong>g a claim under the DTPA; <strong>an</strong>d<br />

3. A seldom-used tie-<strong>in</strong> gr<strong>an</strong>t to claim<strong>an</strong>ts who are authorized<br />

by other laws to br<strong>in</strong>g claims through the DTPA.<br />

A. Directly to the <strong>Consumer</strong><br />

The primary gr<strong>an</strong>t of power for br<strong>in</strong>g<strong>in</strong>g claims directly under<br />

the DTPA by a private litig<strong>an</strong>t is section 17.50(a), which states<br />

“A consumer may ma<strong>in</strong>ta<strong>in</strong> <strong>an</strong> action where <strong>an</strong>y of the follow<strong>in</strong>g<br />

constitute a produc<strong>in</strong>g cause of economic damages or damages<br />

for mental <strong>an</strong>guish...” 13 Section 17.50(a) is expressly limited to a<br />

“consumer,” which is def<strong>in</strong>ed as more th<strong>an</strong> just a person who buys<br />

someth<strong>in</strong>g. A consumer is def<strong>in</strong>ed as “<strong>an</strong> <strong>in</strong>dividual, partnership,<br />

corporation, this state, or a subdivision or agency of this state who<br />

seeks or acquires by purchase or lease, <strong>an</strong>y goods or services.” 14<br />

Thus the DTPA provides for bus<strong>in</strong>ess consumers as well as <strong>in</strong>dividuals.<br />

Courts have broadened the def<strong>in</strong>ition of consumer by<br />

enlarg<strong>in</strong>g it <strong>in</strong> some cases such as by the use of “<strong>in</strong>tended beneficiaries”<br />

15 <strong>an</strong>d signific<strong>an</strong>tly narrowed it, for example by hold<strong>in</strong>g<br />

that borrow<strong>in</strong>g money <strong>in</strong> <strong>an</strong>d of itself is not a good or service under<br />

the DTPA. 16 There are a number of other areas <strong>in</strong> which the<br />

common use of the word “consumer” does not satisfy the DTPA’s<br />

def<strong>in</strong>ition of consumer such as the purchase of <strong>in</strong>t<strong>an</strong>gibles 17 like<br />

lottery tickets, 18 certificates of deposit, 19 <strong>an</strong>d option contracts. 20<br />

B. To the State<br />

The State c<strong>an</strong> act <strong>in</strong> the capacity as a consumer accord<strong>in</strong>g to the<br />

def<strong>in</strong>ition of consumer that <strong>in</strong>cludes “this state, or a subdivision<br />

or agency of this state” when it “seeks or acquires by purchase or<br />

lease, <strong>an</strong>y goods or services.” 21 The DTPA also gives broad powers<br />

exclusively to the State under sections 17.47, 17.48, 17.58, 17.60,<br />

<strong>an</strong>d 17.61. The State, through the Attorney General – <strong>Consumer</strong><br />

Protection Division, c<strong>an</strong> seek <strong>in</strong>junctive relief despite lack of consumer<br />

st<strong>an</strong>d<strong>in</strong>g when it has “reason to believe that <strong>an</strong>y person is<br />

engag<strong>in</strong>g <strong>in</strong>, has engaged <strong>in</strong>, or is about to engage <strong>in</strong> <strong>an</strong>y act or<br />

practice declared to be unlawful by” the DTPA when such action<br />

would “be <strong>in</strong> the public <strong>in</strong>terest.” 22 Under this authority, the State<br />

c<strong>an</strong> seek <strong>in</strong>junctive relief <strong>an</strong>d may seek penalties of up to $20,000<br />

per violation ($270,000 per violation when the practice was calculated<br />

to deprive money from senior citizens). 23 A district or County<br />

Attorney c<strong>an</strong> also br<strong>in</strong>g suit for <strong>in</strong>junctive relief with prior notice to<br />

the Attorney General – <strong>Consumer</strong> Protection Division. 24<br />

C. To a Claim<strong>an</strong>t When Authorized by Another <strong>Law</strong><br />

The DTPA provides a framework for other statutes to make their<br />

provisions enforceable under the DTPA, <strong>an</strong>d this provision gives<br />

rise to the so-called “tie-<strong>in</strong>” statutes under section 17.50(h). 25<br />

The tie-<strong>in</strong> provision results <strong>in</strong> a mosaic of <strong>in</strong>terrelated laws that<br />

are actionable under the primary vehicle of the DTPA but with<br />

enh<strong>an</strong>ced damage provisions. There are two basic features of the<br />

tie-<strong>in</strong> subsection. First is the claim<strong>an</strong>t provision that allows a<br />

pla<strong>in</strong>tiff to br<strong>in</strong>g a claim from <strong>an</strong>other statute through the DTPA.<br />

Second is the enh<strong>an</strong>ced damage provision that substitutes actual<br />

damages for economic damages. The specific gr<strong>an</strong>t of authority <strong>in</strong><br />

section 17.50(h) provides that:<br />

“[n]otwithst<strong>an</strong>d<strong>in</strong>g <strong>an</strong>y other provision of this subchapter,<br />

if a claim<strong>an</strong>t is gr<strong>an</strong>ted the right to br<strong>in</strong>g a cause of<br />

action under this subchapter by <strong>an</strong>other law, the claim<strong>an</strong>t<br />

is not limited to recovery of economic damages only,<br />

but may recover <strong>an</strong>y actual damages <strong>in</strong>curred by the<br />

claim<strong>an</strong>t, without regard to whether the conduct of the<br />

defend<strong>an</strong>t was committed <strong>in</strong>tentionally.” 26<br />

IV. Tie-<strong>in</strong> Statute Specifics<br />

There are a number of signific<strong>an</strong>t differences between a direct action<br />

under the DTPA through 17.50(a) <strong>an</strong>d a tie-<strong>in</strong> action under<br />

17.50(h). The most obvious <strong>an</strong>d perhaps most signific<strong>an</strong>t difference<br />

is the difference between economic damages <strong>an</strong>d actual<br />

damages. Under section 17.50(a), the general damage st<strong>an</strong>dard<br />

Journal of <strong>Consumer</strong> & Commercial <strong>Law</strong> 19

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