Nothing Right About This ‘Cure’

It is a great thing when Ohio can point to a model law. The 40-year-old Consumer Sales Practices Act (CSPA), lauded for its broad and solid protections of Ohioans, is just that — one of the nation’s best preventions against fraud and unfair business practices. It was adopted after an extensive study by the Ohio Legislative Services Commission, which found a need to safeguard legitimate businesse practices while prohibiting deceptive and misleading practices.

The Ohio House recently passed a badly mislabeled “right to cure” bill (H.B. 275), which would freeze CSPA suits, providing the business a chance to offer cash to “fix” the problem. Additionally, the legislation caps attorney fees at $2,500 for the “cure” process — leaving low- and moderate-income families extremely vulnerable to legal costs.

Make no mistake, the changes to the CSPA will harm consumers. In addition to weakening the consumer’s ability to collect damages and attorney fees, the bill reverses the thrust of our consumer protection law by placing the risk on the consumer. If the consumer does not accept the business’s offer and a judge or jury awards less than that offer, the customer loses the ability to receive triple damages — the heart of the CSPA. Below, we provide some basic facts about the bill.

Fact 1: H.B. 275 provides no new rights to consumers.

Despite clever naming, consumers already have a “cure.” Businesses can make an offer to consumers before a lawsuit is filed, and judges can already limit attorney fees. Obviously, consumers often do not take the offer because it does not make them whole for the damages they have suffered.

Fact 2: Other states have not allowed businesses to stop lawsuits in this manner.

Currently, no other state has a “right to cure” law or provision that allows businesses to stop a suit after filing. The National Consumer Law Center sternly warns that adopting H.B. 275 would make Ohio’s law substantially weaker than other states. Even with decent protections, Ohio has already been home to some of the worst fraud in the country from predatory mortgages to tax preparation. Weakening enforcement and economic consequences for bad business practices would make things worse for Ohioans.

Fact 3: Very few lawsuits are filed under the Consumer Sales Practices Act.

The legal system can manage the suits that get filed under the CSPA. In 2011, roughly 100 suits were put forth. The CSPA casts a wide net, rewarding good business practices by providing serious penalties for bad ones (remember, triple damages). The strength of the current law reduces the number of lawsuits filed. H.B. 275 encourages bad businesses to force consumers into court, knowing they can cut off triple damages and shift the entire risk of litigation to the consumer.

Fact 4: The “cure” is a bad deal for consumers.

Failure to take the “deal” offered by the business leaves the consumer extremely vulnerable to a lesser settlement from the judge or jury. Imagine buying a used car for $5,000 that was supposed to be in good working condition but was not and required serious repair. After the consumer has put hundreds of dollars into repairs including mechanical work, towing, rental car and time off work, suppose the business responds with a low-ball cure offer of $5,000 or less. Few consumers would reject the low-ball offer and pursue a claim in court because few would be able to risk losing at trial and having to pay the additional legal costs.

The message, then, to businesses with bad practices is there is a low cost to rip off consumers.

Fact 5: Businesses are rarely held accountable for accidental and unintentional acts.

Reputable businesses that treat their customers right aren’t concerned about the CSPA. If a business does have a consumer dispute, the CSPA already has provisions to protect businesses from frivolous lawsuits. And the Ohio attorney general offers help so businesses can understand their obligations under the law.

The bottom line is that H.B. 275 is not pro-business and is certainly not pro-consumer, as supporters tout. It is pro-bad business practices, providing loopholes and few consequences for deceptive and fraudulent acts. Ohioans have suffered enough fraud and deserve one of the nation’s strongest consumer protection laws. The Ohio legislature should refuse to water down our consumer protections.