unfair consumer practices webinar slides

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Hot Topics in Consumer Protection:

Unfair Practices Under the Consumer Protection Act,

2002

2010, Community Law School (Sarnia-Lambton) Inc.

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The content of this webinar is based on law that was current on the date the webinar was recorded. CLEONet webinars contain general legal information. They are not intended to be used as legal advice for a specific legal problem. For more information on how to find a lawyer or to contact your local community legal clinic visit www.cleonet.ca/need_legal_help


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About our presenter…


Margaret Capes, B.A. (Hons.), LL.B., M.Ad.Ed, is Legal Education Coordinator of Community Law School (Sarnia-Lambton) Inc. She also acts as Review Counsel for Community Legal Services, as an adjunct professor in the clinical law program, and as faculty advisor for Pro Bono Students Canada and the Dispute Resolution Centre, all at the Faculty of Law, University of Western Ontario. She is the former Executive Director of Community Legal Assistance Sarnia.


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Webinar Overview1. Explanation of the Case Study Approach

2. Case Study #1: Mustang Sally

3. Case Study #2: Too Much Hot Tub?

4. Participants’ Experiences

5. Unfair Practice Protections and Other Consumer Protection Laws

Appendices:

Appendix A: Unfair Practices under the Consumer Protection Act, 2002

Appendix B: Case Study #1: Mustang Sally

Appendix C: Case Study #2: Too Much Hot Tub?

Appendix D: Resources


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What is a Case Study Approach?

• Uses a fictionalized fact scenario (the “case study”) to illustrate how the unfair practices provisions of the Consumer Protection Act, 2002 (CPA) operate in the “real world”.

• Copies of the Background Handout and Case Studies are provided to registrants in advance of the live webinar, and are appended to the archived webinar slides.

• Assumes that webinar participants have read the Background Handout and Case Studies prior to attending the live webinar (or prior to reviewing the archived webinar).

• The webinar will focus on the Case Studies provided.

• We also invite participants to share their experiences after we have worked through the Case Studies.


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Case Study #1: Mustang Sally

a) Are there examples of false, misleading, or deceptive representations in this case? How many can you identify?

b) Are there unconscionable representation in this case? How many can you identify?

c) What action plan can we develop for Sally using the remedies available under the Consumer Protection Act, 2002?


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Case Study #2: Too Much Hot Tub?

a) Are there examples of false, misleading, or deceptive representations in this case? How many can you identify?

b) Are there unconscionable representation in this case? How many can you identify?

c) What action plan can we develop for Pat using the remedies available under the Consumer Protection Act, 2002?


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“Unfair Practices” Protections and Other Consumer Protection Scenarios

• Most consumer contracts are covered under the “unfair practices” protections of the Consumer Protection Act, 2002, including, for example:

o Prepaid Services Contracts;o Door-to-Door Contracts; ando Internet Contracts.

• The “unfair practices” provisions of the CPA should be examined whenever one is reviewing a consumer contract with an eye to seeking relief from the contract, as there is a good chance a remedy may be found there.


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Appendix A: What are “unfair practices” under the Consumer Protection Act, 2002?

• The Consumer Protection Act, 2002 (CPA)specifically prohibits two types of unfair practices:

• Making a false, misleading or deceptive representation, and

• Making an unconscionable representation.

• The CPA also prohibits a person from retaining custody or control of goods to force a consumer into renegotiating the terms of the agreement.


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Appendix A, cont.: What are “false, misleading and deceptive representations” under the Consumer Protection Act, 2002?

False, misleading and deceptive representations fall generally into four categories:

• Representations as to the quality, characteristics, condition, or “special” nature of the goods or services;

• The current or future availability of the goods or services;

• The need for the goods or service; and

• The cost, price advantage, or benefit of the good or service to the consumer.


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The CPA includes the following as examples of false, misleading, or deceptive representations:

That the goods or services have sponsorship, approval, performance characteristics, accessories, uses, ingredients, benefits, or qualities that they do not have;

That the person supplying the goods or services has sponsorship, approval, status, affiliation or connection that the person does not have;

That the goods or services are of a particular standards, quality, grade, style, or model, if they are not;

That the goods are new, or unused, if they are not or are reconditioned or reclaimed;

That the goods have been used to an extent that is materially different from the fact;

That the goods or services are available for a reason that does not exist;

That the goods or services have been supplied in accordance with a previous representation, if they have not;

That the goods or services, or any part thereof, are available when the person making the representation knows or should know that they are not;


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That the goods or services, or any part thereof, will be available by a specified time when the person making the representation knows or should know that they will not be available by that time;

That a service, part, replacement or repair is needed or advisable, if it is not;

That a specific price advantage exists, when it does not;

That misrepresents the authority of a salesperson, representative, employee, or agent to negotiate the final terms of the agreement;

That the transaction involves or does not involve rights, remedies, or obligations if the representation is false, misleading, or deceptive;

That misrepresents the purpose or intent of any solicitation of, or communication with, a consumer;

That misrepresent the purpose of any charge or proposed charge; or

That misrepresents or exaggerates the benefits that are likely to flow to a consumer if they help a person obtain new or potential customers.


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Appendix A, cont.: What are “unconscionable representations” under the Consumer Protection Act, 2002?

Some business practices are so egregious that they are deemed unconscionable under the CPA. They include:

Taking advantage of the disability, ignorance, language barriers, or illiteracy of the consumer;

Grossly overcharging for the good or service;

Using excessively one-sided or otherwise inequitable contracts to the detriment of the consumer;

Obligations that the consumer has no reasonable probability of paying in full;

Misleading statements of opinion that the consumer relies on or is likely to rely on, to their detriment; and

Using pressure tactics to persuade the consumer to enter into the transaction.


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Appendix A, cont.: Options for Action under the Consumer Protection Act, 2002

a) Rescission of the Contract

• A consumer may rescind any agreement entered into while the other party engaged in

an unfair business practice under the Act.

• If rescinded, the agreement and all related agreements, guarantees, and payment

security are cancelled as if they never existed.

• Notice of rescission must be given within one year after entering into the agreement

(written notice is recommended).

• If rescission is not feasible, the consumer may recover the amount by which payment

exceeded the actual value of the goods or services, or damages, or both.

• Sample rescission letters are available on the Ministry of Consumer Services website:

www.sse.gov.on.ca/mcs

• If the consumer does not get a satisfactory response from the seller, he or she may

complain to the Ministry, or commence a civil action under the CPA.


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b) Complaint to the Ministry of Consumer Services

• As private lawsuits are expensive( in terms of time, money and certainty of result), a consumer may want to first file a complaint with the Ministry of Consumer Services to see if that results in acceptable redress for the consumer.

• Online complaint forms are available on the Ministry’s website: www.sse.gov.on.ca/mcs

• The Ministry has broad investigative and remedial powers.

• The Ministry may order the seller to comply with the provisions of the Consumer Protection Act, 2002.

• If the seller is in a business that must be licensed by the Ministry, they may have their license suspended or not renewed if there are enough complaints

• The Ministry may also bring charges in Provincial Offences Court.

• The Provincial Offences Court may, upon conviction, impose upon an individual a fine of up to $50,000, or imprisonment for a term of not more than two years less a day, or both.

• A corporation that is convicted may be fined up to $250,000.


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c) Civil Lawsuit

• If the consumer has given notice of rescission but has not received a satisfactory response, he or she may commence a civil suit.

• Exemplary or punitive damages may be awarded in such a suit, in addition to any other remedy that may be available.

• The limitation period for starting a claim is 2 years from the date the breach was discovered under the Limitation Act, 2002

•For information on starting a claim in Small Claims Court, please see the Ministry of Attorney General website: http://www.attorneygeneral.jus.gov.on.ca/english/courts/scc

http://www.attorneygeneral.jus.gov.on.ca/english/courts/scc


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Appendix B: Case Study #1: Mustang Sally

Ms. Sally Smart recently purchased a Ford Mustang from Bargain Auto Sales Inc. The sales representative, Wes Wallen, made several oral representations to her prior to signing the sales contract. For instance, he stated it was a 2007 model with no identifiable mechanical problems. Mr. Wallen also noted the odometer reading was 99,000 km as of the date of sale. The total cost was $7,000 plus HST.

Ms. Smart agreed to a credit check. She was unsure if her credit application would be approved given she had some unpaid loans in her past. She also worried about the $750/month car payment given she worked 2 part time jobs at minimum wage. At the most, she earned $1,500 net per month. She raised this with Mr. Wallen while completing the application but he was dismissive and told her not to worry.

He also agreed to provide a dealer warranty for 30 days as of the date of sale. Mr. Wallen explained this meant if there were any problems with the car during the first 30 days, he would take care of the repairs “at no cost” using one of the dealer mechanics. To be safe, Ms. Smart also purchased an additional warranty for 5 years after some urging by Mr. Wallen. This warranty added $50 per month to the monthly payments.

Ms. Smart did not review the contract in depth in part because she has difficulty reading complicated words. She did not raise this with Mr. Wallen mostly out of embarrassment. She signed quickly and in an effort to compose herself, Ms. Smart excused herself for some fresh air outside the dealership. When she returned, Mr. Wallen had all the paperwork folded into an envelope.


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Appendix B, cont.: Case Study #1: Mustang Sally

The next day, Mr. Wallen called and advised the credit check was “good”. Ms. Smart picked up the car that afternoon.

Problems with the car started within a week of the purchase. It had a rattling sound in the back end and the accelerator seemed to stick. Every so often she had trouble shifting into gear. Ms. Smart called Mr. Wallen at the end of the first week and explained the problems. He agreed to meet her that day.

During the meeting, Mr. Wallen denied making any oral representations about a dealer warranty. He pulled out the contract and there was no wording about a dealer warranty. After a quick look by the dealer mechanic, the car was deemed safe.

Ms. Smart had the car inspected the next day by another dealership in town, and it was determined it should not have passed the safety inspection. It also confirmed it was a 2006 Mustang not a 2007 model. There were problems discovered in the wheel bearings, a loose accelerator part and in the transmission. There was also evidence the odometer had been tampered with. The total to fix these issues was $3,000. To be safe, Ms. Smart had a second mechanic confirm these findings.


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Appendix C: Case Study #2: Too Much Hot Tub?

Pat Brown recently attended the London Home and Garden show and was instantly attracted to an exhibit called “Hot Tub Heaven.” Given his back injury, Pat is unable to work and lives on workers compensation payments. For years, Pat dreamed of having a hot tub to deal with his symptoms so he struck up a conversation with the sole proprietor, Terry Block. Pat explained he needed a model that would provide therapeutic benefits for his back. Terry enthusiastically showed Pat several basic models and a deal was struck for Pat to purchase the “Little Piece of Heaven” model for $20,000.00 plus HST.

This model had all the features of a top-end hot tub, including a stereo/CD/MP3 (with IPod dock) system, a built in cooler for beverages, mood lighting, extra hydro jets and seating for 8. Terry advised it met all safety guidelines and his team had the qualifications to install the unit.

Pat signed the deal and a down payment of $2,000.00 was issued by personal cheque. The balance was to be paid in $1,000/ month installments. Pat and Terry verbally agreed that the hot tub would be delivered and installed on May 20, 2011. A copy of the agreement was never provided to Pat Brown. In fact, Pat did not read the contract at all. He was so excited to find this hot tub he decided to trust Terry that all the terms were on the “up and up”.


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Appendix C, cont.: Case Study #2: Too Much Hot Tub?

The “Little Piece of Heaven” was delivered on time and installed by the staff of Hot Tub Heaven as promised on May 20, 2011. Being new to hot tubs, Pat did not ask the staff if they were licensed electricians or where the tubs were manufactured.

After the hot tub was installed, Pat called his insurance company to advise of the new addition to the house. The agent asked numerous questions about who installed the hot tub and whether it was approved by the Canadian Standards Association (“CSA”). Needless to say, these questions took Pat by surprise. The agent indicated they would cancel his house insurance if the hot tub was not properly installed by a licensed electrician and if it was not CSA-approved. Pat agreed to get details and call back.

When Pat called Hot Tub Heaven, the sales staff advised him that the tubs were manufactured in the United States. They also indicated that the installers were employees of Hot Tub Heaven and they were not licensed electricians. To make matters worse, Pat is struggling to make the next $1,000 payment given his limited workers compensation benefits.


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Appendix D: Resources

Ministry of Consumer Services: http://www.sse.gov.on.ca/mcs/en/Pages/default.aspx.

Small Claims Court Information, forms, and practice guides: http://www.attorneygeneral.jus.gov.on.ca/english/courts/scc.

Sample Complaint Letter (from the Ministry’s website):

Your nameYour address Today’s date Business name and address Dear Sir/Madam: On (date of the contract), I purchased (rented or leased) a (product or service) from you: model xyz, at a price of...(give as much detail as possible –

include model or other identifying numbers that might apply). The purchase agreement was made at your store located at (give details about the location of the store, the person you dealt with and any particular or

relevant representations made to you about the product, goods or services). Describe the problem here. Then state exactly what you want from the business.

I look forward to your immediate reply. You can contact me at my home telephone number at... (Conclusion: indicate that you are expecting an early response/resolution to/of your complaint and your emergency and/or other contact information.) Yours truly, Sign the letter and send it by registered mail, fax or courier.

http://www.sse.gov.on.ca/mcs/en/Pages/default.aspx

http://www.attorneygeneral.jus.gov.on.ca/english/courts/scc


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Appendix D, cont.: Resources

Sample Rescission Letter (from the Ministry’s website):

Your nameYour address Today’s date Business name and address

On (date of the contract), I signed an agreement to buy a (product or service) from you: model xyz, at a price of... (give as much detail as possible – include model or other identifying numbers that might apply). Today, I want to cancel that agreement. I hereby exercise my right to cancel the agreement as a result of unfair business practice(s)as described in the Consumer Protection Act, 2002 and ask that the money be returned to me. I look forward to your immediate reply. You can contact me at my home telephone number at... (Conclusion: indicate that you are expecting an early response/resolution to/of your complaint and your emergency and/or other contact information). Yours truly, Sign the letter and send it by registered mail, fax or courier.

This webinar was brought to you by Community Law School (Sarnia-Lambton) Inc. and CLEONet with funding from the

Law Foundation of Ontario.

For more information about consumer issues visit the Consumer Law section of CLEONet at www.cleonet.ca.

For more public legal information webinars, including webinars on other consumer protection topics, visit:

http://www.cleonet.ca/training.

For information about other consumer issues, social welfare laws, and community advocacy training visit the Community Law School

website at www.communitylawschool.org.


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