What is the Deceptive Trade Practices Act and How Can I Avoid Violating It?
By admin on December 27, 2010
The Deceptive Trade Practice Act (Known as the “DTPA”) is a law in Texas which provides protection for consumers from unscrupulous or just improper actions by businesses. Though the law has gone through significant changes since its inception in 1973, it can still be a potent weapon for consumers and must be addressed by small business owners unaware of its traps.
What Are the Basic Requirements for a Claim Under the DTPA?
To sustain an action under the DTPA, a plaintiff must establish the following elements:
The Plaintiff is a consumer; The Defendant can be sued under the DTPA; The Defendant committed an act that is actionable under the DTPA; and The Defendant’s actions were a producing cause of damage.
How is a “Consumer” Defined Under the DTPA?
The DTPA defines a consumer as “an individual, partnership, corporation… who seeks or acquires by purchase or lease, any goods or services.” Obviously, this definition is quite broad and this is no accident. Notably, the DTPA gives consumer status to businesses, in addition to individuals.
What Defendants Can Be Sued Under the DTPA?
This issue is of most concern to small businesses, and for obvious reasons – if the law does not apply to you, then you don’t have to give it a second thought. The DTPA allows for a cause of action against any person who employs practices that are prohibited by the act. Included in the definition of “Person” are any individual, partnership, corporation, association, or other group, however organized. The main requirement is that the entity must have made a misrepresentation to a consumer. Parties upstream from the initial transaction may sometimes be sued under the Act, but the requirements regarding such are beyond the scope of this post.
What Is an Actionable Act under the DTPA?
The DTPA lists the following four different wrongful acts that are actionable under the statute:
1. FALSE, MISLEADING, OR DECEPTIVE ACT OR PRACTICE
These acts are specifically enumerated under Section 17.46 and are affectionately known as the “Laundry List”. The list includes 27 separate acts so we are not going to list them here. However, the most commonly pursued claims involve the following:
Representations that goods possess characteristics that they do not possess; Representations that goods are of a certain quality that they are not; Representations that goods are new when they are used; and Failure to disclose information concerning goods or services which was known at the time of the transaction if such failure to disclose was intended to induce the consumer into a transaction into which the consumer would not have entered into had the information been disclosed
It is important to note a further couple of things about this list. First, unlike the other causes of action listed below, a laundry list violation requires that a consumer rely on the wrongful act to their detriment. Second, the standard for acceptable reliance is quite low. An act and is actionable if it has the capacity to deceive and ignorant, unthinking, or credulous person.
2. BREACH OF WARRANTY
While the DTPA does not create warranties by itself, bringing a breach of warranty claim under the DTPA entitles Plaintiffs to the heightened collection powers provide by the DTPA, including damages, attorney’s fees, etc. Note that even if you have not expressly (in writing, etc.) created a warranty, it can be implied by your actions and established either by common law or statute.
3. UNCONSCIONABLE ACT OR PRACTICE
The DTPA states that an unconscionable act takes advantage of the lack of knowledge, ability, experience, or capacity of a consumer to his detriment and to a grossly unfair degree. Such action must create an unfairness that was glaringly noticeable, flagrant, complete and unmitigated, though actual intent or knowledge of the results of the act is not required and reliance on the act need not be shown. While the act does not need to take place at the time of the transaction, it must happen within the same context as the interchange.
4. VIOLATION OF CHAPTER 541 OF THE TEXAS INSURANCE CODE
Chapter 541 of the Texas Insurance Code is labeled “Unfair Methods of Competition and Unfair or Deceptive Acts or Practices”. It describes deceptive trade practices unique to that industry. As few insurance companies could be properly described as small businesses, we see no reason to address this issue further and encourage those interested in the particulars of those regulations to read the code.
What Damages Can Be Awarded Under the DTPA?
As the damages that can be awarded for a successful DTPA claim can be quite extensive, this is where the teeth of the statute reside and is the reason why its enforcement has been curtailed by the courts over the past few decades. The DTPA allows for the collection of economic damages and in some situations mental anguish, treble damages, and actual damages. While exemplary or punitive damages are not collectible under the stature, prevailing DTPA Plaintiffs are entitled to costs and reasonable attorney’s fees. In order to achieve a trebling, or tripling, of economic damages, a Plaintiff must show that the conduct of the defendant was committed knowingly.
The Bottom Line For Small Business Owners
The Deceptive Trade Practices Act is a complicated law, with many exceptions and applicable Tie-In Statutes. If you think you or your employees may have violated the DTPA, either on purpose or inadvertently, we recommend contacting an attorney to discuss your exposure to liability and programs that can be put into place to avoid future violations.
DISCLAIMER:The author is not an attorney and is not rendering legal ,financial, or other professional services. The information contained on this web site is the author opinion based on his personal experience. If you need legal advice, consult a competent attorney.