CONSUMER PROTECTION FOR PSYCHIC FRAUD by Michael K Botts, Attorney at Law 421 W. 87th Stre

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CONSUMER PROTECTION FOR PSYCHIC FRAUD by Michael K Botts, Attorney at Law 421 W. 87th Street, Suite 1 P.O. Box 33008 Kansas City, Missouri 64114 (816) 444-8615 [Michael Botts is the Secretary of CSICOP's Legal and Consumer Protection Sub-Committee.] NOTICE: This discussion is for general information purposes only. Please consult with the law of your state for more-specific information as to your rights and liabilities. Generally: All of the normal consumer protection laws apply to psychic and health frauds. One of the most perplexing problems in the area of consumer protection is that consumers are reluctant to seek redress. The causes of this reluctance are often cited as the costs of litigation, time, fear, and embarrassment. Practical considerations against seeking redress include the facts that consumer grievances often involve relatively small amounts of money, evidence is hard to find, the courts are not generally educated in this area of law, and the opposition is generally fanatical and always seems to have limitless financial resources. Exposure of the frauds and the sanctions of the courts are the only weapons available to fight the wolves who wait for the sheep who are "born every minute". This discussion lists some of the more commonly available remedies. REMEDIES: CONTRACT law concerns the bargained-for relationships between individuals. When a party to the contract breaches the agreement, the other party is entitled to a judgement to put him back in the position he would have been in if there had been no breach. Contract damages are only compensatory for the breach of the contract. Only in rare circumstances are punitive damages available. Attorney fees are only recoverable if it is written into the contract. Contract remedies are generally inadequate in consumer fraud, because the underlying contract is usually fraudulently induced. TORT law concerns actions to recover for personal injuries. Tort remedies are designed to compensate for the injury. Punitive damages are often available in tort cases for the specific purposes of penalizing the tort-feasor, sending a message to the tort-feasor to not do that tort again, and sending a message to the public in general that that action will not be tolerated by the courts. Attorney fees are generally not recoverable unless specifically allowed by statute. STATUTORY remedies are those specifically allowed in state and federal laws. There are many consumer protection statutes that specifically regulate such areas as consumer credit and finance. However, those laws are not usually applicable to psychic and health frauds. The primary individual remedies for actual frauds are the state consumer fraud statutes, commonly known as UDAP statutes, an acronym for Uniform Deceptive Acts and Practices. FRAUD AND RELATED THEORIES: COMMON-LAW FRAUD requires proof of 1) a false representation, usually of fact, 2) "scienter" -- the speaker's knowledge that the fact is false, 3) the speaker's intent that the victim rely on the false representation, 4) the victim's reliance on the false representation, and 5) damage to the victim as a result of the reliance. Common-law fraud usually must be proven by "clear and convincing evidence", which is a slightly higher standard of proof than the normal civil standard of a "preponderance" of the evidence. STATUTORY FRAUD UNDER THE FEDERAL TRADE COMMISSION ACT (FTC) becomes "deception". Contrary to common-law fraud, "deception" does not require a showing of intent, scienter, actual reliance, or damage, and even actual deceptions are unnecessary. A deception may be established by proof that the practice has a tendency of capacity to deceive even a significant minority of consumers. The standard of proof is the lower "preponderance" standard. The FTC Act is used by the Federal Trade Commission, but it is the model for many states' UDAP rulings. STATUTORY FRAUD UNDER STATE UNIFORM DECEPTIVE ACTS AND PRACTICES LAWS (UDAP) is also classified as deception, which is generally defined as in the FTC Act. Deception can be found where there is no breach of contract or warranty, and even where there is no negligence. The essence of deception is not evil intent, negligent behavior, or even breach of agreement, but simply being mislead by a seller's statement of actions. UNCONSCIONABILITY is the legal theory that will rescind an agreement when the agreement is found to be such that no reasonable person would have offered and no reasonable person would have accepted. Unconscionability looks to the facts surrounding the agreement and the relative bargaining positions of the parties. The court looks for gross unfairness. UNFAIRNESS under both the state UDAP and federal FTC laws is a fall-back theory where the practice is not illegal, but it is offensive to society's sense of justice. There are currently two tests -- the original FTC test, which most states have recognised, and a new FTC test, which has not yet been widely adopted by the states. In the old FTC standard for "unfairness", which is still recognized by most states, the courts apply the following test: 1) whether the practice offends public policy, 2) whether the practice is immoral, unethical, oppressive, or unscrupulous, and 3) whether the practice causes substantial injury to consumers. The new FTC test is 1) the injury must be substantial, 2) the injury must not be outweighed by any countervailing benefits to consumers or competition that the practice promotes, and 3) the injury must be one that the consumers themselves could not reasonably have avoided. Emotional or other subjective harm will not ordinarily be considered as injury in finding unfairness. WARRANTY LAW under the Uniform Commercial Code (UCC) is the legal theory of promises defining an affirmation of fact or promise made by the seller to the buyer that has a natural tendency to cause the buyer to purchase the property as a warranty. An express warranty does not require any formal words such as "warrant" or "guarantee". There does not even have to be any words -- a warranty may be created by a picture or by the seller's conduct. Warranties are easily created. Warranties only apply to goods. STATE CONSUMER PROTECTION (UDAP) STATUTES: Alabama Code, Section 8-19-1. Alaska Statutes, Section 45.50.471. Arizona Revised Statutes, Section 44-1521. Arkansas Statutes, Section 70-901. California Civil Code, Section 1750. California Business & Professional Code, Sections 17200 and 7500. Colorado Revised Statutes, Section 6-1-101. Connecticut General Statutes, Section 42-110a. Delaware Code, Title 6, Section 2511. District of Columbia Code, Section 28-3901. Florida Statutes, Section 501.201. Georgia Code, Sections 106-701 and 106-1201. Hawaii Revised Statutes, Sections 480 and 481A. Idaho Code, Section 48-601. Illinois Revised Statutes, Chapter 121 1/2, Sections 261 and 311. Indiana Code, Section 24-5-0.5-1. Iowa Code, Section 714.16. Kansas Statutes, Section 50-623. Kentucky Revised Statutes, Section 367.110. Louisiana Revised Statutes, Section 51:1401. Maine Revised Statutes, Title 5, Section 206. Maine Revised Statutes, Title 10, Section 1211. Maryland Commercial Law Code, Section 13-101. Massachusetts General Laws, Chapter 93A. Michigan Compiled Laws, Section 445.901. Minnesota Statutes, Sections 8.31 and 325D.43. Mississippi Code, Section 75-24-1. Missouri Revised Statutes, Section 407.010. Montana Code, Section 30-14-101. Nebraska Revised Statutes, Sections 59-1601 and 87-301. Nevada Revised Statutes, Sections 598.360 and 41.600. New Hampshire Revised Statutes, Section 358-A:1. New Jersey Statutes, Section 56:8-1. New Mexico Statutes, Section 57-12-1. New York Executive Law, Section 63(12). New York General Business Law, Sections 349 and 350. North Carolina General Statutes, Section 75.1. North Dakota General Statutes, Section 51-15-01. Ohio Revised Code, Section 1345.01. Oklahoma Statutes, Title 15, Section 751. Oklahoma Statutes, Title 78, Section 51. Oregon Revised Statutes, Section 646.605. Pennsylvania Statutes, Title 73, Section 201-1. Rhode Island General Laws, Section 6-13.1-1. South Carolina Code, Section 39-5-10. South Dakota Codified Laws, Section 37-24-1. Tennessee Code, Section 47-18-101. Texas Business and Commercial Code, Section 17.41. Utah Code, Sections 13-2-1, 13-5-1, and 13-11-1. Vermont Statutes, Title 9, Section 2451. Virginia Code, Section 59.1.196. Washington Revised Code, Section 19.86.010. West Virginia Code, Section 46A-6-101. Wisconsin Statutes, Section 100.21. Wyoming Statutes, Section 40-12-101. -end-

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