4 Ways NJ Companies Commit Consumer Fraud
The New Jersey Consumer Fraud Act (CFA) is one of the strongest consumer protection statutes in the nation. The CFA punishes merchants for their deceptive and unfair business practices. Despite its comprehensive nature, companies often violate the CFA in several ways. Here, we explore four types of violations: misrepresentations, knowing omissions, regulatory breaches, and unconscionable commercial practices.
1. Misrepresentations
Misrepresentations occur when a company provides false or misleading information about its products or services. These can be either intentional or unintentional.
Intentional Misrepresentations involve deliberate deceit. For instance, if a contractor tells you they will be using a certain quality of product with certain features, when they actually use a lower quality product or the same product which does not have those specified features, this constitutes an intentional misrepresentation. This is often seen in cases where companies make exaggerated claims about the efficacy or quality of their goods, to deceive consumers into making a purchase.
Unintentional Misrepresentations happen when a company makes a false claim without malicious intent but due to negligence or lack of due diligence. For example, a company might promote a product based on outdated information or inaccurate data. Even though this may be merely a mistake, it is still considered consumer fraud in NJ.
2. Knowing Omissions
Knowing omissions involve a company deliberately withholding important information that would influence a consumer’s purchasing decision. Unlike misrepresentations, these violations are characterized by a failure to disclose rather than providing false information.
For instance, if a company sells a car but intentionally fails to disclose that it has been involved in major accidents or has hidden defects, this is a knowing omission. The company is aware of the critical information but chooses not to share it, thereby misleading consumers who may make a different decision if aware of the full picture.
3. Regulatory Violations
Regulatory violations occur when a company fails to comply with specific regulations set forth by consumer protection authorities. These regulations are designed to ensure fair practices and protect consumers from harm.
An example of a regulatory violation might include a company that neglects to adhere to labeling requirements for food products. If a company does not provide necessary allergen information or mislabels ingredients, it not only breaches FDA regulations but also violates the CFA by misleading consumers about the safety of their products.
Another example is a home improvement contractor failing to include in their contracts and invoices specific information and language which is required by the Home Improvement Practices Regulations. FYI, even well-established contractors often fail to include everything necessary in their contracts.
4. Unconscionable Commercial Practices
This is a catchall provision included in the CFA. Essentially, it ensures that unfair or oppressive practices by companies, which do not fall into one of the first three categories, are still restricted under the Act. Business practices that “shock the conscience” or are excessively harsh or unfair to consumers fall into this category.
Courts in New Jersey have applied this catchall provision with some flexibility. Courts often consider the context of the transaction, the relative bargaining power of the parties, and the level of harm to the consumer.
Over the years, New Jersey courts have identified numerous commercial practices that qualify as unconscionable under the CFA. Some of these practices include:
a) high-pressure sales tactics, and making false representations about the necessity and benefits of the product,
b) imposing hidden fees that were not disclosed at the point of sale,
c) unilaterally modifying the terms of an insurance policy to include higher deductibles, without proper notice or agreement,
d) burying unfair clauses in the fine print, including provisions that impose significant penalties for minor breaches,
e) advertising one product at an attractive price but, when consumers arrive to purchase, telling them the product is unavailable and then pressuring them to buy a more expensive option,
f) selling essential items, such as bottled water and medical supplies, at excessively inflated prices during a state of emergency, and
g) refusing to honor warranties.
A Few Takeaways
New Jersey’s Consumer Fraud Act is an extremely powerful tool for safeguarding consumers and ensuring fair business practices. Understanding the ways companies might violate the CFA empowers consumers to better protect themselves and seek recourse if they encounter deceptive practices. By holding businesses accountable for these violations, New Jersey aims to maintain a marketplace built on trust and transparency.
Importantly, the CFA mandates that a company who is found to have violated the CFA pays the consumer’s attorney fees for prosecuting the action. In other words, if you bring a successful action under the CFA against a company, they will pay your attorney’s fees for you!
If you believe you have been the victim of a company who has committed consumer fraud, call RHG Law for a consultation. At that consultation, we will review any documents you have, assess and discuss your situation, and inform you of any claims you may have. We will also discuss your options and help form a plan of action to get you the best results possible.
