Carton’s Corner on consumer law: Why are low-dollar ripoffs such a big problem?

Jeff Carton — Denlea & Carton LLP

Bob’s note: Getting justice, and fairness, doesn’t involve getting mad, or getting even: It involves knowing the law.  Few things scare misbehaving corporations more than consumers who know their rights.  This new series with consumer attorney Jeff Carton of Denlea & Carton will try to give you some basic tools so you can stick up for yourself.  Today’s topic: why are small-dollar, high volume ripoffs such a problem?

Click to see the whole series

Q: We tend to think of ripoffs as big-dollar scams, like an elderly person being cheated out of their retirement savings. But you work on small-dollar, high volume scams.  How did they become such a problem in our economy?

A: As economies grow, marketplaces become more crowded.  And as marketplaces become more crowded, merchants feel greater pressure to compete with one another for consumers’ business and to maintain their bottom lines.  That pressure leads to unfair and deceptive sales practices, which cloud the transparency that a free, robust and competitive marketplace should enjoy.

Take the example of late fees with a subscription based service, like satellite radio, or a weekly magazine.  If the underlying offer a consumer accepts to subscribe to the service (or magazine) doesn’t specifically provide for the right to impose late fees, the media company doesn’t have the unilateral right to impose them.  But yet they often do, anticipating that the consumer will simply think she agreed to them, or be too embarrassed to challenge them.  And when you aggregate an innocuous, modest 99 cents late fee across a subscription base of 50 million users (some portion of which will be delinquent), you’ve just created a new revenue stream which is difficult for the merchant to ignore.

Or take the case of a big-box retailer which backdates its members’ renewal memberships when they allow their membership to lapse, and then renew it weeks (or months) after its expiration.  The economic loss to any individual consumer, being deprived of (say) 6 weeks of an annual membership, may be de minimis, but when the practice is spread across millions of late-renewing consumers there’s a strong, albeit perverse, incentive for the merchant to continue the practice.

The important thing to remember is that it doesn’t have to be a “scam,” in the strict sense of the word, to be actionable.  Everyone’s familiar with the carnival barker peddling snake oil as a cure-all for cancer, male pattern baldness, or sexual stamina.  That’s an obvious scam.  But consumer fraud often takes a less obvious (and more insidious) form; it simply stretches the truth or tries to create an inference based on a half-truth.

Consider diet supplements that make outlandish claims based on a botanical extract that’s never been tested in the manner in which the manufacturer claims it’s being touted.  Or a “healthy, all natural” snack, that really contains synthetic, artificial ingredients.  Or a retailer’s use of “compare to” or “previously offered at” pricing — suggesting a steep discount, only the comparison price was never actually used.

The utility, potency, and superiority of a class action is that it allows individuals to prosecute claims that would make no sense (and be prohibitively expensive) to prosecute on an individual basis.  Consumer fraud class actions allow regular, everyday consumers (like you and me) to challenge small-dollar, high volume scams, and ensure integrity in the marketplace.


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About Bob Sullivan 1638 Articles
BOB SULLIVAN is a veteran journalist and the author of four books, including the 2008 New York Times Best-Seller, Gotcha Capitalism, and the 2010 New York Times Best Seller, Stop Getting Ripped Off! His latest, The Plateau Effect, was published in 2013, and as a paperback, called Getting Unstuck in 2014. He has won the Society of Professional Journalists prestigious Public Service award, a Peabody award, and The Consumer Federation of America Betty Furness award, and been given Consumer Action’s Consumer Excellence Award.

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