In contrast to Maryland’s efforts to expand consumer protection under the MCPA, Arkansas has taken steps to restrict consumer protection, particularly private rights of action.
The Arkansas Deceptive Trade Practice Act (ADTPA) generally prohibits and makes unlawful “deceptive and unconscionable trade practices.” The ADTPA also designates certain specific practices as unlawful. On April 7, 2017, Arkansas enacted House Bill 1742 (now Act 986), effective August 1, 2017, which substantively amended the ADTPA.
Before the amendment, the ADTPA allowed a private right of action for any “person who suffers actual damage or injury as a result of an offense or violation” of the ADTPA. A claimant could recover actual damages. A successful claim under the ADTPA did not require a showing of monetary damages or reliance on the practice that violated the ADTPA.
The amended ADTPA now limits a private right of action to a person that suffers “an actual financial loss as a result of his or reliance on the use of a practice declared unlawful under [the ADTPA].” The claimant may only recover “his or her actual financial loss proximately caused by the offense or violation, as defined under the [the ADTPA].” The amended ADTPA further provides that “[t]o prevail on a claim brought under Ark. Code Ann. § 4-88-113(f)(1), a claimant must prove individually that he or she suffered an actual financial loss proximately caused by his or her reliance on the use of a practice declared unlawful under [the ADTPA].”The amended ADTPA defines “actual financial loss” as “an ascertainable amount of money that is equal to the difference between the amount paid by a person for goods and services and the actual market value of the goods or services provided.”Accordingly, the amended ADTPA now requires a claimant to show actual monetary damages or injury. Furthermore, a claimant must now also show that the damages or injury were “proximately caused by his or her reliance on the use of a practice declared unlawful under [the ADTPA].”
The Arkansas Court of Appeals found that reliance was not necessarily required for a successful claim under the prior version of the ADTPA. Courts applying Arkansas law have held that the amended ADTPA requirements for showing monetary damages and reliance are therefore substantive in nature and not procedural. Accordingly, the courts have held that these requirements are not retroactive and will not apply to purchases made before August 1, 2017.
The amended ADTPA also now prohibits private class-action claims under the ADTPA, with the exception of claims asserting violations of the Arkansas Constitution, Amendment 89, which provides the maximum interest rates a lender may impose. Before the amendment, the ADTPA did not expressly limit private class-action claims.
Consumer Protection Versus Protection from Frivolous Lawsuits
Maryland and Arkansas demonstrate divergent approaches to consumer protection through application of UDAP/UDAAP statutes. Maryland has adopted an expansive view of what constitutes a violation of the MCPA, going beyond even UDAAP standards derived from the Dodd-Frank Act by codifying MLA and SCRA violations as per se unfair, deceptive, or abusive acts. Coupled with increased funding for enforcement by the Maryland Attorney General and its already robust private right of action, the recent MCPA amendments send a strong message that Maryland will be at the forefront of consumer protection in the coming years.
Arkansas reflects a separate priority: concern that malleable concepts of unfairness and deception may be used to justify frivolous lawsuits and class actions where no monetary injury exists. Similarly, at the federal level, “reliance” is not an element of an unfairness, deception, of abusiveness claim. This additional requirement makes proving an ADTPA violation materially more difficult—even where monetary injury exists, consumers must prove that they understood and relied on a representation to their detriment.
These approaches represent opposite ends of the pro-consumer versus pro-industry approach to state UDAP/UDAAP laws. As consumer protection shifts to states, the current reality for both consumers and industry may be this patchwork approach.