In September 2019, the Pennsylvania Supreme Court (“Court”) agreed to review the decision in Gregg v. Ameriprise Financial, Inc. under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (“CPL”). The issue before the Court was whether the Superior Court improperly held that a strict liability standard applies to a claim under the “catch-all” provision of the CPL as amended in 1996, even though the provision expressly requires proof of “fraudulent or deceptive conduct.”
On February 17, 2021, the Court issued a decision that will have a far-reaching impact on businesses and banks alike. It held that under the plain meaning of the “catch-all” statute, deceptive conduct during a consumer transaction that creates a “likelihood of confusion or misunderstanding,” if relied upon by a consumer to his or her financial detriment “is not dependent in any respect upon proof of the actor’s state of mind.” The Court determined that CPL “catch-all” claims have “a lesser, more relaxed standard than claims for fraudulent or negligent misrepresentation.” Instead, the Court proffered that the appropriate test to determine a violation of the CPL “catch-all” provision is “whether the conduct has the tendency or capacity to deceive.”
The Court reasoned that this relaxed standard comports with the plain language of the “catch-all” provision, which bars “engaging in any other fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding.” Simply stated, the Court held “that proof of intent is not necessary in order to establish deceptive conduct,” and a consumer does not need to establish that a business or bank even knew (or should have known) that its conduct violated the CPL. Rather, a consumer need only show that a business engaged in conduct that could deceive consumers, regardless of whether the business was aware of the potential for deception.
The Supreme Court of Pennsylvania rationalized its decision by analyzing the legislative intent of the CPL. The Court determined that “[h]ad the General Assembly intended to limit the catch-all provision to cover only common law misrepresentation claims, it would have done so directly by, for example, barring only fraudulent or negligent conduct. By choosing instead to bar “deceptive conduct,” the General Assembly signaled its intent to dispense with consideration of the actor’s mental state.”
This decision will have a large-scale effect on all businesses across the Commonwealth, and banks should be particularly aware of the impact this decision has on its policies and procedures. Because the Court has ruled that consumers do not have to prove that negligent or intentional conduct caused them harm, there will likely be a significant increase in the number of consumer-protection lawsuits filed against Pennsylvania banks. The Court places the entire burden on “commercial vendors, without regard to their intent.”
Thus, banks must take care to ensure that all advertising, marketing, and communications to consumers do not contain any information that could potentially mislead an average consumer.
While other statutes like the Truth-in-Lending Act already require this kind of analysis, this decision has raised the level of consideration that banks must take because they will not be able to defend lawsuits based upon their lack of knowledge of the allegedly deceptive business practice, as long as the consumer shows that the conduct had the tendency or capacity to deceive. Accordingly, it is of utmost importance that all Pennsylvania banks undertake a review of their policies and practices to minimize liability under the CPL.