New York Law Journal – Commentary: Give New Yorkers a Consumer Protection Law They Can Actually Use

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By Susan Shin and Claudia Wilner

It may come as a surprise to many that New York, a leader on other
consumer protection fronts, has one of the weakest general consumer
protection laws in the country. Forty-two other states have “UDAP”
statutes—laws that broadly ban unfair and deceptive acts and practices
by businesses, and thereby enable people to protect themselves from
businesses that engage in harmful conduct. New York’s notoriously weak
consumer protection law, contained in section 349 of the General
Business Law, bans only deceptive acts and practices.

As a result, New Yorkers lack recourse under state law against any
business that harms them through conduct that is unfair or abusive, but
arguably not deceptive, such as when a debt collector harasses older
adults into giving up their limited, legally protected income—conduct
that has harmed many low-income New Yorkers and New Yorkers of
color.

For years, advocates have urged lawmakers to “put the U in UDAP” and
bring New York in line with those 42 other states. This year, New York
can do just that by enacting the Consumer and Small business Protection
Act (CSPA), as an urgent matter of racial and economic justice. Gov.
Kathy Hochul and the state Senate have pledged to bolster our consumer
protection law in this year’s budget. However, it’s imperative that they
do so firmly, refusing to yield to industry pressure.

Among other critical improvements, the CSPA would cure New York’s
already weak consumer protection law of a debilitating feature illadvisedly added by our courts. The Court of Appeals has stated that to
assert a claim under GBL § 349, one must show that the defendant
engaged in “wrongs against the consuming public.” Oswego Laborers’
Local 214 Pension Fund v. Marine Midland Bank, N.A., 85 N.Y.2d 20, 24,
623 N.Y.S.2d 529, 532, 647 N.E.2d 741, 744 (1995); see also Himmelstein,
McConnell, Gribben, Donoghue & Joseph, LLP v. Matthew Bender & Co., Inc.,
37 N.Y.3d 169, 171 N.E.3d 1192 (2021). Under this court-imposed
requirement, it is not enough for a New Yorker to assert that a deceptive
practice adversely affected them alone; they must also show that the
deceptive acts “have a broader impact on consumers at large.” Oswego
Laborers’ Local 214 Pension Fund, 85 N.Y.2d at 25. Citing Genesco
Entertainment, a Division of Lymutt Industries, Inc. v. Koch, 593 F. Supp.
743, 753 (S.D.N.Y. 1984)), the Oswego court further stated that “[p]rivate
contract disputes, unique to the parties, for example, would not fall
within the ambit of the statute.” 85 N.Y.2d at 25.

Genesco Entertainment—which concerned a dispute between a corporate
concert promoter and New York City over the leasing of Shea Stadium—
was hardly a suitable case from which to derive a broad prohibition that
individual New Yorkers could not proceed against a business with a
claim of deceptive conduct based on a private contract dispute. In that
case, the federal district court determined that the corporate plaintiff
had failed to state a claim under GBL § 349 because the corporation had
not been subjected to a deceptive practice. The court then opined in dicta
that, at any rate, GBL § 349 did not apply to the commercial transaction
in question—a “‘single shot transaction’ involving complex
arrangements, knowledgeable and experienced parties and large sums of
money”—as it was not the kind of transaction for which the average
consumer would ever need GBL § 349’s protections. 593 F. Supp. at 752.
Inexplicably, though GBL § 349 did not even apply in Genesco
Entertainment, the Oswego court nevertheless used the dicta to
promulgate an onerous, often unfulfillable standing requirement that
severely compromises the law’s remedial purpose to protect New
Yorkers from a business’s harmful conduct.

As a result of this baseless requirement, New York courts have routinely
found that a business’ misrepresentation is not “consumer-oriented”—
and have denied relief—solely because the misrepresentation was made
to a single individual or involved a single transaction. Examples include
landlord-tenant transactions (see Brake v. Slochowsky & Slochowsky,
L.L.P., 504 F. Supp. 3d 103 (E.D.N.Y. 2020) (holding landlord’s attorney’s
repeat filing of eviction actions to be a private matter)); disputes with
insurance companies (see Zawahir v. Berkshire Life Ins. Co., 22 A.D.3d 841
(App. Div. 2d Dep’t 2005) (finding that insurance company’s cessation of
payments under disability policies constituted a private contract dispute
and was therefore not consumer-oriented)); nonpayment of wages (see
In re Domino’s Pizza, 2018 WL 1587593 (S.D.N.Y. Mar. 27, 2018) (finding
no consumer-oriented conduct where employer filed fraudulent tax
returns misrepresenting the wages it had paid)); and warranty disputes
(see Parrino v. Sperling, 648 N.Y.S.2d 702 (N.Y. App. Div. 2d Dep’t 1996)
(dismissing warranty claim under GBL § 349 because the sale of a
customized wheelchair was “private in nature”)).

To be clear: This “consumer-oriented” standard effectively requires all
private litigation under GBL § 349 to emulate class action litigation,
which was never the Legislature’s intent; has no support in the text of
the law; and renders the law ineffectual as a deterrent against harmful
conduct by businesses.

New York is one of only six states with this kind of debilitating
requirement. See National Consumer Law Center, Unfair and Deceptive
Acts and Practices 11.4.3.1 (10th ed. 2021), updated
at www.nclc.org/library. Other jurisdictions, such as Connecticut and
Colorado, have amended or are in the process of amending their UDAP
statutes to state explicitly that their residents need not show any public
interest or public injury and that a single bad act may give rise to UDAP
liability. See, e.g., Conn. Gen. Stat. Ann. § 42-110g (“[p]roof of public
interest or public injury shall not be required in any action brought
under this section”) and CO HB24-1014 (proposing in Section 2:
“[e]vidence that a person has engaged in an unfair or a deceptive trade
practice: (a) is prima facie evidence of intent to injure competitors and to
destroy or substantially lessen competition; and (b) is sufficient to
establish a significant impact to the public.”).

UDAP laws are intentionally broad and flexible, in order to protect
people against evolving and unforeseeable schemes without needing to
enumerate issue-specific fixes—which would, at any rate, inevitably lag
behind the invention of new schemes for taking advantage of people,
especially low-income people and people of color. In that vein, the New
York State Legislature intended for GBL § 349 to apply broadly and
protect against all deceptive acts by businesses that would harm New
Yorkers. See Report of the Committee on New York State Antitrust Law of
the Antitrust Law Section of the New York State Bar Association: A
Proposed New State Law Making Deceptive Acts or Practices Unlawful,
1968 N.Y. St. B.A. Antitrust L. Symp. 114, 121 (CCH ed.) (noting that the
statute was drafted “to include all economic activity”).

Not only has the court-imposed “consumer-oriented” requirement
improperly narrowed the scope of New York’s general consumer
protection statute, in contravention of the Legislature’s mandate, the
requirement has severely undermined the Legislature’s goal of
increasing private enforcement of GBL § 349 by “grant[ing] individuals
the right to sue for injuries resulting from consumer fraud.” 980
McKinney’s Session Laws 1867 (Memorandum of Gov. Carey). Requiring
a showing of public impact prevents individuals from seeking to deter
harmful conduct by businesses before that conduct harms others.

New York must take immediate corrective action so that its UDAP law
can provide meaningful and effective protection to its residents against
businesses’ harmful conduct. Commendably, Governor Hochul made
banning unfair and abusive practices in New York part of her 2024 State
of the State address and her fiscal year 2025 budget includes a bill that
would ban unfair and abusive business practices. Unfortunately, her bill
would not eliminate the unnecessary and burdensome requirement that
an individual New Yorker show that a business’s conduct has a public
impact—all to the satisfaction of the business lobby, which has been
working overtime to keep New York’s consumer protection law as
toothless as possible. By contrast, the CSPA, included in the state Senate’s
budget proposal (TED, Part JJ), would both ban unfair and abusive
business practices and eliminate the onerous consumer-oriented
requirement.

Any legislation that falls short of eliminating this court-imposed
“consumer-oriented” barrier will render other much-needed reforms to
GBL § 349—such as a ban on unfair and abusive business practices—all
but meaningless in practice. New Yorkers will remain unprotected
against deceptive business conduct, nor will they benefit from any new
ban on unfair or abusive conduct. New York must act this session to
eliminate this judicially-created barrier and fulfill GBL § 349’s legislative
purpose once and for all, by explicitly stating that GBL § 349 bans unfair,
deceptive, or abusive acts or practices regardless of whether individual
New Yorkers can show that the harmful conduct affects the public at
large.

Susan Shin is legal director at New Economy Project. Claudia Wilner is
director of litigation and advocacy at the National Center for Law and
Economic Justice.