While Still the Smallest State, Rhode Island No Longer Holds the Weakest Consumer Protection Laws

Rhode Island has faced years of scrutiny over its consumer protection laws - or rather lack thereof - prohibiting unfair and deceptive acts and practices (UDAP). Over a dozen years ago, the National Consumer Law Center called out Rhode Island for its state legislature's failure to correct court decisions from 10+ years prior that interpreted UDAP protections as being applicable to almost no consumer transactions because they are regulated by another state or federal agency. Courts broadly construed this exemption to cover nearly all business entities and, in doing so, exempted several industries from the reach of the enforcement authority of Rhode Island's chief law enforcement officer.

The evaluation dubbed Rhode Island (and Michigan) as 'the terrible two.' Rhode Island was further singled out as the only state in the country that did not provide a civil penalty for initial violations - not exactly a ringing endorsement for our nation's smallest state.

But that all changed on August 18 when Rhode Island Governor Daniel J. McKee, backed by Attorney General Peter F. Neronha, signed House Bill 6142 into law. The legislation gives state prosecutors the power to bring an action on behalf of the state against any person that '… is using, has used, or is about to use any method, act, or practice declared to be unlawful …' under Rhode Island's deceptive trade practices laws. The bill also brings Rhode Island from dead last to the middle of the pack in terms of permissible civil penalties by authorizing a $10,000 civil penalty for initial violations. The National Consumer Law Center provides that '… 23 states authorize civil penalties of $10,000 to $50,000 for initial violations, while 26 states plus the District of Columbia authorize less than $10,000.'

The legislation also increases the damages available to private litigants from $200 to $500 per violation and provides for treble damages.

The bill, however, was not without opposition by some business groups. The American Property Casualty Insurance Association (APCIA) argued in a letter to legislators that the exemptions provided in the Unfair Trade Practice and Consumer Protection Act, originally passed in 1968, for regulated industries such as theirs were given because consumers were already adequately protected through the oversight of the Department of Business Regulation and other state agencies. They reasoned that this bill would virtually eliminate those exemptions, thus forcing already-regulated business entities in Rhode Island to deal with a de facto second regulator in the attorney general - and potentially be subject to more than one enforcement action at a time. The APCIA also took issue with the language in the bill's penalty provisions. The statute's previous language provided that an injunction must first be in place to impose a fine of up to $10,000, if violated. The APCIA contends that the new penalties for initial violations in the bill will allow the attorney general to seek a $10,000 fine per violation of the statute with little to no advance notice.

In an interview with the Boston Globe, Neronha firmly rejected those opposed to the legislation, countering that the bill is, in fact, 'pro-business' in that it '… levels the playing field for businesses that are treating Rhode Islanders fairly and not being deceptive.' He continued, 'Thanks to the recent updates to our state's consumer protection law, my Office is better equipped to protect consumers against unfair business practices. This is a significant win for Rhode Islanders … .'

The good news? Rhode Island has 48 other states they can look to if they have any trouble applying the new law. The bad news? Michigan now stands alone.