Burlington County Times Features Opinion-Editorial by James Kozachek on NJ's Consumer Fraud Act

This opinion-editorial by James Kozachek originally appeared in the Burlington County Times

New Jersey's Consumer Fraud Act does not always achieve its intended purpose. It does not always promote truth in the marketplace. It does not always compensate a wronged consumer for his loss. It does not always punish the wrongdoer, and it does not always attract attorneys to accept CFA cases.

From the way the law is written, judges and arbitrators are often constrained to apply it in a manner that accomplishes the CFA's explicit objectives.

All too often, people and companies who are hurt by the act are those working hard to please their customers and make a living for themselves, their employees and their families. Many people securing awards are not the innocent defrauded consumer the CFA is supposed to protect.

Part of the problem is that it is all too easy to violate the CFA and its regulations without ever knowing you've done anything wrong.

Take, for example, a home improvement contractor who prepares a contract to renovate a home or build an addition. This hardworking and honest business owner learns all about the contract requirements for home improvement contracts under the CFA and other laws like the Contractors Registration Act (which requires an explicit three-day rescission period described separately and in large font), and makes absolutely certain that all the correct language is present.

Say this contractor then uses that contract with a homeowner seeking a 1,000-square-foot addition.

All would seem fine, but then our contractor is asked by the homeowner to expand the project already under way. An additional 500 square feet is added to the project scope; all permits and approvals are obtained. With the contract perfectly crafted to conform to all legal requirements, and with the signed copies in the file, the contractor figures he is safe.

Not so. Under the CFA, any and all modifications to the original home improvement contract must also be in writing and signed by both parties. Assuming our honest and hardworking contractor doesn't know this, he completes the job, including the 500-square-foot expansion, and the homeowner refuses to pay - not because there is anything wrong with the work, but because he thinks he can force the contractor to accept less if he refuses to pay in such a depressed economic environment.

Our contractor, wanting to work with his clients, holds off too long after the work is completed to file a lien claim under the construction lien law and has no choice but to sue the homeowner. The homeowner counterclaims, alleging that the contractor violated the CFA by failing to put the expansion in writing and getting it signed by both parties. The homeowner is correct. The contractor's failure to put the amendment to the original contract in writing is a strict liability CFA violation, subjecting our honest and hardworking contractor to lose, at a minimum, the price for the expansion, as well as to pay legal fees and costs.

Other examples can be found where honest business owners try to use a contract containing all the required terms under the CFA and the Contractors Registration Act, but find customers not interested in signing such long agreements and prefer to simply do work on a handshake. The honest contractor agrees, as he does not want to chase his clients away with all the required legal language. Although he has good intentions, this contractor would also be in violation of the CFA and related consumer protection laws.

The heavy-handedness of the CFA has been discussed regularly in cases over the past few decades. It should be amended to account for the extensive judicial analysis and facilitate fair results.

The Legislature should, at a minimum, amend the CFA to: (1) prevent attorneys' fees and additional money from being awarded absent a very specific set of circumstances; (2) increase certain preliminary requirements; (3) prevent certain types of conduct from being improperly characterized as a CFA violation; and (4) allow attorneys' fees to also be assessed against the consumer if he files an improper CFA claim.