Consumer Sales Practices Act (1972) ORC 1345.01

[Parkerman]

What is the name of your state? In part of the Ohio Consumer Sales Practices Act (1972) ORC 1345.01, it says:

Prohibits sellers from selling a product or service to a consumer they know cannot afford . . . the purchase.

https://www.ohioattorneygeneral.gov/Individuals-and-Families/Consumers/Laws-Protecting-Consumers#Consumer_Sales_Practice_Act

Could someone explain to me what the above quote means? I've spent a lot of time on several search engines to search for that quote to find examples of it to make sure that I am understanding it correctly, but I couldn't find anything. Could someone elaborate a little bit more about this quote?

 

[adjusterjack]

What is the name of your state? In part of the Ohio Consumer Sales Practices Act (1972) ORC 1345.01, it says:

Prohibits sellers from selling a product or service to a consumer they know cannot afford . . . the purchase.

No, the statute doesn't say that. The Consumer Sales Practices Act runs from 1345.01 through 1345.99:

http://codes.ohio.gov/orc/1345
I used the "find" feature and the "afford" appears only twice in the entire statute:

(1) During an investigation under this section, "afford", in a manner considered appropriate to the attorney general, a supplier an opportunity to cease and desist from any suspected violation. The attorney general may suspend such an investigation during the time period that the attorney general permits the supplier to cease and desist; however, the suspension of the investigation or the "afford"ing of an opportunity to cease and desist shall not prejudice or prohibit any further investigation by the attorney general under this section.

So I know that's not a direct quote from the statute

https://www.ohioattorneygeneral.gov/Individuals-and-Families/Consumers/Laws-Protecting-Consumers#Consumer_Sales_Practice_Act

Your attorney general, or whoever wrote that, is paraphrasing or interpreting something with the phrase:

Prohibits sellers from selling a product or service to a consumer they know cannot afford or substantially benefit from the purchase.

Now read Section 1345.03 Unconscionable consumer sales acts or practices and you'll understand why you should always read the statutes instead of somebody's interpretation of them.

http://codes.ohio.gov/orc/1345.03v1

 

[Taxing Matters]

So I know that's not a direct quote from the statute

No, it's not. But if you do read the statute, you will see it says something quite similar to it. It can be a violation of the consumer protection act when "the supplier knew at the time the consumer transaction was entered into that there was no reasonable probability of payment of the obligation in full by the consumer." If the consumer can't pay for the purchase in full then the consumer can't afford it. There appears to be no significant cases involving this provision, however. That's not surprising. The vast majority of sellers won't sell to someone knowing that they'll be unable to make full payment for it. The sellers, of course, want their money for the goods sold. There may be scams out there that involve selling to customers whom they know can't pay, but off the top of my head I don't know of one. I agree, though, that the paraphrasing the state AG office did makes it sound more vague than the statute really is.

 

[justalayman]

No, it's not. But if you do read the statute, you will see it says something quite similar to it. It can be a violation of the consumer protection act when "the supplier knew at the time the consumer transaction was entered into that there was no reasonable probability of payment of the obligation in full by the consumer." If the consumer can't pay for the purchase in full then the consumer can't afford it. There appears to be no significant cases involving this provision, however. That's not surprising. The vast majority of sellers won't sell to someone knowing that they'll be unable to make full payment for it. The sellers, of course, want their money for the goods sold. There may be scams out there that involve selling to customers whom they know can't pay, but off the top of my head I don't know of one. I agree, though, that the paraphrasing the state AG office did makes it sound more vague than the statute really is.

Wouldn’t just about every car sale fall under the “if you can’t pay for it in full you can’t afford it”? Along with that, given the reports I hear about the financial condition of us consumers, that statement would refer to a large percentage of retail sales every day.


I can’t imagine your paraphrase to be an accurate interpretation of the actual law.

 

[Parkerman]

Your attorney general, or whoever wrote that, is paraphrasing or interpreting something with the phrase:



Now read Section 1345.03 Unconscionable consumer sales acts or practices and you'll understand why you should always read the statutes instead of somebody's interpretation of them.

http://codes.ohio.gov/orc/1345.03v1

Thank you for your reply, adjusterjack. Also, I agree with you that you should always read the statutes instead of somebody's interpretation of them, however, see my reply that I am about to write in response to Taxing Matters' post #3.

 

[Parkerman]

No, it's not. But if you do read the statute, you will see it says something quite similar to it. It can be a violation of the consumer protection act when "the supplier knew at the time the consumer transaction was entered into that there was no reasonable probability of payment of the obligation in full by the consumer." If the consumer can't pay for the purchase in full then the consumer can't afford it. There appears to be no significant cases involving this provision, however. That's not surprising. The vast majority of sellers won't sell to someone knowing that they'll be unable to make full payment for it. The sellers, of course, want their money for the goods sold. There may be scams out there that involve selling to customers whom they know can't pay, but off the top of my head I don't know of one. I agree, though, that the paraphrasing the state AG office did makes it sound more vague than the statute really is.

Thank you for your reply, Taxing Matters. Also, I agree with what you are saying. Plus, in mentioning a hypothetical situation, when making a large transaction such as house or a car, the salesperson gathers the customer's income information and other payment obligations and should determine if there's enough money for the consumer to 'reasonably' make their monthly payments. However, since life has so many unexpected occurrences in it and since it's important to always save or put away money for emergencies, I would think that it would be unreasonable for a sales person to 'max' out practically all of a customer's income to pay for a product or a service. Any comments on this?

 

[adjusterjack]

"the supplier knew at the time the consumer transaction was entered into that there was no reasonable probability of payment of the obligation in full by the consumer."

Taken literally, as justalayman notes, that would make every sale illegal that involves a credit card or financing. But I don't think that's the intent of 1345.03. I think that (4) is just one of the elements of an unconscionable act that has to be examined in the context of the transaction.

when making a large transaction such as house or a car, the salesperson gathers the customer's income information and other payment obligations and should determine if there's enough money for the consumer to 'reasonably' make their monthly payments. However, since life has so many unexpected occurrences in it and since it's important to always save or put away money for emergencies, I would think that it would be unreasonable for a sales person to 'max' out practically all of a customer's income to pay for a product or a service.

A salesman might gather the information for a sale that involves financing but he wouldn't be the one making the decision as to whether the buyer qualifies for the loan (except maybe tote-the-note car dealers). And with a cash sale, the salesman has absolutely no obligation, legal or otherwise, to determine whether a buyer has maxed out his income to pay for it.

You might get a clearer discussion if you explained what is, or has, happened to you that gives rise to your question. Hypotheticals don't butter any parsnips.

 

[Taxing Matters]

Wouldn’t just about every car sale fall under the “if you can’t pay for it in full you can’t afford it”? Along with that, given the reports I hear about the financial condition of us consumers, that statement would refer to a large percentage of retail sales every day.


I can’t imagine your paraphrase to be an accurate interpretation of the actual law.

The statute uses the phrase "pay the obligation in full" So for the car sale, there are several possibilities. One is that the consumer actually pays cash for the car. Another is the consumer gets a loan from a bank or someone else other than the dealer. In that case the car is still paid to the dealer in full, and the dealer doesn't have problem with the statute. The third case is the dealer itself finances the sale, i.e. takes payments over time for it. Here, given the wording of the statute, if there was "no reasonable probability" that the consumer could pay the obligation, i.e. make those payments then the dealer may well have a problem with the statute. But, absent some kind of scam, I can't see any dealer that is at all smart making that deal.

 

[justalayman]

The statute uses the phrase "pay the obligation in full" So for the car sale, there are several possibilities. One is that the consumer actually pays cash for the car. Another is the consumer gets a loan from a bank or someone else other than the dealer. In that case the car is still paid to the dealer in full, and the dealer doesn't have problem with the statute. The third case is the dealer itself finances the sale, i.e. takes payments over time for it. Here, given the wording of the statute, if there was "no reasonable probability" that the consumer could pay the obligation, i.e. make those payments then the dealer may well have a problem with the statute. But, absent some kind of scam, I can't see any dealer that is at all smart making that deal.

Then you didn’t really mean quite what you said.?


So, now we are requiring merchants to know if a person has adequate credit to make a given purchase or is it simply that if they have adequate credit to make the purchase it’s presumed they can pay it in full?

I simply think demanding the merchant make this determination is unfair. It means they are playing mommy and if they don’t they could lose out. I get the purpose of the law but I don’t believe it was well thought out or written when it came to put it into writing.

There are a lot of buy here pay here lots that sell to people that have no real credit available. Applying this law it would appear such sales are improper. While some are scams, some are simply about the only place a person can purchase a car and even though they aren’t getting bargains, they have little choice. Preventing such sales would harm a lot of people.

I was thinking; a lot of home sales in the gwbush era would have probably fallen under this law.

 

[Taxing Matters]

Then you didn’t really mean quite what you said.?

No, I think you are reading my first reply differently than I do, which likely means that it wasn't written as clearly as it should have been. Either that or you are simply trying to engage in a game of gotcha.

So, now we are requiring merchants to know if a person has adequate credit to make a given purchase or is it simply that if they have adequate credit to make the purchase it’s presumed they can pay it in full?

We aren't doing anything. But Ohio has enacted this provision as one of the factors to consider when deciding whether a business has engaged in an unfair business practice. By the way, I did do the case law research and found no cases involving that particular provision had made it to the appeals courts. That suggests to me that the state is not applying it in the way I think you have in mind.

I simply think demanding the merchant make this determination is unfair. It means they are playing mommy and if they don’t they could lose out. I get the purpose of the law but I don’t believe it was well thought out or written when it came to put it into writing.

I think that, at least standing alone, it is an odd provision in the statute. I've not researched the history to the bill, but I'm guessing there was some circumstance where a consumer got cheated that involved this as a factor and that's why it's in there. But as I've already said, I can't think of one off the top of my head.

There are a lot of buy here pay here lots that sell to people that have no real credit available. Applying this law it would appear such sales are improper. While some are scams, some are simply about the only place a person can purchase a car and even though they aren’t getting bargains, they have little choice. Preventing such sales would harm a lot of people.

First, remember that the standard the statute uses is "that there was no reasonable probability of payment of the obligation in full by the consumer." (Underlining added.) If there was some probability that payment would be made, even if that probability is low (because the loan has a significant risk involved), that to me would seem to not violate the statute. And that's what those buy here/pay here places do — they lend to people that are high risks but that do have some prospects of paying. I can't see any dealer selling a car to someone whom they know pretty much with certainty won't pay it. Of course, without case law on it, it remains unclear exactly where the line would be drawn. But I suspect it would have to really obvious that the consumer really had no way to pay it to run the risk of tripping over this provision.

 

[justalayman]

Nope, not trying for the gotcha. That’s what I get from what you wrote. Apparently I am not picking up what your laying down.

We is a reference to society or in this case, residents of Ohio since we are addressing Ohio law. We was used in the larger sense and not meant to refer to a single individual.



As to a dealer selling a car to somebody they know won’t or can’t complete the purchase

Apparently you have not dealt with the lowest form of car dealers. Some of them have resold rhe same car multiple times to different buyers. Each buyer having failed to complete the terms of the sale. Those dealers make money on it every time it’s sold and the more times the sell it, the more money they will make from that single investment. They actually prefer to have the sale fail at some point. They repo it and sell it again.


I see an honorable intent in the law but I see too many problems with this particular version of a consumer protection law. Heck, one clause in the law says I can’t sell something at a price I know is substantially above what the consumer can find elsewhere.

2) Whether the supplier knew at the time the consumer transaction was entered into that the price was substantially in excess of the price at which similar property or services were readily obtainable in similar consumer transactions by like consumers;

First, what defines substantial? What is substantial to me is likely doffeeent than what is substantial to you. What is substantial to a person living on minimum wage is surely different that a person with $10 million in the bank.

Then, how can the law prevent me from selling something at whatever price I choose? It should be up to the consumer to shop around. I am not suggesting gutting anti gouging laws that come into play, typically, during some form of emergency situation. That is a very different issue that generally precludes a consumer from shopping for the best value.

Then we have clauses such as this:

3) Whether the supplier knew at the time the consumer transaction was entered into of the inability of the consumer to receive a substantial benefit from the subject of the consumer transaction;

first, it automatically precludes anybody from purchasing a gift. The intent isn’t to receive substantial benefit from the purchase. It’s to give it away hopefully with the recipient gaining substantial benefit. I guess gag gifts would just be illegal no matter what

But more to the isssue: so the merchant has to have the buyer sit down for a q and a? What business is it ofmthe merchant why I buy anything. Of suspect the intent is more intended to apply to people that sell the ice makers to eskimos sort of situation but without clarity, it could be applied to anything. Again, poorly written but good intentions.


I think the legislators were snoozing on this one when they wrote it and woke up and said: hey, we just wrote a very comprehensive consumer protection act. It will protect the citizens of Ohio against snake oil salesmen. They then never looked st it again.

 

[Parkerman]

Taken literally, as justalayman notes, that would make every sale illegal that involves a credit card or financing.

Well, first of all, I don't think it's reasonable to take the statute literally. Because as justalayman said in post #4:

Wouldn’t just about every car sale fall under the “if you can’t pay for it in full you can’t afford it”?

I took that as him thinking that the statute is saying that the consumer needs to pay for the product or service up front in full. However, in this day and age of credit, I really don't see how he could have said that. Plus, with his avatar(which may or may not mean anything), I wasn't really sure about his intentions. Therefore, why take the statute literally?

But I don't think that's the intent of 1345.03. I think that (4) is just one of the elements of an unconscionable act that has to be examined in the context of the transaction.

For example?

A salesman might gather the information for a sale that involves financing but he wouldn't be the one making the decision as to whether the buyer qualifies for the loan (except maybe tote-the-note car dealers).

Making the decision as to whether the buyer qualifies for the loan isn't the issue.

And with a cash sale, the salesman has absolutely no obligation, legal or otherwise, to determine whether a buyer has maxed out his income to pay for it.

That's not true. I know of situations where people on fixed incomes have been turned down for loans because the salesperson didn't believe that the buyer couldn't fit the payment within their income.

You might get a clearer discussion if you explained what is, or has, happened to you that gives rise to your question. Hypotheticals don't butter any parsnips.

I'm giving out the information that I want to give out. Plus, I think that most people can follow what I am saying.

 

[Parkerman]

The statute uses the phrase "pay the obligation in full" So for the car sale, there are several possibilities. One is that the consumer actually pays cash for the car.

Which isn't realistic for the average person in this day and age.

Another is the consumer gets a loan from a bank or someone else other than the dealer. In that case the car is still paid to the dealer in full, and the dealer doesn't have problem with the statute.

Thank you.

The third case is the dealer itself finances the sale, i.e. takes payments over time for it. Here, given the wording of the statute, if there was "no reasonable probability" that the consumer could pay the obligation, i.e. make those payments then the dealer may well have a problem with the statute. But, absent some kind of scam, I can't see any dealer that is at all smart making that deal.

I've seen situations where the dealer set up a car loan with a bank, but maxed out a consumer's income where it wouldn't be comfortable for the consumer to make the monthly payments. And if anything happened where the consumer needed more money for emergencies, etc., then the consumer is screwed. Also, I am 100% sure that the salesperson KNEW that they were maxing out the customer's income. But what type of salesperson would do something like that? A stupid one or malicious one?

 

[justalayman]

But what type of salesperson would do something like that? A stupid one or malicious one?

2 possibilities? That’s all you can come up with? Wow.

 

[Taxing Matters]

Nope, not trying for the gotcha. That’s what I get from what you wrote. Apparently I am not picking up what your laying down.

I think you and Jack took my initial post discussing "payment in full" to mean that payment in full must be made at the time of the sale. But the phrase doesn't tell you anything about when payment payment in full is made. It could be before the sale, at the time of sale, or sometime after the sale. This is why signs at merchants requiring payment in full at time of sale or purchase typically make that clear, like the sign at my doctor's office, which says that payment in full is expected at the time of service. It's important to specify when precisely payment is expected because the phrase "payment in full" does not tell you anything about the timing of the payment. That's why the statute refers to payment in full of the obligation. While not perfect I think it does at least make clear that the statute does not expect payment in full must be made at the time of sale. That eliminates the assumption you and jack had that it would bar all credit sales. It does not do that, and never was intended to do that. The statute is intended to bar transactions that take advantage of consumers, and I expect the courts would apply it with that in mind.

As to the rest of your post, clearly you don't like the Ohio law. While I don't feel quite the same way you do about the law as a whole, I do think it is over protective. I'm not going to dive into the merits of the law though since this thread is not the place for that.