Business groups oppose Hochul’s consumer protection changes

(The Center Square) — A coalition of businesses is calling on New York Gov. Kathy Hochul to ditch proposed changes to the state’s consumer protection laws, which they say would lead to a “catastrophic surge” in litigation that would hurt employers and, ultimately, consumers.

In a letter to Hochul, the business groups said they have “grave concerns” about the governor’s plan to include “unfair” and “abusive” practices in the state’s general business law, which they claim — coupled with the nearly 2,000% increase in statutory damages and the mandate for courts to award attorney’s fees — “threatens to dramatically increase extortionate litigation.”

“The expansion proposed here is overly broad and relies heavily on subjective interpretations,” the coalition wrote. “This could lead to a surge in lawsuits against businesses of all sizes. Our concern is not just hypothetical.”

In Hochul’s State of the State address in January, the Democrat vowed to push for the first major expansion of New York consumer protection laws since 1980 to curb “predatory” business practices and “exploitative tactics” that she argues harm consumers.

If approved by the state Legislature, the proposed changes would make “unfair, deceptive or abusive acts or practices in the conduct of any business, trade or commerce” unlawful.

The proposal defines unfair acts and practices as those that cause “substantial injury” and “not outweighed by countervailing benefits to consumers or competition.”

The move would empower private plaintiffs to file actions concerning alleged deceptive acts or practices against more employers — including business-to-business operations — and authorize courts to award attorneys’ fees and costs. It would also increase penalties for violations from $50 to $1,000 per violation or the amount of actual damages, whichever is greater.

Hochul said the efforts aimed at “safeguarding people’s hard-earned cash” and pointed to student loan servicers and debt collectors as examples of financial services businesses that she wants to be subjected to tougher legal constraints.

But the groups, which include the New York Business Council, the New York chapter of the National Federation of Independent Businesses and several chambers of commerce, said businesses already have a “vast body of contract law” to protect against misrepresentations and unfair practices and argued the proposal will make the Empire State “even more litigious, burdening companies with increased risk of catastrophic liability.”

“The potential for excessive damages and increased litigation costs will not only harm these businesses but lead to higher prices for consumers,” they wrote. “This is particularly concerning for small businesses that operate on narrow margins and are still recovering from the economic impact of the pandemic.”

Hochul’s proposal would also usurp the discretion of the Office of Attorney General by transferring “significant power” to private lawyers “who stand to benefit financially from increased filings and windfall payouts,” the business groups argue.

“Rather than unleashing a torrent of speculative lawsuits, we propose a more targeted approach that focuses on genuinely harmful practices without opening the floodgates to opportunistic litigation,” they wrote. “This could include refining the definitions of “unfair” and “abusive” practices to be more specific and objective, capping statutory damages at a more reasonable level, and reconsidering the mandatory awarding of attorney’s fees and costs, which incentivizes litigation over resolution.”