As businesses work to operate in these trying times, a number of decisions have to be made that are outside those many businesses typically have make. Many of these decisions involve providing services to customers as many businesses operate under stay at home orders or have been forced to close temporarily. In Ohio, consumer transactions are governed by the Ohio Consumer Sales Practices Act. In this unprecedented time, it is important that businesses make sure they are complying with the Ohio Consumer Sales Practices Act.
As we try to determine how best to move forward, consumers have already begun filing lawsuits alleging that businesses have worked to deceive them. One such case provides an example of what not to do.
Town Sports International
In an April 3 letter from a group of attorneys general, they tell a story that could easily happen to anyone as we navigate stay at home orders. The attorneys general of Pennsylvania, New York, and Washington D.C. wrote a letter to Town Sports International (“TSI”) addressing the company’s conduct. According to the letter, all three states had ordered local gyms to close their doors to combat the spread of COVID-19. Most gyms immediately froze member’s accounts and stopped charging them. TSI, on the other hand, put an alert on its website informing members that its gyms would be closed, but did not address membership fees. TSI then terminated most of its staff, making it extremely difficult for members to contact anyone about membership fees. When individuals were able to get in touch with TSI employees, they were told they could only freeze or cancel their memberships in person or by certified mail.
After the New York Attorney General contacted the company, TSI stated that it would send its members an email informing them of their right to freeze or cancel their memberships and that it would refund membership fees for the time the gyms had been closed. However, TSI’s subsequent email to members did not mention the right to freeze or cancel memberships. A member even emailed the company asking that her membership be cancelled. TSI informed her that it would not honor her cancellation request until the gyms reopened and her account would be frozen. TSI then charged the member a $15 fee to freeze her membership, even though there had been no mention of such a fee.
Two days after the attorneys’ general letter, a group of plaintiffs in Massachusetts filed a complaint alleging that they were charged a monthly membership fee on April 1 by Boston Sports Club, a subsidiary of TSI. However, as in the other states, their local gym had been closed for weeks by order of the Governor. Moreover, the gym had laid off most of their Massachusetts staff, making it extremely difficult for gym members to ask questions or cancel their memberships. The Complaint seeks relief under the Massachusetts Consumer Protection Statutes, as well as for breach of contract and unjust enrichment. In addition, the plaintiffs requested a preliminary injunction to prevent TSI from: (1) spending any of the money collected from members as April fees and (2) collecting any further fees while its locations are closed.
What is the Ohio Consumer Sales Practices Act?
The Ohio Consumer Sales Practices Act (“OCSPA”) (O.R.C. § 1345.01 et seq.) is a set of laws that aim to protect consumers from sales practices that are deceptive, unfair, or unconscionable. The purpose of the OCSPA is to make it easier and more appealing for consumers “who otherwise might not be able to afford or justify the cost of prosecuting an alleged [O]CSPA violation, which, in turn, works to discourage [O]CSPA violations in the first place via the threat of liability for damages and attorney fees.”
The OCSPA prohibits suppliers from engaging in unfair or deceptive conduct. Deceptive or unfair acts are “those that mislead consumers about the nature of the product they are receiving.” For instance, an act is deceptive if the supplier makes an oral or written statement that is not supported by a reasonable factual basis. A non-exhaustive list of deceptive representations can be found at O.R.C. § 1345.02(B) and in the Ohio Administrative Code.
A supplier is also prohibited from engaging in unconscionable acts. Unconscionable acts are those that “relate to a supplier manipulating a consumer’s understanding of the nature of the transaction at issue.” This includes entering into a transaction where the supplier knows the consumer will not get a substantial benefit from the deal. Businesses can consult O.R.C. § 1345.03(B) for a list of factors to consider when determining whether a supplier has knowingly taken unfair advantage of a consumer.
The consumer may recover actual damages “plus an amount not exceeding five thousand dollars in noneconomic damages.” Additionally, a violation of the OCSPA can lead to an award of treble damages. Treble damages are appropriate where the act has been declared unconscionable or deceptive by statute or by a court’s opinion that has been published for public inspection.
How Can Businesses Comply with the OCSPA during COVID-19?
The OCSPA can have a profound impact on businesses and can be devastating if a business is liable for a violation. In these unprecedented times, it is more important than ever to take steps to ensure businesses remain in compliance with the OCSPA.
Have a Plan in Place
The first thing businesses should do in these trying circumstances is to create a plan. If a business is in a situation where its ability to serve customers is limited or completely cut-off, then they should move quickly to decide how they are going to address customer’s needs. The plan should cover not only how businesses are going to handle the actual logistics, but how they are going to handle customer service. If we simply assume TSI was not prepared when its locations were first closed, its lack of a plan was made much worse by not having anyone in place to address customers concerns.
Business should also consider how they are going to start the process of returning to business as usual. While it is difficult to make these decisions without the benefit of knowing how the various states will reopen, businesses should try to determine how they will resume normal operations. It is important to know how and when you will be able to provide services to customers because businesses will want to avoid misleading customers on when they can expect services to resume and the extent to which those services will resume.
Communicate Clearly with Customers
Businesses should also put the time into creating easy to understand material for employees and customers that explains the way they are going to operate during this crisis. If businesses plan to offer customers an incentive that has them continuing to pay now with a benefit later on, they must provide customers with all their options. This should include any option that allows customers to freeze or cancel their account. An explanation of these options should also include any associated fees that may be involved. This is especially important if you are unable to provide the services or goods your customers expect. TSI was clearly unable to provide services, but failed to clearly explain its policies to customers. Businesses should not hide options from customers and should not give customers options that come with hidden fees.
If businesses plan on offering customers different options for resuming services, they must be sure to give customers a clear explanation of their choices. Any option that allows customers to defer services or maintain a freeze on their account should be clearly stated. This does not mean that business cannot and should not try to sell clients on the benefits of paying now or resuming services, but customers should be given all their options.
As we all work to navigate through the unusual issues that arise during this time, it is important for businesses to keep the OCSPA in mind as they make decisions. Attorneys at Faruki are well-versed in this area of the law and are happy to help answer any questions or assist businesses with concerns about compliance.
 April 3, 2020 letter, p. 2.
 Id. at 3.
 Paul Delvecchio et al. v. Town Sports International, LLC et al., Case No. 1:20-CV-10666, Doc. 1.
 Id. at ¶¶ 36-52.
 Paul Delvecchio et al. v. Town Sports International, LLC et al., Case No. 1:20-CV-10666, Doc. 8.
 Whitaker v. M.T. Automotive, Inc., 111 Ohio St.3d 177, 2006-Ohio-5481, 855 N.E.2d 825, ¶ 11 (citation omitted).
 O.R.C. § 1345.02.
 Whitaker, 111 Ohio St.3d at ¶ 10 (citation omitted).
 O.A.C. § 109:4-3-10.
 Whitaker, 111 Ohio St.3d at ¶ 10 (citation omitted).
 O.R.C. § 1345.03.
 O.R.C. § 1345.09(A).
 O.R.C. § 1345.09(B).
 Arales v. Furs by Weiss, Inc., 8th Dist. Cuyahoga No. 81603, 2003-Ohio-3344, ¶ 40.