Do You Even Understand What You’re Asking Them To Sign? – PA Plain Language Consumer Contract Act
As general practice lawyers, we often need to explain business contracts to consumers. By the same token, we are often called upon by clients to draft contracts which will be read by consumers. Businesses which contract with consumers should have some familiarity with the Plain Language Consumer Contract Act (PLCCA), which can be found at 73 P.S. §§ 2201-2212. Adherence to the guidelines of the PLCCA will be beneficial in many ways for both consumers and commercial entities.
The Pennsylvania Legislature enacted the PLCCA because it found that “many consumer contracts are written, arranged and designed in a way that makes them hard for consumers to understand. Competition would be aided if these contracts were easier to understand.” §2202(a). The Legislature intended to “promote the writing of consumer contracts in plain language. This act will protect consumers from making contracts that they do not understand. It will help consumers to know better their rights and duties under those contracts.” § 2202(b).
In what must be one of the shortest definition sections of any act of the General Assembly, § 2203, only two words are defined:
“Consumer.” Any individual who borrows, buys, leases or obtains credit, money, services or property under a consumer contract.
“Consumer contract” or “contract.” A written agreement between a consumer and a party acting in the usual course of business, made primarily for personal, family or household purposes in which a consumer does any of the following:
(1) Borrows money.
(2) Buys, leases or rents personal property, real property or services for cash or on credit.
(3) Obtains credit.
There are a few exclusions enumerated in § 2204, most notably real estate conveyance documents and contracts, deeds and mortgages, title insurance contracts, and consumer contracts involving amounts of more than $50,000. However, any businessperson involved in selling or leasing anything for personal use – from the large department store to the local auto body shop – must be aware of the provisions of the PLCCA.
Section 2205 is the key provision of the Act. It requires that “all consumer contracts… shall be written, organized and designed so that they are easy to read and understand.” In order to effectuate this general rule, it sets forth numerous guidelines, none of which have yet been applied by the courts. Some of these guidelines include the following suggestions:
- The contract should use short words, sentences and paragraphs.
- The contract should use active verbs.
- The contract should not use technical legal terms, other than commonly understood legal terms, such as “mortgage,” “warranty” and “security interest.”
- When the contract refers to the parties to the contract, the reference should use personal pronouns, the actual or shortened names of the parties, the terms “seller” and “buyer” or the terms “lender” and “borrower.”
- The contract should not use sentences with double negatives or exceptions to exceptions.
The PLCCA also sets out guidelines for how the contract should look:
- The contract should have type size, line length, column width, margins and spacing between lines and paragraphs that make the contract easy to read.
- The contract should caption sections in boldface type.
- The contract should use ink that contrasts sharply with the paper.
Finally, the Act requires that the contract recite a “general description of the property that may be taken or affected by reason of a security interest or contract if the consumer does not meet the terms of the contract.” For instance, the following statement may be used: “If you do not meet your contract obligations, you may lose your house, the property that you bought with this loan, other household goods and furniture, your motor vehicle or money in your account with us.”
If any other Federal or state law requires certain language to be used, or has approved or recommended certain language, such as the Truth in Lending Act (15 U.S.C. § 1601 et seq.), then the use of that language cannot violate the PLCCA. § 2206.
The Legislature was serious about enforcing the terms of the PLCCA. Usually, parties must pay their own attorneys’ fees if they hire a lawyer to enforce their rights. However, § 2207 of the PLCCA makes it clear that anyone who drafts a contract which does not comply with the readability tests shall be liable to the consumer for:
- Compensation in an amount equal to the value of any actual loss caused by the violation of this act;
- Statutory damages of $100. If the total amount of the contract is less than $100, these damages are limited to the total amount of the contract;
- Court costs; and
- Reasonable attorney fees.
In addition, and perhaps more importantly, a violation of the PLCCA is by definition a violation of the Unfair Trade Practices and Consumer Protection Law (UTPCPL), 73 P.S. § 201-1 et. seq., which allows for triple damages for violations.
It is important to recognize that a violation of the PLCCA does not invalidate what might otherwise be a valid contract – it merely subjects the entity drafting the contract to monetary sanctions for its violation. Moreover, there can be no violation if all parties have finished what was required under the contract, and it is a valid defense if the creditor, seller or lessor made a “good faith and reasonable effort” to comply with the Act. § 2208. But do not bother drafting the contract so the consumer waives his or her rights under the Act – such a waiver is void according to § 2210.
Whenever you are circulating consumer contracts to many customers (and we hope you are), it is prudent to have them drafted by a competent legal professional, or at least reviewed by one. Lawyers have made a concerted effort in recent years to avoid “legalese” and to draft language that laypersons can easily understand. If you have doubts about whether your contracts comply with the PLCCA, and you would like to be absolutely sure, you may submit your proposed contract to the Attorney General for pre-approval. When we all work together to avoid confusing contracts, the consumers will be happier because they can understand what they are signing, the businesses will be happier because more consumers will sign contracts, and hopefully lawsuits will be avoided because the contracts will be subject to common sense interpretation.
The attorneys of Wolf, Baldwin & Associates, P.C. have the experience to represent you in your commercial litigation through court or arbitration in Montgomery, Berks, and Chester Counties. Click here now to contact us and to schedule an appointment. We will be happy to advise you about your contract rights under Pennsylvania law, whether you are a vendor or a consumer.