(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued February 18, 1997 -- Decided July 3, 1997
HANDLER, J., writing for a unanimous Court.
The issue before the Court is whether the New Jersey Consumer Fraud Act (CFA) applies to
lenders who engage in “loan packing.” Loan packing refers to a practice of commercial lenders that involves
increasing the principal amount of a loan by combining the loan with loan-related services, such as credit
insurance, that the buyer does not want.
On or about July 19, 1992, Jeanne Lemelledo applied and was approved for a $2000 loan from
Beneficial Management Corp. and Beneficial New Jersey (collectively, Beneficial). Instead of receiving a
$2000 check, Lemelledo was given several forms, including a loan contract for $2,538.47 and a check payable
to her for $2203.19. The difference between the amount on the contract and the amount on the check was
listed as “Amount Paid to Others on Your Behalf” and consisted of credit insurance premiums to be paid
initially by Beneficial but added to the loan principal to be paid by Lemelledo. The premiums -- credit
property insurance ($170.10), credit disability insurance ($123.98) and credit life insurance (41.20) -- covered
the possibility that Lemelledo would default on her loan payments.
Beneficial offers the credit insurance policies to all borrowers to better assure the repayment of its
loans. Borrowers receive a form from Beneficial entitled “Disclosure of Credit Costs,” which, as required by
law, states that the insurance is not a prerequisite to obtaining credit and that the borrower can purchase
the insurance from any insurer. Although Lemelledo received the Disclosure statement, she claims that
Beneficial implicitly led her to believe that if she did not purchase the insurance, she would not get the loan.
Shortly after receiving the loan proceeds, Lemelledo repaid the $2203.19 in full. Thereafter,
Beneficial sent her four $100 payment coupons to cover the insurance premiums plus interest. She made the
first two payments but refused to pay the last two payments. In August 1994, Beneficial sued Lemelledo to
recover the remaining balance, but voluntarily dismissed that claim several months later. After the dismissal,
Lemelledo instituted a class-action suit in the Law Division, alleging violations of the Consumer Fraud Act
(CFA) and the Consumer Loan Act (CLA). She also alleged breach of contract, fraudulent inducement,
conversion, common-law fraud, and criminal usury.
Beneficial moved to dismiss the CFA, CLA and usury claims. The Law Division granted the motion
as to the CFA and usury claims, concluding that the CFA did not apply to loan packing. On appeal, the
Appellate Division reversed and reinstated the CFA claim. The Appellate Division affirmed the dismissal of
the usury claim.
The Supreme Court granted Beneficial's motion for leave to appeal the reinstatement of the CFA
claim.
HELD: The New Jersey Consumer Fraud Act applies to lenders who engage in loan packing.
1. The CFA is intended to protect consumers by prohibiting deceptive, fraudulent and unconscionable
practices and dealings in the marketing or sale of merchandise and real estate. The language of the CFA
evinces a clear legislative intent that its provisions be applied broadly in order to accomplish the Act's
remedial purposes. Because the broad language of the CFA appears to include both lending and insurance-sales practices, its terms also include the sale of insurance in conjunction with lending, otherwise known as
loan packing. (pp. 7-10)
2. Daaleman v. Elizabeth Gas Co. does not stand for the bright-line proposition that a regulated practice is
automatically covered by the CFA or automatically exempt from it based solely on the number of agencies
regulating the practice. A court must look to whether a “real possibility” of conflict would exist if the CFA
were to apply to a particular practice, regardless of the number of agencies with regulatory jurisdiction over
the practice. (pp. 10-14)
3. The CFA's recognition of cumulative remedies and its empowerment of citizens as private attorneys
general reflect an apparent legislative intent to enlarge fraud-fighting authority and to delegate that authority
to various governmental and non-governmental entities. The Court will not undermine the CFA's
enforcement structure by carving out exemptions for each fraudulent practice that is at the same time
regulated by another source of law. (pp. 14-16)
4. In order to overcome the presumption that the CFA applies to the covered activity, a court must be
satisfied that a direct conflict exists between the application of the CFA and application of the other
regulatory scheme(s). The other source or sources of regulation must deal specifically, concretely and
pervasively with the activity, implying a legislative intent not to subject parties to multiple regulations that, as
applied, will work at cross-purposes. The conflict must be patent and sharp and not simply create a
possibility of incompatibility. (pp. 16-18)
5. Beneficial points to four statutes regulating credit-insurance sales in New Jersey that it believes creates
enough of a conflict with the CFA sufficient to trigger a CFA exemption for loan packing. They are: the
CLA, the Insurance Trade Practices Act, the Insurance Producer Licensing Act and the Credit Life and
Health Insurance Act. At least in part, all four of these statutes have the same general goal as the CFA -
the prevention of fraud and misrepresentation in the sale of credit and/or insurance. The CFA complements
these statutes and does not inhibit their enforcement. Despite the existence of overlapping agency authority
for the enforcement of the CFA, the Division of Consumer Affairs and the Department of Banking and
Insurance will be able to coordinate their regulation of loan packing so as not to subject lenders to
conflicting duties and duplicative regulatory burdens. (pp. 18-23)
Judgment of the Appellate Division reinstating the Consumer Fraud Act claim is AFFIRMED and
the matter is REMANDED to the Law Division for proceedings consistent with this opinion.
JUSTICES POLLOCK, O'HERN, GARIBALDI, STEIN and COLEMAN join in JUSTICE
HANDLER'S opinion. CHIEF JUSTICE PORITZ did not participate.
SUPREME COURT OF NEW JERSEY
A-
107 September Term 1996
JEANNE C. LEMELLEDO, on behalf of
herself and all others similarly
situated,
Plaintiff-Respondent,
v.
BENEFICIAL MANAGEMENT CORP. OF
AMERICA and BENEFICIAL NEW JERSEY,
INC.,
Defendants-Appellants.
Argued February 18, 1997 -- Decided July 3, 1997
On appeal from the Superior Court, Appellate
Division, whose opinion is reported at 289
N.J. Super. 489 (1996).
Burt M. Rublin, a member of the Pennsylvania
bar, argued the cause for appellants (Archer
& Greiner attorneys; Sean T. O'Meara, on the
briefs).
Michael D. Donovan, a member of the
Pennsylvania bar, argued the cause for
respondent (Tomar, Simonoff, Adourian,
O'Brien, Kaplan, Jacoby & Graziano,
attorneys; Charles N. Riley, on the letter
brief).
Gail M. Lambert, Deputy Attorney General,
argued the cause for amicus curiae Attorney
General of New Jersey, Peter Verniero,
Attorney General, attorney; Andrea M.
Silkowitz, Assistant Attorney General, and
Jeffrey C. Burstein, Deputy Attorney General,
of counsel).
Melville D. Miller, Jr., President, argued the cause for amicus curiae Legal Services of
New Jersey (Mr. Miller, attorney; Mr. Miller
and Dawn Miller, on the brief).
Clark E. Alpert submitted briefs on behalf of
amicus curiae The Mortgage Bankers
Association of New Jersey (Alpert & Levy,
attorneys; Mr. Alpert and E. Robert Levy, of
counsel).
Jonathan Romberg submitted a brief on behalf
of amicus curiae Seton Hall Law School Center
for Social Justice.
Madeline L. Houston submitted a brief pro se.
The opinion of the Court was delivered by
HANDLER, J.
"Loan packing" refers to a practice on the part of
commercial lenders that involves increasing the principal amount
of a loan by combining the loan with loan-related services, such
as credit insurance, that the borrower does not want. In this
case, a borrower secured a commitment from a commercial lender to
provide a loan to defray the costs of college tuition for the
borrower's daughter. When the borrower received the loan
proceeds, the principal amount to be repaid included unrequested
and unexpected premiums for credit insurance.
The borrower brought a class-action lawsuit challenging the
extra charges affixed to her loan, contending that the practice
was illegal and thus entitled her to damages. The specific issue
raised in this appeal is whether the New Jersey Consumer Fraud
Act applies to lenders who engage in "loan packing."
On or about July 19, 1992, Jeanne Lemelledo ("plaintiff") applied for a $2,000 loan for her daughter's college education from defendants Beneficial Management Corp. and Beneficial New Jersey (collectively referred to as "defendant"). Shortly after receiving the application, defendant notified plaintiff that the loan had been approved in full.
Plaintiff went to defendant's office with the expectation of receiving a check in the amount of $2,000. Instead, however, defendant presented her with numerous forms, including a loan contract for $2,538.47 and a check payable to her for $2,203.19. It is unclear why plaintiff received $203.19 more than she had requested in her application. The difference between the amount in the loan contract and the amount of the loan check ($335.28) was listed as "Amount Paid to Others on Your Behalf" and consisted of credit-insurance premiums, to be paid initially by defendant and added to the loan principal to be repaid by plaintiff. The premiums -- credit property insurance ($170.10), credit disability insurance ($123.98), and credit life insurance ($41.20) -- covered the possibility that plaintiff would default on her loan repayments. The loan, including the insurance premiums, was provided at an interest rate of twenty-eight percent; plaintiff was to make thirty-six monthly payments of $105.00 each.
Defendant apparently offers such insurance policies to all borrowers in order to provide greater assurance that the loans
will be repaid. It sells the policies through either one of its
insurance subsidiaries or an unaffiliated insurance company and
receives a forty-percent commission from each sale. Defendant
also receives substantial interest income from the sales because
the amount of the insurance premium is incorporated into the loan
principal and accrues interest, in this case at a rate of twenty-eight percent. When defendant sells the policies to borrowers,
it provides them with a form entitled "Disclosure of Credit
Costs," which states that the insurance is not a prerequisite to
obtaining credit and that, if the borrower chooses to purchase
the insurance, she can do so from any insurer. Those disclosures
are required by law. N.J.S.A. 17:10-14.1a (replaced by N.J.S.A.
17:11C-21d).
Although plaintiff admits that defendant informed her,
through the "Disclosure of Credit Costs" statement, that she did
not have to purchase the insurance premiums, she alleges that
defendant implicitly led her to believe that, if she did not
purchase the insurance, she would not receive the loan. She
points to several of defendant's actions that allegedly created
such an implication, including: the presentation of the
insurance and loan contracts as a single transaction (i.e., a
single contract with one lump sum presented at the time of the
loan); the failure to discuss the insurance separately from the
loan itself and to evaluate her specific need or lack thereof for
the insurance; and the pressure put on her, that is, the implicit
threat that if she declined the insurance, she would have to
return at a later date to receive the reprocessed loan proceeds.
Plaintiff stresses that borrowers in her position, with
lower incomes and without substantial credit opportunities
elsewhere, are particularly vulnerable to implicit
misrepresentations about the need to purchase credit insurance
and to purchase it from the lender. Apparently, a substantial
percentage of Beneficial's loan customers are low-income and thus
have limited choices about sources of credit. Plaintiff also
emphasizes that credit insurance primarily benefits the lender,
not the borrower.
Shortly after receiving the loan proceeds, plaintiff repaid
the $2,203.19 in full. Defendant then sent her four $100 payment
coupons to cover the insurance premiums plus interest on those
premiums. She made the first two payments, but refused to make
the final two. Defendant brought suit against her in August 1994
to recover the remaining balance, but it voluntarily dismissed
the claim about three months later.
Almost immediately after the dismissal, plaintiff instituted
a class-action lawsuit against defendant in the Law Division,
alleging violations of the Consumer Fraud Act ("CFA"), N.J.S.A.
56:8-1 to -20, and the Consumer Loan Act ("CLA"), N.J.S.A. 17:10-1 to -26.See footnote 1 She also alleged breach of contract, fraudulent
inducement, conversion, common-law fraud, and criminal usury.
Defendant moved to dismiss the CFA, CLA, and usury claims
for failure to state a claim upon which relief could be granted.
R. 4:6-2(e). The Law Division granted the motion as to the CFA
and usury claims, concluding that the CFA did not apply to loan
packing. The Appellate Division granted plaintiff's motion for
leave to appeal the dismissals and reinstated the CFA claim.
289 N.J. Super. 489 (1996). The court affirmed the dismissal of the
usury claim.See footnote 2 Id. at 502.
We granted defendant's motion for leave to appeal the
reinstatement of the CFA claim.
146 N.J. 561 (1996).
Because this interlocutory appeal arises from the Law Division's dismissal of plaintiff's CFA claim for failure to state a claim upon which relief can be granted, we review the legal issues at stake on the assumption that the facts, as alleged by plaintiff, are true. See Feinberg v. Department of Envtl. Protection, 137 N.J. 126, 129 (1994). Our sole inquiry is thus whether the CFA applies to defendant's actions as they are alleged by plaintiff.
The CFA is intended to protect consumers "by eliminating sharp practices and dealings in the marketing of merchandise and real estate." Channell Cos. v. Britton, 167 N.J. Super. 417, 418 (App. Div. 1979); see Daaleman v. Elizabethtown Gas Co., 77 N.J. 267, 271 (1978). It prohibits
[t]he act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing[] concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been mislead, deceived or damaged thereby . . . .
The CFA defines "merchandise" as "any objects, wares, goods, commodities, services or anything offered, directly or indirectly
to the public for sale." N.J.S.A. 56:8-1(c). It defines
"advertisement" as
the attempt directly or indirectly by
publication, dissemination, solicitation,
indorsement or circulation or in any other
way to induce directly or indirectly any
person to enter or not enter into any
obligation or acquire any title or interest
in any merchandise or to increase the
consumption thereof or to make any loan . . .
.
The CFA vests the Attorney General with jurisdiction to enforce its provisions through a variety of mechanisms, N.J.S.A. 56:8-3 to -8, -11, -15 to -18, & -20, but it also provides individual consumers with a cause of action to recover refunds, N.J.S.A. 56:8-2.11 to -2.12, and treble damages for violations, whether in good faith or otherwise, N.J.S.A. 56:8-19. The Attorney General enforces the CFA through the Division of Consumer Affairs. N.J.A.C. 13:45-1.1 to -5.6. The "rights, remedies and prohibitions" created by the CFA are cumulative to any other rights, remedies, and prohibitions created by the common law or other statutes. N.J.S.A. 56:8-2.13.
The language of the CFA evinces a clear legislative intent that its provisions be applied broadly in order to accomplish its remedial purpose, namely, to root out consumer fraud. See Barry v. Arrow Pontiac, 100 N.J. 57, 69 (1985); Martin v. American Appliance, 174 N.J. Super. 382, 384 (Law Div. 1980). Accordingly, our courts have invoked it to cover a wide variety of practices. E.g., Cox v. Sears Roebuck & Co., 138 N.J. 2 (1994) ( unsolicited sale); 49 Prospect Street Tenants Ass'n v. Sheva Gardens, Inc., 227 N.J. Super. 449 (App. Div. 1988) ( apartment rental); Jones v. Sportelli, 166 N.J. Super. 383 (Law Div. 1979) (provision of product to physician free of charge with expectation that physician would prescribe product in future).
In light of the broad legislative intent evident from the language and policy goals of the CFA, we evaluate whether loan packing violates its provisions. We first look to the language of the statute itself to determine if it encompasses the practice.
By its terms, the CFA is applicable to the provision of credit. It specifically includes loans in its definition of what constitutes an "advertisement." N.J.S.A. 56:8-1(a). Moreover, its definition of "merchandise" as "anything offered, directly or indirectly to the public for sale" is more than sufficiently broad to include the sale of credit. See Tuxedo Beach Club v. City Federal Savings Bank, 749 F. Supp. 635, 649 n.13 (D.N.J. 1990). Given the broad language of the CFA, we conclude that its terms apply to the offering, sale, or provision of consumer credit.
Moreover, although several lower courts have held that the payment of insurance benefits is not subject to the CFA,See footnote 3 Nikiper v. Motor Club of America, 232 N.J. Super. 393, 401 (App.
Div.), certif. denied,
117 N.J. 139 (1989); Pierzga v. Ohio
Casualty Group of Ins. Cos.,
208 N.J. Super. 40, 47 (App. Div.),
certif. denied,
104 N.J. 399 (1986), our reading of the CFA
convinces us that the statute's language is ample enough to
encompass the sale of insurance policies as goods and services
that are marketed to consumers. See Dodd v. Commercial Union
Ins. Co.,
365 N.E.2d 802, 807 (Mass. 1977); Fortunato v. Conte,
92 N.J.A.R 2d (INS) 17 (1992).
Defendant places great significance on the failure of the
CFA and its implementing regulations specifically to include
insurance. That omission, however, is far from determinative.
Given that "[t]he fertility of [human] invention in devising new
schemes of fraud is so great . . . ," Kugler v. Romain,
58 N.J. 522, 543 n.4 (1971), the CFA could not possibly enumerate all, or
even most, of the areas and practices that it covers without
severely retarding its broad remedial power to root out fraud in
its myriad, nefarious manifestations. See Federal Trade Comm'n
v. Sperry & Hutchison Co.,
405 U.S. 233, 240,
92 S. Ct. 898, 903,
31 L. Ed.2d 170, 177 (1972) ("Even if all known unfair practices
were specifically defined and prohibited, it would be at once
necessary to begin over again[, constituting] . . . an endless
task.") (citation and quotations omitted).
Because the broad language of the CFA appears to include
both lending and insurance-sales practices, we conclude that its
terms also include the sale of insurance in conjunction with
lending, that is, loan packing.
That the CFA's language covers loan packing does not automatically resolve the issue of the applicability of the CFA as a basis for remedial relief. We must address the contention that, because lenders offering credit insurance are regulated by several State agencies, to subject them to CFA liability would run counter to our traditional reluctance to impose potentially inconsistent administrative obligations on regulated parties.
In Daaleman, supra, we held that a privately owned public utility could not be liable under the CFA for having set rates artificially high in an allegedly fraudulent manner. 77 N.J. at 271-73. After noting that the legislative intent behind the CFA was to attack "sharp practices and dealings in the marketing of merchandise and real estate whereby the consumer could be victimized by being lured into a purchase through fraudulent, deceptive or other similar kind of selling or advertising practices," id. at 271, we concluded that erroneous calculation of tariffs simply did not fit into that legislative definition of "selling or advertising" because of the pervasive control that the Public Utilities Commission ("PUC") exercised over the calculation and permissibility of such tariffs. Ibid.
We then proceeded to discuss another concern that would arise if the CFA were to apply to utilities, namely, that, given the highly regulated nature of the utility industry, "a situation would be presented where separate state agencies would have the right to exercise concurrent jurisdiction and control over [a
utility's] billings, with a real possibility of conflicting
determinations, rulings and regulations affecting the identical
subject matter." Id. at 272. We also stressed that the unique
nature of the utility industry warranted a rejection of the CFA's
punitive-damages provision because the purported beneficiaries of
an award of punitive damages -- the consumers -- eventually would
pay for the additional award through higher rates. Id. at 272-73.
The Appellate Division, in this case, reasoned that Daaleman
stood for the proposition that an industry is exempt from the CFA
if it is otherwise regulated only by a single agency. 289 N.J.
Super. at 496-97. Because defendant was regulated by both the
Department of Insurance and the Department of Banking,See footnote 4 the
court determined that Daaleman did not preclude application of
the CFA. Ibid.
Daaleman, however, does not stand for the bright-line
proposition that a regulated practice is automatically covered by
the CFA or automatically exempt from it based solely on the
number of administrative agencies having regulatory jurisdiction
over the practice. Cf. Daaleman, supra, 77 N.J. at 274 ("There
is no valid reason why a utility, simply by reason of the fact
that it is subject to regulation of its rates in the public
interest, should be exempt from the [CFA] if it should commit
fraud in connection with the marketing of merchandise.")
(Pashman, J., concurring). Although Daaleman did concern an
entity that was subject to regulation by a single agency, that
factor is not dispositive in determining whether the CFA applies
to a consumer practice that is subject to other regulations.
Instead, a court must look to whether a "real possibility" of
conflict would exist if the CFA were to apply to a particular
practice, regardless of the number of agencies with regulatory
jurisdiction over that practice.
Daaleman reflects the understanding that the Legislature
does not intentionally subject regulated entities to clearly
conflicting administrative regimes. We hinted at that limit in
Daaleman itself by referring to the "real possibility of
conflicting determinations, rulings and regulations . . . ." Id.
at 272. Such a "real possibility" existed in Daaleman, in which
application of the CFA to utility rate-setting could have lead to
the anomalous result of a tariff approved by the PUC but rejected
and penalized by the Division of Consumer Affairs or the courts
applying the CFA. We concluded that the Legislature could not
have intended such an outcome.
In determining whether the existence of other regulations
creates an exemption to the CFA for particular conduct that
otherwise would fall within its provisions, it should ordinarily
be assumed that the CFA applies to the covered practice. That
assumption is appropriate because of the strong and sweeping
legislative remedial purpose apparent in the CFA. The CFA
explicitly states that the "rights, remedies and prohibitions"
that it creates are cumulative to those created by other sources
of law. N.J.S.A. 56:8-2.13. Furthermore, the CFA, in allowing
for private suits in addition to actions instituted by the
Attorney General, contemplates that consumers will act as
"private attorneys general." Cf. Agency Holding Corp. v. Malley-Duff & Assoc.,
483 U.S. 143, 151,
107 S. Ct. 2759, 2764,
97 L.
Ed.2d 121, 130 (1987) ("Both statutes bring to bear the pressure
of 'private attorneys general' on a serious national problem for
which public prosecutorial resources are deemed inadequate; the
mechanism chosen to reach the objective . . . is the carrot of
treble damages."); Department of Envtl. Protection v. Standard
Tank Cleaning Corp.,
284 N.J. Super. 381, 411 (App. Div. 1995).
Eliminating CFA remedies for otherwise-covered practices may
undermine that important and calculated legislative objective.
Both of those aspects of the CFA -- its recognition of
cumulative remedies and its empowerment of citizens as private
attorneys general -- reflect an apparent legislative intent to
enlarge fraud-fighting authority and to delegate that authority among various governmental and nongovernmental entities, each exercising different forms of remedial power. That legislative intent is readily inferable from the ongoing need for consumer protection and the salutary benefits to be achieved by expanding enforcement authority and enhancing remedial redress. When remedial power is concentrated in one agency, underenforcement may result because of lack of resources, concentration on other agency responsibilities, lack of expertise, agency capture by regulated parties, or a particular ideological bent by agency decisionmakers. See, e.g., Arcadia v. Ohio Power Co., 498 U.S. 73, 87-88, 111 S. Ct. 415, 423-24, 112 L. Ed.2d 374, 388-89 (1990) (Stevens, J., concurring) (emphasizing that Congress intended that Securities and Exchange Commission and Federal Energy Regulatory Commission both have jurisdiction over particular aspect of utility regulation because of the "difference between the goals and expertise of the two agencies"). Underenforcement by an administrative agency may be even more likely where, as in this case, the regulated party is a relatively powerful business entity while the class protected by the regulation tends to consist of low-income persons with scant resources, lack of knowledge about their rights, inexperience in the regulated area, and insufficient understanding of the prohibited practice. The primary risk of underenforcement -- the victimization of a protected class -- can be greatly reduced by allocating enforcement responsibilities among various agencies
and among members of the consuming public in the forms of
judicial and administrative proceedings and private causes of
action.
The Legislature, of course, need not diffuse enforcement
power to combat fraud, and it certainly may concentrate that
authority in one or more agencies or in private citizens. That
judgment, however, is for the Legislature, not for this Court.
We are loathe to undermine the CFA's enforcement structure, which
specifically contemplates cumulative remedies and private
attorneys general, by carving out exemptions for each allegedly
fraudulent practice that may concomitantly be regulated by
another source of law. The presumption that the CFA applies to
covered practices, even in the face of other existing sources of
regulation, preserves the Legislature's determination to effect a
broad delegation of enforcement authority to combat consumer
fraud.
In order to overcome the presumption that the CFA applies to
a covered activity, a court must be satisfied, as this Court was
in Daaleman, that a direct and unavoidable conflict exists
between application of the CFA and application of the other
regulatory scheme or schemes. It must be convinced that the
other source or sources of regulation deal specifically,
concretely, and pervasively with the particular activity,
implying a legislative intent not to subject parties to multiple
regulations that, as applied, will work at cross-purposes. We
stress that the conflict must be patent and sharp, and must not
simply constitute a mere possibility of incompatibility. If the
hurdle for rebutting the basic assumption of applicability of the
CFA to covered conduct is too easily overcome, the statute's
remedial measures may be rendered impotent as primary weapons in
combatting clear forms of fraud simply because those fraudulent
practices happen also to be covered by some other statute or
regulation. See Therrien v. Resource Financial Group,
704 F.
Supp. 322, 328 (D.N.H. 1989) (reasoning that exemption from New
Hampshire Unfair and Deceptive Acts and Practices Act for
regulated industries would cause the exemption to "swallow the
rule").
In the modern administrative state, regulation is frequently
complementary, overlapping, and comprehensive. Absent a nearly
irreconcilable conflict, to allow one remedial statute to preempt
another or to coopt a broad field of regulatory concern, simply
because the two statutes regulate the same activity, would defeat
the purposes giving rise to the need for regulation. It is not
readily to be inferred that the Legislature, by enacting multiple
remedial statutes designed to augment protection, actually
intended that parties be subject only to one source of
regulation. Cf. Hinfey v. Matawan Regional Bd. of Educ.,
77 N.J. 514, 527-28 (1978) (holding that more specific antidiscrimination
statute did not preempt broader antidiscrimination statute
despite the existence of separate administrative bodies charged
with combatting the same form of discrimination); Dodd, supra,
365 N.E.
2d at 805 ("The mere existence of one regulatory statute
does not affect the applicability of a broader, nonconflicting
statute, particularly when both statutes provide for concurrent
coverage of their common subject matter.").
We next must determine whether there is a "real possibility" of conflict between the CFA and other banking and insurance measures sufficient to trigger a CFA exemption for loan packing. Defendant points to four statutes (and their implementing regulations) that regulate credit-insurance sales in New Jersey: the CLA, the Insurance Trade Practices Act ("ITPA"), N.J.S.A. 17B:30-1 to -22, the Insurance Producer Licensing Act ("IPLA"), N.J.S.A. 17:22A-1 to -25, and the Credit Life and Health Insurance Act ("CLHIA"), N.J.S.A. 17B:29-1 to -13.
The CLA, which prohibits deceptive lending practices generally, N.J.S.A. 17:10-13 (replaced by N.J.S.A. 17:11C-20), specifically requires notice to and written consent by borrowers before lenders sell them credit insurance. N.J.S.A. 17:10-14.1 (replaced by N.J.S.A. 17:11C-21). The Department of Banking and Insurance has prohibited the conditioning of a loan on the purchase of credit insurance. N.J.A.C. 3:17-5.1 (replaced by N.J.S.A. 17:11C-21). If a violation of the CLA is proven, the typical remedy, obtainable by the Department of Banking and Insurance or by individual consumers, is voiding of the contract, subject to a defense based on good faith on the part of the lender. N.J.S.A. 17:10-14 (replaced by N.J.S.A. 17:11C-33b).
The CLA, as incorporated in the Licensed Lenders Act, now allows
for treble damages by aggrieved consumers, N.J.S.A. 17:11C-33b,
and summary revocation of a lender's license, N.J.S.A. 17:11C-48a.
The ITPA prohibits fraudulent insurance practices, N.J.S.A.
17B:30-2 to -14, and invests authority in the Department of
Banking and Insurance to regulate the insurance industry in order
to prevent fraud, N.J.S.A. 17B:30-15 to -20. The Department of
Banking and Insurance is empowered to impose fines on those who
act fraudulently in the sale of insurance policies and to seek
cease-and-desist orders. N.J.S.A. 17B:30-17 & -20. Moreover,
the Department can revoke or suspend a violator's license.
N.J.S.A. 17B:30-20. No private cause of action for damages
exists under the ITPA.
The IPLA concerns the licensing of insurance agents. It
vests the Department of Banking and Insurance with power to
revoke or to refuse to renew a license and to impose civil
penalties on licensees who violate any provision of the statute
or who engage in any type of fraudulent activity in the sale of
insurance. N.J.S.A. 17:22A-17. It does not create a private
cause of action.
The CLHIA regulates the provision of certain forms of credit
insurance. Only the Department of Banking and Insurance has
authority to enforce its provisions, which it may do through an
order issued after a hearing. N.J.S.A. 17B:29-12.
Defendant asserts that those four statutory schemes subject
it to substantial regulation by the Department of Banking and
Insurance such that additional regulation by the Division of
Consumer Affairs and by private civil actions would give rise to
a "real possibility" of conflict. We disagree. All four of the
statutes have, at least in part, the same general goal as the
CFA, namely, the prevention of fraud and misrepresentation in the
sale of credit and/or insurance. The IPLA, ITPA, and CLHIA allow
the Department of Banking and Insurance to define certain unfair
or fraudulent practices and to take steps to eliminate those
practices. Of note, the ITLA states that its remedies are
cumulative. N.J.S.A. 17B:30-21. Moreover, the IPLA has been
applied after a finding of CFA liability by a jury. Conte,
supra,
92 N.J.A.R 2d (INS) 17. The CLA provides the Department
of Banking and Insurance with similar authority, while also
creating a private cause of action allowing for cancellation of
the loan contract and an award of damages unless the lender can
show that it has acted in good faith.
The CFA simply complements those statutes, allowing for
regulation by the Division of Consumer Affairs and a private
cause of action to recover damages. The damages cause of action
in no way inhibits enforcement of the other statutes, because a
court can assess damages in addition to any other penalty to
which a defendant is subject. See ibid. Conflicting
applications of the respective statutes and regulatory schemes
can be avoided if courts are cognizant of the obligations created
by other statutes and if they interpret the scope of the broad
language of the CFA so as not to impose conflicting duties or
duplicative financial obligations on the regulated party. Cf. 49
Prospect Street, supra, 227 N.J. Super. at 467 (noting that
courts should not allow double recovery when CFA and other
remedial statute apply to same conduct).
Our administrative law recognizes procedures by which
agencies and courts with overlapping jurisdiction can coordinate
the exercise of their regulatory and adjudicatory
responsibilities. Recognizing the potential for conflict when
more than one administrative agency is charged with a particular
statutory regulatory duty, agencies must harmonize the exercise
of their jurisdiction so as to further that common goal. See
City of Hackensack v. Winner,
82 N.J. 1, 34-35 (1980) (noting
that agencies in successive proceedings generally would be bound
by principles of comity, res judicata, and other similar
doctrines in order to assure consistent regulatory results);
Hinfey, supra, 77 N.J. at 532 ("Comity and deference to cognate
tribunals are designed to assure that a controversy, or its most
critical facets, will be resolved by the forum or body which, on
a comparative scale, is in the best position by virtue of its
statutory status, administrative competence and regulatory
expertise to adjudicate the matter."); Taylor v. Englehard
Indus.,
230 N.J. Super. 245, 253 (App. Div. 1989); accord Balsley
v. North Hunterdon Bd. of Educ.,
117 N.J. 434, 444-45 (1990)
(noting that an agency that has deferred the exercise of its
jurisdiction subsequently can resolve issues that the agency
retaining primary jurisdiction did not or could not resolve).
We thus have a legal and administrative framework for
situations in which more than one agency possesses jurisdiction
to take administrative action regarding the same regulated party
or activity. Should the broad application of the CFA implicate
the jurisdiction of more than one agency, those agencies should
utilize that framework to resolve the conflict in an orderly and
efficient manner. We believe that, in the vast majority of
cases, it will be clear which of the agencies has primary
jurisdiction. Once the other agency defers and the primary
agency takes action, the deferring agency can take further action
as may be necessary or appropriate to award any additional or
complementary remedial relief. See Balsley, supra, 117 N.J. at
444-45. That understanding of shared government responsibility
should be evident in the field of consumer protection. See
Conte, supra,
92 N.J.A.R 2d (INS) 17 (fining and revoking license
of insurance agent because of violation of IPLA and recognizing
that insurance agent had been held liable by jury under CFA).
Despite the existence of overlapping agency authority for the
enforcement of the CFA, we are satisfied that the Division of
Consumer Affairs and the Department of Banking and Insurance will
be able to coordinate their regulation of loan packing so as not
to subject lenders to conflicting duties and duplicative
regulatory burdens.
Moreover, a court entertaining a private cause of action
under the CFA might, in its discretion, defer to an agency that
legitimately has exercised its jurisdiction. The court may stay
proceedings until the agency has made factual determinations and
awarded relief; if the relief is less than what the court is
empowered to award, the court may resume its proceedings after
the agency has completed its own. Cf. Boss v. Rockland Electric
Co.,
95 N.J. 33, 39-42 (1983) ("[W]here the resolution of a
contested legal issue properly brought before a court necessarily
turns on factual issues within the special province of an
administrative agency, the court should refer the factual issues
to that agency. The trial court should accept the factual
determinations of the agency and lay them against the legal
issues to be resolved and enter its final judgment resolving the
mixed questions of law and fact based upon the agency fact
finding.").
We are confident that the courts and agencies charged with
enforcement of the various laws designed to protect consumers
from unscrupulous practices will be able and willing to
coordinate their enforcement responsibilities in a constructive
and flexible manner to further the clear policy of consumer
protection that the Legislature has announced through a variety
of statutory mechanisms.
We affirm the judgment of the Appellate Division reinstating plaintiff's CFA claim and remand the cause to the Law Division for further proceedings consistent with this opinion.
JUSTICES POLLOCK, O'HERN, GARIBALDI, STEIN and COLEMAN join in JUSTICE HANDLER'S opinion. CHIEF JUSTICE PORITZ did not participate.
NO. A-107 SEPTEMBER TERM 1996
ON APPEAL FROM Appellate Division, Superior Court
ON CERTIFICATION TO
JEANNE C. LEMELLEDO, on behalf of herself
and all others similarly situated,
Plaintiff-Respondent,
v.
BENEFICIAL MANAGEMENT CORP. OF AMERICA
and BENEFICIAL NEW JERSEY, INC.,
Defendants-Appellants.
DECIDED July 3, 1997
Justice Handler PRESIDING
OPINION BY Justice Handler
CONCURRING OPINION BY
DISSENTING OPINION BY
Footnote: 1 On January 8, 1997, the Governor signed the New Jersey