lender liability

Consumer Fraud Whistleblowers Wanted

The Michigan Supreme Court just breathed new life into the state’s once-aggressive Consumer Protection Act (“MCPA”).

From 1999 until last week (July 31, 2026), the MCPA was almost entirely toothless. Even if the MCPA prohibited a deceptive or fraudulent business practice–it outlawed many dishonest billing, advertising, and sales scams–a business holding any sort of business license typically couldn’t be sued successfully under the Act. This was because, in 1999 an activist, “business-friendly” Michigan Supreme Court interpreted a subsection of the Act to mean it did not apply to any licensed industry. Almost every business is legally required to have a state license in Michigan: health care providers, car dealers and service shops, gas stations, banks, chiropractors, lawyers, accountants, child care providers, even barbers. The act was effectively dead.

In a new decision released last week, Attorney General v. Eli Lilly & Co., the Michigan Supreme Court found that licensed businesses can be liable under the MCPA for fraudulent and deceptive practices. This was a common-sense reading of the text of the MCPA itself, which the court acknowledged had been wrongly interpreted in the 1999 decision and cases following it.

The MCPA contains broad prohibitions of deceptive trade practices:

1. Misrepresenting the identity, origin, or quality of what’s sold — false claims about source, sponsorship, certification, geographic origin, ingredients, benefits, grade, style, or passing off used goods as new; also disparaging a competitor by false statements of fact. § 903(1)(a)–(f)

2. Deceptive advertising, pricing, and inducements — advertising with no intent to sell as represented, bait advertising without a quantity disclosure, phony price-reduction claims, “free” offers with buried conditions, rebates contingent on post-closing events, and prize offers tied to sitting through a sales pitch. § 903(1)(g)–(i), (r), (w), (ff)

3. Manufactured need and high-pressure tactics — claiming a repair or replacement is necessary when it isn’t, fabricating a home defect that endangers the family, delivering unrequested goods as though they were ordered, and coercion through the timing and nature of a sales presentation. § 903(1)(j)–(l), (aa)

4. Obscuring legal rights, credit terms, and warranties — creating confusion about a party’s rights, obligations, or remedies, about credit terms, or about a salesperson’s authority to close; unconspicuous warranty disclaimers; unknowing waivers of statutory rights; and having the consumer sign acknowledgments the merchant knows to be false. § 903(1)(m)–(p), (t), (v)

5. Material omissions and false impressions — failing to disclose a material fact the consumer couldn’t reasonably discover, failing to disclose facts made material by the seller’s own affirmative representations, and any statement that leaves the consumer reasonably believing the state of affairs is other than it is. § 903(1)(s), (bb), (cc)

6. Failure to deliver what was promised — promising prompt or timely performance the merchant knows won’t happen, gross discrepancies between oral pitch and written contract, failure to provide promised benefits, and failure to promptly refund deposits or release security interests after cancellation. § 903(1)(q), (u), (y)

7. Exploiting vulnerability and grossly excessive pricing — taking advantage of a consumer’s disability, illiteracy, or inability to understand the language of the agreement, and charging a price grossly in excess of market. § 903(1)(x), (z)

8. Violations of specific statutory mandates — environmental and “degradable/recyclable” marketing claims, home and telephone solicitation rules, conditioning a sale on disclosure of a Social Security number, card-receipt truncation, identity theft protection act violations, misleading tribute-band billing, and the Act’s own cross-referenced sections. § 903(1)(dd)–(ee), (gg)–(ll)

Some of these practices also violated other laws. But the MCPA came with a powerful private enforcement mechanism: unlike other laws prohibiting the same misconduct, the MCPA required the offending business to pay the attorney fees of the defrauded consumer. This was designed to incentivize lawyers to take consumer fraud cases to court, and to enable consumers to hire attorneys even when there were not huge amounts of money at issue. No one in their right mind would pay an attorney $400 per hour to sue a company over a $900 overcharge, even if the overcharge was outright fraudulent. But if the offending business had to pay those attorney fees, that’s a game changer. The MCPA tilted the field in favor of the consumer to keep Michigan’s consumer-facing businesses honest.

For more than 25 years, the MCPA was ineffective. Unscrupulous business owners and executives knew it was ineffective, and consumers were defrauded and deceived by businesses at an alarming and increasing rate. From inscrutable and misleading medical bills to systematically denied insurance claims and everything in between, consumers were mostly out of luck when it came to holding a bad business accountable. A lawyer wouldn’t take your case unless the amount of money you lost was either six figures or more and a slam-dunk case, or you agreed to pay their hourly rate–typically hundreds of dollars per hour. Consumer lawsuits were few and far between, relying on sparse federal consumer laws that only applied to a narrow set of transactions.

That changes now. After the Eli Lilly decision restoring the MCPA prohibitions, we as consumer protection attorneys, and you as consumers and insiders, have the opportunity to make Michigan a place where honesty and fairness are expected, are the norm. A place where deceiving consumers to get their money is rare, but is punished appropriately when it occurs.

Consumer fraud and deceptive practices are often hard for the consumer to even identify. Confusing language in agreements, fast talking, misdirection and outright lies may prevent the consumer from knowing anything about how it is they’re being cheated. But they’re left with the conviction that the business they’ve dealt with cheated them and it has cost them money.

Sometimes consumer fraud and deception are systematic within a business organization–known to insiders but difficult or impossible for the consumer to find out on their own. Unscrupulous businesses may train employees to fudge numbers, change a billing code, charge the client for a service not provided, use a deceptive sales pitch, or otherwise cheat, in ways that unfairly cost the consumer money. Some businesses may incentivize such misconduct through their compensation structure, and look the other way as employees deceive consumers by not performing work the consumer paid for them to perform.

These are only a few examples, but they point up an important truth: insiders–people with detailed knowledge of a deceptive or fraudulent business practice–have been given a potent tool to bring an end to that practice. In short, if you’ve had enough of your employer cheating the individuals and families it deals with, the restoration of the MCPA means that firms like Westbrook Law PLLC can represent the defrauded consumers–in individual cases or class actions–and bring lawsuits to punish the bad business. Those lawsuits sometimes bankrupt the business; in other instances, the business may survive but end the practice.

Enforcement of the MCPA, if done thoroughly, will result in better, more honest and transparent businesses that serve their customers better, statewide, over the long run. Can you imagine a day-to-day life in which you didn’t routinely feel like a business was trying to scam you? That is our vision at Westbrook Law, one case at a time.

If you have detailed knowledge of a deceptive, unfair, or fraudulent business practice that involves consumer transactions, we would love to hear from you. Contact Us

Michigan’s Consumer Protection Act Is Back

After more than 25 years, the Michigan Supreme Court has restored the state’s most important consumer protection statute

On Friday, July 31, 2026, the Michigan Supreme Court did something consumers and the lawyers who represent them have been waiting on for the better part of my career. In Attorney General v Eli Lilly and Company, the Court overruled two decisions — Smith v Globe Life Insurance Co (1999) and Liss v Lewiston-Richards, Inc (2007) — that had quietly reduced the Michigan Consumer Protection Act to something close to a dead letter.

What the MCPA was supposed to do

The Legislature passed the Consumer Protection Act in 1976, and it was aggressive by design. It bans “[u]nfair, unconscionable, or deceptive methods, acts, or practices in the conduct of trade or commerce,” then lists specific prohibited practices — false claims about why a price was reduced, charging a price “grossly in excess” of what similar goods sell for, and many more.

Two features gave the Act teeth. It can be enforced both by the Attorney General and by ordinary consumers filing their own suits. And it shifts fees: a consumer who proves a violation recovers actual damages or $250, whichever is greater, plus reasonable attorney fees. MCL 445.911(2).

That last part matters more than it sounds. A $900 loss is a real injury to the person who suffered it, but nobody can afford to pay a lawyer by the hour to chase it. Fee shifting is how the Legislature made sure the size of the harm doesn’t decide whether a person can find counsel.

How the statute was hollowed out

The Act exempts “[a] transaction or conduct specifically authorized under laws administered by a regulatory board or officer.” MCL 445.904(1)(a). (Emphasis added.) Read naturally, that is narrow: if a regulator blessed the very conduct you’re complaining about, you can’t call it deceptive.

Smith read it differently. The question, the Court said in 1999, is not whether the specific misconduct was authorized, but whether the general transaction was — regardless of whether the misconduct itself is prohibited. Liss extended that reasoning in 2007 to licensed residential home builders.

The consequence was predictable, and Justice Michael F. Cavanagh predicted it in dissent: most businesses selling to consumers hold some license or operate under some regulatory scheme. If a general license is enough, most of them are immune.

That is exactly what followed. Courts applying Smith and Liss held the MCPA inapplicable to home builders, car dealers, car makers, mortgage lenders and servicers, real estate agents, plumbers, doctors, grocery stores, casinos, and pesticide applicators. The mere existence of a license became enough to immunize a defendant, with no inquiry into whether the misconduct had anything to do with what the regulator actually authorized. The perverse result: the more heavily regulated the industry, the more complete its protection.

What the Court held

The case grew out of the Attorney General’s investigation into Eli Lilly’s insulin pricing. Anticipating that Lilly would raise the exemption, the AG asked the courts to declare up front that Smith and Liss did not bar the investigation. The circuit court and the Court of Appeals both said the MCPA didn’t apply, because selling pharmaceuticals is a regulated activity.

The Supreme Court reversed. Writing for a four-justice majority, Justice Noah Hood pointed out that the word “general” appears nowhere in the statute — Smith and Liss had inserted it while writing “specifically authorized” out. The correct question is whether the specific conduct at issue was authorized by law, not whether the industry is regulated.

The Court found no sufficient reason to preserve the two decisions. They had made much of the MCPA “completely unworkable,” and a business’s interest in relying on them to deceive consumers, the Court said, “is not a valid reliance interest.”

Three justices dissented, but on standing grounds only; they expressly took no position on whether Smith and Lisswere rightly decided.

One caution: the Court did not hold that Eli Lilly violated the MCPA. It held that the exemption no longer closes the door before anyone gets to ask.

Why this matters

I have spent almost twenty years litigating consumer protection cases in Michigan, and in most instances, the MCPA has been a statute I had to explain to clients rather than use. A business would deceive someone, we would look at the Act, then look at Smith and Liss, and go find another theory — often there was no fee shifting to go along with the workable theories, which meant no case at all.

That changes now. Michigan consumers again have a statute that reaches deceptive conduct by regulated businesses, and Michigan lawyers again have the fee-shifting provision that makes those cases possible to bring. Not every claim will win; the exemption still exists and still applies where a regulator genuinely authorized the conduct at issue. But the threshold question is no longer “is this defendant licensed?” It is “was this conduct specifically authorized?” For most deceptive practices, the answer is no.

I am glad to have this tool back.

If you believe a business has treated you unfairly or deceptively, Westbrook Law would like to hear from you. Claims that were foreclosed for the last quarter century may now be viable. Get in touch through our contact page: https://westbrook.law/contact/

Federal Court Rejects PNC Bank’s Bid to Dismiss Consumer Class Action – Case Update

In February of 2020, Westbrook Law PLLC filed a class action complaint against PNC Bank, captioned Polonowski v. PNC Bank, N.A. The complaint alleges that, contrary to specific requirements of the federal Truth in Lending Act (“TILA”), PNC Bank routinely fails to send consumers periodic loan statements if they are going through a bankruptcy, even if the consumers have reaffirmed their mortgage debts to PNC. The complaint alleges that this practice harms consumers by preventing them from receiving notice of interest rate changes, minimum payment amounts, remaining balance, and other critical information.

In May of 2020, PNC filed a motion to dismiss the complaint, arguing that PNC could not be liable for violating TILA because PNC would have “violated federal law” if it had provided periodic loan statements. PNC argued that the automatic stay provided in the bankruptcy code prohibited the sending of any loan statements, even after the plaintiffs’ loan had been reaffirmed and the plaintiffs’ remaining debts had been discharged. On behalf of the plaintiffs, Westbrook Law opposed the motion to dismiss.

The presiding district judge, Hon. Paul L. Maloney, referred PNC’s motion to the magistrate judge for a report and recommendation. The magistrate judge sided with PNC and recommended the court grant the motion to dismiss. The plaintiffs objected and requested that Judge Maloney conduct a fresh review of the motion.

Today, Judge Maloney issued the court’s opinion, rejecting the report and recommendation and denying PNC’s motion dismiss. The court emphasized that once a discharge order has entered in a bankruptcy case, the bankruptcy code does not prohibit the sending of statements regarding a reaffirmed debt. The court further found that the Real Estate Settlement Procedures Act (“RESPA”) could not be narrowed by its implementing regulations (“Regulation X”), and thus the plaintiffs’ secondary claim that PNC unlawfully failed to correct servicing errors brought to its attention was viable and could not be dismissed.

As a result of today’s decision, the case against PNC will move forward. Westbrook Law hopes to hold PNC accountable for habitual violations of TILA, obtain compensation for a class of consumers affected by these practices, and ultimately force PNC and other lenders to provide critical financial information to consumers.

TJW

Mortgage Servicer Disregarded Loan Modification Agreement and Is Liable for Debt Collection Abuses, Federal Court Finds

The United States District Court for the Western District of Michigan issued an important published opinion early this month in the case of Macholtz v. Carrington Mortgage Services, LLC, finding, after a “journey through a thick summary judgment record” that detailed a “15-year struggle between plaintiff and a series of lenders,” that the mortgage servicer defendant’s refusal to acknowledge a loan modification agreed to by its predecessor made it liable to the consumer plaintiff under various state and federal consumer protection laws. The lawsuit, filed in early 2019 by Westbrook Law PLLC in Grand Rapids, Michigan, seeks damages for the plaintiff and to unwind a foreclosure sale.

The lawsuit challenged the conduct of the mortgage servicer, Carrington Mortgage Services, LLC, and the bank it worked for, Wilmington Savings Fund Society FSB. Carrington qualified as a “debt collector” under the Fair Debt Collection Practices Act (“FDCPA”) because it began servicing the mortgage after the predecessor servicer, CitiMortgage, had declared a default. CitiMortgage had also previously entered into a modification agreement with the plaintiff, but failed to ever “on-board” the modification or acknowledge its existence. Eventually, after demanding to be paid huge sums of money that were not justified under the modified terms of the loan, Carrington and Wilmington foreclosed on the plaintiff’s Berrien County home, which he had owned for 22 years.

The lawsuit alleged violations of the Real Estate Settlement Procedures Act (“RESPA”); Truth in Lending Act (“TILA”); FDCPA, Michigan Mortgage Brokers, Lenders and Servicers Licensing Act (“MBLSLA”); Michigan Regulation of Collection Practices Act (“MRCPA”), and common-law wrongful foreclosure and breach of contract. The court found violations of TILA, FDCPA, MBLSLA, and MRCPA on the part of Carrington and Wilmington and set the case for trial regarding damages and other remedies.

Consumer advocates in Michigan have often lamented the erosion of protections for homeowners under state and federal law over the last 20 years. It is true that consumers in Michigan have fewer protections than they did during the 1980s and 1990s. However, while holding mortgage servicers and banks accountable remains challenging, the Macholtz opinion shows that the remaining federal and state protections can be potent tools for redressing consumer abuses.

TJW

Westbrook Law PLLC Notches Win in Wrongful Repossession Trial/Westbrook Law of Grand Rapids, Michigan

After a trial in December of 2017, the Montcalm County Circuit Court ruled in favor of the defendant and counter-plaintiff, represented by Westbrook Law PLLC, in a case that began as a $5,000.00 deficiency claim by the plaintiff/counter-defendant car dealer, and ended with a judgment against the car dealer for more than $10,000.00.

The case, Powers v. Brown, resulted from the dealer’s claim that the buyer missed an installment payment on his auto loan, thus entitling the dealer to repossess the vehicle and collect a deficiency balance on the loan. However, the evidence introduced at trial showed that the dealer had no contractual right to repossess the vehicle. Relying on Michigan’s conversion statute, M.C.L. § 600.2919a, Westbrook Law PLLC argued on behalf of the buyer that the dealer was liable for damages. The court (J. Schafer) agreed, finding that the dealer was liable for double damages and attorney fees.

TJW

Banks and Stolen Money/Westbrook Law of Grand Rapids, Michigan

It is surprisingly common for company bookkeepers, controllers and accountants to steal company funds and funnel the money to their banks and other creditors. Today’s Ponzi schemes (think Bernie Madoff, or the closest local analogue, CyberNET) also cannot survive without using bank services like credit accounts, deposit accounts and wire transfer facilities. More than once in my practice I have faced the questions: when the fraudster no longer has the ill-gotten funds, what can the victim do? Do the banks and other creditors have to account for the stolen funds? These are simple questions with complex answers.

In the case of CyberNET (also called Cyberco), the company was engaged in a Ponzi-like scheme amounting to a $100 million fraud on its creditors, mostly consisting of equipment leasing companies. CyberNET’s line bank, Huntington National Bank, saw warning signs that CyberNET’s business was not what it appeared to be. It even went so far as to tell CyberNET to find a new bank, and negotiated accelerated paydowns of its $17 million line of credit to CyberNET. That credit line was fully repaid just before an FBI raid of the company effectively shut it down. The creditors left holding the bag asked the question: would Huntington have to account for any of the tens of millions it received that were proceeds of the fraud? The answer was yes, but not without a complicated and protracted legal fight.

Michigan law and the bankruptcy code each provide specific means of recovering stolen money and fraudulent transfers of funds. In Huntington’s case, while the bank successfully defended claims that it had “aided and abetted” the CyberNET fraud, it ultimately lost in an adversary proceeding in bankruptcy court on theories of avoidance of fraudulent transfers. These theories depended upon the bank failing to prove that it accepted the illegitimate funds “in good faith.” The judgment against Huntington, totaling over $80 million, is currently on appeal to the Sixth Circuit.

An avoidance theory may also be useful outside the bankruptcy context, where defrauded parties may be able to make use of Michigan’s Uniform Fraudulent Transfers Act to pull back ill-gotten funds that were subsequently transferred to a bank, creditor or another. In that instance, the pivotal questions are again the recipient’s “good faith,” along with an inquiry whether the recipient “gave value” for the transfer.

Even negligence and unjust enrichment theories may be relied upon to hold recipient of stolen or fraudulently obtained funds accountable. In Michigan, for example, a common-law “duty of inquiry” exists whereby a bank must conduct a “reasonable inquiry” to ensure that when it receives funds from a third party that does not owe it money (through, e.g., a company check stolen by its bookkeeper), that the presenter is authorized to use those funds. Otherwise, it accepts third-party funds at its own peril. It cannot simply look the other way and accept what it should know are stolen or ill-gotten funds.

Litigating against banks is never a simple proposition, and should not be done lightly. Banks are accustomed to fighting lawsuits and can afford teams of skilled attorneys. However, in the right case, and pursuing the right legal strategy, they are not untouchable–as the Huntington case clearly shows.