SCOTUS Hears Argument in Critical TILA Rescission Case

On November 4, 2014, the U.S. Supreme Court heard oral arguments in Jesinoski v. Countrywide, Docket No. 13-684, a Truth in Lending Act case arising from the Eighth Circuit.

The Truth in Lending Act (“TILA”) is a comprehensive consumer protection statute that regulates the disclosure and, to a lesser extent, the substance of consumer loans. One of its most powerful provisions creates the right for consumer borrowers to rescind refinanced or second mortgages secured by their primary residence for any reason within three days after closing, or for up to three years post-closing if material disclosures are not given or are inaccurate. At issue in Jesinoski is whether merely mailing a notice of rescission within three years of closing a loan is sufficient to “exercise” the right to rescind under 15 U.S.C. § 1635(a) or, alternatively, whether a borrower who wants to rescind the loan must file a lawsuit within the three-year statutory period.

The case has garnered considerable attention from the banking industry and consumer advocates because it stands to resolve a circuit split. The Third, Fourth and Eleventh Circuits have ruled that mailing a letter notifying the creditor of the borrower’s intent to cancel within the three-year period is enough exercise the right to rescind. Conversely, our Circuit, the Ninth, and the First, Sixth, Eighth, and Tenth Circuits hold that the three-year period set forth in 15 U.S.C. §1635(f) to exercise the “right of rescission” requires a borrower to file a lawsuit within three years of consummation of the loan. Because resolution of this and related TILA rescission issues is so critical to preserving borrowers’ rights, six of amicus briefs have been filed.

Those interested in following the progress of Jesinowski can subscribe to updates on the SCOTUSblog website at

Bushing Scams, Yo-Yo Sales, and Spot Delivery of Vehicles

By: Jeremiah Ross

I often get frantic calls from people who have recently purchased and financed a vehicle.  These people are asking for help because the dealer is claiming the consumer must return to the dealership and sign additional financing documents with terms less favorable to the consumer.   Consumers are confused and angry when they learn the financing fell through and the dealer no longer has their trade-in to return to them.   Most of the time these consumers are victims of a bushing scam.  These bushing scams are also known as “spot delivery” or yo-yo sales.

Here is the way bushing scams typically work.  The dealer will sell a person a car and offer to finance the vehicle.  The consumer signs financing paperwork and takes the vehicle home.  Usually the consumer is under the impression the financing is complete and the vehicle is theirs.   Unbeknownst to the consumer, after the consumer leaves the lot the dealer is still attempting to find a finance company to finance the vehicle.  Consumers may receive credit denial letters in the mail, but think it is in error because the dealer told them the vehicle was financed.  Eventually, the dealer contacts the consumer and informs them financing could not be obtained.  The scam is complete when the dealer has the consumer agree to new less favorable financing terms for the vehicle.  This often results in the consumer paying a higher interest rate and putting an additional down-payment down on the vehicle.

The dealer benefits from this transaction because the consumer is usually under the impression the vehicle was theirs the day they drove it off the lot.  Consumers have often put money into the vehicle to buy things like floor mats, a stereo, or other items.  As a result, they feel trapped and will sign new less favorable financing terms.  Additionally, dealers may inform the consumer that their trade-in has been sold and the dealer does not have “authority” to refund their down-payment.  These are frustrating issues for consumers and practitioners alike.  However, in Oregon there are laws to protect consumers in these situations.

Below is a list of questions and answers to assist practitioners and consumers that are facing a spot delivery issue:

Is Spot Delivery Legal In Oregon? Yes, but dealers must comply with ORS 646A.90 and OAR 137-020-0020 (3)These requirements allow dealers to make an offer to sell or lease a vehicle to a consumer that is subject to future acceptance by a lender.  ORS 646A.90 (2)

How long does a dealer who spot delivers a vehicle have to obtain financing for the vehicle? A dealer must find financing for the vehicle under the exact terms negotiated between the dealer and consumer within 14 days after the date on which the buyer takes possession of the vehicle. ORS 646A.90 (3) (a)

What happens to a Consumer’s trade-in in a spot delivery deal?  In a spot delivery deal, the dealer cannot sell or lease the consumer’s trade-in before the dealer has received final approval of funding from the lender. ORS 646A.90 (3) (b) 

Can a dealer offer to obtain financing for a vehicle knowing that the financing will not be approved?  No, a dealer cannot spot deliver a vehicle to a consumer unless the dealer has a “reasonable basis to believe the consumer could qualify for the terms of financing quoted at the time of delivery.137-020-0020 (3) (x)  This is a powerful rule that consumers with horrible credit can use when the dealer initially has them sign a retail installment contract or lease with a low interest rate and little money down.

Does a dealer that fails to finance a spot delivered vehicle have to tell a person why the financing fell through? Yes, if a dealer spot delivers a vehicle and fails to obtain financing under the original terms, the dealer cannot make a misrepresentation regarding why the consumer does not qualify for the original financing terms or misrepresent why the transaction cannot be completed under the original terms. 137-020-0020 (3) (y)  This rule prohibits dealers from calling the consumer back to the lot to sign new less favorable financing terms, even after the consumers original terms were approved by the lender.

What does the dealer have to do if they cannot obtain financing for the vehicle under the original terms?

A dealer that spot delivered a vehicle to a consumer and later learns the consumer does not qualify for the original terms must do the following prior to offering, negotiating, or entering into new terms for the purchase or lease of the vehicle:

  1. Inform the consumer that the consumer is entitled to have all items of value received from the consumer as part of the transaction, including any trade-in and down payment, returned to the consumer.


  1. If the consumer is physically present when the dealer informs the consumer that the consumer does not qualify for the terms offered, the dealer must return all items received from the consumer as part of the transaction. The dealer must have a refund check and the Trade-In keys immediately available.


  1. If the dealer informs the consumer by telephone, text, e-mail, letter, or other means without the consumer present, that the consumer did not qualify for the terms offered. The dealer must clearly disclose the consumer’s right to receive the immediate return of all items of value, i.e. trade in and down payment, when the consumer returns the vehicle.  The consumer must have the actual ability to obtain these items of value and the dealer cannot simply inform them of their right to receive these items back. The dealer must have a refund check and the Trade-In keys immediately available.  Dealers usually have a difficult time complying with this law as they usually sell the consumers trade-in prior to obtaining the financing.

Dealers shall inform consumers of these options and cannot hold the trade-in and down payment for ransom to have the consumer enter into a less favorable financing agreement.  The Commentary 137-020-0020 (3) (z)  makes it clear; “The consumer has an absolute right to walk away from the deal if the original offer is not going to be honored.”  137-020-0020 (3) (x); See Also, ORS 646A.90 (4)

In a failed Spot Delivery, can the dealer charge the consumer for vehicle damage and the mileage the consumer put on the vehicle? Yes, but only if the offer or contract to sell the vehicle provided in writing that the buyer is liable for: the fair market value of damage, excessive wear and tear, or loss of the motor vehicle while the vehicle is in the consumer’s possessionAdditionally, if within 14 days of that date the buyer takes possession of the vehicle the seller sends notice to the buyer by first class mail that financing is unavailable, the dealer may charge for mileage the buyer put on the vehicle.  ORS 646A.90 (4) (b) explains how the mileage is computed and notes, “The [mileage] charge may not exceed the rate per mile allowed under federal law as a deduction for federal income tax purposes for an ordinary and necessary business expense.” ORS 646A.90 (4) (b).

The above list is not exhaustive as many other statutory violations often occur during bushing scams.  However, each situation is unique and these statues and rules are helpful in guiding the practitioner and consumer who is facing a spot delivery issue.  ORS 646A.90  and 137-020-0020 (3) do not explicitly state a consumer has a right of action to sue under these statutes and rules.  However, a creative practitioner can use these laws as a basis for a claim for relief.

Please remember the law is constantly changing and you should refer to the statute and applicable case law before relying on any of the information in this post.

Judge Orders Mortgage Company to Accept Title to Surrendered Home

A new Oregon court opinion may provide relief to consumers still struggling to recover from the housing crash of 2008.
Bankruptcy Opinion
Last week’s ruling in In re Watt forced a senior lien holder to accept title to a home surrendered in chapter 13 bankruptcy.

Under Oregon property law, even after a home is surrendered, its owner remains liable for HOA dues incurred until foreclosure.

“Many people aren’t able to move on with their financial lives, even though they walked away from their homes years ago,” says Oregon bankruptcy attorney Rex Daines. “They’re stuck paying HOA dues on surrendered homes because their banks refuse to foreclose.”

Until last week, homeowners in limbo had no legal way to force their banks to accept title to surrendered property. The new In re Watt opinion may change that.

The opinion, written by Judge Trish Brown, acknowledged that, “– in this post-2007 world, debtors may find themselves in a position where lenders are reluctant to foreclose on their collateral, particularly where foreclosure would obligate the lender to pay homeowner association assessments that run with the property.”

She continued, “It reminds me of the old adage of the dog in the manger. The dog cannot eat the hay but refuses to let the horse or the cow eat it either. BONY Mellon would rather sit on the hay. This creates a stalemate.”

Judge Brown reasoned that the Bankruptcy Code contained no express language requiring a mortgage company’s consent to accept title. “In the absence of such language, I find that a plan which provides for vesting of property in a secured lender at time of confirmation may be confirmed over the lender’s objection.”

The ruling is the first of its kind in Oregon, and only one of a few across the country. Bankruptcy courts in Hawaii (In re Rosa) and North Carolina (In re Rose) have reached similar conclusions, but neither court held that a bank can be forced to take a title back under protest.

CFPB and FTC File a Joint Amicus Brief Requesting Deference to the Agencies’ Interpretation of the FDCPA Validation Notice Requirement

Agencies seek to maintain Congress’s vision of applying the validation process to each subsequent collector of a consumer debt

By John Adams

On August 20, 2014, the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) filed a joint amicus brief in an appeal of a Fair Debt Collection Practices Act (FDCPA) case in the United State Court of Appeals for the Ninth Circuit. The case, Maria Hernandez v. William, Zinman & Parham, P.C., focuses on the FDCPA’s debt validation notice process well known to the consumer law bar and concerns the interpretation of which communication qualifies as a debt collector’s “initial communication” under 15 U.S.C. § 1692g(a). According to the agencies, the Ninth Circuit has not previously defined the phrase.


In cross motions for summary judgment filed in the U.S. District Court for the District of Arizona, the issue became whether the statutory language of § 1692g(a) obligated the defendant (debt collector) to comply with the requirements of the validation notice process[1] if the defendant’s communication to the plaintiff was not the initial communication that the plaintiff received about the alleged debt. The defendant’s argument, which the district court adopted, reasoned that since an earlier, initial debt collector’s communication to plaintiff activated the §1692g requirements, defendant’s communication—sent as a subsequent debt collector—was not subject to the validation notice requirements. The district court reached this conclusion by determining that the statutory language suggested that there would be only a single initial communication, and that subsequent debt collectors—by their later-in-time status unable to be considered the sender of the initial communication to the consumer about the debt—were not responsible for sending the statutory validation notice.

In granting summary judgment for defendant, the district court’s plain text interpretation of the section anticipates only one initial communication, thereby releasing subsequent debt collectors from the requirements of the debt validation process. This has obvious adverse implications for consumers attempting to challenge the validity of debts which may have been sold multiple times before collection begins in earnest.

The Bureau and Commission’s argument for the reversal of the district court takes a two-prong approach, beginning with a textual analysis that emphasizes the consistently broad meaning given to “a debt collector” and the absence of an “initial” limitation that the district court mistaken inserted into the broader phrase that Congress actually used in the statute. The agencies seek to clarify that statute’s use of the phrase “the initial communication” has been read to mean each debt collector’s intial communicaiton with a consumer, and that interpretation is the most likely one in light of the legislative history that demonstrates that Congress’s purpose for enacting §1692g was to end the frustrating issue of debt collectors collecting the wrong payments from incorrect individuals.

Lastly, the agencies’ brief reminds the Court that as the federal agencies responsible for enforcing the FDCPA, their reasonable construction of the statute deserves great weight in the Court’s ultimate interpretation of the statutory language.

The Bureau and Commission’s Joint Amicus Brief

The District Court’s Memorandum of Decision and Order

[1] The validation notice process under 15 U.S.C. §1692g(a) involves the following:

Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing—(1) the amount of the debt; (2) the name of the creditor to whom the debt is owed; (3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector; (4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of the judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and (5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.

Ninth Circuit Determines that Website’s Terms of Use Requiring Arbitration is Unenforceable

By David Venables

On August 18, 2014, the 9th Cir. Court of Appeals issued its opinion in Nguyen v. Barnes & Noble.  The Plaintiff, Nguyen, filed a lawsuit in California Superior Court on behalf of himself and a putative class of consumers whose HP Touchpad orders had been cancelled, alleging that Barnes & Noble had engaged in deceptive business practices and false advertising in violation of both California and New York law.  Barnes & Noble removed the action to federal court and moved to compel arbitration under the Federal Arbitration Act (“FAA”), arguing that Plaintiff was bound by the arbitration agreement on the Barnes & Noble website’s Terms of Use.  The issue before the 9th Cir. was whether Nguyen, by merely using Barnes & Noble’s website, agreed to be bound by the Terms of Use, even though Nguyen was never prompted to agree to the Terms of Use and never in fact read them.


•Plaintiff  had insufficient notice of Barnes & Noble’s Terms of Use, and thus did not enter into an agreement with Barnes & Noble to arbitrate his claims.

•There was no evidence that the website user had actual knowledge of the agreement.

•Where a website makes its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on – without more – is insufficient to give rise to constructive notice

New study indicates that 1/3 of Americans have at least one debt in collections and the average Oregonian is $60,752 in debt- the 9th highest average in the nation

By Kelly D. Jones,

debt-final notice image for blog

More than one-third of Americans (35%) have a debt in collections, according to a study recently released by the Urban Institute. That means just about every third person you pass by on the street is dealing with a collection company in regard to a delinquent debt.

Just about one out of every three Oregonians is also dealing with a debt collector. The same study found that 30.5% of Oregonians have a debt in collections, with the amount averaging $5,456. The national average amount of a debt in collections is $5,178. The national average debt is $53,850. The average Oregonian is $60,752 in debt, the ninth highest in the nation. Only 20% of Americans with credit records have no debt at all.

Debt in collections often originates from nonpayment of a bill, including failing to make payments on an outstanding credit card balance, not paying medical or utility bills, or even not paying a parking ticket. After a debt is more than 180 days past due, it is typically placed in collections by the original creditor or sold to a third-party debt buyer. What the report reveals beyond the numbers is the daily financial distress millions of Americans are living under, as well as the degree of that distress.

The collections industry recovers approximately $50 billion annually, mostly from consumers, according to a study published this year by a Federal Reserve branch research group. Thus while everyday Americans may be struggling, the collections industry is booming and cashing in on the situation. Debt collectors are regulated by the federal Fair Debt Collection Practices Act (FDCPA), among other state specific statutes, such as Oregon’s Unlawful Debt Collection Practices Act (UDCPA).

Ninth Circuit Rules on Viability of Rescission Claim under TILA

By David Venables

Ninth Circuit Court of Appeals Determines that a Borrower Does Not Need to Tender Before Suit or Allege Ability to Tender in Complaint for a Viable Rescission Claim under TILA

In Merritt v. Countrywide Financial Corp. et al, the Ninth Circuit reversed a district court’s dismissal of the plaintiffs’ TILA rescission claim for failure either to tender the rescindable value of their loan prior to filing suit or to allege ability to tender its value in their complaint. Declining to extend Yamamoto v. Bank of New York, 329 F.3d 1167 (9th Cir. 2003), the panel held that an allegation of tender or ability to tender is not required. The panel held that only at the summary judgment stage may a court order the statutory sequence altered and require tender before rescission, and then only on a case-by-case basis, once the creditor has established a potentially viable defense.

SCOTUS Holds That Inherited IRAs Are Not Exempt Retirement Accounts in Bankruptcy

By Kelly D. Jones,

testament-and-last-will picture for blog

Recently, in an opinion authored by Justice Sotomayor, the U.S. Supreme Court released its unanimous decision in Clark v. Rameker, holding that individual retirement account (IRA) funds that a Chapter 7 bankruptcy debtor inherited from her deceased mother are part of the debtor’s bankruptcy estate and are not protected from liquidation by the Trustee to pay her creditors.

The Supreme Court upheld the Seventh Circuit’s decision disallowing the exemption, by finding that inherited IRAs do not share many of the same important characteristics of non-inherited IRAs and thus, unlike non-inherited IRAs, are not exempt from liquidation pursuant to the Bankruptcy Code. The applicable provision, 11 U.S.C. § 522(b)(3)(C), states that a debtor may exempt “retirement funds to the extent those funds are in a fund or account that is exempt from taxation” as set forth in the Internal Revenue Code. According to the Court, the central distinctions of inherited IRA accounts are that, unlike non-inherited IRAs, the beneficiary of the inherited IRA cannot continue to invest funds into the account, IRS tax rules require withdraw of funds from the account after it is inherited, it is possible to completely drain the account upon transfer, and the withdraws, or complete liquidation, could occur long before the transferee’s retirement age.

The Supreme Court’s decision resolved a circuit split, as the Fifth Circuit had reached a contrary holding in In re Chilton in 2012. It is important to note that “inherited” IRAs are different from “roll over” IRAs, and IRAs that are bequeathed by a deceased spouse to the surviving spouse. Those accounts may still be exempt pursuant to 11 U.S.C. § 522(b)(3)(C), because the IRS rules governing these types of more traditional IRAs do not necessarily exhibit the characteristics highlighted by the Court in Clark. It is also worth noting that some inherited IRAs may still be exempt pursuant to various state exemption schemes, depending on the language of the applicable state exemption statute. Although most bankruptcy attorneys outside of the Fifth Circuit were probably already cautious in advising potential bankruptcy clients with funds in inherited IRAs, but this is another reminder that extremely careful pre-bankruptcy asset determination and planning is certainly a must.

2013 Legislative Session Consumer Law Update

By Eva H. Novick

A number of bills passed in the 2013 legislative session that may impact your practice or your consumer clients. Many of these bills do not have a private right of action; however, you may still want to be aware of these changes when you are giving clients advice or screening potential clients. Of course, since you’re also a consumer, you may want to know about these changes for your “real life” away from the office.

I briefly summarize the bills in three categories: (1) changes to the Unlawful Trade Practices Act, (2) bills related to foreclosure or mortgages and (3) other consumer protection-related bills. The effective date for all of the bills is January 1, 2014 unless otherwise noted. To view the full text of any bill, go to

Unlawful Trade Practices Act

HB 2059 – adds consignment sales to ORS 698.640, a violation of which is a violation of ORS 646.608(1)(v). Adds a new requirement regarding the return of unsold property.

HB 2573 – adds a violation to ORS 646.608 of acting as an immigration consultant for compensation. Exceptions for authorization under federal law and attorneys.

HB 2824 – amends ORS 98.854 pertaining to non-preference tows, a violation of which is a violation of ORS 646.608(1)(ddd). Provides that a tower may tow a vehicle if the vehicle violates a prominently posted no parking sign that warns that parking is prohibited 24 hours a day.

HB 3070 – requires disclosure of shipping and handling charges during a sales transaction. Added to ORS 646.607; no private right of action.

HB 3467A – adds a violation to ORS 646.608. If a person operates a website that posts mug shots and charges a fee to remove the mug shot, the person must take down the mug shot and personal information related to the mug shot for free within 30 days if it receives a written request that contains documentation that all charges were acquitted, reduced to violations, or were expunged.

HB 3489A – changes licensing exemptions for escrow agents to act as debt management service providers. Relates to a violation of ORS 646.608(1)(kkk). Effective date: July 18, 2013.


SB 558 – expands the foreclosure mediation program (“resolution conference”) enacted under SB 1552 (2012) to include judicial foreclosures. There is no private right of action. Effective date: August 4, 2013.

HB 2528 – amends definition in ORS 86.205 to remove cap on amount in real estate loan agreement that is subject to requirement to pay interest to borrower on funds that lender collects for lender’s security protection provision.

HB 2568 – amends time of and information required in notices of sale in foreclosures. Changes amount of time a trustee may postpone a sale.

HB 2569A – permits law firms to be trustees of trust deeds.

HB 2929B – relates to trustee’s sale of foreclosed property. Permits trustee to rescind sale within 10 days in certain circumstances. Requires trustee to provide notice of rescission within 10 days after the date of sale, specifies contents of notice, and requires trustee to record affidavit regarding notice. Requires trustee to refund purchase price to purchaser within three days after date of notice. Requires trustee to register with the Secretary of State or DCBS.

HB 3389A – limits lender’s ability to reject short sales. Before approving a short sale, a lender may not require a nonprofit that purchases property to enter into an agreement that limits or bars the homeowner from owning or occupying the property. Provides exceptions. Effective date: July 19, 2013.


SB 237 – relates to billing errors for public utilities.

SB 525B – amends the Unlawful Debt Collection Practices Act (ORS 646.639). A debt collector is prohibited from using the seal or letterhead of a public official or public agency. Although not under ORS 646.639, the bill also prohibits public agencies and public officials from allowing a collection agency to use the agency/official’s seal or letterhead and from getting paid by the collection agency to use the seal or letterhead.

SB 574A – allows a representative of an individual under 16 years old who is incapacitated or has a court-appointed guardian or conservator to place a credit freeze on the individual’s consumer report. Effective date: June 13, 2013.

SB 577C – relates to motor vehicle service contracts and protection products.

HB 2346 – amends ORS 646A.588 pertaining to portable electronics insurance policies and consent to receive statutorily required notices and correspondence by e-mail. Effective date: May 13, 2013.

HB 2706 – allows self-storage facilities to charge late fees. Amends notice and sale requirements for liens. Amends liability for motor vehicles, watercraft and trailers.