Student loan borrowers experience significant burdens beyond their loans’ repayment costs, including servicer misconduct and inefficiency, an oblique collections process, and system complexities. In response to these difficulties, Oregon recently passed legislation creating a student loan ombuds within the Oregon Division of Financial Regulation. The legislation, codified in ORS 725A.500 through 725A.530, also requires federal and private student loan servicers operating in Oregon to obtain licensure with the Division.

The ombuds’ primary responsibilities include receiving and attempting to resolve consumer complaints against servicers, monitoring and recommending changes to the student loan policy landscape, and developing a comprehensive statewide education program for student loan borrowers.

Lane Thompson was hired in June 2022 to serve as Oregon’s first student loan ombuds. Since then, she has contributed to the development of a website for student loan borrowers and an online complaint form for borrowers to submit for consideration. In addition, Thompson has spoken directly with dozens of borrowers and given numerous presentations regarding her role and Oregon’s new student loan legislation. Thompson also ran a communications campaign about the since-expired waiver for expanded borrower eligibility under the Public Service Loan Forgiveness program.

On August 24th, 2022, The Biden/Harris administration announced loan relief of up to $20,000 for eligible borrowers. This relief is blocked by federal appellate court orders, which the administration has appealed.  SCOTUS will hear arguments on the relief program in February 2023.  In response to the delay in implementation, the student loan repayment pause has been extended to June 30, 2023, or 60 days after the courts render a final decision. Once the payment pause expires, borrowers will be responsible for making loan payments, many for the first time. In addition, nearly half of all federal loans have recently been transferred to new servicers. Thompson strongly recommends that borrowers begin planning for the reinstated payments. This includes budgeting and confirming loan details with their current servicer.

Finally, the student loan industry is rife with scams. The Division recent published an alert to notify the public of their prevalence. More information regarding scams can be found on the Division’s student loan website, along with a list of borrower rights, links to resources, and responses to frequently-asked questions. The site also includes Thompson’s direct contact information.

The Oregon Court of Appeals has decided two cases impacting tenants and the Oregon Residential Landlord Tenant Act (ORLTA) in the first half of 2022; Shepard v. Ormandy, 320 Or App 521 (2022) and Thomas v. Dillon Family Ltd. P’ship II, 319 Or App 429 (2022).

 Shepard v. Ormandy, 320 Or App 521 (2022)

In Shepard, the court addressed the appropriate tenant remedy when a landlord wrongfully charges the tenant for utilities in violation of ORS 90.315(4)(b).

ORS 90.315 is a lengthy, convoluted section of the ORLTA that controls the methods through which a landlord can bill its tenants for utilities.  When a landlord is charged by a utility company and passes those charges on to the tenant, a common scenario in an apartment building without separately metered units, then the tenant’s bill must include either:  (1) a copy of the utility company’s bill or (2) include a disclaimer stating that the tenant has the right to inspect the bill if they want. ORS 90.315(4)(b)(C). “If a landlord fails to comply . . . the tenant may recover from the landlord an amount equal to one month’s periodic rent or twice the amount wrongfully charged to the tenant, whichever is greater.” ORS 90.315(4)(f).

In Shepard, the landlord billed the tenant each month, for twelve straight months, without including the utility provider’s bill or the required disclosure.[1]  At trial, the plaintiff/tenant argued, and the trial court agreed, that they were entitled to 12 months’ rent because the landlord violated the statute 12 separate times by sending 12 bills without the required disclosure.

The Court of Appeals overturned the trial court and held that the proper measure of damages was either twice the total amount wrongfully charged over the entire twelve-month period or one single months’ rent for all twelve instances of non-compliance.

The Court of Appeals reasoned that the “legislature chose language that does not direct a deciding court to award one month’s periodic rent or twice the amount wrongfully charged the tenant, whichever is greater for each and every separate noncompliant bill sent by a landlord, and the legislature would have included language to that effect had that interpretation been intended.” Shepard, at 531.

As a result, in Shephard, the tenant was required to choose between $1,920 (double the $960 wrongfully charged among over the full 12-month period) or a single months’ rent of approximately $754.  Under the trial court’s reasoning, the tenant would have been entitled to 12-months’ rent totaling $9,050.

This, of course, represents a huge difference in damages for a tenant. And this holding will massively restrict a tenant’s ability to bring a suit against a landlord who fails to comply with the statute. By restricting the possible recovery to only one instance of one-month’s rent, tenant advocate attorneys will be hard pressed to convince their clients that such a lawsuit is worth the tenant’s time. And tenant attorneys need to be aware of this decision in weighing whether such a claim is worth bringing to them or their client.

Thomas v. Dillon Family Ltd. P’ship II, 319 Or App 429 (2022)

In Thomas, the court of appeals determined that a landlord cannot raise a comparative fault defense in a habitability claim brought by a tenant.

The tenant brought a habitability complaint against the landlord based on the landlord’s failure to properly maintain the unit’s refrigerator after slipping on water leaking onto the kitchen floor and sustaining multiple injuries.  The landlord learned of the malfunctioning refrigerator the day before the tenant slipped. The day after the slip and fall, the landlord repaired the refrigerator.

In its answer to the suit, the landlord asserted a comparative-fault defense, essentially arguing that the tenant’s injuries were caused by her own negligence and not the result of a habitability defect of the property. The Court of Appeals held that the landlord cannot claim comparative fault as a defense in the context of a habitability claim by a tenant.

ORS 90.360 states that “Except as provided in this chapter, if there is a material noncompliance by the landlord . . .  with ORS 90.320 (Landlord to maintain premises in habitable condition)” the tenant may recover damages (emphasis added). The Court focused on the except as provided in this chapter language in holding “[w]e understand that plain text to provide that any limitations on the recovery of damages or injunctive relief must be found exclusively in ORS chapter 90—the ORLTA—and not outside of that chapter.” Thomas, at 434.  Since the ORLTA does not provide a landlord with a common-law, comparative fault defense, the landlord cannot claim one in defending a habitability claim brought by a tenant.

The landlord’s duty to maintain the property in a habitable condition is absolute. The ORLTA is a strict liability set of statutes. See e.g., Humbert v. Sellars, 300 Or 113 (1985); Brewer v. Erwin, 287 Or 435 (1979). If a habitability violation exists, the landlord is strictly liable for damages resulting form that violation, unless the ORLTA itself carves out an exception. A tenant need not prove that a landlord was negligent as a part of a habitability claim, only that the habitability condition existed and the landlord either knew or reasonably should have known of its existence. See, Davis v. Campbell, 144 Or App 288, 293 (1996) (holding that the legislature did not incorporate “common-law negligence principles as predicates to recovery of damages under [ORS 90.360]”).

This ruling eliminates an oft-used avenue for landlords to escape or massively limit their liability for habitability defects. No longer will tenant attorneys have to argue at a motion to dismiss or summary judgement that the tenant is at least partially, if not wholly, at fault for damages resulting from a landlord’s habitability violations. This greatly increases the ability of tenants to demand living conditions that conform to basic concepts of habitability and greatly increases tenants’ incentive and ability to demand remuneration for injuries caused by those violating landlords.

[1] Claims would be limited to twelve months’ worth of billing pursuant to the ORLTA one-year statute of limitations. ORS 12.125.

By Emily Rena-Dozier

The Oregon Supreme Court released an opinion on July 28, 2022, that established important due process protections for tenants facing eviction for nonpayment of rent. In Hickey v. Scott, 370 Or 97 (2022), Justice Nelson wrote for a unanimous Court, holding that if a landlord issues a termination notice for nonpayment that demands more rent than is factually due, the notice is invalid and any eviction proceeding based on such a notice must be dismissed. The Supreme Court reversed the Court of Appeals’ decision to the contrary, explaining that the statutes regulating tenancy terminations in the Oregon Residential Landlord Tenant act “require precise and accurate information so that the tenant does not have to guess as to the exact nature of the breach and can be prepared to defend against it. * * * A notice that fails to meet those requirements—that is, fails to provide the precise and accurate information required—fails to give tenants that notice and, as a result, renders the notice invalid.” 370 Or at 111-12.

This case arose from an eviction proceeding where a landlord issued a termination notice that failed to account for payments made by the tenants, and instead demanded payment of more than tenants owed. Despite finding that landlord’s termination notice demanded more money to cure the nonpayment than tenants in fact owed, the trial court found for landlord, on the basis that tenants did owe some amount of rent. The Court of Appeals affirmed, holding that a termination notice for nonpayment need only state an amount that landlord claimed to be due, not the amount that tenants actually owed. In reversing the decision of the Court of Appeals, the Supreme Court emphasized that, given the power imbalance between landlords and tenants, holding landlords to the strict letter of the notice requirements was necessary to provide tenants with the necessary information to respond to allegations of a breach of the rental agreement and, if necessary, defend against those allegations in court.

Because approximately 85% of all residential evictions are based on nonpayment of rent, this decision will affect thousands of Oregon tenants each year. Oregon landlords and tenants should be on notice that a termination notice that overstates the amount of rent due will result in dismissal of eviction actions.

https://dfr.oregon.gov/news/news2022/Pages/20220819-student-loan-ombuds.aspx

Preventing Home Foreclosures in Oregon Co-sponsored by the OSB Consumer Law Section and the Oregon Homeowner Legal Assistance Project, with support from Oregon Consumer Justice 1 p.m.–4:45 p.m. PDT, Thursday, June 16, 2022 9 a.m.–4:30 p.m. PDT, Friday, June 17, 2022 OR CLE credits: 8.75 General Neighborworks America continuing education credits for housing counselors: (pending) MCLE ID#: 90961 Cost: Free, but registration required In-Person Event: Oregon State Bar Center, Tigard or Live Webcast | Search for FORE22 in the catalog This two-part seminar will delve into historical information about homeownership preservation in Oregon, the state of foreclosure defense, and available resources in the wake of the COVID-19 pandemic. The introductory track on day one will cover the foreclosure process including early case assessment, loss mitigation options, and financial assistance for homeowners. Learn how to help reverse mortgage borrowers, litigate mortgage cases, and explore bankruptcy as a home preservation tool during the advanced track on day two. Register Here: In Person:  https://ebiz.osbar.org/ebusiness/Meetings/Meeting.aspx?ID=5202 Webcast: https://ebiz.osbar.org/ebusiness/ProductCatalog/Product.aspx?ID=5205 Download Brochure: https://www.osbar.org/cle/2022/FORE22.pdf

By David Venables

On May 9, 2022, the Consumer Financial Protection Bureau (CFPB) published an advisory opinion affirming that the Equal Credit Opportunity Act (ECOA) not only prohibits lenders from discriminating against borrowers who are actively seeking credit, but also prohibits discrimination against borrowers with existing credit.  According to CFPB Director Rohit Chopra, this recent “advisory opinion and accompanying analysis makes clear that anti-discrimination protections do not vanish once a customer obtains a loan.”[1]

The CFPB is charged with interpreting and promulgating rules under ECOA and it enforces the Act’s requirements with rules known as Regulation B. See 15 USC §§ 1691b, 1691c(a)(9); 12 C.F.R. pt. 1002.  Advisory opinions, such as this one, are one of many types of guidance documents that the CFPB issues to assist entities in understanding their obligations under the law.    Not all courts have applied ECOA’s protections to cover existing credit accounts, however, and so the CFPB recently filed an amicus brief[2] in Fralish v. Bank of America, N.A., No. 21-2846 (7th Cir.).  In Fralish, the district court had concluded that ECOA did not apply to those who previously applied for and received credit.  Consistent with its rationale in this advisory opinion, the CFPB explained in its amicus that the text, history, and purpose of the Act clearly demonstrate that the protections do not disappear once credit has been extended.

Enacted in 1974, ECOA is a landmark civil rights law which aims to help protect people and businesses against discrimination when seeking, applying for, and using credit by banning credit discrimination on the basis of race, color, religion, national origin, sex, marital status, and age. 15 U.S.C. 1691(a). As noted in the advisory opinion, ECOA prohibits lenders from lowering the credit limit of existing borrowers’ accounts or subjecting certain borrowers to more aggressive collections practices on a prohibited basis.[3]  ECOA also requires lenders to provide “adverse action notices” to borrowers which explain why an unfavorable decision was made and the advisory opinion makes clear that lenders need to provide such “adverse action notices” to borrowers with existing credit. See 15 U.S.C. § 1691(d)(2)-(3).

[1]  https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-advisory-opinion-on-coverage-of-fair-lending-laws/

[2]  The CFPB amicus brief was filed in conjunction with the Federal Trade Commission, the Federal Reserve Board of Governors, and the U.S. Department of Justice.

[3] https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-advisory-opinion-on-coverage-of-fair-lending-laws/

National Consumer Protection Week (NCPW) is a time to help people understand their consumer rights and avoid frauds and scams.

https://www.consumer.ftc.gov/features/national-consumer-protection-week

By Anthony Estrada

In 2007, the Oregon Legislature capped the interest rate on consumer finance loans[1] at 36 percent, or 30 percent above the Federal Reserve discount rate, when it enacted HB 2871.[2] Despite these legislative efforts, a number of consumer finance brokers are using “Rent-A-Bank” schemes in partnership with out-of-state, state-chartered banks to circumvent the rate caps. The Oregon Division of Financial Regulation (DFR), which conducts financial examination of consumer finance brokers, has identified consumer finance loans with interest rates upwards of 178 percent!

The Federal Deposit Insurance (FDI) Act permits state-chartered banks to charge interest at the rate permitted by the state in which the state-chartered bank is located. However, this interest rate exportation may be challenged if the loan broker is determined to be the “true lender” of the loan.[3]

Rent-A-Bank schemes involve nonbank brokers utilizing out-of-state state-chartered banks as a conduit to originate loans to circumvent state usury laws. These nonbank entities list the state-chartered banks on loan documents, or claim to be acting as loan servicers on behalf of the banks, so they can enjoy the benefits of the exportation privileges that apply to national banks or out-of-state state-chartered banks. The bank will fund the loan and almost immediately sell it back to the nonbank, which will provide the majority of services typically provided by the lender.[4]

Several state attorneys general and courts have begun applying a “true lender” test to determine which entity is the actual, rather than nominal, lender. The analysis often focuses on which party has the predominant economic interest. Other factors include which party:

• Designed, brands, or holds the intellectual property on the loan product and collateral;
• Markets, offers and processes loan applications;
• Services the loan and handles customer service;
• Purchases, has first right of refusal, or ultimately holds the bulk of the loans, receivables, or participation interests; and/or
• Has the ability to change the entity that originates the credit or to whom the credits or receivables are sold.[5]

The Oregon Legislature, along with consumer organizations and advocates, recognizes that interest rate limits are the simplest and most effective protection against predatory lending. Certain consumer finance brokers are using Rent-A-Bank schemes to circumvent those limits and charge exorbitant interest rates to Oregon consumers. If you or a client suspect a consumer finance lender of charging excessive interest rates, consider the true lender analysis to determine whether there exists a cause of action. Finally, DFR regulates consumer finance brokers and may be a useful resource for guidance and information:  dfr.oregon.gov

[1] A “consumer finance loan” is a loan or line of credit that is unsecured or secured by personal or real property and that has periodic payments and terms longer than 60 days. See ORS 725.010(2).

[2] See ORS 725.340(1).

[3] The exportation may also be challenged if the state in which the loan is made “opts out” of the interest rate exportation clause under the FDI Act. See 12 U.S.C. 1831d.

[4] For more information on Rent-A-Bank schemes, see the 2020 testimony of Lauren Saunders of the National Consumer Law Center before the House Financial Services Committee here.

[5] See Ubaldi vs. SLM Corp, 852 F. Supp. 2d 1190, Flowers vs. EZPawn Oklahoma, 307 F. Supp. 2d 1191, Glaire vs. La Lanne-Paris Health Spa, Inc., 12 Cal 3d 915, Eul vs. Transworld Systems, 2017 WL 1178537, George Cash America vs. Greene, 734 SE 2d 67.

By Hope Del Carlo:

On June 1, 2021, Oregon instituted HB 2009, its most recent moratorium against residential foreclosures during the pandemic. The law, initially set to expire earlier in 2021, was extended by Governor Brown  via Executive Order 21-30, which protects most residential borrowers from foreclosure through December 31, 2021. More information about HB2009 can be found in David Venables’s article, published on this website on June 28, 2021.

Approximately two-thirds of Oregon’s homeowners have benefited from COVID-19 protections mandated as part of the federal CARES Act, which Congress passed at the beginning of the pandemic. Borrowers with federally-backed loans (such as VA, FHA, and USDA Rural Housing loans, among others) were entitled to forbearances and other forms of relief under the statute and related loan servicing rules. Some of those borrowers may be entitled to post-forbearance COVID-19-related relief. Borrowers with questions about their CARES Act rights should contact a housing counselor or consumer lawyer for additional information about help available to them under federal statutes, rules, and related servicing guidelines.

As Oregon’s moratorium and other protective measures end, economists and others expect an uptick in mortgage defaults and foreclosures. There will be additional help for some at-risk homeowners, however, in the form of an expected $72 million from the U.S. Treasury’s Homeownership Assistance Fund (“HAF”), an aspect of the American Rescue Plan.

Oregon Housing and Community Services is creating programs to distribute these funds, which are described more fully on its website, here.

Mortgage payment and reinstatement assistance is expected, however proposed program terms must be federally approved, and may change based upon the U.S. Treasury’s response. To keep abreast of the current programs that are in development, homeowners can sign up to receive additional details from OHCS about the HAF programs, here.

In addition, you can find HUD-approved housing counselors, here.

Recently, our office has observed an increasing number of vehicle consignment sale fraud. These practices are usually prevalent in RV sales, but they also exist for cars as well. For the reasons provided below, consumers should be extra cautious when purchasing or selling vehicles on consignment.

How do consignment sales work?

Consignment sales are agreements with a dealer to sell your vehicle on your behalf. They are different from traditional sales because you don’t actually sell the vehicle to the dealer, but the dealer acts like a broker to sell the vehicle for you. When a buyer buys your vehicle, the dealer keeps a portion of the sale for commission and processes the title to be conveyed to the new buyer. This is attractive to the dealer because there is much lower risk for the dealer, and it’s also attractive to the seller because the seller can potentially get a better price for the vehicle. This practice is not illegal, but some dealers have used consignment sales to commit egregious fraud.

How do dealers commit consignment fraud?

Consignment fraud is very simple. The dealer sells the vehicle to the buyer and receives payment from the buyer. Under Oregon law, the dealer must have the physical title, or an equivalent document,  when the vehicle is made available for sale. The dealer must also pay the consignor (the seller) within 10 days of the sale of the vehicle. As you can imagine, dealers often do not receive the title from the consignor (seller) and fail to pay the seller at all. Recently, a Salem RV dealer sold over $500,000 worth of RVs, took the money and disappeared, leaving a mess for the buyers and the sellers. The sellers were never paid for the vehicles and so refused to relinquish the title to the buyers. The buyers, meanwhile, paid money for their vehicles, so they demanded their titles from the sellers.

Who has the right to the title?

Although both the seller and the buyer are victims of the dealer’s fraudulent activities, Oregon law favors the buyers over the sellers in these situations. Oregon Law states that a bona fide purchaser of goods “acquires all title which the transferor had or had power to transfer” at the time of sale.[1] The seller, by “entrusting [the vehicle] to a merchant who deals in goods of that kind gives the merchant power to transfer all rights of the entruster to a buyer in ordinary course of business.”[2] In other words, the buyer in these situations take the title free and clear. The reasoning behind this rule is that even though both parties are victims, the seller is slightly more culpable because the law confers a closer relationship between the seller and the dealer than between the buyer and the dealer.

How are these issues resolved?

For the buyer, the remedy isn’t too difficult. If they are, in fact, bona fide purchasers, they can request that the seller relinquish the title. The seller will likely not be willing to part with the title because they never received the proceeds of the sale, but if the buyer takes the action to court, the court will likely grant the title to the buyer. For the seller, the remedy is with the dealer, but that will be difficult, because the dealer has likely run off with the money or will file bankruptcy. Oregon law requires vehicle dealers to carry a bond for these kinds of situations, but the bond amount is limited to $50,000 per year, which must be split among all of the claimants in that year. In these situations, dealers usually defraud multiple victims at once, leaving the victims to take a small percentage of the $50,000 bond.

How to avoid being defrauded.

The best thing a purchasing consumer can do to prevent being defrauded in this way is to never purchase a vehicle of any kind on consignment. Sometimes the dealer may not disclose that a vehicle it is selling is on consignment, so the consumer should make sure to ask if the vehicle is on consignment. Second, if the consumer is purchasing a vehicle on consignment, demand the physical title be signed and given over before paying the dealer. If the dealer doesn’t have the physical title for a consignment sale, it is time to walk away. Likewise, for the seller, never sell your vehicle on consignment. Selling your vehicle to the dealer, trading it in, or selling it directly to a private party are all much safer options than to trust your vehicle to a consignment dealer.

 

By Young Walgenkim

[1] ORS 72.4030(1)

[2] ORS 72.4030(3)