|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
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.
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.”
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 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. 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).
 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.
National Consumer Protection Week (NCPW) is a time to help people understand their consumer rights and avoid frauds and scams.
By Anthony Estrada
In 2007, the Oregon Legislature capped the interest rate on consumer finance loans at 36 percent, or 30 percent above the Federal Reserve discount rate, when it enacted HB 2871. 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.
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.
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.
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
 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).
 See ORS 725.340(1).
 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.
 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. 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.” 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
 ORS 72.4030(1)
 ORS 72.4030(3)
By Kevin Mehrens
Who is a debt collector in the Ninth Circuit for the purposes of the Fair Debt Collection Practices Act (FDCPA)? Seems like one of those know-it-when-you-see-it kind of answers. The FDCPA tells us that a debt collector is: (1) any person who regularly collects or attempts to collect, directly or indirectly, debts owed or due another, or (2) any business, the “principal purpose” of which is the collection of any consumer debts. A business is a debt collector if they meet either of these two definitions. In the context of debt buyers, since they are the owners of the debt they purchase and not collecting for another, they can’t qualify as a debt collector under the first definition, only the second. (See THIS excellent article from Oregon consumer attorney Kelly Jones regarding the definition of when a business “regularly collects” a debt.) So, the question becomes: what is a debt buyer business’ “principal purpose?”
In March 2020, the Ninth Circuit, in McAdory v. M.N.S. & Associates, 952 F.3d 1089 (9th Cir. 2020), held that an entity which purchases debts and subsequently hires a third-party debt collector to actually perform the collection activities is still a debt collector under the FDCPA. The defendant in McAdory argued that they were not a debt collector but merely a “passive debt buyer” (a term not defined in the FDCPA or elsewhere). But the Ninth Circuit held that the debt purchaser’s “principal purpose” is still the collection of debts, regardless of whether it engages the consumer to collect the debt or hires another debt collector to do so. As long as the third-party is a debt collector the debt buyer is also a debt collector.
Great! So now we know that debt buyers are debt collectors for purposes of the FDCPA. But what happens when the third-party collector is the entity which violated the FDCPA? Is the debt buyer who hired the third-party responsible for such a violation?
On remand to the Oregon District Court, the plaintiff in McAdory filed a motion for summary judgement on the issue of vicarious liability arguing that the debt buyer had the right and responsibility to control the actions the collector they hired. Basically, the plaintiff argued that the third-party collector was the agent for the principal debt buyer under common law agency theories and was therefore responsible for its violations of the law. The principal debt buyer argued that they were not responsible for the actions of the agent. The principal told the agent to obey the law but otherwise left the methods for collecting up to it and took a hands-off approach. On June 7, 2021, the District Court held that the principal “should bear the burden of failing to monitor the activities of those it contracts to carry out its primary purpose.” To say it another way, if a debt collector hires another debt collector to collect debts on its behalf it is responsible for violations committed by the hired collector. Actual control or the right to control on the part of the principal is not required.
This ruling is consistent with both the Third and Seventh Circuits. See, Barbato v. Greystone Alliance, LLC, 916 F.3d 260 (3d Cir. 2019) (instructing the district court that, on remand, the plaintiff did not need to show that the principal debt collector exerted actual control over the third-party in order to be held vicariously liable); Janetos v. Fulton Friedman & Gullace, LLP, 825 F.3d 317 (7th Cir. 2016); (“[I]t is fair and consistent with the Act to require a debt collector who is independently obliged to comply with the Act to monitor the actions of those it enlists to collect debts on its behalf.”).
Great again! Now we know that a company that purchases debts but hires a third-party collector to do the dirty work is a debt collector under the FDCPA. And now we have persuasive authority from the Oregon District Court that the debt buyer is vicariously liable for a third-party debt collector’s violation regardless of the level of control over it due to the nature of the principal/agent relationship. But the District Court didn’t stop there. Recognizing that automatically imputing the actions of the third-party directly to the debt buyer was not currently the law of the Ninth Circuit, the Court went on to analyze common law principles of agency law to further hold the debt buyer liable for its agent’s violations due to it having a right to control the actions of the agent debt collector. This was a fact-based inquiry taking into consideration the nature of the relationship and contract between those parties. When a debt buyer allows a third party to collect on their behalf, they will always retain some level of control if for no other reason than to maximize their profits. The District Court provided the framework for consumers to pierce the relationship between the debt buyer and its debt collector agent.
Debt collectors attempted to create a structure to avoid liability for FDCPA violations. By proclaiming themselves “passive debt buyers” and then hiring insolvent debt collectors to do the physical collection work, debt collectors thought they had found a workaround for FDCPA compliance. The Ninth Circuit saw right through that. They are debt collectors. They cannot get around liability simply by hiring someone else to collect from the consumer.
by: Joel Shapiro
The OSB Consumer Law Section led an effort to increase access to legal representation with the passage of Senate Bill 181 in the recent session of the Oregon Legislature. SB 181 was signed into law by Governor Kate Brown on June 15th, and takes effect on January 1, 2022.
SB 181 is intended to expand the number of clients who have access to pro bono representation. For certain statutory claims – including many claims commonly pursued in consumer cases – the court may award reasonable attorney fees to successful parties’ lawyers. However, judges often view pro bono representation as not meriting the same level of hourly fee award as legal work performed for a paying client, even though pro bono work entails the same diligence and skill.
When an attorney offers to undertake pro bono representation for a client who cannot afford to pay an hourly fee, or in a case with a value too small to justify a contingent fee agreement, that does not mean the attorney is agreeing to forego the opportunity to seek a reasonable hourly fee as the prevailing party in the case.
Too frequently, however, judges incorrectly view pro bono representation as an offer to work for free. In fact, many legislators held that mistaken view as well. Fortunately, through the testimony of OSB Consumer Law Section Past Chair Chris Mertens, legislators were educated that pro bono representation means attorneys are undertaking cases at no charge to their clients – not that they are giving up the right to reasonable compensation for their services, should they prevail.
SB 181 clarifies that the fact that a case is undertaken pro bono should not be deemed by the court as a basis to reduce the reasonable attorney fee that is awarded. Encouraging judges to award the full reasonable attorney fees sought in pro bono cases is intended to increase the incentive for lawyers to take on pro bono cases and thereby expand the number of low-income Oregonians who have access to legal representation.
While Chris Mertens was the sole witness to testify before both the Senate and House Judiciary Committees, support for SB 181 was also provided by the Oregon Consumer League, the Oregon Judicial Department, the Oregon Progressive Party, and the Independent Party of Oregon through written testimony.
To view the text and legislative history for SB 181, please see:
By Colin D. A. MacDonald
On June 25, the U.S. Supreme Court may have significantly restricted certain consumer class action lawsuits’ ability to proceed in federal court. The Court held that class members must have suffered a concrete injury to have standing under Article III of the Constitution, even when suing under a statute that allows for statutory damages without showing actual injury. The 5-4 ruling in TransUnion LLC v. Ramirez could make it difficult to enforce certain consumer informational rights through federal class action lawsuits because of the difficulty of proving the link between particular violations and later injuries.
The suit began when Sergio Ramirez attempted to buy a car. Ramirez alleged that, when the dealer obtained a copy of his credit report, he learned that his TransUnion credit report noted his name as matching a list of persons designated by the U.S. Office of Foreign Asset Control (OFAC) as posing a risk to national security. Ramirez could not buy the car (though his wife was able to purchase it in her own name), and he claimed the incident caused embarrassment in front of his wife and father-in-law and caused him to cancel a vacation abroad for fear of the label causing issues with his travel. The trial court found that TransUnion had not used anything besides first and last names to confirm that the consumer reported as a “potential match” was the same as the person on the OFAC list.
Ramirez sued TransUnion and sought class certification on behalf of 8,185 consumers incorrectly identified as being on the Treasury Department list. The suit raised three claims, all under the Fair Credit Reporting Act. First, it alleged that TransUnion had published false credit information to third parties. Second, it alleged that TransUnion provided incomplete information to consumers requesting their own credit reports because the OFAC list information was only sent in a separate mailing. Finally, it alleged that TransUnion failed to provide a notice of consumer rights in the second mailing containing the notification about the OFAC list. The case went to trial in the Northern District of California and the class prevailed on all counts. The Ninth Circuit affirmed the verdict.
The Supreme Court’s ruling significantly narrows the class’ victory. According to the majority opinion by Justice Brett Kavanaugh, a plaintiff class must prove that its members suffered some real harm beyond a “bare procedural violation” to satisfy the Constitution’s requirements. Thus, the court reasoned, only the 1,853 members of the class whose credit reports with the inaccurate information were sent to third parties have standing, and even then only as to the first count. The court acknowledged that “reputational harm” could be a concrete injury, even if it is not readily quantifiable. For the remaining 6,332 class members, the Court held that merely receiving inaccurate information oneself is not a sufficient injury to create standing.
Justice Clarence Thomas, joined by the Court’s three traditionally liberal justices, dissented. Thomas argued that, where Congress has created by statute a claim to enforce a private right, that alone is enough to create standing. Furthermore, the dissenters argued, the realization that one has been identified as a possible terrorist should also be considered a meaningful harm.
Several consumer groups, including Public Justice and the National Consumer Law Center, submitted amicus curiae supporting the plaintiff class, warning that a ruling like that ultimately reached by the majority could undermine important consumer protections. The FCRA, like many federal consumer protection statutes with a private right of action, permits plaintiffs to choose between seeking actual damages based on proven harm or statutory damages based on a fixed range. Where information is inaccurate or is improperly released, it can often be difficult to place a clear value on actual damages. Statutory damages provisions provide an incentive for plaintiffs to enforce and companies to respect consumer rights.
Privacy rights groups raised similar concerns. The Electronic Privacy information Center and Electronic Frontier Foundation both submitted amicus briefs in support of the class. They note that the improper release of truthful but sensitive information, just like the release of inaccurate information, can have real harm to consumers, but that those harms are difficult to quantify. Several large tech companies, including eBay and Facebook, submitted their own amicus briefs supporting TransUnion, arguing that allowing large class actions alleging technical violations of privacy laws made it possible for plaintiff law firms to extract large settlements that did little to compensate consumers while resulting in windfalls for the lawyers. The ruling does not alter the legal requirements on credit reporting agencies like TransUnion, or the authority of government agencies at the state and federal level to enforce the FCRA or any other consumer law. With those agencies stretched thin, however, the Ramirez ruling may significantly alter companies’ compliance strategies and consumers’ options to protect their rights.
The Court declined to reach a separate question about whether Ramirez’s own experience was so much worse than other class members’ that he was not sufficiently “representative” of the class under the Federal Rules of Civil Procedure. The United States had suggested in its own amicus brief the Court take a third route, arguing that, while the Court should find the class as a whole had standing, Ramirez’s experience was too unique to give the jury and the trial court an accurate picture of the severity of the injury to those whose information was never sent to third parties.
The case returns to the Ninth Circuit for a new determination about the appropriateness of class certification for the narrower class and claims.
Colin D. A. MacDonald is a consumer protection attorney for the Federal Trade Commission’s Seattle-based Northwest Region. The views expressed in this article are his own and do not necessarily reflect those of the Commission or of any individual Commissioner.
On June 1, 2021, Governor Kate Brown signed into law Oregon’s most recent COVID-19 pandemic-related foreclosure moratorium, HB 2009. Although similar to last year’s statewide moratorium that expired at the end of last year, Oregon’s most recent moratorium is limited to only residential properties, staying foreclosures and retroactively voiding all such non-judicial foreclosure sales and sheriff’s execution sales that were conducted this year.
In addition to the ban on foreclosures, HB 2009 also provides several other notable protections for borrowers during the emergency period, which began at the beginning of this year. First, if a borrower notifies the lender that the borrower cannot make a payment because of lost income from the COVID-19 pandemic, the lender cannot treat the borrower’s non-payment of any amount due to the lender during the period as a default. After such notification and, unless otherwise agreed by lender and borrower, the lender must defer collecting payment and must permit the borrower to pay the amount deferred during the emergency period to the loan’s maturity date. Further, once the borrower gives that notice to the lender, a lender may not:
(A) Impose charges, fees, penalties, attorney fees or other amounts that the lender might have otherwise imposed or collected from a borrower for failing to make payment;
(B) Impose a default rate of interest that the lender might have imposed or collected from a borrower for failing to pay an amount otherwise due during the emergency period;
(C) Treat the borrower’s failure pay any amount due during the period as an ineligibility for a foreclosure avoidance measure; or
(D) Require or charge for an inspection, appraisal or broker opinion of value during the emergency period.
The new law also creates a private right of action for borrowers to recover damages for an ascertainable loss of money or property due to the prohibited actions of a lender or trustee and allows the borrower to recover attorney’s fees and costs as well. A lender is not liable for damages for acts taken before the lender receives the lost income notice from the borrower.
The protections of HB 2009 were initially set to expire on June 30, 2021, however, the law authorized the Governor to extend the mortgage foreclosure moratorium period for two successive three-month periods by executive order. On June 11, 2021, Governor Brown announced that she had extended the moratorium for that first three-month period, until September 30, 2021, and, if the Governor intends to extend the moratorium again, the Governor must do so by August 16, 2021.
By David Venables