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Oregon District Court finds that a UTPA claim based upon a mortgage servicer’s conduct is viable even if the mortgage loan it is servicing was entered into prior to the 2010 UTPA amendment incorporating “loans” or “extension of credit.”

By Kelly D. Jones

Effective March 23, 2010 Oregon’s Unlawful Trade practices Act (UTPA) was amended to include loans or extensions of credit. See ORS 646.605(6). Prior to that date, Oregon Supreme Court precedent dictated that a plaintiff could not bring a UTPA claim when the underlying conduct alleged to violate the act arose out of a loan or an extension of credit. See, e.g., Lamm v. Amfac Mortg. Corp., 44 Or. App. 203, 204-05 (1980). In part based upon the 2010 UTPA amendment, in 2012 the Oregon Attorney General adopted Oregon Administrative Rule (OAR) 137-020-0805, which prohibits certain conduct related to mortgage loan servicing, including failing to deal with a borrower in good faith.

In December 2017, Julie Collis (Collis) filed a lawsuit against her mortgage loan servicer, Rushmore Loan Management Services, LLC (Rushmore), in the Eugene Division of the District of Oregon court, captioned Collis v. Rushmore Loan Management Services LLC, Case No. 6:17-cv-02062. Collis, a home owner, alleged that Rushmore, her mortgage servicer, had failed to deal with her in good faith as prohibited by OAR 137-020-0805(6) and in violation of ORS 646.608(1)(u) of the UTPA. Rushmore filed a motion for summary judgment arguing that Collis’s UTPA could never succeed as a matter of law because the 2010 UTPA amendment incorporating loans and extensions of credit was not retroactive and Collis’s mortgage loan was entered into long before 2010, and her last modification of the loan occurred just weeks before the 2010 UTPA amendment became effective on March 23, 2010. Rushmore argued that no matter which date was used, Collis’s UTPA claim arose out of a mortgage loan that predated the non-retroactive 2010 UTPA amendment and thus her claim could not be viable. Rushmore relied on multiple District of Oregon decisions dismissing plaintiffs’ UTPA claims, which it argued were analogous to the facts underlying Collis’s claim. Rushmore was represented by attorney Michael Farrell and Thomas Purcell of MB Law Group LLP.

Collis was represented by Portland attorneys Michael Fuller and Kelly Jones (the author). In opposition, Collis argued that the conduct alleged to violate the UTPA, through OAR 137-020-0805, did not arise out of the mortgage loan, but instead arose out of Rushmore’s services in 2017, and “services” have always been covered by the UTPA, prior to the 2010 UTPA amendment. Collis also distinguished the previous District of Oregon cases that Rushmore relied on in support of its arguments. The Magistrate Judge agreed with Rushmore’s arguments, and in his findings and recommendations (F&R) suggested that Collis’s UTPA claim should be dismissed as a matter of law because the UTPA claim arose out of the mortgage loan which predated the 2010 UTPA amendment. In her objections to the F&R, Collis renewed her previous arguments and pointed out to the Article III Judge that the F&R completely ignored Collis’s reliance on what she believed was the most on point Oregon state court case on the issue, Cullen v. Investment Strategies, Inc., 139 Or. App. 119, 127 (1996). In Cullen, the Oregon Court of Appeals navigated the line between the “services” of a non-lender mortgage servicer, like Rushmore, which have always been within the ambit of the UTPA, and conduct arising out of the mortgage loan, which was not covered by the UTPA prior to the 2010 amendment. Collis argued that a close reading of the holding in Cullen, and the persuasive reasoning of an Eastern District of California court, in Contreras v. Nationstar Ltd. Liab. Co., No. 2:16-cv-00302-MCE-EFB, 2017 U.S. Dist. LEXIS 127357, at *13-14 (E.D. Cal. Aug. 9, 2017), that followed Cullen to reach the same conclusion on very similar facts, would in her case have led to an outcome that Rushmore’s conduct arose of its allegedly bad faith services in 2017, rather than out of the mortgage loan itself; therefore her claim was not prohibited by application of the pre-2010 amended UTPA.

The Article III Judge (Court) declined to adopt the F&R (order available here). The Court agreed with Collis that Cullen was the most on point Oregon case and that Cullen’s reasoning confirmed that “[a] determination that a plaintiff cannot pursue a claim under the UTPA based on a loan or loan modification, however, does not bar UTPA claims against the servicer of a loan. Allegations against the servicer of a loan by a non-lender are aimed at ‘those services [that] fall within the UTPA even though the loan itself does not.’” Collis v. Rushmore Loan Mgmt. Servs. LLC, Case No. 6:17-cv-02062-MK, slip op. at 3 (D. Or. Feb. 7, 2019) (second brackets in original) (quoting Cullen, 139 Or. App. at 127). In specific regard to Collis’s UTPA claim, the Court noted that her “claim does not relate to the loan or loan modification, but to Defendant’s actions—or lack thereof—in servicing the loan. Specifically, Plaintiff alleges that Defendant failed to pay her property taxes as promised, ensured her that it had paid the taxes, failed to return her phone calls, and refused to provide her an accounting.” Id. at 4. The Court also found that the decision in Contreras, relying in part on Cullen, holding that the servicing of a loan was subject to the UTPA although the loan itself was not, was persuasive.

Collis is continuing to litigate her claim. Collis is an important decision for several reasons. First, Oregon consumer plaintiffs (and the Oregon Department of Justice) can use it as support in future attacks to dismiss their UTPA claims based upon bad faith mortgage servicing conduct in violation of the OARs and UTPA. Second, if the F&R had been adopted, and its reasoning had spread, many Oregon home owners would have no claim for relief under the UTPA for a mortgage servicer’s unlawful mortgage servicing conduct if their mortgage or modification had been entered into prior to March 2010, even if the conduct complained of had occurred long after the 2010 UTPA amendment and adoption of the OAR regulating mortgage servicing in 2012. Clearly this would have negatively impacted many Oregonians who would have been left without a cause of action to seek redress for bad faith mortgage servicing conduct.

 

Oregon Joins State Attorneys General in Submitting Comments Regarding Small-Dollar Loans to FDIC

In November 2018, the Federal Deposit Insurance Corporation (“FDIC”) published a request for information on small-dollar loans, such as payday loans.  On January 22, 2019, Oregon’s Attorney General, Ellen Rosenblum, joined the attorneys general of twelve other states and the District of Columbia in submitting a letter to the FDIC addressing some of the risks associated with such loans.   A copy of the letter is found here.

In the letter, the AGs state that the “short-term credit needs of [the unbanked and underbanked] households are largely met by the fringe financial sector” which are “‘often usurious,  sometimes  predatory,  and  almost  always  worse  for  low-income  individuals  than  the services offered by traditional banks to their customers.’” The borrowers of such loans can become trapped in an endless cycle of debt since they are often unable to pay the loans when they become due and have to take out new loans (and pay additional fees) to pay of the previous loans.   The letter outlined several legal risks for state-chartered banks seeking to enter the small-dollar loan sector.

I.    Evasion of State  Laws

While noting that “[m]any states have enacted laws to protect consumers from abuses associated with high-cost small dollar credit offered by fringe lenders” the AG’s letter recommends that the  FDIC discourage state-chartered banks from entering into relationships with fringe lenders that are structured to evade state rate caps in any guidance it issues on small-dollar lending.

One way in which fringe  lenders  have  attempted  to evade state restrictions is by  associating with traditional banks to take advantage of the fact that traditional banks are generally not subject to state interest rate caps.  As asserted in the letter, “this method became known as ‘rent-a-bank’ lending  because  the  bank  participated  only  by  lending  its  name  and  charter  to  the  transaction. Payday lenders would claim the bank was the lender, allowing it to take advantage of the bank’s ability to export its home state’s interest rate and evade the usury and other interest rate caps in the state where the borrower resides.” Recently, payday lenders have attempted to evade state restrictions by turning to Native  American tribes in an attempt  to take  advantage  of their tribal  sovereign immunity.

II.    Ability to Repay

The AG also recommended that the FDIC discourage banks from extending small-dollar loans without considering the consumer’s ability to repay.  In particular, the Ags recommended that  “the FDIC suggest that banks consider a consumer’s monthly expenses such as recurring debt obligations and necessary living expenses in evaluating ability to repay and take into account a consumer’s ability to repay the entire balance of  the  proposed  loan  at  the  end  of  the  term  without  re-borrowing.”  The AGS “also  recommend  that  the FDIC suggestthat banks at least consider the consumer’s capacity to absorban  unanticipated financial event –for instance, in the unexpected event of a loss of income or the added expense of a medical emergency–and, nonetheless, still be able to meet the payments as they become due.”

 

5 THINGS OREGON CAR BUYERS SHOULD KNOW ABOUT “ADD-ONS” & 3 CAR BUYING TIPS

By: Jeremiah Ross

You spent days looking for the perfect vehicle. You finally find it, and the $280.00 per month payment is just what you were looking for. The dealer then offers you more than expected for your barely running trade in. Things are going great! The car buying process is taking forever, but you don’t mind because the dealer seems so nice. He is talking about the weekend he had with his kids and his young family. The dealer is in and out of the office. He blames the delay on a a back-log in financing. Hours later he walks in with a stack of “routine” documents that need to be signed so you can purchase and finance the vehicle.

The dealer says that the lender requires that you purchase a warranty and GAP insurance. He explains this is required, and that because you are getting such a great price on the car it will have little effect on the monthly payment. The dealer then starts to present each document and points out where you should sign while keeping one hand on the document and talking about his recent trip to Mt. Hood. The dealer apologizes for the delay and shakes your hand. You drive off the lot with a big grin on your face.

When you get home that big grin quickly turns to a frown once you review the paperwork. It is at that time that you notice the dealer charged you $3,000.00 for the required GAP insurance. You don’t know what GAP insurance is, but he said it was required. You also notice that the car is under factory warranty but you paid $2,000.00 for a service contract that covers the same thing as the warranty. This $15,000.00 car has now become $20,000.00. You also notice the increased monthly payments were the agreed $315.00, but instead of a 48-month loan you have a 60-month loan. You call the dealer and he says that he will look into it and call you back. After that first call, the dealer won’t take your calls anymore. Unfortunately, this unlawful scenario is all too common. However, consumers can mitigate their chances of being ripped off if they educate themselves about “add-ons.” Here are five things Oregon consumers should know about add-ons before they buy a car:

1) What are Vehicle Add-Ons: Vehicle add-ons are the extra goods, services, and accessories the dealer sells you in addition to the vehicle. Common add-ons include service contracts, pre-paid maintenance plans, extended warranties, GAP insurance, rust proofing, VIN etching, anti-theft devices, fabric protection, nitrogen in tires, window tinting, chrome-plated wheels, all-season floor mats, splash guards, wheel locks, cargo trays and alarm systems. These add-ons will almost always increase the price of the vehicle.

2) Dealers Can Make a Significant Profit on Add Ons: Dealers do not typically make a large profit on selling a vehicle. Dealers can substantially increase their profit if they are able to sell you add-ons. This is why they may be willing to substantially drop the asking price of the vehicle or increase your trade in value. This gives the illusion that you are getting a great deal when in reality you are being over-charged for the add-ons. For example, the dealer may charge you $2,500.00 for GAP insurance. The dealer then only pays GAP insurance company $500.00 for your GAP insurance policy. The dealer keeps the $2,000.00 as profit. Because of this profit, there is usually room to negotiate with the dealer if you want to buy an add-on.

3) Dealers Cannot Charge an Unconscionable Price for Add-Ons: Oregon law prevents the dealer from making false or misleading representations about the amount charged for add-ons that are sold with the vehicle by selling them at a price which is unconscionably higher than the price at which they are typically sold to customers. See OAR 137-020-0020 (3)(f). This means that the dealer cannot sell VIN etching to one customer for $50.00 and then sell the same product/service to you for $1,500.00.

4) Dealers Cannot Require You to Purchase Add-Ons in Order to Finance the Vehicle: Oregon law prohibits dealers from informing consumers that the dealer won’t sell the vehicle or obtain financing for the vehicle unless the consumer purchases add-ons, accessories, or insurance. See OAR 137-020-0020 (3)(L)&(v). The dealer can ensure that the consumer has liability insurance that is required by law, but cannot condition the sale based on the consumer purchasing that insurance from the dealer, GAP insurance, or other products or services. To put it another way, you do not have to buy any add-ons in order to buy the car.

5) The Dealer Must Be Up Front About the Cost of the Add-Ons and the Price of the Vehicle: Dealers often try and pack add-ons into the price of the vehicle. This enables them to conceal the actual price of the add-ons. This is called “packing” and it is unlawful. The law requires that during negotiations the dealer cannot quote monthly payments or the total sale price of the vehicle with the add-ons included unless the dealer clearly and separately delivers in writing, during negotiations and prior to any purchase order, the individual price of the add-ons, and the total costs without the items included. See OAR 137-020-0020 (3)(m).  This means that during negotiations the dealer should provide you something in writing noting the total cost of the vehicle and the monthly payments without any of the add-ons included. The dealers should also provide you the individual price of each add on.

How Can You Protect Yourself from a Car Dealer?

1) Read the Documents: It is a no-brainer that you should read what you are signing. However, dealers use tactics to prevent this. Dealers are trained to keep their hands on the documents and point where to sign while engaging in conversation with you. You can protect yourself by asking the dealer to step out of the office or away from the desk and give you time to read the documents. You can also politely ask the dealer to stop talking as you are going through the documents, and remind them that you are trying to focus. There is never enough time to read all of the small print. However, before you sign the documents you should have an understanding of the major aspects of the deal.

2) Shop Based on Total Sale Price: Many people purchase cars solely based on the monthly payments. Focusing on monthly payments puts the consumer at a disadvantage because the dealer can tweak the financing and price of add-ons to keep the monthly payments roughly the same, while the actual amount financed of the vehicle is substantially higher. You can protect yourself by shopping based on the “Total Sale Price” of the vehicle. That price is located on the truth in lending act disclosures that the dealer requires you to sign.

3) Don’t Be Afraid to Walk Away If Something Doesn’t Feel Right: If you think the dealer is trying to take advantage of you then walk away. Dealers use long delays to exhaust buyers so that the dealer can get them to rush through signing the paperwork. You can combat this by giving them a certain amount of time to prepare the documents or you walk. You can also walk out if you get the sense that the dealer is trying to pull a fast one or take advantage of you.

Add-ons may be a good deal for some people, but buyers should beware. Selling add-ons is a fertile area where dealers can increase their profits on a deal substantially. That means the consumer will end up paying more unless they understand what they are purchasing and the amount they are paying.

Jeremiah Ross is a Portland based attorney that represents clients in consumer matters and personal injury matters throughout the state of Oregon.

 

An Explanation of Overbiffing

By: Joel Shapiro
Consumer lawyers should be aware of an emerging unfair debt collection practice known as “overbiffing.”  The term derives from the acronym BIF, which stands for “balance in full.”  Overbiffing occurs when a debt collector inflates the balance actually owed by a consumer and instructs the consumer to pay the excessive amount.  Debt collectors often combine overbiffing with abusive, fraudulent tactics by threatening consumers with false legal consequences if they fail to pay the inflated balance.  In all inquiries from consumers involving debt collection, attorneys should investigate to determine whether the amount being collected is inaccurate.
NOV 7, 2018 
BY KATHY KRISTOF / MONEYWATCH
 
Overstating a debtor’s balance — also called “overbiffing” — is the latest outrage in unfair debt collection.
In a recent case, regulators allege a New York debt collector may have tricked thousands of consumers into paying far more than they actually owed by fraudulently inflating consumer balances and using profane, abusive and illegal tactics to collect the fabricated bills. The term is called “overbiffing” because the scammers overstate a person’s “balance in full,” which is sometimes shortened to BIF.
Slapping a temporary restraining order on a half-dozen companies affiliated with a Buffalo debt collector named Robert Heidenreich, also known as “Bobby Rich,” regulators maintain that Heindenreich’s bill collectors chronicled just how much they “overbiffed” by using forms showing the actual balance due as well as the inflated amount that they told consumers was owed.
In many cases, this false “balance given” was hundreds, even thousands, of dollars more than the consumer actually owed. “This is really egregious,” says John Heath, directing attorney at Lexington Law, a credit repair firm. “Unfortunately this is something that happened enough that the FTC had to involve itself in filing an action.”
In addition to artificially inflating debt balances, Heidenreich directed his employees to mislead debtors about who was calling — encouraging his debt collectors to pose as lawyers or members of law enforcement, according to complaints filed by the Federal Trade Commission and the New York Attorney General’s office.
The debt collectors would warn the consumer had committed a crime and was about to be arrested, sued or served with legal papers because of a failure to pay an alleged debt.  When the frantic consumer would ask how to stop the legal proceedings, the debt collectors would direct them to “attorneys” — actually just additional debt collectors — who would allow them to pay over the phone with a debit card.
When consumers balked at paying the bill, the debt collectors turned abusive, according to the complaint, engaging in threatening expletive-filled rants, sometimes threatening to call the debtor’s employer or relatives. Heidenreich’s attorney failed to return calls for comment.
Illegal behavior
The Fair Debt Collection Practices Act prohibits all of these actions. Debt collectors are not allowed to use abusive language, or contact anyone other than the debtor in their attempt to collect. Misrepresenting who collectors are, lying about the consequences of not repaying a debt and fabricating debt amounts are also prohibited under FDCPA, as well as other fraud statutes.
Anyone who is contacted by a debt collector has the right to demand that the collector “validate” the debt in writing, showing how much is owed and to whom. Consumers should be able to verify these numbers against the numbers on their own credit reports, which they can get for free at www.annualcreditreport.com.
If a debt collector is abusive or is harassing you with multiple phone calls, you also have the right to bar them from further telephone communication, says Heath. The collector would then be forced to only contact you in writing. If a collector violates these rules, you can report the abuse to your state attorney general’s consumer affairs division or to the FTC.
A federal judge issued a temporary restraining order on Heidenreich and his companies and employees on Thursday, barring them from further violations of the law, as well as from destroying documents or moving company assets.
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2018 Annual Meeting Notice

 The annual meeting of the Consumer Law Section will be held on Wednesday, November 28, 2018 at noon at the Oregon Department of Justice, 100 Market Street, Hawthorne conference room, 1st floor, Portland, OR 97201.

 During the annual meeting the following nominations will be made for 2019 Executive Committee positions.  Additional nominations will be accepted from the floor.

 Officers

Terms ending December 31, 2019

Chair:                    Matthew S. Kirkpatrick

Chair-Elect:         Christopher J. Mertens

Past-Chair:          Jeremiah Vail Ross

Secretary:           Colin D. A. MacDonald

Treasurer:           Young Walgenkim

Member-at-Large

Terms ending December 31, 2020

 Bret A. Knewtson

April Kusters

Eva H. Novick

Jordan M. Roberts

 Members previously elected to the executive committee and continuing through December 31, 2019, include Michael Fuller, Kelly Donovan Jones, Kevin A. Mehrens and Joel D. Shapiro.

 The Section’s fund balance as of December 31, 2017 was $18,096. All Section financial statements can be found at http://www.osbar.org/sections/financials.html.

Ascertainable Loss Under the Unlawful Trade Practice

By: Jordan Roberts

Earlier this year the Oregon Court of Appeals decided Simonsen v. Sandy River Auto, LLC 290 Or App 80 (2018), making it the most recent appellate case to discuss the meaning of “ascertainable loss” under Oregon’s Unlawful Trade Practices Act (the “UTPA”).

Under the UTPA: “a person that suffers an ascertainable loss of money or property, real or personal, as a result of another person’s willful use or employment of a method, act or practice declared unlawful under ORS 646.608, may bring an individual action in an appropriate court to recover actual damages or statutory damages of $200, whichever is greater.  The court or the jury may award punitive damages and the court may provide any equitable relief the court considers necessary or proper.”  ORS 646.638(1).

In Simonsen, the plaintiff purchased a used car from a dealership.  Among other things, the dealer represented that various repairs had been made, that the car was “in good running order,” that it would “not need any major fixes soon” and that plaintiff was getting a “really good deal” and “a great price.”

Two days after purchase a third-party mechanic notified plaintiff that the timing belt on the vehicle needed to be replaced, that the valve cover gaskets leaked, that the exhaust system and undercarriage were severely rusted and that the muffler was beginning to “flake apart.”  In addition, plaintiff learned that the car had been in a previous, undisclosed, accident.

Plaintiff brought a single UTPA action and sought rescission of the purchase pursuant to the UTPA or, in the alternative, actual or statutory damages.  The rescission case was tried to the judge and the damage case to a jury.

The jury returned a verdict finding that the vehicle had one or more material defects, that the dealer knew or should have known of those defects and that defendant willfully failed to disclose those defects to the plaintiff.  The jury also found that plaintiff’s economic damages, measured by the “reduction in the fair market value of the vehicle; and the out of pocket expenses incurred by plaintiff” were $0.

Defendant claimed that the $0 damage verdict meant it had prevailed and that the court was bound by the jury’s $0 damage verdict when deciding rescission.  Plaintiff argued that he was still entitled to rescind the transaction because he suffered an “ascertainable loss” when he received a vehicle that was materially different than what had been represented and, in the alternative, was entitled to statutory damages.  The trial court ruled for Plaintiff on his rescission claim and awarded plaintiff his attorney’s fees.  Defendant appealed and the Court of Appeals affirmed the judgment.

After reviewing the history of the phrase “ascertainable loss” in Oregon case law, the Court of Appeals reaffirmed the principle that “ascertainable loss can be more than a quantified measurement of diminished market value.”  In other words, “ascertainable loss” under the UTPA is not synonymous with “damages.”  Any time that a consumer receives something that is different than that which they were promised or bargained for, that consumer may have a viable UTPA claim to recover the purchase price of the goods or services even if they have suffered no diminished value.

Wells Fargo Bank, N.A., provokes fresh outrage

By David Koen

In the past decade, Wells Fargo Bank, N.A., has repeatedly shocked and awed consumers and regulators with a variety of unlawful practices. Revelations of the bank’s misdeeds – admitted and alleged – continue.

In a regulatory filing on August 3, 2018, Wells Fargo disclosed that a software mistake miscalculated eligibility for home loan modifications, causing about 625 homeowners to be denied relief. Approximately 400 of such customers then lost their homes to foreclosure. The errors occurred between April 2010 and October 2015.

Wells Fargo has created an $8 million compensation fund for affected homeowners. That’s an average of $12,800 for each such homeowner.

The bank also allowed that “[t]his effort to identify other instances in which customers may have experienced harm is ongoing, and it is possible that we may identify other areas of potential concern.”

Wells Fargo’s announcement that more of its customers may been harmed follows a similar statement the bank made after a previous scandal in which it was embroiled. In 2016, the bank’s own analysis initially revealed that it had created more than 2 million accounts that may not have been authorized by consumers. A year later, Wells Fargo revealed that it had created up to 1.4 million more potentially fake accounts.

Responding to the mortgage modification mishap, U.S. Senator Elizabeth Warren of Massachusetts tweeted, “Because of an error @WellsFargo made, 400 of its customers lost their homes. What’s the bank doing to make it right? Setting aside a few thousand dollars for each of the people affected. Pathetic. The execs who oversaw this – including CEO Tim Sloan – should be fired.”

Wells Fargo spokesman Tom Goyda said that “customers are receiving what Wells believes is appropriate given the circumstances.

Banking while Black

Two black Florida residents have sued Wells Fargo for racial discrimination in recent months following incidents in which the bank allegedly either threatened to or did call the police on its customers.

In one incident, 78-year-old Barbara Carroll alleged she tried to cash a check for $140 at a Wells Fargo branch. Bank employees then refused to cash her check or return her driver’s license, asked what she did for the money and told her they had called police. Carroll said the employees suspected that Carroll was guilty of forgery, even after the man who wrote the check confirmed its legitimacy. On July 18, Carroll sued Wells Fargo in the U.S. District Court for the Southern District of Florida, Case No. 0:18-cv-61646.

The other suit was brought by Jean Romane Elie. Elie has alleged that after trying to withdraw money for rent, a teller called the Palm Beach County Sheriff’s Office. According to Elie, he was handcuffed, detained, and accused of committing a felony. The case is pending in Palm Beach County, Florida, Circuit Court.

A Wells Fargo spokeswoman told The Washington Post that the bank “opposes discrimination of any kind.”

The cities of Sacramento, Philadelphia, Baltimore, Miami and Memphis have also sued Wells Fargo for racial discrimination. In 2012, Wells Fargo entered into a $175 million settlement with the U.S. Department of Justice after Baltimore alleged the bank had steered minorities into subprime loans and gave them less favorable rates than white borrowers. The bank has also settled Memphis’ suit against it.

Residential Rental Markets and Portland’s Relocation Assistance Program

By Kevin Mehrens

The field of consumer law encompasses many different statutes protecting consumers. From the Fair Debt Collection Practices Act to the Unlawful Trade Practices Act, these laws are designed to protect consumers (particularly low-income ones) from abuses of creditors and debt collectors as well as from unscrupulous businesses who would prey upon the financially vulnerable. The portion of the community protected by consumer protection laws is very much the same section of the population that is served by the protections of state and municipal landlord-tenant statutes.

Over the last five years Oregon, and Portland in particular, has seen a rapid increase in residential housing prices. The average cost of a two-bedroom unit in Portland as of August, 2018 was over $1,500.00 per month.[i] This rapid increase in housing prices has had the effect of forcing many low-income families out of their residences in Portland. The response from renters has been a backlash against landlords who have chosen to increase rents with little to no increase in services and conditions of the rental units – everything from renters strikes[ii], massive litigation over the conditions of rental units,[iii] to large- and small-scale protests over rental increases and housing condition as well as the perceived failure of the State legislature to address the problems.[iv]

In response to the dramatic increase in rental prices, state and local governments have passed, or attempted to pass, a series of acts designed to lessen the impact on affected residents. Notable among these is the Portland City Code § 30.01.085, also known as the Portland Mandatory Renter Relocation Assistance Ordinance. Initially passed as a temporary, emergency measure by the Portland City Council in November 2015, the Ordinance has gone through a number of revisions. It was adopted in its current form as a permanent measure in March 2018. This article will describe the goals and terms of the Ordinance as well as discuss the procedures through which tenants can protect themselves in order to ensure that their landlord abides by the terms of the Ordinance.

The Portland City Council enacted the Ordinance in order to “protect the availability of publicly assisted affordable housing for low and moderate income households . . . .”[v] The stated policy for the Ordinance is “that all Portlanders, regardless of income level, family composition, race, ethnicity or physical ability, have reasonable certainty in their housing, whether publicly assisted or on the private market. . . .[vi] In order the effectuate these goals, the Ordinance requires a landlord to compensate a tenant in an amount up to $4,500.00 depending on the size of the dwelling unit when the landlord either (1) terminates the tenancy without cause or (2) raises the rent by 10 percent or more during any rolling 12-month period.

No Cause Termination of Tenancies. Oregon state law only requires 30 or 60 days’ notice before a landlord can terminate a residential tenancy.[vii]  Portland now requires 90 days’ notice (with certain, narrow exceptions) for all no-cause terminations. These notices must now include a description of a tenant’s rights under the Ordinance—including the eligible amount of the relocation assistance. Landlords can still terminate a tenancy with no cause but should they choose to do so they must pay the tenants the relocation assistance. The payment of the relocation assistance must be made no later than 45 days prior to the termination date specified in the termination notice. So, for example, if a landlord issues a termination of tenancy to a tenant on December 15 with an end date of April 30, the landlord must pay the tenant the relocation assistance by March 16 at the latest.

In addition to being triggered upon the delivery of a no-cause termination notice, should a landlord fail to renew or replace an expiring lease, it is obligated to pay the tenant the relocation assistance.

Rent Increase of Ten Percent. The Ordinance first requires at least 90 days’ notice of any rent increase. Should the increase be ten percent or more (in a rolling 12-month period, two five-percent increases in a calendar year would trigger the requirements under the Code) the tenant is confronted with a series of choices:

  • The tenant can accept the increased rent and remain in the unit and pay the increased rent;
  • Within 45 days after receiving the notice of the rent increase, the tenant can send a written request to the landlord for their relocation assistance;
  • Within 31 days of the landlord receiving the request for relocation assistance, the landlord must pay the tenant the eligible assistance amount;
  • Next, the tenant, after receiving the relocation assistance, has six (6) months to do one of the following:
    • Pay back the relocation assistance and pay the increased rent, or;
    • Provide the landlord with a termination notice and move out of the unit.

So the provisions of the Ordinance dealing with situations in which a landlord dramatically increases the rent place an affirmative obligation on the tenant to request the money or else they will presumably be deemed to have accepted the rent increase. And while the landlord is required to provide a notice of the tenant’s rights with any rent increase, there is no specified form that such a disclosure needs to be in. The Ordinance simply states, “A Landlord shall include a description of a Tenant’s rights and obligations and the eligible amount of Relocation Assistance under this Section 30.10.085 with each and any . . . Increase Notice . . . .[viii]  Such a description could be in the form of a copy of the Ordinance, which is not so easy to understand, particularly for tenants for whom English is not their primary language.

The legal and political challenges to the tenant protection measures are far from over. These tenant protections have seen a concerted response from landlord groups seeking the repeal or rollback these protections as being too onerous for the landlords.[ix] In July 2017, a landlord challenged the Ordinance in Multnomah County Circuit Court as, among other things, violative of an Oregon statute prohibiting rent control.[x] While Judge Henry Breithaupt found that the Ordinance was valid, the case is currently on appeal with the Oregon Court of Appeals. The next few years will certainly see many more, new clashes between landlords and tenant advocacy groups and attorneys as the regulations and laws are fleshed out.

[i] https://www.rentcafe.com/average-rent-market-trends/us/or/portland/

[ii] https://www.wweek.com/news/city/2018/07/31/tenants-in-southeast-portland-launch-a-rent-strike-hoping-to-stay-in-their-gentrifying-apartment-complex/

[iii] https://katu.com/news/local/jury-tenant-wins-20-million-lawsuit-against-landlord-for-safety-hazards

[iv] https://www.oregonlive.com/portland/index.ssf/2017/06/tenants_rights_activists_prote.html

[v] Portland City Code § 30.01.020

[vi] Portland City Code § 30.01.010

[vii] Oregon Revised Statutes § 90.427

[viii] Portland City Code § 30.01.085 D

[ix] https://www.oregonlive.com/portland/index.ssf/2018/08/landlords_prep_for_new_fights.html

[x] Owen, et al. v. City of Portland, No. 17CV05043

Protecting Tenants at Foreclosure Act Permanently Extended

By David Venables

Shortly before the end of the Great Recession, Congress passed the Protecting Tenants at Foreclosure Act (PTFA) of 2009 to protect tenants from post-foreclosure eviction.  Although the PTFA’s tenant protections expired on December 31, 2014, they were recently revived when President Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act (Senate Bill 2155) into law.  Taking effect on June 23, 2018, the Act repealed the “sunset provision of the Protecting Tenants at Foreclosure Act” and restored “notification requirements and other protections related to the eviction of renters in foreclosed properties.”

PTFA

The fundamental purpose of the PTFA is to ensure that tenants facing eviction from a foreclosed property have adequate time to find alternative housing.1 To that end, the law establishes a minimum time period that a tenant can remain in a foreclosed property before eviction can be commenced and does not affect any state or local law that provides longer time periods or other additional tenant protections.

Under the law, the immediate successor in interest following any non-judicial or judicial foreclosure of a “federally-related mortgage loan,” dwelling, or residential real property must (a) provide bona fide tenants with 90 days’ notice prior to eviction and (b) allow bona fide tenants with leases to occupy property until the end of the lease term, except the lease can be terminated on 90 days’ notice if the unit is sold to a purchaser who will occupy the property.  The PTFA does not require tenants to pay rent to the successor in interest however, any successor in interest may accept rent and, in doing so, assume the rights and obligations of a landlord under Oregon’s Residential Landlord and Tenant Act.

A lease or tenancy is bona fide only if:

(1)       The mortgagor or a child, spouse, or parent of the mortgagor under the contract is not the tenant;

(2)       The lease or tenancy was the product of an arm’s-length transaction; and

(3)       The lease or tenancy requires the receipt of rent that is not substantially less than fair market rent or the rent is reduced or subsidized due to a federal, state, or local subsidy.

Now that the PTFA has been restored, bona fide tenants at the time of a foreclosure of residential property will once again be able to take advantage of these protections to help ease the transition to new housing.

1 https://www.federalreserve.gov/boarddocs/supmanual/cch/200911/protect.pdf