By Chris Mertens, Mertens Law, LLC

April 19, 2018, was the effective date of significant amendments to the regulations promulgated by the Consumer Financial Protection Bureau under the Truth In Lending Act related to mortgage servicing rules. The rules as amended provide a right to receive periodic billing statements on mortgage loans for homeowners who are in or have completed bankruptcy. This long-awaited final rule will give mortgage borrowers greater clarity over what is happening with their mortgage loans and the opportunity to review the loans to ensure proper application of payments and loan servicing by mortgage servicers.

The previous versions of the rule contained an exception to providing periodic billing statements during bankruptcy or after bankruptcy where the personal liability for the mortgage debt was discharged. This often left homeowners in the dark about their mortgage balance, payments, and fees and frustrated with attempts to get information from mortgage servicers.

TILA, Regulation Z, and the Bankruptcy Exception for Mortgage Periodic Billing Statements

The Truth In Lending Act (TILA) is codified at 15 U.S.C. § 1601, et seq. TILA was enacted on May 29, 1968, as Title I of the Consumer Credit Protection Act. Pub.L. 90–321, 82 Stat. 146. Some of the expressed purposes of the Truth In Lending Act are to assure meaningful disclosure of credit terms and to protect consumers from inaccurate and unfair billing practices. 15 U.S.C. § 1601(a).

The Regulations implementing TILA were originally published at 12 C.F.R. 226 as “Regulation Z” (Reg Z). References to the requirements imposed under TILA also include reference to the applicable regulation in Reg Z. 15 U.S.C. § 1602(z).

TILA and Reg Z have been amended and updated several times throughout the years. On July 21, 2010, TILA’s rule making authority was transferred from the Federal Reserve Board to the Consumer Financial Protection Bureau (CFPB) pursuant to provisions enacted by the Dodd–Frank Wall Street Reform and Consumer Protection Act in July 2010. Pub.L. 111–203, H.R. 4173.

TILA was amended by the Dodd-Frank Act, as relevant here, adding requirements that applied to creditors, assignees, and servicers regarding the sending and content of periodic billing statements for mortgage borrowers. Pub.L. 111–203, § 1420, enacted as 15 U.S.C. § 1638(f).

The CFPB issued several new regulations as an updated Reg Z, implementing several provisions of TILA as amended by Dodd-Frank and published as 12 C.F.R. 1026, et seq.

Effective January 10, 2014, the CFPB published several regulations governing the servicing of mortgage loans, and specifically the requirements of servicers to send periodic billing statements, and the required form and content of the statements. The CFPB issued the periodic billing statement regulations under the authority of TILA section 128(f), codified in 15 U.S.C. § 1638(f). See also 38 Fed. Reg. 10958-59 (discussing statutory authority under TILA section 128(f) for periodic billing statement regulations and other loan information requirements).

These regulations contained a broad exception for borrowers in bankruptcy, or whose personal liability on a mortgage debt was discharged in bankruptcy, where servicers were not required to send periodic billing statements. See Former 12 C.F.R  1026.41(e)(5), comment 1-3.

It was common for consumer debtors who filed Chapter 7 and received a discharge to stop receiving mortgage statements as soon as the petition for relief was filed, and never to receive the statements again unless they had reaffirmed the mortgage debt–a rare practice in Oregon. Consumers in Chapter 13 sometimes did not receive statements during the plan period, and had to rely on required notices filed with the court, which sometimes were not timely filed, or not filed at all, to know if their mortgage payment was changing due to escrow or had incurred fees.

Changes to the Mortgage Statement Requirements for Borrowers During and Following Bankruptcy

Effective April 19, 2018, the CFPB’s final amended rules governing the mortgage borrower’s rights to periodic billing statements for their residential mortgage loans provided consumer borrowers rights to statements during and following bankruptcy cases.

Below is a brief summary of the changes to 12 C.F.R. 1026.41(e) as a result of the amendment. The new text of the regulation is more detailed than its predecessor and can be viewed here.

Requirement to Send Statements and Updated Exemption Rules – The Borrower Is in Control

Prior to the amendment there was a blanket exception for sending periodic statements to borrowers in bankruptcy. The new regulation as amended added a two-part test for when a servicer is initially not required to send statements, and both parts must be met. 12 C.F.R. 1026.41(e)(5)(i). The first prong requires the borrower to be a debtor in an active bankruptcy case or have discharged personal liability for the mortgage loan in question. 12 C.F.R. 1026.41(e)(5)(i)(A). These requirements mirror the only ones under the previous version of the rule. Now, in order to be initially exempt from sending statements, one of the following must also be true: The consumer requests in writing that the servicer stop sending statements; The most recent chapter 13 plan provides for surrender of the residential property, avoidance of the mortgage lien, or does not provide for ongoing payments or cure of any default; an order avoiding the mortgage lien, granting the mortgage creditor relief from stay, or otherwise requiring statements to be stopped is entered by the court; or in chapter 7 the debtor’s statement of intention for the property states surrender AND no partial or full payment has been made since the case is filed. 12 C.F.R. 1026.41(e)(5)(i)(B).

The big takeaway for consumer borrowers and their bankruptcy counsel is that even if the lender may initially qualify for an exemption, the borrower has the power to elect to receive statements and disqualify the servicer from the exemption. 12 C.F.R. 1026.41(e)(5)(ii). Any borrower on the loan may request the statements be sent, including by an agent of the borrower, such as a borrower’s attorney. 81 Fed. Reg. 72323.

Modified Statements in Bankruptcy and Post-Discharge.

The recent regulation added a section to 12 C.F.R. 1026.41 modifying the requirements of what information is in a periodic billing statement for a mortgage loan during or following a borrower’s bankruptcy. Generally there are limitations on personal liability, the way some fees are reported is limited, and the amount due is not required to be displayed prominently. 12 C.F.R. 1026.41(f)(1)&(2). The text of new paragraph f and related comments can be found here.

There are specific modifications required for periodic billing statements sent to mortgage borrowers who are in chapter 13 (and chapter 12). 12 C.F.R. 1026.41(f)(3). The modifications essentially implement a common-sense approach of differentiating between pre-petition arrears and payments thereon through the chapter 13 plan and post-petition ongoing payments and fees due. The “amount due” may be limited to the post-petition amounts due. 12 C.F.R. 1026.41(f)(3)(ii)&(iii). The statement must also include the pre-petition arrearage balance, total payments received since the last statement, and total pre-petition payments received since the inception of the bankruptcy case.  12 C.F.R. 1026.41(f)(3)(v). This will allow chapter 13 debtors and their counsel to track the proper application of payments on the arrearages, which before was potentially done behind a curtain – with borrowers not knowing the impact of the payment on pre-petition arrears being received and applied or if the mortgage servicer was delaying proper application.

Timing for Compliance – Single-Statement Exemption

Once the triggering event occurs—including the borrower filing for bankruptcy, a servicer becoming disqualified for an applicable exemption, or non-modified statements being required following reaffirmation or non-discharge of mortgage liability following bankruptcy completion—the servicer is excused from complying for the first statement that is due to have been sent had the triggering event not occurred. Thus, the servicer must comply not with the first immediately forthcoming statement, but the second, following the triggering event. 12 C.F.R. 1026.41(e)(5)(iv). This exemption was a late amendment to the final rule, published by the CFPB on March 22, 2018. 83 Fed. Reg.10553-59.

By Eva Novick

Four consumer protection-related bills passed in the 2018 Oregon legislative session. Only one, SB 1551, has been signed by the governor; the others are on the governor’s desk awaiting signature.

Debt Collection: SB 1553 amends ORS 646.639(2)(t), which was added in 2017 HB 2356. This bill clarifies that this subsection only applies to debt buyers or debt collectors acting on behalf of a debt buyer.

Motor Vehicles: HB 4087 amends ORS 87.152. The bill states that a person may not create, attach, assert or claim a possessory lien on a motor vehicle unless the person performs a service that complies with ORS 646A.480 to 646A.495 and one of the following applies: (1) The person is a franchised motor vehicle dealership; (2) The person is a licensed tower (“holds a towing business certificate”) and the lien is only for transporting or storing a motor vehicle; (3) The lien is against an abandoned motor vehicle; or (4) The person has a bond of $20,000 or more.  If a person does not have a valid possessory lien and refuses to release a motor vehicle after the owner of the vehicle requests the release of the vehicle, the owner of the vehicle may bring an action to recover the greater of $2,000 or twice the value of the vehicle, up to $20,000, and attorney fees. The owner of the vehicle may also obtain relief in order to regain title to the vehicle, if the person who wrongly asserted the possessory lien changed the title.

Privacy: SB 1551 adds a requirement that notice of a breach of security must be made no later than 45 days after discovering or receiving notification of the breach, unless law enforcement requests a delay in providing notice.  If a person offers free credit monitoring or identity theft prevention and mitigation services when it provides notice of a breach, it cannot require a consumer to provide a credit or debit card number or to agree to enroll in paid services.  If the person offers paid credit monitoring services or identity theft prevention and mitigation services, it must disclose that those services require payment of a fee.  Additionally, a consumer reporting agency may not charge a fee for placing, temporarily lifting or removing a security freeze; creating or deleting a protective record; placing or removing a security freeze on a protective record; or replacing a lost PIN or password.  The bill also amends the safe harbor provisions in ORS 646A.622(2) for what constitutes reasonable safeguards to protect personal information.  Finally, the bill cleans up non-substantive edits made by Legislative Counsel in the prior legislative session.  The bill takes effect on June 2, 2018.

Net Neutrality: HB 4155 prohibits government agencies from contracting with a broadband Internet access service provider that favors some Internet traffic over others; blocks lawful content or devices; throttles some Internet traffic to either discriminate against that traffic or to favor other traffic; or unreasonably interferes with the end user’s access to lawful content or ability to use a device.  The bill provides exceptions if the Internet access service provider: is the only provider in a particular geographic location or Public Utility Commission of Oregon (PUC) permits the contract; is addressing copyright infringement, unlawful activity, or the needs of emergency communications or law enforcement; is favoring Internet traffic that the PUC has determined provides significant public interest benefits; or engages in activities determined by the PUC to be reasonable network management.

There are also several work groups that have formed or will form to discuss potential legislation for the 2019 session concerning: (1) Autonomous Vehicles; (2) additional amendments to the Oregon Consumer Identity Theft Protection Act; and (3) motor vehicles, including consigned vehicles, a dealer trust fund to supplement the dealer bond, and disposal of abandoned RVs.

By Matthew Kirkpatrick, Kirkpatrick Law, LLC

2018 has started with a bang at the Consumer Financial Protection Bureau (CFPB).  Congress created the CFPB in 2010 as part of the Dodd-Frank financial reforms in response to the 2008 financial crisis.  The agency’s purpose is to ensure “that, with respect to consumer financial products and services—

(1)  consumers are provided with timely and understandable information to make responsible decisions about financial transactions;

(2)  consumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination;

(3)   outdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed in order to reduce unwarranted regulatory burdens;

(4)  Federal consumer financial law is enforced consistently, without regard to the status of a person as a depository institution, in order to promote fair competition; and

(5)   markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.”

12 U.S.C. § 5511(b).

President Obama nominated and the Senate confirmed Richard Cordray to a 5-year term as the CFPB’s initial Director in a 66–34 vote on July 16, 2013.  Under Cordray, the CFPB actively engaged in rulemaking and enforced laws protecting protect American consumers, recovering “nearly $12 billion for 29 million consumers in refunds and canceled debts.”[1]

Following President Trump’s inauguration, however, the CFPB found itself in the hot seat.  Former CFPB Director Cordray had long faced criticism from Republican lawmakers who complained that the CFPB’s single-director structure unconstitutionally concentrated too much power in a single, un-elected official who lacked accountability to the executive branch.  Critics also argued that its enforcement of consumer regulations was overzealous, unfair to business, and harmful to the economy.  This article provides an update on the CFPB’s status one year into the Trump presidency.

CFPB Leadership

Cordray resigned November 24, 2017, and appointed his chief of staff, Leandra English, as acting director.  President Trump rejected English’s appointment, however, and appointed Office of Management and Budget Director Mick Mulvaney to serve as the CFPB’s acting director instead.  Mulvaney, a long-time CFPB critic, once called the agency a “joke * * * in a sick, sad kind of way.”[2]  A federal judge denied English’s motion for a temporary restraining order and Mulvaney has acted as the acting director ever since.  Trump has not nominated a permanent director.

CFPB Constitutionality

On January 29, 2018, the D.C. Circuit Court of Appeals ruled 7-3 that the CFPB’s single-director structure is constitutional and that the director cannot be fired without cause.[3]

CFPB Activity

On July 19, 2017, the CFPB issued its final Arbitration Rule that prohibited arbitration provisions in financial contracts from including class action waivers.  Companies have used such waivers to dismiss class action lawsuits and force consumers to bring individual arbitrations, for example, against Wells Fargo Bank for opening unauthorized consumer accounts.[4]

On November 1, 2017, before the Arbitration Rule went into effect, President Trump signed a Congressional Review Act (CRA) resolution repealing the rule and precluding similar rules in the future, after Vice President Mike Pence broke a tie vote on the resolution in the Senate.[5]  More information on the repeal of the Arbitration Rule is available here.

On December 4, 2017, Mulvaney said he “would support the Congress moving forward with the CRA” review of the CFPB’s payday lender rule.[6]  Mulvaney said he did not think the $31,700 he received from payday lenders during his 2015-16 campaign to maintain his South Carolina House seat would influence his position on the rule, “because I am not in elected office anymore.”  Id.

On January 16, 2018, the effective date of the agency’s rule to “stop payday loan debt traps by requiring lenders to take steps to make sure people can repay their loans[,]”[7] the agency said it was reconsidering implementation of the rule and would “entertain waiver requests from any potential applicant.”[8]

On January 17, 2018, the agency announced a formal evaluation “to ensure the Bureau is fulfilling its proper and appropriate functions to best protect consumers.”[9]  The first request for information seeks input on how the agency demands information from businesses.  Id.

On January 18, 2018, the CFPB dismissed a lawsuit against four online payday lenders for failing to disclose annual interest rates as high as 950%.[10]  More information on the now-dismissed lawsuit is available here.

On January 24, 2018, the CFPB closed its nearly four-year investigation into South Carolina payday lender World Acceptance Corporation, which has given Mulvaney at least $4,500 in campaign donations.[11]

On February 5, 2018, the CFPB reportedly pulled back from its investigation into the Equifax data breach that affected 143 million Americans.[12]

[1] https://www.nytimes.com/2017/08/31/business/consumer-financial-protection-bureau.html.

[2] https://www.youtube.com/watch?v=RaVeNafdyVA.

[3] https://www.politico.com/story/2018/01/31/consumer-financial-protection-bureau-court-ruling-380226.

[4] https://www.usatoday.com/story/money/2016/11/25/wells-fargo-seeks-arbitration-scores-customers/94419028/.

[5] https://www.federalregister.gov/documents/2017/11/22/2017-25324/arbitration-agreements.

[6] https://www.usatoday.com/story/money/2017/12/04/mick-mulvaney-payday-lending-campaign-contributions-pose-no-conflicts-interest/920056001/.

[7] https://www.consumerfinance.gov/payday-rule/.

[8] https://www.consumerfinance.gov/about-us/newsroom/cfpb-statement-payday-rule/.

[9] https://www.consumerfinance.gov/about-us/newsroom/acting-director-mulvaney-announces-call-evidence-regarding-consumer-financial-protection-bureau-functions/.

[10] https://www.bloomberg.com/news/articles/2018-01-18/trump-led-cfpb-signals-shift-by-dropping-payday-lender-lawsuit.

[11] http://www.ibtimes.com/political-capital/cfpb-drops-investigation-payday-lender-contributed-mick-mulvaneys-campaigns.

[12] https://www.reuters.com/article/us-usa-equifax-cfpb/exclusive-u-s-consumer-protection-official-puts-equifax-probe-on-ice-sources-idUSKBN1FP0IZ.

By Michael Fuller

On January 23, 2018, a divided panel of the U.S. Ninth Circuit Court of Appeals issued an opinion that may present difficulties for parties hoping to certify national class action settlements in the future.

The opinion, in In re Hyundai and Kia Fuel Economy Litigation, held that where plaintiffs bring a nationwide class action, Federal Rule of Civil Procedure 23(b)(3) requires courts to consider the impact of potentially varying state laws.

The opinion involved consumer complaints about misstatements made by Hyundai and Kia about the fuel efficiency of their vehicles. After the district court certified a $395 million settlement among the parties, a group of objectors filed an appeal to the Ninth Circuit. The objectors argued (among other things) that the district court erroneously failed to consider variations in each applicable state’s consumer protection laws.

Under Rule 23(a), a class action may proceed only if

“(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.”

The Ninth Circuit ruled that after Rule 23(a)’s prerequisites are met, plaintiffs seeking class certification must then satisfy Rule 23(b)(3), which says that “the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy[.]”

The panel reasoned that while variations “in state law do not necessarily preclude a 23(b)(3) action,” “a court must consider the impact of potentially varying state laws.” The panel cited to a 2012 Ninth Circuit opinion called Mazza v. Am. Honda Motor Co., which laid out several steps district courts must follow to determine whether predominance is defeated by variations in state law under rule 23(b)(3).

Under Mazza v. Am. Honda Motor Co., plaintiffs must first establish that the forum state’s consumer protection laws may be constitutionally applied to the claims of the nationwide class. Then courts must use the forum state’s choice of law rules to decide whether to use the forum state’s consumer protection laws, or whether to use the laws of multiple states to decide the claims at issue. If courts ultimately decide that class claims “will require adjudication under the laws of multiple states,” they must then “determine whether common questions will predominate over individual issues and whether litigation of a nationwide class may be managed fairly and efficiently.”

​​The Hyundai opinion made no decision about whether or not to ultimately approve the parties’ proposed settlement under Rule 23(b)(3). Instead, the district court’s class certification was vacated, and the case was remanded for further proceedings consistent with the panel’s ruling.

 

By: Jordan Roberts

Eblen Freed PC

Dealers’ speak.  Trade talk.  Sellers’ statements.  Puffing.  It goes by many names but the boundaries can be hard to define.

Most often, consumer attorneys will come up against the concept of puffing in the context of a fraud or warranty claim.  Did the seller make a warranty about the condition of the product?  Did the seller make a misrepresentation about the condition of a product?  Did the purchaser have a right to rely on the seller’s misrepresentations?  These are the questions that often must be answered.

“General words of commendation such as ‘good’, ‘high-class’, and ‘okeh’ are regarded, without more appearing, as mere seller’s talk and expressions of personal judgment.  Stovall v. Newell, 158 Or 206, 208-209 (1938).  “As to such matters the plaintiff could observe and judge as well as the defendant.”  Id. at 208.

“A purchaser must use reasonable care for his own protection and cannot rely blindly upon the seller’s statements but must make use of his means of knowledge and failing to do so, cannot claim that he was misled.”  Miller v. Protrka, 193 Or 585, 598 (1952).

“The rule is well settled that mere general commendations of property which are the subjects of sale, sometimes called ‘trade talk,’ ‘dealers’ talk,’ ‘sellers’ statements’ or ‘puffing,’ do not attain the status of fraudulent representations where the parties deal at arm’s length.” Id. at 597.

The rule established in Miller was later clarified to mean that “a knowledgeable buyer was not entitled to treat mere ‘puffing’ or ‘dealers talk’ as a representation of fact.”  Bodenhamer v. Patterson, 278 Or 367, 374 (1977).

As such, when we deal with true “puffing,” we do not get into questions of whether the purchaser had a right to rely on the misrepresentation because, by definition, puffing is not a misrepresentation of fact.  But when does puffing cross over from being opinion to being a representation of fact?

Generally, an action in deceit will lie only for false representations of matters of past or existing fact, and hence statements of opinion, as for example, expressions by a vendor commendatory of the thing which he is trying to sell are not actionable even though false.  Holland v. Lentz 239 Or 332, 344 (1964).

““This rule is based on the universal practice of the seller to recommend the article or thing offered for sale and to employ more or less extravagant language in connection therewith.  The law does not hold him to a strict accountability for those vague commendation of his ware which manifestly are open to difference of opinion, and which do not imply untrue assertions concerning matters of direct observation; nor has the buyer any right to rely on such statements.””  Id. quoting 12 RCL 250-251, Fraud and Deceit §18.

““The reason of the rule lies, we think, in this: There are some kinds of talk which no sensible man takes seriously, and if he does he suffers from his credulity.  If we were all scrupulously honest, it would not be so; but, as it is, neither party usually believes what the seller says about his own opinions, and each knows it.””  Id. at 344-345 quoting Vulcan Metals Co., v. Simmons Mfg. Co. 248 F 853, 856 (2d Cir 1918).

“It is recognized, however, that statements of opinion regarding quality, value, or the like, may be considered as misrepresentations of that, that is, of the speaker’s state of mind, if a fiduciary relation exists between the parties as, for example, representations of value made by a real estate prober to his principal, or where the parties are not on an equal footing and do not have equal knowledge or means of knowledge.”  Id. at 345.

“The rule is well settled that mere general commendations of property which are the subjects of sale sometimes called ‘trade talk,’ ‘dealer’s talk,’ ‘seller’s statements’ or ‘puffing,’ do not attain the status of fraudulent representations where the parties deal at arm’s length, as here***such statements usually are regarded as mere expressions of opinion upon which a purchaser cannot safely rely***This is especially true when the prospective buyers have or can obtain equal means of information and are equally qualified to judge certain factors claimed to contribute to the value of the property offered for sale.  To such statements the maxim of caveat emptor applies.”  Coy v. Starling, 53 Or App 76, 81 (1981) (internal quotations omitted).

These cases illustrate a general guiding principal of “buyer beware” whenever the parties are on relatively equal footing and have equal access to information and there is no fiduciary duty on the part of the seller.  However, in many consumer transactions the “equal footing” doesn’t actually exist.  In those cases, a court may be more likely to find a statement to be a statement of “fact” rather than an “opinion.”

See, for example, Taylor v. Nielsen, 31 Or App 663 (1977), where the defendant sold a used motorcycle to a consumer.  The seller made the representations that the motorcycle engine was “in fine running condition” and that “the cylinders on it were bored .030 over standard size.”  The Court of Appeals upheld a verdict for plaintiff on his fraud claim saying that the statements “were found to not be mere ‘sellers’ puffing’ since the evidence showed defendant had assembled the engine and appeared to have the expertise to know that the engine was not ‘in fine running condition.’”  Id. at 667.

“Thus, notwithstanding some ostensible tensions, Oregon case law adheres to a consistent principle: reliance in fact must be reasonable, but such reasonableness is measured in the totality of the parties’ circumstances and conduct. For example, if there is a naive and unsophisticated plaintiff on one side of the equation and an unscrupulous defendant who made active misrepresentations of fact on the other, a court might well conclude that, although a more sophisticated party would not have taken at face value the false representations of the defendant, that particular plaintiff was justified in doing so. In contrast, if a party is a large and sophisticated organization that has at its disposal a small army of attorneys, accountants, and hired experts to evaluate a business deal, that party, like the plaintiff in Coy, probably “ha[s] or can obtain equal means of information and [is] equally qualified to judge” the merits of a business proposition, thus making reliance on misstatements by another party unjustified.” OPERB v. Simat, 191 Or App 408 (2004) citing Coy, supra.

Ultimately, whether or not a representation will be deemed an “opinion” or a “statement of fact” that could give rise to liability is an intensely fact-based question that will vary case-by-case and will depend on a number of factors including the sophistication of the parties and whether a misrepresentation was made knowingly or negligently.  Understanding this can help an attorney navigate a potential fraud case starting with the very first client intake meeting.

On October 24, 2017, Vice President Mike Pence cast a tie-breaking vote in the Senate to repeal the Consumer Financial Protection Bureau’s arbitration rule. The rule prohibited covered providers of financial products and services from banning participation in a consumer class action as part of a pre-dispute arbitration clause. The rule was issued after a 2015 study showed that pre-dispute arbitration agreements prevent consumers from seeking relief when financial service providers violate the law.

All Democrats and just two Republicans—Lindsay Graham (S.C.) and John Kennedy (La.)—voted against repeal. The House voted in July to repeal the rule with all Democrats and only one Republican, Walter Jones (N.C.), opposing. President Donald Trump has signed the bill into law.

One day before the Senate vote, the Treasury Department issued a report harshly criticizing the CFPB’s justifications for the rule. Treasury argued, among other things, that consumer class actions impose extraordinary costs on businesses while providing little relief to consumers. Treasury warned that the rule would “effect a large wealth transfer to plaintiffs’ attorneys” while encouraging meritless litigation. In lieu of banning class action participation, Treasury suggested that simply requiring more prominent disclosures would better protect consumers.

CFPB Director Richard Cordray said in a statement that the vote was “a giant setback for every consumer in this country,” noting that “Wall Street won and ordinary people lost.”

– Kelly Harpster

 

October 2017 marks the first month that qualified student loan borrowers should be eligible for Public Service Student Loan Forgiveness (PSLF). Anxiety and anticipation is high as borrowers wait to see who, if anyone, will be successful at having their student loans forgiven. Over the past year, some borrowers received the bad news that the federal Department of Education (DOE) believed that they did not qualify for loan forgiveness. In December, the American Bar Association (ABA) filed a lawsuit against the DOE on behalf of four such attorney borrowers who for almost 10 years have believed they were on course to have their loans forgiven.

In 2007, President George W. Bush signed PSLF into law, which promised student loan borrowers who went into public service fields that their remaining federal student loan debt would be forgiven after 10 years of qualifying payments. At the start of the PSLF program, few debtor payments qualified for eventual forgiveness. The program has very specific rules for which loans and borrowers qualified. Borrowers must:

1. Public Service. Work for a not-for-profit 501(c)(3), government organization or other not-for-profit. This does not include labor unions, political partisan organizations or for-profit entities. The employer does not need to be the same employer, and multiple public service employers can be counted towards the 10 years. Borrowers may qualify even if there was a break in public employment.
2. Full-Time Employee. Be employed full-time as defined by your employer, but no less than 30 hours per week if your employer defines full time as less than 30 hours per week.
3. Direct Student Loans. Have federal student loans under the Federal Direct Loan program only. Private student loans are not included. Worse, federal loans under the popular Perkins loans and pre-2010 program of Federal Family Educational loans do not qualify. If these federal loans were consolidated into a Direct Loan, then payments can begin to qualify.
4. Approved Payment Plan. Pay under a qualified payment plan: Any of the income-driven repayment plans or the standard 10-year plan are PSLF-approved plans. This does not include the graduated payment plan, extended repayment plan or any plan that has a specific repayment date beyond 10 years such as the 25-year repayment plan.
5. Make payments after October 1, 2007. Any payments made before October 1, 2007, do not qualify.
6. On-time payments. Pay no later than the 15^th day after payments are due. Payments made while under the grace period, deferment or forbearance do not count (except partial-forbearance if under one of the income-driven repayment plans).
7. 120 payments. Make 120 monthly payments coinciding with the requirements listed above. Prepayments are not counted. Multiple months paid at one time count as one payment only, not more.

During the first 5 years of the program there was no mechanism in place to determine if a borrower was on the right track for loan forgiveness. It was not until 2012 that the DOE released an optional form that borrowers could submit to be given an estimate of their qualifying date.

It is through this form that some borrowers, including the plaintiffs in the ABA’s case, received news from the DOE that it did not believe that they qualified for forgiveness. In the ABA case, the plaintiffs were also ABA employees. The ABA is a not-for-profit organization, but it is not a 501(c)(3) or government entity. The DOE decided that the ABA did not qualify as the right kind of public service employer, though previously the DOE had indicated that the ABA was a public service employer. In response to the ABA lawsuit, the DOE held the position that its employment certification form has no legal effect and that borrowers have no assurance whether they are on the right track until they actually apply for forgiveness at the end of the 10-year period.

Further litigation seems inevitable as borrowers receive their rejection letters this month. In the meantime, the ABA lawsuit is still pending, and the DOE has released the form for borrowers to apply for forgiveness.

Written By: April Kusters

 

By David Koen

A pair of related suits have been filed against Wells Fargo Bank, N.A., charging the third-largest bank in the United States with improperly overcharging for mortgage loans.

In one suit, a class action, Wells Fargo is alleged to have delayed loans to bilk customers into paying fees to keep their agreed-upon interest rate. Muniz v. Wells Fargo & Co., No. 17-4995 (N.D. Cal.). An investigation into the practices contributed to the bank “part[ing] ways with a handful of mortgage executives, including its former national sales manager and regional managers in California, Oregon and Nevada.” http://www.latimes.com/business/la-fi-wells-fargo-rate-lock-20170829-story.html.

In the other suit, a Wells Fargo employee claims he was fired after blowing the whistle on allegedly improper rate-lock practices by the bank. That case is Alaniz v Wells Fargo Bank, N.A., No. 17-5066 (C.D. Cal.).

David Koen is a staff attorney at Legal Aid Services of Oregon

The 2017 legislative session is over. There are a number of bills that may impact your practice – or at least that you will want to know about in order to better screen and advise prospective clients. Below is a list of bills with very short summaries. If you are interested in any of them, you can read the full bill text at olis.leg.state.or.us. Or, you can wait until a more detailed summary of many of these bills is available through the Bar. Unless noted below, the effective date of these bills is January 1, 2018.

Mortgage / Foreclosure / Housing / Rental

SB 79 – Effective date: June 6, 2017. The VA can opt out of participating in a resolution conference.

SB 98 – Waiting for the governor’s signature. Titled the Mortgage Loan Servicer Practices Act. Requires a license from DCBS for mortgage servicers. Sections 9, 12 and 14 set forth requirements for mortgage servicers.

SB 277 – Effective date: June 14, 2017. Requires at least 30 days written notice before terminating a rental agreement for a manufactured dwelling or floating home in serious disrepair. Otherwise, termination notice for disrepair is extended to 60 days. A landlord needs to provide information about disrepair to prospective tenants.

SB 381 – Requires certain loan notices to be mailed to all addresses on file, including a PO Box.

SB 838 – Adds exceptions to ORS 94.807 related to timeshares.

HB 2359 – Removes the requirement in ORS 86.748 for a beneficiary to mail a copy of the notice to DOJ.

HB 2562 – Enhances notice provisions relating to taxes for reverse mortgages.

HB 2624 – Changes exemption for certain banks under ORS 713.300.

HB 3184 – Effective date: June 6, 2017. DCBS can develop a loan counseling program.

Motor Vehicles / Towing

SB 117 – Requires a tower to get written consent from a parking lot owner prior to towing a vehicle, unless the vehicle blocks the entrance or another vehicle or in certain apartment complexes. Requires tower to tow vehicle to tower’s nearest storage facility in the same county. Adds additional causes of action under ORS 646.608.

SB 134 – Amends ORS 646A.090. Allows dealer to provide notice through written electronic communication. Dealers can charge for all mileage added to the vehicle, unless the consumer made a reasonable attempt to return the vehicle within 5 days of receiving notice, in which case the dealer cannot charge for any mileage.

SB 338 – Exempts consumer finance companies from needing to comply with GAP waiver provisions.

SB 488 – Requires law enforcement to share contact information from a stolen vehicle report with a tower, when the tower tows a vehicle reported as stolen. Allows a consumer who does not have applicable insurance coverage to transfer title to a tower in lieu of paying the towing and storage fees.

SB 974 – Increases motorcycle dealers’ bond to $10,000, but limits claims to retail customers. Increases other vehicle dealers’ bond to $50,000 and limits non-retail customer bond claims to $10,000. Eliminates any new motorcycle dealer certificates (aka DMV dealer license).

Collections Activities / Student Loans

SB 253 – Requires colleges to provide certain information to students about federal student loans.

SB 254 – Waiting for the governor’s signature. Requires financial institutions to participate in a data match system established by the Department of Revenue. Prohibits garnishment for delinquent child support obligors.

HB 2134 – Effective date: January 2, 2018. Raises the amount that can be collected for low-income electric bill payment assistance.

HB 2356 – Debt buyers need to include certain information in a complaint. A debt buyer needs to provide a consumer the underlying documents within 30 days of receiving a request from the consumer. Amends ORS 646.639 to prohibit: collection of certain medical expenses; filing a legal action after the statute of limitations expires; collecting amounts not authorized by the agreement creating the debt or permitted by law; and a debt buyer from filing a legal action without having certain documents in its possession. Requires a license from DCBS for debt buyers.

Court / Notices / Business Records

HB 2191 – Waiting for the governor’s signature. Gives the Secretary of State investigatory and enforcement authority. Provides that officers, directors, employees and agents of shell entities are liable for damages in certain instances. Articles of incorporation must include a physical street address and contact information for at least one individual. A registered agent cannot be at a mail forwarding company or a virtual office.

HB 2357 – Amends ORS 33.025 relating to contempt of court to include LLCs and partnerships.

HB 2619 – Amends ORS 726.400 to permit pawnbrokers to provide electronic notice.

HB 2734 – Allows a spouse to appear in certain circumstances in small claims court.

HB 2920 – Requires judgment creditor to file a satisfaction. Permits judgment debtor’s reasonable attorney fees in certain circumstances if judgment debtor does not file a satisfaction.

Residential care facilities

HB 2661 – Waiting for the governor’s signature. Requires certain disclosures by a referral agent before providing a client with a long term care referral. Prohibits certain referrals and sharing of information when the referral agent has a potential conflict of interest. Creates a cause of action under ORS 646.608. Requires referral agents to be registered with DHS.

HB 3359 – Waiting for the governor’s signature. Gives DHS investigatory and enforcement authority over residential care facilities and long term care facilities. Requires DHS to publish annual reports. Increases licensing fees. Requires facilities to have certain employee training.

Misc.

SB 330 – Requires customer to affirmatively agree to receive electronic notices for portable electronics insurance. Reduces advance notice of modification or termination of insurance to 30 days.

HB 2090 – Requires company to follow its publicly published privacy policy. Enforced by the Attorney General under ORS 646.607.