Each week I field calls from people that have purchased a defective vehicle.   The caller typically informs me they recently purchased a “lemon” and the vehicle suffers from various mechanical issues. At that point it is important to ask a few basic questions to determine if this is truly a lemon law case.  If it is truly a lemon law case then you must determine if it is ripe for litigation.

Oregon’s Lemon law is comprised of a group of statutes starting at ORS 646A.400 and continuing through ORS 646A.418.  The law basically states that if a new motor vehicle does not conform to the manufacturer’s express warranty, and the consumer alerts the manufacturer or the authorized dealer of the nonconformity, then the consumer may be entitled to a replacement or a refund, and damages.  However, before a consumer is able to obtain damages they must comply with the nuanced legal requirements.

First, the motor vehicle must qualify to be protected by the lemon law.  The motor vehicle may be no more than two years old or have less than 24,000 miles on it, whichever period ends first.  Most consumers cannot meet this first element because the vast majority of the “material defect” used car cases involve vehicles over 2 years old.  The Lemon Law also does not apply to travel trailers because they are not motor vehicles.  In other words the lemon law only applies to self-propelled vehicles or those designed for self-propulsion.

The second big issue the consumer typically faces is that they must report each “nonconformity” to the manufacturer, or the authorized dealer, for the purpose of repair or correction during the two-year period following the date of delivery or before the vehicle’s mileage reaches 24,000, whichever comes first. The law provides consumers presumptions that the motor vehicle is a lemon if there were a reasonable number of attempts to do such reporting under the vehicle’s express warranties, and the manufacturer receives advance notice of the defects before attempting the repairs.  The law presumes a reasonable number of attempts have been made if the vehicle has either been in the shop 3 or more times, and the defect continues, or the vehicle is out of service by repair for a cumulative total of 30 or more calendar days.  There is also another presumption the vehicle is a lemon if there is one attempted repair of a nonconformity likely to cause death or serious injury but the defect continues. However, those presumptions won’t apply if the manufacturer did not receive notice of the nonconformity.

The vehicle manufacturer must receive “direct written notification” from the consumer, and must be provided the opportunity to correct the alleged defect.  Notification can be a request for an “informal dispute settlement procedure.”  This means that the consumer must put the manufacturer or the authorized dealer on notice the vehicle is defective and provide an opportunity to cure the alleged defect. It also means that if the manufacturer has established an informal dispute settlement procedure and notifies the consumer of the procedures, then the consumer must resort to the informal resolution procedure (arbitration) prior to filing a lawsuit.  The informal resolution procedure is not binding on the consumer but may be binding on the manufacturer.

If the consumer can satisfy the legal requirements, then their case may be ripe and they may feast on the Lemon Law remedies.  The remedies may include rescission, replacement of the vehicle, or triple damages (capped at $50,000.00 above the amount owed to the consumer). The court may also award discretionary attorney fees and costs.  The Lemon law can be a powerful tool.  Unfortunately, it can also be a sour pill to swallow if the consumer learns they failed to comply with the notice requirements or their vehicle is too old to qualify as a lemon.

Jeremiah Ross is an attorney in Portland Oregon.  Please remember this blog is a summary of the law.  Please refer to the actual law or a lawyer for an evaluation of your case.   Do not rely on this post for legal advice.  The law is constantly changing and this post may be outdated.  Please do not cite this post in any governmental proceeding, arbitration, hearing, or negotiations.

The Consumer Financial Protection Bureau (CFPB) has sued four online lenders for deceiving consumers by collecting debt the consumers did not legally owe.  The loans were void under state laws, yet the lenders made deceptive demands and continued to pursue collection of the debts.

https://www.consumerfinance.gov/about-us/newsroom/cfpb-sues-four-online-lenders-collecting-debts-consumers-did-not-legally-owe/

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today took action against four online lenders – Golden Valley Lending, Inc., Silver Cloud Financial, Inc., Mountain Summit Financial, Inc., and Majestic Lake Financial, Inc. – for deceiving consumers by collecting debt they were not legally owed. In a suit filed in federal court, the CFPB alleges that the four lenders could not legally collect on these debts because the loans were void under state laws governing interest rate caps or the licensing of lenders. The CFPB alleges that the lenders made deceptive demands and illegally took money from consumer bank accounts for debts that consumers did not legally owe. The CFPB seeks to stop the unlawful practices, recoup relief for harmed consumers, and impose a penalty.

“We are suing four online lenders for collecting on debts that consumers did not legally owe,” said CFPB Director Richard Cordray. “We allege that these companies made deceptive demands and illegally took money from people’s bank accounts. We are seeking to stop these violations and get relief for consumers.”

Golden Valley Lending, Inc., Silver Cloud Financial, Inc., Mountain Summit Financial, Inc., and Majestic Lake Financial, Inc. are online installment loan companies in Upper Lake, California. Since at least 2012, Golden Valley Lending and Silver Cloud Financial have offered online loans of between $300 and $1,200 with annual interest rates ranging from 440 percent up to 950 percent. Mountain Summit Financial and Majestic Lake Financial began offering similar loans more recently.

The Bureau’s investigation showed that the high-cost loans violated licensing requirements or interest-rate caps – or both – that made the loans void in whole or in part in at least 17 states: Arizona, Arkansas, Colorado, Connecticut, Illinois, Indiana, Kentucky, Massachusetts, Minnesota, Montana, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, and South Dakota. The Bureau alleges that the four lenders are collecting money that consumers do not legally owe. The CFPB’s suit alleges that Golden Valley Lending, Silver Cloud Financial, Mountain Summit Financial, and Majestic Lake Financial violated the Truth in Lending Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. The specific allegations include:

•  Deceiving consumers about loan payments that were not owed: The lenders pursued consumers for payments even though the loans in question were void in whole or in part under state law and payments could not be collected. The interest rates the lenders charged were high enough to violate usury laws in some states where they did business, and violation of these usury laws renders particular loans void. In addition, the lenders did not obtain licenses to lend or collect in certain states, and the failure to obtain those licenses renders particular loans void. The four lenders created the false impression that they had a legal right to collect payments and that consumers had a legal obligation to pay off the loans.
• Collecting loan payments which consumers did not owe: The four lenders made electronic withdrawals from consumers’ bank accounts or called or sent letters to consumers demanding payment for debts that consumers were under no legal obligation to pay.
• Failing to disclose the real cost of credit: The lenders’ websites did not disclose the annual percentage rates that apply to the loans. When contacted by prospective borrowers, the lenders’ representatives also did not tell consumers the annual percentage rate that would apply to the loans.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is authorized to take action against institutions engaged in unfair, deceptive, or abusive acts or practices, or that otherwise violate federal consumer financial laws like the Truth in Lending Act. The CFPB is seeking monetary relief for consumers, civil money penalties, and injunctive relief, including a prohibition on collecting on void loans, against Golden Valley and the other lenders. The Bureau’s complaint is not a finding or ruling that the defendant have actually violated the law.

A copy of the complaint filed in federal district court is available at: http://files.consumerfinance.gov/f/documents/201704_cfpb_Golden-Valley_Silver-Cloud_Majestic-Lake_complaint.pdf

By: Young Walgenkim

On November 18, 2016 the Federal Trade Commission (FTC) amended the Used Motor Vehicle Trade Regulation (FTC Used Car Rule), which made several changes to the FTC Used Car Buyers Guide. The FTC Used Car Buyers Guide is a sticker approved by the FTC, and required to be affixed on the rear passenger window of used vehicles a dealer is offering for sale. The 2016 amendment to the FTC Used Car Rule purposely corrected a common confusion to the Buyers Guide – the AS IS clause.

Used car dealers often use the AS IS clause of the Buyers Guide to avoid any and all liability arising from used car sales. Whenever a consumer complains about a car purchase, dealers usually refuse to provide any remedy, believing that the AS IS clause shields them from all liability. Many consumers are also convinced that they have no remedy even when the dealer has plainly violated various consumer protection statutes. In an attempt to clear up the confusion, the FTC made the following amendment to the AS IS clause:

Old Rule:

AS IS – NO WARRANTY

YOU WILL PAY ALL COSTS FOR ANY REPAIRS. The dealer assumes no responsibility for any repairs regardless of any oral statements about the vehicle.

New Rule:

AS IS – NO DEALER WARRANTY

THE DEALER DOES NOT PROVIDE A WARRANTY FOR ANY REPAIRS AFTER SALE.

Contrary to what dealers think, AS IS does not mean that the dealer is completely absolved of any liability after the sale. As the new language suggests, AS IS simply means that the dealer is not offering any warranties with the sale of the vehicle. The Oregon Attorney General has further clarified this distinction in the official commentary of the Unlawful Trade Practice Act:

“Unless explicitly disclosed prior to a sale or lease, a motor vehicle that is offered for sale or lease to the public is represented, either directly or by implication, to be roadworthy when it is sold, to have an unbranded title and to have no undisclosed material defects. . . for used vehicles, even if the dealer states on the FTC Buyers Guide (“As Is”) that the dealer is not providing a warranty, the dealer must still disclose material defects about which the dealer knew or should have known.”

OAR 137-020-0020(3)(o) Official Commentary. In other words, if the dealer is selling a car that is not roadworthy, has a branded title, or has other material defects, the dealer must make a separate disclosure. Simply providing the AS IS disclosure in the FTC Buyers Guide is not enough.

Generally, it is a good idea to write down all of the dealer’s promises or representations on the contract prior to signing. However, even if you signed the AS IS clause and failed to write anything down, you may still have a remedy for purchasing a car with problems if the dealer knew or should have known of the defects.

By Matt Kirkpatrick

On January 3, 2017, the Consumer Financial Protection Bureau (CFPB) ordered Equifax, Inc. and TransUnion and their subsidiaries to pay more than $17.6 million in restitution to consumers and $5.5 million in fines to the CFPB. According to Director Richard Cordray, “TransUnion and Equifax deceived consumers about the usefulness of the credit scores they marketed, and lured consumers into expensive recurring payments with false promises[.]”

TransUnion and Equifax are two of the “big three” national credit reporting agencies that collect consumer credit information, such as current and past creditor information, payment histories, debt load, late payments, collections activity, and bankruptcies. Credit reporting agencies then sell consumer information in the form of credit reports and credit scores, among other products. Lenders and other businesses purchase the credit information and use it to determine whether to lend to or do business with consumers, and on what terms.

The CFPB action found that Equifax and TransUnion violated the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act, first, by falsely representing that the credit scores they marketed and sold to consumers were the same scores that lenders used to make credit decisions. In fact, when making credit decisions, lenders typically did not use the same scores as those sold to consumers. The credit bureaus also violated the Act by falsely marketing their credit scores and services like credit monitoring to consumers as being “free” or costing “$1”. In fact, the products were only free or $1 during a 7- or 30-day trial period. After that, unless consumers cancelled the service during the trial period, Equifax, TransUnion, and their subsidiaries automatically charged recurring monthly fees, typically $16 per month or more.

The CFPB also found that Equifax violated the Fair Credit Reporting Act (FCRA) requirement that each credit bureau provide consumers with a free credit report once each year upon request.

Consumers may request their free credit reports through the Federal Trade Commission website at https://www.ftc.gov/faq/consumer-protection/get-my-free-credit-report. Equifax violated the FCRA by making consumers view Equifax advertisements in order to obtain their reports.

For more information, the CFPB press release is available at:

http://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-transunion-and- equifax-pay-deceiving-consumers-marketing-credit-scores-and-credit-products/.

The full text of the consent order against Equifax is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_Equifax-consent-order.pdf.

The full text of the consent order against TransUnion is available at:

http://files.consumerfinance.gov/f/documents/201701_cfpb_Transunion-consent- order.pdf.

Matt Kirkpatrick’s practice focuses on consumer litigation, insurance policyholder coverage actions, and financial elder abuse claims.

Earlier this month, the CFPB’s Office for Older Americans and Office for Students and Young Consumers released its “Snapshot of Older Consumers and Student Loan Debt” which revealed a troubling statistic – the number of consumers age 60 and older with student loan debt has quadrupled over the last decade in the United States. In 2015 alone, older consumers owed an estimated $66.7 billion in student loans and consumers age 60 and older are the fastest growing age-segment of the student loan market.

The CFPB noted that this trend is not only the result of borrowers carrying their own student debt later into life but a growing number of parents and grandparents are financing their children’s and grandchildren’s college education, taking out the loans directly or co-signing on a loan with the student as the primary borrower.

Older borrowers entering retirement with student loan debt face a number of challenges that may contribute to their inability to repay their student loans or meet their responsibility for their children’s loans. Unlike younger borrowers, who generally have more time in the workforce to increase their income and pay off the debts, older consumers typically experience a decrease in income as they age.  In addition, some older consumers face other challenges, such as an increased incidence of physical and cognitive impairments associated with aging. These challenges may limit the ability to remain in the work force and may be associated with a decline in income.

The CFPB Report can be found below:
Snapshot of older consumers and student loan debt

By Michael Fuller

This past September, a federal judge refused to dismiss an Oregon homeowner’s complaint that her mortgage servicer violated federal consumer protection laws.

The lawsuit claimed that a Nevada loan servicer, Madison Management Services, failed to respond to various requests for information and notices sent by Portland consumer Anna Nguyen.

Read the complaint and full court opinion.

Federal law generally requires mortgage companies to timely respond to requests for information and notices of servicing errors from consumers. Specifically, the Real Estate Settlement Procedures Act generally requires mortgage servicers to acknowledge receipt of consumer requests within 5 business days, and respond within certain time frames.

In Nguyen’s case, Oregon federal judge Anna Brown decided that new regulations passed after the subprime mortgage crisis gave borrowers the right to sue their mortgage companies for failing to comply with certain servicing laws.

Judge Brown also allowed Nguyen to sue Madison Management Services for failing to comply with the Truth in Lending Act based on its failure to send her mortgage statements and interest disclosures. Nguyen’s claim under the Fair Debt Collection Practices Act also survived dismissal based on the mortgage company’s failure to take certain actions required under federal law.

Nguyen’s claims under the Oregon UTPA were dismissed because her loan was obtained before 2010. The court is expected to set the case for a rule 16 conference in the coming weeks.

—

Michael Fuller is a partner at Olsen Daines and an adjunct professor of consumer law at Lewis & Clark Law School in Portland, Oregon.

By Jeremiah Ross

I frequently receive calls from people asking whether an Oregon car dealer can lawfully sell a vehicle that has a Service Engine Soon light illuminated.    As with many legal issues there is not a clear cut answer to this question.   Typically it is unlawful for a vehicle dealer to sell a vehicle that has the Service Engine Soon light illuminated to a person who will be registering the vehicle in the Portland or Medford Metro Region.  In other words, if the vehicle is sold with a Service Engine Soon light illuminated, it is most likely a violation of the Unlawful Trade Practices Act if the vehicle will be registered in the Portland or Medford Metro Region. (ORS 646.608(1)(u) via Oregon Administrative Rule (OAR) 137-020-0020(3)(o). See, also, Commentary; ORS 646.608(4).

Here is a breakdown of the law:

The Law:  OAR 137-020-0020(3)(o)’s Official Commentary states: “When a dealer sells a vehicle to an individual that is registering the vehicle in a metro area that requires that the vehicle pass DEQ emissions testing to be roadworthy, the dealer must ensure that the vehicle can pass the DEQ emissions test at the time of sale.”

The DEQ Inspection:   The Oregon DEQ operates a Vehicle Inspection Program in the Portland and Rogue Valley areas of Oregon. In these areas, an emissions test is required when registering or renewing a vehicle with Oregon DMV.  ORS 803.350(4).  The DEQ notes that vehicles are the number one source of air pollution in Oregon. Emissions can lead to high smog levels and contain air toxics, carbon monoxide and greenhouse gasses, which can have a variety of effects on Oregonians. The DEQ claims the vehicle Inspection Program is a successful, cost-effective way to reduce air pollution and maintain good air quality.

The Service Engine Soon Light:  The Service Engine Soon light or Check Engine light are lights that are intended to alert drivers there is a problem with the vehicle’s On Board Diagnostics (OBD). Sometimes the warning light is simply an illuminated engine symbol. These lights often illuminate when there is an issue with a key engine component or the emissions system.   That is why they are called Malfunction Indicator Lights (MIL). If MIL lights blink or flash then it may indicate a serious engine malfunction.  Some of these issues are quick fixes, but many times they are not.    When there is a problem then the vehicle will issue a Diagnostic Trouble Code (DCT) and store it in the vehicle’s computer memory.  This code aids a qualified service technician in diagnosing and repairing the problem.

The DEQ Inspection and The Service Engine Soon Light:  The DEQ will not issue a certificate to a vehicle that has an MIL illuminated. This is due to the fact the DEQ tests the vehicle’s OBD on vehicles that are 1996 or newer.  As previously noted, the OBD is a computer that tracks if the vehicle has any issues. The OBD monitors misfires, the fuel system, certain engine components, the catalytic converter, the oxygen sensor and heater, and Exhaust Gas Recirculation valves.  The OBD will trigger the MIL if any of these systems have a problem.   As a result, the vehicle cannot pass DEQ if the MIL is illuminated because the MIL indicates there is a problem with the vehicle’s key components or emissions systems.  Therefore, a vehicle with a MIL light illuminated is not “roadworthy” as mandated by (OAR) 137-020-0020(3)(o).

Where are the Metro Regions requiring a DEQ Emissions Test:  The DEQ has specific boundaries for the Metro Regions requiring testing.  The Metro Regions requiring DEQ inspections are areas surrounding Portland and Medford (aka Rogue Valley Area).  If you live inside those boundaries and will be registering your newly purchased vehicle then your vehicle must pass a DEQ inspection in order to be “roadworthy.”

Not All Vehicles Need to Pass DEQ in Order to Be Registered:  Some vehicles do not need to pass the DEQ inspection due to the vehicle’s age, type, or where the vehicle will be registered. For more information see DEQ Web-Site or OAR 340-256-0300.

If The Service Engine Soon Light Illuminates Shortly After Purchase:  A Service Engine Soon light that illuminates shortly after purchase is often indicative of a recent “reset” of the OBD.   Sometimes a vehicle’s OBD can be reset by simply removing the battery.   Also “diagnostic trouble codes” can be reset.  If that is done, the MIL will often be turned off once the battery is reconnected.  The vehicle then needs to drive through a driving cycle to determine if there is a problem.  Sometimes this may take a few miles; other times it may take a week or so.  The vehicle’s OBD will indicate it is “not ready” if the vehicle is re-diagnosing any issues and is in a drive cycle.  If the vehicle’s OBD indicates “not ready” at the DEQ then this is a good indication the vehicle’s OBD has been reset recently and prior to the sale. This may be a violation of ORS 646.608 (1), OAR 137-020-0020(3), ORS 815.305, and other state and federal regulations.

The Law Prohibits Disconnecting or Altering Pollution Control Equipment:   If a person disconnects the battery or other pollution control devices in an effort to reset the OBD then they may be breaking the law.   It is against the law for a person to disconnect or permit someone to disconnect vehicle air pollution devices.  It is also against the law for a person to modify or alter factory installed pollution control systems in a manner that reduces its efficiency or effectiveness.  There are some exemptions to this law.  See ORS 815.305 for details.

Jeremiah Ross represents consumers in vehicle transactions, personal injury clients, and crime victims.

By Hope Del Carlo

Oregon’s Homeownership Stabilization Initiative (“OHSI”) has rolled out three new programs designed to help financially-strapped Oregonians keep their homes.  OHSI is a program of Oregon Department of Housing and Community Services, and is funded by the Hardest Hit Funds administered by the U.S. Treasury Department.

Together the three new benefits are known as the Loan Preservation Program. They consist of:

1. Preservation Benefit: payment assistance to borrowers who can afford to pay their mortgages after a financial hardship. Through this program, OHSI provides five-year, forgivable loans of up to $40,000 to reinstate delinquent first-lien mortgages. OHSI makes the payments directly to loan servicers.
2. Property Tax Benefit: assists homeowners who own their homes outright (without a mortgage) and can pay their taxes going forward, but are delinquent on taxes due to a hardship. The program can provide a maximum benefit up to $40,000, paid to the county to bring taxes current.
3. Reverse Mortgage Benefit: available to homeowners who are in default on a reverse mortgage due to unpaid property charges (such as taxes, insurance and homeowner’s association fees) that were advanced by their lender. The benefit can provide up to $40,000, paid directly to the reverse mortgage servicer, to cure such delinquencies.

For each of these programs, the funds provided are in the form of a five-year, forgivable loan secured by the home.

Slots become available for these programs on a rolling basis; borrowers seeking to apply should visit OHSI’s website for more information, including referrals to housing counseling agencies for assistance in accessing the programs.  OHSI’s website is found at http://www.oregonhomeownerhelp.org.

By Kelly Harpster

A new Court of Appeals decision clarifies what most lawyers already suspected and the Legislature already confirmed by amendment—that Oregon law does not require courts to include a money award in a judicial foreclosure judgment when the foreclosing party does not seek a money award.

In Bayview Loan Servicing, LLC v. Reed, 282 Or App 525 (2016), the Court of Appeals held that ORS 88.010 (2013) did not require a court to enter a personal money judgment against the debtor if the foreclosing plaintiff does not seek a money judgment. Prior to the foreclosure action, the debtor received a bankruptcy discharge of his personal liability for a defaulted mortgage. When Bayview later commenced a judicial foreclosure, Reed moved for summary judgment, arguing that entry of a money judgment against him was required by ORS 88.010(1) and that entering the money judgment would violate the federal discharge injunction. The trial court agreed, entered a limited judgment dismissing Reed from the case, and awarded Reed his attorney fees. Bayview appealed.

The trial court was not the first to interpret the statute to require a personal money judgment. A few years ago, during the peak of the foreclosure crisis, judges in several Oregon counties decided that in rem foreclosure actions were prohibited by ORS 88.010. The relevant part of the statute provided:

Except as provided in ORS 88.103, in addition to judgment of                                 foreclosure and sale, if the lien debtor or another person, as                                 principal or otherwise, has given a promissory note or other                                 personal obligation for payment of the debt, the court also shall                         enter judgment for the amount of the debt against the lien                             debtor or other person.

Courts understood the word “shall” to mandate personal money awards regardless of the relief actually sought by the foreclosing plaintiff. The new interpretation created an acute problem if the debtor received a bankruptcy discharge prior to the foreclosure. Although bankruptcy law does not prohibit creditors from foreclosing a security interest post-discharge, bankruptcy law does prohibit creditors from obtaining a personal money judgment against the debtor. If every foreclosure judgment had to contain a money award against the debtor, including a debtor who received a bankruptcy discharge, then creditors could not judicially foreclose in Oregon without violating federal law.

The interpretation created problems in other cases, too. For example, some homeowners deed property to the lender in lieu of foreclosure. Many deeds-in-lieu permit the lender to foreclose if necessary to secure clear title but prohibit the lender from seeking a personal money judgment against the homeowner. The new interpretation of ORS 88.010 meant that a lender would have to breach its contractual promise to foreclose judicially.

As the interpretation spread slowly across the state, both debtor and creditor attorneys called for a statutory fix. The Oregon State Bar’s Debtor-Creditor section worked with the Consumer Law section to craft an amendment to clarify the intent of ORS 88.010. The Legislature passed the amendment in 2015, making clear that a court need not enter a personal money judgment against the debtor when other law prohibits it or the plaintiff does not seek a money judgment.

Because the amendment did not take effect until one month after entry of the limited judgment in Bayview, neither party argued that the amended statute controlled. Therefore, the court reviewed the history and context of ORS 88.010, concluding that statute, even prior to the amendment, did not require a court to enter a personal money judgment if the foreclosing plaintiff did not seek one. The Court of Appeals therefore reversed and remanded to the trial court for further proceedings.

The full opinion is available here.