By Joel Shapiro

The New York Times recently reported that many consumers are being denied access to the court system through questionable legal tactics by debt collectors.   Debt collectors file lawsuits to obtain judgments on old (potentially time-barred) debts, often with no notification to the consumer.  But when consumers go to court to challenge the validity of collecting the debt, the debt collectors argue that arbitration clauses in underlying consumer contracts block the consumers’ right to sue in court or their right to pursue a class action lawsuit; and that instead consumers are restricted to arbitration.  The New York Times has reported, in previous articles in this series, that arbitration clauses infringe the rights of consumers and unfairly benefit corporations.  See the full article, and others in the series, here:

http://www.nytimes.com/2015/12/23/business/dealbook/sued-over-old-debt-and-blocked-from-suing-back.html?_r=0

Joel Shapiro is a solo practitioner in Portland. His practice includes crime victim representation, personal injury, consumer law, and legislative advocacy.

By Michael Fuller

On January 4, 2016, the Second Circuit Court of Appeals ruled that consumers can enforce bankruptcy discharge orders in small claims courts under the FDCPA.

Read the full Second Circuit opinion in Garfield v. Ocwen.

The Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (“FDCPA”) generally makes it illegal for a collector to call a consumer to collect a debt the consumer doesn’t owe.

Most states allow consumers to stop collection calls after bankruptcy simply by filing a small claims court complaint under the FDCPA.

Stopping Calls and Fixing Credit After Bankruptcy

The Second Circuit’s ruling applies to consumers in New York, Connecticut, and Vermont.

Read the Seventh Circuit’s opinion in Randolph v. IMBS, which allows consumers in Illinois, Indiana, and Wisconsin to enforce the bankruptcy discharge under the FDCPA.

Read the Third Circuit’s opinion in Simon v. FIA Card Services, which allows consumers in New Jersey, Pennsylvania, and Delaware to enforce the bankruptcy discharge under the FDCPA.

Unfortunately for consumers in the Ninth Circuit (which includes Oregon, Washington, California, Nevada, Arizona, Montana, Idaho and Hawaii), stopping calls after bankruptcy almost always means hiring attorneys to re-open their bankruptcy cases.

Read the Ninth Circuit’s opinion in Walls v. Wells Fargo, which requires consumers on the West Coast to enforce their discharges by filing motions for contempt in bankruptcy court.

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Consumer Reporting Fairness Act

In July 2015 Oregon Senator Jeff Merkley co-sponsored a bill that would essentially overrule Walls v. Wells Fargo, at least in the post-bankruptcy credit reporting context. The bill (Senate Bill 1773), titled the Consumer Reporting Fairness Act, remains pending in the Senate Judiciary Committee.

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

Oregon Federal Court Rules for Homeowner in Truth in Lending Case

By Hope Del Carlo

In November, the United States Court for the District of Oregon ruled in favor of a homeowner who is seeking to undo the non-judicial foreclosure of his home in 2009. The Opinion and Order denying the defendant bank’s motion to dismiss the homeowner’s complaint was issued by the Hon. Ann Aiken in Pataalo v. JPMorgan Chase, USDC Case No. 6:15-cv-01420-AA.

The plaintiff, William J. Paatalo, refinanced his existing home loan in 2006 into two loans with Washington Mutual Bank (WaMu), an option adjustable rate mortgage and a home equity line of credit (HELOC), both of which were secured by his home. Paatalo alleged a number of unlawful business practices against WaMu in conjunction with the servicing of the HELOC account and origination of the loans. In 2008, he sent a letter to WaMu asserting his right to rescind the loans, which WaMu declined to honor. In 2008, WaMu failed, and federal regulators seized it.

In 2009, WaMu began non-judicial foreclosure proceedings against Paatalo, culminating in a trustee’s sale of the home to itself in August 2009. WaMu began an eviction proceeding against Paatalo in 2010, then sold the property to a third party in 2011.

Then, in January 2015, the U.S. Supreme Court decided a seminal Truth in Lending Act (TILA) case, Jesinoski v. Countrywide Home Loans, 135 S. Ct. 790 (2015). Paatalo sent his lender a letter after this decision that stated that the Jesinoski case affirmed that the loan contracts were void as of the date he had rescinded in 2008. He then filed suit in July 2015 and asked the court to declare him the sole owner of the property, rendering void the foreclosure sale and all documents recorded against the home after his March 2008 rescission.

The lender  moved to dismiss the homeowner’s TILA claims, and the court ruled in favor of Paatalo, declining to dismiss. The court followed Jesinoski, which states unequivocally that under TILA a valid “rescission is effected when the borrower notifies the creditor of his intention to rescind,” not at some later point when the lender or a court recognizes or verifies the rescission. It further held that a borrower need not also file suit within TILA’s three-year statute of limitations to enforce such a valid rescission—the notice itself is sufficient to preserve the right.

Defendant argued that even if borrower’s TILA rescission efforts were valid, he could not enforce his rights in 2015, after his home had been subject to a trustee’s sale that cut off his rights to undo the sale, citing the Oregon Trust Deed Act and Mikityuk v. Nw. Trustee Servs., Inc., 952 F. Supp. 2d 958, 960 (D. Or. 2013). This argument was unavailing, as it reasoned that, “[i]f WaMu had no security interest in the property due to a rescission in March 2008, the FDIC could not have transferred any interest in the property to defendant, and defendant would have had no “legal authority to sell the property.”

The court concluded by noting that further litigation and discovery are necessary to determine the rights of the various parties with interests in the property.

Plaintiff was represented by John Cochran of Portland; WaMu was represented by Frederick Burnside, Kaley Fendall, and Kevin Kono of Davis Wright Tremaine, LLC.

Hope Del Carlo is a sole practitioner in Portland who represents consumers in disputes with creditors.

Today the Second Circuit Court of Appeals ruled that consumers can enforce bankruptcy discharge orders in small claims courts under the FDCPA.

Read the full Second Circuit opinion in Garfield v. Ocwen.

The Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (“FDCPA”) generally makes it illegal for a collector to call a consumer to collect a debt the consumer doesn’t owe.

Most states allow consumers to stop collection calls after bankruptcy simply by filing a small claims court complaint under the FDCPA.

Stopping Calls and Fixing Credit After Bankruptcy

The Second Circuit’s ruling applies to consumers in New York, Connecticut, and Vermont.

Read the Seventh Circuit’s opinion in Randolph v. IMBS, which allows consumers in Illinois, Indiana, and Wisconsin to enforce the bankruptcy discharge under the FDCPA.

Read the Third Circuit’s opinion in Simon v. FIA Card Services, which allows consumers in New Jersey, Pennsylvania, and Delaware to enforce the bankruptcy discharge under the FDCPA.

Unfortunately for consumers in the Ninth Circuit (which includes Oregon, Washington, and California), stopping calls after bankruptcy almost always means hiring attorneys to re-open their bankruptcy cases.

Read the Ninth Circuit’s opinion in Walls v. Wells Fargo, which requires consumers on the West Coast to enforce their discharges by filing motions for contempt in bankruptcy court.​

Consumer Reporting Fairness Act

In July 2015 Oregon Senator Jeff Merkley co-sponsored a bill that would essentially overrule Walls v. Wells Fargo, at least in the post-bankruptcy credit reporting context. The bill (Senate Bill 1773) titled the Consumer Reporting Fairness Act remains pending in the Senate Judiciary Committee.
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Michael Fuller is a partner at Olsen Daines in Portland, Oregon and an adjunct professor of consumer law at Lewis & Clark Law School.

By Jeremiah Ross.

Vehicle dealers often come up with creative ways to obtain vehicle financing for consumers.  Unfortunately some dealers violate the law when engaging in “creative financing.”  Usually, the Retail Installment Contract (RIC) contains valuable information that can assist an attorney in determining whether or not the transaction was legal.  The RIC is a valuable tool that can reveal Unlawful Trade Practices Act (UTPA) violations, Truth in Lending Act (TILA) Violations, and violations of the Oregon Administrative Rules.  Oregon Law has specific provisions that apply to every vehicle RIC in Oregon.

ORS 83.510(11) defines what an RIC is.  Basically the RIC is an agreement entered into in Oregon where the vehicle dealer holds the title to the vehicle or a lien upon a motor vehicle, which is the subject matter of a retail installment sale.  Retail installment sales make up the vast majority of vehicle sales in Oregon.

Oregon law specifically prescribes the form and contents of the RIC.  Most consumers are provided the long pink piece of paper noting “Retail Installment Contract” on the heading.  ORS 83.520 notes a retail installment contract shall be in writing, shall contain all the agreements of the parties, and shall contain identifying information relating to the dealer, purchaser, and vehicle.   ORS 83.520 has other statutory mandates, but the most important mandates are found in Section 3.

ORS 83.520(3) (a) mandates the RIC contain the “cash sale price” of the vehicle.  The “cash sale price” is defined as the price for which the vehicle dealer would sell to the consumer, and the consumer would buy from the motor vehicle dealer, if the sale were a sale for cash instead of a retail installment contract.   The “cash sale price” can include taxes, registration, license fees and other charges for accessories and their instillation, and for vehicle improvements.

ORS 83.520(3) is very important if you are addressing a negative equity issue with the vehicle trade in.   The negative equity issue arises if the consumer owes more than the trade-in is worth.   (See  OAR 137-020-0020(2)(t) and (u) for a more detailed explanation of negative equity.) OAR 137-020-0020(3)(aa) prohibits the vehicle dealer from raising the “cash sale price” of the new vehicle to offset the negative equity in the trade-in.  Negative Equity must be disclosed on the RIC.   An unlawful negative equity violation may result in a UTPA violation, TILA violation, or other violations.

ORS 83.520(3)(b) requires the RIC to note the amount of the buyer’s down payment, itemizing the amounts, if any, paid or credited in money or in goods and containing a brief description of goods traded in.   Violations of this section regularly occur when the dealer is taking in property other than a vehicle as the trade-in.  This section should be reviewed if your client has traded in that traded-in item as the down payment. For example, if your client traded in a television and video games to the dealer to be applied to the vehicle down payment, the dealership would violate the law if the dealership listed the traded in items as a $500.00 “cash down payment” on the RIC and failed to itemize the amounts given for the television and video games.  Arguably, failing to comply with this section is a violation of ORS 646.608(1)(k), and ORS 646.608(1)(s).

Another often overlooked sub-section is ORS 83.520(3)(j).  That subsection mandates the RIC must include a plain and concise statement of the amount in dollars of each installment or future payment to be made by the consumer, the number of installments required, and the date or dates on which or periods in which the installments are due.  Dealers sometimes claim to have deferred a down payment that was listed as a “cash down payment” on the RIC.  Later the dealer asserts the consumer owes a certain amount of money for the down payment.  However there is not anything in writing noting that the down payment is owed, and the documents note that the cash down payment has been made.  This section mandates that if there are any future payments the amount and due date must be included in the RIC.  Failing to include the deferred down payment in the RIC is likely a violation of ORS 646.608(1)(k) and  may be a violation of  OAR 137-020-0020(3)(t).

It is important to note, once the transaction is complete the dealer must deliver or mail a copy of  the RIC to the purchaser.  See ORS 83.540.   ORS 83.540 also allows for the consumer to rescind the deal in very limited circumstances.

Lastly, ORS 83.670 notes certain provisions in the RIC are unenforceable.   This section prohibits the dealer from enforcing any provision granting the dealer power of attorney or confession of judgment.  ORS 83.670 also prohibits the dealer from enforcing a provision in the RIC that allows the dealer or finance company to enter the consumer’s property unlawfully to repossess the vehicle.  Vehicle dealers and finance companies also cannot use any provision in the RIC to commit any illegal act to collect payments.

ORS 83.670(5) is the most important sub-section.  This section prohibits enforcement of any provision in the RIC, or any document executed in connection with the RIC, that relieves the vehicle dealer from “liability for any legal remedies that the buyer may have had against the motor vehicle dealer under the contract.” ORS 83.670(5). As a result a waiver of rights or hold harmless agreement signed in conjunction with a RIC is unenforceable.  Attorneys handling car cases are starting to see more and more waiver of rights forms that prohibit the consumer from exercising legal rights.

Unfortunately, Oregon’s Vehicle RIC laws do not have a specific remedy provision.  However, the careful practitioner can rely on these statutes to support various legal theories and allegations.  If you find yourself involved in a case with vehicle financing issues, it is imperative you carefully review the RIC and ORS 83.510, et seq.

Jeremiah Ross practices personal injury law and consumer law at Ross Law, LLC.

By Jordan Roberts

Over the past few years, our office has dealt with a number of “bad used car” cases where a dealer sells a vehicle that breaks down shortly after the sale, or that won’t pass DEQ, or where a dealership has made false or misleading claims to the client in order to facilitate the sale. On occasion, we have run into the following situation: a potential client comes to us and, after an initial evaluation of the facts, we learn that the client has already signed a waiver and / or release of any potential claims. The waiver may take the following form: “in exchange for [small payment amount or token services provided by seller], consumer releases seller from any and all actions, causes of actions, claims, known or unknown, etc., including any alleged violations of the unlawful trade practices act, the truth-in-lending act, unlawful debt collections, the Magnuson-Moss warranty act…” The list can go on and on.

The question then becomes: did the potential client truly sign away all potential claims and would we be risking a motion for summary judgment by filing a new case? The true answer, of course, depends on the particular facts involved. However, consumer attorneys should look hard at the circumstances surrounding the purported waiver. In the context of consumer rights and protections granted by statute, the waiver may very well be unenforceable.

Waiver, in Oregon, is “the intentional relinquishment of a known right.” Waterway Terminals Company v. P.S. Lord Mechanical Contractors, 242 Or 1, 26 (1965). “It is a truism that a contract validly made between competent parties is not to be set aside lightly. When two or more persons competent for that purpose, upon a sufficient consideration, voluntarily agree to do or not to do a particular thing which may be lawfully done or omitted, they should be held to the consequences of their bargain. The right to contract privately is part of the liberty of citizenship, and an important office of the courts is to enforce contractual rights and obligations. As this court has stated, however, contract rights are [not] absolute; …equally fundamental with the private right is that of the public to regulate it in the common interest.” Bagley v. Mt. Bachelor, Inc., 356 Or 543, 551 (2014) (internal citations omitted).

“Statutory rights may be waived, but only to the extent that they serve no broader public policy but are directed solely to the protection of the individual who purports to waive them.” In re Leisure, 334 Or 244, 253 (2003) (emphasis added). “[W]aiver is not appropriate when it is inconsistent with the provision creating the right sought to be secured and a right conferred on a private party, but affecting the public interest, may not be waived or released if such waiver or release contravenes the statutory policy.” Clark v. Capital Credit & Collection Services, 460 F3d 1162, 1170 (9th Cir 2006) quoting New York v. Hill, 528 US 110, 116 (2000). Put more simply: “[w]here legislation is intended to secure general objectives of public policy as well as to protect the interests of individuals, it may not be circumvented by private agreement.” McKinney v. Employment Division, 21 Or App 730, 737 (1975). See also: Welker v. Teacher Standards and Practices Commission, 152 Or App 190, 197 (1998) citing Turney v. J.H. Tillman Co., 112 Or 122, 132, (1924).

When confronted with a potential waiver, it is important to look to the impact on the individual consumer, but it is equally important to look to the underlying policy concerns behind the statute. Consumers do not have to show a specific injury to the public in a specific instance in order to invoke the public policy concerns and void contract term. “In determining whether an agreement is illegal because it is contrary to public policy, ‘[t]he test is the evil tendency of the contract and not its actual injury to the public in a particular instance.’” Bagley v. Mt. Bachelor, Inc., 356 Or 543, 552 (2014) quoting Pyle v. Kernan, 148 Or 666, 673-674 (1934). However, it is also important to examine the specific circumstances of each individual waiver because waivers often are enforced “only if the waiver was ‘knowing’ or ‘intelligent,’ which means the individual has ‘sufficient awareness of the relevant circumstances and likely consequences’ of his decision. Clark v. Capital Credit & Collection Services, 460 F3d 1162, 1171 (9th Cir 2006) quoting Brady v. United States, 397 US 742, 748 (1970). As such, a waiver or release of claims that is negotiated by two attorneys on behalf of their respective clients is more likely to be enforceable than a take-it-or-leave-it waiver signed by a consumer as part of a transaction with little or no explanation.

In the most recent case addressing whether an anticipatory release is valid, the court summarized the law as follows: “We glean from those decisions that relevant procedural factors in the determination of whether enforcement of an anticipatory release would violate public policy or be unconscionable include whether the release was conspicuous and unambiguous; whether there was a substantial disparity in the parties’ bargaining power; whether the contract was offered on a take-it-or-leave-it basis; and whether the contract involved a consumer transaction. Relevant substantive considerations include whether enforcement of the release would cause a harsh or inequitable result to befall the releasing party; whether the releasee serves an important public interest or function; and whether the release purported to disclaim liability for more serious misconduct than ordinary negligence. Nothing in our previous decisions suggests that any single factor takes precedence over the others or that the listed factors are exclusive. Rather, they indicate that a determination whether enforcement of an anticipatory release would violate public policy or be unconscionable must be based on the totality of the circumstances of a particular transaction. The analysis in that regard is guided, but not limited, by the factors that this court previously has identified; it is also informed by any other considerations that may be relevant, including societal expectations.” Bagley v. Mt. Bachelor, Inc., 356 Or 543, 560 (2014).

When a potential client has signed a waiver or release of claims, the inquiry into the facts should dive deeper to see whether such waiver is valid and enforceable. In the context of consumer transactions, as opposed to an arms-length business transaction, or a settlement negotiation involving experienced lawyers on both sides, the answer may very well be that it is not.

Jordan Roberts is a partner at the Roberts Law Group PC.

Written by Michael Fuller

Today, the Ninth Circuit Court of Appeals ruled that consumers in bankruptcy may seek reimbursement for the fees they incur recovering damages caused by automatic stay violations.

The court’s en banc opinion, In re Schwartz-Tallard, overruled a controversial 2010 case, Sternberg v. Johnston, which expressly prohibited courts from awarding fees to recover damages under § 362(k) of the Bankruptcy Code.

See related post: Payday Lender Liable for Expenses Incurred Prosecuting its Bankruptcy Violation

In Schwartz-Tallard, a debtor sued her mortgage company after it wrongfully foreclosed on her home during bankruptcy. The mortgage company denied all liability but lost in bankruptcy court and on appeal. Due to Sternberg’s holding, Schwartz-Tallard could not recover the fees she incurred defending the bankruptcy court’s ruling on appeal.

Today’s opinion expressly overruled Sternberg. The en banc court reasoned that Sternberg’s holding undercut Congressional intent to “encourage injured debtors to bring suit to vindicate their statutory right to the automatic stay’s protection…” The opinion recognized that the purpose of the automatic stay’s remedial scheme was to deter violations and provide redress for those that do occur. The court cited a brief filed by the National Association of Consumer Bankruptcy Attorneys showing that under Sternberg’s holding, “in many cases the actual damages suffered by the injured debtor will be too small to justify the expense of litigation, even if the debtor can afford to hire counsel.”

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Michael Fuller is a partner at Olsen Daines and a consumer law adjunct professor at Lewis & Clark Law School.

By: David Koen- staff attorney with  Legal Aid Services of Oregon

The statewide Legal Aid Foreclosure Help program is expanding the scope of assistance it provides to low-income Oregon homeowners and tenants facing foreclosure-related legal issues.

Since 2012, Legal Aid Foreclosure Help has assisted hundreds of Oregon homeowners and tenants facing foreclosure-related legal problems. Legal services attorneys throughout Oregon have represented homeowners and tenants in foreclosure cases, Oregon Foreclosure Avoidance Program resolution conferences and disputes with loan servicers and landlords.

Previously, the Foreclosure Help program has focused on representing homeowners and tenants when foreclosure proceedings or resolution conferences have commenced. More recently, Foreclosure Help has begun to also assist homeowners and tenants before formal foreclosure or foreclosure-related proceedings have started. In addition to continuing to assist those in some stage of the foreclosure process, examples of those who Foreclosure Help may also be able to assist include, but are not limited to, the following:

 A homeowner current on her loan but who believes she may soon default.

 A homeowner involved in a dispute with his loan servicer about an attempt to cure arrears.

 A homeowner facing foreclosure due to unpaid Oregon property taxes.

 A tenant whose home has been sold in a foreclosure sale.

Assisting those affected by the foreclosure crisis earlier in the process can expand the range of options a homeowner or tenant has to save her home. Foreclosure Help’s expanded assistance also recognizes the need for continuing assistance for Oregonians amid the ongoing foreclosure crisis.

Legal services attorneys directly serve Oregonians facing – or potentially facing – the possibility of foreclosure when their income is below or at 200% of the federal poverty guidelines.

Legal Aid Foreclosure Help also can refer Oregonians between 201% and 400% of the federal poverty guidelines to a private attorney for pro bono assistance. The initial consultation is offered on a no-charge basis; pro bono attorneys are allowed to charge a reduced fee to callers referred by Foreclosure Help at an amount acceptable to both attorney and client.

Homeowners and tenants may call the toll-free Legal Aid Foreclosure Help statewide intake line at 1-855-412-8828 (or in the Portland metro area 503-227-0198) to speak with an intake specialist. The caller will then be screened for acceptance. The intake line is open from 9:00 a.m. to 12:00 p.m., and 1:00 p.m. to 4:30 p.m., Monday through Friday. Intake staff can assist borrowers in English and Spanish, and can also assist homeowners and tenants in other languages via phone-based interpretation services.

If you are an Oregon attorney who would like to volunteer your time to the Foreclosure Help Project, you can obtain an application to join the pro bono panel by calling 503-227-0198 in the Portland area, or toll-free at 1-855-412-8828.

David Koen is a staff attorney with  Legal Aid Services of Oregon and represents homeowners and tenants under the Legal Aid Foreclosure Help program.

By Michael Fuller

Yesterday, a Ninth Circuit Court of Appeals panel opinion ruled that consumers may be able to permanently void mortgage liens in so-called ‘Chapter 20’ bankruptcy cases. Read the full opinion.

The term ‘chapter 20’ means a consumer who files chapter 13 bankruptcy within four years after receiving a discharge of debts in chapter 7 bankruptcy.

The opinion, In re Blendheim, followed similar holdings by the Fourth and Eleventh Circuits. See related post: 9th Cir. BAP Allows Lien Strip in Chapter 20 Bankruptcy

In 2007, the Blendheims filed a straight liquidation Chapter 7 bankruptcy to wipe out their unsecured debts. The day after receiving their Chapter 7 discharge, the Blendheims filed a second bankruptcy case under Chapter 13, in hopes of restructuring mortgages on their condo in West Seattle. The condo was worth about $450,000 and the couple owed $347,900 on their first mortgage and $90,474 on their second mortgage.

The first mortgage holder, HSBC, filed a proof of claim but failed to attach a copy of the promissory note, as required by the bankruptcy rules. The Blendheims objected, and the bankruptcy court, having heard no response from HSBC, disallowed the claim.

The Blendheims later sought an order voiding their first mortgage lien, under the theory that HSBC’s disallowed claim permitted the court to eliminate HSBC’s state-law right of foreclosure. The bankruptcy court agreed with the Blendheims, and HSBC appealed. See related post: 11th Circuit Allows Second Mortgage “Strip Off” in Chapter 20

HSBC argued on appeal that the bankruptcy court could not void its first mortgage lien because the Blendheims were not eligible for discharge under Chapter 13. HSBC also raised due process issues and argued that the Blendheims’ plan was filed in bad faith.

The appellate panel held that the Blendheims could permanently void HSBC’s mortgage lien upon completion of their chapter 13 plan, whether or not they were entitled to a discharge. The court reasoned that the language of § 506 simply did not impose a discharge requirement on a debtor’s ability to void a lien.

The panel also held that the Blendheims’ plan was filed in good faith, based on their valid reorganizational goals and lack of egregious behavior. The panel acknowledged that successive bankruptcy filings did not constitute bad faith per se.

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