JUST HANG UP THE PHONE ON IMPOSTER SCAMS
Consumer Financial Protection Bureau Expands Foreclosure Protections for Borrowers
On August 4, 2016, the Consumer Financial Protection Bureau (CFPB) finalized new measures to ensure that homeowners and struggling borrowers are treated fairly by mortgage servicers, including:
The CFPB’s press release and link to rules is here.
Senator Jeff Merkley (OR) and Representative Elijah Cummings (MD) have drafted a bill that proposes to amend the federal wage garnishment laws. 15 U.S.C 1673. The proposed bill (H.R.5664 – 114th Congress (2015-2016)- WAGE Act) would limit the amount garnished for those earning $1,200 or less per week to 10% of disposable earnings. Those earning more than $1,200 per week would be subject to a 15% garnishment. Those numbers would adjust every three years for inflation. The act would also restrict bank garnishments to those sums on hand that exceed the amount identified as the federal poverty guideline for a household of one which is around $12,000. Currently there is no restriction on bank garnishment although arguably garnishment of those funds traceable to wages would be limited by the wage exemption even if deposited in a bank account.
For more info see this article.
Since 2002, the Oregon Department of Justice has received complaints surrounding the debt collection practices of Daniel N. Gordon, P.C. (“Gordon”), an Oregon law firm that works with creditors and debt collectors. After being the subject of a subsequent DOJ investigation, Gordon brought a declaratory action against the DOJ. Specifically, Gordon sought declarations providing that the Unlawful Trade Practices Act (“UTPA”) and the Unlawful Debt Collection Practices Act (“UDCPA”) did not apply to Gordon’s debt collection activities as those laws are codified in ORS 646.607(1), ORS 646.608(1)(b), and ORS 646.607(6). The trial court ultimately found in favor of Gordon, and permanently enjoined the DOJ from enforcing the UTPA and UDCPA against Gordon with respect to Gordon’s debt collection litigation. The DOJ then appealed.
On appeal, the court affirmed that Gordon’s debt collection activities did not fall under the UDCPA. The court applied precedent and found that the UDCPA simply did not apply to Gordon’s practice of collecting debt through litigation. However, the DOJ prevailed with respect to the UTPA provisions. Specifically, the court held that ORS 646.607(1) applied to Gordon’s debt collection activities because the statute’s text does not require any sort of transactional or contractual relationship between Gordon and the debtor. That is, even though the statute requires “a customer”, the consumer in question does not have to be Gordon’s customer. The court also held that ORS 646.608(1)(b) applied to Gordon’s debt collection activities because the statute’s text also does not require a transactional or contractual relationship between Gordon and the debtor. The court found Raudebaugh v. Action Pest Control, Inc., 59 Or. App. 166 (1982) instructive and reasoned that no direct relationship would be necessary so long as the debtor could demonstrate detrimental reliance on Gordon’s misrepresentations.
While the Gordon decision predominantly affects the work of the Attorney General’s office, the court’s ORS 646.608(1)(b) holding also affects the work of consumer protection attorneys in the private sector. Gordon provides additional support for a valid cause of action under ORS 646.608(1) with no direct or transactional relationship between the consumer and the violator. Simply showing that the consumer detrimentally relied on the violator’s misrepresentations is sufficient to apply the UTPA to the violator’s actions. The plaintiffs in Gordon even anticipated this reality and argued that such a holding would “dramatically broaden the UTPA” to unintended contexts. However, the Court of Appeals explained that Gordon was not being held accountable for the lender’s mistakes. Rather, Gordon was being held accountable for the misrepresentations that Gordon made directly to the debtors. Thus, Gordon allows for recovery from third parties under the UTPA without making the UTPA unfairly broad, provided that the consumer was harmed as a result of a third party’s misrepresentations.
Yesterday, the Ninth Circuit Court of Appeals decided a dispute over the statute of limitations defense under the Fair Debt Collection Practices Act (FDCPA).
Read the full opinion in Lyons v Michael & Associates.
The facts of the case were straightforward: in 2011 a debt collector sued a consumer in a wrong judicial district, in violation of the FDCPA. In 2013, the consumer filed an FDCPA complaint against the collector. The FDCPA complaint was filed more than a year after the collector filed its suit, but less than a year after the consumer was served with the suit.
At trial, the collector raised the statute of limitations defense. The statute of limitations generally requires consumers to file FDCPA complaints against collectors within a year after the law was violated.
On appeal, the Ninth Circuit Court of Appeals held that the discovery rule applies to the FDCPA statute of limitations defense.
Under the discovery rule, the statute of limitations does not begin to run until a consumer knows or has reason to know that a violation occurred. Because the consumer was first served with the collector’s suit within a year before she filed her FDCPA complaint, the collector’s statute of limitations defense failed.
By Jordan Roberts, Roberts Law Group PC
Many consumer-related disputes involve actions by an individual against a corporation or limited liability company. This provides an opportunity for attorneys representing the consumer to notice and take an entity deposition pursuant to ORCP 39C(6). Some attorneys, however, fail to understand the obligations that a 39C(6) deposition creates both for the individual’s attorney, and especially for the corporation. When used properly, a 39C(6) deposition can provide a more efficient way of information gathering for the consumer, and may even bind a corporation and prevent it from presenting certain evidence at trial if the corporation does not adequately prepare the designee being deposed.
As of the writing of this article there are no Oregon Court of Appeals or Oregon Supreme Court cases interpreting ORCP39C(6). There are, however, a number of cases interpreting FRCP 30(b)(6), the virtually identical federal counterpart to ORCP 39C(6), and those cases can offer guidance to practitioners.
Under ORCP 39C(6) a party may, in the notice and in a subpoena, name as the deponent “a public or private corporation or a partnership or association or governmental agency.” The party giving notice to the corporation to be deposed must also “describe with reasonable particularly the matters on which examination is requested.”
Giving the required notice and description then triggers the duty of the corporation to designate one or more “officers, directors, managing agents, or other persons who consent to testify on its behalf.” The person so designated “shall testify as to matters known or reasonably available to the organization.”
This differs from your typical deposition in that 1) the corporation chooses who will appear at the deposition, and 2) the deposing party must let the corporation know before the deposition what the topics of inquiry will be. In exchange for these advantages, the corporation must testify to facts and opinions beyond the personal knowledge of the person designated. They must testify to all matters “known or reasonably available to the organization,” which in the case of a corporation can be quite broad.
The designee is not giving her own opinion or testimony. Instead, the designated witness is “speaking for the corporation and this testimony must be distinguished from a mere corporate employee whose deposition is not considered that of the corporation.” United States v. Taylor, 166 FRD 356 (MDNC 1996). “If the persons designated by the corporation do not possess personal knowledge of the matters set out in the deposition notice, the corporation is obligated to prepare the designees so that they may give knowledgeable and binding answers for the corporation.” Id. This means that, even if a corporation has fired the employee(s) with personal knowledge of the situation it must actively attempt to acquire its past employee(s)’ knowledge so long as it is “reasonably available.” In addition to testifying about objective facts, the designee must also testify about the corporation’s subjective beliefs and its interpretation of documents and events. Id. at 361.
Like an individual, the corporation may testify that it “does not remember” or that it “has no position” with regards to a certain fact set or area of inquiry. However, “if a party states it has no knowledge or position as to a set of alleged facts or area of inquiry at a Rule 30(b)(6) deposition, it cannot argue for a contrary position at trial without introducing evidence explaining the reasons for the change.” Id. at 363. As such, the entity deposition can serve to “bind” the corporation to the testimony of its designee. If the corporation does not spend the necessary time to prepare its designee or to seek out information that is reasonably available to it at the time of the deposition, it may not then introduce that information at trial. Note however, that while many courts consider the testimony of the designee “binding,” other jurisdictions take a more lenient approach and allow additional evidence at trial that may explain or contradict the designee’s testimony. See, e.g., In re Puerto Rico Elec Power Auth., 687 F2d 501 (1st Cir 1982). As no Oregon case has ruled on this issue yet it is unclear which path Oregon will take.
As a practical matter, this means that every attorney taking a 39C(6) deposition should spend time asking questions that relate to the time spent preparing for the deposition including the names of any other persons the designee spoke to and efforts the designee made to contact those with the information. The designee’s responses regarding his or her preparation may prevent the corporation from offering conflicting evidence at a later time. If the designee made no attempt to contact those with the relevant information the corporation may open itself up to motions for discovery sanctions pursuant to ORCP 46D because producing an unprepared witness is tantamount to failing to appear. See, e.g., Starlight International Inc. v. Herlihy, 186 FRD 626 (D Kan 1999); United States v. Taylor, 166 FRD 356 (MDNC 1996); In re: Vitamins Antitrust Litigation, 216 FRD 168 (2003); Harris v. State of New Jersey, 2007 US Dist LEXIS 61457 (DNJ 2007). On the other hand, if the designee attempted to contact the past employee but could not because the employee had moved, changed phone numbers, or was simply refusing to work with the designee, then the corporation has likely met its burden of preparation because that employee’s knowledge was not “reasonably available.”
Although entity depositions require the attorney taking the deposition to spend additional time preparing the areas of inquiry and preparing for the deposition well in advance, one of the added benefits for consumers is that entity depositions can serve to reduce the overall number of depositions that the consumer’s attorney needs to prepare for. For example, instead of deposing each employee individually, the attorney can craft a topic of inquiry that would cover all necessary material then prepare for only a single deposition. In addition, facts that are known by the corporation cannot be shielded from the deposing side under the guise of attorney client privilege or work product. “No contention can be made that the attorney-client privilege precludes disclosures of factual information. The privilege does not protect facts communicated to an attorney. Clients cannot refuse to disclose facts which their attorneys conveyed to them and which the attorneys obtained from independent sources.” Protective Nat’l Ins. Co. of Omaha v. Commonwealth Ins. Co., 137 FRD 267 FRD 267, 278-279 (D Neb 1989).
Using an entity deposition instead of individual depositions forces corporations to provide designee(s) that have knowledge about the noticed topics. It prevents a multitude of corporate employees from disclaiming any knowledge when it is clear that someone in the corporation has relevant information. For that reason it can be particularly helpful for consumers in dealing with companies with high employee turnover such as used car lots, or collection agencies. It prevents trial by ambush by forcing corporations to do its investigations early and provide its interpretation of events. ORCP 39C(6) depositions can also help consumers who often bring cases on a limited budget. While the attorneys on both sides must do more work to prepare for and take a 39C(6) deposition it is possible to cover in a single deposition with a single court reporter fee, a wide range of issues that might otherwise require multiple depositions, multiple court reporters, and multiple transcripts.
As one judge succinctly explained: “the burden upon the responding party, to prepare a knowledgeable Rule 30(b)(6) witness, may be an onerous one, but we are not aware of any less onerous means of assuring that the position of a corporation that is involved in litigation, can be fully and fairly explored.” Prokosch v. Catalina Lightning, Inc., 193 FRD 633, 638 (D Minn 2000).
When appropriate, consumers and their attorneys would be wise to take advantage of the benefits of using an entity deposition rather than a multitude of individual depositions.
On May 5, the Consumer Financial Protection Bureau (CFPB) released a proposed rule that would prohibit the inclusion of class action waivers into forced private arbitration clauses. Importantly, the proposed rule does not prohibit mandatory private arbitration clauses in consumer agreements in general, just the use of class action waivers. A typical consumer financial contract contains a lengthy arbitration clause specifying that the consumer agrees to resolve any dispute that she may have with company, or even other entities that the company may assign the contract to down the road, in private arbitration rather than in a court and waives the consumer’s constitutional right to have their dispute heard by a jury of her peers. Arbitration clauses are usually buried in fine print inside a long and legalistic contract, which may not even require the consumer’s signature to be valid and enforceable. Arbitration clauses are often referred to by critics as requiring “forced arbitration” or as “contracts of adhesion” as the consumer does not have equal bargaining power to reject the contractual terms, even if she could actually decipher the legalese and understand exactly what rights they were giving up and what she was agreeing to. Moreover, the typical arbitration clause contains a class action waiver, whereby the consumer waives their right to participate as a member, or representative, of a class action lawsuit and ability to aggregate their potential claims with other consumers who have been harmed by the alleged wrongdoer.
In recent decades, as a result of congressional action (chiefly the Federal Arbitration Act (FAA)) and pro-arbitration judicial opinions broadly interpreting the FAA and prohibiting state regulations of arbitration based upon federal preemption doctrine, arbitration clauses have been largely upheld and have become ubiquitous. Whereas financial institutions and other private arbitration advocates have long touted private arbitration as an efficient and cost-effective method of dispute resolution, consumer rights advocates have called out for change arguing that mandatory private arbitration creates inconsistency in outcomes, offers a very limited basis to appeal wrong decisions, lacks transparency as the proceedings are not part of the public record, and actually increases costs for the consumer plaintiff—which ultimately means that consumers are much less likely to be able to secure legal representation to seek relief for the harms they suffered. Further, consumer advocates assert that class action waivers effectively eliminate the ability to hold corporate defendants accountable when the alleged damages may be quite small yet thousands, or perhaps even millions, of consumers were injured, because the inability to aggregate the claims of the many victims in a consolidated class case would necessitate a myriad of individual cases that would become much too costly and inefficient to litigate on an individual basis.
It is important to note that this is just a proposed rule—there is a 90-day comment period starting from when the proposal is entered into the Federal Register, and then the CFPB will assess the comments and submit a final rule. Even then, if the rule is adopted, it will likely face judicial challenge given that the opponents of the rule are well-funded groups associated with national banks, institutional creditors, and other large corporations. Also, even if adopted, the rule would only regulate financial institution products (given the scope of the CFPB’s rulemaking authority), and even some financial products are exempted from the rule.
The full text of the proposed rule can be found online here.
Kelly D. Jones is a solo bankruptcy & consumer rights attorney in SE Portland
In an effort to aid tenants facing increases in rent, the Oregon legislature recently passed HB 4143, which was signed into law on March 15, 2016, by Governor Kate Brown. HB 4143 amends the Oregon Residential Landlord Tenant Act (ORLTA) and provides new rent protections for residential tenants starting April 14, 2016.
For tenants in month-to-month tenancies, landlords are now prohibited from raising rent within the first year of the tenancy and must now provide notice at least 90 days before raising rent after that first year of occupancy. The ORLTA had previously required landlords to give notice at least 30 days before increasing rent. For tenants in a week-to-week tenancy, the law now requires landlords to provide at least 7 days notice before rent is increased.
Oregon’s most populous city, Portland, also recently passed additional tenant protections, which are aimed at slowing no-cause evictions that have risen with the increase in property values. Portland City Code 30.01.085 prohibits a landlord from terminating a tenancy “without cause” unless the landlord has provided the tenant with at least 90 days’ written notice of the termination, or the end of rental agreement, whichever is longer.
A Portland landlord is also prohibited from increasing rent by 5 percent or more over a 12-month period unless the landlord gives written notice at least 90 days before the effective date of the rent increase. Landlords that fail to comply with Portland’s new requirements are liable to the tenant for an amount up to three months rent, as well as actual damages, reasonable attorney fees and costs.
—
Written by Portland attorney David Venables.
View the main website for National Consumer Protection Week:
https://www.ncpw.gov/
View a list of the Oregon Department of Justice’s Top 10 consumer complaints from 2015: http://www.doj.state.or.us/releases/Pages/2016/rel030716.aspx
By David Koen
The Oregon Court of Appeals has decided that a borrower who has actual notice that her property is being sold at a trustee’s sale under the Oregon Trust Deed Act (OTDA) is not barred from later challenging the sale on the grounds that the entity that executed the sale was neither a validly appointed successor trustee nor the agent of a trustee. Wolf v. GMAC Mortgage, LLC, 276 Or App 541, 543 (2016).
The court rejected GMAC’s argument that “the legislative history [of the OTDA] emphasizes certainty and finality in foreclosure proceedings as the major public policy consideration and that allowing post-sale challenges like Wolf’s challenge here ‘would gut the purpose of the OTDA.’” Id. at 548. Rather, the court reaffirmed its holding in Staffordshire Investments, Inc. v. Cal-Western, 209 Or App 528, 542, 149, P3d 150 (2006), rev den, 342 Or 727 (2007), that “‘there is nothing * * * in the Act, to indicate that the legislature intended the auction to be final in the absence of legal authority to sell the property.’ . . . (emphasis in original).”
The Court of Appeals found unpersuasive Mikityuk v. Northwest Trustee Services, Inc., 952 F Supp2d 958, 962-70 (D Or 2013), which “predicted that the Oregon appellate courts would conclude that a borrower who received pre-sale notice of a trustee’s sale cannot mount a post-sale challenge to the validity of the sale.” 276 Or App at 549 n4. Mikityuk had been cited favorably no fewer than 19 times by courts including the U.S. Ninth Circuit Court of Appeals, Angels Alliance Grp., LLC v. ReconTrust Co., NA, 617 Fed Appx 740, 742 (2015), and the U.S. District Court for the District of Oregon, e.g., Hayes v. Wells Fargo Bank, N.A., 2015 US Dist LEXIS 130075, at *4-5 (Aug 26, 2015) (pro se plaintiff). The Court of Appeals decision also contrasts with that of the Multnomah County Circuit Court in Offenbacher-Afolau v. ReconTrust, Case No 1202-02429, at 2 (Jan. 16, 2013) (pro se plaintiff; “As Defendants assert in their briefing, plaintiff is statutorily barred under [former] ORS 86.770 [(renumbered as ORS 86.797)] from challenging a completed foreclosure sale of which she had no notice.”).
David Koen is a staff attorney with Legal Aid Services of Oregon and represents homeowners and tenants under the Legal Aid Foreclosure Help program.