Midnight Bill Protects Fraudulent Mortgage Brokers ...

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Midnight Bill Protects Fraudulent Mortgage Brokers, Oppressive Car Dealers, and Harassing Debt Collectors

Ohio law prohibits unfair, deceptive and unconscionable practices by mortgage brokers, used car dealers, debt collectors, and others, and provides injured consumers with the right to sue in court to recover any resulting injury. The waning days of the last Ohio legislative session saw passage of a bill to partially immunize wrong-doers from having to pay for the full extent of the injury they inflict on consumers. Those engaged in deceptive, unfair, and unconscionable practices need pay only a maximum of $5,000 for non-economic loss, even if that injury is many times that dollar amount.

As examples:

A loan broker that steals an elder person’s home of fifty years, forcing her out onto the street, and who is found to have grossly engaged in unfair, deceptive and unconscionable practices to do so, would avoid having to compensate the homeowner for much of her loss.
A debt collector who hounds a family, calling at all hours and making illegal and terrifying threats, has minimal exposure for the family’s injury. For many families, the real injury is not economic, and the midnight legislation caps recovery for unfair, deceptive, and unconscionable debt harassment at $5,000.
A car dealer that changes its mind after handing over the keys to the consumer may sneak onto the consumer’s property late at night and seize the car. Even if a court finds this to be wrongful and unfair and unconscionable, the consumer cannot fully recover for all the resulting injury when the consumer discovers the car gone in the morning, and tells the neighbors that the car was stolen—only later discovering the true facts.

Background

Like similar statutes in virtually every other state, the Ohio Consumer Sales Practices Act, Ohio Rev. Code § 1345.01, et seq., prohibits unfair, deceptive and unconscionable practices and, for many years, allowed consumer victims to recover damages, without exempting any types of damages from this recovery. That changed at the very end of the last legislative session, when the statute (at § 1345.09) was amended to immunize wrong-doers from any liability for non-economic damages beyond $5,000. This makes Ohio almost unique in the country in so limiting non-economic damages for unconscionable practices—Ohio limits this injury even when the seller’s activity is egregious, intentional, knowingly illegal, and with malice.

Instead of leaving it to the courts to shape the appropriate damage for unfair, deceptive and unconscionable practices, the midnight legislation provides that, for certain injuries, the wronged consumer cannot be made whole. Ohio law used to provide that a company was liable for three times the consumer’s damages where the company was on notice that its practice was clearly illegal. Now this is no longer the case if the damage is non-economic.

Thus in a case of debt harassment, there may be no economic damages to treble, and the consumer’s recovery would not only be limited to $5,000 (even if the actual injury was much more), and the wrong-doer’s liability would not be trebled even though it was on clear notice that its practice was illegal. Thus debt collectors and merchants that knowingly violate the law, but who only cause only non-economic damages escape the normal punishment meted on all other Ohio merchants for knowing violation of a clear prohibition.

Why Special Protection for Home Wreckers and Debt Harassers?

Foreclosures are at record levels in Ohio, and other aggressive collection tactics are similarly widespread—repossessions, debt collection, seizure of funds in bank accounts necessary for subsistence, and the like. When the consumer’s home, car, or Social Security funds are illegally seized, or when the family’s peace is invaded by illegal debt collection contacts, the injury is not merely economic. Why should the guilty party be protected in these cases, instead of requiring that party to fully compensate the consumer for the injury caused by its illegal practice? In many cases, the economic loss is secondary to the non-economic injury caused by the illegal practice, but the midnight legislation gives short shrift for this type of injury, and provides no incentives for wrong-doers to cease inflicting such injury.

Used with permission from the NCLC.

The National Consumer Law Center, Inc. is a non-profit corporation founded in 1969, focusing on the legal representation of lower income and elder Americans. NCLC publishes a series of legal treatises on consumer law, conducts training and conferences for attorneys, and works with consumers, attorneys, government officials, and others nationwide to insure marketplace justice for all Americans. For more information, go to www.consumerlaw.org.