Washington Consumer Protection Act
Posted Friday, March 8, 2013 by John S. Palmer
The same day that the Washington Supreme Court decided League of Education Voters v. State (finding that the State Constitution prohibits the legislature from requiring a two-thirds majority vote for tax legislation), it handed down another decision that received little, if any press, but may be equally important for Washington residents.
In Klem v. Washington Mutual Bank, decided February 28, the court held that it is a violation of the Washington Consumer Protection Act for the trustee of a deed of trust to fail to exercise its discretionary authority to decide whether to delay a foreclosure. The court held that the practice of falsely notarizing a notice of trustee’s sale is also a violation of the CPA.
The homeowner in Klem suffers from dementia and lacked the funds to pay her mortgage (technically, it was a loan secured by a deed of trust, which the most common type of mortgage document used in Washington). The homeowner defaulted on her home loan, which had an outstanding balance of about $75,000. The owner’s legal guardian found a buyer willing to purchase the home for $235,000, and asked the trustee to delay the foreclosure in order to give her a chance to complete the sale. The trustee refused and the home was sold in foreclosure for just over $84,000 or $1 more than the amount due the lender, including foreclosure fees. A notary employed by the trustee had falsely notarized the notice of sale by predating the notary acknowledgement.
A jury found that the trustee had violated the Consumer Protection Act, and the trustee appealed.
Establishing a violation of the CPA entitles a plaintiff to seek actual damages plus an enhanced award of treble damages (up to $25,000) and attorneys’ fees incurred in bringing the action.
The easiest way to establish a CPA claim is to prove that a defendant committed an act that has specifically been declared to be a per se violation of the CPA. That has led to litigation over whether various acts, which are arguably unfair and deceptive, but have not been declared to be per se violations of the act, can form the basis of a CPA claim. The court in Klem noted how difficult it is to specifically define what constitutes an unfair or deceptive act by quoting this passage from the congressional record on the federal consumer protection act:
It is impossible to frame definitions which embrace all unfair practices. There is no limit to human inventiveness in this field. Even if all known unfair practices were specifically defined and prohibited, it would be at once necessary to begin over again. If Congress were to adopt the method of definition, it would undertake an endless task. It is also practically impossible to define unfair practices so that the definition will fit business of every sort in every part of this country.
To resolve any confusion over what constitutes an “unfair or deceptive” act, the court held that “a claim under the Washington CPA may be predicated upon a per se violation of statute, an act or practice that has the capacity to deceive substantial portions of the public, or an unfair or deceptive act or practice not regulated by statute but in violation of public interest.”
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