On August 7, the U.S. Court of Appeals for the 9th Circuit reversed a district court’s dismissal of a putative class action brought by two homeowners who alleged violations of Washington’s Consumer Protection Act (WCPA). The appellate court determined the arrangement constituted a reverse mortgage loan as defined by the WCPA and that the plaintiffs had stated a claim for a per se unfair trade practice under the law. Because the court found the agreement met the criteria for a reverse mortgage loan, the court held the plaintiffs’ alternative theory moot regarding how the company’s activities constituted an unfair practice under WCPA. The case was reversed and remanded for further proceedings.
The plaintiffs, who had lived in their home since 1990 and faced financial difficulties, entered into an agreement with a home equity sharing company in 2019, receiving cash in exchange for granting the company an option to purchase an ownership interest in their home. After considering selling their home in 2021, they discovered they would receive almost nothing from the sale under the terms of the agreement. In 2022, they filed a class action complaint in state court, arguing the agreement functioned as a reverse mortgage loan and failed to comply with relevant state laws, constituting unfair and fraudulent practices under the WCPA. The district court granted the company’s motion to dismiss, holding that the agreement was not a loan and all the plaintiffs’ claims failed under the WCPA.
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