Homebuyers Protected by Ohio Consumer Sales Practices Act

Homebuyers that are subjected to unfair or deceptive practices (from their lender, mortgage broker or appraiser) during the home buying process have options under Ohio’s Homebuyer Protection Act. Adopted in the 1970’s, the Ohio Consumer Sales Practices Act or (CSPA) protects consumers from a supplier’s deceptive practices in a consumer transaction. In 2006, the law was amended to broaden the scope of the CSPA to include protections for home buyers, including abusive lending practices by loan officers, mortgage brokers, and non-bank lenders. Under the law, these businesses are prohibited from engaging in any unfair, deceptive, or unconscionable acts or practices. These new consumer protections allow homebuyers the same rights and remedies under the CSPA as other consumers in non-real estate transactions.

Additionally, the Homebuyer Protection Act created a new list of unconscionable acts or practices that apply solely to consumer transactions in connection with residential mortgages. Included are certain bright-line prohibitions, including:

• No flipping without a tangible benefit
• Violations of prepayment penalties
• Using unconscionable contract terms
• Not considering a consumer’s ability to repay
• Compensating, coercing, or instructing an appraiser in order to influence the appraised values
• Taking advantage of the consumer’s known physical or mental infirmities or illiteracy

The Act also specified certain specific mortgage broker and lender duties. Among them include:

• Mortgage broker shall safeguard and account for any money handled for the borrower
• Follow reasonable and lawful instructions from the borrower
• Act with reasonable skill, care, and diligence in connection with originating any residential mortgage loan
• Act in good faith and fair dealing in connection with brokering or originating a mortgage loan
• Make reasonable efforts to secure a mortgage loan, from lenders with whom they regularly do business, with rates, charges, and repayment terms that are advantageous to the borrower
• Prohibits a lender from engaging in any transaction, practice or course of business which is not in good faith or fair dealing, or is fraudulent in the making, purchasing, or selling of a residential mortgage loan
• Prohibits a lender from recommending or encouraging that you default on an existing mortgage or revolving credit loan agreement

Those that violate the CSPA can be criminally charged, or face enforcement through the Ohio Department of Commerce or the Ohio Attorney General’s Office.

Many real estate professionals work closely with their clients in the home buying process. An important part in representing these clients is recognizing conduct that may be in violation of the Homebuyer Protection Act. Additional information about the act can be found on the Ohio Attorney General’s Website.