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| JASON E. MANNING AND JESSICA CLARK
Senate Bill No. 563 amends several provisions of the West Virginia Consumer Credit Protection Act (WVCCPA). The Bill passed the West Virginia Senate and the House of Delegates with high approval margins, and was signed into law by Governor Jim Justice on April 21, 2017. These amendments to the WVCCPA will have an impact on claims that are frequently litigated in West Virginia. Here is a summary of the material amendments and relevant effective dates. Balloon Payment Disclosure (§ 46A-2-105) When disclosing balloon payments, the loan agreement now must contain a disclosure “in form and substance substantially similar to the” the statutory disclosure. This ends the common argument for strict compliance under the former version of the section. Notice of Attorney Representation (§ 46A-2-128(e)) Debt collectors now have three (3) business days, rather than 72 hours, to cease communication with a consumer that has sent notice of attorney representation. Further, consumers must send notice of attorney representation via certified mail, return receipt requested to the debt collector’s registered agent in West Virginia. Statute of Limitations Disclosure (§ 46A-2-128(f)) Disclosure that a debt is beyond the statute of limitations for a legal collection action must now be disclosed in every written communication, not just the initial written communication. Anticipate increased litigation on this disclosure to continue. Protecting Foreclosure Sales (§ 46A-5-101) WVCCPA Actions that seek to set aside a foreclosure sale must now be brought within one (1) year of the final foreclosure sale. This means actions brought more than one year after the final foreclosure sale are barred. Creating a Right to Cure (§ 46A-5-108) Significant new provision: creditors and debt collectors now have a right to cure before a consumer can file a WVCCPA complaint. Completing a cure offer serves as a complete defense to liability. Right to Cure Timeline – (notice, offer, acceptance, completion) Creditor has 45 days to respond once notified of the alleged violation and underlying facts via certified mail, return receipt requested; Consumer has 20 days from receipt to accept a cure offer; and Creditor has 20 days from acceptance to “begin effectuating” the cure, which must be completed in a “reasonable time.” Creditor cure offer may be admissible in litigation and will bar liability of consumer’s attorneys’ fees and costs unless the award exceeds cure offer. Pleadings Cannot be Grounds for a Cause of Action (§ 46A-2-140) This new provision makes clear that “[n]othing contained in or omitted from a pleading filed in a court of this state shall be the basis of a cause of action under” the WVCCPA. These amendments will take effect on July 4, 2017 (90 days after the Bill passed the House on April 5, 2017), and will provide additional clarity to the WVCCPA and its application to frequently litigated issues. While Bill 563’s amendments take effect on July 4, 2017, their application to loans and litigation in West Virginia varies by provision: The Balloon Payment Disclosure (§ 46A-2-105) applies to consumer credit sales or consumer loans entered on or after July 4, 2017; Notice of Attorney Representation (§ 46A-2-128(e), Statute of Limitations Disclosure (§ 46A-2-128(f)), and Pleadings Cannot be Grounds for a Cause of Action (§ 46A-2-140) apply to causes of action that accrue on or after July 4, 2017; and The Right to Cure (§ 46A-5-108) applies to causes of action filed on or after July 4, 2017. Should you have questions or would like more information regarding these amendments and their anticipated effect on litigation in West Virginia, please feel free to contact John Lynch, Jason Manning, or Kyle Deak. The Financial Services Litigation group at Troutman Sanders has handled hundreds of contested matters in West Virginia, including individual and class action cases and arbitrations, and also appeals to the Supreme Court of Appeals of West Virginia and the Fourth Circuit.
| Chris Koegel Assistant Director, Division of Financial Practices, FTC
Making a plan is one thing. Sticking to it: quite another. During 2015, the FTC made a plan to address some new and troubling issues in debt collection. Throughout the course of the year, we stuck to that plan – bringing a record number of new cases, banning bad debt collectors, talking with industry, and finding new ways to do outreach.
The FTC gets more complaints against debt collectors than against any other industry. But this year, we hope, we put a dent in the bad practices we hear so much about. During 2015, we not only coordinated the first federal-state-local enforcement initiative against debt collectors – including actions by more than 70 different partners – we also filed 12 new cases against 52 different defendants. And we resolved 9 cases, getting nearly $94 million in judgments.
We added to our list of banned debt collectors in 2015 – and published the list. These are people and companies that – because of serious and repeated violations of the law – have been banned by federal court orders from ever doing business in debt collection again. This has the result of putting these folks out of business, but it’s also a message to law-abiding debt collectors everywhere: don’t do debt collection business with these folks or you may find yourself in hot water.
One of the really important things we did this year was talk with the debt collection industry. The Debt Collection Dialogues kicked off in Buffalo, and then continued in Dallas and Atlanta. At all three, to sold-out houses, we brought together the debt collection industry with the state and federal agencies that regulate them – allowing all perspectives to be heard.
In consumer education, 2015 saw the release of a Spanish-language graphic novel – or fotonovela – about debt collection. It shows how you can deal with questionable debt collection tactics – and people ordered more than 113,000 copies of the publication last year.
But 2016 is another year – and we have more plans. So watch this space to see what else is coming – and to learn how to spot and avoid bad debt collection practices.
|JUSTIN BRANDT, ALAN D. WINGFIELD AND CHAD FULLER
On February 2, following a joint investigation of the Consumer Financial Protection Bureau and the Civil Rights Division of the Department of Justice, Toyota Motor Credit Corporation, the financing arm and subsidiary of the Japanese auto giant, agreed to pay up to $21.9 million in restitution to thousands of minority borrowers who allegedly were charged higher interest rates than white borrowers for auto loans without regard to their creditworthiness.
The administrative action, In the Matter of Toyota Motor Credit Corporation, and a civil lawsuit filed the same day in the United States District Court for the Central District of California, resulted in a Consent Order between the CFPB, DOJ, and Toyota. The CFPB and DOJ charged Toyota with violating the Equal Credit Opportunity Act and its implementing regulation “by permitting dealers to charge higher interest rates to consumer auto loan borrowers on the basis of race and national origin.”
The CFPB and DOJ alleged that, in comparison to the average borrower over the course of the loan, affected African-American borrowers paid at least $200 more and were charged approximately 27 basis points higher, and Asian and Pacific Islander borrowers paid $100 more and were charged approximately 18 basis points higher.
Notably, a CFPB statement released concurrently with the Consent Order said that “the investigation did not find that Toyota Motor Credit intentionally discriminated against its customers, but rather that its discretionary pricing and compensation policies resulted in discriminatory outcomes.” No civil money penalties were assessed, and in a press release, Toyota denied any wrongdoing.
As part of the settlement, Toyota will pay $19.9 million to compensate affected borrowers whose auto loans Toyota financed between January 2011 and the entry of the Consent Order on February 2, 2016. Toyota is also responsible for up to $2 million to compensate any similarly affected borrowers in the interim period until Toyota “implements its new pricing and compensation structure.” This structure includes, alongside other restrictions, a substantial reduction in its dealers’ discretion to mark up interest rates. The DOJ’s statementnoted that these new policies must be in place by August 2016.
Troutman Sanders LLP has extensive experience representing lenders in the auto finance industry, and will continue to monitor CFPB and other regulatory activity in this area.
| JUSTIN BRANDT, ALAN D. WINGFIELD AND CHAD FULLER
As we previously reported, on November 4, 2015, U. S. Senator Edward Markey (D-Mass.) introduced the Help Americans Never Get Unwanted Phone calls Act of 2015—or HANGUP Act for short. The legislation, which has 14 Democratic co-sponsors, would repeal section 301(b) of the Bipartisan Budget Act of 2015, which permitted an exception to the Telephone Consumer Protection Act of 1991 (“TCPA”) for calls and text messages “made solely to collect a debt owed to or guaranteed by the United States.”
Section 301(b) is scheduled to take effect by August 2016 following guidance from the Federal Communications Commission. The amendment to the TCPA was applauded by trade groups, including ACA International, which stated that “it shows an understanding in government that limiting dialing technology for legitimate debt collection doesn’t make sense.”
On February 10, a coalition of state attorneys general, spearheaded by Indiana Attorney General Greg Zoeller, a Republican, and Missouri Attorney General Chris Koster, a Democrat, sent a letter urging passage of the HANGUP Act to Senators John Thune (R-S.D.) and Bill Nelson (D-Fla.), the chairman and ranking member, respectively, of the U.S. Senate Committee on Commerce, Science, and Transportation. The letter is signed by 25 state attorneys general in total, including 19 Democrats and six Republicans. It claims that the recent enactment of section 301(b) “is a step backward in our law enforcement efforts” and is an inappropriate distinction permitted “simply because the debt has a nexus to the federal government.”
With Republicans in the majority in the Senate and election season heating up, the bill is unlikely to gain traction in the current legislative session. However, in the 2016 election, Republicans will be defending 24 Senate seats, including many in traditionally blue states, compared to just 10 for Democrats. If Democrats retake the Senate, one can reasonably expect the same or similar legislation to be reintroduced in the next Congress. Holders of government-backed debt should continue to monitor this situation and stay tuned for relevant guidelines from the FCC later this year regarding implementation of the new exception.
Troutman Sanders LLP has unique industry-leading expertise with the TCPA, with experience gained trying TCPA cases to verdict and advising Fortune 50 companies regarding their compliance strategies. We will continue to monitor legislative developments and regulatory implementation of the TCPA in order to identify and advise on potential risks.
|TIM J. ST. GEORGE, DAVID M. GETTINGS AND DAVID N. ANTHONY
On November 9, 2015, Terria Harris filed an Amended Complaint against Home Depot U.S.A., Inc. in a Fair Credit Reporting Act (“FCRA”) background check class action lawsuit. In this complaint, she alleged that Home Depot violated the FCRA’s background check disclosure requirement because the disclosure she signed was allegedly “embedded with extraneous information.” As a result, the plaintiff argued, the disclosure was not a “stand-alone document,” in violation of the FCRA.
In response to the complaint, Home Depot moved for summary judgment, arguing the claim was barred by the FCRA’s statute of limitations. The applicable statute of limitations requires a plaintiff to bring a claim either two years after the date of discovery by the plaintiff of the violation, or five years after the date on which the violation occurs, whichever is earlier. Because the plaintiff viewed and signed the allegedly offending disclosure in February of 2011, Home Depot argued the claim brought in 2015 was untimely.
The Court agreed with Home Depot, stating that “a reasonably diligent person would have discovered the facts giving rise to Harris’ FCRA … claims by March 1, 2011.” It concluded that the plaintiff’s FCRA claim was time-barred. The Court’s decision should serve as a reminder to employers hit with FCRA lawsuits to analyze the timeliness of a plaintiff’s claim. Even the most meritorious FCRA claim may not be actionable if the plaintiff fails to assert his or her rights until it is too late.
Troutman Sanders LLP has substantial experience in counseling employers on disclosure form documents under the FCRA, as well as experience in litigating challenges to such claims. We will continue to monitor this and similar cases.
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