West Virginia reforms state consumer protection law . . . again.
On April 8, 2017, the West Virginia legislative session ended, and for the second time in two years, the legislature passed a bill that modifies the law governing consumer protection in financial transactions. That law, known as the West Virginia Consumer Credit and Protection Act (CCPA), originally was enacted in 1974, and, with more than 200 substantive provisions, it addresses myriad aspects of financial transactions involving people who meet the definition of a “consumer.” Its provisions govern things such as placing limits on interest rates for certain transactions, requiring disclosures when providing loans, addressing deceptive practices in the sales and leases of goods, and prohibiting price gouging in emergency situations.
In addition to the above examples, the CCPA also places several limitations on what debt collectors may do when seeking to collect a debt from a consumer. For the past several years, those limitations have led to hundreds of lawsuits being filed across the state. Although some of those lawsuits may have sought legitimate recovery for truly abusive and illegal conduct by collectors, other lawsuits were seen as merely taking advantage of vague parts of the law to give people a windfall even though they suffered no real harm.
In 2015, the state enacted a law adding restrictions to the CCPA in an effort to curb some of the perceived abuses by plaintiffs. During this year’s legislative session, the legislature passed another bill, which the governor signed, that made even more changes to the CCPA. These changes seek to tighten up some of the CCPA’s provisions that many see as still being a source for frivolous and illegitimate lawsuits. Earlier versions of the bill included additional, more sweeping changes to the CCPA. However, consumer protection advocates and advocates for financial institutions worked together to reach a compromise bill, which the legislature ultimately passed.
The amendments, which take effect on July 4, 2017, make the following changes to the CCPA:
- Balloon disclosures in consumer loans or consumer credit sales will have to use language that is only substantially similar to the sample language found in the CCPA. Previously, any disclosure that was given regarding a balloon payment was required to use the exact language that appears in the CCPA in the same font in which it appears. In the past, creditors had been held to have violated the CCPA in instances where they provided a borrower or lessee with a balloon disclosure, but that disclosure did not use the exact language as it appears in the CCPA.
- Attorneys who are licensed or otherwise authorized to practice law in West Virginia are excluded from the definition of a debt collector so long as they are collecting the debt in their own name in connection with their law firm and not as an employee of a collection agency managed by a non-attorney. Previously, there wasn’t any explicit provision that addressed whether attorneys were to be considered debt collectors under the statute.
- Under the new amendments, creditors and collectors who receive notice that a consumer is represented by an attorney are given three business days to process that notice and stop communicating with the consumer. Previously, in 2015, the legislature provided for a seventy-two hour grace period. Prior to 2015, there was no express grace period in the CCPA and many argued that creditors and collectors were required to instantly stop communicating with a consumer as soon as they receive notice that he or she is represented by an attorney.
- Consumers will be required to send notice that they are represented by an attorney by certified mail, return receipt requested. Under earlier versions of the CCPA, there was no express requirement. This lack of express requirement led to some consumers attempting to provide notice in ways that didn’t appear to be legitimate, like printing it in tiny letters on the bottom of remit stubs or saying it so fast during a collection call that it couldn’t be understood.
- Under the amendments, if a debt is beyond the statute of limitations, creditors and collectors must include a disclosure to this effect in every written communication they send to the debtor. The current version of the CCPA requires creditors and collectors to provide this disclosure to the consumer only in the first written communication they send.
- The new bill makes clear that pleadings filed in court cannot be the basis for another lawsuit. In the past, when a creditor or collector would sue a consumer to collect a debt, some consumers would claim that there were errors in the documents that were filed and assert counterclaims or file another lawsuit alleging that those errors amounted to violations of the CCPA. Often, a consumer who was facing a legitimate debt collection lawsuit for a debt of a few thousand dollars would assert counterclaims seeking ten times as much from the creditor or collector. Although the Supreme Court of Appeals of West Virginia previously had issued case decisions that provided that documents filed in lawsuits cannot be the basis for another lawsuit, there wasn’t an express provision in the CCPA addressing it.
- Under the amendments, if a creditor sells a consumer’s real property at a foreclosure sale, any lawsuit that the consumer might file to set aside that foreclosure sale must be filed within one year of the sale. Previously, there wasn’t an express provision in the CCPA placing this time limitation on consumers.
- Under the amendments, if a creditor or collector sues a consumer and the consumer wants to file counterclaims against the creditor or collector, those counterclaims are subject to the statute of limitations periods that are prescribed in the CCPA. Previously, there wasn’t any express limitation in the CCPA that addressed counterclaims.
- The amendments require consumers who want to sue under the CCPA to first inform the creditor or collector of the alleged violation of law and give them time to make an offer to cure that violation. If an offer to cure is made but not accepted by the consumer, the CCPA places a limit on the consumer’s recovery if he or she does file suit. In earlier versions of the CCPA, there was a similar provision in one part of the statute, but it appeared to only apply to suits brought under that specific provision. The new amendments apply this requirement to any claim that a consumer might bring under any provision of the CCPA.
As noted above, the new amendments take effect this summer. It may be a year or more before we see if they have their desired effect. If not, we may see even more amendments. What is certain is that the legislature made clear in 2015 and again this year that it’s willing to change the law to provide what it sees as a more balanced approach to consumer protection.