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Jason specializes in representing banks and loan servicers in class action and individual cases.

On June 12, the Supreme Court of Appeals of West Virginia reversed a Circuit Court ruling and stated that a high volume of telephone calls from a debt collector to a consumer, absent any evidence the debt collector placed the calls with an intent to annoy, abuse, oppress, or threaten the consumer, is not sufficient to prove a violation of the West Virginia Consumer Credit and Protection Act, codified at W.Va. Code § 46A-2-125(d) (1974).

Section 125(d) prohibits debt collectors from calling consumers “with intent to annoy, abuse, oppress or threaten.” The consumer sued the debt collector, alleging that the debt collector violated § 125(d) by placing a high volume of calls to the consumer. After the debt collector sent a letter notifying the consumer of its intent to initiate collection efforts to collect a debt it had purchased from the original creditor, the debt collector placed 250 calls to the consumer during an eight-month period, none of which the consumer answered.

After a bench trial, the Circuit Court ruled in a memorandum opinion that the debt collector’s unanswered telephone calls violated § 125(d). The Circuit Court entered judgment awarding the consumer $75,000 in damages (the stipulated maximum recovery). In its verdict order, the Circuit Court found that the debt collector, with no legitimate purpose “increased its volume and frequency of collection calls to [the consumer] in an attempt to harass or oppress [the consumer] into answering its calls,” and that 230 of the unanswered calls placed to the consumer were in violation of the statute.

The Supreme Court of Appeals reversed, holding that a consumer must show evidence of intent to annoy, abuse, oppress, or threaten the consumer, and that silence alone is “insufficient [for a debt collector] to have imputed knowledge” that it should discontinue making calls to the consumer. The Supreme Court further reasoned that a debt collector has no duty to end collection efforts merely because a consumer fails to answer collection calls based solely on the “fact that [the consumer] does not want to be contacted after a certain period of time that is subjectively known only to [the consumer].”

The West Virginia Legislature amended § 125(d), effective June 15, 2015. The amended version of § 125(d) contains more specific guidelines for debt collectors with respect to call volume, prohibiting debt collectors from “[c]alling any person more than thirty times per week or engaging any person in telephone conversation more than ten times per week, or at unusual times or at times known to be inconvenient, with intent to annoy, abuse, oppress or threaten any person at the called number.” The Court, however, issued its ruling pursuant to the pre-amendment version of § 125(d) because the amended version was not in effect when the bench trial occurred.

Although the amended version of § 125(d) applies to claims regarding calls placed on or after June 15, 2015, debt collectors are still susceptible to claims applicable under the prior version of § 125(d). The statute of limitation period for the WVCCPA is four years from the date of the alleged violation. Because the pre-amendment version of § 125(d) applies to calls placed on or before June 14, 2015, consumers are continuing to file suits for alleged violations under the pre-amendment version of § 125(d). Debt collectors, therefore, will remain susceptible to pre-amendment claims for the next several years. Importantly, for consumers bringing pre-amendment claims, showing a high volume of calls is no longer enough to prove “intent to annoy, abuse, oppress or threaten” in violation of the WVCCPA.

Please click here for a full copy of the opinion.

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, through appeal to the Fourth Circuit. We will continue to monitor decisions in West Virginia federal and state courts to identify and advise new compliance risks and strategies.

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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.

On August 4, 2016, the CFPB issued its final mortgage servicing rule pursuant to Regulation X of the Real Estate Settlement Procedures Act (RESPA) and Regulation Z of the Truth in Lending Act (TILA). The final rule provides greater foreclosure protections to borrowers and requires further transparency between borrowers and mortgage servicers. The final rule provides borrowers with more guidance on the status of their loss mitigation efforts, and also expands the protections borrowers’ successors in interest (i.e., the borrowers’ surviving family members).

In January 2013, the CFPB pursuant to its authority under the Dodd-Frank Wall Street Reform and Consumer Protection Act, established rules for mortgage servicers. Thereafter, in November 2014, the CFPB proposed amendments, and last week, on August 4, 2016, the CFPB issued its new rule for mortgage servicers, adopting many of the amendments proposed in November 2014. Below is an overview of some of the more important changes introduced by the CFPB:

  • Repeated Loss Mitigation: Servicers may be required to provide foreclosure prevention options, such as loan modifications, more than once during the life of the loan. Currently, mortgage services must provide foreclosure protections to a borrower only once during the life of a loan. Under the new rule, if a borrower has brought his or her loan current at any time since submitting his or her prior complete loss mitigation application, then the mortgage servicer will be required to offer foreclosure protections again.
  • Successors in Interest: If a borrower dies, existing CFPB rules already require mortgage servicers to promptly identify and communicate with the borrower’s successors in interest, but the new rule will expand the definition of successors in interest. The new rule ensures that those who become the successor in interest on a borrower’s loan receive the same protections as the original borrower.
  • Required Information for Borrowers in Bankruptcy: Under the old CFPB rules, a mortgage servicer was not required to provide periodic statement or loss mitigation information to borrowers in bankruptcy. The new rule requires servicers to provide borrowers in bankruptcy with periodic statements including specific information tailored for bankruptcy, as well as a modified written early intervention notice to inform borrowers in bankruptcy of their loss mitigation options.
  • FDCPA Safe Harbor: Mortgage servicers will be required to provide modified written early intervention notices explaining loss mitigation options to borrowers even if the borrowers have asked the servicer to cease contacting them pursuant to the Fair Debt Collections Practices Act. You can find the FDCPA safe harbor rule here.
  • Loss Mitigation Status: Servicers are now required to inform borrowers in writing within 5 days of receiving the borrower’s complete loss mitigation application.
  • Servicing Transfers and Loss Mitigation: The new rule requires mortgage servicers to comply with strict timelines regarding loss mitigation efforts. If a loan is transferred to a new servicer while loss mitigation efforts are underway, and the application was complete before the loan was transferred, then the servicer will have thirty (30) days to issue a decision on the loss mitigation application. If the borrower had applied for loss mitigation shortly before the loan was transferred, the new servicer must acknowledge the loss mitigation application within ten (10) business days of receiving the loan.
  • Decision on Loss Mitigation Before Foreclosure: Before proceeding with foreclosure, any complete loss mitigation application must either be (1) properly denied, (2) withdrawn, or (3) the borrower failed to perform under the terms of the agreement.
  • Defining Delinquency: The new rule defines delinquency as the period beginning on the date that the borrower’s periodic payment becomes due and is unpaid. If a borrower makes a payment, and the servicer applies the payment to the oldest outstanding periodic payment, then the borrower’s delinquency date advances.
  • Partial Payment Discretion: Under certain circumstances, servicers will have discretion to consider a borrower as having made a timely payment, even if the borrower’s payment falls short of a full periodic payment.

Most of the provisions of the CFPB’s new rules for mortgage servicers will take effect twelve (12) months after publication in the Federal Register. However, the provisions related to borrowers’ successors in interests and provisions related to periodic statements for borrowers in bankruptcy will take effect eighteen (18) months after publication in the Federal Register.

Troutman Sanders advises many mortgage lenders and servicers in a number of areas, including regulatory and consumer compliance issues and litigation arising out of RESPA, TILA, the FDCPA, and other consumer protection statutes. Please contact us with us with any questions.

On February 18, the California Supreme Court issued a potentially far-reaching decision in Yvanova v. New Century Mortgage Corp., in which it ruled that certain mortgage borrowers have standing to sue for wrongful foreclosure based on a void assignment of the promissory note or deed of trust.  Although the Court limited the scope of its ruling, the decision may lead to a new wave of borrower lawsuits attacking allegedly void assignments.  Mortgage lenders, servicers, and trustees should prepare now by ensuring all assignments and documentation are in order prior to foreclosure.

Since the 2008 financial crisis, mortgage borrowers across the country have attempted to stop or rescind a foreclosure sale by attacking the validity of the assignments of mortgage or deed of trust.  Lenders have responded by arguing that borrowers lack standing to question the validity of an allegedly improper assignment.  In California, a split developed within the courts of appeal, with the majority ruling borrowers lack standing (Jenkins v. JPMorgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)), and at least one court ruling borrowers have standing (Glaski v. Bank of America, 218 Cal.App.4th 1079 (2013)).

In its limited ruling, the Court in Yvanova sided with Glaski, stating “a borrower who has suffered a non-judicial foreclosure does not lack standing to sue for wrongful foreclosure based on an allegedly void assignment merely because he or she was in default on the loan and was not a party to the challenged assignment.”

Importantly, the Court attempted to limit the applicability of its ruling to the specific factual allegations in the complaint.  The borrower in Yvanova alleged that the assignment at issue was void because it was completed after the company had been liquidated in bankruptcy.  If true, the allegation could render the assignment void ab initio, and therefore could support a claim for wrongful foreclosure seeking damages.

The Court ruled that the borrower had standing as a result because she was attempting to protect her interests from an alleged third party to the contract.  The Court, however, distinguished claims that would render an assignment merely voidable, ruling that a borrower would lack standing to assert such a claim.

The Court also limited its ruling to exclude injunctive or prospective relief, meaning that for now the claim cannot be used to enjoin a pending foreclosure.  However, for California mortgages, Yvanova eliminates potential defense arguments that it is irrelevant to the borrower who is enforcing a debt that is in default, and that borrowers lack standing as non-parties to an assignment.

Troutman Sanders LLP has considerable experience and expertise representing loan servicers in mortgage litigation, and will continue to monitor court interpretation in order to identify and advise on potential risks.


On January 15, 2016, the Fourth Circuit issued a published decision affirming summary judgment to the defendant national bank on plaintiff’s unconscionable contract claim under WVCCPA 46A-2-121. Plaintiff relied on a retroactive appraisal in an attempt to prove the loan was “predatory” because “the loan amount was in excess of the property value.”

The ruling is the first appellate decision to address the heavily litigated issue of whether the existence of a retroactive appraisal is sufficient to prove a violation of the WVCCPA on grounds the loan amount improperly exceeded the property value. Agreeing with Judge Goodwin’s analysis over prior decisions to the contrary in West Virginia, the Fourth Circuit held that a loan in excess of the value of a borrower’s property is not, by itself, evidence of substantive unconscionability. Specifically, the Court observed that the mere fact that a loan exceeds the value of the property does not make it substantively unconscionable because the loan does not accrue entirely to the lender’s benefit and lacks the “gross imbalance” and “one-sidedness” necessary to show unconscionability.

In its decision, the Fourth Circuit distinguished Brown v. Quicken Loans, Inc., 230 W. Va. 306, 737 S.E.2d 640 (W. Va. 2012), noting that its holding turned on “much more than the principal amount of the loan.” Importantly, the Fourth Circuit also affirmed the District Court’s decision that it did not need to consider evidence of procedural unconscionability once it had determined that the loan was not substantively unconscionable. Accordingly, the Fourth Circuit affirmed the District Court’s decision that the loan was not an unconscionable contract.

After denying plaintiff’s request to certify the question to the West Virginia Supreme Court of Appeals, the Fourth Circuit became the first court to squarely address and clarify unconscionable inducement under West Virginia Code 46A-2-121(1)(a). The Court held that the statutory language plainly supported such a cause of action, but that the evidence necessary to support a claim for unconscionable inducement is “heightened” and must consist of more than unequal bargaining positions, or other factors outside the control of the lender. Instead, the evidence to support a claim for unconscionable inducement must be based on “affirmative misrepresentations or active deceit.” The case was remanded to Judge Goodwin to determine this limited issue, which is an issue of first impression.

The decision provides clarity to the law of unconscionable contracts under the WVCCPA and, importantly, defends lenders against claims based on retroactive appraisals—a common litigation tactic in West Virginia that the Court has now discredited. The Fourth Circuit also clarifies, for the first time, the contours of a cause of action for unconscionable inducement, making it clear that the claim is akin to fraud and cannot be based solely on allegations of procedural unconscionability.

John Lynch and Jason Manning have represented national banks, lenders, investors, and servicers in hundreds of individual and class cases across the country, obtaining dispositive rulings for their clients on motions, at trial, and through appeal. The Financial Services Litigation team at Troutman Sanders has a national practice representing financial institutions in class action litigation and regulatory compliance.

A copy of the Court’s Opinion is attached here. Plaintiff was represented by Jennifer S. Wagner and Bren J. Pomponio of Mountain State Justice, Inc. The National Consumer Law Center, AARP, The National Association of Consumer Advocates, and The Center for Responsible Lending, were represented by Jason E. Causey of Bordas & Bordas, PLLC, and Jonathan Marshall and Patricia M. Kipnis of Bailey & Glasser, LLP, who filed amicus briefs.

The CFPB released a resource intended to help lenders understand and implement the TILA-RESPA integrated disclosures (“TRID”) when extending construction loans.    

The CFPB’s factsheet provides that construction loans are subject to TRID requirements as long as they are closed-end consumer credit transactions secured by real property.  The only exception is those construction loans that are open-end transactions or loans for a commercial purpose.  Because construction loans usually involve multiple advances, Appendix D to Regulation Z provides a special procedure to estimate and disclose such terms, as well as guidance for the calculation of the interest portion of the finance charge. 

TRID has not eliminated the option that lenders have had all along, i.e., to treat the construction phase and the permanent phase as either one transaction or more than one transaction for purposes of the required disclosures.  If treated as one transaction, a single set of disclosures (Loan Estimate and Closing Disclosure) covers both phases of the transaction.  Otherwise, a separate set of such disclosures has to be provided for each phase.


The CFPB is considering additional guidance to facilitate compliance with TRID, including a webinar on construction loan disclosures



On January 28, the Consumer Financial Protection Bureau released its monthly consumer complaint report, highlighting consumer complaints about financial services such as debt settlement, check cashing, money orders, and credit repair.  The CFPB began accepting complaints as soon as it opened its doors in July 2011.   As of January 1, 2016, the CFPB had handled 790,000 complaints.  Debt collection, mortgage, and credit reporting complaints continue to be the top three most complained about consumer financial products and services, collectively representing about 68 percent of complaints submitted in December 2015.  The CFPB reports that 4,074 complaints about mortgages were received per month between October and December 2015.  Though being the second most complained about financial product in December 2015, mortgages remained the most complained about financial product as of January 1, 2016, with 209,618 total complaints, with debt collection coming in a close second at 205,082.  The volume of complaints related to mortgages continues to remain relatively stable despite the fact that foreclosure and delinquency rates continue their downward trend.  

On September 24, the Illinois Supreme Court reversed trial and appellate courts’ decisions and held that land trusts are considered “consumers” for purposes of exercising a right to rescind the loan transaction under the federal Truth in Lending Act (TILA).

At issue in this case was a reverse mortgage transaction in which the borrower was identified as “Standard Bank & Trust as Trustee under [a certain] trust agreement.”  After the beneficiary of the trust died, the plaintiff lender filed a foreclosure lawsuit against Standard Bank as Trustee.  In response, Standard Bank sent a notice to the lender exercising the right to rescind the transaction.  The lender did not respond, and Standard Bank filed a counterclaim against the lender for violations of TILA, statutory damages, attorney’s fees, and termination of security interest.  Both the trial court and the Illinois Court of Appeals decided that Standard Bank had no right of rescission because it was not an “obligor” within the meaning of TILA.

The Illinois Supreme Court began its analysis by noting that, while TILA vests the right to rescind in “obligors,” the corresponding provision of TILA-implementing Regulation Z states that the “consumer” has the right to rescind.   Emphasizing a great degree of deference to which the Federal Reserve Board’s interpretations of TILA are entitled, the Court concluded that consumers are entitled to rescind loan transactions under TILA even if they do not fall within the definition of an “obligor.”  Relevant to the case was the fact that the transaction at issue was a reverse mortgage for which a borrower has no personal liability, and the lender’s sole recourse is against the property.  Further examining the Official Commentary to Regulation Z, the Court pointed out that land trusts are considered natural persons for purposes of the definition of “consumer.”  Accordingly, the Court concluded that Standard Bank had the right to rescind the loan and remanded the case back to the trial court.

We will continue monitoring this and other cases that examine the issue of whether borrowers other than natural persons may constitute a “consumer” within the meaning of federal and state consumer protection statutes.

On September 28, the U.S. government filed a lawsuit alleging that a purported charitable “counseling fund,” five mortgage lenders, and their principals defrauded the United States and various banks insured by the Federal Deposit Insurance Corporation in actions that resulted in millions of dollars of mortgage losses as well as the payment of over $5.6 million in false claims by the federal government.

The government alleges that the mortgage lenders participated in a federal program sponsored by HUD that allowed the lenders to make mortgage loans that are insured by the Federal Housing Administration in the event of default.  The defendant mortgage lenders then allegedly sold those loans to federally-insured banks.  The government further alleges that the mortgage lenders’ loans went into “early payment default” at more than twice the average default rate of other lenders, and that the lenders conspired with the charitable “counseling fund” to conceal their high default rates from HUD to avoid removal from HUD’s program.

The government claims that the mortgage lenders funneled their money through the charitable “counseling fund” to make defaulting borrowers’ monthly payments to the banks in order to conceal the defaults from HUD and the banks.  When the loans had aged beyond the bank’s contractual right to force repurchase, or past the period that HUD monitored for early payment defaults, the lenders would stop making payments, leaving the borrowers without any further support.

The complaint seeks treble damages and penalties under the False Claims Act, 31 U.S.C. § 3729 et seq.; fines under the Financial Institutions Recovery, Reform and Enforcement Act, 12 U.S.C. § 1833a; and damages and indemnification under the common law theories of gross negligence, breach of fiduciary duty, and unjust enrichment.  The lawsuit is pending in the United States District Court for the Eastern District of New York.

In Covarrubias v. CitiMortgage, Inc ., the plaintiff brought a lawsuit against CitiMortgage, claiming it improperly foreclosed on her home by failing to comply with U.S. Department of Housing and Urban Development regulations incorporated into her deed of trust.  Specifically, she claimed CitiMortgage failed to conduct, or make a reasonable effort to conduct, a face-to-face meeting with her prior to foreclosure.

At the district court level, the trial court dismissed the plaintiff’s claim on the ground that she could not show the breach of HUD regulations caused the damages she alleged.  The trial court’s decision was a victory for defendants, who have faced numerous lawsuits in recent years brought by borrowers in default.  In these lawsuits, plaintiffs typically allege a face-to-face meeting is a condition precedent to foreclosure under deeds of trust that incorporate these HUD regulations.  Although defendants frequently argue a plaintiff cannot prove the causation necessary to prevail on a breach of contract claim, not all courts have adopted this line of reasoning.

In its decision, the Fourth Circuit reversed the district court.  According to the Fourth Circuit, to prove the causation element of a breach of contract, the plaintiff must prove she suffered injury or damage as a result of the defendant’s breach.  The Fourth Circuit held the plaintiff satisfied this standard by “demonstrating a willingness and ability to bring the mortgage current” had a face-to-face meeting occurred and a “loss of equity as a direct result of foreclosure.”  As a result, the Fourth Circuit concluded that a “rational jury could reasonably conclude that a face-to-face meeting … may have resulted in an outcome other than foreclosure … .”

Although the Fourth Circuit’s decision leaves open the factual question of whether the plaintiff can prevail on her breach of contract claim, it should serve as a reminder to mortgage servicers to ensure their foreclosure practices comply with HUD regulations when necessary.