Creditors should take note of a recent decision from the West Virginia Supreme Court of Appeals that exposes them to monetary penalties for violations of the West Virginia Consumer Credit and Protection Act (WVCCPA). In Vanderbilt Mortgage and Finance, Inc. v. Cole, 740 S.E.2d 562 (W. Va. 2013), West Virginia’s highest court held that a person does not need to suffer actual damages in order for a creditor to be monetarily penalized for violations of the WVCCPA.
In 1996, the debtor purchased a manufactured home with a thirty-year mortgage loan. The debtor had continuous trouble making her scheduled payments. In 2005, Vanderbilt Mortgage and Finance became the servicer of the debtor’s mortgage. The debtor failed to make a single payment to Vanderbilt that was on time. The debtor would often tell Vanderbilt that her contact information changed, although the court noted she was not trying to avoid Vanderbilt. When the debtor did not have a phone to call Vanderbilt, the debtor would call from phones owned by her relatives and acquaintances. Vanderbilt would then call these telephone numbers to contact the debtor because it was difficult to contact the debtor any other way.
In 2010, the debtor defaulted on her loan. Vanderbilt foreclosed on the property and purchased the home at a trustee’s sale. The debtor refused to leave and Vanderbilt filed an unlawful detainer action. The debtor turned around and filed a counterclaim against Vanderbilt for fifty-seven violations of the WVCCPA. Specifically, the debtor alleged that Vanderbilt insulted her, revealed private details of the loan to third parties without her permission, and repeatedly called relatives and acquaintances after receiving requests that the calls stop.
Although Vanderbilt won on the unlawful detainer action, the jury found that Vanderbilt violated the WVCCPA on thirteen occasions. However, the jury did not award the debtor any actual damages for these violations, presumably because the violations did not actually harm the debtor. The trial court took matters into its own hands, ordering Vanderbilt to pay penalties that totaled $32,125.24. The WVCCPA includes penalties for creditors who violate the Act and the jury found Vanderbilt guilty of (1) failing to provide account documents upon written request; (2) placing repeated and unsolicited phone calls to third parties; (3) using abusive language over the telephone; and, (4) communicating private details of the loan to a third party. Further, pursuant to the WVCCPA, the trial court decided to award $30,000 in attorney fees to the debtor even though the debtor only prevailed on thirteen of her fifty-seven alleged violations.
On appeal, Vanderbilt argued that the WVCCPA required actual damages for awarding civil penalties, and that West Virginia case law has found punitive damages as improper without a finding of actual damages. However, West Virginia’s Supreme Court explained that an award of civil penalties does not require a finding of actual damages under the WVCCPA. To reinforce its holding, the Court cited the interpretations of equivalent statutes by other jurisdictions. The Court also determined that the West Virginia Legislature’s intent in creating the civil penalty was to deter this sort of activity on the part of lenders. The Court then clarified that civil penalties are not punitive damages, explaining that punitive damages are conditioned on actual harm suffered and civil penalties are conditioned only on a violation of the law.
The cumulative effect of penalties should caution any debt collector to make sure its employees are aware of consumer protections under the WVCCPA. While not a conclusive list, debt collectors should avoid these activities:
• Making any sort of threats of violence or threats that a person has committed fraud
• Telling a debtor that his or her wages will be garnished without explaining that a judicial order must be in effect to do so
• Using profane language or making any sort of insult
• Calling at inconvenient times
• Disclosing indebtedness to anyone not authorized to the information
• Failing to disclose the name and address of the business to which the debt is owed
• Claiming that a call is an emergency
• Calling third-parties in an attempt to reach a debtor, especially after a person requests such calls to stop
The court’s interpretation of the law should caution any loan service provider or debt collector because it can expose them to liability even if their actions did not cause any actual damage to a consumer. In Cole, the court entered statutory damages for Vanderbilt’s violations of the WVCCPA because it wanted to deter such conduct in the future. Loan service providers and debt collectors should certainly avoid the type of conduct described in Cole, but should also make sure they are generally familiar with WVCCPA’s provisions regulating the communications and services provided to a debtor.