STOP, before you collaborate, and listen: Threshold conduct which violates W. Va. Code 46A and -128.

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1 STOP, before you collaborate, and listen: Threshold conduct which violates W. Va. Code 46A and Randall Saunders, Nelson Mullins Riley & Scarborough LLP Kendra Huff, Nelson Mullins Riley & Scarborough LLP Ashley Barebo, Nelson Mullins Riley & Scarborough LLP 1

2 I. Introduction Based on a review of the plain language of W. Va. Code 46A and -128 it appears axiomatic that any action brought under either of these statutes must involve either collection or attempted collection of a claim (W. Va. Code 46A and -128) or information from a consumer (W. Va. Code 46A-2-127). However, claims under both of these sections consistently arise in the state of West Virginia based on allegations which call into question whether the action at issue is in fact debt collection, attempted debt collection, or an attempt to obtain information concerning consumers. As such, it is important to clarify the application of the most basic requirements of these two statutes that the prohibited action be done to collect or attempt to collect claims or to obtain information concerning consumers (W. Va. Code 46A-2-127) or to collect or attempt to collect any claim (W. Va. Code 46A and -128). Namely, that this introductory language applies to all subsections within both of these statutes and that, within the common context of a lender s consideration of a borrower for loss mitigation assistance, collection of or attempts to collect a claim or information are found only under specific and very narrow circumstances. II. Plain Language of W. Va. Code 46A and The Supreme Court of Appeals of West Virginia has been clear that [t]he primary rule of statutory construction is to ascertain and give effect to the intention of the Legislature. 1 As such, a statutory provision which is clear and unambiguous and plainly expresses the legislative intent should not be interpreted by the courts but should be given full force and effect. In other 1 Martin v. Hamblet, 230 W. Va. 183, , 737 S.E.2d 80, (2012) (quoting Syllabus Point 8, Vest v. Cobb, 138 W.Va. 660, 76 S.E.2d 885 (1953)). 2

3 words, [w]here the language of a statutory provision is plain, its terms should be applied as written and not construed. 2 The language of W. Va. Code 46A and -128 is clear and unambiguous, and, to the extent any terms could be considered ambiguous, they are defined by the West Virginia Consumer Credit and Protection Act ( WVCCPA ). The plain language of W. Va. Code 46A and -128 explicitly set forth the requirements of each statute. W. Va. Code 46A provides: No debt collector shall use any fraudulent, deceptive or misleading representation or means to collect or attempt to collect claims or to obtain information concerning consumers. Without limiting the general application of the foregoing, the following conduct is deemed to violate this section... W. Va. Code 46A provides: No debt collector may use unfair or unconscionable means to collect or attempt to collect any claim. Without limiting the general application of the foregoing, the following conduct is deemed to violate this section... Regarding the collection of a claim, or debt, the WVCCPA clarifies this terminology through the definitions section found in W. Va. Code 46A A claim is defined in W. Va. Code 46A-2-122(b) as: any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or service which is the subject of the transaction is primarily for personal, family or household purposes, whether or not such obligation has been reduced to judgment. The WVCCPA also defines debt collection. Debt collection is any action, conduct or practice of soliciting claims for collection or in the collection of claims owed or due or alleged 2 Id. (quoting DeVane v. Kennedy, 205 W.Va. 519, 529, 519 S.E.2d 622, 632 (1999)). 3

4 to be owed or due by a consumer. W. Va. Code 46A-2-122(c). Moreover, as to information concerning consumers, consumer is defined as any natural person obligated or allegedly obligated to pay any debt. W. Va. Code 46A-2-122(a). As to information, Merriam- Webster equates information to facts or data. Therefore, collection or attempted collection of a claim is found only where a consumer is solicited to pay an obligation or alleged obligation. Moreover obtaining or attempting to obtain information concerning consumers is found only where a debt collector obtains or attempts to obtain facts or data concerning a person obligated or allegedly obligated to pay a debt. Courts across West Virginia have recognized these plain language requirements of W. Va. Code 46A and In fact, recent case law from the Supreme Court of Appeals of West Virginia clearly supports the plain language of the statute, finding, it is clear from the plain language of [W. Va. Code 46A and -124] that for a claim to be brought pursuant to these sections of the WVCCPA there must be a debt, and a debt collector attempting to collect the debt. 4 It is therefore axiomatic that the plain language of W. Va. Code 46A and -128 applies and is not open to interpretation. 3 See, e.g., Spoor v. PHH Mortg. Corp., No. 5:10-CV-042, 2011 U.S. Dist. LEXIS 24952, at *22 (N.D. W. Va. Mar. 11, 2011); In re Machnic, 271 B.R. 789, 793 (Bankr. S.D.W. Va. 2002); Patrick v. PHH Mortg. Corp., 937 F. Supp. 2d 773, 785 (N.D.W. Va. 2013); McNeely v. Wells Fargo Bank, N.A., No. 2:13-CV-25114, 2014 WL , at *2 4 (S.D.W. Va. Dec. 10, 2014) (finding no facts to support a claim of fraudulent, deceptive or misleading representation[s] in an attempt to obtain information concerning consumers, which is required to maintain a cause of action under 46A and granting the defendants motion to dismiss); Ballenger v. Nat'l City Mortg., Inc., No. 1:14CV81, 2015 WL , at *13 (N.D.W. Va. Aug. 26, 2015) (recognizing that, pursuant to W. Va. Code 46A 2 127, a debt collector is prohibited from using any fraudulent, deceptive or misleading misrepresentation or means in order to collect or attempt to collect claims or to obtain information concerning consumers. W. Va. Code 46A ) 4 Sigman v. Discover Bank, No , 2017 WL , at *2 (W. Va. Apr. 7, 2017). 4

5 III. Requirements apply to all subsections. W. Va. Code 46A and -128 require that the prohibited action be done to collect or attempt to collect claims or to obtain information concerning consumers (W. Va. Code 46A-2-127) or to collect or attempt to collect any claim (W. Va. Code 46A and - 128) as this language is found in the introductory paragraph of both statutes. The statutes then list subsections of potential conduct deemed to be violative of each statute with the express caveat that these subsections do not limit the general application of the introductory language. 5 As such, the requirement that the conduct be done to collect or attempt to collect claims or to obtain information concerning consumers (W. Va. Code 46A and -128) or to collect or attempt to collect any claim (W. Va. Code 46A only) is specifically not excluded by these subsections of potential violative conduct. 6 West Virginia courts have recognized that the subsections contained in W. Va. Code 46A and -128 are qualified by the general introductory language of these statutes. For example, the Northern District of West Virginia recognized that W. Va. Code 46A provides that [n]o debt collector shall use unfair or unconscionable means to collect or attempt to collect any claim, and found that the statute designates conduct that is deemed to violate this section including subsection (e). 7 Additionally, the Southern District of West Virginia found [i]mportantly, WVCCPA 46A 2 124, 46A 2 125, 46A 2 127, and 46A expressly declared that, [w]ithout limiting the general application of the foregoing, the following 5 See W. Va. Code 46A and See Ballenger v. Nat'l City Mortg., Inc., No. 1:14CV81, 2015 WL , at *13 (N.D.W. Va. Aug. 26, 2015) (recognizing that, with respect to W. Va. Code 46A 2 127, the requirement that the wrongdoing be done in order to collect or attempt to collect claims or to obtain information concerning consumers applies generally, though the Act also enumerates specific conduct deemed violative). 7 Patrick v. PHH Mortg. Corp., 937 F. Supp. 2d 773, 785 (N.D.W. Va. 2013). 5

6 conduct is deemed to violate this section and each section goes on to list certain prohibited activities. 8 Therefore, a violation of a subsection of W. Va. Code 46A and -128, including all lists of violative conduct require that the prohibited action be done to collect or attempt to collect claims or to obtain information concerning consumers (W. Va. Code 46A ) or to collect or attempt to collect any claim (W. Va. Code 46A and -128). IV. Decisions Dismissing WVCCPA Claims Courts interpreting these statutory provisions in the context of whether or not the claims were collection or attempted collection of a claim have ruled in accordance with the legislative intent and the statutes plain language. For example, the Spoor court considered whether evaluation of a loan modification request involved the collection of a debt and held [a]ccepting the plain meaning of the statute, this Court finds that the defendant s evaluation of a loan modification request does not involve the collection of a debt. Although the plaintiff equates all activities occurring in connection with servicing a mortgage loan with debt collection, this is not the case. 9 Similarly, a recent decision in the Circuit Court of Wood County agreed with Spoor and granted summary judgment of a claim for unconscionable means to collect under W. Va. Code 46A which was based on communications regarding loss mitigation because communications regarding evaluation of a borrower for loss mitigation assistance are not debt collection. 10 The seemingly more difficult question for courts surrounds the question of whether consideration of a borrower s application for loss mitigation assistance is, without more, an 8 Pannell v. Green Tree Servicing, LLC, No. 5:14-CV-14198, 2014 WL , at *6 (S.D.W. Va. July 8, 2014) (emphasis added). 9 Spoor v. PHH Mortg. Corp., No. 5:10-CV-042, 2011 U.S. Dist. LEXIS 24952, at *22 (N.D. W. Va. Mar. 11, 2011). 10 O Connor v. Specialized Loan Servicing LLC, 16-C-149 (Cir. Ct. Wood County, Dec. 12, 2017). 6

7 attempt to collect information thus a violation of WVCCPA. In a case directly on point, the allegations involved review of a plaintiffs loan modification request, defendants could not locate certain documents and asked the plaintiffs to resubmit the information. 11 The McNeely court found no facts to support a claim of fraudulent, deceptive or misleading representation[s] in an attempt to obtain information concerning consumers, which is required to maintain a cause of action under 46A Moreover, the court held that repeated requests for information with the purpose of processing a loan modification absent fraud or deception does not constitute unfair or unconscionable debt collection giving rise to a claim under 46A and defendants motion to dismiss was granted. 13 Similarly, in Hanson, the court found that the alleged conduct did not rise to a level sufficient to form a violation of W. Va. Code 46A The only factual support provided by the plaintiffs was that the defendant repeatedly informed them that their loss mitigation application was incomplete and requested they resubmit documents. 15 The plaintiffs did not allege any facts that suggested the defendant deceptively informed them that their application was incomplete in order to obtain further information from them or made any promises that the [plaintiffs ] loss mitigation application would be successful or that it would reconsider them for loss mitigation after the first application in an attempt to obtain additional financial information from [them]. 16 Therefore, the court granted the defendant s motion to dismiss as to the Plaintiff s W. Va. Code 46A claim on this basis McNeely, 2014 WL , at *4. 12 Id. 13 Id. 14 Hanson v. Amerihome Mortg. Co., LLC, No. 2:17-CV-03691, 2017 WL , at *3 (S.D.W. Va. Dec. 28, 2017). 15 Id. at * Id. 17 Id. 7

8 V. Decisions Finding Affirmative Representations Sufficient for WVCCPA Claims Though the Southern District of West Virginia has, on occasion, rendered opinions which seem to differ from those set forth in Section IV, supra, the underlying facts and bases for the Court s opinions in those cases are dissimilar and finite. Therefore, these opinions are not inconsistent with those set forth in Section IV. Specifically, the Southern District has only allowed claims to proceed under W. Va. Code 46A and -128, in the context of loss mitigation assistance, where the plaintiff alleged that the defendant made explicit and affirmative representations regarding the plaintiff s consideration for or approval of loss mitigation assistance in order to obtain information from the plaintiff, and the defendant did not follow through or had no intention of following through with such representations. First, in Koontz, the Southern District found, on a motion to dismiss and drawing all inferences in favor of the Plaintiff, that the Plaintiff s claim under W. Va. Code 46A could proceed. 18 There, the plaintiff alleged that the defendant s offering of a trial plan was merely a ploy to obtain partial payment and that the defendant misrepresented that it would reconsider her for a loan modification, and thereby obtained financial information from her, with no intention to consider her for the modification. 19 Thereafter, in Ranson, again considering a motion to dismiss, the Southern District echoed Koontz. 20 The Ranson court held that where the plaintiff alleged that the defendant misrepresented it would reconsider a loan modification to obtain additional financial information from the plaintiff, a claim was sufficiently stated under W. Va. Code 46A Again, in 18 Koontz v. Wells Fargo, N.A., No. 2:10-CV-00864, 2011 WL , at *6 (S.D.W. Va. Mar. 31, 2011). 19 Id. 20 Ranson v. Bank of Am., N.A., No. CIV.A. 3: , 2013 WL , at *9 (S.D.W. Va. Mar. 14, 2013). 21 Id. 8

9 Petty, considering a motion to dismiss, the Southern District cited the Koontz and Ranson holdings where, again, the defendant told plaintiffs they qualified for a loan modification, but later denied assistance, the claims could continue. 22 Finally, in McFarland, the court denied the defendant s motion for summary judgment where the plaintiff alleged that the defendant misrepresented that it was approving him for loan modifications and the evidence was undisputed that the defendant did not, in fact, honor the agreements. 23 In sum, courts have only allowed claims under W. Va. Code 46A and -128, in the context of loss mitigation assistance, to proceed where the plaintiff alleged that the defendant made explicit representations regarding the plaintiff s consideration for or approval of loss mitigation assistance in order to obtain information from the plaintiff, and the defendant did not follow through or had no intention of following through with such representations. VI. Conclusion W. Va. Code 46A and -128 require that all action proscribed therein be done to collect or attempt to collect claims or to obtain information concerning consumers (W. Va. Code 46A-2-127) or to collect or attempt to collect any claim (W. Va. Code 46A and -128). These requirements apply to all subsections within each of the statutes. Moreover, courts in West Virginia have considered the application of these limitations in the context of a lender s consideration of a borrower for loss mitigation assistance and determined that collection of or attempts to collect a claim or information are found only under narrow circumstances, namely where the defendant made explicit and affirmative representations regarding the 22 Petty v. Countrywide Home Loans, Inc., No. CIV.A. 3: , 2013 WL , at *13 (S.D.W. Va. May 1, 2013). 23 McFarland v. Wells Fargo Bank, N.A., 19 F. Supp. 3d 663, 677 (S.D.W. Va. 2014), aff'd in part, vacated in part, 810 F.3d 273 (4th Cir. 2016). 9

10 plaintiff s consideration for or approval of loss mitigation assistance in order to obtain information from the plaintiff, and the defendant did not follow through or had no intention of following through with such affirmative representations. 10

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF WEST VIRGINIA MARTINSBURG. v. CIVIL ACTION NO. 3:12-CV-68 (JUDGE GROH)

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF WEST VIRGINIA MARTINSBURG DWAYNE A. HEAVENER, JR., Plaintiff, v. CIVIL ACTION NO. 3:12-CV-68 (JUDGE GROH) QUICKEN LOANS, INC.; ADVANCED