Pub. 11 2020 Issue 4

www.wvbankers.org 18 West Virginia Banker Avoiding CCPA Debt Collection Traps — A Periodic Reminder “Knowing where the trap is — that’s the first step in evading it.” — Frank Herbert, Dune E ven after amendments over the past five years, the West Virginia Consumer Credit and Protection Act (the “CCPA”) still has traps for the unwary creditor. Many times, when a debtor gets so far behind that he or she hires a lawyer, the lawyer combs the loan documents and scrutinizes the creditor’s debt collection efforts to find technical CCPA violations. Creditors cannot always avoid these claims of tech- nical violations but being aware of the following fertile areas for debtor claims is an excellent first step. Late fees. West Virginia may be the only state that has a statutory dollar-amount cap on late fees. A monthly late fee can be no more than 5% of the installment amount and never more than $30. (W. Va. Code § 46A-3-112(1)(a) (precomputed loans); W. Va. Code § 46A-3-113(1) (non-precomputed loans).) The key to avoiding charging more than permitted is to follow your contracts. The statutory dollar-amount cap increased to $30 from $15 in 2015. However, simply because the statute changed does not mean that you can now charge $30 (if 5% of the installment is more than that). Presumably, your post- 2015 loan contracts reflect the increase to $30. If so, you get to charge up to the $30 cap. Pre-2015 loans likely reflect the then-effective $15 cap, and older loan documents may have even lower caps. For all pre-2015 loans, you’re still limited to the contracted-for cap amount. Default charges. West Virginia Code § 46A-2-115 establishes West Virginia’s limits on default charges. Subsection (b)(2) lists the default charges that a consumer loan may include. One key thing to be aware of is that legal fees (other than specified trustees’ fees) are not recoverable. Do not have any reference in your loan documents to recovering legal fees in the event of a default. Plaintiffs’ lawyers will pounce on that, alleging that the very presence of the language is uncon- scionably coercive. Subsection (b)(3) of the statute, listing the circumstances under which authorized default charges may be collected, has an interesting twist. A creditor cannot assess or collect authorized and contracted-for default charges unless, among other requirements, the charge is incurred after the last day allowed for a cure and “the holder of the consumer loan and the consumer have agreed to cancel any pending trustee’s sale or other foreclosures on the real property securing the consumer loan.” (W. Va. Code § 46A-2-115(b)(3)(C)-(D).) Those are curious requirements taken together. Read literally, a creditor may collect default charges incurred only after it is too late to cure and only if the foreclosure sale is canceled. No reported decision construes the most recent amend- ments to the default charges statute, so this is an area to tread very, very carefully. The safest course is to reflect in your By Russell Jessee and Sarah Ellis, Steptoe & Johnson PLLC