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  • 4th Circuit upholds sanctions against debt relief operation

    Courts

    On June 23, the U.S Court of Appeals for the Fourth Circuit upheld a default judgment entered against a debt relief operation and related individuals accused of violating the TCPA and the West Virginia Consumer Credit and Protection Act (WVCCPA). Plaintiff-appellee alleged she received multiple telemarketing phone calls regarding debt relief offered through lower interest rates on credit cards from the defendants (including the appellants). During discovery, defendants allegedly engaged in “evasive discovery tactics” and “relentless sandbagging,” which resulted in a magistrate judge entering multiple orders to compel. Defendants allegedly continued to call the plaintiff-appellee for more than a year after she filed her initial complaint. Additional defendants (including some of the appellants) were added via amended complaints as she discovered defendants had allegedly “formed a vast and complex web of corporate entities.”

    The district court eventually sanctioned the appellants and struck their defenses for, among other things, engaging in a “pattern of concealing discoverable material” and failing to obey court orders. Appellants filed a motion for reconsideration, claiming the sanctions were too harsh and came as a surprise, the discovery abuses were “inadvertent,” and the plaintiff-appellee had not been prejudiced. Plaintiff-appellee then filed a renewed motion for sanctions outlining continued violations by appellants. Eventually, the district court entered a default judgment against the appellants for failing “to respond fulsomely and accurately to discovery requests and to comply with court orders pertaining to those requests.” The sanctions imposed an $828,801.36 judgment plus costs.

    On appeal, the 4th Circuit concluded the district court did not abuse its discretion in finding appellants acted in bad faith and entered default judgment against them. The appellate court explained that there are certain circumstances, including this action, “where the entry of default judgment against a defendant for systemic discovery violations is the natural next step in the litigation, even without an explicit prior warning from the district court.” The appellate court further concluded the record contradicted each of the appellants’ arguments and held appellants “had fair ‘indication that sanctions might be imposed against [them]’ for their continued discovery and scheduling order violations.” With respect to appellants’ arguments that the district court awarded damages for the same purported calls pursuant to both the TCPA and the WVCCPA, the 4th Circuit found that penalties under these statutes are not exclusive and that they separately penalize different violative conduct. “[D]amages under the WVCCPA may be awarded in addition to those under the TCPA for a single communication that violates both statutes,” the appellate court wrote, adding that a plaintiff can also “recover separate penalties under separate sections of the TCPA even if the violations occurred in the same telephone call.”

    Courts State Issues Appellate Fourth Circuit West Virginia TCPA Debt Relief Consumer Finance

  • West Virginia amends real estate licensing provisions

    On March 28, the West Virginia governor signed HB 3203 to amend certain provisions relating to the West Virginia Real Estate License Act, which requires persons engaging, directly or indirectly, in the capacity of a real estate broker, associate broker, or salesperson in the state to be licensed. A license is required “even if the person or entity is licensed in another state and is affiliated or otherwise associated with a licensed real estate broker in [West Virginia].” The changes, among other things, (i) eliminate requirements for certain information to be included on license applications; (ii) modify qualifications for licensure; (iii) clarify and amend requirements for prelicense and continuing education requirements; (iv) modify licensing requirements based on licensure in another jurisdiction or for license certifications issued by the Real Estate Commission (Commission); (v) eliminate certain requirements for persons holding a broker’s license; (vi) clarify language relating to when the Commission “may refuse a license or revoke, suspend, or impose any other sanction against a licensee”; (vii) require a licensee “to disclose in writing whether the licensee represents the seller, the buyer, the seller and the buyer, the landlord, the tenant, or the landlord and the tenant”; and (viii) modify certain provisions relating to complaint procedures, the judicial review of final decisions/orders issued by the Commission, criminal penalties, and suits for the collection of compensation. The amendments take effect 90 days from passage.

    Licensing State Issues West Virginia Real Estate

  • Mortgage servicer must pay $4.5 million in payment service fee suit

    Courts

    On November 7, the U.S. District Court for the Southern District of West Virginia granted final approval of a class action settlement, resolving allegations that a defendant mortgage servicer charged improper fees for optional payment services in connection with mortgage payments made online or over the telephone. The plaintiffs' memorandum of law in support of its motion for final approval of the settlement alleges the defendant engaged in violations of the West Virginia Consumer Credit Protection Act, breach of contract, and unjust enrichment with respect to the fees. According to the memorandum, before deduction of attorneys’ fees and expenses, administrative costs, and any service award, the $4.5 million settlement fund represents approximately $216 per fee paid to the defendant by the putative class members. The court also approved $1.5 million in attorney’s fees, plus $4,519.20 in expenses, along with a $15,000 service award for the settlement class representative.

    Courts Class Action Settlement Fees Mortgages Mortgage Servicing State Issues West Virginia

  • 4th Circuit vacates $10.6 million judgment, orders district court to reevaluate class standing

    Courts

    On October 28, the U.S. Court of Appeals for the Fourth Circuit remanded a $10.6 million damages award it had previously approved in light of the U.S. Supreme Court’s decision in TransUnion LLC v. Ramirez. As previously covered by InfoBytes, in January, the Supreme Court vacated the judgment against the defendants and ordered the 4th Circuit to reexamine its decision in light of TransUnion (which clarified the type of concrete injury necessary to establish Article III standing, and was covered by InfoBytes here). Previously, a divided 4th Circuit affirmed a district court’s award of $10.6 million in penalties and damages based on a summary judgment that an appraisal practice common before 2009 was unconscionable under the West Virginia Consumer Credit and Protection Act (covered by InfoBytes here). During the appeal, the defendants argued that summary judgment was wrongfully granted and that the class should not have been certified since individual issues predominated over common ones, but the appellate court majority determined, among other things, that there was not a large number of uninjured members within the plaintiffs’ class because plaintiffs paid for independent appraisals and “received appraisals that were tainted.” At the time, the 4th Circuit “concluded that the ‘financial harm’ involved in paying for a product that was ‘never received’ was ‘a classic and paradigmatic form of injury in fact.’” On remand, the 4th Circuit considered questions of standing and ultimately determined that TransUnion requires the district court to reevaluate the standing of class members.

    Courts State Issues Settlement Appellate Fourth Circuit U.S. Supreme Court Class Action West Virginia

  • West Virginia AG pings CFPB on "unconstitutionally appropriated" funds

    State Issues

    On October 24, the West Virginia attorney general sent a letter to CFPB Director Rohit Chopra, and to the leadership of both the House Financial Services Committee and the Senate Banking Committee, regarding the constitutionality of the Bureau’s continuing operation. As previously covered by a Buckley Special Alert, the U.S. Court of Appeals for the Fifth Circuit held that the CFPB funding structure created by Congress violated the Appropriations Clause of the Constitution, which provides that “no money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” The 5th Circuit ruled that, although the CFPB spends money pursuant to a validly enacted statute, the structure violates the Appropriations Clause because the CFPB obtains its funds from the Federal Reserve (not the Treasury), the CFPB maintains funds in a separate account, the Appropriations Committees do not have authority to review the agency’s expenditures, and the Bureau exercises broad authority over the economy. In the letter, the AG argued that the Bureau cannot discharge its duties in a constitutionally permissible way. He further noted that the Bureau “plainly cannot do that with a funding scheme that ‘sever[s] any line of accountability between [Congress] and the CFPB.’” The AG urged the Bureau to reassess its future plans and to reevaluate whether its present regulations have any effect. The letter also requested answers to a series of questions, no later than November 1: (i) “Does the agency believe that any of the regulations that it promulgated under the unconstitutional funding scheme remain in effect? If so, which ones—and why? Similarly, how does the decision affect past enforcement actions?”; and (ii) “What plans does the Bureau plan to undertake to comply with the ruling? How will its ongoing enforcement efforts be effected? How will this change affect any promulgation of regulations? How will bank supervision continue, if at all?”

    State Issues Federal Issues State Attorney General Appellate Fifth Circuit West Virginia CFPB Constitution House Financial Services Committee Senate Banking Committee Funding Structure

  • West Virginia updates money transmitter licensing law

    Recently, the West Virginia governor signed SB 505, which updates laws regarding licensure and regulation of money transmitters. Among other things, the bill (i) enhances and expands defined terms, including the definition of “control”; (ii) removes the provisional licensing option for check sellers; (iii) gives West Virginia the authority to participate in multistate examinations; (iv) increases the net worth requirement for licensees; (v) sets forth prior approval requirements for a change in control of a licensee; and (vi) requires licensees to maintain specified “permissible investments” at all times. The bill is effective June 7.

    Licensing State Issues State Legislation Money Service / Money Transmitters West Virginia

  • Supreme Court vacates $10 million judgment in light of TransUnion ruling

    Courts

    On January 10, the U.S. Supreme Court issued a short summary disposition granting a petition for a writ of certiorari filed by a lender and an appraisal management company. Rather than hearing arguments in the case, the Court immediately vacated the judgment against the defendants and ordered the U.S. Court of Appeals for the Fourth Circuit to reexamine its decision in light of the Court’s ruling in TransUnion v. Ramirez (which clarified the type of concrete injury necessary to establish Article III standing, and was covered by InfoBytes here).

    As previously covered by InfoBytes, in March 2021, a divided 4th Circuit affirmed a district court’s award of over $10 million in penalties and damages based on a summary judgment that an appraisal practice common before 2009 was unconscionable under the West Virginia Consumer Credit and Protection Act. During the appeal, the defendants argued that summary judgment was wrongfully granted and that the class should not have been certified since individual issues predominated over common ones, but the appellate court majority determined, among other things, that there was not a large number of uninjured members within the plaintiffs’ class because plaintiffs paid for independent appraisals and “received appraisals that were tainted.”

    The defendants argued in their petition to the Court that the 4th Circuit’s “fundamentally unjust” holding could not stand in the wake of TransUnion, which ruled that every class member must be concretely harmed by an alleged statutory violation in order to have Article III standing. According to the defendants, the divided panel “affirmed the class certification and the class-wide statutory-damages award, because the class members all faced the same risk of harm: the appraisers had been ‘exposed’ to the supposed procedural error, and the class members paid for the appraisals, even though the court ‘cannot evaluate whether’ any harm ever materialized.”

    Courts U.S. Supreme Court Fourth Circuit Appellate Appraisal Appraisal Management Companies Settlement Mortgages State Issues Consumer Finance West Virginia

  • FDIC announces West Virginia disaster relief

    Federal Issues

    On June 1, the FDIC issued FIL-38-2021 to provide regulatory relief to financial institutions and help facilitate recovery in areas of West Virginia affected by severe storms. The FDIC acknowledged the unusual circumstances faced by institutions affected by the storms and suggested that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider regulatory relief from certain filing and publishing requirements.

    Federal Issues FDIC West Virginia Disaster Relief Consumer Finance CRA Bank Regulatory

  • West Virginia extends remote working for depository and non-depository entities

    State Issues

    The West Virginia Division of Financial Institutions extended, through September 1, 2020, its guidance temporarily permitting employees of regulated entities to work from home or some other remote location approved by the financial institution, whether in West Virginia or another state.  The initial guidelines were announced on March 13 (previously discussed here) and had been previously extended through June 15, as previously covered here.

    State Issues Covid-19 West Virginia Non-Depository Institution Financial Institutions

  • West Virginia Division of Financial Institutions extends remote working

    State Issues

    West Virginia’s Department of Financial Services Commissioner extended guidance enabling employees of regulated entities to work remotely through August 1 as a result of the Covid-19 crisis. The initial guidelines were announced on March 13 (previously discussed here and here) and were set to expire on June 15.

    State Issues Covid-19 West Virginia Financial Institutions

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