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West Virginia Consumer Credit and Protection Act Update



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The West Virginia Consumer Credit and Protection Act (WVCCPA) can be a minefield for lenders. A recent decision by the West Virginia Supreme Court of Appeals, Quicken Loans, Inc. v. Brown, highlights the expensive nature of running afoul of the WVCCPA when making a loan.

In Quicken Loans, Quicken refinanced a house in East Wheeling, West Virginia, and consolidated consumer debt of Lourie Brown. The loan amount ultimately was $144,800, but Quicken’s initial loan offer was for $112,850. Quicken increased the loan amount after obtaining an appraisal of $181,700. At trial, however, Ms. Brown established that the actual value of the house was only $46,000. The trial court awarded Ms. Brown extensive damages on multiple claims, and Quicken appealed.

Fraudulent Inducement.
The West Virginia Supreme Court first upheld the trial court verdict that Quicken fraudulently induced Mrs. Brown into the loan. The original loan offer of $112,850, for which Quicken had provided a good-faith estimate (GFE), did not have a balloon payment. The second, ultimate loan of $144,800 did have a large balloon payment (more than $107,000), and Quicken failed to provide a GFE for that loan. Quicken also failed to comply with the WVCCPA’s requirements for conspicuous disclosure of a balloon payment, W. Va. Code § 46A-2-105. Thus, although fraud is a common law tort and not a claim of statutory violation, the violation of the WVCCPA balloon disclosure statute provided a basis for the fraud verdict. The West Virginia Supreme Court also confirmed the trial court’s conclusion that Quicken fraudulently promised to refinance Ms. Brown’s loan within several months.

Unconscionable Inducement.
Ms. Brown separately claimed that Quicken unconscionably induced the loan in violation of the WVCCPA, W. Va. Code § 46A-2-121. The West Virginia Supreme Court confirmed the trial court’s conclusion that Quicken violated that provision of the WVCCPA. The Court found that the already established fraudulent conduct also supported the conclusion of unconscionable inducement.

Debt Cancellation as a Remedy.
Quicken did prevail on its appeal of the trial court’s cancellation of Ms. Brown’s debt. The West Virginia Supreme Court found that no WVCCPA provision authorizing debt cancellation applied based on the facts of Ms. Brown’s case. While Quicken’s unconscionable inducement violation of the WVCCPA gave the trial court the authority to refuse to enforce the note and deed of trust, it did not have the authority to actually cancel the debt.

Punitive Damages.
At trial, conducted before a judge and not a jury, Ms. Brown was awarded over $2.1 million in punitive damages. The West Virginia Supreme Court found that the trial judge had not sufficiently articulated its basis for awarding those punitive damages and remanded that aspect for more detailed findings and conclusions. One of the factors in determining whether punitive damages are excessive is the ratio of compensatory damages (actual, provable damages) to punitive damages. In this case, Ms. Brown was awarded nearly $600,000 in attorneys’ fees and litigation costs under the WVCCPA’s fee-shifting provision. Quicken did not appeal that award of fees and costs, but it did argue that those fees and costs were punitive and not compensatory in nature. On appeal, the West Virginia Supreme Court found that fees and costs awarded under the WVCCPA’s fee-shifting provision were properly considered compensatory damages for the purposes of calculating punitive damages. Thus, when the trial court reconsiders its award of punitive damages it will be able to include nearly $600,000 on the compensatory side of the compensatory-to-punitive damages ratio.

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The Quicken Loans case has some particularly bad facts that undoubtedly led to the large damages awarded against Quicken. Nonetheless, the case highlights how powerful a weapon the WVCCPA can be for borrowers. Steptoe & Johnson’s business litigators have extensive experience in defending lenders against WVCCPA claims. We stand ready to assist should you face a complaint or just have questions about the ins and outs of the WVCCPA.