Summary
The Fourth Circuit vacated and remanded a summary judgment ruling in favor of LoanCare, LLC, in a putative class action involving alleged misapplication of mortgage prepayments. The court held that West Virginia Code §§ 46A-2-127(d) and 46A-2-128 impose strict liability and do not require proof of an intentional violation. The court declined to affirm on LoanCare’s alternative arguments because those grounds were not sufficiently developed in the district court.
Topics
Practice areas
Questions Presented
- Whether West Virginia Code sections 46A-2-127(d) and 46A-2-128 require a consumer to prove that a debt collector intentionally violated those provisions.
- Whether the Fourth Circuit should affirm summary judgment on the alternative ground that LoanCare correctly applied the Tedericks' prepayments.
- Whether the Fourth Circuit should affirm on LoanCare's asserted bona fide error defense under West Virginia Code section 46A-5-101(8).
- Whether LoanCare abandoned its argument that the statutory provisions require an intentional violation by declining to defend that issue on appeal.
Holdings
- The statutory provisions do not require proof that a debt collector intentionally violated them. They impose strict liability and require proof of a statutory violation, whether the violation was intentional or unintentional.
- The district court legally erred by adding an intent-to-violate requirement to the statutory provisions and granting LoanCare summary judgment on that basis.
- The court declined to affirm on that alternative ground because the issue was not apparent from the record and the district court had expressly declined to decide whether LoanCare correctly applied the prepayments.
- The court declined to affirm on the bona fide error defense because LoanCare raised it tardily, did not move for summary judgment on that ground, and the issue had not been resolved by the district court.
- LoanCare abandoned its argument that sections 46A-2-127 and 46A-2-128 require an intentional violation by declining to defend that position on appeal.
Key quotations
“the at-issue statutory provisions do not require proof of an intentional violation, such that it was error for the district court to insert such a requirement into the Act’s text.” (3)
“the at-issue statutory provisions of the Act simply require proof of a violation thereof, either intentionally or unintentionally — i.e., they are for “strict liability.”” (19)
“By their plain and unambiguous language, the at-issue statutory provisions do not require the Tedericks to demonstrate that LoanCare acted in an “intentional” manner to violate either provision of the Act.” (25)
“Pursuant to the foregoing, we vacate the judgment of the district court and remand for such other and further proceedings as may be appropriate.” (35)
Factual background
The Tedericks refinanced their West Virginia home in 2004 with a mortgage loan that permitted voluntary prepayments of principal. Between 2005 and 2020, they made approximately 180 combined scheduled-payment and prepayment transactions, with checks identifying the additional amounts as prepayments. The loan servicers, including LoanCare after April 2019, allegedly applied the scheduled payment before the prepayment, causing the Tedericks to pay excess interest; LoanCare did not correct the practice despite their requests, and the Tedericks paid off the loan in 2020.
Procedural history
The Tedericks filed a putative class action in the Eastern District of Virginia alleging that LoanCare violated West Virginia debt-collection provisions by misapplying mortgage prepayments and charging excess interest. The district court dismissed some claims, allowed the statutory claims to proceed, and later granted LoanCare summary judgment on the statutory claims after concluding that the provisions required an intentional violation. The Fourth Circuit vacated the judgment and remanded.
Remand instructions
Remanded for such other and further proceedings as may be appropriate, including consideration in the first instance of whether LoanCare correctly applied the Tedericks' prepayments, the Tedericks' pending summary-judgment request, and LoanCare's bona fide error defense.