Three key pieces of legislation for the banking industry were signed into law following the 2017 Legislative Session: Senate Bill 344 (amending the application of payments for consumer loans), Senate Bill 490 (implementing statutory protections for officers of a corporation) and Senate Bill 563 (enacting comprehensive amendments to the West Virginia Consumer Credit Protection Act).
SB 344 – Application of Payments
Effective Date: July 4, 2017
The application of payments bill, which was signed into law on April 24, 2017, is the culmination of a three-year effort by the banking industry to modify provisions of the WVCCPA that prescribes how payments received from a consumer borrower must be applied for purposes of charging a late fee. The current law, which requires that payments be applied first to the current installment, created operational confusion and uncertainty for West Virginia banks. The new law brings clarity to the process by requiring that payments now be applied first in the order in which they are due, and then to delinquency and other outstanding charges. The bill allows banks to hold partial payments in suspense accounts until full payment is received. Once full payment is received, banks must apply the payment to the loan. SB 344 becomes effective on July 4, 2017. The full bill can be found here.
SB 563 – Amendments to the West Virginia Consumer Credit Protection Act (WVCCPA)
Effective Date: July 4, 2017
SB 563 contains several significant and positive changes for the banking industry.
Right to Cure
One of the most notable provisions to SB 563 is a new requirement that consumers provide creditors and debt collectors a notice of right to cure alleged violations of article two, three, four and five of the WVCCPA prior to filing suit. The legislation sets forth the procedures for presenting and accepting the right to cure and prescribes the circumstances in which the consumer may be entitled to attorneys' fees and court costs.
Under the right to cure provisions, consumers must provide written notice of the alleged violation to creditors and debt collectors prior to filing a civil action under the WVCCPA. If the consumer's claim is presented as a counterclaim, cross-claim or third party claim, the notice of right to cure must be served with the counterclaim, cross-claim or third party claim. The creditor or debt collector has 45 days from the receipt of such notice to make an offer to cure the alleged violation. The consumer may accept or reject the offer within twenty days. If the consumer rejects the offer, the consumer may file suit. However, that consumer may only recover attorney fees if the consumer is awarded more than the offer at trial. If the debt collector or creditor does not make an offer in the 45-day window, the consumer may file the claim. If a consumer brings an action pursuant to this right to cure section, it is a complete defense to show that a cure offer was made, accepted and the cure was performed. If the trier of fact concludes that the cure offer was accepted and performed, the creditor or debt collector is entitled to attorneys' fees and costs associated with defending that action.
Notification of Legal Representation
SB 563 also amends current law relating to the requirement that a borrower notify a creditor that the borrower is represented by legal counsel. The new law prohibits electronic notification and requires consumers to send notification by certified mail. The legislation also increases the time from seventy-two hours to three business days for debt collectors and creditors to cease direct contact with the consumer.
Statute of Limitations for Claims Relating to Foreclosure Sale
SB 563 amends the statute of limitations from four years to one year for any claims relating to setting aside a foreclosure sale. The statute of limitation for all other claims remains four years. Additionally, the bill clarifies that any counterclaim brought under the WVCCPA is subject to the applicable statute of limitations.
Exclusion of Pleadings as a Basis for a Cause of Action
SB 563 also addresses banking industry concerns relating to claims asserted by consumer attorneys alleging that pleadings filed by creditors containing procedural errors, which could be corrected through subsequent filings, should instead be deemed violations of the WVCCPA.
SB 563 resolves this issue by excluding pleadings as the basis of a cause of action under the WVCCPA unless the pleading is a material violation of:
- §46A-2-124(f) – coercion;
- §46A-2-127(d) – misrepresentation;
- §46A-2-128(c) – fees; or
- §46A-2-128(d) – fees not in the contract
It also states that this section is not intended to abolish cause of actions for abuse of process, malicious prosecution, harassment, or frivolity. It further clarifies that seeking an award of costs authorized by the applicable rules of civil procedure cannot be the basis of a cause of action in this chapter.
Finally, with respect to balloon notes, the legislation amends §46A-2-105(2) to require that promissory notes which contain a balloon payment be in the form and substance substantially similar to the language contained in the code provision (as opposed to the exact language set forth in the code).
To view the bill in its entirety, click here.
Effective dates of SB 563:
Although SB 563 is effective on July 4, 2017, there are important distinctions in how the effective date applies under various provisions of the bill. The amendments regarding notification of legal representation and excluding pleadings as a basis for a cause of action apply to all causes of actions accruing on or after July 4, 2017. The amendments relating to the right to cure and the statute of limitations for setting aside a foreclosure sale apply to all causes of action filed on or after July 4, 2017. Finally, the amendment to balloon payments applies to any consumer credit sale or loan entered into on or after July 4, 2017.
SB 490 – Standard of Liability for officers of a corporation
Effective Date: July 6, 2017
Senate Bill 490 amends Article 8 of the West Virginia Business Corporations Act to add a standard of liability section for officers, providing officers of a corporate entity statutory protections that were previously only available to directors. Prior to SB 490, the West Virginia Business Corporation Act only provided a standard of liability for directors of a corporation. This bill, effective July 6, 2017, extends the same standard of liability of directors to officers of a corporation. The full bill can be found here.