On February 23, the U.S. Court of Appeals for the 4th Circuit vacated a district court’s grant of summary judgment to a mortgage loan servicer and remanded a putative class action brought under §§ 46A‑2‑127(d) and 128 of the West Virginia Consumer Credit and Protection Act (WVCCPA) for further proceedings. The case stemmed from allegations that the servicer failed to apply voluntary principal prepayments before monthly mortgage payments, as required by the parties’ promissory note, an act the borrowers alleged resulted in excessive interest payments. The 4th Circuit panel held that both applicable provisions of the WVCCPA impose “strict liability” for violations and do not require proof of intent for recovery, rejecting the lower court’s contrary conclusion.

The applicable provisions of the WVCCPA provide, in relevant part, that a debt collector may not use “any fraudulent, deceptive or misleading representation or means to collect or attempt to collect claims,” listing out examples of prohibited conduct. After discovery, the servicer moved for summary judgment as to the surviving statutory claims, which the district court granted, holding that the practice at issue was a “simple mistake,” rather than an intentional violation of the statute, and thus did not violate the WVCCPA. The plaintiffs, who had made about 180 combined scheduled payments and prepayments between 2005 and 2020, argued that the misapplication violated the terms of their loan and thus constituted a violation of the WVCCPA.

On appeal, the 4th Circuit emphasized the WVCCPA’s broad remedial purpose to protect consumers from unfair and deceptive practices and, contrary to the district court’s opinion, found no textual basis in the plain language of the statute for an intent requirement. The 4th Circuit also declined the servicer’s request that it affirm on alternative grounds — including that payment applications were in fact correct or that the “bona fide error” defense in the statute applies — contending that those issues were not “apparent in the record.” The case returns to district court for proceedings consistent with the appellate interpretation.