CHARLESTON – State law that allows borrowers to sue lenders for unfair practices allows them to sue debt collectors too, the Supreme Court of Appeals ruled on June 14.
The Justices advised U.S. District Judge John Bailey that Linda Barr can sue NCB Management Services under the West Virginia Credit Consumer Protection Act.
Justice Robin Davis, declaring the Court would apply the act broadly and liberally, wrote that "a professional debt collector qualifies as a creditor."
Attorney General Darrell McGraw and private groups, as friends of the court, had urged the Justices to rule in Barr's favor.
Barr bought a Suzuki motorcycle for $9,000 in 2007, borrowing the amount from HSBC Bank Nevada.
In 2009, the bank repossessed the motorcycle and hired NCB to collect a balance of $7,896.
She sued the bank and the collector in federal court last year, alleging they violated the Act.
She claimed NCB misrepresented facts, communicated with family members who weren't on the account, improperly accessed credit reports, and badgered her to pay the deficiency with her husband's credit card.
NCB moved to dismiss, claiming a consumer has no private cause of action against a debt collector under the Act.
Bailey, finding the law unclear, asked the Justices for help.
Barr's lawyers told the Justices that she was to pay NCB, not the note holder.
"This fits the common meaning of creditor, because NCB was the entity to whom money was owed," they wrote.
NCB's lawyers argued that the Act didn't mention debt collectors.
"To now create a new penalty, which no one anticipated, and apply that new penalty to historical conduct is indeed inequitable and unfair," they wrote.
They wrote that regardless of the court's decision, the attorney general could prosecute debt collectors who fail to follow state and federal laws.
McGraw agreed that he could, but argued that he can't fully police the marketplace.
"Enforcement of a regulatory statute through individual actions serves a deterrent effect, curbing impermissible conduct by unscrupulous businesses," deputy attorney general Jill Miles wrote.
Mountain State Justice, American Association of Retired Persons, National Association of Consumer Advocates and National Consumer Law Center all supported Barr.
The Justices answered as their friends hoped they would.
According to Davis, a debt collector qualifies as a creditor whether it acts as a lender's agent or purchases the debt from the lender.
She wrote that because debt collectors fit the definition of creditor, defenses provided to creditors by the Act would be available to debt collectors.
She wrote that Bailey did not call on the court to decide whether NCB violated the Act.
Aaron Amore of Charles Town, Anthony Majestro of Charleston, and John Barrett of Charleston represent Barr.
Bryan Shartle of Metairie, Louisiana, Macel Rhodes of Morgantown, and Sharon Hall of Pittsburgh represent NCB.