Pub. 10 2019 Issue 4

Winter 2019 19 West Virginia Banker Continued on page 20 appears to require a “collection agency” to obtain a license, post a bond, maintain an office in West Virginia, and meet certain recordkeeping requirements. Whether an entity meets the definition of a “collection agency” is addressed in the WVCAA. 3 If an entity meets that definition, the WVCAA provides the following with respect to obtaining a license: No person, firm, corporation, or association shall conduct within this State a collection agency without having first applied for and obtained a business franchise registration certificate ..., nor shall any person, firm, corporation or associ- ation establish or operate a collection agency or the business of a collection agency, unless such person, firm, corporation or association maintains an office within the State of West Virginia. The business franchise registration certificate shall be deemed the collection agency’s license. A license is required for each collection agency, including each principal office and all branch offices thereof. 4 A question arises as to what the WVCAA means by “conduct within this State a collection agency.” 5 Consumers argue that an out-of-state collector making a collection call or sending a collection letter to a consumer in West Virginia is “conducting a collection agency within the State.” Conversely, defendants argue that “conducting a collection agency within this State” means actually having the collector’s operational offices in West Virginia. Next, the WVCAA appears to require collectors to post a bond with the West Virginia State Tax Commissioner. 6 Cred- itors and collectors should be aware that regulators take the position that the bond must be approved by the West Virgin- ia Attorney General’s office. The WVCAA also appears to require a collector to comply with certain recordkeeping requirements. Those require- ments look to be aimed at protecting the collector’s clients (creditors) and thus far have not been a source of lawsuits by consumers. Finally, the WVCAA appears to require a collector to “maintain” an office within the State of West Virginia if the agency is “establish[ing] or operat[ing] a collection agency or the business of a collection agency” within West Virginia. 7 The question arises as to whether this part of the WVCAA requires an out-of-state collector to open and maintain an office in West Virginia if that collector seeks to collect from West Virginia consumers. Consumers have not yet based lawsuits on this part of the WVCAA, nor have regulators focused on this part in investiga- tions or enforcement actions. Our firm defended the collector in the only lawsuit of which we are aware in which a consumer attempted to argue that the WVCAA requires an out-of-state collector to open and maintain an office in West Virginia if it wants to collect from West Virginia consumers. After we briefed the issue, including our position that any such require- ment would violate the Commerce Clause of the United States Constitution, the consumer approached us about settlement discussions. She ultimately agreed to drop her class action claims and settled the lawsuit on an individual basis. In addition to the above requirements, creditors and collec- tors should know that some consumers argue that to comply with the WVCAA, an out-of-state collector must also obtain a certificate of authority from the West Virginia Secretary of State’s office. However, that requirement does not appear in the WVCAA. When consumers file lawsuits based on the WVCAA, we have noticed a trend involving two significant issues that affect both collectors and creditors. First, consumers usually file those lawsuits as class actions under the WVCCPA. Second, they usually file those lawsuits against the creditors that em- ploy the collectors as well. First, consumers basing lawsuits on the WVCAA are not filing those lawsuits solely under its provisions. Rather, they argue that a violation of the WVCAA amounts to a violation of the WVCCPA, which allows them to recover statutory penalties and attorneys’ fees. 8 The WVCCPA prohibits a collector from using “any fraudu- lent, deceptive or misleading representation or means to col- lect or attempt to collect” a debt. 9 Consumers argue that the WVCAA requires a collector, among other things, to obtain a license and post a bond in order to be able to collect lawfully in West Virginia. They argue that any collection attempt Next, the WVCAA appears to require collectors to post a bond with the West Virginia State Tax Commissioner. Creditors and collectors should be aware that regulators take the position that the bond must be approved by the West Virginia Attorney General’s office.