Mortgage servicing
Tederick v. LoanCare LLC
Date: Feb. 23, 2026
Issue: Whether LoanCare LLC violated the West Virginia Consumer Credit and Protection Act (WVCCPA) by misapplying borrowers’ mortgage prepayments and charging excess interest, and whether the act requires proof of an intentional violation to establish liability.
Case Summary: In a unanimous decision, a Fourth Circuit panel revived a proposed class action by West Virginia homeowners against mortgage subservicer LoanCare LLC over alleged interest overcharges, ruling the lower court improperly interpreted the WVCCPA in requiring proof of an intentional violation for a claim.
In September 2022, Gary and Lisa Tederick (Plaintiffs) filed a class action against LoanCare, alleging it violated the WVCCPA by misapplying their mortgage prepayments and charging excess interest. The dispute stemmed from a mortgage loan that Plaintiffs refinanced in 2004 and that LoanCare serviced beginning in 2019. Over the life of the loan, Plaintiffs made many combined monthly payments and prepayments. Still, Plaintiffs alleged LoanCare failed to properly apply those prepayments to principal. Despite notifying LoanCare of the issue and receiving assurances it would be corrected, LoanCare allegedly continued the same practices, leading Plaintiffs to claim they overpaid interest before paying off the loan in 2020.
In October 2023, Judge Raymond Jackson of the Eastern District of Virginia granted LoanCare’s motion to dismiss portions of the statutory claim based on fraud and the unjust enrichment claim, while allowing other statutory claims and the conversion claim to proceed. Plaintiffs then filed a second amended complaint, and the case proceeded through discovery and class certification efforts. In February 2025, Judge Raymond Jackson granted LoanCare summary judgment on the remaining statutory claims, finding that the dispute was a routine billing disagreement. The court held that even if LoanCare misapplied the prepayments, Plaintiffs failed to show intentional fraudulent, deceptive, or unfair conduct required under the statute, emphasizing that mere error or incorrect application of payments does not establish liability. Plaintiffs appealed the district court’s decision.
On appeal, the Fourth Circuit panel vacated the decision. It held that the district court misinterpreted the WVCCPA by requiring proof of an intentional violation, even though the statute’s plain language is unambiguous. The panel explained that the WVCCPA broadly prohibits debt collectors from using any fraudulent, deceptive, or misleading representation, including false statements about a claim, and does not require intent. Moreover, the WVCCPA also prohibits unfair or unconscionable collection practices, including unauthorized interest or fees, and likewise contains no intent requirement. Accordingly, the panel concluded the district court erred by reading an intent element into the statute.
The panel rejected LoanCare’s alternative arguments. LoanCare argued that the panel could affirm because LoanCare properly applied Plaintiffs’ prepayments and did not charge improper interest, and also because it qualified for the WVCCPA’s bona fide error defense. This defense shields a debt collector from liability if it proves that any violation was unintentional and resulted from a genuine mistake despite procedures designed to prevent such errors. The panel rejected the first argument because the record did not clearly show that LoanCare correctly calculated interest, and the district court itself noted that LoanCare may have misapplied payments and collected unearned interest. The panel rejected the second argument because LoanCare did not properly raise the bona fide error defense at summary judgment, and the district court never addressed it. Because neither argument was clearly established and the court does not decide issues in the first instance, the panel declined to affirm on those bases and left both issues for resolution on remand.
Bottom Line: The Fourth Circuit held that the WVCCPA does not require proof of intent, reviving homeowners’ claims and remanding the case back for further proceedings.
Document: Opinion
