## Facts

- In 2006, Philip McFarland refinanced his West Virginia home after a mortgage broker represented that the home’s value had nearly doubled.
- McFarland alleged the refinancing loan amount substantially exceeded the home’s actual value.
- After the housing market declined, McFarland could not afford the increased payments and faced foreclosure.
- McFarland sued Wells Fargo Bank, N.A., and U.S. Bank National Association, asserting violations of the West Virginia Consumer Credit and Protection Act (WVCCPA), including that the refinancing was (1) an unconscionable contract and (2) unconscionably induced by conduct surrounding the transaction.
- The federal district court dismissed the WVCCPA claims, holding that a plaintiff must show substantive unconscionability and that a loan exceeding property value, without more, is not substantively unconscionable.

## Issues

1. Whether a mortgage loan’s principal amount exceeding the home’s fair market value, standing alone, can establish substantive unconscionability under West Virginia law.
2. Whether WVCCPA § 46A-2-121 permits an unconscionable-inducement claim without proof that the contract terms are substantively unconscionable.

## Decision

- The Fourth Circuit affirmed dismissal of the substantive-unconscionability theory based solely on the loan being larger than the home’s value.
- The court vacated dismissal of the unconscionable-inducement theory, holding WVCCPA § 46A-2-121 recognizes inducement-based relief independent of substantively unfair contract terms.
- The case was remanded for the district court to decide, in the first instance, whether the refinancing was induced by “unconscionable conduct” under WVCCPA § 46A-2-121(1)(b).
- Disposition: affirmed in part, vacated in part, and remanded.

## Legal Principles

- Substantive unconscionability under West Virginia law centers on unfairness in the contract’s terms; a loan’s size relative to collateral value, by itself, does not establish substantive unconscionability.
- WVCCPA § 46A-2-121 provides distinct grounds for relief: (a) an agreement or clause unconscionable when made, and (b) an agreement induced by unconscionable conduct (or other unconscionable creditor conduct).
- A plaintiff may pursue unconscionable inducement under WVCCPA § 46A-2-121(1)(b) without proving that the contract’s substantive terms are themselves unfair.

## Conclusion

The Fourth Circuit rejected the view that “over-lending” alone makes a mortgage substantively unconscionable, but held that WVCCPA’s unconscionable-inducement provision creates an independent path to relief based on improper conduct during contract formation, requiring remand for fact-specific evaluation of inducement.


McFarland v. Wells Fargo Bank, N.A., 810 F.3d 273 (4th Cir. 2016)