Maryland Court Limits Reach of State Debt Collection Law

By Ronald S. Canter, Esquire

The Law Offices of Ronald S. Canter, LLC

Maryland is one of a number of jurisdictions that have enacted state law restrictions on consumer debt collection.[1] However, unlike the Federal Fair Debt Collection Practices Act, the Maryland Consumer Debt Collection Act (MCDCA) requires proof of actual damages.[2] Some other state laws similarly require proof of actual damages[3] while others mirror the FDCPA and allow for statutory damages.[4]

The MCDCA prohibits both a consumer creditor and/or a third party collector from making a “claim, attempt or threat(s) to enforce a right with knowledge that the right does not exist.” See, §14-202(8), CL Article. In Chavis v. Blibaum Associates, P.A., __ Md.App. __, 2020 WL 3603741 (July 2, 2020), the Maryland Court of Special Appeals held that although §14-202(8) may be used by a debtor challenging the methods of debt collection, the reach of this restriction cannot be used to challenge the amount of the debt.[5] In Chavis, the debtor contended that a Maryland collection attorney violated §14-202(8) by collecting 10% interest on a judgment for the rent of residential property even though Maryland law limits judgment interest to 6% on a judgment for rent. See, Ben-Davies v. Blibaum & Associates, P.A., 457 Md. 228, 232-33 (2018) (§11-107 CJ Article, allows a general post-judgment rate of 10% but a reduced rate of 6% applies to “money judgments for rent of residential premises”).

The Court’s decision in Chavis distinguished other Maryland rulings that held collectors liable by attempting to collect a fee or charge not allowed by law.[6] In doing so, the Court limited the reach of the MCDCA to challenges to the legal right to collect the debt in contrast of challenges as to the amount of the debt.

The Plaintiff in Chavis also claimed that the landlord/property owner violated the Maryland Consumer Protection Act (MCPA), §13-301(1), CL Article[7] by filing a post wage garnishment seeking 10% interest. The Court held that the landlord was not liable “based on their interpretation of a novel legal issue”[8] that was only resolved by the 2018 Court of Appeals opinion on the certified question of law in Ben-Davies v. Blibaum & Associates. The Court went on to reject the tenant’s argument that a 2018 amendment to the MCDCA, which added a provision making a collector liable under the MCDCA for any conduct “that violates... the Fair Debt Collection Practices Act” applied to a pre-2018 claim, holding that the 2018 amendment would not be applied retroactively.

The tenant did not pursue an independent FDCPA claim because the suit was filed after the expiration of the FDCPA one year statute of limitations. However, the Plaintiff was able to pursue state law claims which were subject to a longer three year statute of limitations. This delay benefited the Defendant law firm because it is likely that an FDCPA claim alleging the collection of excessive post-judgment interest would succeed. See, e.g., Shepherd v. Liberty Acquisitions, LLC, 2012 WL 2708518 at *5 (D. Colo. July 9, 2012), order vacated in part on other grounds, 2013 WL 1117046 (D. Colo. March 15, 2013) (holding collector liable for charging excessive post-judgment interest).

Although in the aftermath of the 2018 Amendment, consumers are now able to pursue MCDCA claims under its three year statute of limitations based on a collector’s violation of the FDCPA, unlike the FDCPA’s strict liability feature allowing statutory damages of up to $1,000.00; a consumer must establish actual damages in order to prevail on a claim under the MCDCA. 

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[1]  The Maryland Consumer Debt Collection Act is codified at §14-201, et. seq. CL Article, Md. Ann. Code.

[2] See, §14-203, CL Article. (imposing liability for damages proximately caused by violation, including damages for emotional distress without accompanying physical injury).   

[3] See, Kaymark v. Bank of America, N.A., 783 F.3d 168, 181 (3rd Cir. 2015) (Pennsylvania’s Fair Credit Extension Uniformity Act requires proof of ascertainable loss).

[4] See, e.g., Fla.Stat. §559.77(2) (allowing statutory damages of up to $1,000.00) and §1788.30, Cal. Civ. Code (allowing “penalty” of not less than $100.00 nor greater than $1,000.00).

[5] Compare, 15 U.S.C. §1692f(1) of the FDCPA which outlaws the collection of any amount not authorized by the agreement or permitted by law. 

[6] See, Allstate Lien & Recovery Corp., 219 Md. 575, 777 (2014) (garageman violated §14-202(8) by assessing a $1,000.00 processing fee for placing a lien for unpaid vehicle repairs) and Mills v. Galyn Homeowner’s Ass’n, Inc., 239 Md.App. 663, 676 (2018), aff’d sub. nom., Anderson & Lawrence Prof. Servs., LLC v. Mills, 467 Md. 126 (2020) (consumer may pursue claim under §14-202(8) based on allegation that Homeowner’s Association governing documents did not permit levying of challenged fine).  

[7] The MCPA cause of action was limited to the property owner Defendant because the MCPA includes a learned profession exemption which excludes claims against attorneys.

[8] Chavis at *7.