Maryland Consumer Debt Collection Act

The Maryland Consumer Debt Collection Act is §§ 14-201 to 14-204 of the Commercial Law Article. All four sections are below. It has no licensing scheme, no notice requirements and no validation procedure — it is a list of eleven things a collector may not do, a definition of who counts, and a damages section.

Who is a “collector”

Section 14-201(b): “Collector” means a person collecting or attempting to collect an alleged debt arising out of a consumer transaction.

Read what is not in that sentence. There is no exception for the original creditor, no requirement that collecting debts be the person's regular business, and no minimum number of accounts. If you are attempting to collect, you are a collector — and the debt need only be alleged, so the Act applies to a demand that turns out to be wrong as much as to one that is right.

“Person” is defined in § 14-201(d) to include an individual, a corporation, a business trust, a statutory trust, an estate, a trust, a partnership, an association, “two or more persons having a joint or common interest”, or any other legal or commercial entity. That middle phrase — two or more persons having a joint or common interest — is why an unincorporated council of unit owners is not outside the Act on a technicality.

“Consumer transaction” (§ 14-201(c)) is the hinge: “any transaction involving a person seeking or acquiring real or personal property, services, money, or credit for personal, family, or household purposes.” Note that real property and services are both named. Whether a particular assessment debt arises out of a consumer transaction is a question about that debt and the transaction behind it; the statutory text is what the question turns on, and it is set out here rather than argued.

The eleven prohibitions

Section 14-202 opens “In collecting or attempting to collect an alleged debt a collector may not” — so every one of these applies during the attempt, not only after a judgment. Taken in order, with what each tends to mean where the debt is an assessment:

1. Use or threaten force or violence.
2. Threaten criminal prosecution, unless the transaction involved the violation of a criminal statute. Unpaid assessments are a civil debt.
3. Disclose or threaten to disclose information affecting the debtor's reputation for credit worthiness with knowledge that the information is false.
4. Contact a person's employer about a delinquent debt before obtaining final judgment, except as permitted by statute. Wage attachment comes after a judgment, not before it, and so does the phone call.
5. Disclose or threaten to disclose, to anyone other than the debtor or the debtor's spouse (or a parent, if the debtor is a minor), information which affects the debtor's reputation, whether or not for credit worthiness, with knowledge that the other person does not have a legitimate business need for it, except as permitted by statute. This is the one that a delinquency list in a newsletter, a notice on a clubhouse board, or a name read out at an open meeting runs into.
6. Communicate with the debtor or a person related to them with the frequency, at the unusual hours, or in any other manner as reasonably can be expected to abuse or harass. No hour and no number is fixed; the test is the effect.
7. Use obscene or grossly abusive language in communicating with the debtor or a person related to them.
8. Claim, attempt, or threaten to enforce a right with knowledge that the right does not exist. A late charge above what the bylaws and the statute permit, a threat to foreclose where no statement of lien has been recorded, a demand for fees the governing documents do not authorise — each of them is a right being asserted, and this item is about asserting one the collector knows is not there.
9. Use a communication which simulates legal or judicial process, or which gives the appearance of being authorised, issued or approved by a government, a governmental agency or a lawyer when it is not. A demand letter dressed up as a court document is squarely here.
10. Engage in unlicensed debt collection activity in violation of the Maryland Collection Agency Licensing Act. See below.
11. Engage in any conduct that violates §§ 804 through 812 of the federal Fair Debt Collection Practices Act. Maryland incorporates part of the federal statute by reference, so those federal sections become enforceable as a matter of Maryland law through this Act.

What a violation is worth

Section 14-203 is one sentence, and the tail of it is the part that matters: a collector who violates any provision of the subtitle “is liable for any damages proximately caused by the violation, including damages for emotional distress or mental anguish suffered with or without accompanying physical injury.” There is no statutory damages figure to fall back on and no fee-shifting in this subtitle — but emotional distress does not have to be accompanied by a physical injury to be recoverable.

The attorney's fees come from the Consumer Protection Act. Commercial Law § 13-301(14)(iii) lists, among unfair, abusive or deceptive trade practices, a “[v]iolation of a provision of” — item (iii) — “Title 14, Subtitle 2 of this article, the Maryland Consumer Debt Collection Act”. And § 13-408 gives any person a private action for injury or loss caused by a practice prohibited by that title, adding that a person who is awarded damages “may also seek, and the court may award, reasonable attorney's fees.” The same section cuts both ways: an action the court finds brought in bad faith or frivolous can carry a fee award against the party that brought it.

Three years. Nothing in this subtitle sets a limitations period, so the general rule in Courts and Judicial Proceedings § 5-101 applies — a civil action at law “shall be filed within three years from the date it accrues unless another provision of the Code provides a different period of time within which an action shall be commenced.”

Licensing: who needs one, and who does not

Item (10) of § 14-202 makes unlicensed collection a violation of this Act, so the licensing statute is worth knowing. It is Business Regulation Title 7, the Maryland Collection Agency Licensing Act, run by the State Collection Agency Licensing Board.

Business Regulation § 7-301(a): “a person must have a license whenever the person does business as a collection agency in the State.” A collection agency (§ 7-101(c)) is a person engaged directly or indirectly in the business of collecting for or soliciting from another a consumer claim; or collecting a consumer claim the person owns if the claim was in default when they acquired it; or collecting a claim they own under a name suggesting someone else is asserting it; or dealing in, or employing others to solicit or sell, collection form-and-letter systems. A consumer claim (§ 7-101(e)) is a claim for money owed or said to be owed by a Maryland resident, arising from a transaction in which, “for a family, household, or personal purpose,” the resident sought or got credit, money, personal property, real property or services.

Two exemptions decide most real cases:

• § 7-301(b)(1) — a regular employee of a creditor, acting under the creditor's general direction and control, collecting a consumer claim the creditor owns, needs no licence. An association's own staff chasing the association's own assessments sit here.
• § 7-102(b)(9) — the title does not apply to a lawyer collecting a debt for a client, unless the lawyer has an employee who is not a lawyer and who is engaged primarily to solicit debts for collection, or primarily makes contact with debtors in a way identified with the operation of a collection agency.

Section 7-102(b) also exempts banks, credit unions, mortgage lenders, savings and loan associations, trust companies, title companies as to escrow business, a person acting under a court order, and a licensed real estate broker collecting rent or allied charges.

Doing it without a licence knowingly and willfully is a misdemeanour under § 7-401, carrying a fine of up to $1,000 or six months' imprisonment or both.

Complaining to the Board

Business Regulation § 7-205 is the practical route that does not involve a courtroom. The Board may receive a written complaint and hold a hearing on an alleged violation by a collection agency of the Maryland Consumer Debt Collection Act or of the licensing title — note that the Board's jurisdiction expressly covers this Act, not only licensing. It may mediate, and may suggest monetary compensation in an amount agreeable to both sides. It may issue orders to cease and desist, or requiring affirmative action to correct a violation.

Note who that route reaches. Section 7-205(a)(1) is about an alleged violation by a collection agency. An association's own employees collecting the association's own assessments are outside the licensing requirement under § 7-301(b)(1), and so outside the Board's complaint route — against them the remedy is § 14-203 and the Consumer Protection Act, not the Board.

If a violator does not comply with a lawful order, the Board may impose a penalty of up to $10,000 for each violation cited in the order, capped at $25,000, weighing the seriousness of the violation, the violator's good faith and history, and the effect on the public and the collection industry.

Where the association's own statutes intersect

Two provisions of the community association statutes are worth holding next to item (5) of § 14-202, the disclosure prohibition:

• Closed session. Real Property § 11-109.1(8) and § 11B-111(4)(viii) both let a board close a meeting for the “[d]iscussion of individual owner assessment accounts”. The ground exists; a board that reads the delinquency list out in open session has chosen not to use it.
• Records. The withholding grounds are Real Property § 11-116(c)(3)(iii) and § 11B-112(a)(2)(iii), which cover an individual's personal financial records, including assets, income, liabilities, net worth, bank balances, financial history or activities, and creditworthiness. (Real Property § 11-132(11) and § 11B-106.1(d)(16) list individual owner files “including assessment account records” too, but those are developer turnover lists, not inspection grounds.) And note the limit that runs through both withholding provisions: a record may be withheld from public inspection, never from the person the record is about.