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Md. law gives debtors private right of action, high court says

Alleged victims of unlicensed or unruly debt collectors can pursue lawsuits against them and need not rely on state regulators to vindicate their rights, Maryland’s top court unanimously ruled Monday.

The Maryland Consumer Debt Collection Act (MCDCA) and the Maryland Collection Agency Licensing Act (MCALA) “unmistakably and unambiguously” permit lawsuits against entities that “knowingly and willfully” act as debt collectors without a license and that claim, attempt or threaten to enforce a right to a debt “knowing the right does not exist,” the Court of Appeals held in its 7-0 decision.

The high court rendered its ruling in sending a lawsuit against an unlicensed debt collector back to trial for a calculation of damages. Liability against the LVNV Funding LLC had been established in a prior legal proceeding.

LVNV had sought review by the Court of Appeals, arguing that neither the text nor legislative history of the consumer protection laws provides for a private cause of action.

But the Court of Appeals said the MCALA and MCDCA do provide that debt collectors can be held liable to a debtor for personal injuries, “including damages for emotional distress or mental anguish suffered with or without accompanying physical injury.”

“It is hard to imagine, notwithstanding LVNV’s importuning, a clearer expression of an intent to provide a private remedy for the violation of MCALA – a remedy that permits recovery of ‘any damages,’ including for emotional distress,” wrote Judge Alan M. Wilner, a retired jurist sitting on the high court by special assignment.

LVNV declined to comment on the decision. The company was represented by Ronald S. Canter, of The Law Offices of Ronald S. Canter LLC in Rockville.

The debtors’ attorneys, Scott C. Borison and Phillip Robinson, did not return telephone messages seeking comment Monday. Borison is with  the Legg Law Firm LLP in Frederick; Robinson is with the Consumer Law Center LLC in Silver Spring.

LVNV had argued in vain that the consumer protection statutes provide no private cause of action but leave recovery to state regulators. The company added it had already paid its legal debt after the Maryland Commissioner of Financial Regulation in 2011 suspended the company’s license after discovering it had operated without the license from 2007 to 2010.

That agency enforcement action ended in 2012 with a settlement in which LVNV admitted no wrongdoing but paid a $1 million penalty and agreed to pay restitution to consumer debtors.

In the ensuing private litigation, LVNV was found liable in 2016 under the consumer protection statutes and a Baltimore City Circuit Court jury awarded more than $38.6 million to 1,589 debtors who had paid less than a tenth of that amount to the then-unlicensed collector. The judge granted LVNV’s request for a reduction in the award to $25 million.

The intermediate Court of Special Appeals upheld the jury’s finding of liability for violating the consumer protection laws but sent the case back for a new trial on damages, saying the jurors were not properly instructed on calculating the monetary award.

The Court of Appeals agreed that the case should be remanded for reconsideration of the $25 million award.

The high court said the case went to the jury on the mistaken theory that the underlying debts owned by LVNV were “void” because the company was unlicensed. However, such a determination had not been made by the district court that initially upheld LVNV’s collection of the debt.

The class of debtors, as certified in August 2016 by Baltimore City Circuit Judge Althea M. Handy, included those LVNV sued and won judgments while the company was unlicensed between Oct. 30, 2007, and Feb. 17, 2010, as well as those who settled out of court. Handy added that LVNV’s liability was established and that a jury trial would determine damages.

LVNV had acquired the debts, usually from consumer credit card companies, for pennies on the dollar and then went to court to obtain judgments against the debtors. In 2013, thousands of LVNV’s cases were dismissed because the company had not been properly licensed in Maryland.

The Court of Appeals rendered its decision in LVNV Funding LLC v. Larry Finch et al., No. 46, September Term 2018.


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