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Consumer protection law covers debt collectors’ payment request, Md. high court says

Maryland law protects debtors not only against debt collectors who resort to harassment but also those who knowingly or recklessly seek amounts or interest rates beyond that permitted by statute or court decision, the state’s top court ruled Friday in a broad reading of the Maryland Consumer Debt Collection Act.

In its 6-1 decision, the Court of Appeals overturned lower court decisions that limited MCDCA’s reach to the “methods” debt collectors use while not applying the law to collectors who sought higher returns than permitted beyond the principal.

The high court said requests for exorbitant recoveries are covered under the MCDCA, specifically Section 14-202(8), which bars debt collectors from claiming, attempting or threatening “to enforce a right with knowledge that the right does not exist.” The non-existent “right,” in these cases, is an amount in excess of the permitted debt recovery, the court added.

“In short, nothing in the MCDCA generally, or in Section 14-202 specifically, warrants an interpretation of Section 14-202(8) that limits its applicability to ‘methods’ of debt collection,” Judge Jonathan Biran wrote for the high court.

“To the contrary the remedial nature of the MCDCA requires that we interpret Section 14-202(8) broadly to reach any claim, attempt, or threat to enforce a right that a debt collector knows does not exist,” Biran added. “Thus, we hold that a plaintiff may invoke Section 14-202(8) when the amount claimed by the debt collector includes sums that the debt collector, to its knowledge, does not have the right to collect.”

To be found liable, debt collectors must be shown to have known their requested recovery or interest rate was impermissibly high or to have exhibited a reckless disregard for the validity of their request, the high court said.

Consumer rights attorney Phillip R. Robinson hailed the court’s decision Monday.

“It’s important for consumers because it makes sure that the statute should be read broadly for its remedial purpose,” said Robinson, who filed a brief urging the high court to hear the case on behalf of consumer rights groups. “The Court of Appeals was right in the plain meaning of the statute.”

Robinson is with Consumer Law Center LLC in Silver Spring.

The Court of Appeals decision revived two lawsuits in which consumers allege debt collectors violated the MCDCA not through harassment but by seeking 10% interest when they were permitted only 6% after winning judgments in state district court.

Circuit court judges in Baltimore and Baltimore County dismissed the lawsuits against Peak Management LLC and Blibaum & Associates PA, saying the MCDCA applies to the debt collectors’ methods and not the amount sought. These unlawful “methods” include using or threatening violence, using obscene language or calling the debtor often or at hours that indicate harassment.

The intermediate Court of Special Appeals upheld the dismissals, holding that the MCDCA is “meant to proscribe certain methods of debt collection and is not a mechanism for attacking the validity of the debt itself.”

The consumers then sought review by the Court of Appeals.

In sending the cases back for trial, the high court said the consumers will have to show that the debt collectors knew the 10% requested exceeded what the district courts permitted or showed reckless disregard as to the falsity of their request.

Judge Joseph M. Getty, the high court’s sole dissenter, criticized his colleagues for “discounting the unambiguous plain language of the MCDCA and adopting an interpretation of this statute that was not intended by the General Assembly at the time it was enacted.”

The law “provides a cause of action for a plaintiff to recover for improper methods of debt collection – not the validity of the underlying debt,” Getty added.

The consumers’ attorney, E. David Hoskins, declined to comment on the high court’s decision. Hoskins is with the Law Offices of E. David Hoskins LLC in Baltimore.

The debt collectors’ attorney, James E. Dickerman, did not immediately return messages Monday seeking comment on the court’s ruling. Dickerman is with Eccleston and Wolf in Hanover.

The Court of Appeals rendered its decision in the consolidated cases Larry S. Chavis et al. v. Blibaum & Associates PA and Bryione K. Moore et al. v. Peak Management LLC, No. 30 September Term 2020.