February 3, 2020: Imagine that a creditor told the court that you owed them a debt, and the court went ahead and allowed the creditor to start taking your money before giving you notice or a chance to defend yourself. This is what happened to Cumanda Cisneros. The Goshen Run Homeowners Association used this tool, called a confessed judgment, to garnish her property and file a lien on her home, but the court didn’t tell her about the judgment for a year and a half, long after the time allowed for her to challenge it. The PJC and allies filed an amicus brief last year asserting that this practice cannot be used to collect homeowners association debt, and in February, the Court of Appeals of Maryland agreed.
Confessed judgments are a tool used to quickly recover debts if there is a breach or default. It essentially waives the debtor’s right to defend themselves in court. Confessed judgments allow creditors to get an immediate judgment in court and begin collecting. The debtor only receives notice from the clerk of the court after the judgment has been entered. In those circumstances, the debtor only has thirty days to challenge the judgment.
Despite the Maryland General Assembly outlawing the use of confessed judgments for consumer debts, some homeowners associations have continued to try to use them to collect debt from homeowners, claiming homeowners association assessments weren’t consumer debts and that putting a confessed judgment clause in a settlement agreement also got around the prohibition on confessed judgments in consumer transactions. In Ms. Cisneros’ case, the Circuit Court for Montgomery County dismissed Goshen Run’s confessed judgment and Goshen Run appealed to the Court of Appeals.
In July 2019, the PJC submitted an amicus brief authored by 2018-2019 Murnaghan Fellow Ejaz Baluch, Jr. in support of Ms. Cisneros. The CASH Campaign of Maryland, Maryland Consumer Rights Coalition, and Public Justice (formerly Trial Lawyers for Public Justice, a national organization with no relationship to the Public Justice Center) joined our brief. The brief described the devastating impact that confessed judgment actions have on low-income consumers and consumers of color. The brief highlighted some of the reasons that confessed judgments are outlawed in consumer transactions: they impede the ability of these groups to sustain homeownership, widen an already wide wealth gap, and make it harder for these individuals to vindicate their rights in debt collection actions. The brief also argued that tricky legal arguments and maneuvers to skirt the prohibition on confessed judgments should be rejected.
The Court of Appeals agreed with the PJC’s brief, holding that homeowners association assessments fall under the broad definition of “consumer debt” under the Maryland Consumer Protection Act and that a settlement of a disputed consumer debt is itself a consumer transaction subject to the prohibition on confessed judgments. Thus, homeowners associations can no longer use confessed judgments as an enforcement tool to collect their debts. This is a huge win for homeowners across Maryland, especially low-income homeowners and homeowners of color.