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Advocacy continues in fight to stop abusive debt collection by homeowners’ associations

December 16, 2021

The Maryland Court of Appeals’ 2020 ruling was clear: homeowners’ associations (HOAs) cannot use confessed judgments to collect debt from homeowners. Yet nearly two years later, HOAs continue to use this practice to take homeowners’ money before giving them notice or a chance to defend themselves. So the PJC and allies are again advocating to stop the use of confessed judgments, which exploit low-income homeowners and homeowners of color and perpetuate systemic barriers to greater equity in homeownership. In October 2021, PJC Murnaghan Fellow Michael Abrams filed an amicus brief in Nagle & Zaller v. Delegall, along with the Cash Campaign of Maryland, the Maryland Consumer Rights Coalition, and Public Justice (a separate organization from the Public Justice Center).

The story begins with the 2020 Court of Appeals victory in Goshen Run Homeowners Association v. Cisneros, which challenged HOAs’ use of confessed judgments as an abusive debt collection tactic. In this practice, if a resident falls behind on HOA assessment fees, and later defaults on a payment plan extended by the HOA, the contract provides that the HOA’s attorneys can appear in court on the resident’s behalf to admit liability and “confess judgment” for the amount of the debt, and even attorney’s fees. Imagine the lawyer for your opponent in a legal dispute being able to speak for you in court behind your back and give away your case! These extreme provisions can result in a resident facing wage garnishment, or even foreclosure, based on court proceedings they were not aware of, even though they may have had a valid defense.

In Goshen Run, 2018-2019 Murnaghan Fellow Ejaz Baluch, Jr, filed an amicus brief explaining the devastating effects of confessed judgments on low-income homeowners and homeowners of color, deepening the racial wealth gap and homeownership gap. The Court of Appeals ultimately held that the practice was illegal under the Consumer Protection Act, ruling that the unpaid assessment fees are a consumer debt, the HOA’s payment plans are effectively consumer credit, and the Act prohibits the use of confessed judgments in relation to consumer transactions.

Despite the ruling in Goshen Run, HOAs have continued trying to get away with this tactic. In Nagle & Zaller v. Delegall, a group of homeowners have sued a law firm for enforcing confessed judgment provisions against them to collect on HOA debts. The federal district court sent the case to the Court of Appeals to resolve the question of whether the law firm enforcing the confessed judgment is acting as a lender under Maryland law, which would require the firm to be licensed and otherwise comply with consumer lending regulations.

2021-2022 Murnaghan Fellow Michael Abrams filed an updated amicus brief, describing persistent racial disparities in homeownership that make it difficult for families to accumulate wealth and build a safety net to weather difficult times. The brief argues that confessed judgments effectively exploit low-income homeowners and homeowners of color because they speed up garnishment of wages and bank account funds, reducing people’s chance to defend themselves. In turn, confessed judgments perpetuate systemic barriers to greater equity in homeownership. We are hopeful that the Court will solidify the holding in Goshen Run and end this abusive practice.

A big thank you to PJC paralegal Carolina Paul and the rest of the Admin team for helping get this brief produced and filed on short notice.