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Victory! Court of Appeals rules that debt collector laws apply to lawyers conducting debt collection

February 3, 2020: In a significant victory for consumers, the Court of Appeals of Maryland ruled this month that lawyers and law firms that collect debts on behalf of their clients are required to follow the laws that govern debt collectors. The Court agreed with the Public Justice Center and allies, who asserted that law firms and their clients cannot hide behind the “professional services” exemption in the Maryland Consumer Protection Act to avoid responsibility for a broad array of unlawful debt collection practices of the lawyers or their client.

2018-2019 PJC Murnaghan Fellow Ejaz Baluch, Jr. and co-counsel Leslie Dickinson of Dickinson Law Firm LLC represented David and Tammy Mills, homeowners who found themselves buried in thousands of dollars in fines and fees from their homeowners association and subject to misleading and illegal debt collection practices. As alleged in the Millses’ case, the association used an outside law firm to attempt to combine disputed fines and fees, legal costs and attorney’s fees, and legitimate annual assessment fees and then claim that the entire balance was overdue assessments. When the Millses made payments, the firm applied them to the disputed fees rather than the annual assessments, creating a spiral of debt. The firm also repeatedly attempted to collect debt that was time-barred, and in some cases, tried to collect the same debt multiple times.

The Millses sued the homeowners association under the Maryland Consumer Protection Act (CPA) and the Maryland Consumer Debt Collection Act (MCDCA), which generally prohibit unfair or deceptive practices in consumer transactions, and in particular, in the collection of consumer debt. But the CPA has an exemption for the “professional services” of various groups of professionals, including attorneys. The homeowners association argued that, because it retained a law firm to collect the money that it claimed the Millses owed, it was completely shielded from any liability for wrongdoing under the CPA. In oral argument last fall, Ejaz asserted that law firms and their clients cannot use the “professional services” exemption in the CPA to escape liability for such practices, like imposing unwarranted fines and fees on our clients, just because it hired attorneys to handle collection. The Maryland Office of the Attorney General, Civil Justice, Inc., and the Housing Initiative Partnership, Inc., represented by noted consumer rights attorney Phillip Robinson, also submitted amicus briefs in support of the Millses.

The Court of Appeals’ decision in favor of the Millses reflects the arguments of the PJC and allies, holding that the professional services exemption does not apply to the conduct or services of a lawyer or law firm when they engage in debt collection activity which 1) requires a license under the Maryland Collection Agency Licensing Act or 2) would be prohibited under the MCDCA. The Court also ruled that the narrow professional services exemption does not shield a lawyer’s client in any event. We hope that this decision will deter debt collection law firms that flout the law from setting up shop in Maryland.