Maryland appeals court holds HOAs may be vicariously liable under Maryland Consumer Protection Act

State Issues Courts Debt Collection Vicarious Liability

On December 21, 2018, the Maryland Special Appeals Court held that a homeowners association (HOA) is not shielded from liability under the Maryland Consumer Protection Act (MCPA) simply because the law firm used by the HOA to collect certain debts is exempt from the law. According to the opinion, after an HOA was awarded a judgment of over $3,000 against homeowners for unpaid fines, the homeowners filed an action against the HOA asserting violations of the MCPA and the Maryland Consumer Debt Collection Act (MCDCA), and the HOA responded by filing a third-party complaint against its law firm, arguing the firm agreed to indemnify it. The lower court granted summary judgment in favor of the HOA on the MCPA claim, holding that because the statute specifically exempts attorneys, the HOA cannot be held vicariously liable under the statute. Additionally, among other things, the lower court held the homeowners improperly used the MCDCA to dispute the validity of the debt and granted the HOA judgment as a matter of law.

The appellate court disagreed and held that the HOA is not shielded from liability under the MCPA solely because the law firm used to collect the debts is exempt from the statute. The court reasoned that a “debt collector should not be able to hire an attorney to engage in illegal debt collection practices on its behalf as a means of avoiding liability” under the MCPA. The court also vacated the lower court’s judgment in favor of the HOA on the MCDCA claims, concluding that the homeowners were challenging the HOA’s methods in filing liens in the collection of the debt, as opposed to disputing the validity of the debt itself.