District Court: Law firm's professional debt-collection services exempt from MCPA

Courts Debt Collection State Issues FDCPA Interest Rate

On September 17, the U.S. District Court for the District of Maryland partially granted a law firm’s motion for summary judgment in a consolidated debt-collection action concerning alleged violations of the Maryland Consumer Debt Collection Act (MCDCA) and the Maryland Consumer Protection Act (MCPA). The law firm, which collects debts from consumers relating to residential leases, filed breach of contract actions against four plaintiffs seeking damages resulting from residential lease breaches. According to two of the plaintiffs, the law firm violated the FDCPA, the MCDCA, and the MCPA when it charged a 10-percent post-judgment interest rate, 4 percent higher than the applicable statutory rate legally allowed. The other two plaintiffs alleged violations of the FDCPA and the MCDCA. In 2018, following the court’s decision to certify the question of law to the Maryland Court of Appeals, the appeals court found that “a post-judgment interest rate of six [percent] applies” in circumstances where a trial court enters judgment in a landlord’s favor, including damages for unpaid rent and other expenses.

The court first addressed the plaintiffs’ FDCPA claims, ruling that the claims are time-barred as the statute of limitations expired prior to the filing of each plaintiff’s complaint. With regard to the plaintiffs’ MCDCA claim, the court concluded that the law firm’s use of a 10-percent post-judgment interest rate is “the type of unauthorized charge proscribed by the MCDCA,” dismissing the law firm’s argument that the interest rate was a “mistake regarding the amount owed on the underlying debt. . .and that a challenge to the amount of interest owed is a challenge to the validity of the underlying debt.” Additionally, the court denied the law firm’s motion for summary judgment on the MCDCA claim because lack of knowledge “‘does not immunize debt collectors from liability for mistakes of law.’”

However, the court granted the law firm’s motion for summary judgment on the MCPA claim because law firms engaged in professional debt-collection services are exempt from liability under the MCPA, and that exemption does not require a relationship between the parties.