Virginia Lawyers Weekly VA Lawyers Weekly
Where a mortgage company argued that it was not a “debt collector” under the Maryland Consumer Debt Collection Act because it only accepted monthly payments and did not actively enforce the payment obligations of defaulting borrowers, its argument was rejected because the statute draws no such distinction.
Background
Plaintiffs brought this case as a class action against Carrington Mortgage Services LLC. They alleged that Carrington violated the Maryland Consumer Debt Collection Act, or MCDCA, and the Maryland Consumer Protection Act, or MCPA, by charging $5 convenience fees to borrowers who paid monthly mortgage bills online or by phone.
The district court found that plaintiffs’ MCDCA claims failed. It consequently dismissed their derivative MCPA claim. On the standalone MCPA claim, the district court found no unfair practice or misrepresentation upon which plaintiffs relied. As a result, it dismissed all of plaintiffs’ claims with prejudice.
Collector
The MCDCA broadly defines a “collector” as “a person collecting or attempting to collect an alleged debt arising out of a consumer transaction.” The MCDCA defines “person” to include “an individual.” There is no dispute that plaintiffs’ debt arose out of a consumer transaction. And it is plain that, by collecting borrowers’ monthly mortgage payments, Carrington is collecting a debt. Each piece of the statutory puzzle thus fits together: Carrington counts as a “collector” under the MCDCA.
To avoid this result, Carrington would first have this court distinguish between loan servicing and debt collection, exempting the former from the MCDCA’s reach. Passively accepting monthly payments, Carrington says, is a world away from actively enforcing the payment obligations of defaulting borrowers. Maybe so, but the statute draws no such distinction.
Next, Carrington argues that plaintiffs must challenge a “method of collection” and not simply the validity of the fees. But the Court of Appeals of Maryland recently rejected this argument. Carrington finally argues that even if it is a “collector” under the MCDCA, plaintiffs must also show that Carrington is a “debt collector” under the FDCPA to establish a violation. The court disagrees.
Amount
The FDCPA prohibits “[t]he collection of any amount (including any interest, fee, charge or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” Carrington claims that the FDCPA only prohibits fees that are “incidental” to the mortgage debt. But this misreads the statute.
The FDCPA’s far-reaching language straightforwardly applies to the collection of “any amount.” While convenience fees are not explicitly enumerated, Congress certainly did not want debt collectors to skirt statutory prohibitions through linguistic sophistry. So the court has no trouble in concluding that convenience fees are an “amount” under the FDCPA.
Permitted by law
The FDCPA prohibits “[t]he collection of any amount . . . unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” Plaintiffs argue that “permitted by law” requires express sanction or approval; Carrington thinks that the phrase indicates only a lack of express prohibition. Plaintiffs’ interpretation aligns best with the statute: here, “permitted by law” requires affirmative sanction or approval, typically (though not always) from a statute.
Other circuits have likewise read “permitted by law” to require an affirmative sanction. As early as 1988, so did the Federal Trade Commission, which had primary enforcement authority over the FDCPA at that time. After enforcement authority shifted to the Consumer Financial Protection Bureau in 2010, it subsequently issued guidance that also required express permission. While none of this authority is controlling, it buttresses our conclusion as to the statutory meaning. So too does the linguistic context.
MCPA
Because the court holds that Carrington has violated the MCDCA by engaging in conduct violating the FDCPA, plaintiffs’ derivative MCPA claim can also proceed. Second, plaintiffs argue that because the fees are prohibited under § 14-202(11), Carrington asserts rights that “do[] not exist” under § 14-202(8). As explained above, Carrington is an MCDCA “collector” whose convenience fees are not “permitted by law.” So the district court’s dismissal, predicated as it was on its view of the MCDCA’s definition of “collector” and plaintiffs’ voluntary assent, was in error.
Plaintiffs’ standalone MCPA claim alleging “unfair, abusive, or deceptive trade practices,” however, cannot proceed. Plaintiffs allegations in support of this claim look more like a “threadbare recital[] of the elements of a cause of action” than a “plausible claim for relief.”
Affirmed in part, reversed in part, vacated in part and remanded.
Alexander v. Carrington Mortgage Services LLC., Case No. 20-2359, Jan. 19, 2022. 4th Cir. (Wilkinson), from DMD at Baltimore (Bennett). Hassan A. Zavareei for Appellants. Fredrick S. Levin for Appellee. VLW 022-2-014. 17 pp.
