The Maryland Court of Appeals has ruled that unlicensed collection agencies, including debt buyers, can face a private right of action under the Maryland Consumer Debt Collection Act (MCDCA) and the Maryland Collection Agency Licensing Act, sending a case back to the Circuit Court of Baltimore for a third time.
A copy of the ruling in LVNV Funding LLC v. Larry Finch et al can be accessed by clicking here.
The case has had a very long and winding road since it was originally filed more than seven years ago. The issue at hand is whether an unlicensed collection agency could obtain default judgments against individuals in Maryland. For five years, between 2005 when the company was founded and 2010 when it obtained a license, LVNV did not have the proper license to operate in Maryland. During that time, LVNV obtained judgments against individuals with unpaid debts.
The case was originally dismissed at the Circuit Court level, but was appealed and that ruling was reversed. The case went back to the Circuit Court, where a jury awarded $38 million in damages to the plaintiffs, which was reduced down to $25 million. That ruling was appealed, which is what the Court of Appeals ruled on yesterday.
LVNV argued that the text of the bill did not demonstrate an intent by the state Legislature to include a private right of action, but the Appeals Court ruled that the law rules it a criminal offense if and when a collection agency operates in Maryland without a proper license.
“An unlicensed debt collector who, in the furtherance of its business, attempts to collect a debt through litigation unquestionably is attempting to enforce a right that, for it, does not exist,” the Appeals Court wrote in its brief. “CL § 14-203, also part of MCDCA states that ‘[a] collector who violates any provision of this subtitle is liable for any damages proximately caused by the violation, including damages for emotional distress or mental anguish suffered with or without accompanying physical injury.’ Mostofi v. Midland Funding, 223 Md. App. 687, 702-03 (2015). It is hard to imagine, notwithstanding LVNV’s importuning, a clearer expression of an intent to provide a private remedy for the violation of MCALA – a remedy that permits recovery of ‘any damages,’ including for emotional distress.”
The Court of Appeals did rule that the case would have to be remanded back to the Circuit Court, possibly even for another trial, for a “reassessment” of the damages under the proper statute.
