Fourth Circuit Rules That A Mortgage Agent Can Be Held Liable For FDCPA Violations Even If Not Subject To The FDCPA | Alston and bird



The putative class action plaintiffs recently prevailed on appeal in a case involving mortgage servicing fees charged to borrowers in Maryland. In doing so, the notice opens the door to FDCPA liability for all mortgage servicing and other collection activities in Maryland, even if such activity is otherwise exempt from FDCPA liability.

Maryland Consumer Debt Collection Act

The case is a putative class action challenging certain fees charged by borrowers’ mortgage servicer in the normal course of business. Among other claims, the plaintiffs alleged that the repairer violated the Maryland Consumer Debt Collection Act (MCDCA). Specifically, the MCDCA prohibits a “collector” from “engaging[ing] in any conduct that violates §§ 804 through 812 of the Federal Fair Debt Collection Practices Act. The plaintiffs alleged that the attempt to collect certain mortgage servicing fees violated the FDCPA’s prohibition on a “collector” engaging in “[t]the collection of any amount (including any interest, commission, charge or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.

The MCDCA applies to any “collector”, defined as any “person who collects or attempts to collect an alleged debt arising from a consumer transaction”. The FDCPA, on the other hand, uses the term “collector” which is defined with several limitations and exceptions, including for debts that were not in default when obtained. Despite the narrower scope of the FDCPA, the plaintiffs in the case argued that a service agent could engage in conduct that violated the FDCPA, and thus be in violation of the MCDCA, even if the service agent n was not a “collection agent” subject to the FDCPA.

The district court dismissed the case before considering the class certification, determining that the duty officer was not a “collector” under the MCDCA and, likewise, was not a “collector Debts” under the FDCPA.

The decision of the Fourth Circuit

On appeal, the Fourth Circuit quashed and remanded the case for retrial, finding that the duty officer was a collector under the MCDCA. Critically, the court determined that the duty officer could be held liable for engaging in conduct that violated the FDCPA, even though he was not actually subject to the FDCPA. The court held that even though the FDCPA only applies to “collection agents” and, even though the MCDCA, in turn, only prohibits conduct that violates the FDCPA, an entity could still be violation of the MCDCA even though it did not engage in debt collection under the FDCPA. The court concluded that “[t]The broader MCDCA definition prevails here, as it is not superseded by the federal definition. The court said the MCDCA only incorporates the “substantive provisions” of the FDCPA contained in §§ 804-812, thus the applicable definitions and exemptions of the FDCPA, contained in §§ 803, 818 should be disregarded. to determine if a violation of the FDCPA has occurred. for purposes of Maryland law.


This decision subjects several otherwise exempt and excluded actors to potential liability for violations of the FDCPA through the MCDCA in Maryland. In addition to mortgage servicers, which are generally exempt from the FDCPA under normal circumstances, the FDCPA contains a number of other exemptions, including for entities collecting their own debts, processors, and certain nonprofit organizations. profit making credit counseling. Under the reasoning of the Fourth Circuit ruling, all of these actors could now be held liable under the MCDCA for violations of the FDCPA in Maryland. In addition, all of these players arguably must comply with FDCPA restrictions in communicating with consumers. This would include restrictions on the timing, frequency, and format of communications with consumers that do not apply to communications outside the scope of the FDCPA. On February 15, 2022, the court denied a motion for rehearing and rehearing en banc, thus finalizing the decision.

As a result of this decision, recent legislation introduced in the Maryland General Assembly may delay foreclosure proceedings in Maryland. On February 3, 2022, a delegate introduced HB 803, which would allow borrowers to file counterclaims in response to foreclosure proceedings, impose additional procedural requirements applicable to such actions, and prevent a foreclosure from continuing if a borrower files such counterclaim. Under the Fourth Circuit’s ruling, repairers could face an increase in challenges from the MCDCA alleging violations of the FDCPA that would not otherwise apply, and, combined with the additional procedural requirements and delays contemplated by HB 803 , foreclosure proceedings could suffer significant delays as a result.

Although certain state laws provide state remedies for violations of federal law, we are not aware of any case that has interpreted such law to expand the scope of liability under incorporated federal law. . While states can and have passed consumer protection laws that are broader than federal law, it remains to be seen whether other courts will now interpret the mere incorporation of federal law as something broader as well.

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