Banking and Finance Law Daily Law firm debt collection services not covered under state’s exemption
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Thursday, January 30, 2020

Law firm debt collection services not covered under state’s exemption

By Nicole D. Prysby, J.D.

Because alleged conduct by a law firm could be provided by any debt collection agency, the conduct did not fall under the "professional services" exemption to the Maryland Consumer Protection Act.

Where the alleged conduct by a law firm could be provided by any licensed debt collection agency or violates the Maryland Consumer Debt Collection Act (MCDCA), the debt collection activities in question do not fall within the lawyers’ "professional services" exemption of the Maryland Consumer Protection Act (CPA), held the Maryland Court of Appeals—Maryland’s highest court. A law firm was retained by a homeowners association to collect a debt from homeowners, who then sued the law firm, challenging its debt collection practices under the CPA and MCDCA. The court considered the question of whether all services provided by a law firm fall within the CPA’s "professional services" exemption and concluded they do not. Where the alleged conduct could be provided by any licensed debt collection agency without regard to whether the agency is affiliated with a lawyer or a law firm, the conduct is not covered by the CPA’s professional services exemption. Similarly, where the alleged conduct by the lawyer or law firm violates the MCDCA, the debt collection activities in question do not fall within the professional services exemption (Andrews & Lawrence Professional Services, LC v. Mills, Jan. 28, 2020, Booth, B.).

Homeowners sued their association (HOA) in connection with the HOA’s attempt to collect delinquent HOA fees. The HOA retained a law firm to undertake debt collection activities. The law firm obtained judgment against the homeowners and garnished their bank account. The homeowners filed suit against the HOA, challenging its debt collection practices under the CPA and MCDCA, and the HOA filed a third-party complaint against the law firm for indemnification. The court considered the question of whether all services provided by a lawyer or a law firm fall within the "professional services" exemption under the CPA.

Under the CPA, a violation of the Maryland Collection Agency Licensing Act (MCALA) or MCDCA is also a per se violation of the CPA. While the CPA "does not apply to" the "professional services" of a lawyer, it does not define "professional services." Like the CPA, the MCALA contains an exemption from the statute for lawyers providing professional services. But under the MCALA, the General Assembly has not categorically exempted all law firms from the licensing requirements of the statute. Specifically, where a lawyer or a law firm is acting like a debt collection agency—i.e., primarily providing debt collection services through non-lawyer employees—the General Assembly treats the lawyer or law firm providing these services in the same manner as any other debt collection agency for purposes of the MCALA. The court declined to adopt a broad interpretation of the professional services exemption under the CPA which would be at odds with the exemption under the MCALA for lawyers performing collection services primarily through non-lawyer employees. In other words, if the lawyer’s services could be provided by any licensed debt collection agency without regard to whether the agency is affiliated with a lawyer or a law firm, then the debt collection activities in question do not fall within the lawyers’ "professional services" exemption of the CPA.

As to the MCDCA, it does not contain any exemption for lawyers engaged in debt collection activities. A factfinder here could conclude that the conduct alleged violates the MCDCA, because it involves actions taken by the law firm’s paralegal to collect a debt on behalf of the HOA. The paralegal’s actions (sending letters and account statements, acting as an intermediary for payment plans and settlement negotiations) do not require a professional license and may be performed by any debt collection agency. The law firm’s status as a law firm does not give its employees a free pass to violate the MCDCA when collecting consumer debts. Where the alleged conduct by the lawyer or law firm violates the MCDCA, the debt collection activities in question do not fall within the lawyers’ "professional services" exemption of the CPA.

The court also found that the statutory exemption for a lawyer’s professional services does not apply to vicarious liability claims against a client for the attorney’s conduct. The court declined to interpret the statutory exemption for a lawyer’s professional services to cover another class of individuals—the lawyer’s clients—where no such exemption exists in the plain language of the statute.

Judge Getty filed a dissenting opinion and would have held that, under a plain-meaning analysis of the "professional services" exemption of the CPA, the debt collection actions are professional services provided by attorneys and are exempt.

The case is No. 5, September Term 2019.

Attorneys: Kary Beth Lawrence for Andrews & Lawrence Professional Services, LLC. Michelle Jacquelyn Marzullo (Law Office of Michelle J. Marzullo, LLC) for Galyn Manor Homeowners Association, Inc. Leslie K Dickinson (Dickinson Law Firm, LLC) for David O. Mills.

Companies: Andrews & Lawrence Professional Services, LLC.; Galyn Manor Homeowners Association, Inc.

MainStory: TopStory DebtCollection MarylandNews

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