Maryland Courts Latest to Require More Documentation from Debt Buyers

Maryland’s court system is the latest to require that collection agencies and debt buyers who sue consumers provide more documents to support their case.

On September 8, the Maryland Court of Appeals issued new rules for lawsuits filed in district court. The new rules now require debt buyers to present a bill, document signed by the debtor, or copy of an account statement from the original creditor showing purchases before the debt buyer can sue a consumer.  Debt buyers also must present a complete chain of title as evidence of their ownership of the debt. The new rules take effect January 1, 2012.

Ron Canter, a Maryland attorney who represents creditors in the state and served as a consultant to the court’s rules committee, expects the new rules to affect 99 percent of the debt collection lawsuits filed in the state because the district court has jurisdiction over claims up to $30,000.

“Most accounts are within that limit,” he said.

However unwelcomed the new rules may be for debt buyers, Canter said the new rules could have been more severe. Maryland’s attorney general had asked the court to require debt buyers to present an affidavit from the original creditor for each account, and affidavits from each subsequent owner of the debt. The AG’s office also wanted debt buyers to attach twelve months of billing statements to each lawsuit.

“Those rules were rejected,” Canter said, due in part to input from members of the debt buying community.

Barbara Sinsley, general counsel for DBA International, said that by working closely with Maryland state officials, the debt buying industry had its voice heard in the creation of these rules. “We believe that our members will be able to comply with the new rules and [court] filings should not decline as a result,” she said.

Since the Federal Trade Commission’s report last year characterizing the litigation system in the debt collection industry as broken, a growing number of state courts, regulators, and legislators have acted to make changes to how the industry operates in their states.

In addition to the new court rules, the Maryland Department of Labor’s Office of the Commissioner of Financial Regulation has been cracking down on unlicensed debt collectors, which has included Encore Capital Group subsidiary Midland Funding, LLC.  Midland later obtained a license and earlier this year agreed to dismiss more than 10,000 cases in Maryland as part of a federal class action settlement.

Earlier this month, Kaufman’s office announced a settlement agreement with Sunshine Financial Group, LLC, attorney J. Scott Morse and the State Collection Agency Licensing Board. Sunshine Financial group had been accused improper collection of fees from Maryland consumers in debt collection cases filed in District Court. Under the terms of the settlement agreement, Sunshine Financial Group agreed to refund to Maryland consumers all attorneys fees and compound interest, and to forfeit those amounts in any judgments previously entered. Kaufman’s office said the refunds total more than $660,000.

Sunshine Financial Group also agreed to dismiss 314 cases filed in district court and pay a fine of $20,000.