12 Sep Maryland Legislative Update
The Maryland legislature recently amended its laws regarding consumer debt collection, and regarding actions to quiet title. Both bills discussed in this memorandum are effective October 1, 2016.
Maryland Senate Bill 771
“Charge-Off” means the act of a creditor that treats an account receivable or any other debt as a loss or an expense because payment is unlikely.
“Charge-Off Balance” means the amount due on the account or debt at the time of charge-off.
“Consumer Debt Collection Action” means any judicial action or arbitration proceeding in which a claim is asserted to collect a consumer debt. It does not include an action for repossession due to failure to pay rent brought by a landlord, or an attorney, property manager, or agent on behalf of a landlord.
“Creditor” means a person to whom a consumer debt is owed or alleged to be owed.
“Debt Buyer” means a person that purchases or otherwise acquires consumer debt from an original creditor or from a subsequent owner of the debt. “Debt Buyer” does not include:
- A check services company that acquires the right to collect on a paper or an electronic check instrument, including an automated clearing house item that has been returned unpaid to a merchant;
- A business entity that, in the business entity’s ordinary course of business, does not purchase or otherwise acquire consumer debt from an original creditor or from a subsequent owner of the debt and acquired the consumer debt:
- As a direct result of the business entity being the successor in a merger with the original creditor of the debt; or
- Because the business entity purchased or otherwise acquired the original creditor in whole;
- A bank, credit union, or savings and loan association that acquired the consumer debt as a direct result of being the successor in a merger with another bank, credit union, or savings and loan association that had owned the consumer debt;
- A licensed mortgage servicer unless the mortgage servicer or a collector acting on the mortgage servicer’s behalf collects or attempts to collect a deficiency balance or deficiency judgment in any way related to or arising from a foreclosure or short sale of real property that secured the mortgage loan;
- A sales finance company or any other person that acquires consumer debt arising from a retail installment sale agreement if:
- The sales finance company or other person acquired the debt before the first installment payment was due from the consumer; and
- The retail installment sale agreement expressly stated that the consumer would be required to make the consumer’s payments to that sales finance company or person;
- A bank, credit union, or savings and loan association that acquired from another bank, credit union, or savings and loan association, in the ordinary course of business, all of a specific type of consumer debt owned by the other bank, credit union, or savings and loan association except for consumer debt that had been charged off; or
- An attorney, a licensed debt collection agency, a property manager, or any other person that collects or attempts to collect consumer debt on behalf of an original creditor that is a residential rental property owner.
A creditor or a debt collector may not initiate a consumer debt collection action after the expiration of the statute of limitations applicable to the consumer debt collection action.
Notwithstanding any other provision of law, on the expiration of the statute of limitations applicable to the consumer debt collection action, any subsequent payment toward, written or oral affirmation of, or any other activity on the debt may not revive or extend the limitations period.
The law provides for the evidence which must be submitted by the debt buyer or a collector on behalf of a debt buyer in a consumer debt collection action.
Nothing in the law alters the licensing requirements for debt buyers or collectors.
Maryland House Bill 920/Senate Bill 509
“Claim” includes a legal or equitable right, title, estate, lien, or interest in property or a cloud on the title to property.
“Holder” means the mortgagee, trustee, beneficiary, nominee, or assignee of record, if any, of a security instrument.
“Property” means real property or any interest in or appurtenant to real property, including fixtures.
“Security Instrument” means a recorded mortgage or deed of trust or an assignment of a recorded mortgage or deed of trust.
An action may be brought to establish title against adverse claims to property. In such an action, the court is deemed to have obtained possession and control of the property for the purposes of the action. This does not limit any authority the court may have to grant any equitable relief that may be proper under the circumstances of the case.
At the time a complaint is filed, the plaintiff must send each holder that is not named as a party in the action a copy of the complaint with exhibits and a statement that:
- The holder is not a party in the proceeding and any judgment in the proceeding will not affect any claim of the holder; and
- If the holder elects to appear in the proceeding, the holder will appear as a defendant and be bound by any judgment entered in the proceeding.
Specific requirements are set forth in regard to providing notice of the complaint, items that must be included with the complaint, responding to a complaint, who must be named as defendants, service of process and other procedural requirements.
A judgment in an action to establish title must be recorded in the land records of the county in which a portion of the property is located. A judgment in an action to establish title does not affect a claim in the property or part of the property of any person who was not a party to the action, if, at the time the action was commenced:
- The claim was of record; or
- The claim was actually known to the plaintiff or would have been reasonably apparent from an inspection of the property.
The above provisions may not be construed to impair the rights of a bona fide purchaser or encumbrancer for value dealing with the plaintiff or the plaintiff’s successors in interest. Any relief granted in an action or proceeding directly or collaterally attacking a judgment in an action to establish title, whether based on lack of actual notice to a party or otherwise, may not impair the rights of a purchaser or encumbrancer for value of the property acting in reliance on the judgment without knowledge of any defects or irregularities in the judgment or the proceedings.
A judgment in an action to establish title is not binding or conclusive on:
- The state of Maryland, unless individually joined as a party to the action and Maryland state law authorizes the judgment to be binding or conclusive as to its interests;
- The United States, unless the United States is individually joined as a party to the action and federal law authorizes the judgment to be binding or conclusive as to its interests.