EDITOR’S NOTE: The following was written by Ronald S. Canter and is being republished with his permission.
On January 19, 2022, the Fourth Circuit Court of Appeals in Alexander v. Carrington Mortgage Services, LLC (Case No. 20-2359, 2022 WL 164018), reversed the dismissal of a class action filed by two Maryland borrowers claiming that the servicer to whom they remit mortgage payments violated the Maryland Consumer Debt Collection Act (MCDCA) and the Maryland Consumer Protection Act (MCPA) by charging a $5.00 convenient fee for online payments. Both the class representative Plaintiffs voluntarily agreed to pay the fee after accessing the servicer’s website and checking the “I Agree” button providing for the $5.00 fee.
The Court’s opinion relied on the MCDCA provision that outlaws efforts to claim, attempt or threaten to enforce a right with knowledge that the right does not exist. The Court also determined that charging of the convenience fee stated a claim based on a 2018 amendment to the MCDCA that deems a violation of the Fair Debt Collection Practices Act (FDCPA) to be a violation of the MCDCA. However, unlike the FDCPA, which only regulates third parties attempting to collect defaulted debts, the MCDCA regulates any creditor who attempts to collect any debt, whether or not in default.
The Court then considered whether a consumer’s payment of a $5.00 online convenience fee violated the FDCPA’s prohibition on collecting any amount not authorized by the agreement creating the debt or permitted by law. The Court determined that because the agreement creating the mortgage debt did not authorize the collection of convenience fees, that the class Plaintiffs stated a claim under §1692f(1) of the FDCPA which is deemed a violation of the MCDCA. The Court rejected the servicer’s argument that because the consumers voluntary agreed to pay the fee when accessing the online payment portal, the convenience charge was otherwise “permitted by law”.
The Court reversed the District Court dismissal of the claim and permitted the Plaintiffs to pursue a claim under the MCPA which deems a violation of the MCDCA to be a violation of the MCPA, which contains a fee shifting provision.
This holding presents the clear message that a creditor or third party collector operating in the State of Maryland may not assess convenience fees for processing payments unless the agreement creating the debt specifically allows the assessment of the fee.
