Maryland debt collection laws are designed to protect consumers from unfair practices while ensuring that creditors can pursue unpaid debts. This article will break down Maryland’s specific rules, including licensing requirements, key protections under state and federal laws, and what to expect if you face a debt collection lawsuit.
Key Takeaways
- Debt collectors in Maryland must adhere to both federal and state laws, including the Fair Debt Collection Practices Act (FDCPA) and the Maryland Consumer Debt Collection Act (MCDCA), which protect consumers from abusive practices.
- Collection agencies in Maryland are required to be licensed, with operational regulations overseen by the Maryland Department of Labor, and judgments obtained by unlicensed agencies are void.
- Consumers have the right to respond to debt collection practices, request validation of debts, and take legal action for violations, including seeking compensation for damages caused by unlawful practices.
Understanding Debt Collectors
Debt collectors are the individuals or companies that pursue unpaid debts, usually hired by creditors to recover money owed. These entities can be collection agencies, attorneys, or even creditors collecting under a different name. They use various methods to recover debts, including phone calls, letters, emails, and sometimes legal action if necessary.
Debt collectors frequently negotiate payment plans or settlements, resolving debts for less than the full amount. Federal and state laws strictly govern these methods to protect consumers from unfair practices.
Key Definitions in Debt Collection
Grasping debt collection terminology is essential. Key terms include:
- Debt collector: regularly collects debts owed to others, often handling past-due accounts.
- Original creditor: initially provided the loan or credit and may collect the debt themselves or hire a debt collector.
- Debtor: the person who owes the money.
The Fair Debt Collection Practices Act (FDCPA) is the main federal law regulating debt collection practices. Notably, it states that creditors collecting their own debts are not classified as debt collectors under this act.
Maryland’s Licensing Requirements for Collection Agencies
In Maryland, collection agencies must comply with state-specific state law licensed laws as outlined in the Maryland Collection Agency Licensing Act. Starting July 1, 2023, these agencies must maintain a license only for their principal executive office, not for every location.
The Maryland Department of Labor oversees the licensing process, ensuring that collection agencies adhere to operational regulations. Any judgments obtained by unlicensed collection agencies in Maryland are void, and there is no time limit for asserting such a judgment as void.
Federal Regulations on Debt Collection Practices
The Fair Debt Collection Practices Act (FDCPA) and the Maryland Consumer Debt Collection Act (MCDCA) provide robust protections against unfair debt collection practices. These acts include the following restrictions:
- Debt collectors cannot contact consumers before 8:00 a.m. or after 9:00 p.m.
- In Maryland, contact must be within reasonable hours.
- In Maryland, contact must be made without harassment.
Debt collectors are subject to the following rules:
- They cannot contact consumers at their workplace if informed that such contact is not allowed.
- They are barred from using unfair means to collect debts.
- Consumers have the right to request validation of the debt, including proof of ownership from the collectors.
Debt collectors cannot disclose information related to debt to third parties unless necessary for obtaining contact details.
Maryland Consumer Debt Collection Act Protections
The Maryland Consumer Debt Collection Act is designed to protect consumers from deceptive and abusive debt collection practices. Under this act, debt collectors are prohibited from using threats or violence during their collection efforts.
These protections ensure that debtors are treated fairly and respectfully, maintaining a balance between the rights of creditors to collect debts and the rights of consumers to be free from harassment.
The Role of Debt Buyers
Debt buyers purchase debts from creditors at low costs, often because the original creditor or another debt buyer failed to collect. These usually include debts written off by original creditors, like credit card companies or utility providers.
Debt buyers pay a small fraction of the debt’s original value, potentially profiting from any amount they collect. They are classified as ‘active’ if they pursue collections directly or ‘passive’ if they outsource collections to other agencies.
This industry has grown into a multi-billion dollar market in the United States.
How to Handle Debt Collection Lawsuits in Maryland
A judgment is an official court decision in a lawsuit, often awarding the creditor the right to collect a debt. In Maryland, the statute of limitations for written contracts and open accounts is three years. Admitting to the debt or making payment arrangements might extend this period for another three years.
If the statute of limitations has expired, this defense should be raised in court. The burden of proof lies with the creditor to show that the statute has not expired. You can demonstrate this by presenting a copy of the debt on your credit report indicating the date of the last activity or charge-off.
After a judgment is entered, which lasts 12 years and can be renewed for another 12 years, the following applies:
- Creditors can collect information about a debtor’s employment, assets, and income.
- Debtors must return the Judgment Debtor Information Sheet within 30 days to avoid further legal actions.
- Post-judgment, creditors can garnish wages or bank accounts to collect the debt.
Stopping Harassment from Debt Collectors
Debt collection harassment includes abusive tactics such as making threatening threats, calling at inappropriate times, and false representations. Debt collectors cannot disclose a debtor’s situation to third parties or threaten with violent actions.
They are also barred from contacting consumers at inconvenient times or locations, including their workplace. While they cannot use social media to publicly disclose debts, they can contact individuals privately unless instructed otherwise.
Wage and Bank Account Garnishments After Judgment
In Maryland, a creditor can initiate a garnishment process only after obtaining a final judgment confirming the debt owed. The garnishee, responsible for holding the debtor’s property, has 30 days to respond to the writ of garnishment after being served.
Creditors can garnish wages but cannot deduct more than 25% of the debtor’s paycheck. When a garnishment is initiated, the debtor’s bank account can be frozen up to the amount of the judgment, including any interest or costs.
Maryland law protects at least $500 in a bank account from garnishment automatically, and certain funds such as Social Security benefits are also typically protected. Debtors can request exemptions by filing a motion within 30 days of the garnishment notice.
How to Respond When a Debt Is Paid
After a debt is paid, the creditor must notify the court and send a notice of satisfaction to the debtor. If the creditor fails to do so, the debtor can file a motion with the court to confirm the debt’s payment status.
Debtors should keep a copy of the satisfaction notice for their records once the debt is marked as paid.
Your Rights Against Unlawful Debt Collection Practices
Consumers have the right to protection against misleading statements and intimidation from debt collectors, as federal and state laws prohibit such practices. They can request that debt collectors cease communication by providing a written notice, although this does not prevent lawsuits.
Debt collectors cannot contact consumers at inconvenient times or places, ensuring respect for consumer privacy. If consumers have concerns, they can be contacted by debt collectors at unusual hours.
In Maryland, consumers can file complaints regarding debt collection practices with the Consumer Protection Division, which provides mediation and assistance. Victims of unlawful debt collection practices can take legal action, including suing for damages under the Maryland Debt Collection Act.
Penalties for Violating Maryland Debt Collection Laws
Debtors in Maryland can seek compensation for actual damages caused by violations of debt collection laws. Claims for emotional distress or mental anguish are also permitted. However, there is no provision for punitive damages in the Maryland Consumer Debt Collection Act.
Victims of improper debt collection practices can file lawsuits against collectors to seek compensation with the help of a lawyer.
Getting Help with Debt Collection Issues
Consumers can file complaints against debt collectors with the Maryland Attorney General’s Consumer Protection Division. Violations of federal debt collection laws can also be reported to the .
Seeking help with debt collection services issues can alleviate stress and provide guidance on your rights and the best course of action.
Summary
Summarizing the key points covered, understanding Maryland’s debt collection laws and your rights can empower you to handle debt collectors effectively. From recognizing who debt collectors are, to knowing your protections under federal and state laws, and taking appropriate action if harassed, this guide has provided a comprehensive overview.
Remember, whether you’re dealing with a lawsuit, harassment, or just trying to understand your options, knowing your rights is the first step towards financial control. Seek professional advice if needed, and don’t hesitate to stand up for your rights.
Frequently Asked Questions
What is the 7 7 7 rule for collections?
The 7 7 7 rule for collections restricts debt collectors from making more than seven calls to a consumer about a specific debt in a seven-day period and prohibits them from calling a consumer within seven days of a previous conversation regarding that debt. This rule aims to protect consumers from excessive communication.
What is the Maryland Collection Act?
The Maryland Collection Act prohibits debt collectors and creditors from engaging in deceptive, threatening, and abusive collection practices. This legislation aims to protect consumers from harassment during the debt collection process.
How long can debt collectors try to collect in Maryland?
In Maryland, debt collectors can attempt to collect on consumer debt for up to 3 years, after which the debt becomes time-barred and they cannot sue you. Thus, it is important to be aware of this timeframe when dealing with debt collection.
Who are debt collectors?
Debt collectors are individuals or companies engaged by creditors to recover outstanding debts through methods including phone calls, letters, and legal actions. They play a significant role in enforcing payment obligations on behalf of creditors.
What is the statute of limitations for debt collection lawsuits in Maryland?
The statute of limitations for debt collection lawsuits in Maryland is three years for written contracts and open accounts. Therefore, action must be taken within this timeframe to enforce the debt.