Askew v. HRFC, LLC
Filing
47
MEMORANDUM OPINION. Signed by Judge Richard D Bennett on 3/25/14. (mps, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
DANTE ASKEW,
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Plaintiff,
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v.
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HRFC, LLC, d/b/a Hampton
Roads Finance Company,
Civil Action No. RDB-12-3466
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Defendant.
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MEMORANDUM OPINION
The Plaintiff Dante Askew has brought this suit against the Defendant HRFC, LLC,
after it notified him of an interest rate error on a used car loan, lowered that interest rate,
and applied a refund to his account for any overpayment. Askew’s claims against HRFC
seek to impose liability upon HRFC for its compliance with Maryland statutory law.
Specifically, Askew asserts claims against the Defendant HRFC, doing business as
Hampton Roads Finance Company, for violations of Maryland Credit Grantor Closed End
Credit Provisions, Md. Code. Ann., Com. Law § 12-1001, et seq., a claim for breach of
contract, and a claim under the Maryland Consumer Debt Collection Act, Md. Code Ann.,
Com. Law § 14-201, et seq. Presently pending is the Defendant’s Motion for Summary
Judgment (ECF No. 26). The parties’ submissions have been reviewed and a hearing was
held on March 20, 2014. There are no genuine issues of any material fact, and the Plaintiff’s
claims are without merit and contrary to the public policy implemented by the Maryland
statutes in question.
For the reasons that follow, Defendant’s Motion for Summary
Judgment (ECF No. 26) is GRANTED, and JUDGMENT shall be entered in the
Defendant’s favor.
BACKGROUND
As agreed by counsel at the hearing, the operative facts of this case are largely
uncontested. The Plaintiff Dante Askew is a resident of Baltimore County, Maryland. The
Defendant HRFC, LLC, d/b/a Hampton Roads Finance Company, is a Virginia finance
company licensed in Maryland, that purchases and services loans. This case arises out of a
car loan the Plaintiff entered into on September 4, 2008 for the purchase of a used 2005
Buick from Heritage Dodge in Baltimore County.
The parties entered into a Retail
Installment Sales Contract (“RISC”) to finance the purchase, and Heritage Dodge took a
security interest in the vehicle. See HRFC 00047-00048, ECF No. 33-1. The RISC, by its
terms, is governed by the Maryland Credit Grantor Closed End Credit Provisions, Md. Code
Ann., Com. Law § 12-1001, et seq. (“Subtitle 10” or “CLEC”):
6. Applicable Law Federal law and Maryland law apply to this contract.
This contract shall be subject to the Credit Grantor Closed End Credit
Provisions (Subtitle 10) of Title 12 of the Commercial Law Article of the
Maryland Code.
See HRFC 00048.
After the sale was complete, Heritage Dodge assigned the loan to Defendant HRFC,
LLC on September 10, 2008. The Plaintiff was charged 26.99% interest, a rate exceeding the
Maryland statutory maximum for that specific type of loan under Subtitle 10 of the
Commercial law article.1
1
An internal HRFC document rendering a decision on Askew’s credit application lists an interest
rate of 24.99%. HRFC 00022, ECF No. 33-1. This fact is immaterial because that rate is still higher
2
From the Plaintiff’s purchase of the vehicle in September of 2008 until July of 2010,
he made monthly payments on the loan, but was assessed fees for late payment on five
occasions. Under the terms of the loan, Askew was charged a late fee of 10% of the part of
the payment that was late. See HRFC 00047. Then, on or about July 17, 2010, the
Defendant realized that the interest rate charged to some of its customers was higher than
that allowed by statute. In the resulting internal review, HRFC discovered that the Plaintiff
had been charged an erroneously high interest rate. As of September 5, 2010, the Defendant
began charging Askew an interest rate of 23.99% and credited his account, backdated to July
23, 2010. Then, HRFC sent Askew a letter dated September 17, 2010, stating that:
During a recent review of your contract, we determined that the interest rate
applied to your contract was not correct. As a result, we have applied a credit
of $845.40 to your account. We will continue to compute interest at the new
rate until you make your final payment.
As a result of this adjustment, you will repay the contract earlier than originally
scheduled if you continue to make your scheduled monthly payments. If you
would like us to adjust your monthly payments so that the contract will be
repaid on the date originally scheduled, please let us know.
See Letter from Craig R. Siebel, Jr., CPA, Secretary/Treasurer & Controller – HRFC, LLC to
Dante Askew, Sept. 17, 2010, ECF No. 33-1.2 Since receiving the refund and his rate being
adjusted, the Plaintiff has been charged for late payments on eight more occasions.
As a result of Askew’s various late payments, HRFC undertook collection efforts.
On July 28, 2011, HRFC represented to Askew that his account was turned over to attorneys
than allowed under the CLEC and the evidence shows that Askew was actually charged the rate
listed in the RISC—26.99%.
2
The Plaintiff made no request to change his repayment schedule. The Plaintiff asserts that the
letter was never received, but does not allege that the Defendant never sent it. This Court notes that
the refund letter was sent to the same address as listed on the RISC and where later correspondence
was received by the Plaintiff.
3
to “prepare a replevin warrant (Court order to surrender) which is to be issued against you
for this vehicle if it is not paid or in the alternative the vehicle is not turned in. The cost to
you for this action is about $2200. . . . Running up your deficiency balance does not benefit
you as the garnishment which follows is for a longer period of time.” Compl. ¶¶ 33-34. On
September 19, 2012, HRFC informed Askew that $2441.95 was due on the account but that
“TOTAL DOES NOT INCLUDE PENDING FEES (REPO FEES $425, ATTORNEY
$732.59),” and that the loan balance must be “paid before the vehicle is repo’d or the
attorney files the case[.] (The file has already been release [sic] for both).” Id. ¶¶ 38-39.
Then, on October 10, 2012, HRFC represented to Askew that “[t]o stop the repossession
you will need $ 1664.48 + the repo close fee (if paid before the replevin warrant is served) . .
. [w]e are seeking a courts [sic] order for the surrender.” Id. ¶ 41. Two days later, on
October 12, 2012, HRFC notified Askew that “[p]ayoff is $2900.61 now (IF PAID
BEFORE WARRANTS ARE SERVED) or $4700.61 + courts costs if paid after service,”
and that “[n]otice of complaint has been forwarded to the MVA fraud division for your
refusal to insure the vehicle and for hiding the car from the lien holder” in a friend’s garage.
Id. ¶¶ 42-43. As a result of the Defendant’s collection efforts, Askew retained counsel.
On October 15, 2012, the Plaintiff filed a Complaint in the Circuit Court of Maryland
for Baltimore County, and the Defendant removed the case to this Court. The Plaintiff
asserts claims for statutory damages under the Credit Grantor Closed End Credit Provisions
and for mental distress and anguish under the Maryland Consumer Debt Collection Act, as
well as a breach of contract claim. The Plaintiff filed an Amended Complaint on December
28, 2012 containing additional allegations in support of the same three causes of action.
4
Specifically, the Plaintiff alleges that on December 17, 2012, after the filing of this lawsuit, an
HRFC employee called Askew on his cell phone attempting to collect on the alleged debt or
in the alternative requesting that Askew voluntarily turn in the motor vehicle. Askew alleges
that after stating that he was represented by counsel and that all communications should be
directed to his attorney, during that same phone call, the HRFC employee represented to
him that the litigation filed by Askew’s attorney was dismissed and that he needed to either
pay off the motor vehicle or voluntarily turn the vehicle in to HRFC. Compl. ¶ 44.
Originally, the Plaintiff sought to sue on a class basis on behalf of all customers who
were subject to the same overcharged interest rate. The Defendant filed a Motion to
Dismiss (ECF No. 10). In a telephonic hearing, this Court addressed matters outside the
pleadings and addressed many issues in the context of summary judgment. Therefore, this
Court denied the Motion to Dismiss and allowed a limited period of discovery to proceed as
to liability only on an individual, not class, basis. A schedule for limited discovery and
summary judgment briefing was set forth in the Letter Order of September 25, 2013 (ECF
No. 18). In accordance with the scheduling order, the Defendant filed a Motion for
Summary Judgment (ECF No. 26).
SUMMARY JUDGMENT STANDARD
Rule 56 of the Federal Rules of Civil Procedure provides that a court “shall grant
summary judgment if the movant shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). A
material fact is one that “might affect the outcome of the suit under the governing law.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A genuine issue over a material fact
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exists “if the evidence is such that a reasonable jury could return a verdict for the
nonmoving party.” Id. In considering a motion for summary judgment, a judge’s function is
limited to determining whether sufficient evidence exists on a claimed factual dispute to
warrant submission of the matter to a jury for resolution at trial. Id. at 249.
In undertaking this inquiry, this Court must consider the facts and all reasonable
inferences in the light most favorable to the nonmoving party. Hardwick ex rel. Hardwick v.
Heyward, 711 F.3d 426, 433 (4th Cir. 2013). However, there must be a “genuine” dispute as
to those facts. Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 519 (4th Cir. 2003)
(quoting Anderson, 477 U.S. at 247-48 (emphasis in original))). This Court must abide by its
affirmative obligation to prevent factually unsupported claims and defenses from going to
trial. Drewitt v. Pratt, 999 F.2d 774, 778-79 (4th Cir. 1993). If the evidence presented by the
nonmoving party is merely colorable, or is not significantly probative, summary judgment
must be granted. Anderson, 477 U.S. at 249-50. A party opposing summary judgment must
“do more than simply show that there is some metaphysical doubt as to the material facts.”
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); see also In re Apex
Express Corp., 190 F.3d 624, 633 (4th Cir. 1999). This Court has previously explained that a
“party cannot create a genuine dispute of material fact through mere speculation or
compilation of inferences.” Shin v. Shalala, 166 F. Supp. 2d 373, 375 (D. Md. 2001) (citations
omitted).
STATUTORY SCHEME
The loan at issue in this case is a Retail Installment Sales Contract (“RISC”) that
originally charged an interest rate of 26.99%. For such a contract, the maximum interest rate
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allowable by Maryland law varies depending on whether the loan is governed by the Retail
Installment Sales Act, Md. Code Ann., Com. Law § 12-601, et seq. (“Subtitle 6” or “RISA”),
or the Credit Grantor Closed End Credit Provisions, Md. Code Ann., Com. Law § 12-1001,
et seq. (“Subtitle 10” or “CLEC”). The maximum rate of interest for used motor vehicles
that are more than two model years old is 27% under Subtitle 6, id. § 12-609(a)(3), while the
maximum interest under Subtitle 10 is 24%, id. § 12-1003(a). The CLEC, Subtitle 10,
provides that:
A credit grantor may charge and collect interest on a loan at any daily, weekly,
monthly, annual, or other periodic percentage rate as the agreement, the note,
or other evidence of the loan provides if the effective rate of simple interest is
not in excess of 24 percent per year. The rate of interest chargeable on a loan
must be expressed in the agreement as a simple interest rate or rates.
Id. § 12-1003(a). The RISC loan at issue in this case by its terms is governed by CLEC. See
HRFC 00048, ECF No. 33-1. Therefore, the maximum allowable interest rate is 24%.
For violations of section 12-1003(a), and other sections not at issue in this case, the
Closed End Credit statute contains a penalty provision: “Except for a bona fide error of
computation, if a credit grantor violates any provision of this subtitle the credit grantor may
collect only the principal amount of the loan and may not collect any interest, costs, fees, or
other charges with respect to the loan.” Md. Code Ann., Com. Law § 12-1018(a)(2). “In
addition, a credit grantor who knowingly violates any provision of this subtitle shall forfeit to
the borrower 3 times the amount of interest, fees, and charges collected in excess of that
authorized by this subtitle.” Id. § 12-1018(b).
However, the CLEC also contains two provisions limiting liability for violations of
the statute. First, the penalty provision in section 12-1008(a)(2) does not apply when a credit
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grantor “[u]nintentionally and in good faith fails to comply with § 12-1003[,]” and [c]orrects
the error or violation and makes the borrower whole for all losses, including reasonable
attorney’s fees and interest, where appropriate, within 10 days after the credit grantor
receives notice of the error or violation.” Id. § 12-1018(a)(3)(i)-(ii). In this context, “notice”
means when the credit grantor receives written notice from the borrower, written notice
from the Commissioner of Financial Regulation, or service of process in a civil action. Id. §
12-1018(a)(1). The credit grantor has the burden “to show that the [] failure to comply with
§ 12-1003 . . . of this subtitle was unintentional and in good faith.” Id. § 12-1018(a)(4).
Therefore, a knowing violation under section 12-1018(b) is not curable under section 121018(a)(3).
The second limitation of liability provision in Subtitle 10 provides that “[a] credit
grantor is not liable for any failure to comply with a provision of this subtitle if, within 60
days after discovering an error and prior to institution of an action under this subtitle or the
receipt of written notice from the borrower, the credit grantor notifies the borrower of the
error and makes whatever adjustments are necessary to correct the error.” Md. Code Ann.,
Com. Law § 12-1020.
At the hearing, counsel agreed that based on the undisputed facts, the Defendant did
not receive notice from the borrower or otherwise, and therefore only the limitation of
liability in section 12-1020 is potentially applicable to this case.3
3
The CLEC contains a statute of limitations, but that provision is not at issue in this case. Id. § 121019 (“An action for violation of this subtitle may not be brought more than 6 months after the
loan is satisfied.”).
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ANALYSIS
I.
Count I
In Count I, Mr. Askew argues that HRFC committed two violations of the Maryland
Credit Grantor Closed End Credit Provisions, Md. Code Ann., Com. Law § 12-1003(a). The
first violation alleged is that HRFC disclosed in the contract that it would charge an interest
rate higher than 24%, and the second is that HRFC then actually charged Askew the higherthan-allowable interest rate.
At the outset, this Court holds that there has been only one violation of the CLEC.
The Plaintiff appears to argue that disclosing an interest rate that is higher than 24% creates
a separate violation itself, based on the following provision: “The rate of interest chargeable
on a loan must be expressed in the agreement as a simple interest rate or rates.” Md. Code
Ann., Com. Law § 12-1003(a). The Plaintiff has cited no case law to support the rather
creative proposition that simply disclosing an improperly high interest rate is a separate
violation from actually charging that interest rate.4 The interest rate in the RISC was
expressed as a simple interest rate, albeit higher than allowed by the CLEC. The only
violation that has occurred in this case is the actual charging of an interest rate higher than
24%.
The Defendant concedes that it charged an interest rate higher than allowed by the
CLEC. However, Defendant argues that it is nevertheless entitled to summary judgment as
4
Plaintiff’s contention in this regard conflicts with his argument that the statute of limitations for
him to bring his breach of contract claim did not accrue until the first payment came due or was
made. For reasons discussed in the context of the breach of contract claim in Count II, this Court
need not decide when a breach of contract claim would accrue based on a CLEC violation for an
improperly high interest rate.
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to Count I because, despite the overcharge, Defendant’s corrective actions entitle it to the
protection of the limitation of liability provision in section 12-1020 of the Commercial Law
Article to bar Askew’s claims under section 12-1003. The limitation of liability provision
allows a credit grantor to cure “any failure to comply” with Subtitle 10 if, within 60 days
after discovering an error by notifying the borrower of, and correcting, the error. Md. Code
Ann., Com. Law § 12-1020.5 The credit grantor also must act “prior to institution of an
action under this subtitle or the receipt of written notice from the borrower.” Id. It is
undisputed that the Defendant discovered the error and made its efforts to cure it prior to
the filing of this suit or any other notice from the Plaintiff. Because HRFC discovered the
error on its own, it could cure the error by complying with section 12-1020.
In this context, discovery of the error means when the Defendant actually knew
about it, not immediately upon assignment of the loan charging the erroneously high interest
rate. The plain language of the statute states that a credit grantor may cure within sixty days
of “discovering” an “error.” An error is an “assertion of belief that does not conform to
objective reality.” Black’s Law Dictionary (9th ed. 2009). Discovery means the “act or process
of finding or learning something that was previously unknown.” Id. Under the plain
meaning of those terms, an error can mean a mistake as to what was the maximum allowable
5
As noted above, the CLEC provides two limitation of liability provisions in sections 12-1018 and
12-1020, but does not allow cure of a knowing violation. The Plaintiff has presented no evidence
that this was a knowing violation. The Plaintiff’s speculative and conclusory allegations in this
regard are insufficient to create a genuine issue of material fact. Moreover, the Plaintiff’s citations to
Pacific Mortgage & Investment Group, Ltd. v. Horn, 641 A.2d 913, 923 (Md. Ct. Spec. App. 1994)
(analyzing the Maryland Consumer Loan Law), and Spencer v. Henderson-Webb, 81 F. Supp. 2d 582,
594-95 (D. Md. 1999) (analyzing the Maryland Consumer Debt Collection Act), are inapposite.
Neither of the statutory schemes at issue in those cases contains a safe harbor provision like the one
in the CLEC at issue in this case. Therefore, the Defendant had the opportunity to cure the error by
following the procedure set forth in section 12-1020 of the CLEC.
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interest rate.
Although HRFC may have known the interest rate actually charged in
September 2008, there is no evidence to show that it discovered that that rate was
erroneously high in violation of the CLEC until July 2010, or that it discovered that Askew
himself was overcharged until August 2010.
Moreover, there is fundamental public policy involved in this process. The clear
intent of the limitation of liability provision is to encourage credit grantors to correct, rather
than hide, errors. The Court of Appeals of Maryland recently summarized the legislative
history of the CLEC, noting that “[w]hen it was introduced, the bill was viewed as primarily
a deregulation effort to permit banks in Maryland to compete more effectively with banks in
nearby states. See Senate Bill 591 (1983), (first reader); partial transcription of hearing before
Senate Economic Affairs Committee (February 25, 1983) in legislative bill file for Senate Bill
591 (1983).” Patton v. Wells Fargo Fin. Md., Inc., ___ A.3d ___, 2014 WL 700110, Sept. Term
2013 No. 3, slip op. at 22 (Md. Feb. 24, 2014).6 After opposition to the bill in its original
form by the Attorney General of Maryland, the CLEC was amended to add additional
protections for borrowers and penalties on lenders for violations. Id.; see also Biggus v. Ford
Motor Credit Co., 613 A.2d 986, 991 (Md. 1992) (noting that after four Maryland banks
transferred their operations to Delaware to take advantage of more favorable banking laws,
then-Mayor of Baltimore William Donald Schaefer urged the General Assembly to respond,
and the result was Chapter 143 of the Acts of 1983, which became known as the Credit
Deregulation Act, of which the CLEC was part), superseded by statute, Md. Code Ann., Com.
Law § 12-1013.1(b). The cure provision in Section 12-1020 was enacted as part of this
6
The Patton case specifically concerned the applicable statute of limitations, not the cure provision,
but gave a general recitation of the history and policies underlying the CLEC.
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legislation. See Chapter 143 at 752, Laws of Maryland 1983. Therefore, the CLEC reflects a
policy of encouraging the granting of credit in Maryland while adequately safeguarding the
rights of borrowers.
HRFC’s self-reporting conduct comports with public policy. To now allow a claim to
go forward based on HRFC’s prompt correction of its error would be at odds with the
statutory provision allowing a credit grantor to cure just this type of error. On the contrary,
the public policy underlying the limitation of liability provision in section 12-1020 of the
CLEC is to encourage credit grantors to correct an honest failure to comply with the statute
without any effort on the part of the borrower to discover the error or enforce any right.7
To hold otherwise would render the sixty-day cure provision nearly meaningless.8
The Plaintiff argues that the sixty-day period began to run on September 10, 2008,
the date on which the RISC was assigned to HRFC. In support of this argument, the
Plaintiff notes that on that date, Askew’s RISC was in HRFC’s computer system and
HRFC’s internal lending criteria required that he be charged 26.99%, and HRFC then sent a
letter to Askew confirming the details of the loan as stated in the RISC.
Moreover, the
Plaintiff argues, HRFC regularly was assigned RISCs printed on the same form, 553-MD.
Each 553-MD RISC, including Askew’s RISC at issue in this case, stated by its terms that it
was governed by Subtitle 10—the CLEC provisions. The CLEC can only apply to credit
7
This holds particularly true as to the many finance companies like HRFC that purchase and are
assigned large numbers of loans. It would simply hinder the conduct of business to an extent not
intended by the legislature to conclude, as the Plaintiff argues, that an assignee is strictly liable for
mistakes made by an assignor without an opportunity to cure once sixty days from the assignment
have passed. Moreover, borrowers, upon cure of an error by a credit grantor, can receive the benefit
of being made whole without having to resort to litigation.
8
Under the Plaintiff’s interpretation, the ten-day cure provision after receipt of notice would also be
ineffective if not cured within the first sixty days assignment. This Court declines to interpret the
statute to so narrowly limit a credit grantor’s ability to cure an error.
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grantors who explicitly elect to make a loan under Subtitle 10, to the exclusion of RISA in
Subtitle 6. Md. Code Ann., Com. Law § 12-1013.1(b). Therefore, according to the Plaintiff,
HRFC should be held to know the settled law applicable to it as a credit grantor, including
the maximum interest rate allowed, as of the date of assignment. See Holloman v. Circuit City
Stores, Inc., 894 A.2d 547, 552 (Md. 2006) (A party to a contract is “presumed to have read
and understood its terms.”).
In essence, the Plaintiff argues that the “discovery rule”—that
the statute of limitations begins to run when a plaintiff knows or should have known of the
injury giving rise to a claim—applies to HRFC.
There is absolutely no legal authority supporting the Plaintiff’s argument. Askew has
cited no case in which the “discovery rule” has been applied to hold that a defendant’s sixty
days began to run when it knew or should have known of the error in compliance with the
CLEC, rather than when the error was actually discovered. Ordinary principles of statutory
interpretation preclude reading the CLEC in the manner advanced by the Plaintiff.9 Indeed,
adopting the Plaintiff’s interpretation would encourage credit grantors to hide errors from
borrowers and simply await the expiration of the CLEC statute of limitations of six months
after the loan was satisfied. Md. Code Ann., Com. Law § 12-1019. This Court declines to
interpret the statute to the detriment of both borrowers and creditors.10
9
The principal case cited by the Plaintiff in support of his argument in favor of applying the
discovery rule is distinguishable from this case. See Miller v. Pac. Shore Funding, 224 F. Supp. 2d 977,
986-87 (D. Md. 2002). That case concerned whether a plaintiff was aware of sufficient facts to
trigger the statute of limitations under the Maryland Consumer Protection Act, id., but did not
involve the discovery of an error for purposes of a statutory cure provision. Likewise, the Plaintiff
provides no authority for his argument that the statute imposes strict liability. Indeed, the safe
harbor provisions suggest just the opposite.
10
Although the plain language of the statute adequately shows that the Defendant was entitled to
cure its error, the structure of the statute also confirms this. There are two safe harbor provisions:
section 12-1018(a)(3) for credit grantors who receive notice of an error and section 12-1020 for
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Having concluded that HRFC was entitled to cure its self-discovered failure to
comply with the CLEC, the evidence is clear that HRFC took the necessary steps to do so
within the sixty days allowed. Specifically, HRFC first discovered an error in the interest rate
charged to some customers on or about July 27, 2010. On August 10, 2010, HRFC’s review
of its accounts uncovered that Askew had been overcharged. Thereafter, on September 15,
2010, HRFC changed Askew’s interest rate to 23.99% in compliance with the statute, applied
a credit of $845.40 to his account, and backdated the adjustment to July 23, 2010. Askew
only discovered the overcharge as a result of HRFC’s September 17, 2010 letter informing
him of the error and notifying him that the error was corrected and that he was issued a
refund of $845.40.
Despite the crediting of his account and adjustment of the interest rate, Askew
argued in his Opposition and at the hearing that because the interest rate was incorrectly
disclosed and charged, HRFC was never legally permitted to charge any interest at all.
Therefore, the Plaintiff argues, the late fees calculated based on the monthly payment and
any interest charged should all be paid back to Askew. The Plaintiff cites no case law to
support the proposition that all interest charged should be forfeited.
Indeed, it is
inconceivable that a borrower should receive such a windfall upon the credit grantor’s cure
of an error pursuant to section 12-1020. Alternatively, the Plaintiff argues that late fees
should have been charged based on a lower monthly payment. This argument confuses the
issues. The penalty provision is based on a percentage of the amount of the monthly
credit grantors who act before receiving notice. The two categories of credit grantors are treated
differently in each case; credit grantors who receive notice have more arduous requirements than
credit grantors who cure errors on their own volition.
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payment that is late, not the interest rate charged. HRFC 00047, ECF No. 33-1. It is
undisputed that the Plaintiff was late on five payments before HRFC cured its error. Then,
he was offered the opportunity to adjust to a lower monthly payment or repay the loan
earlier. Because he did not exercise the option to lower the monthly payment, there was no
reason that HRFC could not keep billing him the same amount per month. Any late fees
thereafter based on the amount of payments made late were also properly charged.
Accordingly, there is no dispute as to any issue of material fact that HRFC “notified the
borrower and made whatever adjustments are necessary to correct the error” as required to
cure under section 12-1020.11 Therefore, Defendant is entitled to limitation of liability as a
matter of law pursuant to the CLEC.
For all those reasons, the Defendant’s Motion for Summary Judgment will be granted
as to the claim for violations of the Maryland Credit Grantor Closed End Credit Provisions
in Count I.
II.
Count II
Askew’s breach of contract claim in Count II is premised on the assertion that
HRFC’s violation of the CLEC provisions was also a breach of the Retail Installment Sales
Contract between the parties, as a matter of Maryland common law. See Patton v. Wells Fargo
11
The Plaintiff cites various cases analyzing the federal Truth in Lending Act. Mirabal v. Gen. Motors
Acceptance Corp., 537 F.2d 871, 879 n.14 (7th Cir. 1976) (analyzing whether an error was a bona fide
error under the TILA), overruled on other grounds, Brown v. Marquette Sav. & Loan Ass’n, 686 F.2d 608,
615 (7th Cir. 1982) (holding that only one recovery per violation allowed under § 1640(a)); Thomka v.
A.Z. Chevrolet, Inc., 619 F.2d 246, 249 (3d Cir. 1980) (involving TILA disclosure requirements); In re
Weaver, 632 F.2d 461, 465 (5th Cir. 1980) (involving TILA disclosure and failure to include finance
charges in the amount financed). These decisions have no bearing on the determination of whether
the Defendant cured its error pursuant to section 12-1020 of the CLEC. Cf. In re CPDC, Inc., 337
F.3d 436, 444-45 (5th Cir. 2003) (rejecting analogy between Texas usury statute’s cure provision and
TILA, where discovery rule expressly disavowed elsewhere in statute: “[L]ooking to other statutes is
improper when the interpretation of a statute is self-evident from its text.”).
15
Fin. Md., Inc., ___ A.3d ___, 2014 WL 700110, Sept. Term 2013 No. 3, slip op. at 1 (Md.
Feb. 24, 2014) (reversing grant of motion to dismiss breach of contract claim because facts
giving rise to claim for CLEC violation for improper repossession also stated breach of
contract claim); Epps v. JP Morgan Chase Bank, N.A., 675 F.3d 315, 328 (4th Cir. 2012)
(reversing grant of motion to dismiss breach of contract claim based on repossession
because assignee was bound by CLEC terms); Decohen v. Capital One, N.A., 703 F.3d 216, 219
(4th Cir. 2012) (reversing grant of assignee’s motion to dismiss breach of contract claim
premised on debt cancellation provision that violated the CLEC). Each of the decisions in
Patton, Epps, and Decohen concerned the motion to dismiss stage and there was no safe harbor
provision at issue. Those cases instruct that an assignee is bound not only by the CLEC, but
also by the contract electing the CLEC, in complying with CLEC requirements. In other
words, if a plaintiff can prove a violation of the CLEC with regard to a contractual
provision, the same facts support of breach of contract claim.
However, based on the principles stated by the Court of Appeals of Maryland and by
the Fourth Circuit, the borrower is equally bound by the CLEC in the context of contractual
obligations. It follows that defenses applicable to CLEC violations are also available for
breach of contract claims secondary to a CLEC claim. In this case, after a period of
discovery for Askew’s claims, the undisputed evidence shows that no CLEC violation
occurred. In compliance with the CLEC, HRFC cured its error as to the interest rate. The
RISC itself does not contain a separate cure period. Therefore, there are two ways to view
the status of Count II: (1) because of the cure, the error in the interest rate charged never
amounted to a CLEC violation, nullifying a breach of contract claim; or (2) because any
16
CLEC violation was cured effectively according to the statute, any breach of the underlying
contract was also cured. Just as a CLEC violation could also support a breach of contract
claim, the CLEC cure provision applies to limit liability for a breach of contract claim as
well.12 Thus, the Defendant’s Motion for Summary Judgment will be granted as to the
breach of contract claim in Count II.13
III.
Count III
Finally, the Defendant moves for summary judgment as to the Plaintiff’s claim for a
violation of the Maryland Consumer Debt Collection Act. The MCDCA provides that a
debt collector “who violates any provision of this subtitle is liable for any damages
proximately caused by the violation, including damages for emotional distress or mental
anguish . . . .” Md. Code Ann., Com. Law § 14-203. To recover damages, a plaintiff must
show that a defendant committed one or more prohibited acts set forth in the statute:
12
The Defendant based its Motion for Summary Judgment as to the breach of contract claim on the
argument that Askew suffered no damages. Because there was no violation of the CLEC provisions,
there has been no breach of the Retail Installment Sales Contract at issue in this case. Furthermore,
in curing their error, HRFC refunded to Askew the full amount of overpayment. As the Defendant
notes, the Plaintiff suffered no damage as a result of HRFC’s conduct. The Plaintiff has noted that
even without proving actual damages, he may be entitled to nominal damages. It is well-settled in
Maryland that “every injury to the rights of another imports damages, and if no other damages are
established, the party injured is at least entitled to a verdict for nominal damages.” Planmatics, Inc. v.
Showers, 137 F. Supp. 2d 616, 625 (D. Md. 2001); see also, Redner’s Mkts., Inc. v. Joppatowne G.P., Ltd.
P’ship, No. RDB-11-1864, 2013 WL 5274365, at *7 (D. Md. Sept. 17, 2013) (where plaintiff failed to
prove actual damages, this Court awarded nominal damages of $1.00 for each breach of contract
proven). However, he cannot prove a breach of contract. Thus, damages of any kind are not at
issue.
13
In its Opposition, the Defendant asserted that Count II is barred by the four-year statute of
limitations for an action for breach of any contract for sale. Md. Code Ann., Com. Law § 2-725(1).
Under this general statute of limitations, a cause of action accrues “when the breach occurs,
regardless of the aggrieved party’s lack of knowledge of the breach.” Id. § 2-725(2). The Plaintiff
was permitted to file a Surreply, in which he argued that his claim is timely because it accrued on
October 17, 2008, when his first payment based on a higher-than-allowable interest rate was due,
not on September 4, 2008, the date of the sale. However, having concluded that no breach of
contract action accrued at all, the statute of limitations question need not be addressed.
17
1. Use or threaten force or violence;
2. Threaten criminal prosecution, unless the transaction involved the
violation of a criminal statute;
3. Disclose or threaten to disclose information which affects the debtors
reputation for credit worthiness with knowledge that the information is
false;
4. Except as permitted by statute, contact a person’s employer with respect to
a delinquent indebtedness before obtaining final judgment against the
debtor;
5. Except as permitted by statute, disclose or threaten to disclose to a person
other than the debtor or his spouse or, if the debtor is a minor, his parent,
information which affects the debtor’s reputation, whether or not for
credit worthiness, with knowledge that the other person does not have a
legitimate business need for the information;
6. Communicate with the debtor or a person related to him with the
frequency, at the unusual hours, or in any other manner as reasonably can
be expected to abuse or harass the debtor;
7. Use obscene or grossly abusive language in communicating with the
debtor or a person related to him;
8. Claim, attempt, or threaten to enforce a right with knowledge that the right
does not exist; or
9. Use a communication which simulates legal or judicial process or gives the
appearance of being authorized, issued, or approved by a government,
governmental agency, or lawyer when it is not.
Id. § 14-202. This Court has recently held that, unlike the federal Fair Debt Collection
Practices Act, the MCDCA is not a strict liability statute. Powell v. Palisades Acquisition XVI,
LLC, No. RDB-13-029, 2014 WL 334814, at *9 (D. Md. Jan. 29, 2014) (citing Akalwadi v.
Risk Mgmt. Alternatives, Inc., 336 F. Supp. 2d 492, 511 (D. Md. 2004)).
In this case, the Plaintiff alleges that HRFC violated the MCDCA by
“[c]ommunicat[ing] with the debtor or a person related to him with the frequency, at the
unusual hours, or in any other manner as reasonably can be expected to abuse or harass the
debtor.” Md. Code Ann., Com. Law § 14-202(6). The communications in questions consist
of several letters representing that Askew’s account was turned over to attorneys, that a
replevin warrant was prepared, that additional amounts including attorneys’ fees could be
18
charged to Askew if he did not make his payments, and that HRFC intended to involve the
MVA fraud division and local authorities.14 The Plaintiff states, on information and belief,
that Askew’s account was not turned over to attorneys, that no replevin warrant was
prepared, no fees accrued at that time and no action had been filed in Court for the warrant
of replevin. Pl.’s Opp. 37, ECF No. 32. Finally, the Plaintiff states that an HRFC employee
improperly contacted him when represented by counsel and misrepresented the status of this
lawsuit. The Plaintiff argues that HRFC’s only purpose was to abuse or harass him, and
based on these circumstances, that there are genuine issues of material fact as to whether
that Defendant’s conduct was abusive and harassing. See Pl.’s Opp. 41 (citing Akalwadi, 336
F. Supp. 2d at 511-12 (denying summary judgment on section 14-202(6) claim)).
In support of this contention, the Plaintiff argued at the hearing that this Court’s
decision in Akalwadi categorically states that whether conduct was reasonably harassing or
abusive is always a jury question. On the contrary, the determination whether there is a
question for the jury turns on whether the evidence in each case creates a genuine issue of
material fact. In Akalwadi, the evidence showed that the creditor’s automated telephone
system called the debtor on a daily basis, and one day called three times within five hours.
Thus, this Court concluded that the reasonableness of the volume and pattern of calls
created a question for the jury as to whether the defendant’s conduct violated section 14202(6) of the MCDCA. 336 F. Supp. 2d at 505-06, 511-12. However, the case may be that,
14
This Court notes that the RISC gives the creditor the right to accelerate the loan and repossess the
vehicle upon any default, including late payment, and to charge collection costs and attorneys’ fees.
To the extent that the Plaintiff’s allegations could be construed to assert a claim based on any other
provisions in the MCDCA, in particular section 14-202(8) concerning enforcement of a right that
does not exist, there is no genuine issue of material fact as to any violation of the statute.
19
based on the undisputed facts, a defendant’s conduct does not, as a matter of law, violate the
prohibition of harassing and abusive collection tactics. See Mateti v. Activus Fin., LLC, No.
DKC-08-0540, 2009 WL 2507423, at *13 (D. Md. Aug 14, 2009) (granting defendant’s
motion for summary judgment: “Two telephone calls is not even remotely adequate to
impose liability under [section 14-202(6)].”). In this case, the evidence shows that the
Plaintiff, in a span of over a year and a half, received several letters and one phone call. This
one direct telephone call to the Plaintiff, while represented by counsel, was one isolated
incident, undertaken by an unspecified HRFC employee, and was not repeated. Taken
individually or as a whole, HRFC’s course of conduct in attempting to collect the debt owed
on the RISC by Askew did not reasonably rise to the level of abuse or harassment.
Accordingly, there has been no violation of section 14-202(6) of the Maryland Consumer
Debt Collection Act and Defendant’s Motion for Summary Judgment will be granted as to
Count III.
CONCLUSION
For the reasons stated above, the Defendant’s Motion for Summary Judgment as a
matter of law (ECF No. 26) is GRANTED.
A separate Order follows.
Dated: March 25, 2014
/s/
Richard D. Bennett
United States District Judge
20
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