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Blackstone v. Sharma
Citation: Not availableDocket: 40/17
Court: Court of Appeals of Maryland; August 2, 2018; Maryland; State Supreme Court
Original Court Document: View Document
In the case of Kyle Blackstone, et al. v. Dinesh Sharma, et al., and others, the Court of Appeals of Maryland addressed the ambiguity in the Maryland Collection Agency Licensing Act (MCALA) regarding whether foreign statutory trusts operating as special purpose vehicles in the mortgage industry are required to obtain a collection agency license. The Court examined legislative history and subsequent amendments to clarify the General Assembly's intent when MCALA was enacted in 1977 and revised in 2007. It concluded that the General Assembly did not intend for these trusts to obtain licenses before initiating foreclosure actions. Consequently, the Court determined that the circuit courts erred in dismissing foreclosure actions based solely on the lack of a collection agency license for the foreign statutory trusts involved. The case involved a consolidated appeal of four circuit court cases questioning the scope of MCALA, particularly whether its revised provisions applied to the mortgage debt sector. Initially enacted to protect consumers from abusive collection practices, MCALA mandates that third-party debt collectors obtain a license and post a surety bond. The State Collection Agency Licensing Board, part of the DLLR, oversees compliance with MCALA. The opinion was filed on August 2, 2018, with dissenting opinions from Justices Adkins and McDonald. The Maryland Consumer Debt Collection Act (MCDCA) prohibits various practices by debt collectors, such as threatening consumers, disclosing personal information, contacting employers, or simulating legal processes during debt collection efforts. Although the MCDCA operates independently of the Maryland Collection Agency Licensing Act (MCALA), collection agencies must comply with both laws. In 2007, the Maryland Department of Labor, Licensing and Regulation (DLLR) proposed legislation to revise the definition of collection agencies under MCALA to encompass entities that acquire delinquent consumer debt. This change aimed to close a loophole that allowed these entities to bypass licensing requirements. Subsequent court rulings determined that foreign statutory trusts holding defaulted mortgage debts are required to obtain a collection agency license under MCALA before initiating foreclosure actions. These trusts contested this requirement, leading to a legal inquiry regarding the General Assembly's intent concerning licensing for such entities. The court found that the 2007 amendments did not extend MCALA's scope to include mortgage industry participants pursuing foreclosures. Additionally, the Supreme Court's decision to hear Obduskey v. McCarthy, Holthus LLP highlights a related federal issue regarding the Fair Debt Collection Practices Act (FDCPA) and its applicability to non-judicial foreclosure proceedings. The Tenth Circuit ruled that the FDCPA does not apply in such contexts, aligning with the Ninth Circuit's stance while rejecting opposing views from other appellate courts and state supreme courts. This ongoing debate reflects significant challenges in statutory interpretation and potential conflicts between federal and state foreclosure laws. The Court determined that the 2007 departmental bill does not extend the Maryland Collection Agency Licensing Act (MCALA) to the mortgage industry, rendering unnecessary discussion of three specific issues: 1) whether foreclosure actions are considered 'debt collection' under MCALA when the loan is owned by parties other than foreign statutory trusts; 2) the licensing status of involved parties, including trustees and mortgage loan servicers; and 3) any potential violations of the Maryland Consumer Debt Collection Act (MCDCA) by the foreign statutory trusts and associated parties. The appeal involves two consolidated cases before the Court of Special Appeals, alongside two additional circuit court foreclosure actions. Each respondent had secured a mortgage loan to purchase or refinance their homes, which were secured by a deed of trust. Following defaults on the loans, the banks transferred them to foreign statutory trusts (Ventures Trust 2013-I-H-R and LSF9 Master Participation Trust), managed by trustees who were also banks. A loan servicer was assigned for borrower communications and payment collection, and substitute trustees were appointed to enforce the deeds of trust through foreclosure actions. In response to these actions, defaulting homeowners filed counter complaints asserting that the foreign statutory trusts acted as unlicensed collection agencies under MCALA by collecting mortgage payments post-default. They sought dismissal of the foreclosure actions, arguing that any judgment from unlicensed entities would be void. The substitute trustees contended that the foreign statutory trusts were exempt from MCALA as they were not doing business in Maryland as collection agencies, and the homeowners failed to provide a valid defense under Maryland mortgage foreclosure law. Circuit courts held hearings to examine the various arguments regarding MCALA. Circuit courts dismissed foreclosure proceedings without prejudice, determining that foreign statutory trusts, which had attempted to collect on defaulted mortgage loans, were engaged in consumer debt collection and not exempt under the Maryland Collection Agency Licensing Act (MCALA). The courts found that Ventures Trust and LSF9 lacked the necessary collection agency licenses, concluding that these trusts had no right to initiate foreclosure actions. In the case of Kyle Blackstone, et al. v. Dinesh Sharma, et al., Ruchi Sharma sold her home in Potomac, Maryland, to her parents, Dinesh and Santosh Sharma, financing the purchase with a $1,920,000 loan from Washington Mutual Bank (WMB). Since the transaction was not arm's length, Ruchi was required to sign the deed of trust. After the Sharmas defaulted in 2007, Ventures Trust acquired their loan as part of a securitized pool. Ventures Trust, through its trustee MCM Capital Partners, LLC, appointed substitute trustees who initiated foreclosure proceedings in 2014. The Sharmas countered with claims against Ventures Trust, alleging it operated as a collection agency without proper licensing, violating both MCALA and the Maryland Consumer Debt Collection Act (MCDCA). They sought to dismiss the foreclosure action, arguing that the court should resolve any legal defenses before addressing equitable claims, citing a precedent that voids judgments from unlicensed collection entities. The substitute trustees opposed the Sharmas' motion, asserting that the Sharmas did not present a relevant defense. Ventures Trust’s substitute trustees contended that Ventures Trust qualifies for an exemption under the Maryland Collection Agencies Licensing Act (MCALA), allowing them to initiate a foreclosure action without a license. The Circuit Court for Montgomery County held a hearing on the Sharmas' motion opposing the foreclosure, ultimately ruling in their favor on August 28, 2015, and dismissing the case without prejudice. The court concluded that the Maryland legislature did not include foreign statutory trusts as exempt from MCALA, indicating a deliberate omission. Furthermore, Ventures Trust failed to demonstrate that it met the criteria of a trust company, which is exempt from MCALA licensing. Finding that Ventures Trust was subject to MCALA licensing and lacked the necessary license, the court determined that Ventures Trust had no right to pursue the foreclosure. In a related case involving Seyed Marvastian, he obtained a $1,396,500 loan secured by a deed of trust but defaulted in 2012. Ventures Trust acquired the loan and initiated foreclosure proceedings. The Marvastians requested mediation, which was unsuccessful, and filed a counter complaint alleging that Ventures Trust acted as an unlicensed collection agency under MCALA. They argued that the foreclosure should be stayed until the counter complaint was resolved, asserting that any judgment for Ventures Trust would be invalid due to its lack of licensing. The substitute trustees opposed the motion, maintaining that Ventures Trust was exempt from MCALA requirements, which would not affect the foreclosure proceedings. Substitute trustees argued that the Marvastians did not present any valid defenses against the foreclosure and claimed that their motion was merely a tactic to delay proceedings. Following a motions hearing on March 26, 2015, the circuit court issued an order on May 12, 2015, establishing that Ventures Trust acted as a collection agency in Maryland for collecting mortgage debts and was therefore subject to the Maryland Collection Agency Licensing Act (MCALA). The court concluded that Ventures Trust lacked the right to initiate foreclosure proceedings, resulting in the dismissal of the foreclosure action without prejudice. Subsequently, Ventures Trust sought to alter or amend the judgment, contending that the circuit court incorrectly applied MCALA to foreclosure actions concerning statutory foreign trusts. The Marvastians countered that foreclosure actions constitute debt collection and that Ventures Trust did not qualify for the MCALA trust company exemption. After a second hearing, the court reaffirmed its decision, emphasizing a legislative intent to require licensing for foreign statutory trusts engaged in debt collection through foreclosure in Maryland, noting that the MCALA and registration requirements serve different purposes. On September 10, 2015, Ventures Trust appealed to the Court of Special Appeals, which consolidated the appeals related to the Marvastians and the Sharmas. The court, in a reported opinion on June 6, 2017, addressed two primary questions: whether a party authorizing a trustee to foreclose needed to be licensed under MCALA, and if MCALA's licensing requirements applied to foreign statutory trusts like Ventures Trust. The Court of Special Appeals ruled that Ventures Trust must comply with MCALA licensing before initiating foreclosure actions and clarified that the trust company exemption did not apply, as Ventures Trust did not operate as a trustee or commercial bank. Ultimately, it affirmed the circuit court's judgment, barring Ventures Trust from pursuing the foreclosure without the necessary license. Ventures Trust, represented by substitute trustees, submitted a petition for writ of certiorari on July 14, 2017, regarding the case B. Laura O’Sullivan, et al. v. Jeffrey Altenburg, et al. The Altenburgs, having taken out a $592,250 loan from Bank of America on March 30, 2007, defaulted in 2011. Subsequently, Bank of America transferred its interest in the loan to U.S. Bank Trust, which appointed substitute trustees in 2016 to initiate foreclosure proceedings in Howard County Circuit Court. The Altenburgs moved to dismiss the foreclosure, arguing that LSF9, the entity holding the loan, lacked the necessary MCALA license to proceed and contended that any judgment against them would be void due to LSF9 being an unlicensed debt collector. They also claimed that LSF9 did not qualify as a trust company, which is exempt from licensing requirements. The substitute trustees opposed this, asserting that MCALA did not apply to their in rem foreclosure actions and that LSF9 met the criteria for a trust company exemption. After hearings, the circuit court found that LSF9 was required to have an MCALA license to pursue foreclosure. Consequently, the court granted the Altenburgs' motion to dismiss the case without prejudice on August 25, 2016. The substitute trustees appealed, and before the Court of Special Appeals could hear the case, they filed a petition for writ of certiorari on August 4, 2017, following a relevant opinion in another case. Marvin and Martha Neviaser obtained a $171,000 loan from Countrywide Bank, FSB, in October 2007, secured by a deed of trust on their home. They defaulted in 2009, and in 2015, Bank of America transferred the loan interest to LSF9, which later assigned the deed of trust to U.S. Bank Trust. Substitute trustees initiated foreclosure proceedings in the Circuit Court for Washington County. The Neviasers filed a motion to dismiss, arguing LSF9 lacked the necessary MCALA license to foreclose on a defaulted debt and was not exempt from MCALA's requirements. They also claimed LSF9 was estopped from obtaining a different outcome than a previous Howard County ruling. The substitute trustees opposed the motion, asserting that LSF9 was not engaged in business under MCALA, was not acting as a collection agency, qualified for the trust company exemption, and that any ambiguities in MCALA should favor LSF9 due to the act's criminal penalties. After a motions hearing, the circuit court determined that the foreclosure constituted consumer claims under MCALA, concluding that LSF9 was collecting on a purchased defaulted mortgage. The court dismissed the case without prejudice, and the substitute trustees appealed. Before the appeal could be heard, the Court of Special Appeals issued an opinion in a related case, prompting the trustees to file for certiorari with the Maryland Court of Appeals. The Court granted certiorari in multiple consolidated cases and scheduled oral arguments, focusing on whether a foreign statutory trust pursuing a mortgage foreclosure constitutes a 'consumer claim' under MCALA. Key legal questions address whether a foreign statutory trust engaging in mortgage foreclosure actions is considered "doing business as a collection agency" under the Maryland Collection Agency Licensing Act (MCALA), despite being statutorily exempt from "doing business" in the state. The issues include the application of the Court of Special Appeals’ ruling in *Finch v. LVNV Funding, LLC*, regarding the validity of judgments by unlicensed agencies, and whether a foreign statutory trust is required to obtain a collection agency license to pursue foreclosure actions. The court must assess if the Maryland General Assembly intended for foreign statutory trusts to hold a collection agency license before initiating in rem foreclosure proceedings. The circuit courts previously ruled that the lack of a collection agency license precluded foreign statutory trusts from pursuing foreclosure actions, interpreting their actions as collection agency activities when acquiring defaulted mortgage loans. Additionally, the court reviews the standard of legal correctness for motions to dismiss under Maryland Rule 14-211, which allows borrowers to challenge foreclosure actions. The court indicated that issues of law determined by the circuit courts would be reviewed de novo. Ultimately, if the court concludes that foreign statutory trusts do not need a collection agency license, it can bypass further inquiries regarding the validity of judgments and exemptions under MCALA. The motion to strike, filed by the substitute trustees, was denied, allowing for the continuation of proceedings post-oral argument. The core issue in this case revolves around the interpretation of the Maryland Collection Agency Licensing Act (MCALA) as amended by a 2007 departmental bill. The petitioners, acting as substitute trustees for foreign statutory trusts, argue that these trusts do not require an MCALA license to initiate foreclosure proceedings. Specifically, the substitute trustees for Ventures Trust assert that in rem foreclosure actions, which target the property rather than seek repayment of debt, do not necessitate a license. They further claim that licensing foreign statutory trusts for foreclosure conflicts with Maryland law, which states that such trusts are not considered to be doing business in the state. They argue that requiring a license does not enhance consumer protection since these trusts operate solely through trustees without physical offices or employees. Conversely, the substitute trustees for LSF9 present a different perspective, contending that the entities needing licensure or exemption under MCALA include the trustees, substitute trustees, and mortgage loan servicers, while the foreign statutory trust itself merely holds the mortgage loans and does not conduct business. They assert that the term "doing business" should be interpreted in accordance with its legal definition in other Maryland statutes and that foreclosure actions do not constitute consumer claims under MCALA. They also argue for an interpretation of MCALA that includes foreign statutory trusts under the exemption for trust companies. In response, the defaulting homeowners contend that MCALA clearly requires any entity collecting a consumer claim in default to possess a collection agency license. They argue that the absence of an explicit exemption for foreign statutory trusts indicates legislative intent and assert that other statutes should not influence the Court's interpretation. The homeowners maintain that a foreign statutory trust is essentially an account, which cannot qualify for the trust company exemption. The defaulting homeowners argue that Maryland law prohibits unlicensed individuals from seeking court assistance for certain business activities. The court must perform a statutory interpretation analysis, adhering to the principle of judicial deference to legislative intent as expressed in statutory language. The interpretation process starts with the statute's plain language, using ordinary meanings to guide understanding. If the statute's language is ambiguous, the court will look for legislative intent through various indicators, including legislative history and the context of the bill, such as its title, function paragraphs, and any amendments. When faced with ambiguity, the court applies statutory construction rules to ascertain legislative intent, ensuring the interpretation fulfills the statute's purpose. The court also considers the implications of different interpretations to avoid unreasonable or illogical outcomes. In this case, the key issue is whether the General Assembly required foreign statutory trusts, like Ventures Trust and LSF9, to obtain a collection agency license under the Maryland Collection Agency Licensing Act (MCALA) before substitute trustees can file foreclosure actions on their behalf. The excerpt outlines the interpretation of the Maryland Consumer Collection Agency Law (MCALA) regarding the licensing requirements for collection agencies. MCALA mandates that any individual or entity operating as a collection agency in Maryland must possess a license. The statute defines a collection agency as one that either collects or solicits consumer claims on behalf of others or collects its own consumer claims that were in default upon acquisition. It also includes terms related to the use of names or systems that imply a third party is involved in the collection process. A consumer claim is characterized as any claim for money owed by a state resident that arises from personal transactions involving credit, property, or services. The 2007 amendments to the law expanded the definition of collection agencies to encompass those collecting their own defaulted claims. However, the statute exempts certain entities from its provisions, including banks, credit unions, mortgage lenders, real estate brokers, savings and loan associations, title companies (regarding escrow), trust companies, and lawyers, though it does not define these exempt entities. The interpretation acknowledges the common understanding of "collection agency" as businesses engaged in traditional debt collection activities, such as sending letters and making calls to debtors. The case law referenced illustrates that collection agencies must comply with licensing requirements to engage in such practices legally. Collection agencies are defined as entities that collect or solicit consumer claims on behalf of others or for claims they own, particularly when using names or methods that suggest a third party is involved. The 2007 amendment to the Maryland Consumer Debt Collection Act (MCALA) adds complexity to this definition, indicating that any individual or entity collecting on a defaulted claim they acquired could be classified as a collection agency, potentially requiring licensing. This interpretation raises questions about the General Assembly's intent and whether it broadens the traditional understanding of collection agencies. The statutory language is ambiguous, as seen in prior cases like Old Republic Ins. Co. v. Gordon, where the Court of Special Appeals examined whether an insurance company acting on subrogation rights fell under this definition. The court identified the phrase "in the business of" as lacking clear authority or definition in Maryland law, leading to various interpretations. The broader implications suggest that even minimal involvement in debt collection could necessitate licensing under MCALA, highlighting the need for clarity regarding what constitutes engaging in the business of collection agencies. The excerpt analyzes the definition of "business" as per the Third New International Dictionary and Funk and Wagnall’s New Standard Dictionary, highlighting its relevance in evaluating whether foreign statutory trusts are engaged in business activities under the Maryland Collection Agency Licensing Act (MCALA). It notes that these trusts lack employees, offices, or a registered agent in Maryland, and operate solely through trustees, complicating the determination of whether they conduct "business" as defined. The defaulting homeowners argue that MCALA's definition of a consumer claim is clear and applicable, emphasizing that it includes claims for money owed arising from real estate transactions. However, the central question for the court is whether the General Assembly intended to require licensing for foreign statutory trusts within the mortgage industry, as opposed to focusing solely on actors in the collection agency sector. The excerpt also references advisory notices and FAQs issued by the Board regarding licensing, asserting that while agency interpretations may provide guidance, they are not legally binding on the court. The Court of Special Appeals and this Court find the Maryland Collection Agency Licensing Act (MCALA) ambiguous regarding whether it applies to foreign statutory trusts owning defaulted mortgage debts when a substitute trustee initiates foreclosure. The interpretation of MCALA is crucial, and the agency's process of reasoning in its interpretation is important. The Board's approach to merely instruct trusts on licensing procedures, rather than thoroughly analyzing the licensing act or related legislation, is noted. While some federal cases assert that MCALA requires a license for passive debt purchasers, including foreign statutory trusts, it is emphasized that federal courts must adhere to state court interpretations of Maryland statutes. The Court will examine legislative history, subsequent legislation, and related statutes to determine the General Assembly's intent regarding the MCALA licensing requirement for foreign statutory trusts involved in defaulted mortgage loans. The legislative history reveals that in 1977, the General Assembly enacted the initial collection agency licensing statute, prohibiting unlicensed collection agency operations and establishing the Collection Agency Licensing Board. The definition of "Collection Agency" was broad, encompassing entities soliciting or collecting claims for others, specifically mentioning claims related to transactions involving Maryland residents. The statute also clarified that the term includes those selling or distributing collection systems indicating involvement by someone other than the original creditor. Regular employees of creditors, licensed collection agencies, banks, trust companies, savings and loan associations, building and loan associations, mortgage bankers, abstract companies engaged in escrow business, attorneys, and individuals acting under court orders are exempt from the licensing requirements for collection agencies as outlined in the original collection agency licensing statute. The 1977 legislation aimed to regulate third-party collection agencies and included similar exemptions. The General Assembly's intent to exempt specific entities related to the mortgage industry is evident from the statutory language. The Fiscal Note for Senate Bill 435 highlighted that the bill mandates licensure for collection agencies operating in Maryland, with an expectation of 110 agencies applying for licenses. Senator Clarence W. Blount, the bill's sponsor, emphasized the urgent need for regulation due to rising complaints about debt collection practices, exacerbated by economic challenges leading to increased abuse by collection agencies. He noted that while the Consumer Protection Division received numerous complaints, they primarily pursued cases with documented evidence. Senator Blount's testimony clarified that certain actors, including regular employees of creditors and collection agencies, as well as banking institutions and attorneys, were excluded from these licensing requirements. Mortgage bankers are to be excluded from the Maryland Collection Agency Licensing Act (MCALA) as per an amendment proposed by Senator Blount to Senate Bill 435. This amendment was accepted by the Senate Economic Affairs Committee during the bill's second reading on March 21, 1977. Three years later, an evaluation report by the Department of Fiscal Services, drafted under the Regulatory Program Evaluation Act of 1978, assessed the collection agency industry, noting that only third-party collectors are licensed in Maryland, with 174 agencies currently operating. The report described collection agencies as entities that recover debts on behalf of creditors, primarily through commission-based efforts. A survey indicated that their clients predominantly include hospitals (54%), retail stores (23%), and banks (10%). The report also highlighted the necessity for regulation due to prevalent abuses within the industry, such as harassment and misrepresentation, emphasizing the need for public protection. Senator Blount’s testimony underscored the legislative intent to regulate an industry marked by a high volume of complaints related to aggressive collection practices, particularly during the economic challenges of the late 1970s. The Fiscal Note revealed that the Department of Licensing and Regulation (DLLR) expected only 110 collection agencies to apply for licensing, indicating legislative intent to specifically regulate these entities to curb abusive practices. Senator Blount clarified that certain entities, including mortgage bankers, were to be exempt from the Maryland Collection Agency Licensing Act (MCALA). The original licensing statute primarily targeted small businesses collecting medical and retail debts via phone or mail. In 2007, DLLR proposed House Bill 1324 to address emerging issues under the licensing act, which revised the definition of "collection agency" to encompass individuals collecting their own defaulted consumer claims. However, the bill's language did not clearly define the intended regulatory scope, leaving ambiguity about whether DLLR aimed to expand MCALA's reach beyond traditional collection agencies or to regulate individuals acquiring defaulted accounts for collection purposes. The Court will examine further legislative history to clarify the General Assembly's intent in revising MCALA, considering factors such as bill request forms, titles, related statutes, and amendments. DLLR had submitted a bill request to the Governor's office in 2006 for proposed changes to MCALA, as part of the legislative process, which typically requires sponsorship from a member of the General Assembly. A departmental bill is defined as a bill introduced by a committee chairman at the request of the Executive Branch, a practice established by custom in the Maryland General Assembly. Since 1969, Maryland Governors have mandated that departments submit proposed departmental bills to the Governor's legal or legislative office for approval, a procedure initiated by Governor Marvin Mandel. House Bill 1324 was introduced only in the House of Delegates and not cross-filed. It was referred to the House Rules and Executive Nominations Committee and later to the Economic Matters Committee before passing the House and moving to the Senate. The legislation addresses the collection agency industry under the Maryland Collection Agencies Licensing Act (MCALA), which mandates licensing for agencies collecting debts on behalf of others but not for businesses collecting their own debts. A loophole allows debt purchasers to operate without state licensing by entering into purchase agreements for delinquent debt, thus avoiding regulatory oversight. The proposal aims to redefine collection agencies to include these debt purchasers, thereby extending licensing requirements and regulatory control to them. The excerpt outlines the requirements for licensing by the State Collection Agency Licensing Board for entities collecting consumer claims in Maryland, specifying that businesses collecting their own debts are exempt from this law. The Department of Labor, Licensing, and Regulation (DLLR) proposed legislation in 2007 to address a loophole allowing debt purchasers to evade licensing by acquiring delinquent consumer debts through contracts resembling collection agency agreements. The proposal aimed to regulate these debt purchasers as part of the collection industry to ensure compliance with licensing, complaint resolution, and regulatory actions under the Maryland Collection Agency Licensing Act (MCALA). The proposal asserted that only about 40 debt purchasers would likely seek licenses under this legislation, estimating minimal annual growth in licensees. The intent was to close a loophole rather than expand regulations to other industries, such as the mortgage industry. The purpose paragraph of House Bill 1324 clarifies that the General Assembly aimed to adjust the definition of 'collection agency' specifically for licensing and regulation concerning consumer debt collection. It emphasizes that no intention existed to broaden MCALA's scope beyond the collection agency industry. Additionally, the Fiscal Note for House Bill 1324 indicates that the legislation extends the board's authority to include individuals collecting consumer claims that were previously in default, with DLLR currently regulating 1,304 collection agencies. The department anticipates that House Bill 1324 will bring 40 debt purchasers under state regulation, addressing a gap where these purchasers currently operate unregulated. They acquire debt directly from creditors and receive compensation based on recovery percentages. The legislative intent, as outlined in the floor report, is to regulate these debt purchasers who collect debts owed to themselves, effectively bypassing licensing requirements. The report highlights a concern that creditors are selling defaulted debts to unlicensed collectors, which the bill aims to address by closing this loophole. The testimony from Charles W. Turnbaugh, the Commissioner of Financial Regulation, reinforces that while Maryland law mandates licensing for collection agencies acting on behalf of creditors, it does not cover entities that collect their own debts. Turnbaugh emphasizes that the evolution of the debt collection industry has led to practices allowing some debt purchasers to operate without compliance to licensing or bonding requirements. Importantly, the bill's focus remains solely on consumer debt, with no intention to extend regulations to the mortgage sector. Susan Hayes, a consumer member of the State Collection Agency Licensing Board, and Eileen Brandenberg, another board member, provided written testimony supporting House Bill 1324, which aims to close a loophole in Maryland's licensing laws for debt collectors. Hayes emphasized that debt collectors who purchase debts should not be exempt from licensing requirements, as their operations can lead to consumer issues. Brandenberg noted that many serious debt collection problems arise from a small number of unregulated collectors, especially debt purchasers, who are not currently covered by licensing laws. She underscored the need for regulatory tools to manage the practices of these businesses. Both testimonies specifically addressed consumer debt collection issues without suggesting that the bill would impose licensing requirements on the mortgage industry. Notably, there was no opposition testimony from representatives of the mortgage industry regarding this bill, despite their vocal participation in discussions about other legislative measures in 2009, indicating that they did not perceive the 2007 bill as affecting their licensing status. Mortgage industry representatives did not provide testimony regarding the departmental bill, as the bill aimed solely to clarify that the Maryland Collection Agency Licensing Act (MCALA) applies to collection agencies purchasing defaulted consumer debts, thereby avoiding licensing requirements. The documents do not indicate that the Department of Labor, Licensing and Regulation (DLLR) sought to extend its authority under MCALA to the mortgage industry. The language of the bill offered no indication that it would encompass mortgage industry participants or loans, leading to the absence of opposition testimony, as stakeholders believed House Bill 1324 pertained only to "professional collectors of defaulted debt." The 2007 perspectives of the Commissioner and Board members are crucial for analyzing legislative intent; they highlighted concerns about collection agencies circumventing licensing by purchasing consumer debts. Ms. Brandenberg noted that the focus was on regulating collection agencies that acquired debt to evade licensing. Ms. Hayes supported the bill, citing unlicensed collectors benefiting from contingent fees after debt collection. The legislative history indicates that the Board's intent was to regulate collection agencies exploiting loopholes, not to expand MCALA’s reach to the mortgage industry or to include foreign statutory trusts managing mortgage loans. The Court interprets the legislative history to affirm that the General Assembly intended MCALA to regulate the collection agency industry, without significantly enlarging its scope to include mortgage industry actors. Moreover, the Court will examine related statutes and subsequent legislation to confirm this interpretation, considering the statute’s context and its relationships with earlier and later laws to clarify its purpose and scope. Every statute is designed to achieve a specific purpose and should be interpreted in light of its overarching goals. It is essential to analyze related statutes to assess if they apply to the same situation, with a preference for reconciling them to ensure both are given effect. This approach includes reviewing subsequent legislation to clarify the intentions behind the licensing statute for collection agencies. In response to a foreclosure crisis, Governor Martin J. O’Malley established the Homeownership Preservation Task Force on June 13, 2007, shortly after the enactment of the Maryland Collection Agency Licensing Act (MCALA). The Task Force aimed to address rising foreclosure rates by reviewing existing laws and regulations pertaining to the mortgage industry and foreclosure processes, proposing necessary legislative and regulatory changes. It highlighted the need to strengthen laws against mortgage transaction fraud and improve the foreclosure process. The Task Force noted that nearly 70% of homeowners now obtain mortgages through brokers, with non-bank originators collecting upfront fees, leading to a disconnect between homeowners and the holders of their mortgage notes. The current mortgage model involves brokers matching borrowers with lenders, after which loans are often packaged into mortgage-backed securities. Key components of the mortgage industry include lenders (typically banks), mortgage-backed securities (packages of loans sold to investors), and mortgage loan servicers (entities that manage loans and collect payments from borrowers). The mortgage marketplace consists of both primary and secondary markets, with the secondary market enabling lenders to sell originated mortgages, enhancing liquidity and reducing risk through diversification. Securitization is a critical process where a mortgage originator sells a mortgage to a buyer, often an investment bank subsidiary, which then bundles multiple mortgages into a "special purpose vehicle" (SPV) or trust. This SPV holds the loans and has no other assets or employees. A pooling and servicing agreement designates a trustee to manage the loan assets and a servicer to handle borrower communications and payments. Importantly, mortgage loan servicers, akin to debt collectors, are not selected by consumers, who cannot refuse to engage with the servicing company assigned through the securitization agreement. The Task Force examining this industry model did not address the licensing requirements under the Maryland Collection Agency Licensing Act (MCALA) for collection agencies. However, it noted that mortgage brokers, lenders, and servicers can operate legally under the Maryland Mortgage Lender Law. The Task Force Report highlights the necessity for mortgage originators in Maryland to obtain a separate license, noting there are 6,154 mortgage lending licensees and 10,493 mortgage originators, with approximately two-thirds (4,120) being brokers. In contrast, only 1,304 individuals hold a collection agency license under the Maryland Collection Agency Licensing Act (MCALA). The report recommends enhancing the legal and regulatory oversight of the mortgage lending industry by the Commissioner of Financial Regulation to protect homeowners and maintain industry integrity. It suggests enacting a criminal mortgage fraud statute applicable to all participants in mortgage transactions, including a reporting requirement to the Commissioner. Additionally, the Task Force proposed amendments to the statutory requirements governing the foreclosure process, which led to legislative changes in 2008, 2009, and 2010. These changes included revised recordation requirements, enhanced foreclosure process stipulations, a comprehensive mortgage fraud statute, and modifications to licensing requirements for mortgage lenders and originators, aimed at providing legal protections for homeowners. The Court noted that the General Assembly intentionally distinguished the consumer debt collection agency industry under MCALA from the mortgage industry, as evidenced by the separate legislative actions taken regarding mortgage reform. The Task Force did not address MCALA or collection agency licensing in its review of foreclosure and mortgage industry laws as of 2007. The Task Force acknowledged the existing mortgage industry model, which includes mortgage-backed securities structured as foreign statutory trusts and separate loan servicers responsible for collecting payments from homeowners. As of 2007, Maryland had approximately 6,154 mortgage lending licensees, comprising 4,120 mortgage brokers and an estimated 10,493 mortgage originator licensees. In contrast, the Department of Labor, Licensing and Regulation (DLLR) estimated only 1,304 licensed collection agencies, indicating that the Maryland Consumer Debt Collection Act (MCALA) was designed to regulate a significantly smaller industry. Legislative revisions stemming from the 2007 Homeownership Preservation Task Force aimed to address two distinct issues: regulating collection agencies that collect consumer debts for a fee and imposing stricter requirements on mortgage industry participants to protect homeowners during foreclosure processes. The absence of any discussion about MCALA or collection agencies during the legislature's deliberations on rising foreclosure rates suggests that the General Assembly did not intend for MCALA to apply to foreign statutory trusts. Following the majority of Maryland's mortgage foreclosure law reforms in 2008 and 2009, the General Assembly enacted the Maryland Statutory Trust Act in 2010, defining a "statutory trust" and a "foreign statutory trust" and requiring the latter to register with the State Department of Assessments and Taxation before conducting business in Maryland. This act also established penalties for non-compliance and affirmed that statutory trusts possess broad powers, including entering contracts, incurring liabilities, managing assets, and pursuing legal action. The Fiscal and Policy Note acknowledges that the legislature recognized the diverse functions of statutory trusts across various industries. It clarifies that certain activities of a foreign statutory trust, specifically foreclosing mortgages and deeds of trust in Maryland, do not constitute "doing business" in the state. This creates a conflict with the homeowners' claim that the Maryland Collection Agency Licensing Act (MCALA) requires foreign statutory trusts to obtain a license to act as collection agencies during foreclosure actions. The Maryland Statutory Trust Act and MCALA both apply in this context, leading to a need for the court to harmonize the statutes. The court aims to interpret statutes as a cohesive legal framework, but if an irreconcilable conflict exists, the more recently enacted statute may implicitly repeal conflicting provisions of the earlier one. The legislative history indicates that MCALA was designed to license entities within the collection agency sector, excluding foreign statutory trusts. Following the enactment of MCALA, comprehensive foreclosure reform was introduced, mandating specific homeowner protections for foreclosure processes. The Maryland Statutory Trust Act, passed in 2010, did not impose a registration requirement on foreign statutory trusts for foreclosure actions, acknowledging that MCALA's licensing focus did not extend to these trusts and that the foreclosure reform legislation adequately addressed the regulatory needs for foreclosure proceedings. Homeowners argue that the Maryland Statutory Trust Act's provisions are irrelevant to MCALA's intent. However, this perspective overlooks the legislative context; the Act was enacted after MCALA and foreclosure reforms, indicating that requiring statutory trusts to register separately for foreclosure actions would be redundant. Collectively, MCALA, the foreclosure reform legislation, and the Maryland Statutory Trust Act illustrate the legislature's intent to regulate the distinct collection agency industry while exempting foreign statutory trusts from additional licensing requirements for foreclosure actions. In 2008 and 2009, the Maryland legislature established specific procedures for in rem foreclosure proceedings. In 2010, it enacted the Maryland Statutory Trust Act, which exempted statutory trusts from registration when pursuing foreclosure, acknowledging that prior foreclosure reforms provided necessary protections. The legislative intent indicates that the General Assembly aimed to address abusive practices in the collection agency industry, as highlighted by the original licensing statute in 1977. Concerns arose when certain collection agencies circumvented licensing by purchasing debts directly, leading to a departmental bill request aimed at licensing those agencies engaging in debt collection practices after acquiring defaulted debts. However, the General Assembly did not intend to extend MCALA’s licensing requirements beyond the collection agency sector. Legislative history shows no intent to regulate the mortgage industry under MCALA, as evidenced by the Task Force's review of mortgage laws, which did not mention MCALA’s licensing. The Task Force clarified that securitization of loans requires special purpose vehicles, like trusts, and designated roles for trustees and loan servicers. The General Assembly enacted reforms to Maryland foreclosure law during 2008-2010, establishing specific procedures for in rem foreclosure proceedings. The legislature's failure to include a requirement for a Maryland Collection Agency Licensing Act (MCALA) license for mortgage industry entities indicates that such entities were not intended to be regulated under MCALA. The 2010 Statutory Trust Act further clarified that statutory trusts were not considered to be conducting business in Maryland for the purpose of foreclosures, as the existing foreclosure laws already outlined the necessary requirements. Therefore, the court concluded that foreign statutory trusts acting as special purpose vehicles for mortgage loans do not need a collection agency license under MCALA to initiate foreclosure actions. The circuit courts erred in dismissing these foreclosure proceedings based on the licensing issue. Consequently, the court reversed judgments from the Court of Special Appeals and various circuit courts, remanding the cases for further proceedings consistent with this interpretation, and ruled that costs should be borne by the respondents and appellees in the respective cases. The Circuit Court judges' conclusions in four consolidated cases are affirmed, aligning with the Court of Special Appeals' opinion in related cases. A dissent is noted against the Majority Opinion. The central issue revolves around the 2007 amendment to the Maryland Collection Agency Licensing Act (MCALA), which expanded licensing requirements to include entities collecting consumer debt they own or that is owned by others. The amendment aims to ensure that those purchasing and attempting to collect defaulted consumer debt are licensed. The case involves petitioners, substitute trustees, who have initiated foreclosure on defaulted residential mortgage debt purchased by foreign statutory trusts. Both the circuit courts and the Court of Special Appeals determined that MCALA applies to these collection activities, requiring the trusts to be licensed. The petitioners propose three arguments against this ruling: 1. The trusts do not qualify as a “collection agency” under MCALA. 2. Foreclosing on a residential mortgage does not constitute debt collection under the statute. 3. Even if the trusts fall under MCALA, they claim exemption as financial institutions known as “trust companies.” The statute's text indicates that entities engaged in collecting consumer claims they own, which were in default at acquisition, must be licensed. A “consumer claim” is defined as a claim for money owed arising from a transaction for a family, household, or personal purpose related to real property. The debts in question are residential mortgage loans, clearly fitting the definition of a “consumer claim.” The trusts acquired these claims at a discount while already in default, specifically created to collect these debts for the benefit of the trusts and their owners. Each trust involved, represented by the Petitioner trustees, operates as an entity engaged in the business of collecting consumer claims that were acquired when already in default, necessitating licensing under the Maryland Collection Agency Licensing Act (MCALA). The Majority Opinion spans 64 pages attempting to justify a conclusion that diverges from the statute's explicit language, notably refusing to accept Petitioners' argument that foreclosure actions do not constitute debt collection under MCALA. The opinion also does not support the Petitioners' classification of these entities as “trust companies.” The Petitioners' assertion that foreclosure should be viewed without considering its debt-collecting nature is dismissed as meritless, emphasizing that the foreclosure process aims to collect a consumer debt by selling the property. Furthermore, the Petitioners' argument that their statutory trusts qualify as “trust companies” is criticized for its reliance on dictionary definitions and irrelevant statutes. The opinion highlights that their reasoning would, absurdly, classify a family financing education as a savings and loan association. The Majority Opinion's agreement with the Petitioners is seen as a departure from established statutory construction principles, particularly neglecting the statute's text in favor of legislative history. It contends that the Majority Opinion overlooks the defined statutory terms in favor of a "commonly understood" definition, ultimately misinterpreting the law's intent and creating new criteria for application that are not found within the statute itself. A federal appellate judge compared the Majority Opinion’s approach to interpreting the Maryland Collection Agency Licensing Act (MCALA) to searching for friends at a crowded party, suggesting a reliance on legislative history to escape the plain text of the law. The Majority Opinion claims the text is ambiguous, although most judges have affirmed its clarity. Previous cases, such as Bradshaw v. Hilco Receivables and Ademiluyi v. PennyMac, confirm that MCALA's language is unambiguous, particularly regarding its application to purchasers of defaulted mortgage debt. The Majority Opinion dismisses contrary decisions, notably Old Republic Insurance Co. v. Gordon, where ambiguity was debated concerning a credit insurer's status under MCALA. The Majority Opinion's reliance on legislative history is criticized for substituting its own criteria, focusing on undefined terms like "mortgage industry" and "actors," which do not appear in the statute. The argument that the General Assembly exempted an entire industry contradicts the explicit statutory language that exempts specific entities. The Majority Opinion's extensive discussion on securitized mortgage pools highlights their role in the financial crisis but acknowledges the potential benefits of proper securitization. In these cases, trusts intentionally acquired already defaulted mortgage debt at a discount. The Majority Opinion fails to clarify how it classifies certain statutory trusts as part of the exempt "mortgage industry." There is no evidence that these trusts originate mortgages or provide liquidity to the mortgage market; rather, they purchase mortgage debt at reduced prices after default and pursue collection through foreclosure. This activity does not support the mortgage market or distribute default risk, as the mortgages involved are already in default. The behavior of these trusts aligns more closely with the debt buying and collection industry rather than traditional mortgage practices. The text references a shift in the debt collection landscape, highlighting that entities previously reluctant to collect on mortgage deficiencies are now entering this market, potentially bringing associated issues from the credit card collection sector into mortgage defaults. The Majority Opinion also conflates business registration with regulatory oversight, erroneously presenting a dichotomy between foreign statutory trusts and collection agencies. Under Maryland law, foreign statutory trusts are required to register to conduct business, with specific activities like mortgage foreclosure excluded from registration requirements. This exclusion allows trusts to operate without registering while still being able to initiate lawsuits in Maryland courts. MCALA's licensing requirement does apply to foreign statutory trusts engaged in foreclosure proceedings, despite a majority opinion suggesting otherwise based on an alleged conflict. The Foreign Statutory Trust Act's exceptions to “doing business” are limited to its specific provisions and do not exempt the trusts from complying with other Maryland laws, including licensing under MCALA. Although the act allows foreign statutory trusts to initiate foreclosure actions without registering with SDAT, it does not shield them from other regulations, such as landlord-tenant laws. The form of business organization—whether a statutory trust, corporation, or limited liability company—does not determine the type of business conduct or the regulatory obligations imposed by state, local, or federal laws. The Majority Opinion's assertion that MCALA was intended to have a limited scope based on historical data regarding collection agencies is misguided, especially in light of the increase in statutory trusts involved in mortgage collections since the law's enactment. The legal excerpt emphasizes the evolving nature of regulations under the Maryland Collection Agency Licensing Act (MCALA) and the increasing number of entities, such as debt buyers and statutory trusts, involved in activities requiring licensing. It notes that the original definition of "collection agency" was too narrow, failing to include these emerging entities, which led to legislative amendments in 2007 aimed at broadening the scope of regulation. The legislative history reveals a significant increase in licensed collection agencies from 1977 to 2007, indicating a need for updated definitions to encompass new business models in debt collection. The excerpt critiques the Majority Opinion's conclusion that foreign statutory trusts are not subject to MCALA licensing, arguing that this interpretation overlooks the clear legislative intent and language of the statute. It contends that these trusts, engaged in purchasing and collecting defaulted debt, must be licensed under MCALA. The author suggests that the Majority Opinion’s rationale relies on speculative interpretations regarding the silence of industry stakeholders during the legislative process, which is deemed insufficient to negate the clear requirements of the statute. Ultimately, the author advocates for affirming lower court decisions that align with the statute’s explicit language, asserting that statutory trusts involved in debt collection indeed require a collection agency license.