The “It Wasn’t Me” Defense
Lenders, loan servicers, businesses and their attorneys are often faced with debtors singing a common refrain when payment is demanded of them: “I don’t owe this money because ____________”. While the blank is often filled with nonsense, the line between nonsense and a potential source of serious liability and/or expense for the debt collectors has become blurred with respect to consumer debts. The Maryland Consumer Debt Collection Act (“MCDCA”) prohibits a debt collector from claiming or asserting rights that they know do not exist with respect to consumer debts. Some examples of prohibited behavior include collecting on promissory notes beyond the statute of limitations or foreclosing on deeds of trust that clearly do not attach to the property at issue.
Until recently, the prohibition on asserting rights that do not exist only applied when the improperly asserted rights were obviously unavailable from an objective perspective, rather than simply objected to by the debtor.
In Newsom v. Brock & Scott, PLLC, 253 Md.App. 181 (2021), the Court of Special Appeals significantly loosened that standard. There, the borrower claimed that her signature was forged on a deed of trust. The borrower’s testimony was akin to the Shaggy classic, “It Wasn’t Me”. The borrower admitted that the signature looked like her signature and could not explain how the forgery occurred, but insisted that the signature simply was not hers. The appellate court found that the borrower’s bare assertion that the signature was not hers was enough to create a jury question as to whether the collector should have believed the borrower and ceased debt collection activities accordingly. While it is unclear what the ultimate result of the case will be, the collector is faced with a huge legal bill and possible liability, simply because the borrower made a rather questionable claim that she did not sign a document.
Another recent decision in Nationstar Mortgage LLC v. Kemp, 476 Md. 149 (2021), is also problematic for debt collectors. In that case, a lender was collecting a default-related property inspection fee that was clearly permitted by the loan documents. However, a somewhat novel interpretation of Maryland’s usury law, applying usury restrictions to subsequent note holders, rendered those fees illegal. While the applicability of the statute was not obvious at the time, the Court of Appeals held that the question of whether the lender should have known that the fee was illegal when it was assessed was sufficiently pled, notwithstanding the unsettled status of the law. Again, while the ultimate outcome of the case is unknown, the fact remains that the lender is facing significant legal expense and possible liability because a statute was interpreted by the Court differently than the lender.
Any defense to collection, no matter how vaguely asserted, could give rise to liability and expense. While sovereign citizen defenses can still be ignored, anything else, no matter how improbable, should be thoroughly analyzed before deciding to proceed with collection efforts. Even if the defense ultimately proves frivolous, the fact that it was raised by the borrower could be enough to tie a collector up with MCDCA litigation for years.
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