Cashcall, Inc. v. Maryland Commissioner of Financial Regulation

GREENE, J. In the instant case, we address whether the definition of a “credit services business” under the Maryland Credit Services Business Act (“the MCSBA”) 1 requires there to be a direct payment from a consumer to a company whose primary business is to assist consumers in obtaining loans that would be usurious under Maryland law. The Commissioner of Financial Regulation of the Department of Labor, Licensing, and Regulation (“the Commissioner”) 2 brought an administrative enforcement action against Petitioners, CashCall, Inc. (“CashCall”), a California corporation, and John Paul Reddam (“Reddam”), the corporation’s president and owner, for violating various Maryland consumer protection laws, including the MCSBA. Petitioners disagreed that their business activities ⁴¹⁶ fell within the purview of the MCSBA, claiming that our holding in Gomez v. Jackson Hewitt, Inc., 427 Md. 128 , 46 A.3d 443 (2012) established a broad “direct payment” requirement within the MCSBA’s definition of a credit services business. We shall clarify the holding in Gomez v. Jackson Hewitt, Inc., 427 Md. at 128 , 46 A.3d at 443 by limiting its discussion of a “direct payment” requirement to the circumstances of that case.

For the reasons explained below, we hold that the definition of a credit services business does not contain a broad direct payment requirement. FACTUAL AND PROCEDURAL BACKGROUND A person or entity engaged in providing credit services business is subject to regulation under Maryland law. Under CL § 14-1901(e), (1) “Credit services business” means any person who, with respect to the extension of credit by others, sells, provides, or performs, or represents that such person can or will sell, provide, or perform, any of the following services in return for the payment of money or other valuable consideration: (i) Improving a consumer’s credit record, history, or rating or establishing a new credit file or record; (ii) Obtaining an extension of credit 3 for a consumer; or (iii) Providing advice or assistance to a consumer with regard to either subparagraph (i) or (ii) of this paragraph. (2) “Credit services business” includes a person who sells or attempts to sell written materials containing information that the person represents will enable a consumer to establish a new credit file or record. 4 ⁴¹⁷ Under CL and FI, a credit services business must comply with various requirements imposed by statute.

Most relevant to this case is the requirement that a credit services business is prohibited from assisting “a consumer to obtain an extension of credit at a rate of interest which, except for federal preemption of State law” would exceed the maximum annual percentage rates under Maryland Law. 5 CL § 14-1902(9). See CL § 12-102. Although federal law 6 allows federally ⁴¹⁸ insured banks to charge out-of-state consumers the same interest rate permitted by the bank’s home state, regardless of the interest rate caps imposed by the law of the consumer’s resident state, “a credit services business may not, under the MCSBA, assist a consumer in obtaining a loan, from any instate or out-of-state bank, at an interest rate prohibited by Maryland law.” Maryland Comm’r of Fin. Regulation v. CashCall, Inc., 225 Md.App. 313, 325, 124 A.3d 670, 677 (2015).

CashCall’s Business Activities CashCall marketed high-interest loans to consumers through television and internet advertisements. The advertisements contained information regarding CashCall’s website and telephone number. CashCall offered loans to consumers at three different interest rates: 59%, 89%, or 96%. 7 These interest rates greatly exceeded the interest rates permitted by Maryland law, which caps the interest rate at 33% on all loans below $6,000. 8 Between January 2006 and December 2010, through CashCall, Maryland consumers received 5,651 loans in amounts less than $6,000 with interest rates greater than 33%. Maryland consumers who visited the CashCall website or called CashCall directly were directed to fill out an online loan application though CashCall’s website.

CashCall then forwarded the completed application to a federally insured out-of-state bank that is exempt from Maryland’s usury laws. Once a bank approved a loan application, the bank would place, in the consumer’s bank account, the requested loan amount less a $75 fee designated as an “origination fee.” 9 The following example is illustrative of a typical transaction: In the case of a $2,600 approved loan, the consumer receives $2,525, which is the principal amount owed on the loan less the $75 origination fee. The consumer is required to pay the holder of the loan ⁴¹⁹ $2,600, plus interest. In other words, “the consumer ultimately pa[ys] the origination fee as he or she repa[ys] the loan in monthly installments to whomever [holds] the loan.” CashCall, Inc., 225 Md.App. at 318, 124 A.3d at 673 .

Specifically, CashCall had entered into partnerships with First Bank & Trust, a South Dakota-chartered bank and First Bank of Delaware, a Delaware-chartered bank. Pursuant to contracts between CashCall and each bank, CashCall was required to purchase a loan three days after 10 the loan was originated and the funds dispersed to the consumer. 11 Cash-Call paid the bank the full value of the loan, i.e., the $2,600 from the example above, plus the three days of interest that had accrued on the loan. The banks also paid CashCall a “royalty” fee of $5 to $72.22 per loan depending on the amount of the loan and the bank that disbursed the funds. Upon CashCall’s purchase of the loan, all of the bank’s rights and interests in the loan were assigned, without recourse, to CashCall.

This gave CashCall the right to enforce the terms provided in the loan documents, including the right to collect payments of the principal, interest and other fees. 12 In fact, if the bank mistakenly received a payment from a consumer on a ⁴²⁰ loan CashCall purchased, the bank was required to hold the payment “in trust” and forward the payment to CashCall no later than the following business day. Given the nature of the partnership between CashCall and the banks, Maryland consumers who obtained loans through CashCall dealt primarily with CashCall. A consumer’s contact with the bank was limited to a single transaction: the bank’s deposit of money into the consumer’s bank account. Maryland consumers communicated with CashCall, and made all loan payments whether it be for principal, interest, or any other fees directly to CashCall.

The Enforcement Action Between 2007 and 2011, eighteen Maryland residents filed complaints with the Commissioner. Based on these complaints, the Commissioner initiated an investigation into the business practices of CashCall and Reddam. 13 On June 23, 2009, in a “Summary Order to Cease and Desist,” 14 the ⁴²¹ Commissioner found that “[Petitioners] engaged in illegal and predatory business activities which directly resulted in Maryland consumers obtaining usurious loans from national banks” in violation of the MCSBA. In response, on July 7, 2009, Petitioners requested a hearing in the Office of Administrative Hearings (“OAH”). On September 14, 2010, administrative law judge (“ALJ”) Nancy E. Paige held a hearing on the Summary Order.

In ALJ Paige’s December 2, 2010 “Proposed Decision,” she concluded that Petitioners violated the MCSBA and the licensing provisions of the Maryland Consumer Loan Law. 15 Characterizing each of the 5,651 loans Petitioners offered to a Maryland consumer as a first offense, ALJ Paige proposed a penalty of $1,000 for each loan, for a total civil penalty of $5,651,000. ALJ Paige further recommended that the Commissioner “[e]nter a final Order that [Petitioners] cease and desist from engaging in the ‘credit services businessf ]’ ” and ordered CashCall to pay the full civil penalty of $5,651,000. Petitioners filed exceptions to the ALJ Paige’s “Proposed Order” on January 20, 2011. The parties agreed to stay the matter pending the outcome of a case for which we had granted certiorari on October 24, 2011, Gomez v. Jackson Hewitt, Inc., ⁴²² 422 Md. 352 , 30 A.3d 193 (2011) This Court issued its opinion in Gomez, 427 Md. at 128 , 46 A.3d at 443 on June 22, 2012.

In the aftermath of Gomez, Commissioner Mark Kaufman held a hearing on the exceptions filed in this case on August 10, 2012 and issued an “Opinion and Final Order” (“Final Order”) on November 8, 2012. In his Final Order, Commissioner Kaufman explained that the representative promissory note and disclosure statement ALJ Paige admitted into evidence demonstrates how consumers made payments directly to CashCall: [Petitioners’] Exhibit # 1 (admitted in the OAH hearing) is the First Bank & Trust Promissory Note and Disclosure Statement, dated as of December 12, 2006 (the “Promissory Note”) for a $2,600 consumer loan. The “financed” amount of the loan is shown as $2,525.00. This is the amount received by the consumer.

A “Prepaid Finance Charge/Origination Fee” is listed at $75.00. The $75.00 fee is rolled into the principal amount of the loan. As a result, the total amount of principal due from the consumer is $2,600.00. In order to understand the significance of the $75 fee, one must turn back to the Sealed Agreements [contracts between CashCall and the bank].... [W]hen CashCall purchased a loan, CashCall paid for the outstanding balance due, including all principal, interest origination fees, and other charges or sums owed by the borrower.

In other words, CashCall paid $2,600 for the loan. Because the loan was transferred from the bank to CashCall three days later, the consumer did not make a single payment to the bank.... The consumer, however, directly paid CashCall, not the bank, because CashCall collected on the loan, which included the $75.00. (footnote omitted).

Moreover, Commissioner Kaufman rejected Petitioner’s argument that Gomez, 427 Md. at 128 , 46 A.3d at 443 applied to the Petitioners’ case. He distinguished Gomez factually: ⁴²³ In Gomez, the fees to Jackson Hewitt for tax preparation were rolled into the principal amount of the loan and the lending bank, not Jackson Hewitt, collected on the loan. The lending bank then paid Jackson Hewitt, resulting in no direct payment by the consumer to Jackson Hewitt. Here, the consumer paid CashCall for the principal, interest, and fees on the loan.

(emphasis in original). Commissioner Kaufman also conducted an analysis of Gomez and concluded that “Gomez applies to tax preparers who were marketing refund anticipation loans in the context of tax preparation services.” He explained: One of the concerns of the Court of Appeals was that allowing indirect payment to trigger the application the MCSBA in the context of refund anticipation loans could lead to “the absurd results in applying the statute to tremendous numbers o'f retailers throughout Maryland who have never registered under the [M]CSBA.” Gomez, 427 Md. at 138 [ 46 A.3d 443 ]. Specifically, the Court was concerned that “department stores, electronic retailers, big box retailers, bookstores, gas stations[, and] clothing retailers” would be subject to the MCSBA when assisting consumers in applying for credit offered by third-party banks. Gomez, 427 Md. at 159 [ 46 A.3d 443 ].

The Court was clearly focused on the fact that the extension of credit was related to the services of the facilitator of the loan, but the primary commercial and contractual relationship between Ms. Gomez and Jackson Hewitt was related to tax preparation, not obtaining an extension of credit. The extension of credit was merely collateral to Jackson Hewitt’s primary service of preparing tax returns. On the other hand, Cash-Call’s solicitation, website applications, support services and assistance to consumers, and processing all zeroed in on obtaining a loan for a consumer. The record in this matter contains no evidence that CashCall provided any other services to the consumers.

Application of the MCSBA to CashCall in this context creates no risk that department ⁴²⁴ stores, retailers, or gas stations could be swept within the scope of the MCSBA. (alterations and emphasis in original). Commissioner Kaufman also emphasized this Court’s detailed analysis of the legislative history of the MCSBA. After recounting the legislative history of the MCSBA, as discussed in Gomez, he concluded that “a ‘marketer’ of loans for out-of state banks who receives an indirect payment from a consumer for providing services to facilitate a high-interest, small-dollar consumer loan is subject to the MCSBA and the Commissioner’s jurisdiction to enforce the MCSBA.” Thus, he ordered that Petitioners “cease and desist from engaging in the ‘credit services business[ ]’ ” and pay to the Commissioner “a civil penalty of $5,651,000.00 within 30 days.” On December 7, 2012, CashCall filed a timely petition for judicial review of the Final Order and a motion to stay the Final Order in the Circuit Court for Baltimore City.

Reddam did not file a petition for judicial review at that time. On April 11, 2013, however, CashCall and Reddam filed an amended petition for judicial review solely for the purpose of adding Reddam as a petitioner. The Circuit Court dismissed the amended petition for judicial review as untimely, eliminating Reddam as a party to the judicial review proceeding. Despite noting that CashCall may be “a predatory entity preying on the consumers of Maryland and has developed a scheme to evade the usory [sic] laws of Maryland,” the Circuit Court reversed the Final Order on July 3, 2013.

In its “Memorandum and Order,” it explained that the Gomez decision requires a direct payment between a business and a consumer under the MCSBA. Therefore, it concluded that CashCall was not a “credit services business” under the MCSBA. The Circuit Court further issued a “Nun Pro Tunc Order” to clarify that its reversal of the Final Order applied only to CashCall and not Reddam because Reddam was not a party to the judicial review proceeding. As a result, the Final Order against Reddam was intact and enforceable against him.

On September 18, 2013, the Commissioner filed a Notice of ⁴²⁵ Appeal to the Court of Special Appeals. 16 The intermediate appellate court conducted a comprehensive review of this Court’s decision in Gomez and of the MCSBA, including its legislative history. In a reported opinion, Maryland Comm’r of Fin. Regulation v. CashCall, Inc., 225 Md.App. 313 , 124 A.3d 670 (2015), the Court of Special Appeals affirmed the Final Order. We granted certiorari, CashCall, Inc. v. Comm’r of Fin.

Regulation, 445 Md. 487 , 128 A.3d 51 (2015), to answer the following questions, which we have consolidated and rephrased: 17 Does the MCSBA’s definition of a “credit services business” require there to be a direct payment from a consumer to an entity whose primary business is to market, facilitate, and ultimately acquire the loans it arranged? For the reasons stated below, we shall answer this question in the negative. Accordingly, the judgment of the Court of Special Appeals is affirmed. STANDARD OF REVIEW Review of most administrative agency decisions, such as the present one, is governed by the Maryland Admin ⁴²⁶ istrative Procedure Act, Md. Code (1984, 2014 Repl.

Vol.), § 10-222 of the State Government Article. Bayly Crossing, LLC v. Consumer Prot. Div., Office of Atty. Gen., 417 Md. 128, 136 , 9 A.3d 4, 8-9 (2010).

In an appeal from the judicial review of an administrative agency’s decision, “we look through the decisions of the circuit courts and intermediate appellate court, and evaluate the agency decision directly.” W.R. Grace & Co. v. Swedo, 439 Md. 441, 452-53 , 96 A.3d 210, 217 (2014). When a party challenges how an agency applied, as opposed to interpreted, a statute, the party raises a mixed question of law and fact. Bayly Crossing, LLC, 417 Md. at 138 , 9 A.3d at 10 . “We [] apply the substantial evidence standard when reviewing mixed questions of law and fact.” Consumer Prot. Div. v. Morgan, 387 Md. 125, 160 , 874 A.2d 919, 939 (2005).

The standard for substantial evidence review is “whether a reasoning mind reasonably could have reached the factual conclusion the agency reached.” Christopher v. Dept. of Health, 381 Md. 188, 199 , 849 A.2d 46, 52 (2004) (quoting Board of Physician v. Banks, 354 Md. 59, 68 , 729 A.2d 376, 380 (1999)). DISCUSSION CashCall argues that this Court’s decision in Gomez, 427 Md. at 128 , 46 A.3d at 443 made it clear that the plain language of CL § 14-1901 requires the consumer to have made a direct payment to a business like theirs in order to fall within the ambit of the MCSBA. Distinguishing the case sub judice from Gomez, the Commissioner counters that the direct payment requirement discussed in Gomez does not apply to companies like CashCall, whose sole business is to arrange loans for consumers. We agree and provide clarity as to the meaning of what constitutes a “credit services business” under the MCSBA.

Gomez v. Jackson Hewitt In Gomez v. Jackson Hewitt, we were called upon to decide whether the MCSBA applied to “a tax preparer who receives payment from a lending bank for ‘facilitating’ a consumer’s ⁴²⁷ obtention of a refund anticipation loan (“RAL”), 18 where the tax preparer receives no direct payment from the consumer for this service^]” 427 Md. at 133 , 46 A.3d at 446 . In Gomez, Jackson Hewitt, a provider of tax preparation services, had an agreement with a lender, Santa Barbara Bank & Trust (“SBBT”). 427 Md. at 134 , 46 A.3d at 447 . Pursuant to this agreement, SSBT would “offer, process, and administer certain financial products, including RALs” to Jackson Hewitt customers. Id.

Jackson Hewitt facilitated these loans by informing its customers of the availability of a RAL and providing a loan application developed by SBBT. Gomez, 427 Md. at 135 , 46 A.3d at 448 . Under the program agreement, SBBT paid Jackson Hewitt a fixed annual fee as well as “variable payments tied to growth in the SBBT program.” Gomez, 427 Md. at 135 , 46 A.3d at 447 . Alicia Gomez alleged violations of the MCSBA after Jackson Hewitt prepared her federal income tax return and helped her obtain a RAL through the SBBT program.

Gomez, 427 Md. at 133-34 , 46 A.3d at 447 . 19 Before this Court, Ms. Gomez, the Commissioner, and the Consumer Protection Division of the Office of the Maryland Attorney General 20 argued that the “plain language of the [M]CSBA and its legislative history” supported the MCSBA’s application to Jackson Hewitt. Gomez, 427 Md. at 142 , 46 A.3d at 452 . Jackson Hewitt disagreed, arguing that it did not qualify as a credit services business because it was not paid directly by the consumer. Gomez, 427 Md. at 147 , 46 A.3d at 454 . ⁴²⁸ This Court agreed with Jackson Hewitt, concluding that Jackson Hewitt was not a credit services business and therefore, not subject to the requirements of the MCSBA.

Gomez, 427 Md. at 178 , 46 A.3d at 473 . We explained: In the context of the [MjCSBA and § 14-1901(e), “in return” can reasonably be understood to envision an exchange of assistance for payment between the consumer and the provider of that assistance and to mean that any payment to the credit services business for such assistance in obtaining the extension of credit must come directly from the consumer. Gomez, 427 Md. at 154 , 46 A.3d at 459 (emphasis in original). This Court also conducted an extensive analysis of the legislative history of the MCSBA and the General Assembly’s enactment of RAL legislation in 2010 to confirm that “the most logical reading of the [MjCSBA as a whole is that it was not intended to regulate RAL facilitators who do not receive compensation directly from the consumer.” Gomez, 427 Md. at 159 , 46 A.3d at 462 .

The Court of Special Appeals appropriately recognized that in rendering its decision in Gomez, [the Court of Appeals] did not intend to establish a universal rule, and that the “direct payment” requirement was not meant to apply to a company, like CashCall, which is exclusively engaged in assisting Maryland consumers to obtain small loans bearing annual interest rates that would be, under Maryland law, usurious and then, to further profit from this activity, immediately purchases the loans after their issuance and thereafter collects all payments due on the loans from the consumer, including the “rolled in” origination fee. CashCall, Inc., 225 Md.App. at 330-31 , 124 A.3d at 680 . We agree and now make it clear that the “direct payment” requirement as set forth in Gomez is limited to the circumstances before the Court in that case, i.e., “a tax preparer who receives payment from a lending bank for ‘facilitating’ a consumer’s obtention of a [RAL].” Gomez, 427 Md. at 133 , 46 A.3d at 446 . ⁴²⁹ Chief Judge Krauser noted, as did Commissioner Kaufman in his Final Order, that in Gomez, we were “asked to address a set of facts quite different from those presently before us.” CashCall, Inc., 225 Md.App. at 331 , 124 A.3d at 680 . “The facts in Gomez established that there were, in the Commissioner’s words, ‘two separate commercial relationships’ between Ms. Gomez and Jackson Hewitt: one relationship for tax preparation purposes and the other for facilitating the RAL.” Id. In his Final Order, Commissioner Kaufman astutely recognized that “the primary commercial and contractual relationship between Ms. Gomez and Jackson Hewitt was related to tax preparation, not obtaining an extension of credit” and that “[t]he extension of credit was merely collateral to Jackson Hewitt’s primary service of preparing tax returns.” In contrast, CashCall’s business model revolves around the benefits it inures from purchasing and collecting principal, interest and all other fees on the very loans it assisted consumers in obtaining.

Ms. Gomez’s allegation in her complaint that she “ ‘indirectly ’ paid [Jackson Hewitt] for arranging the RAL” zones in on the annual fee SSBT paid to Jackson Hewitt for participation in the SBBT program. Gomez, 427 Md. at 137 , 46 A.3d at 448-49 (emphasis in original, footnote omitted). Ms. Gomez obtained a loan in the amount of $2,323. This amount was composed of the following: $1,950.97 as the “[a]mount paid directly to [Ms. Gomez];” $284.00 as the “[t]ax preparation fees paid to” [Jackson Hewitt]; $29.95 as the “SBBT tax refund account handing fee;” and $58.08 as the “total prepaid finance charge (SBBT bank fee).” Gomez, 427 Md. at 136 , 46 A.3d at 448 (emphasis added).

As a result, the payment for Jackson Hewitt’s role in “providing advice or assistance to a consumer with regard to ... [obtaining an extension of credit for a consumer” was characterized as “indirect” because Ms. Gomez contended that SSBT used the income from the $88.03 in fees it charged her to pay ⁴³⁰ Jackson Hewitt the fixed annual fee and payments tied to growth under the SBBT program. CL § 14-1901(e). See Gomez, 427 Md. at 137, n. 12 , 46 A.3d at 449, n. 12 . It is evident that the $284 amount SBBT paid to Jackson Hewitt was the amount Ms. Gomez owed Jackson Hewitt for tax preparation services.

The lending bank paid Jackson Hewitt separately, from its own funds, for Jackson Hewitt’s role in facilitating the RAL. To surmise, as Ms. Gomez did, that the lending bank categorically paid Jackson Hewitt for its RAL facilitation role out of the exact income it obtained from the consumer through the SBBT program, rather than income it obtained elsewhere through business activities unrelated to the SBBT program is, at best, conjecture. Thus, the link between the fees paid by Ms. Gomez to SBBT as the “SBBT tax refund account handling fee” and the “total prepaid finance charge (SBBT bank fee),” and the independent payments SBBT made to Jackson Hewitt as part of the SBBT program is tenuous. Gomez, 427 Md. at 136 , 46 A.3d at 448 .

Based on this particular scenario, this Court recognized that Ms. Gomez’s “interpretation of the [M]CSBA would lead to absurd results in applying the statute to tremendous numbers of retailers throughout Maryland who have never registered under the [MjCSBA.” Gomez, 427 Md. at 138 , 46 A.3d at 449 . Concluding that a “direct payment” requirement existed was appropriate under those circumstances to allay that concern. That concern does not exist in the case sub judice. The Final Order distinguishes the instant case from Gomez: “In Gomez, the fees to Jackson Hewitt for tax preparation were rolled into the principal amount of the loan and the lending bank, not Jackson Hewitt, collected on the loan.” (emphasis in original).

Furthermore, “CashCall’s solicitation, website applications, support services and assistance to consumers, and processing all zeroed in on obtaining a loan for a consumer. The record in this matter contains no evidence that CashCall provided any other services to the consumers.” The Final Order also indicated that the “[ajpplication of the MCSBA to CashCall in this context creates no risk that department ⁴³¹ stores, retailers, or gas stations could be swept within the scope of the MCSBA.” Limiting the “direct payment” requirement to the facts of Gomez also comports with the principals of statutory construction: The cardinal rule of statutory interpretation is to ascertain and effectuate the real and actual intent of the Legislature. A court’s primary goal in interpreting statutory language is to discern the legislative purpose, the ends to be accomplished, or the evils to be remedied by the statutory provision under scrutiny. To ascertain the intent of the General Assembly, we begin with the normal, plain meaning of the statute.

If the language of the statute is unambiguous and clearly consistent with the statute’s apparent purpose, our inquiry as to the legislative intent ends ordinarily and we apply the statute as written without resort to other rules of construction. We neither add nor delete language so as to reflect an intent not evidenced in the plain and unambiguous language of the statute, and we do not construe a statute with forced or subtle interpretations that limit or extend its application. We, however, do not read statutory language in a vacuum, nor do we confine strictly our interpretation of a statute’s plain language to the isolated section alone. Rather, the plain language must be viewed within the context of the statutory scheme to which it belongs, considering the purpose, aim, or policy of the Legislature in enacting the statute.

We presume that the Legislature intends its