Commissioner of Financial Regulation v. Brown, Brown, & Brown, P.C.

McDonald, j. Maryland law places various restrictions on those who purport to assist consumers in obtaining credit — restrictions that include certain licensing, bonding, and disclosure requirements. These requirements are set forth in the Maryland Credit Services Businesses Act (“MCSBA”), codified at Maryland Code, Commercial Law Article (“CL”), § 14-1901 et seq. Under the rubric “credit services business,” the MCSBA applies to those who offer, in return for the payment of money, to assist a homeowner in default on a mortgage loan to fend off foreclosure by obtaining a modification of that loan from the lender.

In an accommodation to other regulatory regimes, the statute exempts from its requirements certain entities and professions that are regulated by other bodies. Among those exemptions is one for Maryland lawyers acting within the scope of their legal practice, so long as they do not engage in activities that constitute a “credit services business” on a “regular and continuing basis.” In this case, Respondent Brown, Brown & Brown, P.C. (“BB&B”), a small Virginia law firm, consulted with hundreds ³⁴⁹ of Maryland homeowners facing foreclosure, and entered into more than 50 agreements with homeowners over a nine-month period in 2008 and 2009. The firm’s managing partner, Respondent Christopher E. Brown, oversaw this aspect of the firm’s business and signed many of the agreements.

Under these agreements, in return for an advance payment of money by the homeowner, BB&B promised to attempt to renegotiate the mortgage loan so that the homeowner could avoid foreclosure. BB&B ultimately did not obtain loan modifications for any of those homeowners. After receiving a complaint about BB&B from a family that had entered into such an agreement, Petitioner Commissioner of Financial Regulation (“Commissioner”), who has primary responsibility for enforcing the MCSBA, initiated the administrative proceedings that resulted in this case. Following an evidentiary hearing, an administrative law judge (“ALJ”) of the Office of Administrative Hearings concluded that Mr. Brown and his firm had violated the MCSBA in several respects and recommended that the Commissioner issue a permanent cease and desist order, impose a substantial civil monetary penalty, and direct BB&B and Mr. Brown to pay treble damages to the Maryland homeowners with whom they had agreements.

The Commissioner accepted the ALJ’s recommendations and issued an order imposing that relief. Respondents sought judicial review. The Circuit Court reversed the agency decision on the ground that the agreements with the Maryland homeowners were for legal services rather than credit services and that the MCSBA did not apply to BB&B and Mr. Brown. The Court of Special Appeals affirmed in an unreported opinion.

We granted certiorari. We hold that the agency decision accurately construed the MCSBA and was supported by substantial evidence. There is substantial evidence in the administrative record that BB&B and Mr. Brown represented that, in return for the payment of money, they would undertake to obtain a loan modification for the homeowners with whom they had agreements. Those activities fell within the definition of “credit services business” ³⁵⁰ under the statute, unless BB&B and Mr. Brown qualified for an exemption.

There is also substantial evidence in the record to support the conclusion that BB&B and Mr. Brown did not qualify for the attorney exemption in the MCSBA. While BB&B employed at least one Maryland attorney during the relevant period, Mr. Brown and another non-Maryland attorney at the firm executed many of the agreements. More importantly, the evidence revealed that the firm engaged in these activities on a “regular and continuing basis” during the relevant period of time and therefore did not qualify for the exemption. I Background A. Statutory Framework Credit Services Business The MCSBA defines a “credit services business” as “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 certain enumerated services “in return for the payment of money or other valuable consideration.” CL § 14 — 1901(e)(1) (emphasis added). 1 The term “person” is defined to include not only individuals, but also various types of entities, as well as “any other legal or commercial entity.” CL § 14 — 1901(g).

The enumerated services that qualify a person as a “credit services business” are: “(i) Improving a consumer’s credit record, history, or rating or establishing a new credit file or record; (ii) Obtaining an extension of credit for a consumer; or (iii) Providing advice or assistance to a consumer with regard to either [of the first two services].” CL § 14 — 1901(e)(1) (emphasis added). An “extension of credit” is defined as “the right to defer payment of ³⁵¹ debt, or to incur debt and defer its payment, offered or granted primarily for personal, family, or household purposes.” CL § 14 — 1901(f). Thus, an individual or entity that, in return for the payment of money, offers to assist a consumer in obtaining an extension of credit — such as the deferral of a debt that was incurred for household purposes — falls within the general definition of “credit services business.” Attorney Exemption Notwithstanding the breadth of the general definition of “credit services business” in the statute, there are 10 categories of individuals and entities excluded from that definition. CL § 14-1901(e)(3).

Each of those categories relates to individuals or entities whose activities are regulated by other authorities. Pertinent to this case, one such category encompasses “[a]n individual admitted to the Bar of the Court of Appeals of Maryland when the individual renders services -within the course and scope of practice by the individual as a lawyer and does not engage in the credit services business on a regular and continuing basis.” CL § 14-1901(e)(3)(vi). We will refer to this provision as the “attorney exemption.” 2 A person who claims the benefit of an exemption, such as the attorney exemption, has the burden of establishing entitlement to the exemption. CL § 14-1907(d).

Regulation of Credit Services Businesses The MCSBA applies to any contract with a Maryland resident involving credit services. CL § 14-1903(a). It regulates the activities of a credit services business in a number of ways. Among other things, a credit services business may not ³⁵² “[c]harge or receive any money or other valuable consideration prior to full and complete performance of the services that [it] has agreed to perform for or on behalf of the consumer,” must be licensed by the Commissioner, must provide the consumer with certain specified information before “either the execution of a contract or agreement between a consumer and a credit services business or the receipt by the credit services business of any money or other valuable consideration,” must use contracts meeting certain requirements, and must obtain a surety bond.

CL §§ 14-1902(6), 14-1903, 14-1904, 14-1906, and 14-1908. A contract for credit services that fails to comply with the MCSBA is void and unenforceable. CL § 14 — 1907(b). The provisions of the MCSBA are primarily enforced by the Commissioner of Financial Regulation, who may issue cease and desist orders and initiate administrative enforcement proceedings.

CL §§ 14-1911 through 14-1913. 3 One who negligently fails to comply with the statute is liable for any actual damages sustained by consumers, as well as attorney’s fees and the costs of the proceeding. CL § 14 — 1912(b). One who “willfully” violates the MCSBA is liable for any actual damages suffered by the consumer, a monetary award of treble damages of the total amount collected from the consumer, as ordered by the Commissioner, and any punitive damages that a court awards, as well as costs and attorney’s fees. CL § 14-1912(a).

The Commissioner also has authority, under the general enforcement authority of that office, to impose a civil monetary penalty of up to $1,000 for a first violation and up to $5,000 for each subsequent violation. Maryland Code, Financial Institutions Article (“FI”), § 2-115(b)(3). B. Facts The Firm The following facts were found by the ALJ who conducted the hearing and were accepted by the Commissioner, or are ³⁵³ undisputed. During the relevant period, BB&B was a law firm located in Alexandria, Virginia, that employed no more than four attorneys at any one time. 4 Mr. Brown, an attorney licensed to practice law in Virginia and the District of Columbia, served as the managing partner of BB&B and was its sole shareholder.

Mr. Brown was not licensed to practice law in Maryland. During the time period relevant to this case, BB&B employed a Maryland lawyer to meet with Maryland clients and work on their matters. Specifically, Bradley Deutchman, a lawyer licensed in Maryland, worked for BB&B during 2008, but left in January 2009. After Mr. Deutchman left the firm, it employed Adam Polsky, who was also licensed in Maryland, for three or four months at the beginning of 2009.

If a Maryland lawyer was not available to meet with a Maryland client of BB&B, Mr. Brown or Michael Miller, a lawyer licensed in the District of Columbia, would meet with the Maryland client instead. Referrals of Homeowners Facing Foreclosure During late 2008 and early 2009, Mortgage Analysis & Consulting LLC, a Virginia-based business that advertised in Spanish-language media and that accepted fees from homeowners to analyze their mortgage status, referred hundreds of Maryland homeowners to BB&B. 5 The ALJ found that Mortgage Analysis & Consulting was responsible for 90 per cent of the homeowners who consulted with the firm during that period. 6 Mr. Deutchman estimated that the firm actually entered into agreements with less than a quarter of those homeowners. Mr. Deutchman testified that, by the time he left ³⁵⁴ the firm in early 2009, he spent the majority of his time dealing with the homeowners facing foreclosure. Between June 2008 and March 2009, at least 57 Maryland homeowners, most of whom were referred by Mortgage Analysis & Consulting, paid BB&B to help them with their mortgage debts.

Most of the Maryland homeowners who entered into these agreements with BB&B were native Spanish-speakers and spoke little or no English. Most, if not all, of the homeowners were seeking a modification of their mortgage loans. Agreements with Homeowners The agreements between BB&B and Maryland homeowners were entitled either “Retainer Agreement” or “Fee Agreement.” Although the agreements varied in their precise content and some contained parallel provisions in Spanish as well as English, certain provisions were common to the vast majority of the agreements. Under the agreements, homeowners paid BB&B amounts varying from $2,500 to $7,500 up front before receiving any services.

The amount paid, according to the agreement, was deemed “earned upon receipt.” An introductory paragraph of the agreement, which appears in several different iterations in the agreements, stated that BB&B would represent the homeowners in negotiations with the homeowner’s lender, foreclosure defense, and possible litigation concerning the homeowner’s property. The nature of the work, in relation to the amount paid, was elaborated in a paragraph entitled “BB&B’s Obligations.” That paragraph specified that, in consideration for the money paid by the homeowner, the firm would “engage the appropriate party in discussions to renegotiate the terms of your loan.” If the renegotiation of the homeowner’s mortgage loan proved unsuccessful, BB&B was to “assess the chances of success in state or federal court and the costs involved” to decide whether to do something more. In the event of such further action, the agreements provided that BB&B would receive an additional fee (usually stated as a 40% contingency fee, or any attorney’s fee awarded by a court, whichever was greater). ³⁵⁵ Only four of the agreements with Maryland homeowners were signed by the firm’s Maryland lawyer on behalf of BB&B. Thirteen were signed by other BB&B lawyers, including Mr. Brown, on behalf of BB&B, while most of the agreements had no signature of any attorney on behalf of BB&B. BB&B apparently made little effort to actually renegotiate loans and did not obtain a loan modification for any of the Maryland homeowners with whom it had agreements. There was some evidence that it made other efforts that it referred to as “foreclosure defense.” In particular, it would sometimes send what Mr. Deutchman referred to as “form letters” to lenders requesting documentation under certain federal statutes in the hope that the lender would fail to make a timely response and that BB&B might use that failure as leverage in future negotiations. 7 The Experience of Mr. and Mrs. Batres Testimony at the administrative hearing focused on the example of Miguel and Teresa Batres, who filed the complaint with the Commissioner that initiated this case.

Ms. Batres, whose native language is Spanish and who does not read English, responded to a Spanish-language radio advertisement for Mortgage Analysis & Consulting. After paying $150 to that entity, she was referred to BB&B to help her obtain a loan modification. On July 23, 2008, she and her husband signed an agreement with BB&B and paid $1,500 of the $3,000 specified in the agreement. Approximately six months later, after receiving a notice initiating a foreclosure action as to their home, and a form notice of the Commissioner advising homeowners in foreclosure of potential remedies, the Batreses contacted the Commissioner’s Office to lodge a complaint against BB&B. The ³⁵⁶ Batreses alleged that BB&B had done nothing on their behalf and asked for their money back.

The Batreses eventually lost their home to foreclosure. 8 Non-Compliance with the MCSBA Neither BB&B nor Mr. Brown nor any of the firm’s other attorneys has ever been licensed under the MCSBA. Nor did they apparently comply with the other requirements of the Act, such as the bonding and disclosure requirements. None of the agreements contained any advisements relevant to credit services. C. Procedural History Administrative Investigation and Charges As a result of the Batres complaint, the Commissioner investigated BB&B. On the basis of that investigation, the Commissioner issued a Summary Order to Cease and Desist on March 6, 2009 to BB&B, Mr. Brown, Mr. Deutchman, and Mr. Miller that alleged various violations of the MCSBA.

In response, BB&B terminated its agreements with Maryland homeowners. In April 2009, Mr. Deutchman settled with the Commissioner, admitting the essentials of the alleged violations. BB&B and Mr. Brown requested a contested case hearing. 9 The Commissioner referred the matter to the Office of Administrative Hearings for a hearing and proposed decision. Administrative Hearing and Decision On September 28 and November 4, 2010, an ALJ of the Office of Administrative Hearings held an evidentiary hearing.

After receiving post-hearing briefs, the ALJ issued a Proposed ³⁵⁷ Decision on March 8, 2011, concluding that BB&B and Mr. Brown had violated the MCSBA. The ALJ recommended that the Commissioner issue a final cease and desist order and assess a civil monetary penalty in the amount of $114,000 under FI § 2-115(b)(3). In addition, the ALJ found that the violations were “willful” and, accordingly, recommended that the Commissioner order that BB&B and Mr. Brown pay to the homeowners treble damages pursuant to CL § 14-1912(a)(2). The matter was delegated to the Deputy Commissioner of Financial Regulation as final agency decisionmaker under the State Administrative Procedure Act.

See FI § 2-103; Maryland Code, State Government Article, §§ 10-216, 10-221. On May 5, 2011, the Deputy Commissioner issued a Proposed Order adopting the ALJ’s findings of fact, conclusions of law, and recommended order with minor amendments. Two weeks later, BB&B and Mr. Brown advised the Commissioner that they excepted to the proposed disposition of the case and asked for an exceptions hearing. There followed an interregnum during which the parties entered into a settlement agreement and consent order.

BB&B and Mr. Brown were apparently unable or unwilling to carry out some of the monetary requirements of the consent order and the administrative proceeding was revived. 10 The Deputy Commissioner held a hearing on the exceptions of BB&B and Mr. Brown on October 4 and October 23, 2012. On March 26, 2013, the Deputy Commissioner issued an Opinion and Final Order concluding that BB&B and Mr. Brown had violated the MCSBA. The Opinion and Final Order also declared that the agreements with Maryland homeowners were void and unenforceable, ordered BB&B and Mr. Brown ³⁵⁸ to cease and desist from engaging in any credit services business activities with Maryland residents, held BB&B and Mr. Brown jointly and severally liable for a civil monetary penalty of $114,000, 11 and directed them to pay 57 Maryland consumers a total of $720,600 as treble damages. 12 Judicial Review BB&B and Mr. Brown sought judicial review of the agency decision in the Circuit Court for Baltimore City. In the memorandum in support of their petition, BB&B and Mr. Brown contended: (1) for a variety of reasons, the MCSBA did not apply to them; and (2) even if it did, any violations they committed were not willful.

After hearing legal arguments of the Commissioner and of BB&B and Mr. Brown on June 18 and July 29, 2014, the Circuit Court issued an order and memorandum opinion reversing the Commissioner’s decision. The Circuit Court concluded that, while BB&B and Mr. Brown may have violated the ethical rules governing attorneys, any loan modification they obtained would have been “ancillary” to ³⁵⁹ their provision of legal services and their activities did not constitute a credit services business as defined in the MCSBA. The Circuit Court did not address the issue of willfulness. The Commissioner appealed, and, on October 23, 2015, the Court of Special Appeals affirmed the Circuit Court in an unreported opinion.

We subsequently granted the Commissioner’s petition for a writ of certiorari. II Discussion It is undisputed that neither BB&B nor Mr. Brown obtained a license to operate a credit services business or otherwise complied with the various requirements in the MCSBA. The issue is whether they should have. To resolve that issue requires consideration of the following questions.

First, did the business activities of BB&B and Mr. Brown with respect to the Maryland homeowners with whom they entered into agreements during late 2008 and early 2009 come within the definition of a “credit services business” under Maryland law? Second, if the answer to the first question is “yes,” did BB&B or Mr. Brown qualify for the attorney exemption in the MCSBA? In adopting, with minor changes, the ALJ’s Proposed Decision, the Commissioner answered “yes” to the first question and “no” to the second. It is now our task to review those determinations.

A. Standard of Review When we review the final decision of an administrative agency, such as the decision made by the Commissioner in this case, we “look through” the circuit court’s and intermediate appellate court’s decisions, and evaluate the decision of the agency directly. CashCall, Inc. v. Commissioner of Financial Regulation, 448 Md. 412, 426 , 139 A.3d 990 (2016). We look for whether there is substantial evidence in the record as a whole ³⁶⁰ to support the agency’s decision, and whether the agency’s decision applies a correct interpretation of the law. Bd. of Directors of Cameron Grove Condo., II v. State Comm’n on Human Relations, 431 Md. 61, 80 , 63 A.3d 1064 (2013).

In the latter assessment, “the interpretation of a statute by the agency charged with administering the statute is entitled to great weight.” Adventist Health Care Inc. v. Maryland Health Care Comm’n, 392 Md. 103, 119 , 896 A.2d 320 (2006). B. Whether the Activities Came Within the Deñnition of “Credit Services Business” 1. Statutory Text Any effort at statutory interpretation begins with the text of the statute. Lockshin v. Semsker, 412 Md. 257, 275 , 987 A.2d 18 (2010).

The MCSBA applies to a “credit services business,” which the statute defines to include a “person who, with respect to the extension of credit by others ... sells ... or represents that such person can or will sell, provide, or perform ... in return for the payment of money or other valuable consideration” the service of “[ojbtaining an extension of credit for a consumer,” where an “extension of credit” includes “the right to defer payment of debt ... offered or granted primarily for personal, family, or household purposes.” CL §§ 14-1901(e)(1), (f). This is precisely what BB&B and Mr. Brown did. Each of the agreements obligated the homeowner to pay several thousand dollars to BB&B. The agreements specified that, in consideration for that payment, BB&B was “to engage the appropriate party in discussions to renegotiate the terms of your [mortgage] loan.” Renegotiating the key terms of a mortgage loan in distress means seeking to modify such terms as the principal, the interest rate, and the length of the loan term. It may involve forgiveness of past due mortgage payments, moving missed payments to the end of the loan, recapitalization of the loan, or any number of other mechanisms that defer all or part of the debt in some manner. ³⁶¹ Modification of a mortgage loan in default inevitably results in some form of deferral.

Thus, renegotiating the terms of a mortgage loan in distress is “obtaining an extension of credit” as defined in MCSBA because it would involve some form of deferral of the original payment terms. Finally, a home mortgage loan is debt primarily for personal, family, or household (as opposed to, for example, commercial or business) purposes. Accordingly, renegotiating the terms of a mortgage loan involves seeking “the right to defer payment of debt ... offered or granted primarily for personal, family, or household purposes,” which is an extension of credit according to CL § 14—1901(f). As the firm and its attorneys, including Mr. Brown, undertook to obtain such an extension of credit in exchange for the payment of money, they met the general definition of a “credit services business” in CL § 14-1901(e)(1). 13 2.

Legislative History Although the text of the statute encompasses the agreements between BB&B and Maryland homeowners, it is appropriate to examine the legislative history of the statute for at least two reasons. First, we may consult legislative history to confirm our understanding of apparently unambiguous text. Hammonds v. State, 436 Md. 22, 44 , 80 A.3d 698 (2013). Second, in this case, BB&B and Mr. Brown argue that the General Assembly actually intended that the MCSBA cover only credit repair agencies, and therefore it should not cover them.

Although this argument has no basis in the language of the statute, we shall also consider it in our examination of the legislative history. ³⁶² MCSBA (1987-2010) The General Assembly, inspired by model legislation suggested by the Council of State Governments in 1986 (which in turn was inspired by California’s Credit Services Act of 1984 14 ), enacted the MCSBA in 1987. Chapter 469, Laws of Maryland 1987; see Council of State Governments, Suggested State Legislation (vol. 45) (1986); California Civil Code § 1789.10 et seq. This Court previously reviewed the legislative history of the enactment of the MCSBA and the subsequent amendment of the statute in 2001, 2002, and 2010 in Gomez v. Jackson Hewitt, Inc., 427 Md. 128, 164-69 , 46 A.3d 443 (2012). After reviewing that history, the Court concluded that, while the original enactment was primarily aimed to regulate credit repair agencies, the subsequent amendments extended the reach of the MCSBA to payday lenders and others. 427 Md. at 161-62, 169 , 46 A.3d 443 .

In particular, the post-1987 amendments prohibited a credit services business from “[c]harg[ing] or receiving] any money or other valuable consideration in connection with an extension of credit that, when combined with any interest charged on the extension of credit, would exceed the interest rate permitted for the extension of credit under the applicable title of this article.” 15 CL § 14-1902(7). As this Court concluded in Gomez , because many of the amendments seemed directed at payday lenders, the MCSBA’s legislative history suggests that the MCSBA is not limited to “ordinary credit repair ³⁶³ services.” Gomez, 427 Md. at 169 , 46 A.3d 443 . Rather, it is intended to provide broad protection to consumers of