Nagle & Zaller, P.C. v. Delegall

Nagle & Zaller, P.C., et al. v. Jahmal E. Delegall, et al., Misc. No. 6, September Term, 2021, Opinion by Booth, J. MARYLAND CONSUMER LOAN LAW — A law firm that engages in debt collection activities on behalf of a client, including the preparation of a promissory note containing a confessed judgment clause and the filing of a confessed judgment complaint to collect a consumer debt, is not subject to the Maryland Consumer Loan Law, Md. Code (2013 Repl. Vol., 2021 Supp.), Commercial Law Article § 12-301, et seq. and Md. Code (2020 Repl. Vol, 2021 Supp.), Financial Institutions Article § 11-201, et seq.

United States District Court for the District of Maryland Case No.: 8:20-cv-0626-PWG Argued: December 6, 2021 IN THE COURT OF APPEALS OF MARYLAND Misc. No. 6 September Term, 2021 NAGLE & ZALLER, P.C., et al. v. JAHMAL E. DELEGALL, et al. *Getty, C.J., *McDonald, Watts, Hotten, Booth, Biran, Gould, JJ. Opinion by Booth, J. Watts, J., dissents. Filed: August 11, 2022 *Getty, C.J. and McDonald, J., now Senior Judges, participated in the hearing and Pursuant to Maryland Uniform Electronic Legal Materials Act conference of this case while active members of (§§ 10-1601 et seq. of the State Government Article) this document is authentic. this Court.

After being recalled pursuant to Md. 2022-08-11 15:06-04:00 Const., Art. IV, § 3A, they also participated in the decision and adoption of this opinion. Suzanne C. Johnson, Clerk This case comes to us from the United States District Court for the District of Maryland (the “federal court”) pursuant to a certification order1 requesting that we answer the following question, which we have rephrased:2 Is a law firm that engages in debt collection activities on behalf of a client, including the preparation of a promissory note containing a confessed judgment clause and filing of a confessed judgment complaint to collect a consumer debt, subject to the provisions of the Maryland Consumer Loan Law, Md. Code, Commercial Law Article § 12-301, et seq.? As we explain below, the answer to that question is “no.” In connection with our consideration of the question of law presented herein, we accept as true the following facts as set forth in the operative complaint filed in the federal court, which was incorporated by reference into the federal district court’s certification order.3 1 Under the Maryland Uniform Certification of Questions of Law Act, Md. Code (2020 Repl. Vol., 2021 Supp.), Courts and Judicial Proceedings Article (“CJ”) § 12-601, et seq., the court certifying the question shall issue a certification order containing “(1) [t]he question of law to be answered; [and] (2) [t]he facts relevant to the question, showing fully the nature of the controversy out of which the question arose[.]” CJ § 12-606(a). 2 Pursuant to CJ § 12-604, we may reformulate a question of law so long as our answer properly disposes of the question as certified.

See Rauch v. Allstate Ins. Co., 388 Md. 690 (2005). The certified question contained in the certification order is as follows: The Maryland Consumer Loan Law, Md. Code Ann., Commercial Law § 12 - 301, et seq., applies to consumer “loans” made by “lenders,” and requires a “person engaged in the business of making loans” to be licensed. Based upon the allegations in the Third Amended Complaint, is Nagle & Zaller, P.C. subject to the statute? 3 In responding to a certification from another court, this Court accepts the facts provided by the certifying court.

See, e.g., Price v. Murdy, 462 Md. 145, 147 (2018). We resolve only issues of Maryland law, not questions of fact. Parler & Wobber v. Miles & Stockbridge, 359 Md. 671, 681 (2000). I Background This case arises from debt collection activity by Nagle & Zaller, P.C.

(“Nagle & Zaller”), a law firm, on behalf of its clients. The clients are homeowners associations and condominium regimes (collectively, “HOAs”)4 that retain Nagle & Zaller to undertake collection efforts against lot owners in HOAs and unit owners in condominium regimes (collectively, “homeowners”) seeking to recover delinquent assessments. The HOAs retained Nagle & Zaller to represent them in negotiating and drafting promissory notes with homeowners that memorialized the repayment terms of the delinquent assessments. The promissory notes drafted by Nagle & Zaller included confessed judgment clauses.5 4 As set forth in note 6 infra, the initial lawsuit apparently included homeowners associations that were clients of Nagle & Zaller.

Other defendants, such as Vineyards Condominium, appear to be condominium regimes organized under the Maryland Condominium Act, Md. Code (2015 Repl. Vol., 2021 Supp.), Real Property Article (“RP”) § 11-101, et seq. Because the operative complaint collectively refers to these various entities as “Homeowners Associations” notwithstanding the fact that some of the entities appear to be condominium regimes, we shall do the same. As we explain more fully herein, our analysis is the same regardless of whether the assessments are imposed under the Maryland Homeowners Association Act or the Maryland Condominium Act. 5 According to the allegations in the Complaint, the promissory note, signed by Jahmal E. Delegall and prepared by Nagle & Zaller, contained the following confessed judgment clause: In the event of default of any payment due hereunder, this Promissory Note shall, at the option of the Holder hereof, become immediately due and payable in full.

Maker, and any other party at any time liable hereunder, waives presentment, demand and presentation for payment, notice of nonpayment and dishonor, protest and notice of protest, and expressly agrees this Promissory Note or any payment hereunder may be extended from time to time without in any way affecting the liability of the Maker or such other party. The Maker, and any other party at any time liable hereunder, hereby 2 When homeowners defaulted on their obligations, Nagle & Zaller filed confessed judgment complaints against them. In February 2018, Jahmal E. Delegall and others filed a putative class action against Nagle & Zaller in the Circuit Court for Montgomery County challenging the law firm’s above-described debt collection practices. After the plaintiffs filed an amended complaint adding the HOA clients of the law firms as defendants, the defendants removed the case to the federal court.

After some procedural twists and turns,6 in August 2020, Jahmal E. Delegall and Hadassah Sanders (hereinafter collectively referred to as “Delegall”) filed a Third authorizes and empowers any attorney of any Court of record to appear in any Court of competent jurisdiction in the State of Maryland or any Court of competent jurisdiction in the United States, any time after payment is due hereunder, whether by acceleration or otherwise, and confess judgment without process in favor of the Holder hereof against the Maker, and any other party at anytime liable hereunder, for such amount as may be due hereunder, together with the costs of such proceedings and attorney’s fees of fifteen percent (15%) of the amount unpaid hereunder. 6 According to the certification order, the initial putative class action was filed in the Circuit Court for Montgomery County by Mr. Delegall, along with co-plaintiff Natalie Thomas, and was titled Thomas v. Cameron Mericle, P.A. (“Thomas”). The plaintiffs asserted claims against Nagle & Zaller and another law firm. The complaint was amended in June 2018 to add homeowner association (“HOA”) clients of the law firms as defendants.

In October 2018, the plaintiffs filed a second amended complaint, adding violations of federal law. Thereafter, in November 2018, the defendants removed the case to federal court on the basis of federal question jurisdiction. Following a partial class-action settlement in Thomas, in March 2020, the federal court granted a motion to sever the claims against Nagle & Zaller and Vineyards Condominium, one of Nagle & Zaller’s clients, from Thomas, into the pending federal case from which this certified question has been raised. In August 2020, plaintiffs filed the operative Third Amended Complaint, which added Hadassah Saunders as an additional named plaintiff.

For simplicity’s sake, we refer to the Third Amended Complaint as the 3 Amended Complaint against Nagle & Zaller and its client, Vineyards Condominium, which is the operative complaint (the “Complaint”). Although the Complaint includes several counts,7 in connection with the certified question, we are only concerned with one count— Count VIII—which alleges that Nagle & Zaller violated the Maryland Consumer Loan Law (“MCLL”), Md. Code (2013 Repl. Vol., 2021 Supp.), Commercial Law Article (“CL”) § 12-301, et seq., and Md. Code (2020 Repl. Vol, 2021 Supp.), Financial Institutions Article (“FI”) § 11-201, et seq.

For purposes of that count, Delegall alleges that the HOAs and Nagle & Zaller are “Lenders” as that term is defined in CL § 12-301(c), but that neither the HOAs nor Nagle & Zaller “are licensed to make loans” under the MCLL. Because they were not licensed to make loans, Delegall asserts that the promissory notes are void and unenforceable, and that the HOAs and Nagle & Zaller cannot collect or retain any payments made on them. In other words, because the HOAs and Nagle & Zaller lack a license under the MCLL, the debt memorialized in the promissory note, including the principal delinquent amount owed, is uncollectible. See CL § 12-314(b)(1) and (2) (stating that a “person may not receive or retain any principal, interest, fees, or other compensation with respect to any loan that is “Complaint.” Since the filing of the Complaint, Mr. Delegall has settled his claims against Vineyard Condominium so that only the claims against Nagle & Zaller remain. 7 The additional counts in the eight-count Complaint are: Count I (Violation of the Maryland Consumer Debt Collection Act (“MCDCA”), Md. Code Commercial Law (“CL”) § 14-202(8)); Count II (Negligent Misrepresentation); Count III (Money Had and Received); Count IV (For a Declaratory Judgment pursuant to Md. Code Courts and Judicial Proceedings (“CJ”) § 3-409); Counts V and VI (Violations of the Federal Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692f and 1692e); and Count VII (Violations of the Maryland Consumer Protection Act (“MCPA”), CL § 13-101, et seq.). 4 void and unenforceable under this subtitle[]” and that a loan is void and unenforceable if “a person who is not licensed under or exempt from the licensing requirements under Title 11, Subtitle 2 of the Financial Institutions Article made the loan[]”).

Nagle & Zaller filed a motion to dismiss the Complaint, alleging, in part, that the MCLL does not apply to the debt collection activities as alleged in the Complaint. Because there are no Maryland appellate court decisions referencing or interpreting whether a law firm that undertakes debt collection activity is required to be licensed under the MCLL under these circumstances, the parties filed a joint motion to certify a question of law, requesting that the federal court enter an order certifying the question to this Court. In July 2021, the federal court entered a certification order requesting that we answer the certified question set forth above. Nagle & Zaller contends that the General Assembly did not intend to require that law firms or HOAs obtain a license to engage in transactions of this nature because neither the law firms nor their HOA clients are “lenders” who “engage in the business of making loans” under the MCLL, CL § 12-302.

For its part, Delegall contends that the promissory notes constitute “loans” because they are an extension of credit enabling the homeowners to pay delinquent debts owed to the HOAs, and the law firm is “making the loans.” Delegall asserts that, under the broad, general definitions contained in the MCLL, the transactions are subject to the MCLL. Because neither the law firm nor the HOAs are licensed to make the loans, Delegall asserts that the promissory notes are void and unenforceable. In large part, Delegall relies upon our decision in Goshen Run Homeowners Association, Inc. v. Cisneros, 467 Md. 74 (2020), in which we held that promissory notes 5 like the ones at issue here are extensions of consumer credit that fall within the purview of a different statute—the MCPA. II Discussion Before we turn to the question at hand, it is useful to discuss the underlying transaction and the applicable laws that govern the payment of HOA assessments and charges.

In Goshen Run, we observed that HOAs “are often placed in a difficult situation of having to undertake collection efforts against lot owners in their communities for delinquent homeowners assessments.” 467 Md. at 80 . We noted that, “[t]o address the problem, the General Assembly has provided HOAs with multiple collection tools” that are outlined in the Maryland Homeowners Association Act, including the HOA’s ability to collect delinquent assessments through both in rem proceedings under the Maryland Contract Lien Act, as well as in personam proceedings at law. Id. Because similar tools are available to the governing body of a condominium regime, it is useful to touch upon those statutory provisions as well.

A. Right of a Governing Body of a HOA and Condominium Regime to Collect Delinquent Assessments 1. The Maryland Homeowners Association Act The Maryland Homeowners Association Act (“HOA Act”) is set forth in Maryland Code (2015 Repl. Vol., 2021 Supp.), Real Property Article (“RP”) § 11B-101, et seq. The HOA Act applies to real property lots in a development community that are subject to a 6 declaration of a HOA and also provides the legislative framework under which HOAs8 operate and manage their affairs.

RP § 11B-102. A HOA is governed by its governing body9 in accordance with its declaration,10 as well as other corporate documents such as its bylaws, and rules and regulations promulgated and adopted in accordance with the declaration and other governing documents. The HOA Act contains provisions which address many operational and governance aspects of a development that are subject to a HOA declaration, such as the notice or conduct of meetings of the HOA or its governing body, requirements for maintaining books and records of the association, and the establishment of an annual budget for the repair and maintenance of the common areas. RP §§ 11B-111, 11B-112, and 11B-112.2.

In connection with the establishment of a budget, the HOA has the authority to adopt assessments and charges to cover expenses for maintaining and repairing common areas.11 8 “Homeowners association” is defined under the HOA Act as “a person having the authority to enforce the provisions of a declaration” and “includes an incorporated or unincorporated association.” RP § 11B-101(i). 9 “Governing body” is defined as the “homeowners association, board of directors, or other entity established to govern the development.” RP § 11B-101(h). 10 The declaration of a HOA is the genesis of its authority. The HOA Act defines the “declaration” as: “an instrument, however denominated, recorded among the land records of the county in which the property of the declarant is located, that creates the authority for a homeowners association to impose on lots, or on the owners or occupants of lots, . . . any mandatory fee in connection with the provision of services or otherwise for the benefit of some or all of the lots, the owners or occupants of lots, or the common areas.” RP §11B-101(d)(1). 11 Under the HOA Act, “common areas” are defined as “property which is owned or leased by a homeowners association.” RP § 11B-101(b). 7 Under its declaration, the HOA can establish and impose on any lot, or on the owners or occupants of any lot, mandatory assessments or fees to cover “the provision of services or otherwise for the benefit of some or all of the lots, the owners or occupants of lots, or the common areas.” RP § 11B-101(d)(1). Section 11B-117(a) of the HOA Act states that, “[a]s provided in the declaration, a lot owner shall be liable for all homeowners association assessments and charges that come due during the time that the lot owner owns the lot.” To encourage the timely payment of assessments, the HOA Act gives the HOA the authority to establish in its declaration or bylaws “a late charge of $15 or one-tenth of the total amount of any delinquent assessment or installment, whichever is greater, provided the charge may not be imposed more than once for the same delinquent payment and may be imposed only if the delinquency has continued for at least 15 calendar days.” RP § 11B-112.1. With respect to enforcement, the HOA Act permits a HOA to establish provisions in its declaration for collection of delinquent assessments through both in rem and in personam proceedings. “The express language of the HOA Act authorizes the governing body of a HOA to take enforcement action to collect delinquent assessments and charges owed by the individual lot owners within the development.” Goshen Run, 467 Md. at 93 . “As part of its collection efforts, the HOA is authorized to assess late charges, to impose a lien on the lot in accordance with the Maryland Contract Lien Act, [RP] § 14-201[,] et seq.

(2013), and to file suit against the individual lot owner for the amount of the debt owed.” Id. 8 2. The Maryland Condominium Act12 The Maryland Condominium Act, RP § 11-101, et seq. regulates the formation, management, and termination of condominiums in Maryland. A condominium is a “communal form of estate in property consisting of individually owned units which are supported by collectively held facilities and areas.” Ridgely Condominium Ass’n, Inc. v. Smyrnioudis, 343 Md. 357, 358 (1996) (internal citations omitted). “A condominium owner, therefore, holds a hybrid property interest consisting of an exclusive ownership of a particular unit or apartment and a tenancy in common with the other co-owners in the common elements.” Id. at 358–59 (footnote omitted).13 Under the Maryland Condominium Act, property becomes a condominium upon the recording of a declaration, bylaws, and a condominium plat. RP § 11-102.

The bylaws govern the administration of the condominium and must include the form of the condominium administration and its powers, meeting procedures, and fee collection procedures. RP § 11-104(a), (b). The Council of Unit owners, which may delegate its powers to a Board of Directors, governs the affairs of the condominium and may adopt rules for the condominium. RP §§ 11-109(a), (b), 11-111(a).

The Council of Unit Owners 12 As set forth in note 4, the Complaint refers to Nagle & Zaller’s clients as “HOAs” despite the fact that some of them appear to have been established as condominium regimes. We briefly discuss the Maryland Condominium Act because a unit owner is subject to similar assessments and charges as a lot owner in a HOA. The governing body of the condominium regime—a council of unit owners or a board of directors—has similar powers and authority to impose and collect assessments. The Maryland Condominium Act defines “common elements” as “all of the 13 condominium except for the units.” RP § 11-101(c)(1). 9 has the obligation to establish an annual budget, which shall include, among other things, maintenance costs of the common areas and utilities.

RP § 11-109.2(a), (b). The Council of Unit Owners has the authority to adopt assessments and charges to cover the cost of maintaining and repairing the common areas. The Condominium Act states that “[a] unit owner shall be liable for all assessments, or installments therefore, coming due while he is the owner of a unit,” RP § 11-110(c), and that “[p]ayment of assessments, together with interest, late charges, if any, costs of collection and reasonable attorney’s fees may be enforced by the imposition of a lien on a unit in accordance with the provisions of the Maryland Contract Lien Act.” RP § 11-110(d)(1). Any assessment that is not paid when due bears interest at a rate of 18% per annum, unless a lower rate of interest is established in the bylaws.

RP § 11-110(e). Like the HOA Act, the Condominium Act also states that the “bylaws may provide for a late charge of $15 or one tenth of the total amount of any delinquent assessment or installment, whichever is greater, provided that the charge may not be imposed more than once for the same delinquent payment and may only be imposed if the delinquency has continued for at least 15 calendar days.” Id. B. Homeowners’ Remedies Where Governing Body’s Collection Efforts Do Not Comply with State Consumer Protection Laws Although the governing body of an HOA or a condominium regime has the statutory right to collect delinquent assessments, interest, and fees, the exercise of such rights must be undertaken in conformance with the organization’s respective bylaws and organizational documents, as well as applicable state laws. Similarly, the governing body’s efforts to collect the debts must comply with the applicable federal and state consumer 10 protection statutes, including the Maryland Consumer Protection Act (“MCPA”), which is set forth in CL § 13-101, et seq.

As noted above, in Goshen Run, we specifically held that the collection of HOA assessments through confessed judgment clauses in promissory notes violates the MCPA. 467 Md. 74 . Delegall relies extensively on our analysis and holding in Goshen Run as support for the position that law firms and HOAs that undertake debt collection activity through the use of confessed judgment clauses similarly violate the MCLL—a separate and distinct statutory scheme that governs small consumer loan businesses. Given Delegall’s reliance on Goshen Run and the application of the MCPA to the types of transactions that are at issue in this case, it is useful to discuss the scope of the statute and our holding in that case. The purpose of the MCPA is to “set certain minimum statewide standards for the protection of consumers across the State.” CL § 13-102(b)(1).

In enacting the MCPA, the General Assembly intended to “take strong protective and preventive steps to investigate unlawful consumer practices, to assist the public in obtaining relief from these practices, and to prevent these practices from occurring in Maryland.” CL § 13-102(b)(3). The MCPA generally prohibits unfair, abusive, or deceptive trade practices in consumer transactions,14 and the Act sets forth a non-exhaustive list of prohibited practices. See CL 14 Under CL § 13-101(c)(1) and (2), a “consumer” is defined as “an actual or prospective purchaser, lessee, or recipient of consumer goods, consumer services, consumer realty, or consumer credit” and includes “an individual who sells or offers for sale to a merchant consumer goods or consumer realty that the individual acquired primarily for personal, household, family, or agricultural purposes.” The statute collectively defines “consumer credit”, “consumer debts”, “consumer goods”, “consumer realty”, and “consumer services” as “credit, debts, or obligations, goods, real property, and 11 § 13-301. One such “unfair, abusive, or deceptive trade practice[]” is the “use of a contract related to a consumer transaction which contains a confessed judgment clause that waives the consumer’s right to assert a legal defense to an action[.]” CL § 13-301(12).

A confessed judgment clause is a “device designed to facilitate collection of a debt.” Goshen Run, 467 Md. at 103 (quoting Schlossberg v. Citizens Bank, 341 Md. 650, 655 (1996)). Specifically, it is a provision in a debt instrument, such as a promissory note, “by which debtors agree to the entry of a judgment against them without the benefit of a trial in the event of a default on the debt instrument.” Id. (internal quotation marks omitted). In Goshen Run, we discussed in detail some background and history of the use of confessed judgments in Maryland, including their disfavor, given their ex parte nature, the ease with which a judgment may be entered, and the limited defenses available to a defendant who seeks to attack the judgment after its entry.

Id. at 103–07. In Goshen Run, we considered whether a HOA’s collection of HOA assessments from a homeowner, through the use of a promissory note containing a confessed judgment clause, violated the MCPA. We determined that it did. Id. at 119.

Specifically, we considered the definitions contained in the MCPA, and held that: the homeowner fell within the definition of “consumer”; the HOA assessments fell within the broad definition of “consumer debt”; and the promissory note constituted an “extension of credit” to pay the HOA assessments. Id. at 101. We also held that the MCPA prohibits the use of all confessed judgment clauses in consumer contracts. Id. at 115. services which are primarily for personal, household, family, or agricultural purposes.” CL § 13-101(d)(1). 12 Under the facts of that case, the HOA obtained a confessed judgment based upon the confessed judgment clause in the promissory note.

Id. at 84. Because the MCPA does not permit the use of a confessed judgment, we determined that dismissal of the confessed judgment case was required under Maryland Rule 3-611(b). Id. at 117. The homeowner argued that the promissory note was void in its entirety.

Id. at 117–18. We observed that the promissory note contained a severability clause and thus we rejected the homeowner’s argument. Id. We held that the confessed judgment clause could be severed from the remaining provisions of the promissory note “without destroying the instrument’s overall validity.” Id. at 118.

We stated that the homeowner “should not obtain a windfall and escape responsibility for paying her delinquent homeowners assessments solely because the promissory note contained a confessed judgment clause.” Id. at 118 (capitalization omitted). Accordingly, we held that the dismissal of the confessed judgment would have been without prejudice to the HOA to file a separate breach of contract action based upon the promissory note with the confessed judgment clause severed. Id. at 119. To summarize, under Goshen Run, a HOA may not use a promissory note containing a confessed judgment clause to collect delinquent HOA assessments, because the use of a promissory note containing a confessed judgment clause violates the MCPA.

See CL § 13- 301(12). A violation of the MCPA is subject to public enforcement measures consisting of civil penalties and criminal penalties that may be imposed by the Consumer Protection Division (“Division”) of the Office of Attorney General. CL §§ 13-410, 13-411.15 In 15 In addition to the general provisions of the MCPA pertaining to public enforcement, the HOA Act and the Condominium Act specifically incorporate the public 13 addition to the public enforcement measures, a consumer who has been subjected to a prohibited practice under the MCPA has a private right of action for damages where the consumer can prove injury or loss. CL § 13-408.

In addition to the remedies afforded under the MCPA, a consumer may have a private right of action under the Maryland Consumer Debt Collection Act (“MCDCA”), CL § 14-201, et seq., against any person collecting or attempting to collect an alleged debt arising out of a consumer transaction in violation of the provisions of that Act. See Nationstar Mortgage, LLC v. Kemp, 476 Md. 149, 161 (2021).16 In addition to the private enforcement provisions set forth in CL § 14-203, a violation of the MCDCA also constitutes an “[u]nfair, abusive or deceptive trade practice” that violates the MCPA. CL § 13-301(14)(iii). With respect to debt collection activities by lawyers and law firms enforcement provisions under the MCPA into these statutes.

See RP §§ 11-130(c)(1), 11B- 115(c)(1). In other words, under both the Maryland HOA Act and the Maryland Condominium Act, a homeowner may seek public enforcement of his or her rights under the applicable law, through the Attorney General’s Office, under the MCPA. 16 The MCDCA prohibits eleven categories of conduct when collecting or attempting to collect a debt, including: claiming, attempting, or threatening to enforce a right with knowledge that the right does not exist. CL § 14-202(8). “To prove a claim under this provision of the MCDCA, a complainant must establish two elements: (1) the debt collector did not possess the right to collect the amount of debt sought; and (2) the debt collector attempted to collect the debt knowing that it lacked the right to do so.” Chavis v. Blibaum & Assocs., P.A., 476 Md. 534, 553 (2021) (cleaned up). The “with knowledge” element of this subsection of the MCDCA “require[s] proof that a debt collector claimed, attempted, or threatened to enforce the non-existent right with actual knowledge or with reckless disregard as to the falsity of the existence of the right.” Id. at 563 (cleaned up).

Under CL § 14-203, “[a] collector who violates any provision of [the MCDCA] is liable for any damages proximately caused by the violation, including damages for emotional distress or mental anguish suffered with or without accompanying physical injury.” 14 specifically, in Andrews & Lawrence Professional Services, LLC v. Mills, 467 Md. 126 (2020), we held that not all debt collection activity undertaken by a law firm falls within the professional services exemption of the MCPA, CL § 13-104(1).17 Of course, we are not here to consider whether Nagle & Zaller’s debt collection activities violated the state or federal consumer protection statutes. Those issues will be for the federal court to decide in connection with the other counts set forth in the Complaint that are not before us. Here, we must determine whether Nagle & Zaller’s debt collection activities are subject to the MCLL. C. Canons of Statutory Interpretation In considering the parties’ competing interpretations of the MCLL, we apply the following principles of statutory interpretation. “The cardinal rule of statutory interpretation is to ascertain and effectuate the real and actual intent of the Legislature.” Lockshin v. Semsker, 412 Md. 257, 274 (2010). “We begin with an examination of the text of a statute within the context of the statutory scheme to which it belongs.” Kemp, 476 Md. at 169 . “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.” Lockshin, 412 Md. at 17 The MCPA exempts “professional services of a . . . lawyer” from the scope of the Act.

CL § 13-104(1). The MCDCA does not contain any professional services exemption for lawyers. In Andrews & Lawrence Professional Services, LLC v. Mills, 467 Md. 126, 156 (2020), we held that in the “debt collection context, where a lawyer or law firm engaged in debt collection activity which: (1) requires a license under the [Maryland Collection Agency Licensing Act (“MCALA”)] ; or (2) which would be prohibited under the MCDCA, the professional services exception of the [M]CPA, CL § 13-104(1) does not apply to the conduct or services.” 15 275 (internal quotation marks and citations omitted). Rather, we construe the statute “as a whole so that no word, clause, sentence, or phrase is rendered surplusage, superfluous, meaningless or nugatory.” Koste v. Town of Oxford, 431 Md. 14 , 25–26 (2013) (internal quotation marks and citations omitted).

We “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.” Lockshin, 412 Md. at 275 . In other words, “[r]eview of the text does not merely entail putting the words under the microscope by themselves with a dictionary at hand, because words that appear clear and unambiguous when viewed in isolation may become ambiguous when read as part of a larger statutory scheme.” Kemp, 476 Md. at 169 (internal quotation marks and citations omitted); see also Johnson v. State, 360 Md. 250, 265 (2000) (explaining that the Court must analyze the statute “in its entirety, rather than independently construing its sub-parts[]”). “We presume that the Legislature intends its enactments to operate together as a consistent and harmonious body of law, and, thus, we seek to reconcile and harmonize the parts of a statute, to the extent possible consistent with the statute’s object and scope.” Lockshin, 412 Md. at 276 . “We also review the legislative history of the statute to confirm conclusions drawn from the text or to resolve ambiguities. In addition, we examine prior case law construing the statute in question.” Kemp, 476 Md. at 170 . “Finally, we check our interpretation against the consequences of alternative readings of the text.” Bell v. Chance, 460 Md. 28, 53 (2018). Doing so ensures that we adopt an interpretation that avoids a construction that is “illogical, unreasonable, or inconsistent with common sense.” Reier v. State Dep’t of Assessments and Taxation, 397 Md. 2, 33 (2007) (internal quotation marks and citations omitted).

Indeed, “it has been 16 called a golden rule of statutory interpretation that, when one of several possible interpretations produces an unreasonable result, that is a reason for rejecting that interpretation in favor of another which would produce a reasonable result.” Id. (internal quotation marks and citations omitted); see also Kemp, 476 Md. at 170 (explaining that “it is important to consider the consequences of alternative interpretations of the statute, in order to avoid constructions that are illogical or nonsensical, or that render a statute meaningless[]”) (internal quotations and citations omitted). D. Maryland Consumer Loan Laws—The General Statutory Framework The General Assembly has enacted a comprehensive statutory scheme for the regulation of consumer lending, which is set forth in Title 12 of the Commercial Law Article. Various Subtitles within Title 12 address the lending terms and conditions associated with different types of consumer loans, including the maximum interest rate, fees, and charges that lenders are permitted to charge.18 For example, the maximum allowable interest rate that a lender may charge depends on the type of consumer loan in question.19 18 The Subtitles contained in Title 12 of the Commercial Law Article which apply to various types of consumer loans are: Subtitle 1 (Interest and Usury); Subtitle 3 the (Maryland Consumer Loan Law — Credit Provisions); Subtitle 4 (the Maryland Secondary Mortgage Loan Law); Subtitle 5 (Retail Credit Accounts); Subtitle 6 (Retail Installment Sales); Subtitle 9 (Credit Grantor Revolving Credit Provisions); and Subtitle 10 (Credit Grantor Closed End Credit Provisions). 19 For example, installment loans that are not secured by residential real property and are made under the Interest and Usury Subtitle generally cap interest rates at 24%, see CL § 12-103(c), whereas a loan that is subject to the MCLL caps interest at 33% with varying lower interest rates depending upon the amount of the original principal balance and the unpaid balance, see CL § 12-306. 17 In addition to the consumer credit provisions contained in Title 12 of the Commercial Law Article, the General Assembly has also enacted comprehensive licensing provisions in Title 11 of the Financial Institutions Article, which establish various types of licenses, and the terms and conditions associated with each license, depending upon the type of consumer loan being offered.

Licenses are issued by the Commissioner of Financial Regulation of the Department of Labor (“Commissioner”), which has the authority to issue consumer credit licenses, investigate the qualifications of prospective licensees, issue cease and desist orders, and promulgate rules and regulations. When considering the various requirements that are applicable to a particular consumer lending transaction—whether they pertain to the permissible terms associated with a particular type of consumer loan, the licensing requirements applicable to the lender, or the rights and remedies associated with a violation of a consumer lending law—the General Assembly has established a statutory framework whereby the provisions of Title 12 of the Commercial Law Article and Title 11 of the Financial Institutions Article must be read together. As discussed below, the Maryland Consumer Loan Law is no exception. E. The Maryland Consumer Loan Law (“MCLL”) The MCLL is located in two separate Articles of the Maryland Code: (1) the Maryland Consumer Loan Law – Credit Provisions, set forth at CL § 12-301, et seq.

(“Credit Provisions”); and (2) the Maryland Consumer Loan Law – Licensing Provisions, set forth in the Financial Institutions Article (“FI”) § 11-201, et seq. (“Licensing Provisions”). Both the Credit Provisions and the Licensing Provisions, together, form the “Maryland Consumer Loan Law.” See FI § 11-201(f) (stating that the “‘Maryland 18 Consumer Loan’ law means this subtitle and Title 12, Subtitle 3 of the Commercial Law Article[]”); CL § 12-317(b) and FI § 11-223 (each stating that the Credit Provisions and the Licensing Provisions “may be jointly cited as the Maryland Consumer Loan Law[]”). 1. The MCLL Credit Provisions Under the Credit Provisions of the MCLL, a person is prohibited from “engag[ing] in the business of making loans . . . unless the person is licensed or is exempt from the licensing requirements of” the Licensing Provisions.

CL § 12-302. The MCLL defines “lender” as a “licensee or a person who makes a loan subject to this subtitle.” CL § 12- 301(c). A “licensee” is a “person who is required to be licensed under the [Licensing Provisions], regardless of whether the person is actually licensed.” CL § 12-301(d). And a “loan” is “any loan or advance of money or credit subject to this subtitle, regardless of whether the loan or advance of money or credit is or purports to be made under this subtitle.” CL § 12-301(e)(1).

The Credit Provisions “appl[y] to a loan of $25,000 or less made for personal, family or household purposes.” CL § 12-303(a)(1).20 Among other things, the Credit 20 The Credit Provisions contain some exclusions. Specifically, CL § 12-303(a)(3) states that the Credit Provisions “do[] not apply to: (i) A plan or loan for which a written election has been made under Subtitle 1 [Interest and Usury], Subtitle 4 [Maryland Secondary Mortgage Loan Law], Subtitle 9 [Credit Grantor Revolving Credit Provisions], or Subtitle 10 [Credit Grantor Closed End Credit Provisions] of this title; (ii) A loan made by an individual provided the individual: 1. Does not make more than three loans in a calendar year; and 19 Provisions regulate lender advertising, CL § 12-304; prohibit discrimination against loan applicants, CL § 12-305; limit the maximum rate of interest permitted to be charged, CL § 12-306; define the fees a lender may collect, CL §§ 12-307, 12-307.1; outline the duties of lenders, CL § 12-308; and prohibit a lender from taking a confessed judgment as security for a loan, CL § 12-311(b)(1). “A loan made in the amount of $25,000 or less, regardless of whether the loan is or purports to be made under this subtitle, is void and unenforceable if . . . [a] person who is not licensed under or exempt from the licensing requirements under [the Licensing Provisions] made the loan.” CL § 12-314(b)(1)(i)(3).21 If a loan is unenforceable under the MCLL, “[a] person may not receive or retain any principal, 2. Does not engage in the business of making loans; or (iii) A loan between an employer and an employee.” 21 Curiously, although the MCLL refers to persons who are “exempt from licensing,” neither the Credit Provisions (CL § 12-301, et seq.) nor the Licensing Provisions (FI § 11- 201, et seq.) contain any exemptions from the licensure requirements.

In other words, under the plain language of the statute, any “person who makes a loan” under the Credit Provisions is required to be licensed. See FI §§ 11-201(e); 11-203.1. Although the MCLL does not contain any license exemptions, FI § 11-202 states as follows: (a) The Maryland Consumer Loan Law does not change any powers conferred by law on any person who is not required or permitted to be licensed under this subtitle. (b) The Commissioner may not license any bank, trust company, savings bank, credit union, or savings and loan association.

By way of contrast, the licensing provisions that apply to the Interest and Usury Subtitle contain licensing exemptions. Specifically, under CL § 12-103(c)(4), a lender who makes a loan under subsection (c) “is subject to the licensing provisions of Title 11, Subtitle 3 of the Financial Institutions Article.” When one peruses the provisions set forth in that particular licensing subtitle, they will find that it contains various exemptions. See FI § 11-302. 20 interest, fees, or other compensation” in connection with the loan. CL § 12-314(b)(2) (emphasis added); see also CL § 12-314(d)(1) (stating that with respect to a loan that is void and unenforceable under this section, a person may not “collect, directly or indirectly, any amount from the borrower[]”). 2.

The MCLL Licensing Provisions The definitions contained in the Licensing Provisions include a definition of “loan” that mirrors the definition of “loan” contained in the Credit Provisions. FI § 11-201(e).22 The MCLL defines “license” as a “license issued in any form by the Commissioner under this subtitle to make loans under the Maryland Consumer Loan Law[.]” FI § 11-201(d). “Licensee” is defined as “a person licensed under this subtitle to make loans under the Maryland Consumer Loan Law.” FI § 11-201(d-1). Under the Licensing Provisions: Unless a person[23] is licensed by the Commissioner, the person may not: (1) Make a loan; or (2) In any way use any advantage provided by the Maryland Consumer Loan Law. FI § 11-203.1(a). 22 FI § 11-201(e) specifies that: “Loan” means any loan or advance of money or credit subject to Title 12, Subtitle 3 of the Commercial Law Article, the Maryland Consumer Loan Law — Credit Provisions, regardless of whether the loan or advance of money or credit is or purports to be made under Title 12, Subtitle 3 of the Commercial Law Article. 23 A “person” is defined under the MCLL as “an individual, corporation, business trust, statutory trust, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal commercial entity.” CL § 12-301(f); FI § 11-201(g). 21 The Licensing Provisions require that a person obtain a license through the Nationwide Multistate Licensing System & Registry to “[m]ake a loan.” FI § 11-203.1.

The Licensing Provisions contain, in part, the qualifications of an applicant for a license, FI § 11-205; requirements for applying for a license, paying fees, and filing a surety bond, FI § 11-206; and various powers of the Commissioner of Financial Regulation (the “Commissioner”), including: the authority to investigate applicants for licensure, FI § 11- 207; the power to grant or deny license applications, id.; the right to issue a cease and desist order for a violation of the MCLL or