Fourth Circuit Takes on Second Debt Collection Case in a Week

In its second look at the FDCPA in less than a week, the Fourth Circuit dismissed debt collection claims under both the federal and Maryland statutes against a bank and its collection attorneys.  In Elyazidi v. Suntrust Bank, No. 14-1290 (4^th Cir. Mar. 5, 2015), Elyazidi contested the actions of the bank and its collection attorneys in a Virginia suit seeking to collect overdrafts. Elyazidi wrote herself a check for almost $10,000.00 when in fact her account only held a few hundred dollars.  The bank engaged counsel to file suit to collect the overdrafts from Elyazidi.  The suit was filed in Virginia where she resided.  The bank’s counsel sought to recover its attorney’s fees associated with its collection efforts consistent with Elyazidi’s agreement with the bank.  In support of its attorney’s fees, counsel submitted an affidavit requesting an award of fees of 25% of the balance and stating her hourly rate, the amount of time expended thus far and estimating the amount of time that would be expended in order to handle the matter through execution. [Slip Op. at 5].  The attorneys inadvertently failed to redact Elyazidi’s social security number from the statements filed with the complaint, an error which the court promptly corrected. 

After judgment was entered against Elyazidi in Virginia state court, she filed suit in Maryland, alleging that the actions of the bank and its attorneys in the Virginia collection action (whose firm was based in Maryland) violated the FDCPA and the Maryland Consumer Debt Collection Act.  Elyazidi contended that the bank and its counsel’s efforts to collect attorney’s fees violated the FDCPA and Maryland Consumer Debt Collection Act because the contractual provision capped her liability for attorney’ fees at 25% and she could not have owed the full 25% at the time the suit an affidavit were filed.  Elyazidi further alleged that the disclosure of her social security number violated the FDCPA. 

In reviewing the FDCPA claims regarding the efforts to collect attorney’s fees, the court applied the least sophisticated consumer standard.   While the court acknowledged that litigation activity is subject to the FDCPA, where the debt collector sought no more than applicable law allowed and explained via affidavit that the figure was merely an estimate, the representations cannot be considered misleading under 15 U.S.C. 1692e(2). 

As to the disclosure of her social security number, the Fourth Circuit determined the disclosure did not constitute an unfair or unconscionable means of debt collection.   “No doubt, the public disclosure of one’s social security number can be alarming.  Here, though, where the lapse occurred in the course of litigation and was easily remedied, the disclosure cannot be considered unconscionable.” [Id. at 18].   “In sum, we hold that, as a matter of law, the failure to redact Appellant’s social security number before submitting the bank statements to the Virginia court was not an unfair or unconscionable means of debt collection under the FDCPA.” [Id. at 19].

While the Fourth Circuit opinion devotes a lot of time and attention to the FDCPA claims, the more interesting issue is that presented by the state court claims.  Specifically, whether actions which take place in Virginia regarding a Virginia consumer may give rise to claims under the Maryland Debt Collection Practices Act?  In other words, what is the extra territorial effect of the state debt collection statutes?  Elyazidi maintained that the challenged activities occurred in the state of Maryland, noting that the attorney’s office was in Maryland, the bank had numerous branches in Maryland, the legal documents were prepared in Maryland and the filing of the suit in Virginia was directed from the attorney’s office in Maryland.  The court, however, focused on where the injury occurred.  Applying Maryland law, the court noted that “[i]n Maryland, regulatory statutes are generally construed as not having extra-territorial effect unless a contrary legislative intent is expressly stated.” [Slip Op. at 20]. “The critical point…is not whether Appellees conduct business in Maryland, but whether some significant portion of the challenged activity occurred there.  Here, Appellant was a Virginia resident who incurred a debt in Vriginia.  The allegedly offensive representations appeared in Virginia court documents, and any harm they might have inflicted could have occurred only in Appellant’s home state of Virginia.” [Id. at 21].