Md. courts freeze 900 debt-collection lawsuits

Move comes after state denies Sunshine Financial Group's application for debt-collection license

July 20, 2011|By Jamie Smith Hopkins, The Baltimore Sun

Maryland's District Courts are putting a freeze on about 900 debt-collection lawsuits after the local company that filed them tried and failed to get a license.

Sunshine Financial Group, a Catonsville-based firm that buys consumer debts and collects primarily by suing, was turned down for a collection agency license this month by the state Department of Labor, Licensing and Regulation.

The agency said the company filed affidavits in court cases that "misled and deceived both consumer defendants and the courts" about key issues, from the amount of the debt owed to whether the company could prove it had the right to collect.

District Court Chief Judge Ben C. Clyburn ordered the courts Wednesday to put a stay on all the company's pending cases until further notice, preventing further action — such as judgments being entered against consumers. Notices will be sent to defendants.

The cases could ultimately be dismissed.

The company's owner, J. Scott Morse, can appeal the state's license decision. Otherwise, it becomes final. He declined to comment.

At least some active debt buyers have filed lawsuits against Maryland consumers without getting a collection agency license, prompting the state to issue a warning last year that a license was required for such litigation.

Debt buyers typically purchase older, charged-off credit card accounts and other debts and try to collect, frequently through small claims court. Hundreds of thousands of such debt-collection cases have been filed in Maryland's small claims courts in recent years.

Wednesday's freeze on Sunshine Financial's cases comes after massive dismissals of debt suits in the past year and a half.

Last year, Clyburn dismissed more than 27,000 Maryland cases handled by Mann Bracken after the Rockville debt-collection law firm collapsed. In March, debt buyer Midland Funding agreed to drop just over 10,000 cases against Maryland consumers to settle a class-action lawsuit, though it admitted no wrongdoing.

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