On July 1, the Maryland Court of Special Appeals affirmed in part a trial court’s dismissal of claims brought under Maryland’s Credit Grantor Closed End Credit Provisions (CLEC) due to the plaintiff’s lack of damages. Specifically, the court ruled that a plaintiff could, in theory, state a CLEC claim without having paid more than the principal balance on his/her loan, but practically would have no damages under such a claim until he/she had paid more than the principal balance. Consequently, such a plaintiff could only seek declaratory or injunctive relief under CLEC.
In Bolling v. Bay Country Consumer Finance, Inc., the plaintiff financed a vehicle with Bay Country Consumer Finance, Inc. (Bay Country). After Bolling defaulted, the vehicle was repossessed and sold for less than the principal amount of the subject loan. Bolling filed suit, alleging that Bay Country violated CLEC by failing to provide her with a written statement containing all information required by the statute prior to repossession and sale. Bay Country moved to dismiss, arguing, among other things, that Bolling (1) could not state a claim under CLEC until she had paid more than the principal balance of the loan, and (2) had no recoverable damages because she had not paid more than the principal balance of the loan. Relying on precedent from federal courts, including the District of Maryland and the Fourth Circuit, the trial court granted Bay Country’s motion to dismiss on both of these bases.
On appeal, the Maryland Court of Special Appeals evaluated CLEC’s language, legislative history, and Maryland precedent interpreting the statute to conclude that a theoretical plaintiff may be able to state a claim under CLEC for declaratory or injunctive relief even if he/she had not paid more than the principal balance of the loan. The court affirmed, however, the second basis for dismissal, finding that a plaintiff had no recoverable damages under CLEC until he/she paid, at a minimum, the principal balance of the loan. In reaching this conclusion, the court noted that “[p]ractically speaking, it is difficult to image the imposition of money damages under [CLEC] where the borrower has not paid the principal amount.” Thus, although the Court of Special Appeals disagreed with earlier rulings by the Fourth Circuit and district courts, it reached the same result and affirmed the trial court’s dismissal because Bolling had no damages and did not seek declaratory or injunctive relief.
Less than a month after the Bolling decision, a different panel of the Court of Special Appeals issued an unpublished opinion in Colbert v. Capital One National Association, confirming the requirement for CLEC claimants to plead damages or equitable relief and rejecting the same legal theories presented in Bolling. After the Colbert plaintiff’s vehicle had been repossessed and sold, she filed suit, alleging a violation of CLEC arising out of convenience fees. Colbert claimed CLEC allowed her to sue for the alleged violation even though she never paid more than the principal amount of the loan and failed to plead any facts supporting declaratory or injunctive relief. Relying on the reasoning of Bolling, the court affirmed dismissal of Colbert’s case because she failed to allege damages and was not entitled to declaratory or injunctive relief.
The Bolling and Colbert decisions have specific import to consumer-facing companies that transact in Maryland, particularly in the auto finance space. As a practical matter, the decisions should have a limited effect. Bolling and Colbert affirm the traditional concept that a plaintiff does not have a cause of action without damages. However, in certain limited situations, declaratory or injunctive relief may be available for some CLEC claimants that have paid less than the principal amount of the loan.
Troutman Pepper routinely counsels auto finance companies and other consumer-facing institutions in Maryland and nationwide. We will continue to monitor developments in this space.