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Maryland has some of the strictest debt collection laws in the U.S., combining federal protections under the Fair Debt Collection Practices Act (FDCPA) with state-specific rules like the Maryland Consumer Debt Collection Act (MCDCA) and the Maryland Collection Agency Licensing Act (MCALA). These laws aim to shield consumers from harassment, deception, and abusive practices, while also regulating how debts are collected and who is allowed to collect them. Key highlights include:
Maryland's laws go beyond federal standards, making compliance essential for collectors and offering strong safeguards for consumers.
Maryland vs Federal Debt Collection Laws: Key Differences and Requirements
The Maryland Consumer Debt Collection Act (MCDCA) is part of the Maryland Annotated Code, Commercial Law Article, §§ 14-201 through 14-204. This law sets clear boundaries for how consumer debts can be collected within the state. Its definition of a "collector" is quite broad, covering original creditors, employees, third-party agencies, debt buyers, attorneys, and even mortgage lenders.
Section 14-202 of the MCDCA lists nine specific actions that debt collectors are prohibited from taking. These include:
Violators of these provisions can be held liable for damages, including emotional distress, even if there’s no physical harm. The State Collection Agency Licensing Board can impose fines of up to $500 per violation. Additionally, licensed agencies are required to maintain a $5,000 surety bond. Together, these rules form a strong framework for protecting consumers from abusive debt collection practices.
The MCDCA stands apart from the federal Fair Debt Collection Practices Act (FDCPA) in several key ways. While the FDCPA primarily targets third-party collectors, Maryland's law also applies to original creditors and their in-house collection teams. This means businesses like banks and retailers collecting their own debts must follow the same rules.
Maryland courts have also emphasized that the MCDCA governs both how debts are collected and the validity of the debt itself. Collectors cannot attempt to enforce debts they know are invalid. Furthermore, any violations of the FDCPA are automatically considered violations of Maryland's law, allowing federal standards to bolster state enforcement.
Two major court cases in August 2021 further shaped the MCDCA's scope:
In its ruling, the Maryland Supreme Court stated:
If, in the course of collecting or attempting to collect a debt, an attorney recklessly claims a right that turns out not to exist, the attorney – like any other debt collector – is liable under the MCDCA.
These decisions overturned earlier lower court rulings and reinforced the MCDCA's role as a powerful tool for consumer protection. They also highlighted its focus on holding all debt collectors, including attorneys and mortgage servicers, accountable for their actions.
Maryland law sets strict boundaries for debt collection practices, with violators facing fines of up to $500 per violation, capped at $5,000 in total. Additionally, collectors may be held liable for emotional distress damages even when no physical harm occurs.
Under the Maryland Consumer Debt Collection Act (MCDCA), harassment through excessive or poorly timed communication is strictly forbidden. This includes late-night calls, repeated contact in a single day, or any behavior that causes undue stress. Collectors are also prohibited from using obscene or abusive language during any interaction.
Threats of violence, force, or criminal prosecution are not allowed unless the debt involves an actual violation of criminal law. For example, threatening jail time for failing to pay a credit card bill would be illegal, as nonpayment of consumer debt is not a criminal offense. Furthermore, collectors cannot disclose - or threaten to disclose - information that could harm a debtor’s reputation to third parties who lack a legitimate business reason for such information. Exceptions to this rule apply only to a spouse or, in the case of minors, their parents.
Maryland law prohibits notifying an employer about a debt unless a final court judgment has been issued. This is stricter than the federal Fair Debt Collection Practices Act (FDCPA), which only limits workplace contact if the collector knows the employer disallows it.
The MCDCA also bans deceptive practices. Collectors cannot send communications that mimic legal or judicial documents or falsely imply government or attorney authorization. For instance, sending letters designed to look like court summonses or official notices is a direct violation. Furthermore, it is illegal to claim or threaten to enforce rights that the collector knows do not exist. According to the MCDCA:
A collector who violates any provision of this subtitle 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.
Collectors must ensure they have the legal authority to pursue garnishment or litigation before making such threats. False claims or empty threats can lead to significant liability under Maryland law.
In Maryland, all collection agencies are required to hold a valid license issued by the State Collection Agency Licensing Board. This applies to businesses collecting consumer debts on behalf of others, debt buyers purchasing defaulted claims, and companies that sell or use collection systems or forms. Operating without the proper license is considered a misdemeanor and can result in penalties of up to $1,000 in fines and six months in jail. This licensing rule underscores Maryland's strict approach to regulating debt collection practices.
Licenses and renewals are processed through the Nationwide Multistate Licensing System (NMLS). To apply, businesses must first set up an NMLS account to obtain a unique identifier. The initial application fee is $400, and licenses are valid for two years, with a renewal fee of $400.
A license is required for the business's main office. However, as of July 1, 2023, branch locations no longer need individual licenses. Instead, all additional locations must be disclosed to the Board through NMLS. This includes any site involved in customer interactions, complaint handling, or core operational functions like compliance, risk management, or finance. By requiring disclosure of these locations, Maryland ensures accountability across all operational sites. Additionally, licensees must maintain a $5,000 surety bond, which provides protection to anyone harmed by violations of Maryland’s collection agency or consumer debt collection laws.
Maryland law classifies debt buyers as collection agencies if they purchase and collect defaulted consumer claims, meaning they must also hold a collection agency license. Debt buyers are responsible for verifying the status of claims before purchase and ensuring a license is in place if the debts are already in default.
Like licensed agencies, debt buyers must keep their NMLS records up to date. This includes ensuring their legal name, trade names, and principal office address are accurately recorded. Business operations can only be conducted under the legal name or trade names properly disclosed in NMLS. Employees collecting debts for their employer or a licensed collection agency are exempt from individual licensing requirements.
Maryland has set up strong protections for individuals dealing with medical debt. These rules strictly regulate how hospitals and debt collectors can pursue and report medical debts. Understanding these laws is essential for managing medical debt in the state, as they reflect Maryland's broader efforts to safeguard consumers from unfair debt collection practices.
Signed into law on May 13, 2025, and effective October 1, 2025, HB 428 introduced major changes to how medical debt judgments are handled. Under this law, any legal complaint seeking a money judgment for medical debt must clearly identify the debt as medical and include the debtor’s primary residence address. Maryland District Court forms have been updated to reflect these new requirements.
One of the most impactful parts of HB 428 is the ban on placing liens on owner-occupied residential properties to collect medical debt. If a lien is improperly filed against someone’s primary residence, the court is required to remove it. The law defines medical debt as money owed to providers of medical services, products, or devices. However, it excludes debts from general-purpose credit cards unless those cards are specifically issued for healthcare expenses. These rules apply only to cases filed on or after October 1, 2025.
HB 1020 works alongside HB 428 to address how medical debt impacts credit reports. Effective October 1, 2025, this law prohibits consumer reporting agencies from including medical debt in credit reports, regardless of when the debt was incurred. The Maryland Office of Financial Regulation emphasized:
Medical debt is completely excluded from consumer credit reports and cannot influence credit decisions.
This means reporting agencies cannot store or use any information related to medical debt or its collection. Additionally, agreements between medical providers and debt collectors must include a clause banning the disclosure of medical debt to reporting agencies. Contracts that fail to include this clause are considered void and unenforceable.
Maryland law also establishes clear rules for hospitals when it comes to medical debt. Hospitals are required to provide free medically necessary care to patients with family incomes at or below 200% of the federal poverty level (FPL). Patients earning between 200% and 300% of the FPL are entitled to reduced-cost care, while those below 500% of the FPL who face financial hardship - defined as medical debt exceeding 25% of their annual family income - can also receive reduced-cost care. Additionally, patients enrolled in programs like SNAP, WIC, or free/reduced-price lunch are automatically eligible for free care.
Hospitals face strict limits on their collection practices as well. They cannot charge interest on bills for self-pay patients until a court judgment is obtained, and they are prohibited from forcing the sale or foreclosure of a patient’s primary residence to recover medical debt. Hospitals must also wait at least 120 days after sending the initial bill before reporting negative information to credit bureaus or initiating legal action. Furthermore, under SB 1006, the sale of medical debt is restricted to transactions involving governmental units or their contractors, specifically for the purpose of canceling the debt.
| Assistance Category | Income Threshold (% of FPL) | Requirement |
|---|---|---|
| Free Medically Necessary Care | ≤ 200% | Must provide free care |
| Reduced-Cost Care | 200%–300% | Must provide reduced-cost care |
| Financial Hardship | < 500% | Reduced-cost care if debt exceeds 25% of annual income |
| Presumptive Eligibility | N/A (Program Enrollment) | Deemed eligible for free care (e.g., SNAP, WIC) |
Hospitals are also required to ensure that outside collection agencies have a system for patients to file complaints. These complaints must be forwarded promptly to the hospital. If it’s determined that a patient was eligible for free care at the time of service, the hospital must refund at least $25 to the patient.
Maryland has taken steps to strengthen protections for consumers against debts tied to coercion or identity theft. These measures ensure that debt collectors must stop pursuing such debts once the situation is verified, offering a critical layer of security for individuals facing these challenges.
Under HB 1198, when a consumer informs a debt collector that a debt was incurred due to coercion - such as economic abuse or threats from a partner or family member - the collector is required to stop collection efforts immediately once evidence of coercion is provided. The Maryland Consumer Debt Collection Act (MCDCA) explicitly prohibits collectors from enforcing or threatening to enforce a debt they know is invalid or unenforceable.
The MCDCA's protections extend to original creditors, debt buyers, collection agencies, and attorneys, ensuring that victims of coerced debt can seek remedies no matter who holds the debt. Violations can result in damages and even the loss of the violator’s license.
Additionally, Maryland has implemented specific steps to address identity theft-related debts, ensuring swift dispute resolution for fraudulent claims.
For cases of identity theft, Maryland provides clear guidelines to help consumers dispute fraudulent debts. Victims are required to file a report through the FTC’s IdentityTheft.gov and a police report to document the crime.
The state also offers an Identity Theft Passport through the Attorney General's Identity Theft Unit. This document assists victims in resolving financial disputes and can prevent wrongful arrest if their personal information was misused during a crime. Once a consumer submits an FTC Identity Theft Report to a debt collector, the collector must verify the debt and confirm the consumer’s responsibility before continuing any collection efforts. Credit reporting agencies are also obligated to promptly block and remove fraudulent information, helping to prevent further collection attempts on disputed accounts.
Maryland law allows consumers to access two free credit reports annually from each of the three major credit reporting agencies. This enables individuals to monitor their credit closely and spot potential fraud.
For those facing lawsuits over fraudulent debts, immediate action is critical. As the Holland Law Firm emphasizes:
"If you are being sued on an account opened in your name you must defend yourself. If you do nothing, the debt won't go away."
Consumers typically have just 15 days to file a Notice of Intention to Defend and must attend all court hearings to avoid a default judgment. It’s essential to keep detailed records, including confirmation letters from businesses closing fraudulent accounts and proof of residency (such as leases or utility bills) to demonstrate that the account was opened without their knowledge or during a time they lived elsewhere.
These steps provide a framework for protecting consumers from the financial and legal fallout of identity theft and coercion.
Recent changes in Maryland's laws now impact how debt collectors and buyers operate. Staying informed about these updates is crucial to ensure compliance and avoid costly penalties.
The Central Collection Unit (CCU), part of Maryland's Department of Budget and Management, handles debt collection for state government agencies. Under HB 706, the CCU retains its authority to collect overdue accounts and debts owed to the State of Maryland or its agencies.
State agencies are now required to refer debts to the CCU rather than handling collections independently. This centralized system promotes uniformity in collection practices. However, public colleges and universities have a specific exception - they cannot refer overdue student accounts to the CCU until the late registration period for the next semester ends. These adjustments have a direct impact on how debt portfolios are documented and managed.
The 2026 legislative updates emphasize stricter compliance measures affecting debt buyers and collectors managing Maryland portfolios. Reflecting earlier licensing requirements, proper documentation and enforcement remain key priorities. Notably, judgments obtained by unlicensed businesses are considered void, with no time limits for debtors to challenge them. As stated by the Maryland People's Law Library:
Any judgments obtained by a business not licensed at the time of filing are void. There is no time limit for asserting that a judgment is void due to lack of a collection agency license.
Debt buyers must maintain a thorough chain of title and provide either a signed consumer document or proof of account usage. This poses challenges, particularly for older portfolios where documentation might be incomplete. Collectors are also required to supply detailed breakdowns of principal amounts, interest, and late fees.
Failing to comply can result in penalties of up to $500 per violation, and judgments from unlicensed businesses may be voided. Additionally, the Maryland Consumer Debt Collection Act allows for damages in cases of violations, including compensation for emotional distress or mental anguish:
A collector who violates any provision of this subtitle is liable for any damages proximately caused by the violation, including damages for emotional distress or mental anguish.
Navigating Maryland's debt collection laws demands a structured compliance approach. With penalties reaching up to $500 per violation and the possibility of voided judgments, debt professionals must ensure they have systems in place to monitor licensing, documentation, and communication practices as required by the Maryland Consumer Debt Collection Act.
Debexpert simplifies compliance by centralizing crucial documentation and tracking processes. It securely manages chain of title records, licensing statuses, and debtor communication logs, all while adhering to Maryland's legal standards. The platform’s end-to-end encrypted file sharing ensures debt buyers maintain the required documentation, and its portfolio analytics tools provide detailed insights into principal balances, interest, and late fees. Additionally, Debexpert’s built-in NMLS verification confirms that only properly licensed entities handle debt portfolios. Its real-time communication tools also create a comprehensive audit trail, documenting all debtor interactions to ensure compliance with Maryland’s contact regulations.
While tools like Debexpert are invaluable, pairing them with strong best practices is essential for staying compliant in Maryland.
Additionally, maintain a strict schedule for license renewals. Maryland collection agency licenses must be renewed every two years, expiring on December 31 of odd-numbered years. The renewal fee is $400, and missing the deadline can lead to fines of up to $1,000 and void any judgments obtained without a valid license. Setting reminders six months before expiration can help prevent disruptions.
Maryland's debt collection laws create a highly regulated environment, demanding a thorough understanding of the state's unique requirements. Unlike the federal FDCPA, the Maryland Consumer Debt Collection Act (MCDCA) extends its reach to include original creditors, attorneys, and any business engaged in collecting consumer debts. This broader application means a wider range of entities must meet compliance standards, making ongoing adherence to these regulations essential.
Failing to comply with Maryland's rules can lead to serious consequences, such as voided judgments or even criminal penalties for unlicensed operations. Additionally, collectors who violate the MCDCA may face liability for emotional distress or mental anguish, even without evidence of physical harm.
Maryland also enforces stricter documentation standards compared to federal laws. Collectors must have either a signed agreement or electronic records showing actual account usage, along with a complete chain of title from the original creditor, before initiating collection efforts.
To meet these rigorous requirements, advanced compliance tools play a vital role. Platforms like Debexpert simplify the process by consolidating chain-of-title records, verifying NMLS licensing status, and maintaining detailed audit trails of debtor communications. When combined with regular audits, focused staff training, and timely license renewals (every two years at a cost of $400), these tools help reduce the risk of violations while improving overall portfolio management.
Navigating Maryland's debt collection landscape requires proactive compliance strategies. By mastering the state's specific rules and utilizing secure platforms, debt professionals can minimize risks and enhance the value of their portfolios. These practices not only reduce legal exposure but also position collectors for success in one of the nation's most challenging regulatory environments.
To verify if a collector is licensed in Maryland, check their registration with the Maryland State Collection Agency Licensing Board. You can do this by reaching out to the Board directly or visiting their official website. The Board is responsible for overseeing licensing and ensuring that collectors comply with Maryland laws. If you need additional help, the Maryland Department of Labor offers resources, including the Board Administrator's email for inquiries.
If a debt collector attempts to collect a debt you don't owe, Maryland law has safeguards in place to protect you. Start by notifying the collector in writing that you dispute the debt and request validation. This means asking them to provide proof that the debt is legitimate and that you are responsible for it.
Collectors are required to follow the law, avoiding any abusive or misleading tactics. They also need proper documentation before pursuing legal action against you. Be sure to keep detailed records of all communications, including letters and phone calls. If you believe your rights have been violated, you may want to file a complaint or reach out to a legal professional for guidance.
Starting October 1, 2025, Maryland will introduce new medical debt laws aimed at offering greater financial protection. Under these laws, medical debts can no longer be reported on credit reports, shielding your credit score from being impacted by unpaid medical bills. Additionally, liens on homes for medical debts will be limited, providing extra security for homeowners. The laws also set restrictions on lawsuits, barring legal action for debts under $500 or for debts that are less than 240 days old. These changes are designed to protect both your credit and your home from the consequences of medical debt.
More than a decade of Ivan's career has been dedicated to Finance, Banking and Digital Solutions. From these three areas, the idea of a fintech solution called Debepxert was born. He started his career in Big Four consulting and continued in the industry, working as a CFO for publicly traded and digital companies. Ivan came into the debt industry in 2019, when company Debexpert started its first operations. Over the past few years the company, following his lead, has become a technological leader in the US, opened its offices in 10 countries and achieved a record level of sales - 700 debt portfolios per year.
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