Lyles v. Santander Consumer USA Inc.

Decision Date13 May 2022
Docket NumberMisc. No. 3, Sept. Term, 2021
Citation478 Md. 588,275 A.3d 390
CourtCourt of Special Appeals of Maryland

Argued by Cory L. Zajdel (David M. Trojanowski and Jeffrey C. Toppe, Z Law, LLC, Timonium, MD), on brief, for Appellant.

Argued by Robert J. Brener (Duane Morris LLP, Newark, NJ; Laurie G. Furshman, Duane Morris LLP, Baltimore, MD), on brief, for Appellee.

Argued before:* Getty, C.J., *McDonald, Watts, Hotten, Booth, Biran, Alan M. Wilner (Senior Judge, Specially Assigned), JJ.

Getty, C.J. Consumers may use "closed end credit" and "revolving credit" in making purchases for a variety of consumer goods by borrowing funds through a credit plan. "Closed end credit" requires a borrower to repay the amount owed in multiple installments, generally of an equal amount, over a fixed period of time. "Revolving credit" enables a borrower to purchase goods or secure loans on a continuing basis as long as the borrower's total balance does not exceed a specified limit. The borrower has the option of paying the minimum required monthly payment, paying any amount above the minimum payment each month, or paying off the entire balance.

Borrowers frequently access closed end credit to finance the purchase of a motor vehicle. In Maryland, if the purchase of a motor vehicle is financed by an installment sale, the lender may elect for the contract to be governed by either of two statutes located in Title 12 of the Commercial Law Article ("CL") of the Maryland Code—the Credit Grantor Closed End Credit Provisions ("CLEC"), CL §§ 12-1001 et seq ., or the Maryland Retail Installment Sales Act, CL §§ 12-601 et seq . See Patton v. Wells Fargo Fin. Md., Inc. , 437 Md. 83, 88–89, 85 A.3d 167 (2014). The present matter involves a borrower who purchased a motor vehicle and financed it by closed end credit pursuant to an agreement governed by CLEC.

Before this Court is a certified question of law from the United States District Court for the District of Maryland ("federal district court") regarding the calculation of damages under Maryland Code ("Md. Code"), (1983, 2013 Repl. Vol., 2021 Supp.), Commercial Law Article § 12-1018(b). Appellant Jabari Morese Lyles ("Mr. Lyles") initiated the underlying class action against Appellee Santander Consumer USA, Inc. ("Santander") for alleged violations of CLEC.

This matter comes before the Court with unique posturing. The question posed to this Court will inform the federal district court's analysis of its subject matter jurisdiction after resolution of the certified question. Mr. Lyles, the Plaintiff in the federal district court, advocates for a damages calculation that would entitle him to lesser monetary relief than the interpretation Santander argued before the federal district court. We hold that, based upon prior caselaw regarding CLEC, a plain language analysis of CL § 12-1018(b), and a review of the pertinent legislative history, CL § 12-1018(b) requires a credit grantor who knowingly violates CLEC to forfeit three times the amounts of interest, fees, and charges collected in violation of CLEC.


Pursuant to the Maryland Uniform Certification of Questions of Law Act, Md. Code (1996, 2020 Repl. Vol.), Courts & Judicial Proceedings Article ("CJ") §§ 12-601 et seq ., this Court has the power to certify questions of law to another court and answer questions of law presented to it. "[I]f the answer may be determinative of an issue in pending litigation in the certifying court and there is no controlling appellate decision, constitutional provision, or statute of this State[,]" this Court may "answer a question of law certified to it by a court of the United States[.]" CJ § 12-603 ; see also United Bank v. Buckingham , 472 Md. 407, 411, 247 A.3d 336 (2021). In answering a certified question of law, this Court resolves only issues of Maryland law, not questions of fact. Parler & Wobber v. Miles & Stockbridge , 359 Md. 671, 681, 756 A.2d 526 (2000). As such, this Court accepts the statement of facts submitted to it by the certifying court and will not "evaluate or weigh the evidence[.]" Reed v. Campagnolo , 332 Md. 226, 228, 630 A.2d 1145 (1993) (quoting Food Fair Stores, Inc. v. Joy , 283 Md. 205, 219 n.7, 389 A.2d 874 (1978) ).

The Maryland General Assembly enacted CLEC and other legislation as a part of the Credit Deregulation Act of 1983 "to entice creditors to do business in the State[.]" Ford Motor Credit Co., LLC v. Roberson , 420 Md. 649, 662, 25 A.3d 110 (2011) ; see also 1983 Md. Laws, ch. 143. The General Assembly intended to enable Maryland banks "to compete more effectively with banks in nearby states." Patton , 437 Md. at 105, 85 A.3d 167. As this Court has previously explained:

Prior to the 1983 session of the General Assembly, four Maryland banks transferred certain of their operations to Delaware where the banking laws were more favorable. These included the credit card operations of two major banks based in Baltimore. Some 1,000 jobs were lost in the Baltimore area. The response by the General Assembly was Chapter 143 of the Acts of 1983, the enactment of which was urged by then Mayor Schaefer of Baltimore and others. Chapter 143 has become known as the Credit Deregulation Act of 1983.

Biggus v. Ford Motor Credit Co. , 328 Md. 188, 197, 613 A.2d 986 (1992).

CLEC provides consumer protection to borrowers in transactions involving closed end credit, as well as establishes parameters and requirements with which credit grantors must comply. Patton , 437 Md. at 89, 85 A.3d 167. The subtitle also establishes various remedies to a borrower if the credit grantor fails to comply with CLEC. Id . at 90, 85 A.3d 167. Notably, these protections, parameters, requirements, and remedies only apply if a credit grantor affirmatively elects CLEC to apply to a closed end credit loan. See CL § 12-1013 ; CL § 12-1013.1.

The following facts are provided in the federal district court's Certification Order. On or about January 11, 2021, Mr. Lyles initiated the underlying class action in the Circuit Court for Baltimore City alleging that Santander violated CLEC. Mr. Lyles entered into a Retail Installment Sales Contract ("RISC") to finance the purchase of a motor vehicle. The RISC, subsequently assigned to Santander, expressly invoked CLEC as the governing law. Mr. Lyles financed $20,657.00 in the RISC with finance charges of $15,596.44 throughout the duration of the RISC. Mr. Lyles completed several payments to Santander under the RISC. As of the filing of the underlying class action, Santander collected at least $27,029.67 on the RISC, which amounts to $6,372.67 more than the amount Mr. Lyles financed under the RISC. According to Santander, $15,603.54 remains due on the RISC.

Santander charges a convenience fee to its customers "for making a payment by phone through a live representative or through an automated system or through the internet[.]" On Mr. Lyles’ RISC, Santander charged and collected twelve convenience fees, each for $10.95, totaling $131.40.

Mr. Lyles maintains that Santander knowingly violated CLEC by charging the twelve convenience fees and asserts that he and the purported class are entitled to relief under CL § 12-1018(a)(2) and CL § 12-1018(b). Santander removed this action to the federal district court on March 4, 2021 pursuant to 28 U.S.C. § 1332(d)1 , which, in part, requires the class action's amount in controversy to exceed $5,000,000.

Presently, a Motion for Remand is pending before the federal district court. As such, the federal district court's subject matter jurisdiction over this matter is dependent on the proper amount in controversy—i.e., the appropriate amount of damages Mr. Lyles may be entitled to under CL § 12-1018(b).

The federal district court certified the following question of law to this Court to determine the appropriate interpretation of CL § 12-1018(b) :

If a credit grantor is found to have knowingly violated Credit Grantor Closed End Credit Provisions ("CLEC"), Maryland Code Annotated, Commercial Law §§ 12-1001, et seq ., does [CL] § 12-1018(b) require the credit grantor to return three times: (1) all amounts collected by the credit grantor in excess of the principal amount financed; (2) only those amounts collected that the borrower contends violate CLEC (in this case, the convenience fees); or (3) some other amount?

For the reasons that follow, we hold that CL § 12-1018(b) requires a credit grantor to return three times the amount of interest, fees, and charges collected that the borrower contends violate CLEC (in this case, the convenience fees).

A. Parties’ Contentions

Mr. Lyles maintains that if a credit grantor knowingly violates CLEC, CL § 12-1018(b) requires the credit grantor to forfeit three times the amount of the unauthorized charges. In this case, that would total $394.20, which is three times $131.40, the total amount collected for the twelve convenience fees charged. In support of this contention, Mr. Lyles relies upon the recent Court of Special Appealsholding in Bolling v. Bay Country Consumer Finance, Inc. , 251 Md. App. 575, 256 A.3d 271 (2021). Mr. Lyles asserts that the Court of Special Appealsinterpretation of CL § 12-1018(a)(2), in conjunction with the plain language of CL § 12-1018(b), indicates that a knowing violation of CLEC entitles the borrower to treble the unauthorized amounts charged.

In addition, Mr. Lyles emphasizes that the legislative history of CL § 12-1018(b) demonstrates that the penalty provisions set forth in CLEC are identical to the penalties set forth in CL § 12-413, the Maryland Secondary Mortgage Loan Law. Accordingly, Mr. Lyles asserts that caselaw and regulatory decisions interpreting CL § 12-413 provide the appropriate calculation of damages under CL § 12-1018(b).

Before the federal district court, Santander argued that under CL § 12-1018(b) a credit grantor would be required to pay three times the amount collected in excess of the principal amount...

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6 cases
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    ...Bolling without criticism. Lyles v. Santander Consumer USA Inc., 478 Md. 588 (2022). Defendants argue that the Court of Appeals' opinion in Lyles should be disregarded because it was focused on issues about how to calculate damages under CLEC, rather than whether declaratory relief is appro......
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