Today's Trends in Credit Regulation

Vicarious Liability for Violations of Telephone Solicitation
By Latif Zaman

Telephone solicitations can serve as a valuable tool for creditors and sellers while also creating potential nuisances and issues for consumers. As such, states have regulated the practice in various ways. A potential point of contention is the determination of the liability that might attach to a creditor or seller arising from telephone solicitations made by a telemarketing company ostensibly working on the creditor or seller’s behalf. A recent case in a federal court, interpreting Maryland law, touched on this issue in relation to a service contract provider and has yet to be resolved.

Theresa Costley received a call from Service Protection Advisors, LLC, offering to sell her a service contract for her car. By the end of the call, she agreed to buy the service contract and authorized Service Protection to deduct payments from her checking account, which it did. The contract named Automobile Consumer Service Corporation as administrator and provider. A month later, Costley made a claim under the contract, which ACSC denied under the pre-existing condition exclusion in the contract. Costley sued for, among other things, violations of the Maryland Telephone Solicitations Act and the Maryland Consumer Protection Act. ACSC removed the case to the U.S. District Court for the District of Maryland and moved for summary judgment.

Under the MTSA, it is a statutory violation for a merchant engaging in a telephone solicitation for consumer services to make or submit any charge to a consumer’s credit account until after the merchant receives from the consumer a contract in compliance with the MTSA. A violation of the MTSA is also a violation of the MCPA. ACSC argued that it was Service Protection that made the telephone call to Costley and that Service Protection was not its actual or apparent agent. Therefore, it was not liable for MTSA and MCPA violations emanating from that telephone call.

The court denied ACSC’s motion for summary judgment. The court found that an issue of fact remained regarding whether or not Service Protection acted as an agent for ACSC. The court noted the strongest evidence of an agency relationship was the existing contract between ACSC and Costley that arose from the telephone call and that referenced agreements from the telephone call.

The court has yet to reach a decision regarding whether or not ACSC was ultimately liable for the statutory violations. Looking forward, the level of liability sellers and creditors can expect to face in connection with telephone solicitations made by telemarketers on their behalf is an issue to keep an eye on.

Costley v. Service Protection Advisors, LLC, 2013 U.S. Dist. LEXIS 34123 (D. Md. March 8, 2013).

Latif Zaman is an associate in the Maryland office of Hudson Cook, LLP. Latif can be reached at 410-782-2346 or by email at

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