Maryland Laws Update for Financial Services

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Maryland Laws Update 2019

We are pleased to provide our clients and friends this review of 2019 Maryland laws affecting financial services providers. The new laws present challenges and opportunities for financial institutions.  As always, Gordon Feinblatt's Financial Services Team is able to assist you with any questions. Please email or call using the contact information found below.

The full text of each of the bills listed below can be found on the Maryland General Assembly’s website. If you need assistance obtaining copies of bills or other legislative materials, please contact us.

Table of Topics


Please call or email us if you would like more information about these new laws and their impact on your business.

Charles R. Bacharach, 410-576-4169
Andrew D. Bulgin, 410-576-4280
Douglas T. Coats, 410-576-4002
D. Robert Enten, 410-576-4114
Robert A. Gaumont, 410-576-4007

Ned T. Himmelrich, 410-576-4171
Laura L. Johnson, 410-576-4065
Christopher T. Magette, 410-576-4191
Bryan M. Mull, 410-576-4227
Christopher R. Rahl, 410-576-4222

Maryland Laws Update


Student Loan Servicers – Prohibitions and Unfair, Abusive, or Deceptive Trade Practices
HB594 (Chapter 546)
(effective October 1, 2019)

This law, which will be codified in the Maryland Education Article, imposes new prohibitions and obligations on student loan servicers. The law includes a long list of practices in which student loan servicers may not engage. Most of these are basic unfair practices but some, particularly those focused on allocating nonconforming payments, are unique. This law also requires student loan servicers to acknowledge written inquires or complaints from student loan borrowers within ten days of receipt and to respond to written inquiries or complaints within thirty days of receipt, with very specific response requirements related to balance and document inquiries. In addition to enforcement by the Maryland Attorney General, the new law gives enforcement authority to the Commissioner of Financial Regulation.

Practice Point: In order to determine whether a person that is servicing loans must comply with this new law, it is necessary to focus on the definitions. Paraphrasing, “student loan servicer” means a person responsible for servicing one or more student education loans made to student loan borrowers. “Student loan borrowers” are residents of Maryland. “Student education loan” means a loan made, insured, or guaranteed under Title IV of the federal Higher Education Act or a loan made with the express expectation that the funds will be used to pay expenses that are part of the “cost of attendance” as defined in federal law. “Student education loan” includes a loan to refinance or consolidate a consumer’s existing student education loans. It does not include, regardless of loan purpose, an open-end line of credit or a loan secured by real property. “Servicing” means receiving payments or notification of payments from a student loan borrower and applying the payment to a student loan borrower’s account. It also means, during a period when no payment is required, maintaining student education loan account records and communicating with student loan borrowers regarding the loan on behalf of the loan owner. If, based on these paraphrased definitions, a person thinks they might be a “student loan servicer” under this Maryland law, we recommend further consideration.

Protections from Shutdowns for Government Employees
SB512 (Chapter 522)
(effective May 13, 2019)

This law provides government employees with certain financial protections if a government shutdown occurs. Most pertinent to financial services providers, it allows a court to put on hold (stay) the foreclosure of an owner-occupied residential property if the owner-occupant shows that he or she is a government employee and is involuntarily furloughed from work without pay because of a government shutdown. The court may grant a stay of the foreclosure for a time period that the court considers reasonable but normally not longer than thirty days after the end of the shutdown. There is similar protection against repossessing property during a government shutdown for government employees who are residential tenants that fail to pay rent. Finally, there is some protection against terminating electric and gas service for government employees during a government shutdown. This was enacted as an emergency bill and became effective immediately upon signature by the Governor.

Practice Point: The protections afforded to government employees temporarily stop creditors, landlords, and utilities from taking action due to delinquent payments. They do not, however, stop the creditor, landlord, or utility from taking action after the shutdown ends or diminish the ability to collect what is owed. While there are three separate protections, in three different Maryland statutes, afforded to government employees in this new law, only one of the statutes defines “government shutdown”. Specifically, the protection allowing a court to stay a residential foreclosure does not define government shutdown. If there is ever a question as to what constitutes a government shutdown in connection with a request to stay a foreclosure, the parties and the court should look to that part of this law providing protections for electric and gas payments.

Statute of Limitations for Claims of Unfair, Abusive, or Deceptive Practices by Mortgage Servicers
HB425 (Chapter 650)
(effective October 1, 2019)

This law lengthens the statute of limitations for claims against mortgage loan servicers for unfair, abusive, or deceptive trade practices as defined in Maryland’s Consumer Protection Act (MCPA). “Mortgage loan servicers” are persons who service residential mortgage loans for others or receive payments on residential mortgage loans directly from borrowers for distribution to others. The typical statute of limitations for violations of the MCPA is three years from discovery of the practice. This new law allows a longer statute of limitations for an owner of owner-occupied residential property or an individual who occupies residential property under a divorce use and possession order. These individuals may bring an MCPA claim against a mortgage loan servicer up until the earlier of five years after a foreclosure sale of the property or three years after the mortgage servicer discloses the alleged unfair, abusive, or deceptive practice to the individual.

Practice Point: While amendments to this bill greatly reduced what could have effectively resulted in no statute of limitations for MCPA claims against mortgage loan servicers, the final enactment still presents a very lengthy time for these types of claims (i.e., five years after a foreclosure sale). Because a mortgage loan servicer can, through disclosure of alleged unfair, abusive, or deceptive practices, reduce the statute of limitations to three years after such a disclosure, servicers may determine under certain circumstances it is a good business decision to makes disclosures about certain practices.


Corporate Records and Electronic Transmission
SB136 (Chapter 288)
(effective October 1, 2019)

This law expands the statutory definition of “electronic transmission” (which currently includes electronic mail, facsimile, and Internet transmissions) under the Maryland Corporations and Associations Article to include the “use of or participation in one or more electronic networks or databases, including one or more distributed electronic networks or databases”. Thus, it authorizes corporations to maintain their records on a distributed electronic network or database, commonly known as “blockchain”. The records may be maintained on an information storage device, method, or electronic network or database only if the records can be converted within a reasonable time into clearly legible written form for visual inspection. A corporation is required to convert the electronically maintained record into such form on request of any person who is entitled to inspect the record. The converted records are admissible as evidence and must be accepted for all other purposes to the same extent as original written records. This Act also makes a series of changes regarding the acceptance and use of electronic transmissions.

Practice Point: Recently, a number of other states have enacted legislation that authorizes “blockchain” transactions specifically related to corporations. These distributed networks and databases allow data to be shared and synchronized across multiple sites, countries, or institutions without the need for a central administrator or centralized data storage location. If a corporation switches to such a record-keeping system, it will need to ensure compliance with the relevant requirements of the revised statute.

Maryland General Corporation Law – Miscellaneous Provisions
SB137 (Chapter 349)
(effective October 1, 2019)

This law alters requirements under the Maryland Corporations and Associations Article relating to: (1) corporate board vacancies; (2) informal action by stockholders; (3) quorums to vote on corporate matters; (4) notice requirements for specified merger agreements; (5) the effective date of a consolidation or merger if the successor is a foreign entity; and (6) the powers of real estate investment trusts. This Act also makes a series of technical and clarifying changes to Maryland corporate law.

Practice Point: Each Maryland corporation will need to be mindful of the various changes made in this law as they are applicable to that corporation’s business. Additionally, this law imbues real estate investment trusts with the new power to make guarantees, in addition to existing enumerated powers to make contracts, incur liabilities, and borrow money.

Maryland Commercial Receivership Act
HB1065 (Chapter 284)
(effective October 1, 2019)

The Maryland Commercial Receivership Act (MCRA) is a comprehensive statute that will apply to most commercial real estate receiverships, receiverships filed in connection with the dissolution of a corporation, any other receivership in which a receiver is appointed to wind up the affairs of a business, and in assignment for the benefit of creditors proceedings. Historically, receiverships in Maryland have been governed by unwritten case law dating back to the early 1800’s and outdated court rules. Provisions in this new law that delineate a receiver’s rights, powers and duties are intended to bring greater certainty and uniformity to the receivership process. Many of the MCRA’s provisions were derived from the Uniform Commercial Real Estate Receivership Act which was adopted by the National Conference of Commissioners on Uniform State Laws in July, 2015.

Practice Point: The MCRA expressly recognizes that a court cannot stop a governmental unit from commencing or continuing an action to enforce the unit’s police or regulatory power. Thus, for example, the powers of the Maryland Commissioner of Financial Regulation to take possession of a Maryland-chartered bank should not be adversely affected by the MCRA.

Merchant Credit Card or Electronic Commerce Transaction Processing Agreements
HB777 (Chapter 296)
(effective October 1, 2019)

This new law limits the cancellation fees that a merchant processor may charge Maryland businesses in certain circumstances. A “merchant processor” is a provider of merchant services, a financial institution, or an independent sales organization (or any subsidiary or affiliate of any of these entities). Covered agreements include those between a Maryland business and a merchant processor where the business agrees to pay the merchant processor for processing credit or electronic commerce transactions on behalf of the business. The new law provides that if a covered agreement is terminated within the initial term, the merchant processor may not charge a cancellation fee of more than $500; and no cancellation fee may be assessed if a covered agreement is terminated in any renewal term (unless the merchant processor and the business enter into a separate renewal agreement). The new law also requires specific contract disclosures concerning cancellation fees, renewal terms, and customer service contact information. This law does not apply to merchant processing agreements without any cancellation fee. It also does not apply to businesses that employ fifty or more employees or that reasonably estimate that the business will generate more than $2 million in credit card or electronic commerce transactions each year.

Practice Point: This new law addresses concerns of small merchants who want to terminate agreements for processing credit or electronic commerce transactions but face significant termination fees under those agreements. The Commissioner of Financial Regulation is given investigative and enforcement authority over complaints filed for violations of this law.

Gender Diversity in the Boardroom – Annual Report
HB1116 (Chapter 513)
(effective October 1, 2019)

This law is intended to promote gender diversity in corporate management and boardrooms. It requires certain larger Maryland-chartered businesses (i.e., stock corporations with sales exceeding $5 million or tax-exempt non-stock corporation with an operating budget exceeding $5 million) to include as a part of their annual Maryland Department of Assessments and Taxation personal property tax reports their total number of board members and the number of female board members. This requirement does not apply if the corporation is privately held and at least 75% of the shareholders are members of the same family.

Practice Point: The Comptroller is directed by this new law to report annually to the General Assembly and post on its website the percentage of female representation on the boards of directors for all entities required to file that information. This new law only applies to “domestic corporations”, defined as corporations organized under the laws of Maryland.


Guardianship by Local Department of Child in Need of Assistance
SB732 (Chapter 304)
(effective October 1, 2019)

This law requires that, if a court has appointed a local department of social services (DSS) as guardian over a child in need of assistance (CINA), the court must also, at DSS’s request, issue an order granting DSS authority to establish for the CINA a savings account, an ABLE account, or a pooled special needs trust account. Among other requirements, an order issued pursuant to the new law must require that DSS provide prompt notice to the financial institution of the termination of the department’s guardianship over the CINA.

Practice Point: This law should not result in additional burdens for depository institutions in which these CINA-related accounts are maintained. Nonetheless, depository institutions maintaining CINA-related accounts should be mindful of, and promptly comply with, court orders concerning these accounts.


Labor and Employment Law – Criminal Record Screening (“Ban the Box”)
HB994/SB839 (Vetoed for Policy Reasons)
(would have been effective January 1, 2020)

Normally, our Maryland Law Update excludes bills that do not become law. HB994/SB839 passed the General Assembly but were vetoed by the Governor on May 24, 2019. However, there is a possibility that when the General Assembly next convenes, it will override the Governor’s veto. If there is a veto override at the beginning of the next General Assembly Session (beginning January 8, 2020), this law would go into effect 30 days after the veto override, which would not be long after its normal effective date. For this reason, we decided to include this law in our 2019 report.

If there is an override of the Governor’s veto, Maryland would join a growing number of states and local governments to enact “Ban the Box” legislation for private employers. This law would prohibit an employer with 15 or more full-time employees from requiring job applicants to disclose, prior to the first in-person interview, whether they have a criminal record or have had criminal accusations brought against them. The law would not prohibit an employer from making an inquiry or taking other action that the employer is required to take or is expressly authorized to take by another applicable federal or state law, or to employers that provide services or direct care to minors or vulnerable adults. Employers that violate the law would be subject to a civil penalty of up to $300 for each applicant affected. This statewide law would not preempt a local jurisdiction from enacting or enforcing a law that is more restrictive with respect to criminal record screening practices. Baltimore City and Montgomery and Prince George’s Counties already have enacted their own versions of a “Ban the Box” law.

Practice Point: We believe the exemption in this law allowing employers to take action expressly authorized by federal law means banks and credit unions may ask about criminal convictions before the first in-person interview. There are federal statutes that prohibit both banks and credit unions from employing individuals who have been convicted of any criminal offense involving dishonesty or breach of trust (or, in the case of banks, money laundering). There is regulatory guidance that interprets these statutes as imposing a duty upon an insured institution to make a reasonable inquiry regarding an applicant's history, which consists of taking steps appropriate under the circumstances, consistent with applicable law, to avoid hiring or permitting participation in its affairs by a person who has a conviction or program entry for a covered offense. At a minimum, each insured institution should establish a screening process that provides the insured institution with information concerning any convictions or program entry pertaining to a job applicant. This would include, for example, the completion of a written employment application that requires a listing of all convictions and program entries.

Labor and Employment Law – Payment of Minimum Wage (“Fight for Fifteen”)
HB166/SB280 (Chapters 10/11)
(effective June 1, 2019)

The General Assembly successfully overrode Governor Hogan’s veto to amend the State’s Wage and Hour Law and gradually increase the State’s minimum wage to $15.00 an hour by 2025 (or 2026 for small employers). The law requires employers to begin phasing-in a higher minimum wage over the coming years as follows:

  • January 1, 2020 - $11.00 per hour
  • January 1, 2021 - $11.75 per hour
  • January 1, 2022 - $12.50 per hour
  • January 1, 2023 - $13.25 per hour
  • January 1, 2024 - $14.00 per hour
  • January 1, 2025 - $15.00 per hour

Small employers (those with fourteen or fewer employees), face a slightly more gradual increase, as follows:

  • January 1, 2020 - $11.00 per hour
  • January 1, 2021 - $11.60 per hour
  • January 1, 2022 - $12.20 per hour
  • January 1, 2023 - $12.80 per hour
  • January 1, 2024 - $13.40 per hour
  • January 1, 2025 - $14.00 per hour
  • January 1, 2026 - $14.60 per hour
  • July 1, 2026 - $15.00 per hour

The law allows employers to pay an employee under the age of eighteen a rate equal to 85% of the State’s minimum wage. This portion of the act replaces the current law which had allowed employers to pay 85% of the minimum wage to employees under the age of twenty as well as to certain seasonal employees. Charter counties may still establish a local minimum wage rate higher than the State minimum wage rate.

Prohibiting Enforcement of Non-Compete or Conflict of Interest Provisions
SB328 (Chapter 753)
(effective October 1, 2019)

This law applies to employment agreements for employees whose compensation is equal to or less than $15.00 per hour or $31,200 annually. Under the law, a non-compete provision or conflict of interest provision in an employment contract with such employee will be null and void as being against public policy. The law does not apply to an agreement that prohibits an employee from taking or using a client list or other proprietary client-related information.

Practice Point: In an uncodified section of the bill (which means it will not be part of the statute but is still Maryland law), the General Assembly expressed its intention that the law should not affect a decision by a court involving an agreement with a non-compete provision or conflict of interest provision if that agreement is with an employee whose compensation exceeds the amounts stated in the law.


Elective Share of Surviving Spouse
HB99 (Chapter 435)
(effective October 1, 2020)

As a public policy, Maryland law has long tried to protect the surviving spouse from disinheritance when his or her spouse dies, but the law was easily circumvented. For example, if all or most of a decedent’s assets pass outside of probate through a joint tenancy with right of survivorship, a payable on death beneficiary designation, or an inter vivos trust, a surviving spouse can be effectively disinherited. Conversely, if the decedent adequately provided for the surviving spouse through non-probate assets, the surviving spouse’s election to take the statutory share of the net probate estate could result in the surviving spouse taking more than his or her “fair share”. Maryland courts have endeavored to find equitable solutions to these problems and, over time, developed a list of factors to consider, but those factors are applied on a case by case basis.

The new law implements a formula (including the factors developed by the courts) to calculate and satisfy the surviving spouse’s elective share that takes into account non-probate arrangements and allows courts to modify the elective share where that will achieve an equitable result. The new law also sets out methods by which the election may be made if the surviving spouse is a minor or is incapacitated, and modifies the Maryland Statutory Form Powers of Attorney to include the option to designate an agent to make the election.

Practice Point: Depository institutions should anticipate seeing the modified Statutory Power of Attorney forms, but not until the October 1, 2020 delayed effective date.

Division or Consolidation of Trust
HB932/SB832 (Chapters 498/499)
(effective October 1, 2019)

If a trust instrument does not provide for the consolidation or division of a trust, this new law allows the trustee to consolidate or divide the trust without court approval if: (1) the beneficiaries’ interests in the trust, in the aggregate, are substantially similar to the interests that each beneficiary has before the division or consolidation of the trust; (2) the proposed action to divide or consolidate does not adversely affect the accomplishment of the trust’s purposes; and (3) no qualified beneficiary has objected to the proposed action within 30 days of receiving notice.

Practice Point: This law will allow for more efficient and less expensive division or consolidation of trusts where the trust instrument does not provide for such action.

Maryland Trust Act – Methods of Notice
SB381 (Chapter 291)
(effective October 1, 2019)

The Maryland Trust Act requires a trustee to give notice to the beneficiaries of a trust when (1) a trustee resigns, (2) there is a proposed modification, termination, consolidation, or division of a trust, (3) there is a proposed transfer of a trust’s principal place of administration, (4) a trustee accepts a trusteeship, (5) an irrevocable trust is created, and/or (6) a revocable trust becomes irrevocable. Prior to the new law, the methods by which a trustee could give such notice were limited to personal delivery or certified mail, return receipt requested. The new law allows notice to be given also by first-class mail, postage prepaid, return receipt requested, and by prepaid courier or delivery service, with delivery confirmation requested. In addition, if a beneficiary provides the trustee with written authorization to do so, notice can be provided by alternative methods such as first-class mail, postage prepaid, facsimile transmission from a device that will produce a confirmation page stating the date and time of delivery, or by email with an acknowledgment of receipt requested. A beneficiary can revoke an authorization for alternative service at any time. If a trustee attempts delivery by an alternative method, and knows that delivery was unsuccessful, notice must then be provided by one of the non-alternative means.

Practice Point: Where possible, a trustee should endeavor to obtain written authorization to send out notices by one of the alternative methods. These methods are less costly for the trustee and easier for the beneficiary.

Execution of Wills
HB1140/SB212 (Chapters 322/323)
(effective as to Wills executed on or after October 1, 2019)

This law is in response to a 2017 Nevada law that permits the electronic signing of Wills under certain circumstances. It prohibits an individual from qualifying as a witness to a Will if the individual is not physically located in the same location as the testator at the time of the Will’s signing. The law also clarifies that a Will executed outside of Maryland will be valid if it is executed in conformity with the law of the place where the testator was physically located at the time of the Will’s signing.

Practice Point: Because the proper execution of a Will is critical to its validity, it is important to determine – as to Maryland Wills – that this execution process was followed.


Corporate Governance Annual Disclosure Act
SB44 (Chapter 105)
(effective July 1, 2019)

This new law adopts the corporate governance reporting requirements of the National Association of Insurance Commissioners’ (NAIC) Model Act. Not later than June 1, 2020 and annually after that, each insurer domiciled in the State must submit a Corporate Governance Annual Disclosure (CGAD) to the Maryland Insurance Commissioner. The CGAD will include detailed information related to the insurer’s corporate governance structure, as well as its policies and practices. The CGAD must be signed by the Chief Executive Officer or Corporate Secretary of the insurer and a copy of the CGAD must be provided to the insurer’s board of directors or the appropriate board committee. Penalties may be imposed by the Insurance Commissioner for failure to comply with applicable requirements in this law.

Record Retention – Life Insurance
SB73 (Chapter 112)
(effective October 1, 2019)

This law requires life insurers to maintain records for seven years after an individual or group policy or an individual or group annuity is no longer in effect. This law was viewed as necessary because life insurance policies typically terminate after the covered individual dies and any benefit is paid.

Practice Point: Prior to this, Maryland law has not expressly required life insurers to maintain records of policies after the policy was no longer in effect. The Maryland Insurance Administration has advised that most life insurers already maintain records for between three and seven years, so the law should not change the practice of many life insurance companies.

Breach of Security of a Computer System – Notification Requirement
SB30 (Chapter 103)
(effective October 1, 2019)

This law imposes a new, additional notice requirement on certain insurance businesses, including insurers, nonprofit health service plans, health maintenance organizations, dental organizations, managed care organizations, managed general agents, and third party administrators. These businesses are already subject to the provisions of Maryland’s Personal Information Protection Act (MPIPA), requiring the prompt investigation of any breach of a security system involving certain personal information and the giving of specified notices if the investigation indicates that personal information has or is likely to be misused. The new law requires these businesses to provide an additional notice of a security breach to the Maryland Insurance Commissioner at the same time the business provides notice required under MPIPA to the Office of the Maryland Attorney General.

Prohibiting Discrimination in Underwriting and Rating Homeowner's Insurance based on Status as a Surviving Spouse
SB607 (Chapter 331)
(effective January 1, 2020)

Current law is silent on whether marital status may be used when underwriting and rating a homeowner’s insurance policy. This law clarifies that it is prohibited for an insurer to increase a homeowner’s insurance premium of a surviving spouse based solely on the insured’s change in marital status. A similar change in Maryland law was enacted in 2017 relating to private passenger motor vehicle insurance.


Jane E. Lawton Conservation Loan Program – Eligible Borrowers
HB170 (Chapter 135)
(effective June 1, 2019)

This law expands the definition of “borrower” under the Jane E. Lawton Conservation Loan Program (JELLP) to include a State agency, alters the purpose of JELLP to allow the program to provide no interest loans, expands the purposes of JELLP to include reduction of greenhouse gas emissions, and repeals a provision under JELLP that made projects in structures used primarily for religious or fraternal activities ineligible for loan funding.

Practice Point: JELLP is currently authorized to provide financial assistance in the form of low-interest loans to nonprofit organizations, local jurisdictions, and eligible businesses for projects in order to: (1) promote energy conservation; (2) reduce consumption of fossil fuels; (3) improve energy efficiency; and (4) enhance energy-related economic development and stability in the nonprofit, commercial, and industrial sectors. The changes to JELLP provide new opportunities for no interest loans and for projects to reduce greenhouse gas emissions. Additionally, in response to the U.S. Supreme Court’s decision in Trinity Lutheran Church of Columbia, Inc. v. Comer, 137 S. Ct. 2012, the changes remove the exclusion on projects that include improvements or modifications for energy conservation or renewable energy generation in structures used primarily for religious or fraternal activities.


Provision of Real Estate Brokerage Services through a Team
HB123 (Chapter 582)
(effective October 1, 2019)

Under the Maryland Real Estate Brokers Act, the term “team” means two or more licensed associate real estate brokers, licensed real estate salespersons, or any combination of these persons, who (1) work together on a regular basis to provide real estate brokerage services, (2) represent themselves to the public as being part of one entity, and (3) designate themselves by a collective name such as team or group. Until this legislation, some uncertainty existed as to whether a “team” could use certain terms in advertising, such as “sales associate,” that might mislead or cause confusion. This law expressly authorizes a real estate team to designate themselves by a collective name using the words “and associates”.

Debt Settlement Services Registration Process
HB59 (Chapter 90)
(effective July 1, 2019)

This new law transfers the debt settlement services registration process to the Nationwide Multistate Licensing System (NMLS). Debt settlement services registrants will be required to obtain a unique NMLS identification number and transfer certain registrant information into the NMLS system starting in 2019 (after the Maryland Office of the Commissioner of Financial Regulation provides specified registrant notifications about the migration to NMLS). The new law also changes the expiration date of debt settlement services registrations to December 31 of each year.

Practice Point: Based on experience with other licensing regimes that were previously migrated to NMLS, debt settlement services registrants should expect to experience a learning curve as this process is implemented.

Disclosure of Information from Investigations by the Commissioner of Financial Regulation
SB67 (Chapter 87)
(effective October 1, 2019)

This new law clarifies that the Maryland Commissioner of Financial Regulation may publish or may deny access to information obtained during examinations or investigations. Prior to this, Maryland law did not expressly state that the Commissioner could deny access to records from an investigation. This new language should allow for the flow of information between the person being investigated and the Commissioner’s office to be open and frank.

Changes to Mortgage Broker, Lender, and Servicer Licensing
HB61 (Chapter 92)
(effective October 1, 2019)

This legislation changes the Maryland Mortgage Lender Law, which requires residential mortgage loan brokers, lenders, and servicers to be licensed. First, it greatly expands the existing net worth requirements for licensed mortgage loan servicers. Under this new law, servicers that do not operate as approved servicers for a government sponsored enterprise (GSE) must maintain minimum net worth based on the unpaid principal balance of the servicer’s entire servicing portfolio, with the lowest tier minimum net worth of $100,000 and the highest tier of $1,000,000. If a servicer operates as an approved servicer for a GSE, then the minimum net worth is the largest amount required of the servicer by the GSE. The new law also clarifies how a mortgage broker, lender, or servicer licensee can meet the net worth requirements, including using cash, a working capital line of credit (but not a warehouse line of credit), an irrevocable letter of credit, other assets, and a combination of all these sources. However, there are specific limitations on the use of a working capital line of credit and an irrevocable letter of credit. Second, the new law lengthens the mandatory examination schedule. Currently, the Commissioner must examine “seasoned” licensees at least every thirty-six months. The new law changes that schedule to at least every sixty months. New licenses still must be examined within eighteen months after the date the original license is issued. Third, record retention requirements are lengthened, from twenty-five to sixty-one months. There are a number of other changes to the Mortgage Lender Law provisions that licensees and license applicants should review.

Practice Point: Mortgage loan servicers need to prepare for the new higher net worth requirements that will be effective for the 2020 license renewals. All licensees need to be prepared to retain records for the significantly longer record retention period. Depository institutions are reminded that the exemptions from licensing were not changed. Banks and credit unions with branches in Maryland continue to be exempt from licensing. While still unchanged, it continues to be of surprise to some that there is no licensing exemption for banks chartered in another state that have no deposit taking branch in Maryland or for credit unions chartered by another state.

Credit Services Businesses and Information Statements
SB68 (Chapter 88)
(effective October 1, 2019)

This new law makes adjustments to the Maryland Credit Services Businesses Act (MCSBA). The MCSBA applies to businesses that offer or provide assistance to a consumer in connection with: improving a consumer’s credit record, history, or rating (or establishing a new credit file/record); or obtaining an extension of credit for a consumer. Among other prohibitions and requirements, the MCSBA requires a credit services business to provide a specified information statement to the consumer and to include certain disclosures in the agreement between the credit services business and the consumer. The new law eliminates the requirement to provide the information statement to the consumer for those credit services businesses that only help consumers obtain an extension of credit. The new law also alters the required disclosures in the agreement between the credit services business and the consumer for those credit services businesses that only help consumers obtain an extension of credit.

Practice Point: The Office of the Maryland Commissioner of Financial Regulation has asserted that the MCSBA applies to fintech firms providing technology that connects lenders with consumers. This new law eliminates what have been insurmountable obstacles to MCSBA compliance for some technology firms and others. Businesses that do not directly assist consumers obtain extensions of credit but that indirectly facilitate the connection between lenders and consumer borrowers should reevaluate whether they are subject to the MCSBA licensing. Existing MCSBA licensees should carefully review their agreements and practices to comply with the changes in this new law.


Processing and Dispensing Medical Cannabis 
HB17 (Chapter 456)
(effective May 13, 2019)

Chapter 456 is an emergency bill that became effective upon enactment on May 13, 2019 and makes numerous changes to Maryland’s medical cannabis program. First, Chapter 456 authorizes an institution of higher education, a related medical facility, or an affiliated biomedical research firm that has registered with the Natalie M. LaPrade Medical Cannabis Commission to purchase medical cannabis for research purposes. Second, the new law defines and allows for the sale and regulation of edible medical cannabis products. Third, the legal protections afforded to persons who are authorized to use or possess medical cannabis are expanded by providing that these persons may not be subject to the revocation of mandatory supervision, parole, or probation for such use or possession. Fourth, the new law imposes various restrictions and requirements on the packaging and advertisement, including through an Internet website, of cannabis products. Finally, the length of time that a medical cannabis license holder must be actively engaged in the industry before selling or transferring ownership of the license was increased from two years to three years.

Practice Point: To date, Maryland has legalized only medical cannabis and only when that product is grown, processed, dispensed, and used in full compliance with Maryland law.

Medical Cannabis – Regulation of Dispensaries, Growers, and Processors
SB426 (Chapter 501)
(effective July 1, 2019)

This law requires the Natalie M. LaPrade Medical Cannabis Commission to allow a person to have an ownership interest in, or control of (including the power to manage and operate), up to four licensed dispensaries. Prior to this new law, a person could have an ownership interest in only one cannabis dispensary. In addition, the legislation makes clear that a person may have an ownership interest in, or control of (including the power to manage and operate), only one licensed grower, and it codifies that a person may have an ownership interest in, or control of (including the power to manage and operate), only one licensed processor. Finally, this new law provides that licensed cannabis growers, dispensaries, and processors are subject to the Maryland Antitrust Act and the Maryland Sales Below Cost Act.

Practice Point: To date, Maryland has legalized only medical cannabis and only when that product is grown, processed, dispensed, and used in full compliance with Maryland law.

Hemp – Legalization and Production
HB1123 (Chapter 228)
(effective June 1, 2019)

This law clarifies that agricultural hemp that meets a certain definition, which is the same definition found in the Agricultural Improvement Act of 2018 (Public Law No: 115-334) enacted December 20, 2018, is excluded from the definition of marijuana under Maryland law. To promote farming of hemp, this law also authorizes a program to be administered by the Maryland Department of Agriculture, for the growing of hemp in Maryland.

Practice Point: While growers will need to be licensed and monitored under procedures yet to be established by the Maryland Department of Agriculture, this law is a step forward toward making hemp a viable commercial farm product in Maryland.


Motor Vehicle Administration – Licenses and Identification Cards – Electronic Credentials
HB180 (Chapter 142)
(effective October 1, 2019)

This new law modernizes how a person’s identity can be verified using electronic identification. It authorizes the Motor Vehicle Administration (MVA) to implement systems so that individuals can use “electronic credentials” in addition to driver’s licenses or identification cards. The electronic credentials will contain the same information found on tangible cards, which will still be issued by the MVA. However, using electronic credentials, the individual can choose to show only the information necessary for a particular transaction or identifying purpose. For instance, a person may be able to show electronically to a seller of alcohol only information necessary to verify the person’s age and exclude other information like physical address or driver’s license number. The MVA is permitted to work with third parties to implement electronic credentials.

Practice Point: Maryland will be joining a handful of states that have enacted legislation to permit this new technology. As electronic credentials become more available, financial institutions may want to consider whether their customer identification programs should be updated to address acceptance of electronic credentials to verify customer identity. It may be helpful to review the FFIEC publication entitled Authentication in an Internet Banking Environment (as supplemented).

Vehicle Certificate of Title Application – Electronic Signatures Permitted
SB84 (Chapter 140)
(effective October 1, 2019)

This law is another effort to modernize administrative systems for vehicles titled in Maryland. Currently, Maryland law provides that an owner of a vehicle must sign the application for a certificate of title in ink. This new law repeals the ink requirement. Thus, it will afford more options and convenience when applying for vehicle titles. It also means that Maryland’s motor vehicle titling law will no longer conflict with Maryland’s Uniform Electronic Transactions Act, which deems electronic signatures sufficient where the law requires a signature.


Notarial Acts and Notaries Public
SB678 (Chapter 407)
(effective October 1, 2020)

This law represents a significant updating of Maryland’s law that governs notaries and notarial acts. Of significance, this law authorizes, for the first time in Maryland, remote notarization. Subject to very specific requirements, including as to the communication technology that will be approved for remote notarizations, this will allow a Maryland notary to perform notarial acts for an individual who is not in the physical presence of the notary. The law makes it clear that no one is required to accept, agree to, conduct, or complete a transaction where a notarial act is performed remotely. Because of the breadth of changes, this law has a delayed effective date.

Practice Point: All notaries will need to review this law and change some of their procedures, including record keeping, to be sure they continue to comply with legal requirements. As to remote notarization, financial institutions need to decide whether they are willing to accept remote notarizations and update their policies to reflect their decisions.


Interception of Oral Communications - Law Enforcement Officer
HB552 (Chapter 521)
(effective October 1, 2019)

Subject to certain exceptions, it is unlawful under Maryland law to intercept an oral communication without the consent of all parties to the communication. One of the exceptions applies to a law enforcement officer who intercepts an oral communication through a recording device, including a body camera, in the course of the officer’s regular duties if, among other requirements, the officer is a party to the communication and notifies the individual being recorded that he or she is being recorded. This new law provides that an officer’s failure to notify an individual that the oral communication is being recorded will not affect the admissibility of that communication in court if the individual joined a discussion in progress for which proper notification was previously given.

Maryland Security Breach Notification Requirements
HB633/SB578  Chapters 423 and 424)
(effective January 1, 2019)

This new law changes Maryland’s Personal Information Protection Act (MPIPA) to expand the duties under MPIPA for those who maintain certain personal information. Under existing provisions of MPIPA, owners and licensees of covered personal information have a duty to investigate a breach of a security system to determine the likelihood that covered personal information has been or will be misused as a result of the breach. The new law now imposes this same duty to investigate on a person who, while not an owner or licensee of the information, maintains the information. MPIPA requires owners and licensees of personal information to provide certain notices upon the breach of a security system. The new law provides that if the business that incurred the breach of a security system is not the owner or licensee of the computerized personal information data, that business may not charge the owner or licensee any fee for providing the information that the owner or licensee needs to provide the required MPIPA notifications. Owners and licensees may not use information provided by the business that maintains the computerized data for any purposes other than providing notices required under MPIPA, protecting or securing personal information, and providing notices to certain national information sharing organizations.

Practice Point: While this new law does not impact the exemptions in MPIPA for businesses subject to and in compliance with specific federal laws, regulations, and interagency guidelines concerning data breach investigations and notifications and for their affiliates that do the same, the new law may be useful to financial institutions in imposing duties on their service providers in the event a service provider suffers a data breach. Financial institutions should revisit key service provider agreements to determine whether such agreements clearly require service providers to investigate data breach situations and provide, without charge, prompt notice and assistance if a financial institution’s customer/member data is impacted.


Procurement – Small Businesses and Minority Businesses – Qualification and Certification (Small and Minority Business Certification Streamlining Act of 2019)
HB284/SB983 (Chapters 315/316)
(effective October 1, 2019)

Existing law requires certain Maryland governmental units to specify the criteria that a business must meet to qualify as a “small business” for certain procurement purposes. This new law establishes that regulations governing Maryland’s Small Business Preference Program must require that a Maryland business may qualify as a “small business” for the exclusive purpose of pursuing out-of-State contracts only if the business (1) has 250 or fewer employees or (2) has annual gross receipts of $10 million or less over the previous three years.

Practice Point:This three year threshold was based on laws that have traditionally determined small business size status by averaging the business’s gross receipts for a three-year period. However, in December 2018, President Trump signed into law the federal Small Business Runway Extension Act of 2018, which allows small business size status to be determined by averaging gross receipts for a five-year period. According to the Small Business Administration (SBA), businesses must continue to report their annual gross receipts based on a three-year average until the SBA amends its regulations to reflect the increase in the calculation period. As of the time this publication was completed, regulations had yet to be amended. That being said, it is conceivable that by the time the 2020 Maryland General Assembly session begins, the SBA regulations will have been amended. If that is the case, the General Assembly will likely amend the Small and Minority Business Certification Streamlining Act of 2019 to account for the increase in the calculation period.

In addition, the new law will require that regulations governing Maryland’s Minority Business Enterprise (MBE) program allow for the certification of a business as an MBE if the business has obtained certification under the federal Disadvantaged Business Enterprise program and meets the eligibility requirements of Maryland’s MBE program. This will allow the MBE certification process to be more streamlined and help to increase the pool of MBEs that can compete for state contracts.

Practice Point: The regulations required under the new law must be adopted by December 31, 2019.


Appraisal Management Companies – Notice and Opportunity to Respond before Removing Appraiser from Panel
SB20 (Chapter 86)
(effective October 1, 2019)

Under existing Maryland law, an appraisal management company (AMC) is not required to provide any notice to an appraiser before removing that appraiser from the AMC’s panel or refusing to assign appraisal requests to that appraiser during the thirty days after of an appraiser is first added to the AMC’s panel. This new law eliminates the AMC’s ability to remove an appraiser from its panel or otherwise refuse to assign work to that appraiser without any notice and, instead, establishes that AMCs must always provide a specific notice to an appraiser and an opportunity for the appraiser to respond when the AMC removes the appraiser from its panel or otherwise refuses to assign work to that appraiser. This change conforms Maryland law to changes enacted by the Dodd-Frank Act.

Appraisal Management Companies – Annual Fee and Reports
SB69 (Chapter 89)
(effective October 1, 2019)

As provided by federal law, Maryland registers and supervises appraisal management companies (AMCs). As amended by the Dodd-Frank Act, federal law now requires States that register and supervise AMCs to collect annual fees from AMCs for delivery to the federal Appraisal Subcommittee. The Appraisal Subcommittee maintains a national registry of AMCs. This new law addresses collection of fees from AMCs in Maryland. The fees are, as mandated by federal law, $25 multiplied by the number of appraisers who have performed one or more appraisals for the AMC in connection with a covered transaction during the previous year (or if an AMC has not been in existence for more than one year, then $25 multiplied by the number of appraisers who have performed one or more appraisals for the AMC since the AMC commenced doing business).

Residential Real Estate Transactions – Escrow Agents
HB222 (Chapter 349)
(effective October 1, 2019)

This law requires an escrow agent to enter into a written agreement with the purchaser and seller in a residential real estate transaction when the escrow agent agrees to hold trust money in escrow in connection with that transaction. The new law provides that the written agreement must contain: (1) the amount of trust money entrusted to the agent; (2) the date the trust money was entrusted to the agent; (3) the responsibility of the agent to notify the purchaser and seller of trust money returned due to dishonored funds; (4) the conditions under which the escrow agent may release the trust money; and (5) the process to address disputes over the release of the trust money.

Practice Point: The law applies only to the following classifications of residential real estate: (1) real property improved by four or fewer single-family dwellings that are intended for human habitation; and (2) unimproved real property zoned for residential use by the local zoning authority of the county or municipality in which the real property is located. Notably, this law does not apply to, among others, banks, trust companies, savings and loan associations, savings banks, or credit unions. Any person serving as an escrow agent in a residential real estate transaction, who does not fall under an excluded category, should be mindful of having a written agreement that complies with the requirements of this law.

Mortgage Forgiveness Debt Relief – Extension of Maryland’s Income Tax Subtraction Modification
SB265 (Chapter 303)
(effective June 1, 2019)

In 2017, Maryland enacted State income tax relief for discharged mortgage indebtedness. The tax relief enacted by Maryland in 2017 was set to expire on June 30, 2019. This law eliminates the expiration and makes this Maryland tax relief permanent.

Residential Property Foreclosure Procedures
HB107 (Chapter 93)
(effective October 1, 2019)

For foreclosures of residential real property, both a person authorized to make a sale and the purchaser must register the subject property with the Foreclosed Property Registry (FPR) at various points throughout the foreclosure process, including upon the commencement of a foreclosure action, after the auction, and after closing. Under existing law, the Department of Labor, Licensing, and Regulation (DLLR) maintains the FPR. The law substitutes the Commissioner of Financial Regulation for DLLR regarding maintenance of the FPR, thus consolidating all online foreclosure registration functions for residential property with the Commissioner. The law also recodifies certain statutes dealing with the FPR and other notice and disclosure requirements. This Act makes no substantive changes to Maryland’s foreclosure law.

Practice Point: This law should not result in an increased burden to lenders foreclosing on residential real property. Instead, the Commissioner of Financial Regulation intends to streamline all online reporting on a single integrated web-based platform, which may ease the reporting and compliance burdens.


Renaming the Department of Labor, Licensing, and Regulation
HB60 (Chapter 91)
(effective July 1, 2019)

The Maryland governmental department that includes, among many other units, the Office of the Commissioner of Financial Regulation is being renamed. The Department of Labor, Licensing, and Regulation will now be known as the Department of Labor. No other changes are intended.


Assisting Homeowners in Tax Sale Proceedings
HB1209 (Chapter 730)
(effective January 1, 2020)

This law will assist homeowners whose residences may be sold at tax sales. It establishes a State Tax Sale Ombudsman within the State Department of Assessments and Taxation (SDAT). Duties of the Ombudsman include to: (1) educate homeowners on the process for collection of delinquent taxes; (2) actively assist homeowners to apply for tax credits and other programs that may help the homeowners pay delinquent taxes; (3) refer homeowners to legal, housing, and other social services; (4) establish a website that functions as a clearinghouse for information regarding the tax sale process and the services and program that are available to assist homeowners; and (5) maintain a toll-free telephone number that a homeowner may call to obtain individualized personal assistance with delinquent taxes. Each county may establish its own county tax sale ombudsman to perform the responsibilities of the State Tax Sale Ombudsman. In addition, counties or municipalities may withhold a home from a tax sale if it is owned by a person who is low income, at least sixty-five years old, or disabled, provided the homeowner meets eligibility criteria to be established. Local tax collectors are required to provide homeowners a plain language summary of the tax sale process and how to retain the property. The law directs SDAT to submit to the General Assembly an annual report concerning tax sales containing specified data that must be obtained from the local governments.

Baltimore City – Tax Sales of Real Property – Water Liens
SB96 (Chapter 320)
(effective July 1, 2019)

This law makes permanent an existing law set to expire at the end of 2019 that prohibited Baltimore City from conducting tax sales of residential property if the taxes consist only of a lien for unpaid water and sewer charges. This law further provides that Baltimore City may not conduct a tax sale of a property for unpaid water and sewer charges unless: (1) the lien is $350 or more; (2) the property is not residential property or tax-exempt property owned by religious groups or organizations; and (3) the charges are at least three quarters in arrears. The law further prevents Baltimore City from enforcing a lien for water and sewer charges on residential property or certain property owned by religious organizations if the property is being sold to enforce another lien.

Practice Point: This law is designed to afford Baltimore City homeowners and religious organizations greater protection from tax sales resulting from water and sewer debts to the City. It may have the effect of fewer properties being made available at tax sale, but the law should not have a significant impact on tax sale purchasers.

Expiration of Tax Liens
SB484 (Chapter 225)
(effective July 1, 2019)

This law addresses the expiration date for certain tax liens. It provides that liens for unpaid real property and personal property taxes will terminate twenty years after attachment. Prior to this law, liens for unpaid personal or real property taxes did not have an expiration date. The law also increases the expiration period for tax liens for unpaid inheritance taxes from four years to twenty years.

Practice Point: Lenders should be mindful of these new expiration deadlines with respect to any collateral encumbered by tax liens.

In Rem Foreclosure and Sale – Vacant and Abandoned Property
SB509 (Chapter 276)
(effective October 1, 2019)

This law authorizes counties and municipalities to establish procedures for local governments to conduct in rem judicial tax sale foreclosures for certain vacant real property and then to sell the property. To be eligible, the subject property must: (1) be either a vacant lot or cited as vacant and unfit for habitation or other use on a building violation notice; and (2) be encumbered by tax liens exceeding the value of the property. The law provides that the county or municipality must send notice of the complaint for in rem foreclosure by first-class mail and certified mail to interested parties, including lien holders. Further, the court must hold a hearing no earlier than 30 days after the county or municipality files its complaint in order to provide interested parties an opportunity to cure the tax debt or otherwise be heard with respect to the foreclosure. Assuming no interested party cures the tax debt, the court may enter judgment foreclosing interested parties’ interests and order that ownership of the subject property be transferred to the county or municipality. Essentially, the law affords counties and municipalities with a mechanism to more quickly move vacant property held by disinterested or distressed owners toward new uses.

Practice Point: Lenders should monitor their collateral to identify vacant properties that may become subject to such an in rem judicial foreclosure. In the event of such an in rem foreclosure, lenders may have a relatively short period to determine whether they want to redeem the property from foreclosure and should be prepared to act quickly in response to a notice given as required by this law.


Property Tax Exemption for Nonprofit Charitable Museums
HB432/SB296 (Chapters 433/434)
(effective June 1, 2019, applicable to all taxable years beginning after June 30, 2019)

Under Maryland law, 100 acres of certain real property owned by certain nonprofit organizations is not subject to property tax. This new law repeals the 100-acre restriction solely for nonprofit charitable museums open to the public that do not charge an admission fee.

Alteration of Eligibility Criteria of the Property Tax Credit for Elderly Individuals
HB1339/SB654 (Chapters 332/333)
(effective June 1, 2019, applicable to all tax years beginning after June 30, 2019)

This law changes one of Maryland’s eligibility criteria for the property tax credit for elderly individuals. The term “eligible individual” is changed so that it includes an individual who is at least sixty-five years old. The requirement that the individual also live in the same home for at least the preceding forty years has been eliminated. However, local governments are authorized to enact additional criteria in order for an individual to be eligible for the tax credit, including the minimum number of years (not to exceed forty years) in which the individual must have resided in the same dwelling.

Optional Installment Payment Schedule for Real Property Taxes
HB396 (Chapter 647)
(effective June 1, 2019)

This new law authorizes, but does not require, each Maryland county and municipal corporation to enact a law that allows a taxpayer to pay property taxes in advance or on an installment payment basis. If a local government were to enact such a law, the taxpayer may elect to pay real property taxes in advance installments. However, the taxpayer’s failure to follow through and make those advance installment payments would not be considered a failure to pay property tax on time as long as tax payments are made by the time they are otherwise due under Maryland law. This new law prohibits a county or municipal corporation from enacting law that authorizes advance payment or an installment payment schedule for real property taxes if the property is subject to a deed of trust or mortgage that includes the escrowing of property tax payments.

Practice Point: The prohibition against a local law allowing advance or installment payments for real property taxes if the property is subject to a deed of trust or mortgage that includes the escrowing of property tax should avoid the need for mortgage loan servicers to have to make tax payments more often than when tax payments are otherwise due under Maryland law.