Maryland Legal Alert for Financial Services

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Maryland Legal Alert June 2010

MARYLAND LEGAL ALERT keeps you updated on Maryland legal developments affecting financial services providers. If you would like more information about the items in this issue, please click on the specified links or contact any member of the Financial Services Practice Group. Learn more about Gordon Feinblatt by clicking here.

In this issue:

FTC DELAYS RED FLAGS RULES ENFORCEMENT, THIS TIME UNTIL DECEMBER 31, 2010
COMMISSIONER OFFERS GUIDANCE ON MORTGAGE LOAN ORIGINATOR LICENSING
COLLECTION AGENCY LICENSING BOARD CLARIFIES NEED FOR LICENSE
2010 LEGISLATIVE SESSION – SOME NEW LAWS ARE EFFECTIVE
MARYLAND RULES CHANGE REGARDING CONFESSED JUDGMENTS
DOES INTERNET ACTIVITY EXPAND WHERE A PERSON MAY BE SUED?
IMPORTANCE OF SAFEGUARDING CUSTOMER INFORMATION
PEOPLE ARE CALLING ABOUT...MODEL PRIVACY NOTICE

FTC DELAYS RED FLAGS RULES ENFORCEMENT, THIS TIME UNTIL DECEMBER 31, 2010

Again, at the 11th hour, the FTC delayed enforcement of the requirement that certain non-depository "creditors" implement a written Identity Theft Red Flags program. The FTC's press release can be found here. The FTC expressed its hopes that Congress will act to clarify the law before the end of 2010. For background on this rule, see our April 29, 2009 Legal Bulletin. If you have any questions about the Red Flags Rules, please contact Margie Corwin.

COMMISSIONER OFFERS GUIDANCE ON MORTGAGE LOAN ORIGINATOR LICENSING

On May 7, 2010, the Commissioner of Financial Regulation published Frequently Asked Questions, along with answers, addressing Mortgage Loan Originator pre-licensing and continuing education and testing issues. The Commissioner followed with a Mortgage Licensing Update reminding certain MLO licensees of upcoming deadlines for education, testing, and criminal background checks. If you have any questions about the mortgage lender or loan originator licensing, please contact Margie Corwin.

COLLECTION AGENCY LICENSING BOARD CLARIFIES NEED FOR LICENSE

On May 5, 2010, the Maryland Collection Agency Licensing Board issued an advisory to clarify that persons who acquire consumer credit claims which are in default at the time of acquisition must be licensed under Maryland's Collection Agency Act even if the claims are pursued by these persons solely as plaintiffs in civil litigation handled by an attorney licensed under that law. There was some confusion regarding the need for such persons (plaintiffs) to be licensed, so this Advisory expresses the Board's position that certain consumer debt purchasers will not be barred from licensure and will not be subject to enforcement actions if they apply for a collection agency license before August 31, 2010. Please contact Andy Bulgin if you have any questions or need licensing assistance.

2010 LEGISLATIVE SESSION – SOME NEW LAWS ARE EFFECTIVE

We will soon print and mail our annual Maryland Laws Update, which will provide descriptions of and insights on the many new laws that impact financial service providers. Our May 2010 Maryland Legal Alert provides brief descriptions of some of these new laws that already are or soon will be effective. One of these new laws, effective July 1, 2010, makes changes to the foreclosure process for all residential properties, and makes significant changes to this process for owner-occupied properties. Attached is a slide presentation prepared by Margie Corwin for a recent webinar sponsored by the Maryland Bankers Association.

MARYLAND RULES CHANGE REGARDING CONFESSED JUDGMENTS

Effective July 1, 2010, Maryland Court Rules change and require a very specific affidavit to be filed along with a complaint seeking a confessed judgment. Md. Rules 2-611 and 3-611. The revised Rules also clarify what actions the court must take based on a confessed judgment complaint and other filed pleadings and papers. Lenders pursuing commercial debts where the documents contain a confession of judgment provision should be sure to look at these new rules. Please contact Peter Rosenwald for information about including confession of judgment provisions in commercial loan documents.

DOES INTERNET ACTIVITY EXPAND WHERE A PERSON MAY BE SUED?

A recent memorandum opinion by the United States District Court for the District of Maryland addresses this cutting edge question: when is a person subject to personal jurisdiction in another state because of online activities? In Customer Direct, LLC v. Wynwyn, Inc. et al., Civil Action No.: RDB-09-2348, the court found that passive internet activity that simply makes information available, even if the website includes a click through to another website that actually sells products, does not constitute the kind of electronic activity that would establish personal jurisdiction in a state where the person otherwise has no presence. This is good news for a business that merely supports a website that contains information. However, what is the effect when a depository institution through its website offers online banking and/or allows persons to open new accounts? Please contact John Morton or Margie Corwin if you would like to discuss this subject in greater detail.

IMPORTANCE OF SAFEGUARDING CUSTOMER INFORMATION

On May 10, 2010, the Consumer Protection Division of the Maryland Attorney General's Office entered into a settlement with a company that provided payment processing services, and the officers of the company, based upon the Division's investigation and allegation that the company improperly disposed of business records containing nonpublic personal information of its customers. The Division cited the Maryland Personal Information Protection Act stating that it is an unfair and deceptive trade practice for a business to destroy records containing customers' personal information without taking reasonable steps to protect against unauthorized access to or use of the personal information. This action serves as a reminder to businesses of the importance of maintaining a comprehensive privacy policy and information security program and ensuring compliance with the terms of such policies and programs. If you have any questions about your information security program, please contact John Morton.

PEOPLE ARE CALLING ABOUT...MODEL PRIVACY NOTICE

On April 15, 2010, federal agencies released an "Online Form Builder" for financial institutions to use in developing and preparing customized optional model privacy notices ("Model Privacy Notice"), under the Gramm-Leach-Bliley Act, based on the model form regulation published in the Federal Register on December 1, 2009. Effective January 1, 2011, the Model Privacy Notice will serve as the only safe harbor for financial institutions under the privacy rules governing financial institutions. In order to qualify for the safe harbor, the Model Privacy Notice must be prepared in strict compliance with the regulations. Additionally, the Online Form Builder has some inherent limitations that may require preparation of the notice by other means. If you have any questions concerning your privacy notice or would like assistance with preparing or reviewing your privacy notice to ensure its compliance with the new safe harbor, please contact John Morton.