Maryland Legal Alert for Financial Services

In This Issue:

• 2012 MARYLAND LEGISLATION – SOME LAWS HAVE JUNE 1 EFFECTIVE DATES
• REVIEW YOUR REPOSSESSION NOTICES – NOW
• NLRB POSTPONES IMPLEMENTATION OF ITS NOTICE POSTING RULE – AGAIN

2012 MARYLAND LEGISLATION – SOME LAWS HAVE JUNE 1 EFFECTIVE DATES

The 2012 Maryland General Assembly ended on April 9. The Governor has completed two bill signing sessions, with a third expected on May 22. We will prepare our annual Maryland Laws Update again this year, which will provide insights on the many new laws that impact financial service providers. In the meantime, we briefly describe a few bills (some of which have already been signed into law) that will become effective June 1.

Reduction in Required Interest on Mortgage Loan Escrow Accounts. HB 533/SB 507 alleviate a long standing problem for depository institutions that establish escrow accounts in connection with first lien residential mortgage loans. The law reduces the interest rate that must be paid on escrowed amounts from at least 3% per year to an annual rate not less than the 6 month average dealer bid rate on nationally traded certificates of deposits, as published by the Federal Reserve in "Selected Interest Rates (Daily) – H.15," as of the first business day of the calendar year. Lenders must adjust the interest rate as of the first day of each calendar year to reflect the rate to be paid on escrow accounts during that year. Caution: The new lower interest rate only applies to escrow accounts first established on or after June 1, 2012.

Reduction in Required Interest on "Christmas Club" or "Vacation" Deposit Accounts. In addition to addressing interest rates on mortgage loan escrow accounts, HB 533/SB 507 lower the required interest rate that Maryland banks must pay on "club" accounts. The law reduces the required interest rate from at least 3% per year to an annual rate not less than the 6 month average dealer bid rate on nationally traded certificates of deposits, as published by the Federal Reserve in "Selected Interest Rates (Daily) – H.15," as of the first business day of the calendar year. Caution: The new lower interest rate only applies to "club" accounts established on or after June 1, 2012.

New Possibilities for Banks and Credit Unions to Offer Sweepstakes. HB 786 permits banks and credit unions to offer "savings promotion raffles" with the chance for participants to win prizes under certain circumstances. Maryland's existing gifts and prizes law will not apply to compliant "savings promotion raffles."

Motorcycle Financing May Include Balloon Payment. HB 730/SB 258 expand the ability of creditors to make balloon payment loans for motorcycle financing. If the motorcycle-secured credit will be in an amount exceeding $10,000 and governed by Maryland's Credit Grantor Closed-End Provisions (sometimes referred to as "CLEC"), the creditor may contract for a balloon payment.

Collateral for Deposits by State and Local Government. HB 868/SB 606 clarify that letters of credit issued by a Federal Home Loan Bank that meet guidelines issued by the State Treasurer can be used by banks as collateral for State and local government deposits. This law eliminates a concern raised by the State Treasurer in late 2011 that the existing law was not clear whether these letters of credit were eligible collateral.

Court Order Ratifying Foreclosure Sale Must Be Provided to County Tax Assessors. SB 123 requires persons who purchase residential property at a foreclosure sale to provide a copy of the court order ratifying the sale to the supervisor of assessments for the county in which the residential property is located within 60 days of the issuance of that order. The law provides some exceptions to this requirement. The purpose of this law is to allow for efficient elimination of the benefit of homestead tax credit when property is no longer owner occupied.
If you have questions about these Maryland laws or any other matters concerning the 2012 Legislative Session, please contact Bob Enten.

REVIEW YOUR REPOSSESSION NOTICES – NOW

Many reports already have been published about the recent Fourth Circuit Court of Appeals decision in Epps v. JP Morgan Chase Bank, N.A. (decided April 5, 2012). This case focused on notices provided to a borrower that apparently did not comply with Maryland's repossession notice requirements. Simply stated, the Court of Appeals struck down the lower court's determination that the National Bank Act preempted the need for a national bank to comply with Maryland's repossession notice requirements. While this is an important preemption decision (and we love to discuss preemption issues), it also is a vivid reminder that Maryland law requires very specific and somewhat peculiar repossession notices. Every creditor that is engaged in (or is thinking about engaging in) repossessing personal property located in Maryland should be sure notices and procedures are compliant. We have made this suggestion in past Maryland Legal Alerts (February 2009, May 2009, May 2010). We again mention it, this time as an order: review your repossession procedures and notices now (or be ready for a messy class action lawsuit to come your way). Please contact Chris Rahl if you have any questions.

NLRB POSTPONES IMPLEMENTATION OF ITS NOTICE POSTING RULE – AGAIN

In our November 2011 Legal Alert, we reported on the ever-continuing postponement of the NLRB's rule that would require most private sector employers to post a notice regarding employees' rights under the National Labor Relations Act. As reported by our Employment Law Group in its bulletin published on April 19, 2012, this rule has yet again been postponed and is not likely to be resolved before next Fall. If you have any questions, please contact Chuck Bacharach or Bob Kellner.