Signed by Governor Larry Hogan, Jr.

Vote Smart's Synopsis:

Vote to concur with House amendment and pass a bill that establishes the Financial Consumer Protection Act of 2018.

Highlights:

• Defines “person” as an individual, corporation, business trust, statutory trust, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal or commercial entity (Sec. 2).

• Defines “licensed collection agency” as an individual who is required to be licensed under this subtitle, regardless of whether the person is actually licensed (Sec. 1).

• Authorizes the Board to impose a penalty not exceeding $10,000 for each violation cited in the order, not to exceed $25,000, from which the violator failed to cease and desist or for which the violator failed to take affirmative action to correct, as ordered by the Board (Sec. 1).

• Defines “licensee” as a person that is required to be licensed to make loans subject to this subtitle, regardless of whether the loan or advance of money or credit is or purports to be made under this subtitle (Sec. 2).

• Defines “loan” as a loan or an advance of money or credit subject to this subtitle, regardless of whether the loan or advance of money or credit is or purports to be made under this subtitle (Sec. 2).

• Authorizes on or after January 1, 2019 a lender to elect to make a loan to any borrower either under this subtitle or as otherwise authorized by applicable law (Sec. 2).

• Defines “covered loan” as a loan subject of this subtitle, made for personal, family, or household purposes, regardless of whether the loan is or purports to be made under this subtitle (Sec. 2).

• Prohibits an unlicensed person to make a covered loan (Sec. 2).

• Defines “unlicensed person” as an individual who is not licensed in the state to make a covered loan or exempt from licensing in the state (Sec. 2).

• Prohibits an individual from making a covered loan if the person directly or indirectly contracts for, charges, or receives a rate of interest, charge, discount, or other consideration that is greater than the amount authorized under state law (Sec. 2).

• Prohibits an individual to make a covered loan that violates the federal Military Lending Act (Se. 2).

• Specifies that a covered loan made by an unlicensed person is void and unenforceable (Sec. 2).

• Prohibits, with respect to a loan that is void and unenforceable under this section, an individual from (Sec. 2):

• Collect or attempt to collect, directly or indirectly, any amount from the borrower;

• Enforce or attempt to enforce the contract against any property securing the loan; or

• Sell, assign, or otherwise transfer the loan to another person.

• Defines “loan” as any loan or advance of money or credit subject to this subtitle, regardless of whether the loan or advance of money or credit is or purports to be made under this subtitle (Sec. 2).

• Defines “wages” as all remuneration paid to any employee for the employee’s employment, including the cash value of all remuneration paid in any medium other than cash (Sec. 2).

• Prohibits, with respect to any loan, a lender from (Sec. 2):

• Directly or indirectly contract for, charge, or receive an interest, discount, fee, fine, commision, charge, brokerage, or other consideration in excess of that permitted by this subtitle;

• Divide into separate parts any contract made from the purpose or with the effect of obtaining charges in excess of those permitted by this subtitle; or

• Enforce a contract of surety or guarantee unless the loan contract with the borrower is executed also by the surety or guarantor.

• Prohibits a person from lending $25,000 or less if (Sec. 2):

• The person directly or indirectly contracts for, charges, or receives a greater rate of interest, charge, discount, or other consideration than that authorized by the laws of this State;

• The transaction violates the federal Military Lending Act; or

• The person is not licensed under or exempt from the licensing requirements under the Maryland Consumer Loan Law-Licensing Provisions.

• Prohibits, with respect to a loan that is void and unenforceable under this section, a person from (Sec. 2):

• Collect or attempt to collect, directly or indirectly, any amount from the borrower;

• Enforce or attempt to enforce the contract against any property securing the loan; or

• Sell, assign, or otherwise transfer the loan to another person.

• Defines “lender” as a licensee or a person who makes a secondary mortgage loan but is exempt expressly from the licensing requirements of the Maryland Mortgage Lender Law (Sec. 2).

• Prohibits a collector from collecting or attempting to collect an alleged debt by engaging in unlicensed debt collection activity in violation of the Maryland Collection Agency Licensing Act or engaging in any conduct that violates the Federal Debt Collection Practices Act (Sec. 3).

• Prohibits a consumer reporting agency from charging a fee for any service relating to a security freeze, including for any placement, temporary lift, or removal of a security freeze (Sec. 3).

• Defines “commissioner” as the Commissioner of Financial Regulation in the Depart of Labor, Licensing, and Regulation (Sec. 3).

• Defines “Office” as the Office of the Attorney General (Sec. 3).

• Requires, that for fiscal year 2020 and each fiscal year after, the Governor to include an appropriation of at least $700,000 in general funds in the state budget for the office for the purpose of enforcement of (Sec. 3):

• Consumer Protection Laws; and

• Financial Consumer Protection Laws.

• Requires the office use the funds for the following, including, but not limited to (Sec. 3):

• Staffing costs associated with hiring new employees; and

• Investigations of alleged violations of consumer protection laws in the state.

• Requires, that for fiscal year 2020 and each fiscal year 2020 and each fiscal year thereafter, the governor to include an appropriation of at least $300,000 in general funds in the state budget for the commissioner for the purposes of enforcement of financial consumer protection laws, to be used for (Sec. 3):

• Staffing costs associated with hiring new employees; and

• Investigations of alleged violations of consumer protection laws in the state.

• Authorizes the Commissioner to bring an action in the circuit court of the county in which the person resides or transacts business to obtain one or more of the following remedies when it appears to the Commissioner that a person has engaged in an act or practice constituting a violation of a law, regulation, rule, or order over which the Commissioner has jurisdiction (Sec. 3):

• A temporary restraining order or a temporary or permanent injunction;

• A civil  penalty not exceeding $10,000 for a first violation and $25,000 for each subsequent violation;

• A declaratory judgement or an order preventing access to the violator’s assets;

• Rescission or restitution; and

• Any other relief as the court deems just.

• Defines “servicing” as the following (Sec. 4):

• Receiving scheduled periodic payments from a student loan borrower according to the terms of a student education loan;

• Applying the payments according to the student education loan terms; and

• Performing other administrative services.

• Defines “student education loan” as any loan, notwithstanding any election of law or designation of status in any contract, used for financing post-secondary education or other post-secondary school-related expenses (Sec. 4).

• Defines “student loan borrower” as the following (Sec. 4):

• A resident of the state who has received or agreed to pay a student education loan; or

• A resident who shares repayment responsibility with a resident.

• Defines “student loan ombudsman” as an individual, whether a paid employee or a volunteer, whom the commissioner designates to serve as a liaison between student loan borrowers and student loan servicers (Sec. 4).

• Defines “student loan servicer” as an individual, regardless of location, responsible for servicing a student education loan to a student loan borrower (Sec. 4).

• Specifies that student loan servicer includes a trust entity performing or receiving the benefit of student loan servicing (Sec. 4).

• Requires the Commissioner to designate an individual to serve as the student loan ombudsman (Sec. 4).

• Requires each student loan servicer in the state to designate an individual to represent the student loan servicer in communications with the student ombudsman (Sec. 4).

• Requires the student loan ombudsman, in consultation with the Commissioner, to receive and process complaints about student education loan servicing, which includes (Sec. 4):

• Receiving and reviewing complaints from student loan borrowers;

• Attempting to resolve complaints, including by collaboration with institutions of higher education, student loan servicers, and any other participants in student loan lending, such as the Board of regents of the University system of Maryland and the Maryland Higher Education Commission;

• Compiling and analyzing complaint data.

• Authorizes the student loan ombudsman to refer any matter that is abusiver, unfair, deceptive, or fraudulent to the office of the attorney general for civil enforcement or criminal prosecution (Sec. 4).

• Requires the student loan ombudsman, in consultation with the Commissioner, to disseminate information about student education loans and servicing by (Sec. 4):

• Helping student loan borrowers understand their rights and responsibilities under the terms of student education loans;

• Providing information to the public, state agencies, elected officials, and other individuals regarding student loan borrower problems and concerns; and

• Disseminating information about the availability of the student loan ombudsman to assist those with student loan servicing concerns.

• Specifies that the disseminating of the information to the following Sec. 4):

• Student loan borrowers and potential student loan borrowers;

• State and higher education institutions; and

• student loan servicers.

• Requires the student loan ombudsman to do the following (Sec. 4):

• Analyze and monitor the development and implementation of federal, state, and local laws, regulations, and policies on the student loan borrowers;

• Disclose the complaint data it compiles and notes any trends in the data and identifying the names of student loan servicers engaging in any abusive, unfair, deceptive, or fraudulent practices; and

• Make recommendations regarding statutory and regulatory methods to resolve student loan borrower problems and concerns and necessary changes to state law to ensure that the student loan servicing industry is fair, transparent, and equitable, including whether the state should require licensing or registration of student loan servicers.

• Requires the student loan ombudsman, in consultation with the commissioner, to establish a student loan borrower education course, on or before October 1, 2019 (Sec. 4).

• Requires the Maryland Financial Consumer Protection Commission to study the following (Sec. 6):

• Cryptocurrencies, initial coin offerings, cryptocurrency exchanges, and other blockchain technologies;

• The Consumer Financial Protection Bureau Arbitration rule and the Model State Consumer and Employee Justice Enforcement Act, including reviewing similar laws adopted in other states;

• The possible exemption of retailers of manufactured homes from the definition of “mortgage originator” in federal law; and

• The U.S. Department of Labor rule and any Securities and Exchange Commission Actions in addressing conflicts of interest of broker-dealers offering investment advice by aligning the standard of care for broker-dealers with that of the fiduciary duty of investment advisors.

• Requires the Maryland Financial Consumer Protection Commission to include recommendations in its 2018 report to the Governor and the General Assembly regarding the following (Sec. 6):

• State action to regulate cryptocurrencies, initial coin offerings, and cryptocurrency exchanges;

• Changes to the state law to provide the protection intended by the Model State Consumer and Employee Justice Enforcement Act;

• Changes to the State law to provide the protection intended by the U.S. Department of Labor conflicts of interest rule addressing fiduciary duty standards of care; and

• Clarification of State law to ensure that Maryland buyers of manufactured homes are protected in their home-buying transaction.

Full Bill Text