Maryland Laws Update for Financial Services

• CONSUMER PROTECTION

• CORPORATE/BUSINESS

• DEBT COLLECTION

• ESTATES AND TRUSTS

• FINANCIAL INSTITUTIONS

• REAL PROPERTY

• TAX SALES

Contacts

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

• Andrew D. Bulgin, 410-576-4280
• Douglas T. Coats, 410-576-4002
• Sudipta Das, 410-576-4048
• 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
• David S. Musgrave, 410-576-4194
• Christopher R. Rahl, 410-576-4222
• Peter B. Rosenwald, II, 410-576-4193
• Jason F. Weintraub, 410-576-4042

Maryland Laws Update

CONSUMER PROTECTION

Debt Settlement Services – Student Education Loan Debt Relief – Disclosures and Prohibitions
HB 128 (Chapter 618)
(effective October 1, 2022)

This new law requires debt settlement plan (DSP) providers to provide enhanced disclosures when advertising debt relief services related to student education loans. The law also requires the provision of specific disclosures in any DSP services agreement, where student education loans are included in the debt relief plan. Under the new law, student education loans that are covered include any loans used to finance postsecondary education or other postsecondary school-related expenses.  Advertisements for and DSP services agreements that involve covered student education loans must include a specific disclosure that makes clear that the DSP provider is not affiliated with any governmental entity or agency and that borrowers can apply for consolidation and repayment plan assistance without paying for DSP services.  In addition, DSP providers may not advise a borrower that he or she should stop making student education loan payments or stop communicating with a student education loan servicer.  

Commercial Law – Maryland Personal Information Protection Act – Revisions
HB 962/SB 643 (Chapters 502/503)
(effective October 1, 2022)

Existing Maryland law requires that businesses that maintain certain “personal information” of consumers maintain reasonable security procedures to safeguard such information.  The Maryland Personal Information Protection Act (MPIPA) also requires covered businesses to provide specified notices to impacted consumers of certain security breaches of systems they maintain.  Under certain circumstances, notices must also be provided to the Maryland Attorney General and statewide media.  Under MPIPA, “personal information” means a consumer’s first name or first initial and last name in combination with certain additional other unencrypted data elements (e.g., Social Security number, driver’s license number, account/credit card number in combination with any required access code, and certain health-related information).  The new law includes within “personal information” certain biometric data, such as test results related to the genetic material of an individual.  The new law expands the types of businesses that are covered under MPIPA from those that own or license personal information of Maryland individuals to include those that merely maintain such personal information.  MPIPA has also been changed to require notice to impacted consumers in more situations.  Under existing law, MPIPA requires notice to impacted consumers if the covered business conducts an investigation of a security breach and determines that there is a likelihood that personal information has been or will be misused.  Under the new law, the presumption concerning whether a notice is required has been inverted.  Now, a covered business must send notice to impacted consumers in all covered security breach situations, unless such business conducts an investigation and reasonably determines that the breach does not create a likelihood that personal information has been or will be misused.  In addition, covered businesses will now have less time to conduct an investigation of a security breach and provide required consumer notices.  Under the new law, covered businesses will have 45 days from the date of discovery of a covered security breach to send required consumer notices.  The new law requires businesses that maintain personal information to notify the owner or licensor of such personal information within 10 days after discovery of a covered security breach.  The new law permits substitute notice to impacted consumers in certain situations by posting notice on a covered businesses website, via email, and by notifying major print or broadcast media in geographic areas where impacted consumers reside. Under the new law, the content of notices to the Maryland Attorney General has also been expanded to include the number of impacted consumers, a description of the breach and how it occurred, steps taken to remedy the breach, and a form of the notice sent to impacted consumers.

Practice Pointer: The new law does not change existing MPIPA provisions applicable to financial institutions.  Financial institutions that are subject to and in compliance with the federal Gramm-Leach-Bliley Act requirements concerning response programs for unauthorized access to customer information are deemed to be in compliance with MPIPA provisions.

Fiduciary Institutions – Investigation of Financial Abuse and Financial Exploitation – Records Disclosure
SB 175 (Chapter 227)
(effective October 1, 2022)

This new law makes it clear that a financial institution may disclose account information to an adult protective services (APS) program when the financial institution receives notice that the APS program is investigating suspected financial abuse or exploitation.  These disclosures may be made even if the financial institution has not made its own report of suspected financial abuse or exploitation.  In addition, a financial institution will now be required to provide specified account information when an APS program makes a written request in connection with an investigation of financial abuse or exploitation.  The new law also permits an APS program to provide to a financial institution information concerning the status of a financial abuse/exploitation investigation (in situations where a financial institution has previously made a report of financial abuse/exploitation to such APS program).  

Practice Pointer: Financial institutions should review policies and procedures concerning financial abuse/exploitation to reflect that account information may now be provided to an APS program on request, even if the financial institution has not made its own report of suspected financial abuse/exploitation.   

Commissioner of Financial Regulation – Enhanced Consumer Protections and Enforcement Tools
HB 804/SB 252 (Chapters 106/107)
(effective July 1, 2022)

This new law imposes restrictions on “regulated persons”, e.g., a person required to be licensed by or registered with the Office of the Commissioner of Financial Regulation (OCFR). Generally, this covers non-depository entities such as mortgage lenders and debt collectors. Under the new law, regulated persons are prohibited from (1) engaging in false, misleading, or deceptive advertising or representations, (2) imposing a restriction on dealing with a competitor as a condition for providing loans or services, and (3) from engaging in acts that are anticompetitive, unfair, deceptive, abusive, or injurious to the public interest. The law contemplates the OCFR further defining the specific acts or practices that may violate the foregoing restrictions.

CORPORATE/BUSINESS REGULATION

Corporations and Associations – Limited Liability Companies and Partnerships – Operating Agreements and Partnership Agreements
HB 342/SB 261 (Chapters 294/295)
(effective October 1, 2022)

This law permits the members of a limited liability company to provide in their operating agreement that a membership interest, an economic interest, or a noneconomic interest in the limited liability company may or shall be transferred or assigned in whole or in part to one or more persons upon the occurrence of specified events regardless of whether the transferee is also a member.  In addition, the members can agree that a member’s assignment of his, her or its economic interest in the limited liability company will not cause that member to cease being a member or forfeit his, her or its noneconomic interest in the limited liability company.  Similarly, the act permits partners of a partnership to agree in their partnership agreement that a partner’s transferable interest in the partnership may or shall be transferred or assigned in whole or in part upon the occurrence of specified events regardless of whether the transferee is also a partner.  Finally, this act provides that transfers of interests upon death that occur pursuant to an operating agreement for a limited liability company or a partnership agreement for a partnership are effective according to those agreements and are not considered testamentary.

Corporations and Associations – Ratification of Defective Corporate Acts
HB 996/SB 879 (Chapters 289/290)
(effective October 1, 2022)

This act creates a new corporate charter document called Articles of Validation pursuant to which a Maryland corporation can, subject to certain procedural requirements, ratify a defective corporate act.  For purposes of the legislation, a defective corporate act is any act purportedly taken by the board of directors, a committee of the board, or the stockholders of a corporation that would have been within the power of the corporation at the time it was purportedly taken but that is void or voidable due to (i) a failure to authorize the act in the manner required by the Maryland General Corporation Law, the corporation’s charter or bylaws, or any plan or agreement to which the corporation is a party if and to the extent that failure would otherwise render the act to be void or voidable, or (ii) the issuance of a class or series of stock in excess of the number of shares of that class or series that the corporation has authority to issue.  A defective act that is validated will be the valid and binding act of the corporation upon the filing of Articles of Validation, and any act taken by the corporation in reliance on the defective act will also be the valid and binding act of the corporation, although the legislation allows a party who claims to be substantially and adversely affected by the ratification to ask a court within a certain period of time after the ratification to determine its validity.

DEBT COLLECTION

Vehicle Towing or Removal – Secured Parties – Electronic Notification
HB 870/SB 731 (Chapters 560/561)
(effective October 1, 2022)

This new law updates the Transportation Article regarding how secured parties may receive notice concerning vehicle repossessions.  Under existing Maryland law, repossession agents and towing providers must provide certain notices concerning a vehicle repossession in Maryland.  Notices must include vehicle identifying information, the date and time a vehicle was removed from a particular location, the reason for the removal, and the location where the vehicle was taken.  Existing Maryland law requires that such notices be provided via certified mail return receipt requested and first-class mail to the vehicle owner, secured parties, and the insurer of record.  Notice must also be given to the police department in the jurisdiction where the vehicle was located within one (1) hour after towing or other removal.  The new law permits notice to a secured party via email or other electronic method, if the party removing the vehicle and the secured party have agreed to notice via email or other electronic method.  It is unclear how a towing provider or repossession agent will enter into agreements with secured parties concerning the provision and receipt of email and similar electronic notices under the new law.

ESTATES AND TRUSTS

Wills and Trust Instruments – Electronic Execution
HB 576/SB36 (Chapters 176/177)
(effective April 21, 2022)

In recent years, the General Assembly has passed legislation to modernize the process for executing and notarizing wills and other trust instruments. This act builds upon recent legislation and authorizes an electronic will or remotely witnessed will to be executed without a notary if the will is signed, acknowledged, and sworn to before a supervising attorney along with a prescribed form attached to the will. The supervising attorney may not serve as a witness to the will in this situation.

The act also enables a notary public to perform a notarial act with respect to a will or trust instrument via remote communication technology. Under prior law, such notarial acts were not available via remote means.

Maryland Trust Act – Trustee Liability – Release by Interested Parties
HB 1049/SB 878 (Chapters 632/633)
(effective October 1, 2022)

The Maryland Trust Act provides for certain procedures by which a trustee may seek a release from liability for the administration of the trust upon the termination of the trust or the trustee’s removal or resignation. This act revises the procedures for obtaining such a release by enabling a trustee to seek a release as to the specific interested party from which the trustee seeks a release. Under prior law, a trustee had to send the notice and release request to all interested parties.

The act further provides that interested parties may submit a statement to the trustee indicating that the interested party does not object. Once the interested party either (i) states that she does not object, or (ii) fails to respond within 120 days of the trustee’s notice and release request, the trustee’s release becomes effective and the trustee may then distribute trust property to the appropriate successors in interest.

FINANCIAL INSTITUTIONS

Financial Institutions — Presumption of Property Abandonment — Revisions
HB 305 (Chapter 648)

This law amends existing abandoned property law to revise the rules and procedural measures by which property held by a banking or financial institution or a business association may be consider abandoned.  Generally, property is presumed abandoned three (3) years after the later of (1) the date the holder of the property is deemed to no longer have a valid address for the owner of the property or (2) the date the owner has last interacted with the banking institution or business association with regards to the property.  The date that the holder of the property is deemed to no longer have a valid address for the owner depends on the dates when the holder sends certain notices to the owner via first-class mail and the U.S. Postal Service returns those notices back to the holder as “undeliverable”.  If the holder does not send communications to the owner by first-class mail, the holder may attempt e-mail contact with the owner.

REAL PROPERTY

Real Property —Partition of Property
HB 777/SB 92 (Chapters 401/402)
(effective October 1, 2022)

This act establishes new procedures for suits to partition real property held by joint owners where the owners are unable to agree on the proposed partition. A partition action seeks a court order either: (i) physically dividing real property among its owners into separately titled parcels (a “partition in kind”); or (ii) selling the property and splitting the proceeds split among the co-owners (a “partition by sale”).

The act sets forth procedures for serving notice on owners with unknown whereabouts and for determining the property’s fair market value if the co-owners of the property are unable to agree. If an owner seeks a partition by sale, the act also sets forth procedures for the owners that did not request the sale may buy out the interests of other owners in the property.

For partitions in kind, the act sets forth factors that a court must review in determining whether and how to partition the property, including the owners’ respective ownership share, whether they have contributed towards the property’s carrying costs, and whether owners have certain sentimental ties to the property.

This act comes on the heels of legislation in other states aimed at curbing perceived abuses in the partition action process and protecting “heirs property”.

Landlord and Tenant – Residential Leases – Tenant Rights and Protections (Tenant Protection Act of 2022)
SB 6 (Chapter 34)
(effective June 1, 2022)

Known as the Tenant Protection Act of 2022, this act revises existing law to bolster certain protections and rights for tenants as to their residential dwellings.

Under a ratio utility billing system, the landlord allocates utilities via a master meter rather than per-tenant usage. The act now requires landlords using such a system to provide certain statements to prospective tenants regarding how the landlord incurs and calculates its utilities. Tenants now also have a right to inspect the landlord’s records with respect to the ratio utility billing system. Rental units in a condominium or cooperative project organized under Maryland law are exempt from these new requirements.

The act also requires landlords to provide itemized statements when the landlord withholds amounts from a tenant’s security deposit. If the landlord’s expenses are ultimately less than the estimated itemized state of costs, the landlord must return the excess funds from the security deposit within 30 days after the repairs are completed.

The act also establishes protections for “tenant organizations”, to ensure that they retain the right to assemble at the leased premises without excessive fees.

The act further expands existing protections for victims of abuse, affording verified victims the ability to terminate a tenancy without liability to the landlord for future rent.

TAX SALES

Tax Sales – Alternative Collection Programs
HB 1196 (Chapter 663)
(effective October 1, 2022)

Last year, the General Assembly passed a law authorizing the governing body of a county or municipal corporation to withhold owner-occupied residential property from tax sale for a two-year period. This act makes this authorization permanent but specifies that such property may be withheld only if it meets certain objective criteria established by the county or municipality. The act also authorizes a governing body to withhold a residential property from tax sale if the property is enrolled in a payment program for tax arrearages. The act also authorizes a governing body to cancel tax sales during a state of emergency.