Maryland Laws Update for Financial Services

• CANNABIS

• CONSUMER PROTECTION

• DEBT COLLECTION

• EMPLOYMENT

• ESTATES

• FINANCIAL INSTITUTIONS

• REAL PROPERTY

• TRANSPORTATION

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
• Tonya R. Foley, 410-576-4238
• Robert A. Gaumont, 410-576-4007
• 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

CANNABIS

Cannabis Reform

HB 556/SB 516 (Chapters 254/255)

(emergency bill - effective upon enactment)

This act is the latest legislative development in Maryland’s ongoing embrace of the cannabis industry. Specifically, this act establishes the regulatory and licensing framework for recreational cannabis in Maryland, which voters approved in a referendum vote. While this legislation has significant impact for the cannabis industry generally, there are important provisions in the bill concerning the intersection of financial services and the legal cannabis industry, including:

i.    The Commissioner of Financial Regulation (Commissioner) may not take adverse action against a depository institution solely because it provides financial services to a legal cannabis business or service provider;

ii.    The Commissioner may not discourage or penalize a depository institution from providing financial services to a legal cannabis business or service provider;

iii.    The Commissioner may not encourage a depository institution to decline to offer financial services to a business solely on the fact that it is a cannabis business or service provider (or an employee/officer thereof);

iv.    A financial services provider and its officers, directors, and employees cannot be held liable under state law or regulation solely for providing a financial service to a cannabis business or further investing income derived from the financial service;

v.    A financial services provider cannot be subjected to criminal, civil, or administrative forfeiture as to its collateral interest for a loan or other financial service to a owner, employee, or operator of a cannabis business or an owner or operator of real estate or equipment leased/sold to a cannabis business; and

vi.    The state may not cooperate or aid federal law enforcement attempting to prosecute financial institutions that are lawfully dealing with lawful cannabis businesses.

Practice Pointer: While this act includes comforting provisions for financial institutions dealing with the Maryland cannabis industry on a state level, this does not absolve financial institutions from the well-known hazards under federal law for engaging with cannabis businesses. Until federal legislators change the status quo, financial institutions must continue to exercise tremendous care before engaging with a cannabis business.

CONSUMER PROTECTION

Commissioner of Financial Regulation Name and Organization of Office

HB 379/SB929 (Chapters 28/29)

(effective July 1, 2023)

This legislation creates the Office of Financial Regulation within the Department of Labor, which is to be headed by the Commissioner of Financial Regulation.  In addition, the legislation provides for the appointment of a Deputy Commissioner for Depository Institutions and a Deputy Commissioner for Non-Depository Institutions, with specific experience requirements for each.

Commercial Law - Consumer Protection - Telephone Solicitation (Stop the Spam Calls Act of 2023)

HB 37/SB 90 (Chapters 414/413)

(effective January 1, 2024)

This act is intended to curb excessive “spam” calls to Maryland residents. The act prohibits a telephone solicitor from using an automated dialing systems or prerecorded messages without prior express written consent. This new law also prohibits a solicitor from intentionally concealing its identity on the called party’s caller identification system.  Violations of these restrictions will constitute an unfair, abusive, or deceptive trade practice under the Maryland Consumer Protection Act. 

Practice Pointer: The act specifies the requirements for valid “prior express written consent” and contains numerous exemptions and carve-outs for communications such as business-to-business solicitations and isolated solicitation calls. Businesses should review these requirements to ensure whether they are covered by this law and, if so, whether their opt outs and procedures align with these requirements.

DEBT COLLECTION

Courts - Judgments - Exemptions From Execution

HB 42/SB 106 (Chapters 719/720)

(effective October 1, 2023)

This new law imposes an important wrinkle in the bank account garnishment process.

Under Maryland law, exemptions from judgment enforcement are not usually automatic. That is, a judgment debtor seeking to exempt property from enforcement must claim an exemption through a filing with the court. In the context of account garnishments, debtors often utilize their “wildcard” exemption, which allows debtor to exempt up to $6,000 in cash from execution.

Under this new law, when a creditor serves an account garnishment, the debtor’s depository institution must apply an automatic exemption of up to $500 for funds in the debtor’s account(s). This automatic exemption is applied against the debtor’s $6,000 cash exemption, such that a debtor would need to affirmatively claim up to $5,500 in additional funds on deposit. Pending further order of court, the garnishee depository institution must freeze all amounts above the $500 automatic exemption and any future deposits.

Practice Pointer: This modest automatic exemption is similar to the automatic exemption laws for account garnishments in other states, such as Pennsylvania. Depository institutions should review their account garnishment compliance procedures to incorporate this new automatic exemption requirement.

District Court - Small Claims - Enforcement of Money Judgments

HB 127 (Chapter 709)

(effective October 1, 2023)

After a creditor obtains a judgment, the creditor will often seek the court’s assistance to compel post-judgment discovery from the debtor pertaining to the debtor’s assets and liabilities. This new law restricts this practice for judgments entered in small claims actions (i.e., judgments seeking money judgments less than or equal to $5,000). Specifically, this new law prohibits a District Court from entering an order compelling a small claims judgment debtor from appearing for an examination or answering interrogatories in aid of enforcement.

Real Property - Sheriff's Sales - Procedures and Subordinate Interests

SB 277 (Chapter 762)

(effective October 1, 2023)

When a creditor obtains a judgment against a debtor, the creditor may obtain a lien against the debtor’s property situated within that jurisdiction. The creditor may then enforce this lien with a writ of execution that directs the sheriff to seize and sell the property to satisfy the judgment. This new law clarifies that a sheriff sale for real property, like a foreclosure sale, will extinguish any subordinate lien or interest on the land that is sold.

Practice Pointer: This act aligns with a 2014 unreported decision from the Maryland Appellate Court that addressed the ambiguity that existed under Maryland law as to whether a sheriff sale extinguished junior liens.

EMPLOYMENT

Family and Medical Leave Insurance Program - Modifications

HB 988/SB 828 (Chapters 258/259)

(effective June 1, 2023)

This new law modifies the Time to Care Act (TCA), passed in 2022, which created a state-administered paid family and medical leave program.  These modifications delayed the start dates for both employer and employee contributions, access to benefit payments, and the date by which the Secretary of Labor must adopt implementing regulations.  The rate of contribution will now be capped at 1.2% of an employee’s covered wages up to the Social Security base, with 50% of the contribution paid by the employer and 50% paid by the employee. The amendments also reverse the TCA requirement that an employee must exhaust employer-provided leave before receiving TCA benefits.  Instead, these modifications allow an employer and an employee to agree to supplement TCA benefits with employer-provided benefits and allows an employer to require TCA benefits to be made concurrent with leave under an employer plan for certain types of leave.  For more detailed information regarding the modifications to the TCA, please see our in-depth summary.

Labor and Employment - Noncompete and Conflict of Interest Provisions - Application of Prohibition

SB 591 (Chapter 266)

(effective October 1, 2023)

Under existing law, Maryland employers are prohibited from enforcing non-compete agreements or conflict of interest provisions that restrict the ability of an employee to enter into employment with a new employer, or to become self-employed, in the same or similar business or trade if the employee’s compensation was less than or equal to $15 per hour or $31,200 annually.  Effective October 1, 2023, those amounts will be replaced with a formula tied to increases in the minimum wage.  This act makes such non-compete and conflict of interest provisions unenforceable against employees earning less than 150% of the State minimum wage, which will increase to $15 per hour beginning January 1, 2024.

ESTATES AND TRUSTS

Maryland General and Limited Power of Attorney Act – Alterations

SB 851/HB 18 (Chapters 697 and 696)

(effective October 1, 2023)

This new law amends the Maryland Statutory Form Personal Financial Power of Attorney and the Maryland Statutory Form Limited Power of Attorney. The new provision updates the statutory form power of attorney to grant agents additional authority to make certain gifts to qualify for a governmental benefit or program.  The new language specifically authorizes an agent to self-deal on behalf of the principal to qualify for government benefits and programs.

Practice Pointer: Financial institutions should examine policies and procedures concerning the review and acceptance of statutory form power of attorney forms to be prepared to honor agent self-dealing account ownership/POD changes for governmental benefit planning that may have previously been denied.

Estates and Trusts - Registers of Wills - Electronic Filing and Signatures

SB 253/HB 244 (Chapters 660/661)

(effective October 1, 2023)

This act will require a register of wills to accept electronically-filed documents, except an original will. The new law will not, however, preclude traditional filing of documents in paper form. The act further prohibits a register of wills from refusing to accept a document based on how it was signed (e.g., an electronic signature).

FINANCIAL INSTITUTIONS

Financial Institutions – Student Financing Companies – Required Registration and Reporting

HB 913 (Chapter 456)

(effective October 1, 2023)

This new law requires certain “student financing companies” to register with the Commissioner of Financial Regulation (the “Commissioner”) and provide specified reports.  Under the new law, a “student financing company” is an entity engaged in the business of securing, making, or extending “student financing” products.  Covered parties include any purchaser, assignee, or holder of student financing products. The law covers unsecured extensions of credit that are not guaranteed by a federal agency that are extended to a consumer (in whole or in part) for post-secondary educational expenses (regardless of whether the credit is provided by the related educational institution).  The law also covers extensions of credit used to refinance or repay existing student financing or federal student loan debt; and financial obligations in which the repayment amount is equal to a predetermined percentage of a consumer’s future income.  The law exempts banks, savings banks, savings and loan associations, and credit unions (as well as wholly-owned subsidiaries of such financial institutions).  Starting on March 14, 2024, covered entities must register with the Commissioner and then make annual reports to the Commissioner including a list of schools attended by borrowers, the total number of borrowers living in Maryland, and the total outstanding loan amount owed by borrowers living in Maryland.

Commercial Law and Financial Institutions – Credit Regulation – Shared Appreciation Agreements

HB 1150 (Chapter 568)

(effective July 1, 2023)

This new provision makes certain “shared appreciation agreements” subject to the Maryland Mortgage Lender provisions regulating extensions of residential closed-end and open-end credit.  Under the new law, a “shared appreciation agreement” includes a transaction, option, future, or other derivative between a person and a consumer where the consumer receives funds or other value in exchange for an interest or future interest in a dwelling or residential real estate, or a future obligation to repay a sum on the occurrence of certain events (e.g., transfer of ownership, a specified maturity date, the death of the consumer, or any other trigger event in the related writing).

Financial Regulation – Modernizing Licensing of Non-Depository Institutions and Elimination of Branch License Requirements

HB 686 (Chapter 567)

(effective July 1, 2023)

To streamline the licensing and registration process for non-depository financial institutions in Maryland, Chapter 567 eliminates the requirement that a covered institution obtain, and pay a fee for, a separate license or registration for each branch location.  Covered institutions include collection agencies, consumer loan licensees, installment loan licensees, sales finance companies, mortgage lenders, brokers and originators, check cashers, money transmitters, and debt management services providers.  The legislation will establish a new system whereby covered institutions will obtain a single license or registration and pay one fee that covers all of the institution’s operational locations.  For purposes of this new regime, the locations that must be registered will be expanded to include any location that investigates customer complaints or directly communicates with customers verbally, electronically, or in writing, any location that houses any core operational infrastructure or technology systems, and any location that is otherwise required to be listed in the Nationwide Multistate Licensing System & Registry (the NMLS).  A covered institution may not add, delete or modify a registered location without notifying the Commissioner of Financial Regulation and complying with other statutory requirements.  In addition, a covered institution that desires to use a trade name must first obtain approval from the Commissioner of Financial Regulation and take certain other steps.  Finally, Chapter 567 changes the amounts of surety bonds required to be maintained by covered institutions, as well as the manner in which the amounts of those bonds are to be calculated.

REAL PROPERTY

Recordation Tax - Indemnity Mortgage Exemption - Threshold Amount

HB371 (Chapter 800)

(effective July 1, 2024)

Under existing Maryland law, an indemnity mortgage transaction (usually, an indemnity deed of trust) is exempt from recordation tax if it secures a guarantee of a loan for less than $3 million. This act increases that recordation tax exemption for guarantees of a loan less than $12.5 million.

Practice Pointer: With proper loan structuring, this increased tax exemption should provide significant savings for obligors on real estate-secured loans.

Real Property – Actions to Repossess – Proof of Rental Licensure

SB 100/HB 36 (Chapters 482 and 481)

(effective October 1, 2023)

Under existing Maryland law, many counties and cities require that landlords leasing residential real property register or obtain a license to engage in such rental activities.  This new law requires a landlord to demonstrate that they have the proper registration/license (or are exempt from such requirements) before the landlord can file a complaint to repossess residential leased property.  In addition, at trial in connection with any complaint to repossess residential real property, a landlord must demonstrate that they have the proper registration/license (or are exempt from such requirements); and that the property satisfies the inspection requirements of the local licensing authority and is free from defects that threaten life, health, or safety of the related tenant.

Practice Pointer: Landlords should examine registration/licensing requirements in the locations where residential property is leased to verify proper registration/licensing and be prepared to satisfy the applicable property condition/inspection requirements of the new law on repossession.

Real Property - Residential Leases - Notification of Rent Increases

HB 151 (Chapter 146)

(effective October 1, 2023)

Under this act, Maryland landlords must send written notice of a rent increase to the residential tenant via first-class mail with a certificate of mailing or, if the tenant has elected to receive electronic notices, via an email, text message, or an electronic tenant portal.  Any electronic delivery method must provide the landlord with proof of transmission.  Landlords may not condition acceptance of a lease application on a tenant’s election to receive electronic notices nor use a lease that requires the tenant to accept notices of rent increases by electronic delivery.  The act also provides specific requirements for the timing of the notices depending on the type of tenancy.  The provisions will not supersede or affect local laws or ordinances requiring additional notice or providing greater tenant protections, and the provisions are not applicable to landlords who have provided written notice of the intent to terminate a tenancy in accordance with existing statutes.  

Ground Leases – Notices and Billing – Forms and Requirements

SB 194 / HB 118 (Chapters 185/184)

(effective October 1, 2023)

This act supplements existing notice and billing requirements for ground lease holders before a lease holder can bring an action for possession, seek repayment, or transfer the ground lease. The act requires the State Department of Assessments and Taxation (SDAT) to develop forms that ground lease holders must use for these billing and notice functions. The legislation further requires ground lease holders to provide additional notice where the leasehold tenant’s last known address is different than the premises address.

Practice Point: The act further provides that it is the General Assembly’s intent that all ground leases be redeemed.

 

Ground Leases - Collection of Rent, Interest, Fees, and Other Expenses - Registration Requirements

SB 193/HB92 (Chapters 181/180)

(effective October 1, 2023)

This act seeks to bolster ground leasehold tenant’s protections against collection activity by a ground lease holder that has not registered its ground lease with the State Department of Assessments and Taxation (SDAT). Under this new law, a ground lease tenant may submit an affidavit and supporting documentation to SDAT if the tenant believes that the leaseholder has engaged in collection activity without registering the ground lease. Thereafter, SDAT must send notice to the leaseholder warning of possible voiding of the lease if the leaseholder does not submit a counter-affidavit. Upon review of all affidavits, SDAT may then make a final decision as to whether the leaseholder violated the collection efforts restrictions. If either party disagrees with the SDAT’s finding, the party must then file an action with the circuit court within 45 days of the SDAT’s decision for a de novo ruling on the issue.

Property Tax - Tax Sales - Notices and Payoff Amount for Redemption

HB 21 (Chapter 274)

(effective July 1, 2023)



This act seeks to make it easier to contact the holder of a tax sale certificate for the purpose of obtaining a quote for the redemption cost. Specifically, the act requires that the tax sale certificate holder include an e-mail address in the required notices that must be sent prior to filing a complaint to foreclose the right of redemption. If an owner or lien holder timely requests a payoff from the certificate holder, that payoff quote must be valid for 30 days to afford the interested party time to make the redemption payment.

Property Tax - Tax Sales – Redemption

HB 83 (Chapter 273)

(effective date October 1, 2023)

This act seeks to incentivize tax sale certificate holders to promptly respond to an interested party’s request for a payoff quote as to the holder’s expenses. Under this new law, a tax collector must make at least one attempt by phone and e-mail to contact a certificate holder after the collector is informed that the certificate holder has failed to respond to an interested party’s payoff quote request. If the certificate holder does not respond to the tax collector within five (5) business days after the contact attempts, the collector may redeem the property without first obtaining a confirmation letter from the certificate holder stating that the holder’s expenses have been paid.

TRANSPORTATION

Abandoned Vehicles – Secured Parties – Electronic Notification

HB 262 (Chapter 518)

(effective October 1, 2023)

This new law updates the Transportation Article regarding how secured parties may receive notice concerning vehicle seizures by law enforcement authorities.  Under existing Maryland law, law enforcement authorities must provide certain notices concerning vehicle seizures in Maryland with seven (7) days after taking custody of a vehicle.  Notices must include vehicle identifying information 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 and secured parties.  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 law enforcement authorities will enter into agreements with secured parties concerning the provision and receipt of email and similar electronic notices under the new law.