Maryland Laws Update for Financial Services

• BUSINESS

• CONSUMER PROTECTION

• FINANCIAL INSTITUTIONS

• GOVERNMENT REGULATIONS

• INSURANCE

• REAL PROPERTY

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
• D. Robert Enten, 410-576-4114
• Tonya R. Foley, 410-576-4238
• Robert A. Gaumont, 410-576-4007
• Natalie C. Gibson, 410-576-4049
• Christopher T. Magette, 410-576-4191
• Tamia J. Morris, 410-576-4021
• 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

BUSINESS

Small, Minority, and Women-Owned Business Account
HB0026/SB0215 (Chapter 68)
(effective July 1, 2024)

The Small, Minority, and Women-Owned Businesses Account under the Maryland Department of Commerce provides grants to eligible entities to provide funds to small, minority, and women-owned businesses in the State.  This legislation replaces the terms “investment capital and loans” with “financial assistance,” defined as a loan or a grant of up to $10,000 that may be provided in conjunction with a loan or in response to a local, State, or federal disaster or emergency.

Business Façade Improvement Programs – Eligible Funding Recipients
HB510
(effective July 1, 2024)

The Maryland Business Facade Improvement Program has been amended to expand eligible funding recipients, including community development organizations serving designated sustainable communities as defined in §6–205 of the Housing and Community Development Article. The bill also requires Department of Housing and Community Development will develop an application process and criteria for rating and awarding funds to applicants. Starting from fiscal year 2025, the Governor must include an annual appropriation of $5,000,000 in the state budget for the Program.

Corporate Actions in an Emergency
HB0749/SB0400
(effective October 1, 2024)

This bill updates Maryland corporate law to address corporate governance during emergencies. It authorizes corporate bylaws to include provisions for managing the corporation during an emergency, such as by modifying quorum requirements and designating substitute directors. 

However, the bill also provides default provisions if the bylaws do not cover emergency situations. For example, in an “emergency” where a quorum of the Board of Directors cannot reasonably be assembled due to a catastrophic event, the bill allows the Board of Directors to provide notice to only those directors “whom it is practicable to reach in the circumstances.” Similarly, in an “emergency” that renders the corporation unable to convene a meeting of the stockholders, House Bill 749 allows the Board of Directors to postpone the meeting and authorize remote participation in the meeting. 

This bill also provides that corporate acts taken in an emergency bind the corporation but do not impose liability on directors, officers, employees or agents of the corporation. 

These provisions ensure that the corporation can continue to operate effectively during catastrophic events by providing flexible governance procedures and protecting individuals from liability for actions taken in good faith.

Corporations and Associations - Ratification of Defective Corporate Acts - Alterations
HB888/SB544 (Chapters 605 / 604)
(effective October 1, 2024)

In 2022, the General Assembly codified the ability of a Maryland corporation to ratify a host of “defective corporate acts” (i.e., acts that were taken without due authorization), subject to various procedural requirements and the right of the corporation or its successor, any director, certain stockholders, and any person claiming to be substantially and adversely affected by the ratification to ask a court to determine the validity of the ratification or modify or waive any of the procedures required by the statute.  This 2024 legislation clarifies various aspects of the statute, including when the stockholders of a corporation must be part of the ratification process and that the court action discussed above may be brought in either Maryland state court or a federal court sitting in Maryland.

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CONSUMER PROTECTION

Consumer Protection - Consumer Reporting Agencies - Information in Consumer Credit Reports
HB0262/SB0041 (Chapter 618)
(effective October 1, 2024)

Section 14-1203 prohibits consumer reporting agencies from including certain information in a consumer report, subject to certain exceptions.  This legislation increases the threshold amounts that trigger the exceptions to the reporting prohibitions. 
 

Maryland Online Data Privacy Act of 2024
HB567
(effective October 1, 2025)

The Maryland Online Data Privacy Act of 2024 (House Bill 567) aims to regulate the processing of personal data by controllers and processors. The act provides consumers with rights regarding their personal data, imposes obligations on data controllers, and sets penalties for violations under the Maryland Consumer Protection Act. 
The key provisions include: 
1.    Consumer Rights: The Act grants consumers specific rights regarding their personal data, including the ability to access, correct, delete, and obtain a copy of their data. Consumers can also opt out of data processing activities.
2.    Authorized Agents: Consumers can designate an authorized agent to act on their behalf to opt out of data processing.
3.    Privacy Notices: Controllers must provide consumers with a clear privacy notice detailing their data processing practices.
4.    Data Processing Contracts: Controllers using processors to handle personal data must enter into contracts that govern the processors' data handling procedures.
5.    Data Protection Assessments: Controllers must conduct and document data protection assessments for activities that present a heightened risk of harm to consumers.
6.    Exemptions: Certain data regulated by federal acts such as COPPA, HIPAA, the Fair Credit Reporting Act, Federal Farm Credit Act, and the Driver’s Privacy Protection Act are exempt. Also exempted, are financial institutions, affiliates of financial institutions, and data that is subject to Title V of the Federal Gramm-Leach-Bliley Act and regulations adopted under that act. 

Consumer Reporting Agencies - Records of Criminal Proceedings – Prohibition
HB0622 (Chapter 432)
(effective upon enactment)

This legislation prohibits consumer reporting agencies from including any record of criminal proceedings that did not result in a guilty verdict or guilty plea, including expunged records.  Consumer reporting agencies are also prohibited from considering criminal proceedings that did not result in a guilty verdict or plea in its determination regarding a consumer’s creditworthiness. 
 
Consumer Protection - Consumer Council - Name Change
HB1021 (Chapter 482)
(effective October 1, 2024)

This legislation changes the name of the Consumer Council in the Division of Consumer Protection in the Office of the Attorney General to the Consumer Protection Commission.  The legislation also removes the authority for Consumer Protection Commission members to receive per diem compensation for their service. 

Discrimination - Military Status – Prohibition
SB413/HB598 (Chapters 323 and 322)
(effective October 1, 2024)

This new law generally prohibits discrimination based on military status in connection with housing and employment.  The new law defines “military status” to include someone who is a member of the uniformed services, a member of a reserve component of the armed forces of the United States, and a dependent of such person.  The legislation prohibits employers generally from failing or refusing to offer employment or otherwise discriminate against an individual with respect to the terms, conditions, or privileges of employment based on military status.  In the housing context, the new law generally prohibits the refusal to sell, rent, or make unavailable any dwelling, or otherwise discriminate against an individual, based on military status. 

Consumer Protection - Online Products and Services - Data of Children (Maryland Kids Code)
SB571/HB 603 (Chapters 460 and 461)
(effective October 1, 2024)

This legislation will require certain businesses that offer online products reasonably likely to be accessed by children to complete a data impact assessment to identify how the product uses children’s data and if the product is designed with the best interest of children reasonably likely to access the product in mind. There are also data usage prohibitions in the new law.  The legislation applies to certain “covered entities” that: (a) are operated for profit; (b) collect consumers’ personal data or use another entity to collect consumers’ personal data; (c) determine the purposes and means of processing consumers’ personal data; (d) do business in Maryland; and (e) meet one of the following: (i) have annual gross revenues of more than $25 million, (ii) annually buy, receive, sell, or share personal data of 50,000 or more consumers, households, devices, (iii) or derives at least 50% of its annual revenues from the sale of consumers’ personal data.  Fortunately for financial institutions, the new law includes exemptions for data that is controlled by an entity/service provider subject to Title V of the Gramm-Leach-Bliley Act. It is also noteworthy that there is no private right of action established under the new law.

Consumer Protection - Retail Sales of Gift Cards (Gift Card Scams Prevention Act of 2024)
SB 760/HB 896 (Chapters 463)
(portions effective June 1, 2025 and October 1, 2025)

This new law prohibits merchants from selling a certain open-loop and closed-loop gift cards to consumers unless the merchant meets certain requirements.  An open-loop gift card is a gift card redeemable at multiple unaffiliated merchants for goods or services; and a closed-loop gift card is a gift card redeemable at a single merchant (or a group of affiliated merchants).  The new law requires merchants that sell open-loop and closed-loop gift cards to conspicuously display a notice following a specified form that includes a warning not to purchase a gift card if packaging has been broken or if packaging indicates tampering.  The new law also generally requires merchants to sell both open-loop and closed-loop gift cards enclosed in secure packaging without activation codes visible, unless the gift card is a “chip-enabled” numberless gift card that can only be activated by a consumer after registering the card on the card issuer’s website.  The new legislation also requires merchants to provide training to all employees of the merchant on identifying and responding to gift card fraud and requires the Division of Consumer Protection to create a specified notice and issue certain guidelines regarding gift card fraud.  The new law also requires third-party gift card resellers to record and maintain a copy of certain information concerning gift card sales for at least 3 years.  The new law makes violations of the new provisions unfair, abusive, or deceptive trade practices under Maryland law.

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FINANCIAL INSTITUTIONS

Financial Institutions – Third-Party Service Providers - Examinations

HB250 (Chapter 422)
(effective October 1, 2024)

This new law will authorize the Commissioner of Financial Regulation to conduct examinations of third-party service providers who provide services on behalf of an institution licensed or chartered by the Office of Financial Regulation. The new legislation exempts from the types of service providers subject to examination: (a) providers of interactive computer services or communications platforms (except to the extent that such service/platform is specifically designed or adapted for financial services and activities related to financial services); and (b) any person that controls or is under common control with an entity licensed/chartered by the Commissioner (unless such person performs lending functions, funds transfers, fiduciary activities, trading activities, deposit taking activities, electronic bill payments, mobile applications, system/software development or maintenance, or security monitoring).  If any third-party service provider refuses to permit such an examination, or if an examination reveals any unsafe or unsound activities, the Commissioner may advise the underlying licensed/chartered institution that continued use of such third-party service provider may constitute an unsafe or unsound activity.  The new legislation authorizes the Commissioner to collect a fee in connection with any service provider examination (from the service provider).  If the service provider fails to pay the examination fee within 60 days of the Commissioner’s notice, the Commissioner may collect the examination fee from the regulated financial institution.

Practice Pointer:  Financial institutions should review third-party service provider agreements to ensure that such agreements require cooperation by the service provider with examination requests and provide for the service provider to indemnify the financial institution for the costs of any examination, to the extent imposed on the financial institution. 

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GOVERNMENT REGULATIONS

State Government – Permits, Licenses, and Certificates – Processing (Transparent Government Act of 2024)
HB581
(effective July 1, 2024)

This bill requires each department and independent unit of the Executive Branch to create an annual catalog of all the licenses, permits, and certificates it issues. The catalog must be submitted to the Governor by October 1 of each year. Additionally, by December 1, 2024, each department and independent unit must provide a summary of their application process for each license, permit, and certificate. This summary should include any updates to the application process and an estimate of the time it would take to process the applications. The bill also establishes the Government Efficiency Commission, which will oversee each department and independent unit to improve efficiency and economic competitiveness in the application process. 

Establishing the Maryland Community Investment Corporation
HB0599 / SB 0483
(effective July 1, 2024)

House Bill 599 establishes the Maryland Community Investment Corporation (MCIC) to support investments in low-income communities within the state. The MCIC is a state entity tasked with applying for federal new markets tax credits and making qualified equity investments to galvanize long-term financial capacity and sustained investment in these areas. Governed by a Board of Directors, who must geographically represent low-income communities, and advised by an investment committee, the MCIC may employ a CEO, staff, consultants, and legal advisors as needed. The corporation is exempt from certain state procurement and personnel regulations but must comply with public information and ethics laws. Empowered to receive and manage funds, enter into contracts, and provide financial assistance through grants, loans, or tax credits, the MCIC prioritizes projects owned or operated by Maryland-based entities. Additionally, the MCIC will develop strategic plans, set performance goals, and ensure inclusive and diverse entrepreneurship in its initiatives. To govern its investments, the corporation must adopt regulations specifying the amount of money available and the qualifications required for projects to receive investment. This initiative aims to create a qualified community development entity as defined by the U.S. Department of Treasury and to facilitate economic growth and opportunities in Maryland's low-income communities.

Introduction of Local Government Investment Guidelines
HB0846/SB0776
(effective October 1, 2024)

This Bill requires the State Treasurer to adopt local government investment guidelines, which shall include a list of permitted investments and guidance on prudent investment of money, to regulate the investment of public money. Local governments are prohibited from borrowing money for the express purpose of investing it. Prior to changing what investments local governments may make, the State Treasurer must consult with the governmental entities.

Increase of Allotment for SDAT Administrative Expenses
SB0289 
(effective July 1, 2024)

This bill allows the State Department of Assessments and Taxation (“SDAT”) to charge up to 15% of the continuing, nonlapsing fund within SDAT for administrative expenses of the Office of the Director of SDAT, which is three times the previous allotment of 5%. 

Removal of Repository Duties from the Department of Planning 
SB0310
(effective October 1, 2024)

This bill removes the Department of Planning’s responsibility to serve as a repository for, and to publish in the Maryland Register, information concerning federal and state grants, loans, and other assistance, but maintains its duty to annually publish information regarding such assistance

Prior Authorizations of State Debt – Alterations
SB966 
(effective June 1, 2024)
Senate Bill 966 focuses on amending prior authorizations of State Debt in Maryland. The amendments involve changing the names of grantees, altering the authorized uses of certain grants, and extending the termination dates of certain grants. Numerous grants have been updated, including those for the Kennedy Krieger Institute, various community resource centers, and recreational facilities in different counties. Additionally, significant funding is allocated for local parks and playgrounds infrastructure. The bill also allows for funds provided to county administrative units to be used to acquire property. 

Overall, the bill addresses the reallocation and extension of state grants to support a wide range of community development and infrastructure projects in Maryland, while also optimizing the use of state debt authorizations to better align with current needs and project scopes.

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INSURANCE

Holding Companies – Group Capital Calculation and Liquidity Stress Test
HB025 (Chapter 121)
(effective October 1, 2024)

This legislation requires the ultimate controlling person of an insurer to file an annual group capital calculation yearly to the Maryland Insurance Commissioner (the “Commissioner”)  and the results of a specific year’s liquidity stress test along with the insurer’s annual registration statement. The group capital calculation and the liquidity stress test must be done in accordance with the National Association of Insurance Commissioners (“NAIC”) guidelines and framework. 

Additionally, this legislation expands the confidentiality protections for information provided to the Maryland Insurance Commissioner in compliance with the Maryland Acquisitions Disclosure and Control Act (the “Act”). The legislation provides guidelines for when and how the Commissioner may share information received under the Act with other entities.  

Insurance - Producer Licensing Requirements - Education and Experience
HB0265/SB0336 (Chapter 874)
(effective October 1, 2024)

This legislation removes some of the experience and education requirements for licensing certain insurance producers, including the requirements to take the written examination to become licensed. 

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REAL PROPERTY

Housing Innovation Pilot Program and Housing Innovation Fund (Housing Innovation Pilot Program Act of 2024)
HB0007/SB0203
(effective July 1, 2024)

The Housing Innovation Pilot Program Act establishes a five-year program dedicated to providing a special, non-lapsing fund to local housing authorities and county government to develop mixed-income, cross-subsidized housing. The fund will be used to provide low or no-interest loans to local housing authorities or county governments partnering with housing developers to acquire private-owned housing through the Housing Innovation Pilot program. This Act will remain in effect until June 30, 2029.

Real Estate Brokers – Commercial Transactions – Buyer’s Rights
HB 697
(effective October 1, 2024)

This bill requires each real estate contract submitted to a party by a real estate broker, a nonresident real estate broker, an associate real estate broker, a real estate salesperson, or a nonresident real estate salesperson for use in the sale of a commercial real estate to contain, in bold-faced type, a statement that the buyer has the right to select the buyer’s own (1) title insurance company, (2) settlement company, (3) escrow company, or (4) title lawyer. The required statement must also contain, in bold-faced type, a statement that a seller may not be prohibited from offering owner financing as a condition of settlement.

Practice Pointer: Affected parties drafting real estate contracts should be aware of the new requirements and incorporate the same into their agreements. 

Real Estate Brokers - Brokerage Agreements - Requirements
SB 542
(effective October 1, 2024)

This bill requires certain provisions to be included in a brokerage agreement between a real estate broker and a seller or lessor or a buyer or lessee, including certain terms addressing termination of the brokerage agreement and compensation.

Practice Pointer:  Parties drafting brokerage agreements should be aware of the new requirements and incorporate the same into their agreements. 

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