Maryland Legal Alert for Financial Services

In this issue:

• 2013 MARYLAND LEGISLATION – SOME LAWS EFFECTIVE JULY 1
• NEW COURT RULE PROHIBITS PERSONAL IDENTIFYING INFORMATION IN FILINGS
• AUTOMATIC TELEPHONE DIALING SYSTEMS: IS THERE A CHARGE FOR THE CALL?
• GARNISHMENTS: FINAL FEDERAL BENEFITS RULE

2013 MARYLAND LEGISLATION – SOME LAWS EFFECTIVE JULY 1Our Maryland Laws Update is close to being published – look for it to arrive in your email box this month. Please note that we only will be providing the Update in electronic format this year. In the meantime, there are a few important laws you should be aware of that become effective on July 1:
Changes to the Tax Law Governing IDOTs and Refinancing in General
Introduced as SB346/HB1209 (effective July 1, 2013)
This law has many facets, all of which are discussed in detail by Ed Levin in our Real Estate Department's recent publication of Relating to Real Estate. Two important points to keep in mind are:
1. IDOTs. Currently, indemnity deeds of trust (IDOTs) securing guaranties of loans of up to $1 million are exempt from Maryland recordation tax. This law increases the amount for the exemption up to $3 million. All loans in a series that are part of the same transaction must be aggregated to determine if the $3 million threshold is reached; and
2. Refinancing. For a number of years, Maryland law has provided an exemption from recordation tax when recording a refinancing mortgage or deed of trust (mortgage) if the refinancing mortgage is secured by the principal residence of an individual who is the original mortgagor of the existing mortgage. The tax exemption applies to an amount secured by the refinancing mortgage up to the unpaid principal balance of the loan being paid off.
Effective July 1, 2013, the scope of this recordation tax exemption expands and will apply not only to individuals who are refinancing their principal residences but also to any person (which can include entities) and to any type of property. With the July 1st changes, the recordation tax exemption will be available to any refinancing mortgage to the extent the debt is being refinanced by the original mortgagor of the existing mortgage. The tax exemption will continue to apply only to an amount secured by the refinancing mortgage up to the unpaid principal balance of the loan being paid off. There also continues to be a requirement that the original mortgagor (or his/her/its agent) include certain information in the recitals or in the acknowledgment of the refinancing mortgage or provide a certain affidavit along with the refinancing mortgage.
If you have questions about how this law may impact your business, please contact John Morton or Ed Levin.
Motor Vehicle Leasing – Payment of Tolls
Introduced as HB420 (effective July 1, 2013; applicable to previously incurred tolls that are unpaid on that date)
This law clarifies that in the motor vehicle leasing context, a "person alleged to be liable" for tolls means either the registered owner (the lessor) or a person to whom a registered owner has transferred liability. Further, it provides that if at the time of the toll transaction the vehicle is in the possession of the lessee, and the lessor – who will receive the "notice of toll due" in the first instance – provides a copy of the lease or other "acceptable documentation" identifying the lessee to MTA within 30 days of the "notice of toll due," then the lessee will be liable for the toll and will be sent a "notice of toll due." Motor vehicle lessors should stay focused on the regulations mandated by this law to ensure this process of shifting liability to lessees is clear and effective. If you have questions about this law, please contact Margie Corwin.

NEW COURT RULE PROHIBITS PERSONAL IDENTIFYING INFORMATION IN FILINGSEffective July 1, 2013, a new rule governing Maryland court actions prohibits including certain personal identifying information in filings. Maryland Rule 1-322.1 generally prohibits inclusion in any court filing – whether electronic or paper – the following: an individual's Social Security number, taxpayer identification number, or date of birth; or the numeric or alphabetic characters of a financial or medical account identifier. Financial accounts include credit card, debit card, bank, and brokerage accounts as well as insurance policies and annuity contracts. If deemed necessary, the filer may include the last four digits of the Social Security or taxpayer identification number or the year of the individual's birth. A filer also may include the last four characters of the financial or medical account identifier, unless that identifier consists of fewer than eight characters. There are exceptions in the rule for certain situations when personal identifying information may be included in the filing. Many filers already redact personal identifying information from public records, but now Maryland courts have a specific rule to follow. Please contact Margie Corwin or Bob Enten if you have questions.

AUTOMATIC TELEPHONE DIALING SYSTEMS: IS THERE A CHARGE FOR THE CALL?A recent opinion by the United States District Court for the District of Maryland is worrisome for those using automatic telephone dialing systems. The court agreed with plaintiff that the federal Telephone Consumer Protection Act (TCPA) and the Maryland Telephone Consumer Protection Act (MDTCPA) were violated when the defendant used an automatic telephone dialing system to call plaintiff because plaintiff was charged by its service provider for incoming calls. Specifically, plaintiff used a voice over internet protocol (VoIP) service that charged, in addition to a very minimal monthly charge, a per minute charge for each incoming call as well as a separate charge for each transmission of caller ID for each incoming call. Under the MDTCPA, a violation of the TCPA is an unfair or deceptive trade practice. The TCPA prohibits making a call using an automatic telephone dialing system to any telephone number "assigned to … any service for which the called party is charged for the call." The court determined that because plaintiff was charged for the incoming automated calls, defendant violated the TCPA which caused a violation of the MDTCPA. As of June 4, 2013, both a motion for reconsideration and a motion for certificate of appealability are pending in this litigation. Even so, the issue should be of great interest to those who use automatic telephone dialing systems. A copy of the opinion can be found here. Please let Margie Corwin know if you would like to discuss this issue in greater detail.

GARNISHMENTS: FINAL FEDERAL BENEFITS RULEVarious federal regulators finalized the interim rule, which has been in place since May 1, 2011, governing garnishment of bank accounts containing federal benefits. The final rule, published in the May 29, 2013 Federal Register, makes a few changes that will be in effective beginning June 28, 2013. Perhaps the biggest change is the revised definition of "garnishment order" to include orders or levies issued by any State, State agency, or municipality. In Maryland this means that the Comptroller's non-judicial attachments for unpaid tax liabilities now will be covered by the rule. There also is a slightly better opportunity for financial institutions to collect garnishment fees in the event non-protected funds become available following account review. There are additional changes to the rule that will require many banks and credit unions to "tweak" their garnishment operations before June 28, 2013. Please contact Margie Corwin or Victor Kwansa if you would like to discuss changes to the federal benefits bank garnishment rule.