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Nearly every loan in Maryland is subject to Maryland law that governs the terms of the credit extension.

However, Maryland has a number of different laws that govern extensions of credit – lending – and there are times when it can be unclear which Maryland law governs a particular transaction.

Here are a few tips to follow if you want to determine the Maryland law that governs a credit transaction.

Start at Title 12 of the Maryland Commercial Law Article

All Maryland laws that govern the terms of an extension of credit are found in one place – Title 12 of the Maryland Commercial Law Article.  We like to call these the “Maryland’s credit laws”.

Maryland’s credit laws govern terms like: the amount of interest the creditor can charge; fees that may be imposed on the borrower; limitations on the creditor, like the amount of insurance coverage that may be required; prohibited features, such as balloon payments.

Title 12 is the place to start!

Who? What kind?

First you need to identify who the borrower is and the purpose for the loan.  Permitted terms of credit vary significantly between commercial loans and consumer loans – but sometimes the lines between these types of loans get blurred.

If the loan is a commercial loan and is to a corporation or if the commercial loan is to a non-corporate entity (for example, a limited liability company), there are nuances and thresholds you need to know about, terms might even be unregulated!   Commercial lenders should consult with their compliance gurus and/or their lawyer to determine what other laws might apply.

Wait! There’s More!

Not surprisingly, unlike commercial lending, Maryland’s credit laws governing consumer loans get more complicated.

For consumer loans and other types of consumer credit like, financed sales, there are a number of alternative Maryland credit laws that can govern the transactions.  The creditor needs to think ahead about what credit law will govern the consumer transaction so the terms of the credit don’t’ violate Maryland law.  There are a variety of reasons why each of the Maryland credit laws may be better or worse for the creditor, and this video is not an appropriate vehicle for us to dive into that kind of detail. 

You should also remember that Maryland has not expressly overridden any federal law that governs credit laws.  Whether based on the type of lender or the type of credit, always consider if there is a federal law that preempts a Maryland credit law restriction or limitation.

We recognize that this video simplifies a legal analysis that, at times, can get complex.  We also are cognizant that even when an applicable Maryland credit law is identified for a particular transaction, that credit law will have nuances that need to be considered.  We are happy to help if you have questions.