Maryland Enacts Financial Consumer Protection Act of 2018
Maryland recently enacted the Financial Consumer Protection Act of 2018 (FCPA) to expand the Maryland Consumer Protection Act (MCPA) to include “abusive practices,” and to make modifications to certain consumer lending and monetary penalty provisions, among other changes. While most provisions enacted by the FCPA are effective on October 1, 2018, certain provisions relating to consumer and secondary mortgage lending take effect on January 1, 2019. A general summary of the changes is provided below.
By expanding the MCPA to include “abusive” trade practices, a broader range of activities may now be interpreted to be violative of the MCPA. In addition, the FCPA increases the maximum civil penalties for violations of the MCPA and several other financial licensing and regulatory laws to $10,000 for initial violations and $25,000 for subsequent violations.
The FCPA now also prohibits consumer reporting agencies from charging a fee for any service relating to a security freeze. Further, the FCPA establishes a Student Loan Ombudsman within the Office of the Commissioner of Financial Regulation (OCFR), and specifies the duties for that office, which includes reviewing complaints from student loan borrowers and establishing a student loan borrower education course. Also, the FCPA requires the Office of the Attorney General to conduct a study to assess whether the OCFR has authority to regulate “fintech firms” or technology-driven nonbank companies that compete with traditional methods in the delivery of financial services.
Effective on January 1, 2019, the FCPA increases the threshold below which a loan is subject to the Maryland Consumer Loan Law (MCLL) from $6,000 to $25,000, expanding the scope of persons subject to licensing requirements. The MCLL will apply to a loan or advance of money of $25,000 or less for personal, family, household, or agricultural purposes, regardless of whether the loan or advance is another type of product, such as an installment loan or a nonrecourse or contingent transaction. Additionally, the threshold under which a lender is prohibited from taking a security interest will increase from $2,000 to $4,000 if the security is real property, and $700 to $1,400 if the security is personal property. A lender will also be authorized to make an election to lend under the Secondary Mortgage Loan Law. If a lender elects to do so, the provisions of the Maryland Commercial Law Article relating to interest and usury, consumer loans, revolving credit, and closed end credit do not apply.
The full revisions of the Financial Consumer Protection Act of 2018 are available here.
