Maryland Enacts New Surety Bond Requirements for Licensees

Maryland Senate Bill 924, which was signed by the Governor on May 5, alters surety bond requirements for persons licensed under Maryland’s (1) collection agency provisions; (2) Consumer Loan Law; (3) Mortgage Lender Law; (4) Money Transmission Act; (5) Debt Management Services Act; and (6) Debt Settlement Services Act.  These provisions go into effect June 1, 2017.

The new provisions require every applicant for a new license under the above mentioned provisions to file a surety bond with the various boards responsible for the above mentioned provisions (collectively the “Board”) which shall run to the Board for the benefit of the state and the public.  The bond must be issued by a surety company that is authorized to do business in Maryland and holds a Certificate of Authority issued by the Maryland Insurance Commissioner.

Further, the total liability of the surety bond: (1) must be continuous; (2) may not be aggregative or cumulative; (3) may not be determined by adding together the penal sum of the bond; (4) must be considered one continuous obligation; (5) must not be affected by the insolvency or bankruptcy of the licensee, any misrepresentation, breach of warranty, failure to pay a premium, or any other act or omission of the licensee or its agent, or the suspension of the licensee’s license; (6) cannot require administrative enforcement as a prerequisite to liability; and (7) shall continue for three years after the bond is cancelled or the licensee ceases to be licensed.  The bond may be cancelled by giving written notice 90 days in advance to the Board by certified mail.

The entire Senate Bill 924 can be found here: http://mgaleg.maryland.gov/2017RS/bills/sb/sb0924F.pdf.