Maryland Interest and Usury
Commercial Law Article
Title 12. Credit Regulations
Subtitle 3. Consumer Loans - Credit Provisions
(a) In this subtitle the following words have the meanings indicated.
(b) "Commissioner" means the Commissioner of Financial Regulation.
(c) "Lender" means a person who makes a loan under this subtitle.
(d) "Licensee" means a person who is licensed under Title 11, Subtitle 2 of the Financial Institutions Article, the Maryland Consumer Loan Law -- Licensing Provisions.
(e) "Loan" means any loan or advance of money or credit made under this subtitle.
(f) "Person" includes an individual, corporation, business trust, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal or commercial entity.
(g) "Wages" means all remuneration paid to any employee for his employment, including the cash value of all remuneration paid in any medium other than cash.
A person may not engage in the business of making loans under this subtitle unless the person is licensed under or is exempt from the licensing requirements of Title 11, Subtitle 2 of the Financial Institutions Article, the Maryland onsumer Loan Law -- Licensing Provisions.
(a) A lender may not make a loan under this subtitle unless the loan is in an original amount or value which does not exceed $6,000.
(b) (1) The purpose of this subsection is to prevent evasion of the provisions of this subtitle by means of a purchase or assignment of wages.
(2) For the purposes of this subtitle:
(i) The payment of $6,000 or less in money, credit, goods, or things in action as consideration for any sale, assignment, or order for the payment of wages, whether earned or to be earned, is considered a loan of money secured by the sale, assignment, or order for payment of wages; and
(ii) The amount by which the wages exceed the consideration paid for them is considered interest or charges on the loan from the date of the payment to the date the wages are payable.
(3) The transaction described in this subsection is governed by and subject to the provisions of this subtitle.
(c) This subtitle applies but is not limited to a lender who:
(1) As security for a loan, use, or forebearance of money, goods, or things in action or for any loan, use, or sale of credit, whether or not the transaction is or purports to be made under this subtitle, makes a pretended purchase of property from any person and permits the owner or pledgor to retain possession of the property; or
(2) By any device or pretense of charging for his services or otherwise, seeks to obtain any interest, charges, discount, or like consideration.
(d) (1) A lender who lends or contracts to lend an amount which exceeds $6,000 may not directly or indirectly contract for, charge, or receive any interest, fee, or other charge in excess of that which he would be permitted to charge if he were not authorized to make loans under this subtitle.
(2) The provisions of this subsection apply to any debt in excess of $6,000 which is directly or contingently owed or contracted to be so owed by any person jointly or severally:
(i) Whether as a borrower, an endorser, guarantor, or surety for a borrower, or otherwise; and
(ii) Whether the debt is part of a single transaction or the aggregate of more than one transaction.
(a) A lender may not directly or indirectly print, publish, distribute, or broadcast any false, misleading, or deceptive statement regarding the rates, terms, or conditions of a loan.
(b) (1) If charges or rates of charges are advertised by a licensee, the Commissioner may require him to state them fully and clearly in any manner the Commissioner considers necessary to prevent misunderstanding by a prospective borrower.
(2) Subject to any condition which the Commissioner may impose to prevent a false impression regarding the scope or degree of protection provided by this subtitle, the Commissioner may permit or require a licensee to refer in his advertising to the fact that his business is under State supervision.
(a) In granting or denying an application for a loan, a licensee may not discriminate against any loan applicant only on the basis of race, color, creed, national origin, sex, marital status, or age.
(b) (1) A licensee is not in violation of this section if the licensee is in compliance with the federal Equal Credit Opportunity Act and the regulations adopted under that act.
(2) Denying an application for a loan by an applicant who is a minor is not discrimination on the basis of age.
(a) (1) Except as provided in subsections (b) and (c) of this section, a lender may charge interest on a loan at a rate not more than the rates specified in this subsection.
(2) For any loan with an original principal balance of $2,000 or less, the maximum interest rate is:
(i) 2.75 percent interest per month on that part of the unpaid principal balance not more than $500;
(ii) 2 percent interest per month on that part of the unpaid principal balance that is more than $500 but not more than $700; and
(iii) 1.25 percent interest per month on that part of the unpaid principal balance that is more than $700.
(3) For any loan with an original principal balance of more than $2,000 and not more than $3,500, the maximum interest rate is 1.75 percent interest per month on the unpaid principal balance of the loan.
(4) For any loan with an original principal balance of more than $3,500 and not more than $5,000, the maximum interest rate is 1.5 percent interest per month on the unpaid principal balance of the loan.
(5) For any loan with an original principal balance of more than $5,000, the maximum interest rate is 1.35 percent interest per month on the unpaid principal balance of the loan.
(6) Notwithstanding the provisions of paragraphs (2) through (5) of this subsection on any loan made on or after July 1, 1982, a lender under this subtitle may charge interest not exceeding the following rates:
(i) For any loan with an original principal balance of $2,000 or less, 2.75 percent interest per month on that part of the unpaid principal balance not more than $1,000 and 2 percent interest per month on that part of the unpaid principal balance that is more than $1,000;
(ii) For any loan with an original principal balance of more than $2,000, the maximum rate of interest is 2 percent per month on the unpaid principal balance of the loan.
(7) A loan may be made pursuant to paragraph (6) of this subsection provided that:
(i) If the loan is a renewal or refinancing of a loan made prior to July 1, 1982, the lender complies with § 12-116 of this title;
(ii) If the loan includes a provision for a rate of interest which may be adjusted by the lender during the term of the loan, the lender complies with § 12-118 of this title;
(iii) Upon the borrower's default, if the loan is secured by personal property, the lender complies with § 12-115 of this title concerning repossession and redemption of the goods securing the loan; and
(iv) The loan does not include a balloon payment, unless payment in full is due on demand or in 1 year or less.
(b) If any principal balance remains unpaid 6 months after the loan matures as originally scheduled or deferred, the lender may not contract for, charge, or receive interest at a rate exceeding 6 percent simple interest per annum on the actual unpaid principal balances from time to time.
(c) If the lender refinances a loan in the ordinary course of business, he may not add to the principal balance or deduct from the proceeds of the new loan more than 60 days' interest then due.
(d) (1) The lender shall compute interest on the actual unpaid principal balances outstanding from time to time, and he may not contract for, charge, or receive interest in advance or compounded interest.
(2) For each day on which an unpaid principal balance is outstanding, the lender may charge on that unpaid balance 1/30th of the interest permitted under this subtitle to be charged for 1 month.
(3) For purposes of this section, each of the 12 calendar months in the year shall be treated as having 30 days, as follows:
(i) The last day of each month which has 31 days shall be omitted; and
(ii) The necessary number of days shall be added at the end of February to make 30 days.
(e) The maximum term of any loan made under this subtitle may not exceed:
(1) For any loan with an original principal balance of $700 or less, 30 months and 15 days;
(2) For any loan with an original principal balance of more than $700 but less than $2,000, 36 months and 15 days; and
(3) For any loan with an original principal balance of $2,000 or more, 72 months and 15 days.
(a) At the time a loan is made, a lender may collect from the borrower:
(1) As to any item of the total property that secures a loan:
(i) The fees paid to a public official or governmental agency for recording or satisfying a mortgage, encumbrance, or lien on any property securing the loan; or
(ii) An equal or lesser amount for nonfiling insurance premium on any property, or portion of the property, that is not recorded if:
1. The Insurance Commissioner approves the rates; and
2. A commission is not paid on the policy; and
(2) The title insurance premiums or reasonable attorney's fees paid for searching and insuring the title to any real property securing the loan.
(b) A lender may collect from the borrower a fee not exceeding $15 if payment is made with a check that is dishonored on the second presentment.
(a) On any loan with an original principal balance of more than $2,000, if a borrower defaults under the terms of a loan and the lender refers the borrower's account for collection to an attorney who is not a salaried employee of the lender, and if the note, contract, or other evidence of the loan permits, the lender may charge and collect from the borrower court costs and attorney's fees not exceeding 15 percent of the amount due and payable under the terms of the loan.
(b) On any loan with an original principal balance of $2,000 or less, if a borrower defaults under the terms of a loan and the lender refers the borrower's account for collection to an attorney who is not a salaried employee of the lender, and if the note, contract, or other evidence of the loan permits, the lender may recover from the borrower court costs and attorney's fees not exceeding 15 percent of the amount due and payable under the terms of the loan, to be set by the court in the event of the filing of suit.
(a) (1) At the time a loan is made, the lender shall deliver to the borrower a statement in the English language which:
(i) Quotes §§ 12-306, 12-307, 12-312, and 12-313 of this subtitle, in their entireties; and
(ii) Complies with § 12-106(b) of this title.
(2) If there are two or more borrowers, the lender:
(i) May deliver the statement to any one of the borrowers; and
(ii) At the request of any other borrower, shall deliver a copy of the statement to that borrower within 10 days after the request.
(b) (1) Except as provided in paragraphs (2), (3), and (4) of this subsection, at the time a lender receives a payment on account of a loan, the lender shall deliver to the person making the payment a receipt which specifies:
(i) The amount applied to principal;
(ii) The amount applied to interest and other charges; and
(iii) The unpaid principal balance of the loan.
(2) The lender may deliver an unitemized receipt at the time of payment if he delivers the required itemized receipt within 10 days after the payment.
(3) The lender is not required to issue a receipt if, before the due date of each payment, he regularly delivers to the borrower a billing statement which specifies:
(i) The previous unpaid principal balance of the loan;
(ii) The amount and date of each payment made during the billing period;
(iii) The amount of each of these payments applied to interest;
(iv) The amount of each of these payments applied to principal;
(v) The current unpaid principal balance; and
(vi) The amount and due date of the next maturing installment.
(4) The lender is not required to issue a receipt if the lender issues to the borrower a payment book or coupon book and payment is made by check or money order.
(c) (1) A lender shall permit a borrower to prepay a loan in full or in part at any time, without penalty.
(2) Each partial prepayment shall be applied:
(i) First, to any interest accrued on the unpaid principal balance to the date of the payment; and
(ii) Then, to the unpaid principal balance.
(d) After full repayment of a loan, the lender shall:
(1) (i) Indelibly mark with the word "paid" or "canceled" and return each note, contract, or other evidence of obligation of the borrower in the possession of the lender; or
(ii) Furnish the borrower with a written statement that identifies the loan transaction and states that the loan has been paid in full;
(2) Release any mortgage, security agreement, or other form of security instrument which no longer secures any indebtedness to the lender; and
(3) Restore any pledge or certificate of title.
(e) At the request of the borrower, the lender shall furnish the borrower with a written statement of the account. However, the lender is not required to do so more than once in any 30-day period.
(f) A lender making or offering to make a loan secured by residential real property shall comply with § 12-125 of this title, as applicable.
(a) If a lender makes a loan for the purpose of enabling a borrower to buy goods or services used primarily for personal, family, or household purposes, then, in addition to any other claim or defense which the borrower has under this subtitle, the lender is subject to the claims and defenses of the borrower against the seller arising from the sale of the goods or services, if:
(1) The lender knows that the seller arranged for the extension of credit by the lender; or
(2) The lender otherwise knowingly participated in the sale.
(b) In determining that a lender knowingly participated in a sale transaction, the following factors, among others, may be considered:
(1) The lender was a person related to the seller, unless the relationship was remote or was not a factor in the sale or loan;
(2) The proceeds of the loan were made payable in whole or in part to the seller;
(3) The lender took a purchase-money security interest in the goods which were the subject of the sale;
(4) The seller guaranteed the loan or otherwise assumed the risk of loss by the lender on the loan;
(5) The lender directly supplied to the seller a form used by the borrower to evidence or secure the loan; or
(6) The loan was conditioned on purchase by the borrower of the goods or services from the particular seller, but the payment by the lender of any proceeds of the loan to the seller does not establish in itself that the loan was so conditioned.
(c) (1) The liability of a lender under this section may not exceed the amount owed to the lender with respect to the sale at the time the lender has notice of a claim or defense of the buyer against the seller.
(2) If two or more loans are consolidated, the maximum amount owed to the lender under paragraph (1) of this subsection is determined as follows:
(i) If the consolidated loans arose from sales made on the same day, the payments received after the consolidation are considered to be applied first to the smallest loan; and
(ii) In any other case, the payments received after the consolidation are considered to be applied first to payment of the loan first made.
(d) The lender is subrogated to each right and remedy which the borrower has against the seller.
(a) For purposes of this subtitle, any profit or advantage which a person contracts for, collects, receives, or obtains by a collateral sale, purchase, or agreement in connection with negotiating, arranging, or making a loan is considered a charge for the loan.
(b) This section does not apply to any commission, dividend, retrospective rating credit, or other consideration received by a licensee or a licensed insurance producer who is an officer, director, agent, employee, or affiliate of a licensee on insurance sold under this subtitle in accordance with the applicable provisions of the Insurance Article.
(a) (1) In this section the following words have the meanings indicated.
(2) "Covered loan" means a mortgage loan made under this subtitle that meets the criteria for a loan subject to the federal Home Ownership Equity Protection Act set forth in 15 U.S.C. § 1602(aa), as modified from time to time by Regulation Z, 12 C.F.R. Part 226, except that the comparison percentages for the mortgage loan shall be one percentage point less than those specified in 15 U.S.C. § 1602(aa), as modified from time to time by Regulation Z, 12 C.F.R. Part 226.
(3) "Home buyer education or housing counseling" means instruction on preparing for home ownership, shopping for a home, obtaining a mortgage, loan closing, and life as a homeowner.
(4) "Residential real property" means owner-occupied real property having a dwelling on it designed principally as a residence with accommodations for not more than four families.
(b) A lender may not take as security for a loan any:
(1) Confession of judgment or power of attorney to him or to a third person to confess judgment or appear for the borrower in a judicial proceeding;
(2) Assignment or order for payment of wages;
(3) Instrument in which blanks are left to be filled after execution; or
(4) Note, promise to pay, or security instrument which does not state:
(i) The principal amount of the loan;
(ii) A schedule of payments or a description of the schedule; and
(iii) The agreed amount and rate of interest, charges, and fees.
(c) (1) A lender may not take any security interest in:
(i) Real property for any loan under $2,000 in value or amount; or
(ii) Personal property for any loan under $700 in value or amount.
(2) Any lien taken in violation of this subsection is void.
(3) This subsection does not apply to or affect a lien on an interest in real property which results from a judgment obtained by the lender based on a loan otherwise secured or unsecured.
(d) (1) A lender may not make a covered loan without giving due regard to the borrower's ability to repay the loan in accordance with its terms.
(2) A borrower is presumed to be able to repay a loan if at the time the loan is made the borrower's total scheduled monthly payment obligations, including the required loan payment, do not exceed 45 percent of the borrower's monthly gross income.
(3) This subsection does not apply to a covered loan to a borrower whose monthly gross income is greater than 120 percent of the median family income for the metropolitan statistical area in which the residential real property securing the loan is located.
(e) (1) In this subsection, "loan application" has the meaning stated in § 12-125 of this title.
(2) At the time a borrower completes a loan application for a covered loan, the lender shall provide the borrower with:
(i) A written recommendation that the borrower seek home buyer education or housing counseling; and
(ii) A list of agencies and organizations approved by the county in which the residential real property securing the covered loan is located to provide home buyer education or housing counseling.
(a) (1) In this section the following words have the meanings indicated.
(2) "Covered loan" means a mortgage loan made under this subtitle that meets the criteria for a loan subject to the federal Home Ownership Equity Protection Act set forth in 15 U.S.C. § 1602(aa), as modified from time to time by Regulation Z, 12 C.F.R. Part 226, except that the comparison percentages for the mortgage loan shall be one percentage point less than those specified in 15 U.S.C. § 1602(aa), as modified from time to time by Regulation Z, 12 C.F.R. Part 226.
(3) "Credit health insurance" has the meaning stated in § 13-101 of the Insurance Article.
(4) "Credit involuntary unemployment benefit insurance" has the meaning stated in § 13-101 of the Insurance Article.
(5) (i) "Credit life insurance" means insurance on the life of a borrower that provides indemnity for repayment of a specific loan or credit transaction on the death of the borrower.
(ii) "Credit life insurance" does not include life insurance payable to a beneficiary designated by the borrower other than the obligee of a specific loan or credit transaction.
(6) "Mortgage loan" has the meaning stated in § 11-501 of the Financial Institutions Article.
(7) "Premium" has the meaning stated in § 1-101 of the Insurance Article.
(8) "Single premium coverage" means insurance for which the total premium is payable in one lump sum at or before the time coverage commences.
(b) Subject to the provisions of this section, a lender may collect from the borrower, at the option of the borrower, the premiums paid for:
(1) Insurance covering any real or personal property pledged as security for the loan;
(2) Credit health insurance covering any one or more borrowers, if the insurance does not provide for benefits exceeding the actual period of disability;
(3) Credit life insurance:
(i) Covering any one borrower for any loan under $700 in value or amount; or
(ii) Covering any one or more borrowers for any loan of $700 or more in value or amount; and
(4) Credit involuntary unemployment benefit insurance covering any one borrower, if the insurance:
(i) Does not provide for benefits exceeding the actual period of unemployment; and
(ii) Is not contingent upon the purchase of any other type of insurance permitted under this subtitle.
(c) (1) A lender may not require that the insurance be purchased through a particular insurance producer or insurance company.
(2) The lender may:
(i) Assist an applicant or act with the applicant in forwarding an application to an insurance producer; and
(ii) Receive and transmit premiums or other identifiable charges for the insurance.
(3) Subject to subsection (e) of this section, at the option of the borrower, a lender may be coinsured or protected to the extent of his interest by a mortgagee clause.
(d) (1) (i) Subject to subsection (e) of this section, the amount of property insurance may not exceed either the reasonable value of the property insured or the originally scheduled total of payments under the loan contract.
(ii) The terms and conditions of the property insurance policy shall be filed with and approved by the Insurance Commissioner.
(iii) Property insurance may be provided by the lender if the borrower, at the time the loan is made, fails to furnish a loss payable endorsement for the protection of the lender in an amount sufficient to cover the amount of the loan or the value of the property securing the loan, whichever is less.
(iv) If, however, within 30 days of the inception date of the loan, the borrower does provide a loss payable endorsement for the protection of the lender, and no claim has been filed under the coverage purchased, the lender shall cancel the property insurance on the loan and shall refund the entire original property insurance premium to the borrower.
(v) A lender providing property insurance under this section shall give the borrower, at the time the loan is made, a written notice of the borrower's right to provide a loss payable endorsement for the protection of the lender and the borrower's right to a refund of the entire property insurance premium.
(2) Credit health insurance shall provide for:
(i) Benefits not exceeding the then scheduled unpaid total of payments of the loan;
(ii) A waiting period of at least 14 days; and
(iii) Periodic benefits, the amount of each of which may not exceed the originally scheduled total of payments under the loan contract, divided by the number of installments.
(3) The amount of credit life insurance in force may not exceed the unpaid principal but shall include all accrued interest under the loan contract.
(4) Credit involuntary unemployment benefit insurance shall provide that, in the event of involuntary loss of employment, the aggregate amount of periodic benefits payable in the event of involuntary loss of employment, as defined in the policy, may not exceed the then scheduled unpaid total of payments of the loan.
(5) (i) Except as provided in this paragraph, a person making a covered loan may not finance as a part of the covered loan transaction single premium coverage for:
1. Credit health insurance;
2. Credit involuntary unemployment benefit insurance; or
3. Credit life insurance.
(ii) Nothing in this paragraph shall prohibit the financing of any insurance coverage in connection with a mobile home or its premises, as those terms are defined in § 8A-101 of the Real Property Article.
(e) (1) In this subsection, "property insurance coverage" means property insurance against losses caused by perils that commonly are covered in insurance policies described with terms similar to "standard fire" or "standard fire with extended coverage".
(2) (i) A lender may not require a borrower, as a condition to receiving or maintaining a loan secured by a first mortgage or first deed of trust, to provide or purchase property insurance coverage against risks to any improvements on any real property in an amount exceeding the replacement value of improvements on the real property.
(ii) In determining the replacement value of the improvements on any real property, the lender may:
1. Accept the value placed on the improvements by the insurer; or
2. Use the value placed on the improvements that is determined by the lender's appraisal of the real property.
(3) A violation of this subsection or of subsection (c)(1) of this section shall entitle the borrower to seek:
(i) An injunction to prohibit the lender who has engaged or is engaging in the violation from continuing or engaging in the violation;
(ii) Reasonable attorney's fees; and
(iii) Damages directly resulting from the violation.
(4) A violation of this subsection or of subsection (c)(1) of this section does not affect the validity of the first mortgage or first deed of trust securing the loan.
(f) Under this subtitle, insurance may be obtained only:
(1) From an insurance company qualified to do business in the State; and
(2) At rates not exceeding those approved by the Insurance Administration.
(g) Within 25 days after a lender has charged for any insurance in connection with a loan, he shall deliver a copy of the appropriate policy or certificate to the borrower.
(a) With respect to any loan, a lender may not:
(1) Directly or indirectly contract for, charge, or receive any interest, discount, fee, fine, commission, charge, brokerage, or other consideration in excess of that permitted by this subtitle;
(2) Divide into separate parts any contract made for the purpose or with the effect of obtaining charges in excess of those permitted by this subtitle; or
(3) Enforce a contract of surety or guarantee unless the loan contract with the borrower is executed also by the surety or guarantor.
(b) If any amount in excess of the charges permitted by this subtitle is directly or indirectly contracted for, charged, or received by a licensee or a person who is exempt from licensing, and (1) if the excess charge was made willfully for the benefit of the lender, then the lender may not receive or retain any interest or compensation with respect to the loan; or (2) if the excess charge was not made willfully for the benefit of the lender, and if the lender does not correct the error before the borrower makes the next payment on the loan, then the lender is liable to the borrower for an amount equal to three times the excess amount, but the lender may continue to receive principal, interest, or compensation with respect to the loan.
(a) A person may not lend $6,000 or less if the person directly or indirectly contracts for, charges, or receives a greater rate of interest, charge, discount, or other consideration than that authorized by the laws of this State.
(b) (1) A loan made in the amount of $6,000 or less, whether or not the loan is or purports to be made under this subtitle, is unenforceable if a rate of interest, charge, discount, or other consideration greater than that authorized by the laws of this State is contracted for by any person unless the excess rate contracted for is the result of a clerical error or mistake and the person corrects the error or mistake before any payment is received under the loan.
(2) The person who is neither a licensee nor exempt from licensing may not receive or retain any principal, interest, or other compensation with respect to any loan that is unenforceable under this subsection.
(3) This subsection does not apply to a person who is a licensee or who is exempt from licensing under this subtitle.
(c) This section does not apply to a loan transaction validly made in another state in compliance with a similar loan law of that state. However, a lender may not collect an amount that is more than the total amount that would be permitted if this subtitle were applicable. This section applies to all loans made by a lender domiciled in another state to a borrower who is a resident of this State if the application for the loan originated in this State.
This subtitle shall be interpreted and construed to effectuate its general remedial purpose.
Any licensee or his officer or employee who knowingly violates any provision of §§ 12-303 through 12-306, § 12-308, § 12-311, § 12-313, or § 12-314 of this subtitle is guilty of a misdemeanor and on conviction is subject to a fine not exceeding $500 or imprisonment not exceeding 6 months or both.
(a) A licensee or a person exempt from licensing under this subtitle is not subject to a penalty involving the forfeiture of interest or principal for a violation that arises because the licensee or person exempt from licensing in good faith:
(1) Performed or omitted to perform an act in conformity with or in reliance upon:
(i) A written opinion of the Attorney General of Maryland or a regulation adopted by the Commissioner;
(ii) A written opinion by the Commissioner given on request of the licensee or person exempt from licensing; or
(iii) An interpretation by the Commissioner in a written notice or examination report; or
(2) Used a form or procedure that has been approved in writing by the Commissioner and the Attorney General.
(b) The provisions of subsection (a) of this section do not apply to an act or omission to act that occurs after:
(1) The opinion, regulation, or interpretation relied on is amended, repealed, or determined to be invalid for any reason by any judicial or other authority; or
(2) Approval for a form or procedure is amended, rescinded, or determined to be invalid for any reason by any judicial or other authority.
(c) This section may not be construed to:
(1) Limit the imposition of any civil or criminal penalty for a knowing or willful violation of this subtitle; or
(2) Limit the power of the Commissioner or the courts to order a refund to a borrower of moneys collected in violation of this subtitle.
(a) This subtitle may be cited as the Maryland Consumer Loan Law -- Credit Provisions.
(b) This subtitle and the Maryland Consumer Loan Law -- Licensing Provisions may be cited jointly as the Maryland Consumer Loan Law.
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