Maryland Credit Grantor Revolving Credit Provisions
Commercial Law Article
Title 12. Credit Regulations
Subtitle 9. Credit Grantor Revolving Credit Provisions
(a) In this subtitle the following words have the meanings indicated.
(b) "Borrower" means a corporation, partnership, association, government or governmental subdivision or agency, trust, individual, or other entity receiving a loan or other extension of credit under this subtitle.
(c) "Commercial loan" and "extension of credit for a commercial purpose" mean an extension of credit made:
(1) Solely to acquire an interest in or to carry on a business or commercial enterprise; or
(2) To any business or commercial organization.
(d) "Consumer borrower" means an individual receiving a loan or other extension of credit under this subtitle for personal, household, or family purposes or an individual receiving a commercial loan or other extension of credit for any commercial purpose not in excess of $75,000, secured by residential real property.
(e) "Credit device" means any card, plate, check, draft, identification code, or other means of identification contemplated by the agreement governing the plan.
(f) (1) "Credit grantor" means any 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 making a loan or other extension of credit under this subtitle which is incorporated, chartered, or licensed pursuant to State or federal law, the lending operations of which are subject to supervision, examination, and regulation by a State or federal agency or which is licensed under Title 12, Subtitle 4 of the Financial Institutions Article or is a retailer.
(2) "Credit grantor" includes:
(i) Any bank, trust company, depository institution, or savings bank having a branch in this State;
(ii) Any subsidiary of a bank holding company, as defined in the federal Bank Holding Company Act of 1956, as amended, which is domiciled, doing business, and offering a revolving credit plan involving the issuance of credit devices in this State; and
(iii) Any person who acquires or obtains the assignment of a revolving credit plan made under this subtitle.
(g) "Loan" means a cash advance to be paid to or for the account of the borrower.
(h) "Nonconsumer borrower" means any borrower other than a consumer borrower.
(i) (1) "Outstanding unpaid indebtedness" means on any day the total amount of purchases and loans charged to the borrower's account under the plan which is outstanding and unpaid at the end of the day, after adding the aggregate amount of any new purchases and loans charged to the account that day and deducting the aggregate amount of any payments and credits applied to the account that day.
(2) If the agreement governing the plan permits, "outstanding unpaid indebtedness" may include the amount of any interest, finance charges, and additional charges, including late or delinquency charges, that have accrued in the account and are unpaid at the end of the day.
(j) "Purchase" means an extension of credit for a purchase of real or personal, tangible or intangible property, or an extension of credit for services, licenses, taxes, official fees, fines, private or governmental obligations, or any other thing of value, including a charitable contribution.
(k) "Residential real property" means owner-occupied real property having a dwelling on it designated principally as a residence with accommodations for not more than four families.
(l) "Revolving credit plan" or "plan" means a plan that contemplates the extension of credit under an account governed by an agreement between a credit grantor and a borrower under which:
(1) The credit grantor permits the borrower and, if the agreement governing the plan permits, persons acting on behalf of or with authorization from the borrower to make purchases or obtain loans from time to time;
(2) The amounts of purchases and loans are charged to the borrower's account;
(3) The borrower is required to pay the credit grantor the amounts of all purchases and loans charged to the borrower's account under the plan but has the privilege of paying amounts due from time to time as agreed; and
(4) Interest or finance charges may be charged and collected by the credit grantor from time to time on the amounts due under the plan.
(a) Any credit grantor may, subject to the other provisions of this subtitle:
(1) Offer and extend credit under a revolving credit plan to a borrower and in that connection charge and collect the interest, finance charges, and other charges permitted by this subtitle;
(2) (i) Take any security as collateral as may be acceptable to the credit grantor.
(ii) If real property is taken as security, the credit grantor shall record the entire line of credit when the credit plan is established.
(b) Without limiting subsection (a) of this section, credit may be extended under a revolving credit plan by a credit grantor's acquisition of obligations arising out of the honoring of a credit device made available to a borrower under a plan, whether directly or indirectly by means of telephone, point of sale terminal, automated teller machine or other electronic or similar device, or through the mails, by:
(1) A merchant;
(2) A bank or other financial institution chartered or organized under the laws of this or any other state, the District of Columbia, the United States or any district, territory, or possession of the United States, or any foreign country;
(3) Any other person or entity; or
(4) A government or governmental subdivision or agency.
(a) (1) A credit grantor may charge and collect interest or finance charges under the plan on the outstanding unpaid indebtedness in the borrower's account under the plan at any daily, weekly, monthly, annual, or other periodic percentage rate as the agreement governing the plan provides, if the effective rate of simple interest does not exceed 24 percent per year. The rate of interest chargeable on a plan must be expressed in the agreement as a simple interest rate or rates.
(2) The repayment terms for a plan extended to a consumer borrower may not include a provision under which the consumer borrower may be required to pay a balloon payment at maturity. However, the adjustment of payment amounts, due to fluctuations in unpaid balance or rate of interest, may not be deemed to result in a balloon payment.
(3) If the plan is secured by a lien on residential real property, the credit grantor may, in addition to the periodic percentage rate charge authorized under subsection (a)(1) of this section, charge and collect at the time the plan is entered into by the borrower points, loan origination fees, loan discount fees, and similar fees, provided that:
(i) All such fees, when combined with any finder's fee imposed by a mortgage broker under § 12-804 of this title, may not exceed 10 percent of the maximum amount of credit made available to the borrower under the plan;
(ii) The documents evidencing the plan specifically enumerate any such fees;
(iii) The borrower agrees in writing to pay those fees; and
(iv) The fees are disclosed to the borrower in accordance with the federal Truth in Lending Act.
(b) With respect to a revolving credit plan of a consumer borrower, interest may be calculated on an amount not in excess of the average of the outstanding unpaid indebtedness for the applicable billing period, determined by dividing the total of the amounts of outstanding unpaid indebtedness for each day in the applicable billing period by the number of days in the billing period, or on an amount calculated by another balance computation method specified in the agreement.
(c) If the applicable periodic percentage rate under the agreement governing the plan is monthly, a billing period shall be deemed to be monthly if the last day of each billing period is on the same day of each month or does not vary by more than 4 days.
(d) (1) Notwithstanding subsections (a) and (b) of this section:
(i) If the outstanding balance of purchase obligations under an open-end credit plan is paid in full within 25 days after the end of a prior billing period, a finance charge or interest may not be imposed on a consumer borrower with respect to such balance for the period from the end of the prior billing period to the date of the payment in full; and
(ii) If there is no purchase balance at the beginning of a current billing period or if full payment of an outstanding balance from a prior billing period is made under subparagraph (i) of this paragraph within 25 days after the end of the prior billing period, a finance charge or interest may not be imposed on a consumer borrower with respect to any purchase obligation added to the account during the current billing period from the date of purchase to the end of the current billing period.
(2) Notwithstanding paragraph (1) of this subsection, if the agreement governing a plan so provides, a finance charge or interest may be imposed from the date of purchase, if the agreement does not provide any charge permitted by § 12-905(a) of this subtitle.
(a) If the agreement governing the revolving credit plan so provides, the periodic percentage rate of interest or finance charges under the plan may vary in accordance with an index or formula that:
(1) Is made readily available to and verifiable by the borrower;
(2) Is beyond the control of the credit grantor; and
(3) May be within the control of the borrower.
(b) The periodic percentage rate, as varied, may be made applicable to all outstanding unpaid indebtedness on or after the effective date of the variation, including any indebtedness arising out of purchases made or loans obtained prior to the variation.
(c) The periodic percentage rate, as varied, may not exceed the maximum rate permitted pursuant to § 12-903(a)(1) of this subtitle.
(d) If a formula used under subsection (a)(3) of this section measures credit risk, the periodic percentage rate of interest or finance charges:
(1) Shall be lower for any consumer borrower measured as more credit worthy under the formula; and
(2) If the formula considers delinquency or arrearages, may not be raised unless a consumer borrower is at least 2 months in arrears in payment.
(a) With respect to an unsecured open end credit plan, fees or charges may not be imposed on a consumer borrower in addition to interest or finance charges as permitted by this subtitle, except as follows:
(1) If the plan is offered by a seller of goods or services, or both, and may be used only for the purchase or lease of the seller's goods and services, the seller may charge one of the following fees:
(i) An annual charge in any amount the agreement provides for the privileges made available to the consumer borrower under the plan;
(ii) A transaction charge or charges in such amount or amounts as the agreement may provide for each separate purchase under the plan; or
(iii) A minimum charge for each scheduled billing period under the plan during any portion of which there is an outstanding unpaid indebtedness under the plan.
(2) If the plan is offered by any other credit grantor, the credit grantor may impose any or all of the following fees:
(i) An annual charge in any amount the agreement provides for the privileges made available to the consumer borrower under the plan;
(ii) A transaction charge or charges in such amount or amounts as the agreement may provide for each separate purchase or loan under the plan; and
(iii) A minimum charge for each scheduled billing period under the plan during any portion of which there is an outstanding unpaid indebtedness under the plan.
(3) Notwithstanding the provisions of paragraph (2) of this subsection, if the credit agreement provides, a credit union may make loans or extend credit to its members incorporating the same terms and conditions as a federal credit union is permitted under federal law and regulations relating to:
(i) An over the limit fee assessed on a credit card account; and
(ii) Fees for ancillary and administrative services requested by the member, including:
1. Researching account records;
2. Providing duplicate statements and other documents; and
3. Expedited issuance of a duplicate or original credit card or device.
(b) Except as provided in subsection (f) of this section, with respect to a secured open end credit plan, fees or charges may not be imposed on a consumer borrower in addition to interest or finance charges except for actual and verifiable fees incurred by the credit grantor and not retained by the credit grantor for the following:
(1) Attorney's fees for services rendered in connection with the preparation, closing, or disbursement of the loan;
(2) Any expense, tax, or charge paid to a governmental agency;
(3) Examination of title, appraisal, or other costs necessary or appropriate to the security of the loan; and
(4) Premiums for any insurance coverage permitted under this subtitle.
(c) If a plan is established for a consumer borrower, a fee or charge may not be charged or collected unless the agreement concerning the plan permits the fee to be charged.
(d) If a plan is established for a nonconsumer borrower, the nonconsumer borrower and credit grantor may agree upon any terms concerning charges and fees.
(e) For purposes of this section, the additional charges listed in subsections (a), (b), and (f) of this section are not interest or finance charges with respect to a plan.
(f) (1) Subject to the provisions of paragraphs (2) through (8) of this subsection, a credit grantor of an open end credit plan that is secured by a deposit, savings, passbook, or other similar account or certificate of deposit may impose:
(i) An application fee not to exceed $35; and
(ii) An annual charge not to exceed $35 for the privileges made available to the consumer borrower under the plan.
(2) If an application to the plan is approved, the credit grantor shall credit the application fee:
(i) To the initial annual charge; and
(ii) If there is no annual charge, to the interest or finance charges under the plan.
(3) If an application to the plan is rejected, the credit grantor shall return the application fee to the applicant.
(4) Within 45 days after the receipt of the application, the credit grantor shall:
(i) Accept the application; or
(ii) Reject the application and return the application fee to the applicant.
(5) Any such plan shall have a credit limit of no less than the amount of the deposit, savings, passbook, or other similar account or certificate of deposit required as security.
(6) The application shall state the amount of:
(i) The minimum required security; and
(ii) The application fee.
(7) The agreement shall state the amount of the annual charge.
(8) If an annual charge is imposed, the credit grantor shall pay interest on the deposit, savings, passbook, or other similar account or certificate of deposit required as security in the greater of:
(i) A rate of 4 percent per annum simple interest; or
(ii) The rate of interest regularly paid on regular passbook savings accounts by the lending institution that issued the deposit, savings, passbook, or other similar account or certificate of deposit required as security.
(a) If the agreement governing a revolving credit plan permitting the borrower to obtain both loans and purchases so provides, a credit grantor may impose different terms on the indebtedness arising out of purchases than to the indebtedness arising out of loans.
(b) Subsection (a) of this section applies to all terms, including:
(1) The terms governing the periodic percentage rate used to calculate interest or finance charges;
(2) The method of computing the outstanding unpaid indebtedness to which the periodic percentage rate is applied;
(3) The amounts of other charges; and
(4) The applicable repayment schedule.
(a) If credit under a revolving credit plan is offered and extended by a credit grantor which is a depository institution in connection with a demand deposit account or other transaction account maintained by the borrower with the credit grantor under an agreement or arrangement where the credit grantor agrees to honor checks, drafts, or other debits to the account by making extensions of credit to the borrower under a revolving credit plan, any charges customarily imposed by the credit grantor under the terms governing the account in the absence of any associated revolving credit plan may continue to be imposed on the account without specific reference or incorporation in the agreement governing the revolving credit plan.
(b) The account charges referred to in subsection (a) of this section include:
(1) Check charges;
(2) Monthly maintenance charges;
(3) Checkbook charges;
(4) Charges for checks drawn in excess of an available line of credit; or
(5) Any similar charges.
(c) The amount of any charge imposed on the account may be charged to the account under the plan as a loan and may be included in the outstanding unpaid indebtedness under the terms of the agreement governing the revolving credit plan, to the extent the balance in the demand deposit or other transaction account is insufficient to pay the charge.
A credit grantor may at any time allow a borrower under a revolving credit plan to defer scheduled payments and charge the borrower a deferral charge agreed to by the credit grantor and the borrower.
(a) In connection with a plan established for a consumer borrower:
(1) The purchase of credit life, credit accident and health, credit disability, involuntary unemployment benefit, and similar coverages is optional with the consumer borrower; and
(2) Subject to § 12-909.1 of this subtitle, the purchase of property insurance, title insurance, and credit loss insurance from an insurer of the borrower's choice may be required if the loan is secured.
(b) The provisions of this section do not alter or modify rights, privileges, or restrictions heretofore existing between the credit grantor and a nonconsumer borrower.
(c) Premiums for any insurance coverage permitted by this section are not interest or finance charges under the plan.
(d) The offering and placement of insurance under this section shall be subject to the provisions of the Insurance 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 credit grantor may not require a borrower, as a condition to receiving or maintaining a loan secured by a first lien, to provide or purchase property insurance coverage against risks to any improvements on any real property in an amount exceeding the replacement value of the 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 shall entitle the borrower to:
(i) Seek an injunction to prohibit the credit grantor 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 does not affect the validity of the first lien securing the loan.
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