# Commercial Law (GCL)

## Title 12. Credit Regulations

### Subtitle 1. Interest and Usury

#### Section 12-101

(a) In this subtitle the following words have the meanings indicated.

(b) "Borrower" means a person who borrows money under this subtitle.

(c) "Commercial loan" means a loan which is made:

  (1) Solely to acquire or carry on a business or commercial enterprise; or

  (2) To any business or commercial organization.

(d) "Effective rate of simple interest" means the yield to maturity rate of interest received or to be received by a lender on the face amount of a loan, computed in accordance with Sec. 12-107 of this subtitle.

(e) "Interest" means, except as specifically provided in Sec. 12-105 of this subtitle or Sec. 12-1501 of this title, any compensation directly or indirectly imposed by a lender for the extension of credit for the use or forbearance of money, including any loan fee, origination fee, service and carrying charge, investigator's fee, time-price differential, and any amount payable as a discount or point or otherwise payable for services.

(f) "Lender" means a licensee or a person who makes a loan subject to this subtitle.

(g) "Licensee" means a person that is required to be licensed to make loans subject to this subtitle, regardless of whether the person is actually licensed.

(h)

  (1) "Loan" means a loan or an advance of money or credit subject to this subtitle, regardless of whether the loan or advance of money or credit is or purports to be made under this subtitle.

  (2) "Loan" does not include:

    (i) A loan or advance of money or credit subject to Subtitle 3 of this title, unless a written election is made under Sec. 12-101.1 of this subtitle;

    (ii) A plan or loan for which a written election is made under Subtitle 3, Subtitle 4, Subtitle 9, or Subtitle 10 of this title; or

    (iii) An installment sale agreement as defined in Sec. 12-601 of this title.

(i) "Mobile home" has the meaning stated in Sec. 11-501 of the Financial Institutions Article.

(j) "Person" includes an individual, corporation, business trust, statutory trust, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal or commercial entity.

(k) "Point" means a fee, premium, bonus, loan origination fee, service charge, or any other charge equal to 1 percent of the principal amount of a loan which is charged by the lender at or before the time the loan is made as additional compensation for the loan.

(l) "Simple interest" means interest charged on the principal amount loaned to the borrower.

(m) "Stated rate of interest" means the annual rate of interest stated in percentage which appears on the face of the bond, draft, mortgage, deed of trust, security agreement, promissory note, or other instrument which evidences the indebtedness.

(n)

  (1) "Tip" means a voluntary payment by a consumer to a lender or third party who provides or arranges a loan:

    (i) Made at the time of the transaction in recognition of the lender's or third party's provision or arrangement of the loan;

    (ii) Made at the sole discretion of the consumer; and

    (iii) That does not affect the willingness of the lender or third party to provide or arrange the loan or any future loan or affect the terms of any loan.

  (2) "Tip" does not include any payment made by a consumer for expedited processing or disbursement or for a membership, registration, or subscription fee.

(o) "Usury" means the charging of interest by a lender in an amount which is greater than that allowed by this subtitle.

(p) "Wages" means all remuneration paid to any employee for the employee's employment, including the cash value of all remuneration paid in any medium other than cash.

#### Section 12-101.1

(a) On or after January 1, 2019, a lender may, at the lender's option, elect to make a loan to any borrower either under this subtitle or as otherwise authorized by applicable law.

(b) If a lender makes a written election in the agreement, note, or other evidence of the loan specifying that this subtitle will govern the loan, Subtitles 3, 4, 5, 6, 9, and 10 of this title do not apply to the loan.

(c) If a lender that makes or contracts to make a loan does not make a written election under this subtitle or Subtitle 3, Subtitle 4, Subtitle 9, or Subtitle 10 of this title, this subtitle still applies to the loan if the loan is:

  (1) For an amount over $25,000; or

  (2)

    (i) For an amount of $25,000 or less; and

    (ii) Not subject to Subtitle 3 of this title.

#### Section 12-102

Except as otherwise provided by law, a person may not charge interest in excess of an effective rate of simple interest of 6 percent per annum on the unpaid principal balance of a loan.

#### Section 12-103

(a)

  (1) Except as provided in subsections (b), (c), (d), (e), and (f) of this section, a lender may charge interest at an effective rate of simple interest not in excess of 8 percent per year on the unpaid principal balance of a loan if there is a written agreement signed by the borrower which sets forth the stated rate of interest charged by the lender.

  (2) If a loan made under paragraph (1) of this subsection is secured by the pledge of collateral which is a certificate of deposit held by the borrower, the lender may charge interest at a rate not to exceed 2 percent in excess of the rate of interest payable on the certificate of deposit.

  (3) If a loan made under paragraph (1) of this subsection is secured by the pledge of collateral which is other than a savings account or if such loan is unsecured, the lender may charge a rate of interest not in excess of 18 percent. However, on a loan made on or after July 1, 1982, a lender may charge an effective rate of simple interest not in excess of 24 percent per year on the unpaid principal balance, provided that:

    (i) If the loan is a renewal or refinancing of a loan made prior to July 1, 1982, the lender complies with Sec. 12-116 of this subtitle;

    (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 Sec. 12-118 of this subtitle;

    (iii) Upon the borrower's default, if the loan is secured by personal property, the lender complies with Sec. 12-115 of this subtitle concerning repossession and redemption of the goods securing the loan;

    (iv) If the loan is for the purchase of consumer goods, the loan contract complies with Sec. 12-117 of this subtitle; and

    (v) The loan does not include a balloon payment, unless payment in full is due on demand or in one year or less.

(b)

  (1) A lender may charge interest at any effective rate of simple interest on the unpaid principal balance of a loan if:

    (i) There is a written agreement signed by the borrower which sets forth the stated rate of interest charged by the lender;

    (ii) The loan is secured by a first mortgage or first deed of trust on any interest in residential real property;

    (iii) There is no prepayment penalty in connection with the loan;

    (iv) The loan is made and the mortgage or deed of trust is executed after the effective date of this section;

    (v) The loan is not a refinancing of a loan secured by a first mortgage or first deed of trust on any interest in residential real property unless:

      (1) The lender is a banking institution, a national banking association, a federal savings bank, a federal or State savings and loan association, or a federal or State credit union; or

      (2) The loan is subject to the provisions of Sec. 501(a)(1) of the Depository Institutions Deregulation and Monetary Control Act of 1980, Public Law 96-221, 94 Stat. 161; and

    (vi) The lender does not require payment of any interest in advance except any points permitted under this subtitle.

  (2) For purposes of this subsection, "refinancing" means increasing or altering the balance due, the term, or the interest rate of an existing loan or paying off an existing loan whether or not the lender also made the existing loan.

  (3)

    (i) If the loan is a refinancing, the lender is limited as to the interest, fees and other charges made in connection with the refinanced loan to those provided in Subtitle 4 of this title.

    (ii) The provisions of subparagraph (i) of this paragraph do not apply to:

      (1) A purchase money loan;

      (2) A lender refinancing an existing loan if the lender is a banking institution, a national banking association, a federal savings bank, a federal or State savings and loan association, a federal or State credit union, or a credit grantor refinancing the loan pursuant to Subtitle 9 or Subtitle 10 of this title; or

      (3) A loan that is subject to the provisions of Sec. 501(a)(1) of the Depository Institutions Deregulation and Monetary Control Act of 1980, Public Law 96-221, 94 Stat. 161.

  (4) A lender making a mortgage loan as defined under Sec. 11-501 of the Financial Institutions Article shall be subject to the licensing provisions of Title 11, Subtitle 5 of the Financial Institutions Article.

(c)

  (1) Subject to paragraph (2) of this subsection, a lender may charge interest at an effective rate of simple interest not in excess of 18 percent per year on the unpaid principal balance of the loan. However, on a loan made on or after July 1, 1982, a lender may charge an effective rate of simple interest not in excess of 24 percent per year on the unpaid principal balance of the loan provided that:

    (i) If the loan is a renewal or refinancing of a loan made prior to July 1, 1982, the lender complies with Sec. 12-116 of this subtitle;

    (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 Sec. 12-118 of this subtitle;

    (iii) Upon the borrower's default, if the loan is secured by personal property, the lender complies with Sec. 12-115 of this subtitle concerning repossession and redemption of the goods securing the loan;

    (iv) If the loan is for the purchase of consumer goods, the loan contract complies with Sec. 12-117 of this subtitle; and

    (v) The loan does not include a balloon payment, unless payment in full is due on demand or in 1 year or less.

  (2) The rates permitted by this subsection may be charged only if:

    (i) There is a written agreement signed by the borrower which sets forth the stated rate of interest charged by the lender;

    (ii) The loan is not secured by a first mortgage or first deed of trust on real property;

    (iii) The borrower is required to repay the loan in periodic installments, which may be regular, irregular, equal or unequal installments;

    (iv) The loan is not secured by a confession of judgment or power of attorney to the lender or to a third person to confess judgment or appear for the borrower in a judicial proceeding;

    (v) The loan is not secured by an instrument in which blanks are left to be filled after execution;

    (vi) The loan is not secured by a note, promise to pay, or security instrument which does not state:

      (1) The principal amount of the loan;

      (2) A schedule of payments or a description of the schedule; and

      (3) The agreed amount or rate of interest, charges, and fees to be charged;

    (vii) The loan is not secured by real property;

    (viii) The loan is not secured by personal property for any loan under $700 in value or amount; and

    (ix) The loan is not fully secured by investment securities or savings accounts.

  (3) If interest on a loan made under this subsection is precomputed, and if the effective rate of simple interest required to be disclosed under Sec. 12-106 of this subtitle is exceeded by reason of a prepayment of the loan, the lender shall refund the excess to the borrower or credit it to any unpaid principal balance owed by him.

  (4) A lender who makes a loan under this subsection is subject to the licensing provisions of Title 11, Subtitle 3 of the Financial Institutions Article.

(d) A lender may charge interest at any rate not in excess of that permitted by federal law if the loan is:

  (1) Secured by a mortgage or deed of trust;

  (2) Insured or guaranteed in full or in part by the Federal Housing Administration, Veterans Administration, or any other federal agency or instrumentality; and

  (3) Made in full compliance with applicable federal law.

(e)

  (1) A lender may charge interest at any rate if the loan is:

    (i) A loan made to a corporation;

    (ii) A commercial loan in excess of $15,000 not secured by residential real property; or

    (iii) A commercial loan in excess of $75,000 secured by residential real property.

  (2) Commercial loans to individuals secured by residential real property shall comply with the provisions of Sec. 12-407.1 of this article.

  (3) As used in this subsection, residential real property is owner-occupied property having a dwelling on it designated principally as a residence with accommodations for not more than 4 families.

(f) A broker or dealer, who is registered under the Securities Exchange Act of 1934, as amended, and under Title 11 of the Corporations and Associations Article, and who extends credit to a customer on pledged securities, may charge the customer on his debit balance interest at any rate if:

  (1) The debit balance is payable on demand; and

  (2) The debit balance is secured by securities as defined in Sec. 11-101(s) of the Corporations and Associations Article.

#### Section 12-104

Interest at a rate otherwise allowed by this subtitle is not usurious solely because of any one or more of the following:

(1) For a period of less than one year, interest is calculated on the premise that there are 360 days in the year and 30 days in each month, which may include the date of the loan and the date due or paid;

(2) Interest on a periodic payment of principal is computed to the due date; or

(3) Except for installment loans made under Sec. 12-103(c) of this subtitle:

  (i) Interest-drop calculations are made on sums not in excess of multiples of $100, without regard to interim partial payments; or

  (ii) Interest-drop calculations are made on periods not in excess of one year, without regard to interim partial payments.

#### Section 12-105

(a) In this section, "mortgage loan" has the meaning stated in Sec. 11-501 of the Financial Institutions Article.

(b) Fees and charges collected at the direction of and actually paid to a government or governmental agency may be collected and are not interest under this subtitle.

(c) Except as provided in subsection (d) of this section, if the loan contract provides for them, the following fees and charges also may be collected and are not interest under this subtitle:

  (1) A service charge for investigation and the continued servicing of collateral for a commercial loan secured by inventory or accounts receivable;

  (2) A service charge made by a broker or dealer dealing in investment securities if:

    (i) Money is advanced on the security of pledged investment securities; and

    (ii) Services are rendered in the collection, crediting, and disbursement of income on the investment securities and in the furnishing of income tax and other information in connection with that income;

  (3) A delinquent or late charge of the greater of $2 or 5 percent of the total amount of any delinquent or late periodic installment of principal and interest, if:

    (i) The delinquency has continued for at least 15 calendar days; and

    (ii) A delinquent or late charge has not already been charged for the same delinquency; and

  (4) A prepayment charge or penalty on a prepayment of the unpaid principal balance of the loan, if the loan is secured by a home, by a combination of home and business property, or by agricultural property, or if the loan is a commercial loan not in excess of $15,000, provided that the charge or penalty:

    (i) May be imposed only on prepayments made within 3 years from the date the loan is made; and

    (ii) May not exceed an amount equal to 2 months' advance interest on the aggregate amount of all prepayments made in any 12-month period in excess of one-third of the amount of the original loan.

(d) In connection with a mortgage loan, a lender may not require or authorize the imposition of a penalty, fee, premium, or other charge in the event the mortgage loan is prepaid in whole or in part.

(e) The following charges, if actual expenses of the lender, also may be collected and, if not retained by him, are not interest under this subtitle:

  (1) Charges by the lender's attorney for service rendered in connection with the preparation, closing, or disbursement of the loan;

  (2) Charges for the payment of any property expense, tax, or governmental charge; and

  (3) Charges for the payment of any premium and cost for insuring:

    (i) The lender against loss or liability on or in connection with the loan; or

    (ii) The life or health of the borrower.

(f) Fees and charges otherwise includable as interest under this subtitle paid by a developer to the lender for the purpose of making permanent loans available to home purchasers are not interest under this subtitle. These fees and charges may not be charged to the home purchaser unless they are charged as interest and do not violate Sec. 12-108 of this subtitle.

#### Section 12-106

(a) This section does not apply to any loan:

  (1) Described in Sec. 12-103(e) of this subtitle; or

  (2) Made under Title 18, Subtitle 10 of the Education Article.

(b)

  (1) Before the execution of a loan contract under this title, the lender shall furnish to the borrower a written statement which sets forth:

    (i) The total principal amount of the loan and the total amount of finance charge as defined in the federal Truth in Lending Act to be paid, stated in dollars, except that on loans payable on demand, the total amount of finance charge to be paid shall be stated on a per diem basis;

    (ii) The annual effective rate of simple interest charged, stated in percentage calculated to the nearest 0.2 percent; and

    (iii) The itemized amount of payments in addition to interest payable to the lender in connection with the loan at the time the loan is made, stated in dollars.

  (2) If the loan is made to two or more borrowers, delivery of the statement to one borrower is sufficient, but a copy of the statement shall be furnished to each other borrower.

  (3) Paragraphs (1)(i), (ii), and (iii) of this subsection do not apply to any loan subject to the disclosure provisions of the federal Truth in Lending Act, if the lender complies with the applicable disclosure provisions of the federal act and its regulations.

  (4) A statement that complies with the applicable disclosure provisions of the federal Truth in Lending Act is sufficient to meet the requirements of this title.

(c) At least annually and, on request of the borrower, at any other reasonable time or interval, a lender who receives scheduled monthly periodic payments on more than five loans secured by an interest in real property shall furnish to the borrower a written statement informing the borrower of the amount of:

  (1) Payments credited to reducing the principal;

  (2) Payments credited to interest as defined in this subtitle; and

  (3) The remaining unpaid principal balance.

#### Section 12-106.1

(a) A person may not require a borrower, as a condition to receiving a loan, to make any false or misleading statement or characterization that a loan is a commercial loan under Sec. 12-101(c), Sec. 12-103(e), or Sec. 12-105 of this subtitle or Sec. 12-401(i)(3) of this title if the loan is not a commercial loan.

(b)

  (1) Except as provided in paragraph (2) of this subsection, any person who willfully requires a borrower to make a false or misleading statement in violation of subsection (a) of this section, or who willfully procures such statement, knowing that it is false or misleading, shall forfeit to the borrower three times the amount of interest and charges contracted for or collected in excess of that permitted by law, in addition to any other penalty otherwise provided in this title.

  (2) When a loan obtained by a borrower is not subject to restrictions imposed by law on the maximum amount of a finance charge and interest, any person who willfully requires a borrower to make a false or misleading statement in violation of subsection (a) of this section, or who willfully procures such statement, knowing that it is false or misleading, shall forfeit the finance charge or interest, brokerage fees, points, or any other charges or fees in addition to any other penalty otherwise provided in this title.

  (3) This section may not affect the rebuttable presumption that the loan was made for commercial purposes.

(c) If a written complaint for violation of this section is filed with the Consumer Protection Division of the Office of the Attorney General, the Office may investigate the complaint and hold a hearing in accordance with Title 13 of this article.

#### Section 12-107

If a charge or fee considered interest under this subtitle is charged at or before the inception of a loan contract, the effective rate of simple interest permitted to be charged by Sec.Sec. 12-102 and 12-103 of this subtitle, and required to be disclosed by Sec. 12-106 of this subtitle shall be determined in the same manner as if the fee or charge had not been charged, except that the principal of the loan used in determining the rate of interest is the face amount of the loan less the fee or charge.

#### Section 12-108

(a) Except for a loan described in Sec. 12-103(d) or (e) of this subtitle, a lender may not charge a borrower or any other person any point or fraction of a point.

(b) Notwithstanding the provisions of subsection (a) of this section, a lender may charge points on a mortgage loan which is not insured or guaranteed by an agency or instrumentality of the United States government if:

  (1) The loan is eligible for purchase by an agency or instrumentality of the United States government, or a subsidiary thereof, pursuant to the Emergency Home Purchase Assistance Act of 1974 (PL93-449) or any amendment to it, and is tendered in good faith for purchase pursuant to a commitment obtained by the lender from such an agency, instrumentality, or subsidiary; and

  (2) The federal law, rules, or regulations under which the agency, instrumentality, or subsidiary is authorized to purchase the loan allows the payment of points, and the points charged and the interest rate on the loan are not in excess of those allowed under the federal program.

(c) Notwithstanding the provisions of subsection (a) of this section, a lender may impose and collect, as a condition of making a loan, all fees, discounts, points, or other charges that lenders are permitted or required to impose, collect, or pay pursuant to a federal or Maryland law providing for a program of mortgage purchases or loans originated pursuant to a State or local governmental program of direct lending or mortgage purchase, or by any federal agency or instrumentality or subsidiary thereof, including, but not limited to, Government National Mortgage Association, Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Federal Reserve Bank, Federal Home Loan Bank, and the Farmers Home Administration, provided that all of the following conditions are met:

  (1) The loan is eligible for purchase by, and is tendered in good faith, for purchase, pursuant to a commitment or offer to purchase by the federal, State, or local governmental agency, instrumentality, or subsidiary;

  (2) The fees, discounts, points, or other charges imposed, and the interest rate on the loan, do not exceed those allowed by the applicable federal or Maryland law providing for the mortgage purchase program; and

  (3) Not more than one point is charged to the borrower, unless the federal law specifies a higher limit on points which may be charged to the borrower.

#### Section 12-109

(a)

  (1) In this section the following words have the meanings indicated.

  (2) "Escrow account" means an expense or escrow account which tends to protect the security of a loan by the accumulation of funds for the payment of taxes, insurance premiums, water and sewer facilities assessments, or other expenses.

  (3) "Lending institution" means a bank, savings bank, or savings and loan association doing business in Maryland.

  (4)

    (i) "Water and sewer facilities assessment" means a fee or charge that is:

      (1) Assessed on an owner of residential real property that is served by public water or wastewater facilities for which deferred water or sewer charges have been established by a recorded covenant or declaration to cover or defray the cost of installing or maintaining during construction all or part of the public water or wastewater facilities constructed by the developer; and

      (2) Paid to the lienholder of the lien recorded on the residential real property for public water and wastewater facilities.

    (ii) "Water and sewer facilities assessment" includes a front foot benefit fee or charge.

(b)

  (1) A lending institution which lends money secured by a first mortgage or first deed of trust on any interest in residential real property and creates or is the assignee of an escrow account in connection with that loan shall pay interest to the borrower on the funds in the escrow account at an annual rate not less than the weekly average yield on United States Treasury securities adjusted to a constant maturity of 1 year, as published by the Federal Reserve in "Selected Interest Rates (Daily) - H.15", as of the first business day of the calendar year.

  (2) Interest on these funds shall be:

    (i) Adjusted, if applicable, as of the first day of each calendar year to reflect the rate to be paid during that year, as determined under paragraph (1) of this subsection;

    (ii) Computed on the average monthly balance in the escrow account; and

    (iii) Paid annually to the borrower by crediting the escrow account with the amount of interest due.

  (3) The lending institution shall annually provide the borrower with a statement of the escrow balance.

(c) The provisions of this section do not apply to a lending institution which provides for the payment of taxes, insurance, water and sewer facilities assessments, or other expenses under the direct reduction method by which these expenses, when paid by the lender, are added to the outstanding principal balance of the loan.

(d) This section does not apply if the loan is purchased by an out-of-state lender through the Federal National Mortgage Association, the Government National Mortgage Association, or the Federal Home Loan Mortgage Corporation and the out-of-state lender as a condition of purchase elects to service the loan. However, this section shall apply if the out-of-state lender sells the loan to a Maryland lender or places the loan with a Maryland lender for servicing.

(e) On request of a borrower, a lending institution that lends money secured by a first mortgage or first deed of trust on any interest in residential real property may, at the option of the lending institution, create an escrow account in connection with that loan solely for the payment of water and sewer facilities assessments.

#### Section 12-109.1

(a) The provisions of this section do not apply to escrow accounts maintained in connection with loans described in Sec. 12-103(e)(1) of this subtitle.

(b) Except in a foreclosure, release, or as provided in subsection (c) of this section, funds in any escrow account for use in paying taxes, insurance premiums, ground rents, and water and sewer facilities assessments may not be used to:

  (1) Reduce the principal; or

  (2) Pay interest or other loan charges.

(c) If there is periodically a balance in the escrow account that exceeds the amount provided for in the note, loan agreement, or security instrument, the borrower shall be given at least annually the option of:

  (1) Receiving a refund of the excess amount;

  (2) Applying the excess amount to the payment of principal and interest; or

  (3) Leaving the excess amount in the escrow account.

(d) A refund of any excess amount shall be made:

  (1) Within 60 days after the receipt by the lender of the borrower's request for a refund; or

  (2) If the borrower has not notified the lender of the option chosen by the borrower under subsection (c) of this section, within 60 days after the date the lender mailed notice of the excess amount to the borrower.

(e)

  (1) Subject to paragraph (3) of this subsection, if, after recalculating the amount that is required to be maintained in escrow under a first mortgage or first deed of trust on residential real property, a lender or a servicer of a loan determines that the amount that a borrower is required to pay must increase, the lender or servicer may not include, for a 1-year period after the determination is made, the amount of the increase in escrow payments in any calculation of the amount of interest or any fee due under the loan.

  (2) This subsection may not be construed to limit the ability of a lender or a servicer of a loan to impose a late fee for any escrow payment that is due and not timely paid.

  (3)

    (i) In this paragraph, "other expenses" does not include money required by a lender or a servicer of a loan for an escrow account cushion as permitted by the federal Real Estate Settlement Procedures Act.

    (ii) A lender or a servicer of a loan may charge interest to a borrower on the amount of funds the lender or servicer advances to pay taxes, insurance premiums, or other expenses owed by the borrower in order to protect the security of the loan.

    (iii) Interest may be charged by a lender or a servicer of a loan under subparagraph (ii) of this paragraph only if:

      (1) The lender or servicer advances its own funds because funds of the borrower were not available to pay the taxes, insurance premiums, or other expenses owed by the borrower;

      (2) The need for the advance was not caused by an error of the lender or servicer in servicing the loan;

      (3) The lender or servicer provides notice to the borrower that the advance was made and that interest will be charged on the advance;

      (4) Interest does not begin to accrue until 60 days after notice has been provided to the borrower in accordance with item 3 of this subparagraph;

      (5) Interest is charged only on the amount of funds actually advanced by the lender or servicer after the lender or servicer has used all available funds of the borrower to pay taxes, insurance premiums, or other expenses owed by the borrower; and

      (6) The borrower is permitted to repay the advance as permitted by the federal Real Estate Settlement Procedures Act.

#### Section 12-109.2

(a)

  (1) In this section the following terms have the meanings indicated.

  (2) "Escrow account" has the meaning stated in Sec. 12-109 of this subtitle.

  (3) "Lender" includes a lender and assignee of a lender.

  (4) "Mortgage" includes a mortgage and a deed of trust.

(b)

  (1) Funds in any escrow account shall be kept separate from and may not be commingled with the funds of the lender.

  (2) A lender may place escrow funds received in connection with more than one mortgage into a single escrow account.

  (3) In the event of the bankruptcy of the lender, any escrow funds placed in any escrow account under this section may not be considered to be part of the bankrupt estate of the lender.

(c) A lender may not impose a collection fee or service charge on the maintenance of an escrow account on a first mortgage.

#### Section 12-110

An assignment of wages is void if given as security for the payment or fulfillment of a usurious contract or the payment of the principal or interest on a usurious loan.

#### Section 12-111

(a) This section does not apply to a loan subject to Sec. 12-114.1 of this subtitle.

(b) A private action for usury under this subtitle may not be brought more than 6 months after the loan is satisfied.

#### Section 12-112

(a) This section does not apply to a loan subject to Sec. 12-114.1 of this subtitle.

(b) A claim or plea of usury is not available against a legal or equitable assignee, endorsee, or transferee of any bond, draft, mortgage, deed of trust, security agreement, promissory note, or other instrument or evidence of indebtedness, if he receives it for a bona fide and legal consideration without notice of any usury in its creation or subsequent assignment.

#### Section 12-113

(a) Except as provided in subsection (b) of this section, a lender may not refuse to lend money to any person solely because of:

  (1) Geographic area or neighborhood; or

  (2) Race, creed, color, age, sex, sexual orientation, gender identity, disability, marital status, handicap, or national origin.

(b) A lender may refuse to make a loan:

  (1) On property outside a geographic area of the State in which the lender normally does business;

  (2) To be used in a type of business or activity other than a type in connection with which the lender normally makes loans; or

  (3) Because of a greater than normal risk, including one due to:

    (i) The presence of an airport;

    (ii) An unusual drainage condition; or

    (iii) Any other situation which causes a greater than normal risk of loss in a particular area.

#### Section 12-114

(a) This section does not apply to a loan subject to Sec. 12-114.1 of this subtitle.

(b)

  (1) Any person who violates the usury provisions of this subtitle shall forfeit to the borrower the greater of:

    (i) Three times the amount of interest and charges collected in excess of the interest and charges authorized by this subtitle; or

    (ii) The sum of $500.

  (2) A claim or plea of usury is not valid if, within 30 days from the date the loan contract was executed, the lender:

    (i) Notifies the borrower and any other party to the loan contract that the loan was usurious; and

    (ii) Agrees to modify it by substituting for the usurious rate of interest a legal rate of interest not exceeding the stated rate of interest.

(c) Any person who violates the disclosure provisions of Sec. 12-106(b) and (c) of this subtitle is guilty of a misdemeanor and on conviction is subject to a fine not exceeding $1,000 or imprisonment not exceeding 1 year or both.

(d) Even if a loan document is executed outside of the State, this section is applicable if the loan is made to a resident of Maryland and is secured by property located within the State.

#### Section 12-114.1

(a)

  (1) In this section the following words have the meanings indicated.

  (2)

    (i) "Covered loan" means a loan subject to Sec. 12-103(a)(3) or (c) of this subtitle, made for personal, family, or household purposes, regardless of whether the loan is or purports to be made under this subtitle.

    (ii) "Covered loan" does not include:

      (1) A loan or an advance of money or credit subject to Subtitle 3 of this title, unless a written election is made under Sec. 12-101.1 of this subtitle;

      (2) A plan or loan for which a written election has been made under Subtitle 3, Subtitle 4, Subtitle 9, or Subtitle 10 of this title; or

      (3) An installment sale agreement as defined in Sec. 12-601 of this title.

  (3) "Unlicensed person" means a person who is not:

    (i) Licensed in the State to make a covered loan; and

    (ii) Exempt from licensing in the State.

(b) This section applies to a covered loan made to any person.

(c)

  (1) An unlicensed person may not make a covered loan.

  (2) A person may not make a covered loan if the person directly or indirectly contracts for, charges, or receives a rate of interest, charge, discount, or other consideration that is greater than the amount authorized under State law.

  (3) A person may not make a covered loan that violates the federal Military Lending Act.

(d)

  (1) A covered loan made by an unlicensed person is void and unenforceable.

  (2)

    (i) Except as provided in subparagraph (ii) of this paragraph, a covered loan is void and unenforceable if a person contracts for a covered loan that has a rate of interest, charge, discount, or other consideration greater than the amount authorized under State law.

    (ii) A covered loan is not void and unenforceable if:

      (1) A clerical error or mistake resulted in the rate of interest, charge, discount, or other consideration being greater than the amount authorized under State law; and

      (2) A person corrects the error or mistake before the first payment is due under the loan.

  (3) A covered loan that violates the federal Military Lending Act is void and unenforceable.

  (4) With respect to a loan that is void and unenforceable under this section, a person may not:

    (i) Collect or attempt to collect, directly or indirectly, any amount from the borrower;

    (ii) Enforce or attempt to enforce the contract against any property securing the loan; or

    (iii) Sell, assign, or otherwise transfer the loan to another person.

#### Section 12-115

(a) With respect to any loan made at a rate of interest pursuant to Sec. 12-103(a) and (c) of this subtitle or Sec. 12-306 of this title:

  (1) A lender may repossess goods securing a loan under an agreement if the borrower is in default in:

    (i) The payment of any sum due under the agreement;

    (ii) The performance of any other condition which the agreement lawfully requires him to perform in order to obtain unencumbered title to the goods; or

    (iii) The performance of any promise the breach of which is expressly made a ground for repossessing the goods; and

  (2) The lender may repossess goods only by:

    (i) Legal process; or

    (ii) Self-help, without use of force.

(b) Nothing in this section authorizes a violation of criminal law.

(c)

  (1) Except as provided in paragraph (2) of this subsection, at least 10 days before a lender repossesses any goods, a lender may serve a written notice on the borrower of the lender's intention to repossess the goods.

  (2)

    (i) Except as provided in subparagraph (ii) of this paragraph, at least 30 days before a lender repossesses a mobile home that is primarily for personal, family, or household use, the lender shall serve on the borrower a written notice of the lender's intention to repossess the mobile home.

    (ii) The notice required under subparagraph (i) of this paragraph may be served by the lender less than 30 days before repossession if:

      (1) The mobile home:

      (A) Is vacant and abandoned, based on a determination by the lender that at least three of the circumstances listed in Sec. 7-105.18(d) of the Real Property Article have been met; or

      (B) Has been voluntarily surrendered by the borrower to the lender; and

      (2) The notice is accompanied by a certification from the lender identifying the circumstances demonstrating that the mobile home is vacant and abandoned or that the mobile home has been surrendered.

  (3) The notice shall:

    (i) State the default and any period at the end of which the goods will be repossessed; and

    (ii) Briefly state the rights of the borrower in case the goods are repossessed.

(d) The notice may be delivered to the borrower personally or sent to the borrower's last known address by registered or certified mail.

(e) Within 5 days after he repossesses the goods, the lender shall deliver to the borrower personally or send to him at his last known address by registered or certified mail, a written notice which briefly states:

  (1) The right of the borrower to redeem the goods, and the amount payable for them;

  (2) The rights of the borrower as to a resale, and his liability for a deficiency; and

  (3) The exact location where the goods are stored and the address where any payment is to be made or notice delivered.

(f) For 15 days after the lender gives the notice required by subsection (e) of this section, the lender shall retain any repossessed goods.

(g) During the period provided for in subsection (f) of this section, the borrower may:

  (1) Redeem and take possession of the goods; and

  (2) Resume the performance of the agreement.

(h) To redeem the goods, the borrower shall:

  (1) Tender the amount due under the agreement at the time of redemption, without giving effect to any provision which allows acceleration of any installment otherwise payable after that time;

  (2) Tender performance of any other promise for the breach of which the goods were repossessed; and

  (3) If the discretionary notice provided for in subsection (c) of this section was given, pay the actual and reasonable expenses of retaking and storing the goods.

(i) This section does not apply if the borrower was guilty of fraudulent conduct, intentionally and wrongfully concealed, removed, damaged, or destroyed the goods, or attempted to do so, and the goods were repossessed because of that conduct.

(j)

  (1) The lender shall sell the repossessed goods at private sale (subject to the provisions of paragraph (2) of this subsection) or at public auction. At least 10 days before the sale, the lender shall notify the borrower in writing sent by certified mail, return receipt requested, sent to the borrower's last known address of the time and place of sale. Any sale of repossessed property must be accomplished in a commercially reasonable manner.

  (2) In all cases of a private sale of repossessed goods under this section, a full accounting shall be made to the borrower in writing and the seller shall retain a copy of this accounting for at least 24 months. This accounting shall contain the following information:

    (i) The unpaid balance at the time the goods were repossessed;

    (ii) The refund credit of unearned finance charges and insurance premiums, if any;

    (iii) The remaining net balance;

    (iv) The proceeds of the sale of the goods;

    (v) The remaining deficiency balance, if any, or the amount due the buyer;

    (vi) All expenses incurred as a result of the sale;

    (vii) The purchaser's name, address, and business;

    (viii) The number of bids sought and received; and

    (ix) Any statement as to the condition of the goods at the time of repossession which would cause their value to be increased or decreased above or below the market value for goods of like kind and quality.

  (3) The Commissioner of Financial Regulation may make a determination concerning any private sale that the sale was not accomplished in a commercially reasonable manner. Upon that determination, the Commissioner may enter an order disallowing any claim for a deficiency balance.

(k)

  (1) The provisions of this subsection apply to a public sale of goods which secured a loan in excess of $2,000 at the time the loan was made.

  (2) The proceeds of a sale to which this subsection applies shall be applied, in the following order, to:

    (i) The actual and reasonable cost of the sale;

    (ii) The actual and reasonable cost of retaking and storing the goods; and

    (iii) The unpaid balance owing under the agreement at the time the goods are repossessed.

  (3) The lender shall furnish to the buyer a written statement which shows the distribution of the proceeds.

  (4) If the provisions of this section, including the requirement of furnishing a notice following repossession, are not followed, the lender shall not be entitled to any deficiency judgment to which he would be entitled under the loan agreement.

(l) If there is no resale of repossessed goods, all obligations of the borrower under the agreement shall be discharged, and the holder may retain the goods as his own property without obligation to account to the buyer.

#### Section 12-116

Any loan made before July 1, 1982, which is refinanced at a higher rate pursuant to Sec. 12-103(a) and (c) of this subtitle or Sec. 12-306 or Sec. 12-404 of this title must comply with the following requirements:

(1) The lender must give the following disclosures in writing to the borrower prior to the execution by the borrower of the new loan agreement:

If you do agree to consolidate your existing loan, you will be paying an annual percentage rate of . . . . .% on the existing net balance of $. . . ., instead of the rate of . . . . . .% which you are now paying.

Schedule of Monthly Payments

Separate loan agreements              Consolidated loan agreement 

$ . . . . per month for                  $ . . . . per month for

the next . . . .months                  the next . . . .months 

Then 

$ . . . . per month for 

. . . . months after that  

Total of Payments

Separate loan agreements              Consolidated loan agreement

$ . . . . total of payments                  $ . . . . total of payments

for your existing loan                  for your consolidated

. . . . for your new loan                 loan 

total of payments  

(2) The lender must allow the borrower the choice of repaying his existing loan balance at the originally agreed upon rate and obtaining any additional extension of credit as a separate loan, notwithstanding any law which limits the lender's ability to make more than 1 loan to the same borrower;

(3) The lender must refund or credit to the borrower's account any unearned interest and any returned insurance premiums upon the cancellation of insurance sold in connection with the loan;

(4) Except in the case of a demand loan, a loan may be refinanced only upon the borrower's request;

(5) The lender must allow the borrower the right to cancel the consolidated loan agreement within 3 business days. The lender shall provide to the borrower conspicuous notice of the provisions of this subsection; and

(6) Nothing in this subsection shall prohibit the receipt of the loan proceeds by the borrower at the time the consolidated loan agreement is made. The borrower must return any loan proceeds received pursuant to the consolidated loan agreement if he elects to cancel the consolidated loan agreement pursuant to subsection (5) of this section. The borrower may retain the loan proceeds if he elects the separate loan option pursuant to subsection (2) of this section.

#### Section 12-117

With respect to any loan made at a rate pursuant to Sec. 12-103(a) and (c) of this subtitle or Sec. 12-404 of this title, the lender must comply with Sec. 14-1302 of this article except that subsection (c) of Sec. 14-1302 is not applicable.

#### Section 12-118

A lender may not enter into a loan agreement, providing for an initial interest rate pursuant to Sec. 12-103(a) and (c) of this subtitle or Sec. 12-306 or Sec. 12-404 of this title, which contains a provision that permits the lender to increase or decrease the applicable rate of interest or finance charges from time to time during the term of the obligation, unless:

(1) The loan is secured by an interest in real property;

(2) Any such provision limits adjustments in the rate on an obligation as follows:

  (i) The increase and decrease in the rate is determined by an objective index which is not directly controlled by the lender and which is agreed upon by the parties to the agreement.

  (ii) The rate may not be adjusted more frequently than once in a 6 month period.

    (1) The amount of increase in any 6 month period may not be more than the equivalent of 1 percentage point above the rate in effect prior to the rate change.

    (2) Notwithstanding subparagraph (i) of this paragraph, if the rate of change in any index so allows, the rate may be increased to not more than the originally contracted for rate if authorized by the loan agreement. The agreed upon additional increases must comply with subparagraph (i).

    (3) Notwithstanding subparagraph (i) of this paragraph, the lender may decrease the rate at any time and by any amount;

(3) Interest rate decreases warranted by decreases in the agreed upon index shall be mandatory except to the extent that past increases in the index have not been implemented by the lender, either at his option or because the lender was subject to the rate change limitation of paragraph (2) of this section;

(4) The loan instrument shall specify the circumstances under which the rate may increase or decrease, any limitations on an increase or decrease, and the effects of an increase or decrease;

(5) A lender must allow the borrower the choice of implementing the variable rate feature of the loan either by changes in the amount of periodic payments or by extending or reducing the length of the term of the obligation;

(6) Through a periodic billing statement or other written notice, the borrower is notified of the basis and effect of a change in rate, including any change in the required periodic payment amount, at least 15 days prior to the due date of the first payment that reflects the changed rate; and

(7) No new closing costs, processing fees or similar fees are imposed on the borrower as a result of adjustments in rate.

#### Section 12-119

(a) This section applies to any application for a loan, other than a commercial loan, to be secured by a first mortgage or first deed of trust on a borrower's primary residence.

(b) Any lender that imposes fees on borrowers for settlement services, or document review services, performed by a lender-designated attorney, or who conditions settlement on the employment of a particular attorney or title insurance company under Sec. 12-120(c) of this subtitle, shall provide a prospective borrower with a written notice stating:

  (1) The lender's requirements concerning selection of an attorney, title insurance company, or other person to perform settlement services relating to the purchase of the real property;

  (2) The borrower's ability to choose an attorney or title insurance company under Sec. 12-120(c) of this subtitle; and

  (3) A good faith estimate of the fee or fees to be charged to the borrower.

(c) If notice is required by this section:

  (1) The notice shall be provided at the time of or within 3 days after the application for a loan, or earlier upon request; and

  (2) A copy of the notice, signed by the applicant, shall accompany any executed application for a loan.

#### Section 12-120

(a) This section applies to any loan, other than a commercial loan, to be secured by a mortgage or deed of trust on a borrower's primary residence.

(b) A lender may require the borrower to pay for services rendered by the lender's attorney in connection with a loan described in subsection (a) of this section only if:

  (1) The attorney's fee is limited to legal services attributable to processing and closing the loan and not to unrelated services performed by the attorney for the lender;

  (2) The amount of the attorney's fee, if in excess of $100, is supported by a statement, provided to the borrower at or prior to settlement, that:

    (i) Describes the services performed;

    (ii) Sets forth the time spent by the attorney and the hourly rate or other basis for determining the fee;

    (iii) States that the legal services are being performed on behalf of the lender and not on behalf of the borrower; and

    (iv) States that the services are being paid for by the borrower;

  (3) The amount of the attorney's fee is reasonable on the basis of the legal services performed; and

  (4) The attorney's fee is separately itemized on the loan settlement sheet and identified as a fee to the lender's attorney.

(c)

  (1) A lender may not require as a condition of settlement that a borrower employ a particular attorney or title insurance company to perform a title search, examination of title, or closing if:

    (i) The borrower notifies the lender, within 7 days after application for the loan, of the name and business address of the borrower's choice of attorney or title insurance company to perform the title search, examination of title, or closing; and

    (ii) The lender does not reject the borrower's choice of attorney or title insurance company for good cause within 7 days after the receipt of the notice under item (i) of this paragraph.

  (2) Subject to the requirements of subsection (b) of this section, this subsection may not be construed to prohibit a lender from requiring a borrower to pay for:

    (i) Preparation of loan closing documents;

    (ii) Title insurance;

    (iii) Review of documents prepared by the borrower's attorney; or

    (iv) Attendance at settlement by the lender's attorney.

#### Section 12-121

(a) In this section, the term "lender's inspection fee" means a fee imposed by a lender to pay for a visual inspection of real property.

(b) Except as provided in subsection (c) of this section, a lender may not impose a lender's inspection fee in connection with a loan secured by residential real property.

(c) A lender's inspection fee may be charged if the inspection is needed to ascertain completion of:

  (1) Construction of a new home; or

  (2) Repairs, alterations, or other work required by the lender.

(d) This section does not apply to an appraisal of the value of real property by a lender or to fees imposed in connection with an appraisal.

#### Section 12-122

Any lender who knowingly and willfully violates any provision of Sec. 12-103, Sec. 12-109.2, Sec. 12-119, Sec. 12-120, or Sec. 12-121 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.

#### Section 12-123

(a) In this section, "binder" means a binder or other temporary contract of insurance as provided under Sec. 12-106 of the Insurance Article.

(b) A lender shall comply with this section if the lender:

  (1) Makes any loan secured by a first mortgage or a first deed of trust on any interest in owner-occupied residential real property; and

  (2) As a condition of making the loan, requires the borrower to purchase property insurance or credit loss insurance.

(c) A lender who makes a loan subject to this section shall accept as evidence of insurance a written binder issued by any authorized insurer or its insurance producer if the binder includes or is accompanied by:

  (1) The name and address of the insured borrower;

  (2) The name and address of the lender;

  (3) A description of the insured residential real property;

  (4) A provision that the binder may not be canceled within the term of the binder unless the lender and the insured borrower receive written notice of the cancellation at least 10 days prior to the cancellation;

  (5) Except in the case of the renewal of a policy subsequent to the closing of the loan, a paid receipt for the full amount of the applicable premium; and

  (6) The amount of coverage.

(d) This section does not prohibit a lender from refusing to honor a binder in cases where:

  (1) The lender receives notice of the cancellation of the binder by the insurer; or

  (2) At the expiration of 30 days of the date the binder was given, the insurer has failed to issue the policy of insurance.

#### Section 12-124

(a)

  (1)

    (i) In this section the following words have the meanings indicated.

    (ii) "Flood insurance coverage" means flood insurance against losses caused by flooding that are covered under a policy issued by:

      (1) The federal government; or

      (2) An insurer.

    (iii) "Improvements" means buildings or structures erected upon or affixed to real property that enhance the value of the real property.

    (iv) "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".

    (v)

      (1) "Replacement cost" means the amount needed to repair damage to or rebuild improvements on real property to restore the improvements to their pre-loss condition.

      (2) "Replacement cost" does not include the value of land.

  (2) 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 cost of the improvements on the real property.

  (3) 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 flood insurance coverage in an amount exceeding the replacement cost of the improvements on the real property.

  (4) In determining the replacement cost of the improvements on any real property, the lender may:

    (i) Accept the value placed on the improvements by the insurer; or

    (ii) Use the value placed on the improvements by the lender's appraisal of the improvements.

  (5) A lender may not require that the insurance be purchased through a particular insurance producer or insurance company.

(b)

  (1) A violation of this section shall entitle the borrower to:

    (i) Seek 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.

  (2) A violation of this section does not affect the validity of the first mortgage or first deed of trust securing the loan.

#### Section 12-124.1

(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. Sec. 1602(bb), as modified from time to time by Regulation Z, 12 C.F.R. Part 1026, except that the comparison percentages for the mortgage loan shall be one percentage point less than those specified in 15 U.S.C. Sec. 1602(bb), as modified from time to time by Regulation Z, 12 C.F.R. Part 1026.

  (3) "Credit health insurance" has the meaning stated in Sec. 13-101 of the Insurance Article.

  (4) "Credit involuntary unemployment benefit insurance" has the meaning stated in Sec. 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 Sec. 11-501 of the Financial Institutions Article.

  (7) "Premium" has the meaning stated in Sec. 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)

  (1) Except as provided in this subsection, a lender making a covered loan may not finance as a part of the covered loan transaction single premium coverage for:

    (i) Credit health insurance;

    (ii) Credit involuntary unemployment benefit insurance; or

    (iii) Credit life insurance.

  (2) Nothing in this subsection shall prohibit the financing of any insurance coverage in connection with a mobile home or its premises, as those terms are defined in Sec. 8A-101 of the Real Property Article.

#### Section 12-125

(a)

  (1) In this section the following words have the meanings indicated.

  (2) "Borrower" means a person who makes an application for a loan secured by a first mortgage or first deed of trust on a 1- to 4-family home to be occupied by the borrower as the borrower's primary residence.

  (3) "Commitment" means a written, specific, binding agreement between a borrower and a lender which sets forth the terms of a loan being extended to the borrower.

  (4) "Financing agreement" means a written agreement between a borrower and a lender which sets forth the terms of a purchase money loan or a refinancing of an existing loan that:

    (i) Results in or is secured by a first mortgage or a first deed of trust on a 1- to 4-family home to be occupied by the borrower; and

    (ii) Is offered or extended to the borrower.

  (5)

    (i) "Lender" means a person subject to the licensing requirements of Title 11, Subtitle 5 of the Financial Institutions Article.

    (ii) "Lender" does not include a person exempt from licensure under Sec. 11-502 of the Financial Institutions Article.

  (6)

    (i) "Loan application" means any oral or written request for an extension of credit that is made in accordance with procedures established by a lender for the purpose of inducing the lender to seek to procure or make a mortgage loan.

    (ii) "Loan application" does not include the use of an account or line of credit to obtain a loan within a previously established credit limit.

(b)

  (1) A lender who offers to make or procure a loan secured by a first mortgage or first deed of trust on a 1- to 4-family home to be occupied by the borrower shall provide the borrower with a financing agreement executed by the lender within 10 business days after the date the loan application is completed.

  (2) The financing agreement shall provide:

    (i) The term and principal amount of the loan;

    (ii) An explanation of the type of mortgage loan being offered;

    (iii) The rate of interest that will apply to the loan and, if the rate is subject to change or is a variable rate or is subject to final determination at a future date based on some objective standard, a specific statement of those facts;

    (iv) The points, if any, to be paid by the borrower or the seller, or both; and

    (v) The term during which the financing agreement remains in effect.

  (3) If all the provisions of the financing agreement are not subject to future determination, change, or alteration during its term, the financing agreement shall constitute the final binding agreement between the parties as to the items covered by the financing agreement.

  (4) A disclosure provided by a lender to a borrower in compliance with 12 C.F.R. Sec. 1026.37 shall satisfy the requirements of this subsection.

(c)

  (1) If any of the provisions of the financing agreement are subject to change or determination after its execution, the lender shall provide the borrower with a commitment, executed by the lender, at least 72 hours before the time of settlement agreed to by the parties, providing:

    (i) The effective fixed interest rate or initial interest rate that will be applied to the loan; and

    (ii) A restatement of all the remaining unchanged provisions of the financing agreement.

  (2) Subsequent to execution of the financing agreement, the borrower may waive in writing the 72-hour advance presentation requirement and accept the commitment at settlement only if compliance with the 72-hour requirement is shown by the lender to be infeasible.

  (3) A disclosure provided by a lender to a borrower in compliance with 12 C.F.R. Sec. 1026.38 shall satisfy the requirements of this subsection.

(d) If a lender fails to comply with the requirements of this section, the lender shall be subject to the penalties set forth in Sec. 11-523 of the Financial Institutions Article.

(e) A borrower aggrieved by any violation of this section shall be entitled to bring a civil suit for damages, including reasonable attorney's fees, against the lender.

(f) This section may not be construed to exempt a lender from the provisions of Sec.Sec. 12-119 through 12-122 of this subtitle.

#### Section 12-126

(a) This section applies only to a loan that:

  (1) Is secured by a mortgage or deed of trust on the borrower's primary residence; and

  (2) Is not a commercial loan.

(b) Except to the extent expressly provided otherwise in the loan contract, a borrower may prepay all or part of outstanding unpaid indebtedness under a loan at any time.

(c) In the event of prepayment of the entire loan, the lender shall refund or credit to the borrower the unearned portion of the precomputed interest charge. This refund or credit shall be in an amount not less than the amount which would be refunded or credited if the unearned precomputed interest charge were calculated in accordance with the actuarial method, except that the borrower may not be entitled to a refund or credit of less than $5. The unearned portion of the precomputed interest charge is, at the option of the lender, either:

  (1) That portion of the precomputed interest charge which is allocable to all originally scheduled or, if deferred, all deferred payment periods, or portions of payment periods, ending subsequent to the date of prepayment. The unearned precomputed interest charge is the total of that which would have been earned for each period, or portion of a period, had the loan not been prepaid, by applying to the unpaid balances of principal, according to the actuarial method, an annual percentage rate based on the precomputed interest charges, assuming that all payments were made as scheduled, or as deferred, if deferred. The lender, at its option, may round this annual percentage rate to the nearest 1/4 of 1 percent; or

  (2) The total precomputed interest charge less the earned precomputed interest charge. The earned precomputed interest charge shall be determined by applying an annual percentage rate based on the total precomputed interest charge, under the actuarial method, to the unpaid balances for the actual time those balances were unpaid up to the date of prepayment.

(d) As used in subsection (c) of this section, the following terms have the meanings indicated.

  (1) "Actuarial method" means the method of allocating payments made on a loan between the outstanding principal balance of the loan and interest, by which a payment is applied first to the accumulated interest, and any remainder is subtracted from the outstanding principal balance of the loan.

  (2) "Payment period" means the time period within which scheduled payments on a loan are due as provided in the agreement, note, or other evidence of the loan.

  (3) "Precomputed interest charge" means interest as computed by an add on, discount, or other similar method.

#### Section 12-127

(a)

  (1) In this section the following words have the meanings indicated.

  (2) "Fully indexed rate" means the index rate, as defined in the mortgage loan documents, prevailing at the time the mortgage loan is approved by the lender, plus the margin that will apply after the expiration of an introductory interest rate.

  (3)

    (i) "Mortgage loan" has the meaning stated in Sec. 11-501 of the Financial Institutions Article.

    (ii) "Mortgage loan" does not include a reverse mortgage loan.

(b) A lender may not make a mortgage loan without giving due regard to the borrower's ability to repay the mortgage loan in accordance with its terms, including the fully indexed rate of the mortgage loan, if applicable, and property taxes and homeowner's insurance whether or not an escrow account is established for the collection and payment of these expenses.

(c)

  (1) Due regard to a borrower's ability to repay a mortgage loan must include:

    (i) Consideration of the borrower's debt to income ratio, including existing debts and other obligations; and

    (ii) Verification of the borrower's gross monthly income and assets by review of third-party written documentation reasonably believed by the lender to be accurate and complete.

  (2) Acceptable third-party written documentation includes:

    (i) The borrower's Internal Revenue Service form W-2;

    (ii) A copy of the borrower's income tax return;

    (iii) Payroll receipts;

    (iv) The records of a financial institution; or

    (v) Other third-party documents that provide reasonably reliable evidence of the borrower's income or assets.

  (3) This subsection does not apply to a mortgage loan:

    (i) Approved for government guaranty by the Federal Housing Administration, the Veterans Administration, the United States Department of Agriculture, the Maryland Department of Housing and Community Development, or the Community Development Administration; or

    (ii) That refinances an existing mortgage loan if the refinance mortgage loan is:

      (1) Offered under the federal Homeowner Affordability and Stability Plan; and

      (2) Made available by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association.

#### Section 12-128

(a) A lender may not accept a tip from a consumer or give a consumer the option to provide a tip.

(b) A lender may not directly or indirectly suggest that providing a tip will influence:

  (1) The lender's willingness to provide a loan to a consumer at any time; or

  (2) The terms of any loan offered to the consumer by that lender.

(c) A lender who receives a tip may not be found in violation of this subtitle if the lender returns all of the tip within 7 days after receiving the tip.

(d) A lender shall prominently disclose that it is prohibited from accepting a tip from a consumer.

### Subtitle 3. Consumer Loans -- Credit Provisions

#### Section 12-301

(a) In this subtitle the following words have the meanings indicated.

(b) "Commissioner" means the Commissioner of Financial Regulation.

(c) "Interest" has the meaning stated in Sec. 12-101 of this title.

(d) "Lender" means a licensee or a person who makes a loan subject to this subtitle.

(e) "Licensee" means a person who is required to be licensed under Title 11, Subtitle 2 of the Financial Institutions Article, the Maryland Consumer Loan Law - Licensing Provisions, regardless of whether the person is actually licensed.

(f)

  (1) "Loan" means any loan or advance of money or credit subject to this subtitle, regardless of whether the loan or advance of money or credit is or purports to be made under this subtitle.

  (2) "Loan" does not include an installment sale agreement as defined in Sec. 12-601 of this title.

(g) "Person" includes an individual, corporation, business trust, statutory trust, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal or commercial entity.

(h) "Tip" has the meaning stated in Sec. 12-101 of this title.

(i) "Wages" means all remuneration paid to any employee for the employee's employment, including the cash value of all remuneration paid in any medium other than cash.

#### Section 12-302

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 Consumer Loan Law -- Licensing Provisions.

#### Section 12-303

(a)

  (1) This subtitle applies to a loan of $25,000 or less made for personal, family, or household purposes.

  (2) Except as provided in paragraph (3) of this subsection, this subtitle applies regardless of:

    (i) Whether the transaction is or purports to be made under this subtitle;

    (ii) Whether the transaction is or purports to be an installment loan;

    (iii) The duration of the repayment period;

    (iv) Whether the transaction is or purports to be nonrecourse or contingent; and

    (v) Whether the transaction purports to be the purchase of wages, pensions, governmental benefits, or other similar future payment streams.

  (3) This subtitle does not apply to:

    (i) A plan or loan for which a written election has been made under Subtitle 1, Subtitle 4, Subtitle 9, or Subtitle 10 of this title;

    (ii) A loan made by an individual provided the individual:

      (1) Does not make more than three loans in a calendar year; and

      (2) Does not engage in the business of making loans; or

    (iii) A loan between an employer and an employee.

(b) A lender may not make a loan subject to this subtitle unless the loan is in an original amount or value which does not exceed $25,000.

(c)

  (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 $25,000 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.

(d) This subtitle applies but is not limited to a lender who:

  (1) As security for a loan, use, or forbearance 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.

(e)

  (1) A lender who lends or contracts to lend an amount which exceeds $25,000 may not directly or indirectly contract for, charge, or receive any interest, fee, or other charge in excess of that which the lender would be permitted to charge if the lender were not authorized to make loans under this subtitle.

  (2) The provisions of this subsection apply to any debt in excess of $25,000 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.

#### Section 12-304

(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.

#### Section 12-305

(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, sexual orientation, gender identity, disability, 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.

#### Section 12-306

(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 Sec. 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 Sec. 12-118 of this title;

    (iii) Upon the borrower's default, if the loan is secured by personal property, the lender complies with Sec. 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.

#### Section 12-307

(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.

#### Section 12-307.1

(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.

#### Section 12-308

(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 Sec.Sec. 12-306, 12-307, and 12-312 of this subtitle, in their entireties; and

    (ii) Complies with Sec. 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 Sec. 12-125 of this title, as applicable.

#### Section 12-309

(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.

#### Section 12-310

(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.

#### Section 12-311

(a)

  (1) In this section the following words have the meanings indicated.

  (2) "Fully indexed rate" means the index rate, as defined in the mortgage loan documents, prevailing at the time the mortgage loan is approved by the lender, plus the margin that will apply after the expiration of an introductory interest rate.

  (3)

    (i) "Mortgage loan" has the meaning stated in Sec. 11-501 of the Financial Institutions Article.

    (ii) "Mortgage loan" does not include a reverse mortgage loan.

(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 $4,000 in value or amount; or

    (ii) Personal property for any loan under $1,400 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) A lender may not make a mortgage loan without giving due regard to the borrower's ability to repay the mortgage loan in accordance with its terms, including the fully indexed rate of the mortgage loan, if applicable, and property taxes and homeowner's insurance whether or not an escrow account is established for the collection and payment of these expenses.

(e)

  (1) Due regard to a borrower's ability to repay a mortgage loan must include:

    (i) Consideration of the borrower's debt to income ratio, including existing debts and other obligations; and

    (ii) Verification of the borrower's gross monthly income and assets by review of third-party written documentation reasonably believed by the lender to be accurate and complete.

  (2) Acceptable third-party written documentation includes:

    (i) The borrower's Internal Revenue Service form W-2;

    (ii) A copy of the borrower's income tax return;

    (iii) Payroll receipts;

    (iv) The records of a financial institution; or

    (v) Other third-party documents that provide reasonably reliable evidence of the borrower's income or assets.

  (3) This subsection does not apply to a mortgage loan:

    (i) Approved for government guaranty by the Federal Housing Administration, the Veterans Administration, the United States Department of Agriculture, the Maryland Department of Housing and Community Development, or the Community Development Administration; or

    (ii) That refinances an existing mortgage loan if the refinance mortgage loan is:

      (1) Offered under the federal Homeowner Affordability and Stability Plan; and

      (2) Made available by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association.

#### Section 12-312

(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. Sec. 1602(bb), as modified from time to time by Regulation Z, 12 C.F.R. Part 1026, except that the comparison percentages for the mortgage loan shall be one percentage point less than those specified in 15 U.S.C. Sec. 1602(bb), as modified from time to time by Regulation Z, 12 C.F.R. Part 1026.

  (3) "Credit health insurance" has the meaning stated in Sec. 13-101 of the Insurance Article.

  (4) "Credit involuntary unemployment benefit insurance" has the meaning stated in Sec. 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 Sec. 11-501 of the Financial Institutions Article.

  (7) "Premium" has the meaning stated in Sec. 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 Sec. 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.

#### Section 12-314

(a) A person may not lend $25,000 or less if:

  (1) 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;

  (2) The transaction violates the federal Military Lending Act; or

  (3) The person is not licensed under or exempt from the licensing requirements under the Maryland Consumer Loan Law - Licensing Provisions.

(b)

  (1)

    (i) A loan made in the amount of $25,000 or less, regardless of whether the loan is or purports to be made under this subtitle, is void and unenforceable if:

      (1) Except as provided in subparagraph (ii) of this paragraph, a person contracts for a loan that has a rate of interest, charge, discount, or other consideration greater than that authorized under State law;

      (2) The loan violates the federal Military Lending Act; or

      (3) A person who is not licensed under or exempt from the licensing requirements under Title 11, Subtitle 2 of the Financial Institutions Article made the loan.

    (ii) A loan is not void and unenforceable if:

      (1) A clerical error or mistake resulted in the rate of interest, charge, discount, or other consideration being greater than the amount authorized under State law; and

      (2) A person corrects the error or mistake before the first payment is due under the loan.

  (2) A person may not receive or retain any principal, interest, fees, or other compensation with respect to any loan that is void and unenforceable under this subsection.

  (3) This subsection does not apply to a person who is exempt from licensing under this subtitle.

(c)

  (1) This section does not apply to a loan transaction validly made in another state in compliance with a similar loan law of that state.

  (2) A lender may not collect an amount that is more than the total amount that would be permitted if this subtitle were applicable.

  (3) 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.

(d) With respect to a loan that is void and unenforceable under this section, a person may not:

  (1) Collect or attempt to collect, directly or indirectly, any amount from the borrower;

  (2) Enforce or attempt to enforce the contract against any property securing the loan; or

  (3) Sell, assign, or otherwise transfer the loan to another person.

#### Section 12-315

This subtitle shall be interpreted and construed to effectuate its general remedial purpose.

#### Section 12-316

Any licensee or his officer or employee who knowingly violates any provision of Sec.Sec. 12-303 through 12-306, Sec. 12-308, Sec. 12-311, or Sec. 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.

#### Section 12-316.1

(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.

#### Section 12-317

(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.

#### Section 12-318

(a) A lender may not accept from any consumer, or give any consumer the option to provide, a tip.

(b) A lender may not directly or indirectly suggest that providing a tip will influence:

  (1) The lender's willingness to provide a loan to a consumer at any time; or

  (2) The terms of any loan offered to the consumer by that lender.

(c) A lender who receives a tip may not be found in violation of this subtitle if the lender returns all of the tip within 7 days after receiving the tip.

(d) A lender shall prominently disclose that it is prohibited from accepting a tip from a consumer.

#### Section 12-319

Notwithstanding any other provision of this title, a loan shall be subject to this subtitle, whether or not elected, if the loan is consumer-directed earned wage access under Subtitle 15 of this title.

### Subtitle 4. Secondary Mortgage Loans -- Credit Provisions

#### Section 12-401

(a) In this subtitle the following words have the meanings indicated.

(b) "Lender" means:

  (1) A licensee; or

  (2) A person who makes a secondary mortgage loan but is exempt expressly from the licensing requirements of the Maryland Mortgage Lender Law.

(c) "Licensee" means a person who is required to be licensed under the Maryland Mortgage Lender Law, regardless of whether the person is actually licensed.

(d) "Lien on real property" includes:

  (1) A confessed judgment note or consent judgment required by a person who ordinarily requires such an instrument for the purpose of acquiring a lien on property described in subsection (i) of this section; and

  (2) A sale and leaseback required by a person for that purpose.

(e) "Loan" means a secondary mortgage loan.

(f) "Net proceeds" means the difference between:

  (1) The full amount of a secondary mortgage loan; and

  (2) The amount of interest taken in advance on the loan plus the amount of the loan origination fee.

(g) "Payment period" means the period scheduled by the terms of a loan to elapse between the days on which installment payments are required to be made on the loan.

(h) "Person" includes an individual, corporation, business trust, statutory trust, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal or commercial entity.

(i)

  (1) "Secondary mortgage loan" means a loan or deferred purchase price secured in whole or in part by a mortgage, deed of trust, security agreement, or other lien on real property located in the State, which property:

    (i) Is subject to the lien of one or more prior encumbrances, except a ground rent or other leasehold interest; and

    (ii) Has a dwelling on it designed principally as a residence with accommodations for not more than four families.

  (2) "Secondary mortgage loan" does not include:

    (i) A loan to any corporation unless the lender required the borrower to incorporate as a condition for obtaining the loan; or

    (ii) A commercial loan of more than $75,000, as defined in Sec. 12-101(c) of this title.

  (3) If a commercial loan of $75,000 or less is made in the name of an individual, secured by owner-occupied residential real property and not to a business or commercial organization, the mortgage lender, as defined by the provisions of Sec. 11-501 of the Financial Institutions Article, shall document independent evidence that the borrower is seeking funds for a legitimate commercial enterprise before the lender grants any loan for that purpose. An affidavit is not by itself evidence of a commercial loan. However, if the borrower is seeking funds to start a business and has not yet incorporated or prepared documentation of proof of ownership of a commercial enterprise, an affidavit by itself is sufficient if it states the purpose for which the proceeds are to be used and the nature of the business conducted by the borrower.

(j) "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.

#### Section 12-402

A person may not make a loan under this subtitle unless he is licensed under or exempt from the licensing requirements of the Maryland Mortgage Lender Law.

#### Section 12-402.1

(a)

  (1) On or after January 1, 2019, a lender may, at the lender's option, elect to make a loan to any borrower either under this subtitle or as otherwise authorized by applicable law.

  (2) In order to make a loan under this subtitle, a lender shall make a written election in the agreement, note, or other evidence of the loan specifying that this subtitle will govern the loan.

(b)

  (1) If a lender elects to make a loan under this subtitle in accordance with this section, Subtitles 1, 3, 9, and 10 of this title do not apply to the loan.

  (2) If a lender who makes or contracts to make a loan does not make a written election under this subtitle or Subtitle 1, Subtitle 3, Subtitle 9, or Subtitle 10 of this title:

    (i) Subtitle 1 of this title will apply to the loan if the loan is:

      (1) For an amount over $25,000; or

      (2)

        (A) For an amount of $25,000 or less; and

      (B) Not subject to Subtitle 3 of this title; or

    (ii) Subtitle 3 of this title will apply to the loan if the loan is:

      (1) For an amount of $25,000 or less; and

      (2) Subject to Subtitle 3 of this title.

#### Section 12-403

(a) A person may not advertise directly or indirectly in the State any false or misleading statement regarding secondary mortgage loans or their availability.

(b) This section does not apply to the owner, publisher, operator, or employee of any publication or radio or television station which disseminates the statement without knowledge of its false or misleading character.

#### Section 12-403.1

In granting or denying any application for a loan, a lender may not discriminate against any loan applicant solely on the basis of age. Refusal to grant a loan to an applicant who is under the age of 18 is not discrimination solely on the basis of age.

#### Section 12-404

(a) A lender may:

  (1) Make a loan in such an amount that the net proceeds of the loan equal a predetermined sum; and

  (2) Take interest in advance on the full amount of the loan for the period from the date the loan is made to the date of maturity of the final installment.

(b) A lender may charge interest at any effective rate of simple interest not to exceed 16 percent per annum on the principal balance of a loan, except as provided in subsection (d) of this section.

(c) A loan shall be amortized in equal or substantially equal monthly installments without a balloon payment at maturity, except that:

  (1) Payment on the loan may be reduced or suspended until all prior liens or encumbrances are wholly or partially satisfied;

  (2) A lender, including a seller who takes a mortgage or deed of trust to secure payment of all or a portion of the purchase price of a residence sold to a borrower, may make a loan for the purpose of aiding the borrower in the sale of the borrower's residence or the purchase of a new residence, and may create a balloon payment at maturity of this loan if the balloon payment is:

    (i) Expressly disclosed to the borrower;

    (ii) Agreed to by both the borrower and the lender/seller in writing; and

    (iii) Required to be postponed one time, upon becoming due, at the borrower's request, for a period not to exceed 6 months, provided that the borrower continues to make the monthly installments provided for in the original loan agreement, and no new closing costs, processing fees or similar fees are imposed on the borrower as a result of the extension; and

  (3)

    (i) A commercial loan of $75,000 or less made under this subtitle need not be amortized in equal or substantially equal payments and may contain a balloon payment at maturity if the borrower is authorized to postpone the maturity date one time and continue to make installment payments as provided in the original loan agreement and the postponed maturity date does not exceed:

      (1) 24 months if the original maturity date is more than 12 months after the loan is made; or

      (2) 6 months if the original maturity date is 12 months or less after the loan is made.

    (ii) No new closing costs, processing fees, or similar fees may be imposed on a borrower who elects to postpone the maturity date in accordance with this subsection.

(d) Notwithstanding the provisions of subsections (a), (b), and (c) of this section, on any loan made on or after July 1, 1982, a lender under this subtitle may charge interest not exceeding 24 percent per annum simple interest on the loan provided that:

  (1) The interest is computed on the unpaid principal balances outstanding from time to time;

  (2) The lender does not contract for, charge, or receive any interest in advance or any compounded interest;

  (3) If the loan is a renewal or refinancing of a loan made prior to July 1, 1982, the lender complies with Sec. 12-116 of this title;

  (4) 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 Sec. 12-118 of this title; and

  (5) If the loan is for the purchase of consumer goods, the loan contract complies with Sec. 12-117 of this title.

#### Section 12-404.1

Notwithstanding the provisions of Sec.Sec. 12-404, 12-405(a), and 12-411 of this subtitle, a lender may impose and collect, as a condition of making a loan, all fees, discounts, points, or other charges that lenders are permitted or required to impose, collect, or pay pursuant to a federal law providing for a program of mortgage purchases or loans originated pursuant to a State or local governmental program of direct lending or mortgage purchase, or by any federal agency or instrumentality or subsidiary thereof, including but not limited to the Government National Mortgage Association, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Federal Reserve Bank, the Federal Home Loan Bank, and the Farmers Home Administration, if the following conditions are met:

(1) The loan is eligible for purchase pursuant to a commitment or offer to purchase by the federal, State, or local government agency, instrumentality, or subsidiary; and

(2)

  (i) The sum of the fees, discounts, points, or other charges imposed plus the interest rate on the loan does not exceed 24 percent; and

  (ii) The fees, discounts, points, or other charges imposed and the interest rate on the loan do not exceed those allowed by the applicable federal law providing for the mortgage purchase program.

#### Section 12-405

(a)

  (1) A lender may collect a loan origination fee for making a loan under this subtitle only as provided in this section.

  (2) The aggregate amount of the loan origination fee imposed by a lender under this section when combined with any finder's fee imposed by a mortgage broker under Sec. 12-804 of this title may not exceed the greater of:

    (i) $500 or 10 percent of the net proceeds of a commercial loan of $75,000 or less made under this subtitle; or

    (ii) $250 or 10 percent of the net proceeds of any other loan made under this subtitle.

  (3) A lender may not collect from the borrower any other commission, finder's fee, or point for obtaining, procuring, or placing a loan under this subtitle.

  (4) A lender who utilizes the provisions of Sec. 12-404.1 of this subtitle, relating to federal second mortgage purchase programs, is not entitled to the origination fee provided for in paragraph (2) of this subsection in addition to the fees, discounts, points, or charges allowed under Sec. 12-404.1(2) of this subtitle. All other second mortgage programs in this State are limited to the charges and fees provided in paragraph (2) of this subsection.

(b) A lender may collect the fees paid to a public official or governmental agency for recording or satisfying the instrument securing the loan.

(c)

  (1) A lender may collect from the borrower a delinquent or late charge of the greater of $2 or 5 percent of the amount of any delinquent or late periodic installment, if:

    (i) The delinquency has continued for at least 10 days; and

    (ii) A delinquent or late charge has not already been charged for the same delinquency.

  (2) The lender shall deduct the charge from the next payment made by the borrower.

#### Section 12-406

(a) Except as permitted by Sec. 12-405(a) of this subtitle, any commission, finder's fee, or point shall be paid by the lender, and may be paid only to:

  (1) A licensed real estate broker;

  (2) A lawyer licensed to practice law in the State; or

  (3) A licensee.

(b) An agreement to pay a commission, finder's fee, or point may not be enforced unless it is in writing and signed by the lender.

#### Section 12-407

(a)

  (1) In this section the following words have the meanings indicated.

  (2) "Commissioner" has the meaning stated in Sec. 12-301(b) of this article.

  (3) "Cost of the loan" means the total amount of:

    (i) As nearly as the same can be determined, the charges payable by the borrower for the loan under Sec.Sec. 12-405(a) and (b) and 12-410 of this subtitle; and

    (ii) The interest which will be charged if the loan is carried to maturity.

(b) At the time a loan is made, the lender shall deliver to the borrower a statement in a form required by the Commissioner that complies with Sec. 12-106(b) of this title.

(c)

  (1) Except as provided in paragraph (2) of this subsection, at the time a lender receives a payment on account of a loan, the lender shall give to the borrower a plain and complete receipt for the payment.

  (2) If the payment is made by personal check, money order, cashier's check, or treasurer's check, the lender need give a receipt to the borrower only on the request of the borrower.

(d)

  (1) A lender shall permit a borrower to prepay a loan in full or in part at any time, without penalty.

  (2) If a borrower prepays a loan in full, he shall receive a refund credit for the interest taken in advance. The amount of the refund shall be calculated in accordance with subsection (f) of this section.

(e)

  (1) After full repayment of a loan, the lender shall:

    (i) Indelibly mark with the word "paid" or "canceled" and return each note or other paper signed by the borrower; and

    (ii) Release the mortgage, deed of trust, security agreement, or other lien.

  (2) The lender shall prepare the release of the mortgage, deed of trust, security agreement, or other lien at his own expense.

(f) If interest charged pursuant to this subtitle in respect of a loan to a borrower has been precomputed, then, in the event of prepayment of the entire loan, the lender shall refund or credit to the borrower the unearned portion of the precomputed interest charge. This refund or credit shall be in an amount not less than the amount which would be refunded or credited if the unearned precomputed interest charge were calculated in accordance with the actuarial method, except that the borrower may not be entitled to a refund or credit of less than $5. The unearned portion of the precomputed interest charge is, at the option of the lender, either:

  (1) That portion of the precomputed interest charge which is allocable to all originally scheduled, or, if deferred, all deferred payment periods, or portions of payment periods, ending subsequent to the date of prepayment. The unearned precomputed interest charge is the total of that which would have been earned for each period, or portion of a period, had the loan not been precomputed, by applying to the unpaid balances of principal, according to the actuarial method, an annual percentage rate based on the precomputed interest charges, assuming that all payments were made as scheduled, or as deferred, if deferred. The lender, at its option, may round this annual percentage rate to the nearest 1/4 of 1 percent; or

  (2) The total precomputed interest charge less the earned precomputed interest charge. The earned precomputed interest charge shall be determined by applying an annual percentage rate based on the total precomputed interest charge, under the actuarial method, to the unpaid balances for the actual time those balances were unpaid up to the date of prepayment.

#### Section 12-407.1

(a) The Commissioner shall develop and prepare a form that each lender shall furnish to an applicant for a secondary mortgage loan. The form shall state the following:

  (1) The purpose for which the loan is to be used;

  (2) A disclosure that, if the loan is for a commercial purpose, the borrower shall forfeit certain rights.

(b) The form shall state that the forfeiture of rights includes:

  (1) The borrower's right to pay a loan origination fee that, when combined with any finder's fee imposed by a mortgage broker under Sec. 12-804 of this title, does not exceed the greater of:

    (i) $500 or 10 percent of the net proceeds of a commercial loan of $75,000 or less made under this subtitle; or

    (ii) $250 or 10 percent of the net proceeds of any other loan made under this subtitle;

  (2) The borrower's right not to pay any other commission, finder's fees, or points for obtaining, procuring, or placing a loan; and

  (3) The borrower's right not to pay an interest rate greater than 24 percent.

(c) This section does not prevent a lender from imposing fees, discounts, points, or other charges whenever permitted under Sec. 12-404.1 of this subtitle concerning mortgage loan programs of state and federal agencies.

(d) Compliance with the provisions of this section does not relieve the lender or mortgage broker from the provisions of Sec. 12-401(i)(3) of this subtitle.

#### Section 12-408

A lender may not refinance a loan more often than:

(1) Once during any twelve-month period of the loan; and

(2) Twice during any five-year period of the loan.

#### Section 12-409

An instrument which evidences or secures a loan may not contain any:

(1) Acceleration clause under which any part or all of the unpaid balance of the loan not yet matured may be declared due and payable for any reason other than default by the debtor in the payment or in another required term of the instrument;

(2) Provision by which the debtor waives any right accruing to him under the provisions of this subtitle; or

(3) Assignment or order for the payment of wages, whether earned or to be earned.

#### Section 12-409.1

(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. Sec. 1602(bb), as modified from time to time by Regulation Z, 12 C.F.R. Part 1026, except that the comparison percentages for the mortgage loan shall be one percentage point less than those specified in 15 U.S.C. Sec. 1602(bb), as modified from time to time by Regulation Z, 12 C.F.R. Part 1026.

  (3) "Fully indexed rate" means the index rate, as defined in the secondary mortgage loan documents, prevailing at the time the secondary mortgage loan is approved by the lender, plus the margin that will apply after the expiration of an introductory interest rate.

  (4) "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.

(b) A lender may not make a secondary mortgage loan without giving due regard to the borrower's ability to repay the secondary mortgage loan in accordance with its terms, including the fully indexed rate of the secondary mortgage loan, if applicable, and property taxes and homeowner's insurance whether or not an escrow account is established for the collection and payment of these expenses.

(c)

  (1) Due regard to a borrower's ability to repay a secondary mortgage loan must include:

    (i) Consideration of the borrower's debt to income ratio, including existing debts and other obligations; and

    (ii) Verification of the borrower's gross monthly income and assets by review of third-party written documentation reasonably believed by the lender to be accurate and complete.

  (2) Acceptable third-party written documentation includes:

    (i) The borrower's Internal Revenue Service form W-2;

    (ii) A copy of the borrower's income tax return;

    (iii) Payroll receipts;

    (iv) The records of a financial institution; or

    (v) Other third-party documents that provide reasonably reliable evidence of the borrower's income or assets.

  (3) This subsection does not apply to a secondary mortgage loan:

    (i) Approved for government guaranty by the Federal Housing Administration, the Veterans Administration, the United States Department of Agriculture, the Maryland Department of Housing and Community Development, or the Community Development Administration; or

    (ii) That refinances an existing mortgage loan if the refinance mortgage loan is:

      (1) Offered under the federal Homeowner Affordability and Stability Plan; and

      (2) Made available by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association.

(d)

  (1) In this subsection, "loan application" has the meaning stated in Sec. 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.

#### Section 12-410

(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 and Equity Protection Act set forth in 15 U.S.C. Sec. 1602(bb), as modified from time to time by Regulation Z, 12 C.F.R. Part 1026, except that the comparison percentages for the mortgage loan shall be one percentage point less than those specified in 15 U.S.C. Sec. 1602(bb), as modified from time to time by Regulation Z, 12 C.F.R. Part 1026.

  (3) "Credit health insurance" has the meaning stated in Sec. 13-101 of the Insurance Article.

  (4) "Credit involuntary unemployment benefit insurance" has the meaning stated in Sec. 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 Sec. 11-501 of the Financial Institutions Article.

  (7) "Premium" has the meaning stated in Sec. 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 require a borrower to insure and may collect from the borrower the premiums paid for insurance on:

  (1) Any real property securing the loan;

  (2) The life of any person obligated on the loan; and

  (3) The title of any real property securing the loan.

(c) Subject to the provisions of this section, the licensee may collect from the borrower, at the borrower's option, the premiums paid for credit health insurance covering any one borrower obligated on the loan. The insurance may not provide benefits exceeding the actual period of disability.

(d)

  (1) Subject to the provisions of subsections (e), (f), (g), and (h) of this section, a lender may collect from a borrower, at the option of the borrower, the premiums paid for credit involuntary unemployment benefit insurance covering the borrower.

  (2) The availability of credit involuntary unemployment benefit insurance to a borrower may not be made contingent on the purchase of any other type of insurance permitted under this section.

(e)

  (1) Except as provided in this subsection, a lender making a covered loan may not finance as a part of the covered loan transaction single premium coverage for:

    (i) Credit health insurance;

    (ii) Credit involuntary unemployment benefit insurance; or

    (iii) Credit life insurance.

  (2) Nothing in this subsection shall prohibit the financing of any insurance coverage in connection with a mobile home or its premises, as those terms are defined in Sec. 8A-101 of the Real Property Article.

(f)

  (1)

    (i)

      (1) In this paragraph the following words have the meanings indicated.

      (2) "Improvements" means buildings or structures erected upon or affixed to real property that enhance the value of the real property.

      (3) "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".

      (4)

        (A) "Replacement cost" means the amount needed to repair damage to or rebuild improvements on real property to restore the improvements to their pre-loss condition.

      (B) "Replacement cost" does not include the value of land.

    (ii) A lender may not require a borrower, as a condition to receiving or maintaining a secondary mortgage loan, to provide or purchase property insurance coverage against risks to any improvements on any real property in an amount exceeding the replacement cost of the improvements on the real property.

    (iii) In determining the replacement cost 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 by the lender's appraisal of the improvements.

    (iv) Any property insurance coverage required by a lender shall bear a reasonable relation to the existing risk of loss.

    (v) A violation of this paragraph or of subsection (h) of this section shall entitle the borrower to:

      (1) Seek an injunction to prohibit the lender who has engaged or is engaging in the violation from continuing or engaging in the violation;

      (2) Reasonable attorney's fees; and

      (3) Damages directly resulting from the violation.

    (vi) A violation of this paragraph or of subsection (h) of this section does not affect the validity of the mortgage or deed of trust securing the secondary mortgage loan.

  (2) The amount of credit life insurance may not exceed the total original amount payable under the loan contract.

  (3) The credit health insurance shall provide:

    (i) Benefits not exceeding the then scheduled unpaid total of payments of the loan;

    (ii) A waiting period for the collection of benefits 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.

  (4) The credit involuntary unemployment benefit insurance may not provide that:

    (i) The periodic benefits shall continue for a period exceeding the actual period of the borrower's involuntary unemployment; or

    (ii) The aggregate amount of periodic benefits payable in the event of a borrower's involuntary loss of employment shall exceed the scheduled unpaid total of payments remaining on the loan on the date of the borrower's involuntary loss of employment.

  (5) A lender may not require a borrower to purchase credit involuntary unemployment benefit insurance as a condition of obtaining a loan.

(g) 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.

(h) A lender may not require the borrower to purchase any insurance:

  (1) Through a particular insurance producer or insurance company; or

  (2) From the lender.

#### Section 12-411

A lender may not directly or indirectly, contract for, charge, or receive, any interest, discount, fee, fine, commission, brokerage, charge, or other consideration in excess of that permitted by this subtitle.

#### Section 12-412

A lender may not make or offer to make any secondary mortgage loan except within the terms and conditions authorized by this subtitle.

#### Section 12-413

Except for a bona fide error of computation, if a lender violates any provision of this subtitle he may collect only the principal amount of the loan and may not collect any interest, costs, or other charges with respect to the loan. In addition, a lender who knowingly violates any provision of this subtitle also shall forfeit to the borrower three times the amount of interest and charges collected in excess of that authorized by law.

#### Section 12-414

Any lender, his officer or employee and any other person who willfully violates any provision of this subtitle is guilty of a misdemeanor and on conviction is subject to a fine not exceeding $1,000 or imprisonment not exceeding one year or both.

#### Section 12-415

This subtitle may be cited as the Maryland Secondary Mortgage Loan Law.

### Subtitle 5. Retail Credit Accounts

#### Section 12-501

(a) In this subtitle the following words have the meanings indicated.

(b) "Account" means a retail credit account.

(c)

  (1) "Buyer" means a person who, under a retail credit account transaction, buys goods or obtains services from a seller not principally for the purpose of resale.

  (2) "Buyer" includes:

    (i) A person who enters into a prior agreement with a financial institution by which the financial institution agrees to pay the debts of the buyer as they accrue at various retail sellers designated by the financial institution, in consideration of which the buyer pays to the financial institution the cash sale price and the finance charge; and

    (ii) A prospective buyer.

(d)

  (1) "Cash sale price" means the price for which the seller would sell or furnish to the buyer the goods or services which are the subject of a retail credit account if the sale were a sale for cash and not under the account.

  (2) "Cash sale price" includes any taxes and charges for delivery, installation, servicing, repair, alteration, or any improvement which is supplied or rendered in connection with the sale.

(e) "Closed end account" means a retail credit account in which the finance charge is computed in advance and assessed on the original unpaid balance of the purchase price.

(f) "Finance charge" means the amount, however expressed, in excess of the cash sale price which a seller or financial institution charges a buyer for the privilege of purchasing goods or services in a retail credit account transaction.

(g)

  (1) "Financial institution" means a person who enters into an agreement with a buyer by which the person agrees to extend credit to the buyer and apply it as directed by him by use of a credit card which the person issues to the buyer.

  (2) "Financial institution" includes an incorporated bank, savings institution, and trust company.

(h)

  (1) "Goods" means any tangible personal property purchased primarily for personal, family, or household purposes, including any certificate or coupon exchangeable for it.

  (2) "Goods" includes goods which at or after the time of sale are affixed to real property or become a part of it, whether or not severable from it.

  (3) "Goods" does not include any:

    (i) Tangible personal property purchased primarily for industrial, commercial, or agricultural purposes;

    (ii) Motor vehicle, as defined in the State Motor Vehicle Law; or

    (iii) Home improvement, as defined in the Maryland Home Improvement Law, or any transaction under that law.

(i) "Holder" means a person, including a seller and a financial institution, entitled to enforce a retail credit account against a buyer.

(j) "Open end account" means a retail credit account in which the finance charge is assessed on the outstanding balances from month to month.

(k) "Person" includes an individual, corporation, business trust, statutory trust, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal or commercial entity.

(l)

  (1) "Retail credit account" means an agreement or transaction for the retail sale of goods or services, which is negotiated or entered into and pursuant to which a time sale price is established.

  (2) "Retail credit account" includes credit card financing by a financial institution.

(m) "Seller" means a person regularly engaged in the business of selling goods to retail buyers.

(n)

  (1) "Services" means work, labor, and services furnished primarily for personal, family, or household purposes.

  (2) "Services" includes:

    (i) Services furnished in connection with the improvement of real property; and

    (ii) Contributions to a "charitable organization" as defined in the Maryland Charitable Solicitations Act.

  (3) "Services" does not include any:

    (i) Work, labor, or service furnished primarily for industrial, commercial, or agricultural purposes; or

    (ii) Service for which the tariff, rate, charge, cost, or expense, including in each instance the time sale price, is required by law to be filed with or approved by the United States, the State, or any department, division, commission, or agency of either.

(o) "Time sale price" means the total of the cash sale price and the amount of the finance charge.

#### Section 12-502

(a) Each retail credit account established after May 31, 1967 shall comply with this subtitle.

(b)

  (1) Notwithstanding any situs of contract specified in it, a retail credit account is made in this State and is subject to this subtitle if:

    (i) The seller offers or agrees in this State to sell to a resident buyer of this State; or

    (ii) The resident buyer of this State accepts or makes the offer in this State to buy.

  (2) A verbal or written solicitation or communication to sell that originates outside the State but that is forwarded to and received in the State by a resident buyer of this State shall be construed as an offer or agreement to sell in this State.

  (3) A verbal or written solicitation to buy that originates in this State from a resident buyer of this State and that is forwarded to and received by a retail seller outside this State shall be construed as an acceptance or offer to buy in this State.

(c) This subtitle does not apply to an installment sale agreement, as defined in Sec. 12-601 of this title, relating to goods, as defined in that section, regardless of the cash sale price of the goods.

#### Section 12-503

(a) A retail credit account may be established by a seller or financial institution only on the request of a buyer or with his consent.

(b)

  (1) A seller or financial institution may not discriminate solely on the basis of race, sex, sexual orientation, gender identity, religious beliefs, disability, marital status, geographic area of residence, neighborhood of residence, or age against a buyer who wishes to establish an account. Refusal to establish an account for a buyer who is under the age of 18 is not discrimination solely on the basis of age.

  (2) An application, questionnaire, or other written document used to establish credit for an applicant may not contain any reference to the race, creed, color, or national origin of the applicant.

  (3) An investigation made for the purpose of establishing credit for an applicant may not contain any information pertaining to the race, creed, color, or national origin of the applicant.

(c) For the purpose of considering the eligibility of a buyer for an extension of credit, a seller or financial institution shall consider alimony or child support awarded by a court and received by the buyer as income to the buyer.

(d)

  (1) If a seller or financial institution establishes an account for the use of a buyer, the seller or financial institution shall confirm the fact to the buyer in writing. The confirmation shall be in type no smaller than elite typewriter characters and shall contain:

    (i) A clear and understandable statement of the amount or the rate of the finance charge;

    (ii) A legend that the buyer may pay at any time the entire balance without incurring any additional charge for prepayment;

    (iii) A statement which advises the buyer of his right under Sec. 12-510 of this subtitle to an answer to a written inquiry concerning the status of his account; and

    (iv) Unless set out in a copy of the application form delivered to the buyer, the legend required by subsection (e)(2) of this section.

  (2) If no copy of the confirmation is retained by the seller or financial institution, a notation in the permanent records of the seller or financial institution which shows that the confirmation was mailed and the date of mailing is admissible as evidence of the mailing.

(e)

  (1) A retail credit account agreement shall be in writing and either:

    (i) Signed by the buyer; or

    (ii) The seller or financial institution shall have made a reasonable attempt to obtain the signature of the buyer to the agreement.

  (2) A legend stating that finance charges will be made in amounts or at rates not in excess of those permitted by law shall be printed in type no smaller than elite typewriter characters in both:

    (i) The application form used by the seller or financial institution; and

    (ii) A copy of either the application form or the confirmation delivered or mailed to the buyer when the retail credit account is established.

(f) Before the first payment on an account is due, other than any down payment, and within 40 days after each purchase, the holder of a retail credit account shall inform the buyer in writing of:

  (1) The cash sale price of the goods or services purchased;

  (2) The amount of any down payment;

  (3) A general description of the type of goods or services and the date of each purchase;

  (4) If the account is a closed end account:

    (i) The amount of the finance charge;

    (ii) The time sale price;

    (iii) The amount of each installment due, expressed in dollars; and

    (iv) The time or period of the payment of each installment; and

  (5) If the account is an open end account:

    (i) The amount or the rate of the finance charge on the outstanding balance; and

    (ii) The method of determining the outstanding balance pursuant to Sec. 12-506(c) of this subtitle.

(g) Unless the buyer previously received written notice by coupon, book, or otherwise of the amount of the payment and the amount of the unpaid balance after the payment, the holder of a retail credit account shall inform the buyer in writing, within 40 days after each payment, of:

  (1) The total amount remaining due to the seller; and

  (2) The total amount paid by the buyer since the last written notice.

(h) The buyer under an open end retail credit account may request in writing, not more frequently than once each year, that the holder of the account inform the buyer of the total amount of finance charges assessed on the account during the preceding calendar year and the holder shall so advise the buyer in writing within 30 days of the request.

(i) The holder of a retail credit account shall disclose his address and telephone number on each billing statement for the use of the buyer for status and billing inquiries under Sec.Sec. 12-510 and 12-511 of this subtitle.

(j) Except as otherwise provided in this section, the information required by this section may be stated in any sequence, order, or form and in one or more documents. Additional items may be included with the information to explain the computations made in determining the amount to be paid by the buyer.

#### Section 12-504

(a) Notwithstanding any other statutory law, a seller, financial institution, or the successor in interest of either may charge, collect, and receive under a retail credit account a finance charge, however described, not to exceed the amounts permitted in Sec.Sec. 12-505 and 12-506 of this subtitle.

(b) If the date of performance or delivery of an item or service is more than 10 days from the date of purchase, the finance charge shall be computed from the date of performance or delivery.

#### Section 12-505

(a) In a closed end account, the finance charge may not exceed the greater of:

  (1) An amount computed using the following annual simple interest rates of finance charge:

    (i) 22 percent on that part of the outstanding balance not exceeding $1,000; and

    (ii) 18 percent on that part of the outstanding balance exceeding $1,000; or

  (2) A minimum charge of $10 or, if the due date of the last installment is eight months or less after the effective date of the retail credit account agreement, $8.

  (3) Notwithstanding the provisions of paragraph (1) of this subsection, in a closed end account made on or after July 1, 1982, the finance charge may not exceed 24 percent per annum simple interest.

(b)

  (1) In a closed end account, the finance charge may be computed:

    (i) On the actual unpaid principal outstanding from time to time; or

    (ii) In advance, at the time the purchase is made, by adding to the original unpaid balance the amount of finance charge that would be earned if the account were repaid exactly according to its terms at the rate stated in subsection (a) of this section.

  (2) Nothing in this section shall be construed to prohibit any particular method of computing the finance charge on a closed end account so long as the amount of the finance charge does not result in a rate of charge in excess of that permitted by subsection (a) of this section.

(c) Amounts due under a closed end account may be payable in successive monthly, semimonthly, or weekly installments.

(d) As part of the regular practice of a holder, he may include fractional periods of 15 days or more as a whole month if he also entirely excludes fractional periods of 14 days or less.

(e)

  (1) A buyer may prepay at any time, without penalty, all or any part of the outstanding balance of a closed end account.

  (2) Except as provided in paragraph (4) of this subsection, if the buyer pays the balance in full before maturity, the holder immediately shall refund to him a portion of the finance charge, including the charge provided in subsection (a)(2) of this section.

  (3) The amount of the refund shall be calculated in accordance with subsection (g) of this section.

  (4) If a prepayment is made, the holder is entitled to retain a finance charge of at least $6. If the amount of credit for prepayment is less than $1, no refund need be made.

(f)

  (1) The holder of a closed end account on which the finance charge is computed in advance may:

    (i) By agreement with the buyer, extend the scheduled due date or defer the scheduled payment of all or part of the installments payable under it; and

    (ii) Charge the buyer an extension or deferral charge.

  (2) The extension or deferral charge may not exceed an amount equal to 1 percent per month of the amount extended or deferred for the period of extension or deferral.

  (3) The period of extension or deferral may not exceed the period from the date when the extended or deferred amount would have been payable in the absence of the extension or deferral to the date when the amount is made payable under the agreement of extension or deferral.

(g) If interest charged pursuant to this subtitle in respect of a loan to a buyer has been precomputed, then, in the event of prepayment of the entire loan, the holder shall refund or credit to the buyer the unearned portion of the precomputed interest charge. This refund or credit shall be in an amount not less than the amount which would be refunded or credited if the unearned precomputed interest charge were calculated in accordance with the actuarial method, except that the buyer may not be entitled to a refund or credit of less than $5. The unearned portion of the precomputed interest charge is, at the option of the holder, either:

  (1) That portion of the precomputed interest charge which is allocable to all originally scheduled or, if deferred, all deferred payment periods, or portions of payment periods, ending subsequent to the date of prepayment. The unearned precomputed interest charge is the total of that which would have been earned for each period, or portion of a period, had the loan not been precomputed, by applying to the unpaid balances of principal, according to the actuarial method, an annual percentage rate based on the precomputed interest charges, assuming that all payments were made as scheduled, or as deferred, if deferred. The holder at its option, may round this annual percentage rate to the nearest 1/4 of 1 percent; or

  (2) The total precomputed interest charge less the earned precomputed interest charge. The earned precomputed interest charge shall be determined by applying an annual percentage rate based on the total precomputed interest charge, under the actuarial method, to the unpaid balances for the actual time those balances were unpaid up to the date of prepayment.

#### Section 12-505.1

Any closed end account made prior to July 1, 1982 which is refinanced at a higher rate pursuant to Sec. 12-505(a)(3) of this subtitle must comply with the following requirements:

(1) The holder must give the following disclosure in writing to the buyer prior to the execution by the buyer of the new retail credit account agreement:

If you do agree to consolidate your existing account, you will be paying an annual percentage rate of ..... on the existing net balance of $........, instead of the rate of ....... which you are now paying.

Schedule of Monthly Payments

Separate Account Agreements              Consolidated Account Agreement

$....... per month for                   $....... per month for 

the next ....... months                  the next ....... months    

then

$....... per month for

....... months after that

Total of Payments

Separate Account Agreements              Consolidated Account Agreement 

$....... total of                      $....... total of

payments for your                     payments  for your

existing account                     consolidated account 

....... total of payments

for your new account 

(2) The holder must allow the buyer the choice of repaying his existing account balance at the originally agreed upon rate and obtaining any additional extension of credit as a separate account, notwithstanding any law which limits the holder's ability to establish more than 1 account for the same buyer;

(3) An account may be refinanced only upon the buyer's request;

(4) The holder must refund or credit to the buyer's account any unearned finance charge and any returned insurance premiums upon the cancellation of insurance sold in connection with the obligation;

(5) The holder must allow the buyer the right to cancel the consolidated purchase agreement within 3 business days and to elect the separate account option pursuant to subsection (2). The holder shall provide to the buyer conspicuous notice of the provisions of this subsection; and

(6) Nothing in this subsection shall prohibit the receipt of goods or services by the buyer at the time the consolidated purchase agreement is made.

#### Section 12-505.2

A seller or holder may not enter into a closed end retail credit account agreement, providing for an initial rate of finance charge pursuant to Sec. 12-505(a)(3) of this subtitle, which contains a provision that permits the seller or holder to increase or decrease the applicable rate of finance charge from time to time during the term of the account.

#### Section 12-505.3

With respect to a closed end retail credit account established at a rate pursuant to Sec. 12-505(a) of this subtitle, the agreement may not provide for a balloon payment.

#### Section 12-506

(a) In an open end account:

  (1) The finance charge may not exceed 1.5 percent a month on that part of the outstanding balance not exceeding $700;

  (2) The finance charge may not exceed 1 percent per month on that part of the outstanding balance exceeding $700;

  (3) Notwithstanding the provisions of paragraphs (1) and (2) of this subsection, the finance charge may not exceed 2 percent per month on that part of the outstanding balance originating on or after July 1, 1982;

  (4) Including a credit card plan that provides for sales, cash advances, or both, the buyer or borrower may not be required to pay a membership fee for the privilege of participating in the plan;

  (5) If made at a rate pursuant to paragraph (3) of this subsection, the seller or holder may not contract for, charge, or receive any compounded interest or compounded finance charge; and

  (6) A seller or financial institution may assess either, but not both:

    (i) A finance charge equal to the rate of interest charged on past due accounts as provided in the agreement; or

    (ii) A late payment charge.

(b) In an open end account, if a finance charge is applied to all outstanding balances within a range not exceeding $10, the finance charge may be computed on the basis of the median amount within the range.

(c) For the purpose of computing the outstanding balance of an open end account subject to the finance charge, the outstanding balance:

  (1) On any day may not exceed the sum of the total charges to the account less the amounts paid or credited to the account before that day; or

  (2) May be computed by the average daily balance method except that a finance charge may not be assessed on an account if the outstanding balance is paid in full 25 days after the billing cycle.

(d) In an open end account, (1) the finance charge in any given month may not exceed an amount which may be assessed pursuant to subsection (c)(2) of this section; and (2) if there is no balance at the beginning of a billing cycle, a finance charge may not be assessed on any charge added to the account during that billing cycle from the date of purchase to the end of that billing cycle.

(e) A finance charge for a monthly period may not be imposed on an open end account unless the periodic statement for that month is mailed to the buyer at least 15 days before the end of the next billing cycle.

(f)

  (1) If a seller or financial institution establishes two or more open end accounts for an individual buyer, the seller or financial institution may not impose a higher rate of finance charge than would be obtained if there was but one open end account between the buyer and the seller or financial institution.

  (2) A seller does not establish two open end accounts within the meaning of this subsection solely because the seller accepts payment from a financial institution, as directed by a buyer by use of a credit card issued to the buyer by the financial institution, and also establishes an account directly payable to him by the buyer.

(g) Regardless of the date of actual posting of a payment to an account, the payment shall be credited to the customer's account as of the date the payment is received by the creditor, and no finance charge, late payment charge, or other charge shall be imposed with respect to the amount of the payment which is properly received by the creditor on or before the time indicated by the creditor as necessary to avoid imposition thereof, provided that:

  (1) If a creditor fails to post the customer's payment in time to avoid the imposition of finance charges, late payment charges, or other charges, the creditor shall adjust the customer's account so that the finance charges, late payment charges, or other charges are credited to the account during the customer's next billing cycle.

  (2) For the purposes of paragraph (g) of this section the creditor may specify on the periodic statement or on accompanying material that need not be retained by the customer, reasonable requirements with respect to the form, amount, manner, location, and time for receipt of payments, except that:

    (i) If no particular hour of the day has been clearly specified by the creditor as the time by which payment must be received by the creditor in order to obtain crediting to the customer's account as of that date, payments received prior to the close of business on that day must be credited as of that date;

    (ii) If no location(s) has been clearly specified as the location(s) at which payment may be made, then payment at any location where the creditor conducts business shall be credited as of the date payment is presented; and

    (iii) If no particular manner of payment has been clearly specified, then payment by check, cash, money order, bank draft or other similar instrument in properly negotiable form shall constitute proper manner of payment.

  (3) If the creditor accepts payment at locations other than those specified under paragraph (g)(2)(ii) of this section, the creditor shall credit the customer's account promptly (in no case later than five days from the date of receipt), provided that the possibility of the delay is clearly disclosed to the customer on the periodic statement or on accompanying material that need not be retained by the customer.

  (4) Payments need not be credited as of the date of receipt (but in any case must be credited promptly) if a delay in crediting does not result in the imposition of any finance charges, late payment charges, or other charges for that billing cycle or a later billing cycle.

(h)

  (1) A seller or financial institution that imposes a finance charge in connection with an open end account may not directly or indirectly contract for, charge, or receive from the buyer any finance charge, discount, fine, commission, charge, brokerage, or other consideration on that account in excess of that permitted by this section.

  (2) If a credit card plan allows for both purchases and the extension of cash advances, the charges prohibited by this section may not be imposed as to either function.

#### Section 12-506.1

(a) In this section "credit balance" means a balance on an open end retail credit account which indicates that the buyer has made payments or obtained refunds in excess of charges, resulting in a credit due to the buyer.

(b) If there is a credit balance in excess of $1 on any retail credit account:

  (1) The holder shall send to the buyer a monthly statement which indicates the amount of the credit balance; and

  (2) If the credit balance remains the same after four consecutive monthly statements, the holder shall send to the buyer a check or money order in the full amount of the credit balance.

(c) The provisions of this section shall apply only to credit balances remaining the same after four consecutive monthly statements for billing periods commencing after July 1, 1975.

#### Section 12-506.2

Changes in the rate applicable to an open end account, including a credit card plan which provides for sales, cash advances, or both, are limited as follows:

(1) Any balance existing before July 1, 1982 is to be repaid at the then applicable rate of interest or finance charge regardless of any subsequent increase in the rate applicable to the account.

(2) If the rate applicable to any balance for which the borrower or buyer becomes obligated on or after July 1, 1982 is increased, the borrower or buyer may repay the existing balance at the rate in effect prior to the time the increase becomes effective. If the borrower or buyer increases the balance of his account by making purchases or requesting cash advances, the increased rate shall apply only to the portion of the balance incurred after the rate increases.

#### Section 12-507

(a) If, as part of a retail credit account, a promissory note is taken by the seller or financial institution, the note shall refer to the account out of which it arises.

(b) The note may not contain a confession of judgment or any power of attorney to appear for the buyer or for any surety or guarantor for the buyer to confess judgment.

(c) If the note is assigned, it is subject to all defenses which the buyer might have asserted against the seller or financial institution.

#### Section 12-508

If a retail credit account agreement provides for the payment of attorney's fees, that provision may permit the holder only to receive reasonable attorney's fees to be set by a court in the event of the filing of suit.

#### Section 12-509

Notwithstanding any agreement to the contrary between a seller and the issuer of a credit card, the seller is permitted to offer a cash discount to consumers who pay cash instead of using the credit card.

#### Section 12-510

If a buyer inquires in writing about the status of his account and the holder fails to answer the inquiry in clear and definite terms within 60 days after receiving it, the buyer is not required to pay a finance charge for that 60-day period or for any further period during which the holder fails to so answer.

#### Section 12-511

(a) In this section, "billing error" means the initial occurrence of an error in a billing statement given to a buyer by the holder of an account, which error results from:

  (1) An omission or commission by the holder in posting any debit or credit;

  (2) The computation of any amount; or

  (3) Any similar error of an accounting nature.

(b) The provisions of this section do not apply to a status inquiry made under Sec. 12-510 of this subtitle if a billing error is not asserted by the buyer.

(c) If, on receipt of a billing statement from a holder, a buyer believes the billing is in error, he may inquire as to the computation of the statement. The inquiry by the buyer shall:

  (1) Be made within 60 days of receipt of the billing statement which contains the claimed error;

  (2) Be in writing and sent to the holder by mail at the address designated on the statement pursuant to Sec. 12-503(i) of this subtitle; and

  (3) Set forth sufficient information to enable the holder to identify:

    (i) The buyer and the account;

    (ii) The amount and transaction shown in the billing statement which the buyer in good faith believes to be a billing error; and

    (iii) The facts providing the basis for the buyer's belief that the billing statement is in error.

(d) On receipt of an inquiry under this section, the holder shall:

  (1) Within 30 days after its receipt, mail a written acknowledgement to the buyer; and

  (2) Within 60 days after its receipt, before taking any action to collect the amount believed by the buyer to be a billing error:

    (i) Make appropriate corrections in the account and mail to the buyer a written notice which states that the amount believed to be in error has been corrected and will be so shown on the next billing statement mailed to him; or

    (ii) Send to the buyer a written notice which sets forth in a clear and definitive manner the reasons why the holder believes that the account was correctly shown in the statement.

(e) Notwithstanding the receipt of an inquiry, the holder may:

  (1) Transmit to the buyer regular periodic billing statements which include the amount believed by the buyer to be a billing error; and

  (2) Undertake collection of any amount which the buyer does not dispute under this section.

(f) On or before the first billing statement for a new account, the holder shall send to the buyer a written notice which describes the procedures to be followed by a buyer under this section to claim a billing error.

(g) On receipt of an inquiry under this section, until the holder has complied with the provisions of this section, he may not communicate to any person, including any credit bureau or credit reporting agency, unfavorable credit information concerning the buyer and based on the buyer's failure to pay the amount believed by him to be a billing error.

(h) If a holder of an account receives a written inquiry from a buyer under this section and fails to comply with the requirements of this section, then:

  (1) If the disputed amount is not a billing error, the holder:

    (i) May proceed to collect the disputed amount; and

    (ii) Shall forfeit the right to collect any finance charge assessed on the account in connection with the disputed amount from the date of the mailing of the written inquiry to the date the holder complies with this section; or

  (2) If the disputed amount is a billing error, the holder:

    (i) May not collect the amount of the error or any finance charge on that amount; and

    (ii) Is liable to the buyer for his actual damages sustained as a result of the failure of the holder to comply with this section.

#### Section 12-511.1

A holder may not charge a buyer a fee for any reply to an account status inquiry or billing status inquiry made under Sec. 12-510 or Sec. 12-511 of this subtitle.

#### Section 12-512

No act, agreement, or statement of a buyer may constitute a valid waiver of any benefit or protection provided to him under this subtitle.

#### Section 12-513

(a) Except as provided in subsection (b) of this section, if a holder violates any provision of this subtitle, no holder may collect or receive any finance charge from the buyer.

(b)

  (1) If the seller or any subsequent holder unintentionally and in good faith fails to comply with any provision of Sec.Sec. 12-504 through 12-507 of this subtitle, the holder may correct the error within 10 days after:

    (i) He notices it; or

    (ii) The buyer notifies him in writing of the error.

  (2) If the holder corrects the error within the 10-day period, he may not be subject to any penalty under this subtitle.

#### Section 12-514

(a) If a complaint for violation of any provision of this subtitle is filed with the Commissioner of Financial Regulation, he may investigate the complaint and hold a hearing on it in accordance with Sec. 11-413 of the Financial Institutions Article.

(b) The Commissioner shall give to the person complained against at least 10 days' written notice of the complaint and the time and place of any hearing. The notice shall be in writing and sent by registered or certified mail to his principal place of business.

(c)

  (1) If, after the hearing, the Commissioner finds that the person has engaged or is engaging in any act or practice prohibited by this subtitle, he shall order the person to cease and desist from the act or practice.

  (2) The order of the Commissioner shall comply with the Administrative Procedure Act.

(d)

  (1) If no appeal is filed, the order becomes final after expiration of the time allowed by the Administrative Procedure Act for appeals from the Commissioner's orders.

  (2) If an appeal is filed, the order becomes final after final decision of the court affirming the order or dismissing the appeal.

(e) For purposes of this section, the Commissioner's order may not apply to any:

  (1) Incorporated bank, savings institution, or trust company; or

  (2) A savings and loan association.

#### Section 12-515

Any person who knowingly violates or participates in the violation of any provision of this subtitle is guilty of a misdemeanor and on conviction is subject to a fine not exceeding $100 for the first offense and not exceeding $500 for any subsequent offense.

### Subtitle 6. Retail Installment Sales

#### Section 12-601

(a) In this subtitle the following words have the meanings indicated.

(b) "Agreement" means an installment sale agreement, a renewed or extended installment sale agreement, and any renewal, extension, or refund agreement made in connection with an installment sale agreement.

(c)

  (1) "Buyer" means a person who buys or leases goods under an installment sale agreement, even though the person has entered into one or more renewal, extension, or refund agreements.

  (2) "Buyer" includes a prospective buyer.

(d) "Cash price" means the minimum price for which goods subject to an installment sale agreement, or other goods of like kind and quality, may be purchased for cash from the seller by the buyer.

(e)

  (1) "Collateral security" means any security interest in, encumbrance on, or pledge of property or goods that is given to secure performance of an obligation of a buyer or a surety for a buyer under an agreement.

  (2) "Collateral security" includes the undertaking of a surety for a buyer.

  (3) "Collateral security" does not include any goods or interest in goods that are the subject of an installment sale agreement.

(f) "Consumer goods" means goods bought for use primarily for personal, family, or household purposes, as distinguished from industrial, commercial, or agricultural purposes.

(g) "County" includes Baltimore City.

(h) "Debt cancellation agreement" means an agreement between a seller and a buyer which provides for cancellation of the outstanding balance payable under an installment sale agreement in the event of theft or total destruction of the motor vehicle that is the subject of the installment sale agreement minus the proceeds of any insurance maintained on the motor vehicle or, if the buyer does not have insurance, the actual cash value of the motor vehicle at the time of loss, determined as provided in the agreement.

(i) "Down payment" includes all amounts paid in cash, credits, or the agreed value of goods, by or for a buyer and to or for the benefit of a seller at or before execution of an installment sale agreement.

(j) "Finance charge" means the amount in excess of the cash price of the goods sold, agreed on by a seller and a buyer, to be paid by the buyer for the privilege of purchasing the goods under an installment sale agreement.

(k)

  (1) "Goods" means all tangible personal property that has a cash price of $100,000 or less.

  (2) "Goods" does not include money or things in action.

(l) "Holder" means a person, including a seller and a sales finance company, entitled to enforce an agreement against a buyer.

(m)

  (1) "Installment sale agreement" means a contract for the retail sale of consumer goods, negotiated or entered into in this State, under which:

    (i) Part or all of the price is payable in one or more payments after the making of the contract; and

    (ii) The seller takes collateral security or keeps a security interest in the goods sold.

  (2) "Installment sale agreement" includes:

    (i) A prospective installment sale agreement;

    (ii) A purchase money security agreement; and

    (iii) A contract for the bailment or leasing of consumer goods under which the bailee or lessee contracts to pay as compensation a sum that is substantially equal to or is more than the value of the goods.

  (3) "Installment sale agreement" does not include:

    (i) A bona fide C.O.D. transaction or a layaway agreement as defined in Sec. 14-1101(g) of this article; or

    (ii) A lease for industrial, commercial, or agricultural purposes.

(n) "Mechanical repair contract" has the meaning stated in Title 15, Subtitle 3 of the Transportation Article.

(o) "Motor vehicle" has the meaning stated in Title 11 of the Transportation Article.

(p) "Outstanding balance", when used in reference to a debt cancellation agreement, does not include:

  (1) Any delinquent or deferred payments;

  (2) Past due charges;

  (3) Late payment charges;

  (4) Unearned interest;

  (5) Unearned rental payments;

  (6) The portion of any financed taxes or charges, including charges for credit life insurance, credit health insurance, credit involuntary unemployment benefit insurance, and mechanical repair contracts, actually refunded to the buyer or credited as a reduction to the loan balance; or

  (7) By agreement of the parties, the amount of any primary insurance deductible.

(q) "Person" includes an individual, corporation, business trust, statutory trust, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal or commercial entity.

(r) "Principal balance" means the sum of items described in Sec. 12-606(b)(5), (6), and (7) of this subtitle.

(s) "Retail sale" means the sale of goods for use or consumption by the buyer or for the benefit or satisfaction that the buyer may derive from the use or consumption of the goods by another, but not for resale by the buyer.

(t) "Sales finance company" means a person who is engaged, whether by purchase, discount, pledge, loan, or otherwise, in the business of acquiring, investing in, or lending money or credit on the security of any interest in:

  (1) An installment sale agreement made between other parties;

  (2) A retail credit account transaction, as defined in Sec. 12-501 of this title, made between other parties; or

  (3) A transaction that deals with home improvement, as defined in Sec. 8-101 of the Business Regulation Article, made between other parties, if collateral security is required by and given to the contractor as a condition to the transaction.

(u) "Security interest" has the meaning stated in Sec. 1-201(37) of this article.

(v) "Seller" means a person who sells or leases or agrees to sell or lease goods under an installment sale agreement.

(w)

  (1) "Surety" includes a guarantor.

  (2) "Surety" does not include a seller who sells, transfers, or assigns an agreement.

(x) "Time balance" means the sum of the items described in Sec. 12-606(b)(10) and (11) of this subtitle.

(y) "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.

#### Section 12-602

A seller or sales finance company may not make in any advertisement, publication, display, broadcast, solicitation, or representation any false, misleading, or deceptive statement relating to:

(1) Any finance, delinquency, or extension charge or rate; or

(2) The security interest, collateral, terms, or conditions on which it will make or finance any installment agreement.

#### Section 12-603

A seller or sales finance company may not discriminate against a buyer solely on the basis of the race, sex, sexual orientation, gender identity, religious beliefs, disability, marital status, geographic area of residence, neighborhood of residence, or age of the buyer. Refusal to grant credit to a buyer who is under the age of 18 is not discrimination solely on the basis of age.

#### Section 12-604

An installment sale agreement shall be evidenced by an instrument in writing which contains all of the agreements of the parties. It shall be signed by all parties before the seller delivers to the buyer any of the goods covered by the agreement.

#### Section 12-605

(a)

  (1) At or before the time the buyer signs an installment sale agreement, the seller shall deliver to him an exact copy of it.

  (2) If the seller does not sign the copy, and if, within 15 days after the buyer signs the installment sale agreement, the seller does not deliver to the buyer a copy of it signed by the seller, the installment sale agreement and the instruments signed by the buyer are void without any action by the buyer, and the seller immediately shall refund to the buyer all of his payments and deposits.

(b)

  (1) Until the buyer signs an installment sale agreement and receives a copy of it signed by the seller, he has an unconditional right to cancel it and receive immediate refund of all payments and deposits made on account or in contemplation of it.

  (2) The buyer's request for the refund operates as cancellation of the installment sale agreement.

(c) Until the buyer signs an installment sale agreement and receives a copy of it signed by the seller, if a payment or deposit is accepted by the seller, he immediately shall deliver to the buyer a receipt for it which clearly states in 12-point type or larger the buyer's rights under subsection (b) of this section.

(d) An acknowledgment of delivery of a copy of an installment sale agreement shall be printed in 12-point type or larger, and, if the acknowledgment is contained in the agreement, it shall be printed immediately below the signature to the agreement and independently signed.

#### Section 12-606

(a) An installment sale agreement shall:

  (1) State the full name, place of residence, and post office address of each party to it;

  (2) State the date when signed by the buyer; and

  (3) Contain a clear description of the goods sold sufficient to identify them readily.

(b) An installment sale agreement also shall state in simple tabular form the following separate items in the following order:

  (1) The cash price of the goods sold;

  (2) All charges for delivery, installation, or repair of or other services to the goods which, separate from the cash price, are included in the installment sale agreement;

  (3) The sum of the cash price in item (1) and the charges for services in item (2);

  (4) The amount of the buyer's down payment, together with:

    (i) A statement of the respective amounts credited for cash, credits, and the agreed value of goods;

    (ii) A statement of amounts actually paid or to be paid by the seller pursuant to an agreement with the buyer, on behalf of the buyer to discharge any amount financed under an outstanding loan agreement or installment sale agreement or the unpaid portion of the early termination obligation under any lease or other obligation of the lessee, with respect to a motor vehicle or other property traded in;

    (iii) A statement of the net amount available to reduce the cash price, which is item (i) of this item less item (ii) of this item; and

    (iv) A description of all goods sufficient to identify them;

  (5) The unpaid balance of the cash price payable by the buyer to the seller, which is item (3) less item (4);

  (6) The cost to the buyer of any insurance for the payment of which credit is to be extended to the buyer, together with:

    (i) The amount or extent of the insurance;

    (ii) The expiration date of the insurance;

    (iii) The party to whom the insurance is payable; and

    (iv) A concise description of the coverage, including, if the goods sold include a motor vehicle, a definite statement in 12-point bold type or larger as to whether the insurance includes coverage for personal liability and for property damage caused to others;

  (7) The amount of any official fees charged to the buyer which the seller expects to be paid to a public official for filing or recording the installment sale agreement or other instrument securing or evidencing the buyer's obligation or an equal or lesser amount for a nonfiling insurance premium at rates approved by the Insurance Commissioner and on which no commissions may be paid;

  (8) The cost to the buyer of any optional debt cancellation agreement sold in connection with a motor vehicle;

  (9) The principal balance owed, which is the sum of items (5), (6), (7), and (8) plus, if the amount stated in item (4)(iii) of this subsection is a negative number, add that amount as a positive number;

  (10) The finance charge stated as a sum in dollars; and

  (11) The time balance owed by the buyer to the seller, which is the sum of items (9) and (10), the number of installment payments required to pay it, and the amount and time of each payment.

(c) In addition to the items in subsections (a) and (b) of this section, the installment sale agreement shall:

  (1) State clearly any collateral security taken for the buyer's obligation under it; and

  (2) Contain the following notice in 12-point bold type or larger, directly above the space reserved in the agreement for the signature of the buyer:

  Notice to Buyer

(1) You are entitled to a copy of this agreement at the time you sign it.

(2) Under the State law regulating installment sales, you have certain rights, among others:

  (1) To pay off the full amount due in advance and obtain a partial rebate of the financing charge;

  (2) To redeem the property if repossessed for a default;

  (3) To require, under certain conditions, a resale of the property, if repossessed.

(d) A seller may not be deemed to be making loans for purposes of Sec. 11-301(b)(6)(i) of the Financial Institutions Article merely by engaging in activities described in subsection (b)(4)(ii) of this section.

#### Section 12-607

(a) A holder may not take or receive any instrument from a buyer or a surety for a buyer, which contains:

  (1) Except as provided in subsection (b) of this section, any blank space to be filled in after the instrument is signed by a party to it;

  (2) A confession of judgment or any power of attorney to appear for the buyer or for a surety for the buyer to confess judgment;

  (3) A schedule of payments under which any installment, except the down payment, is more than double the average of all other installments, excluding the down payment, or under which the interval between any consecutive installments is less than one-half the average of all other intervals, unless the buyer is given an absolute right, on default in any of the excess or irregular installments, to have the schedule of unpaid installments, including that in default, revised to conform in both amounts and intervals to the average of all preceding installments and intervals;

  (4) A provision for repossession of the goods or for the acceleration of the time when any part or all of the time balance becomes payable, if the condition of the repossession or acceleration is that the holder considers himself insecure;

  (5) A provision by which the buyer waives or purports to waive a tort claim or by which the seller has the right to enter unlawfully upon any premises;

  (6) A provision by which a person acting on behalf of a holder in connection with the formation or execution of an agreement is treated as an agent of the buyer; or

  (7) An assignment or order for payment of wages, whether earned or to be earned.

(b) If, at the time of its execution, an installment sale agreement contains a sufficient description of the goods as required by Sec. 12-606 of this subtitle, further serial numbers or other identifying marks on the goods may be inserted in the agreement on delivery of the goods.

#### Section 12-608

(a) This section applies to an installment sale agreement negotiated and entered into without personal solicitation by a salesman or other representative of a seller, if the seller's prices, terms of payment, and other terms are clearly set forth in a catalog or other printed solicitation of business which is generally available to the public and contains at least two copies of the form of the agreement.

(b) If the buyer enters into a sale described in subsection (a) of this section, all of the provisions of this subtitle apply, except that:

  (1) The seller is not required to deliver a copy of the installment sale agreement to him;

  (2) If the installment sale agreement received by the seller from the buyer contains blank spaces to be filled in or corrections to be made, the seller may insert or correct in the appropriate blank spaces the amounts of money and other terms set forth in the seller's catalog then in effect; and

  (3) Instead of the copy of the installment sale agreement required by Sec. 12-605 of this subtitle, the seller shall furnish to the buyer, within 15 days from the date of shipment of the goods, a written statement of the items inserted in the blank spaces.

#### Section 12-609

(a) The finance charge imposed on the sale of a motor vehicle may not exceed an amount computed using the following annual simple interest rates of finance charge:

  (1) Class 1: A new motor vehicle -- 16.5 percent on the outstanding balance;

  (2) Class 2: A used motor vehicle designated by the manufacturer by a model year not more than two years before the year in which the sale is made -- 22 percent on the outstanding balance; and

  (3) Class 3: A used motor vehicle designated by the manufacturer by a model year more than two years before the year in which the sale is made -- 27 percent on the outstanding balance.

(b)

  (1) A service or other charge not specifically provided for in this section may not be included in a retail installment sale of a motor vehicle.

  (2)

    (i) This section does not prohibit a seller from financing the cost to the buyer of a mechanical repair contract sold in connection with a motor vehicle, provided that the cost of the mechanical repair contract is separately itemized in the financing agreement.

    (ii) A seller may finance the cost of a mechanical repair contract sold in connection with a motor vehicle whether or not the motor vehicle is covered by an original manufacturer's warranty.

  (3) A seller may not require a buyer of a motor vehicle, as a condition of receiving a loan, to enter a mechanical repair contract.

  (4) A seller may contract for, charge for, receive, and finance the cost to the buyer of an optional debt cancellation agreement sold in connection with a motor vehicle, provided that the cost of the debt cancellation agreement is separately itemized in the financing agreement.

(c) Except for an overcharge which results from a bona fide error in computation and which is corrected within 60 days from the date of the agreement, if a holder collects a charge greater in amount than the maximum permitted by this section, he shall forfeit to the buyer all finance charges paid or payable under the agreement.

(d)

  (1) A holder may not collect from the buyer a greater amount for insurance than that allowed by the State Insurance Department for the insurer carrying the risk.

  (2) The insurance for which the holder may collect from the buyer is limited to automobile bodily injury and property damage liability, automobile physical damage, life and accident, medical reimbursement, and nonfiling insurance.

  (3) Except for an overcharge which results from a bona fide error in computation and which is corrected within 60 days from the date of the agreement, if a holder collects from the buyer a charge for insurance greater than that permitted under this subsection, he shall pay to the buyer a sum equal to ten times the amount of the overcharge.

(e) A finance charge in excess of the rates provided in this section may be imposed on the sale of new and used trucks, new and used truck tractors, new and used trailers, or new and used semitrailers purchased for industrial, commercial, or agricultural purposes.

(f) Notwithstanding subsection (a) of this section, the finance charge imposed on a motor vehicle sold under a contract may not exceed the following annual simple interest rates of finance charge:

  (1) Class 1: A new motor vehicle -- 24 percent on the outstanding balance; and

  (2) Class 2: A used motor vehicle designated by the manufacturer by a model year not more than 2 years before the year in which the sale is made -- 24 percent on the outstanding balance.

(g) A seller may assign a retail installment agreement and receive a portion of the finance charge only if the fact is disclosed in the agreement. The specific amount to be received need not be disclosed.

#### Section 12-610

Except as provided in Sec. 12-609 of this subtitle as to a motor vehicle, and notwithstanding the provisions of any other statutory law, in the retail sale of consumer goods bought under an installment sale agreement, including any add-on contract described in Sec. 12-618 of this subtitle, the finance charge may not exceed the greater of:

(1) An amount computed using the following annual simple interest rates of finance charge:

  (i) 22 percent on that part of the outstanding balance not exceeding $1,000; and

  (ii) 18 percent on that part of the outstanding balance exceeding $1,000; or

(2) A minimum charge of $10 or, if the date of the last installment is eight months or less after the effective date of the installment sale agreement, $8.

(3) Notwithstanding the provisions of subsection (1) of this section, a seller may charge a finance charge at a rate not in excess of 24 percent per annum simple interest on the outstanding balance under an installment sale agreement made on or after July 1, 1982.

#### Section 12-610.1

Any agreement made before July 1, 1982, which is refinanced at a higher rate allowed by Sec. 12-609(f) or Sec. 12-610(3) of this subtitle must comply with the following requirements:

(1) The holder must give the following disclosures in writing to the buyer prior to the execution by the buyer of the new agreement:

If you do agree to consolidate your existing obligation, you will be paying an annual percentage rate of  . . . .% on the existing net balance of $. . . . . ., instead of the rate of  . . . . .% which you are now paying.

Schedule of Monthly Payments

Separate Purchase Agreements             Consolidated Purchase Agreement

$ . . . . per month for                 $ . . . . per month for

the next . . . . months                 the next . . . . months 

then

$ . . . . per month for

. . . . months after that 

Total of Payments 

Separate Agreements                 Consolidated Agreement

$ . . . . total of                      $ . . . . total of payments

payments for your                      for your consolidated

existing purchases                      purchases

. . . . total of payments

for your new purchases

(2) The holder must allow the buyer the choice of repaying his existing purchase balance at the originally agreed upon rate and obtaining any additional extension of credit as a separate agreement, notwithstanding any law which limits the holder's ability to have more than 1 agreement with the same buyer;

(3) An existing balance may be refinanced only upon the buyer's request;

(4) The holder must refund or credit to the buyer's account any unearned finance charge and any returned insurance premiums upon the cancellation of insurance sold in connection with the purchases;

(5) The holder must allow the buyer the right to cancel the consolidated purchase agreement within 3 business days and to elect the separate account option pursuant to subsection (2). The holder shall provide to the buyer conspicuous notice of the provisions of this subsection; and

(6) Nothing in this subsection shall prohibit the receipt of goods or services by the buyer at the time the consolidated purchase agreement is made.

#### Section 12-610.2

A holder may not enter into a retail installment sales agreement, providing for an initial rate of finance charge pursuant to Sec. 12-609(f) or Sec. 12-610(3) of this subtitle, which contains a provision that permits the holder to increase or decrease the applicable rate of finance charge from time to time during the term of an agreement.

#### Section 12-611

(a)

  (1) The finance charge under an installment sale agreement relating to consumer goods or a motor vehicle may be computed:

    (i) On the actual unpaid principal outstanding from time to time; or

    (ii) In advance, at the time the agreement is made, by adding to the principal balance the amount of the finance charge that would be earned if the installment sale agreement were repaid exactly according to its terms at the applicable rate.

  (2) Nothing in this subtitle shall be construed to prohibit any particular method of computing the finance charge on an installment sale agreement so long as the amount of the finance charge does not result in a rate of finance charge in excess of that permitted by Sec. 12-609 or Sec. 12-610 of this subtitle, as applicable.

(b) Amounts due under an installment sale agreement relating to consumer goods may be payable in successive monthly, semimonthly, or weekly installments.

(c) As part of the regular practice of a holder, he may include fractional periods of 15 days or more as a whole month if he also entirely excludes fractional periods of 14 days or less.

(d) Unless the buyer has notice of an assignment of an installment sale agreement relating to consumer goods, his payments to the last known holder of the agreement shall discharge his obligation to the extent of the payments.

#### Section 12-612

(a) Notwithstanding the provisions of Sec. 12-601(k) of this subtitle, for the purposes of this section, "goods" means any personal property bought for use primarily for personal, family, or household purposes regardless of the cash price of the goods.

(b) A buyer may prepay at any time, without penalty, all or part of the outstanding balance payable under an installment sale agreement relating to consumer goods.

(c)

  (1) Except as provided in subsection (d) of this section, if the buyer pays the balance in full before maturity, the holder immediately shall refund to him a portion of the finance charge, including the charge provided for in Sec. 12-610(2) of this subtitle.

  (2) The amount of the refund shall be calculated according to the actuarial method based on the original schedule of payments.

(d) If a prepayment is made, the holder is entitled to retain a finance charge of at least $6.

(e) If the amount of the credit prepayment is less than $1, no refund need be made.

#### Section 12-613

(a) The provisions of this section are in addition to and not in substitution for any other applicable provision of statutory law.

(b) If a holder undertakes at the expense of the buyer to sell, purchase, or supply insurance on the goods sold, the amount charged the buyer for the insurance may not exceed the lesser of:

  (1) The premium actually payable by the holder; or

  (2) The rate charged for similar insurance coverage by those companies whose rates are promulgated by a nationally recognized organization of underwriters.

(c)

  (1) If the buyer is charged for insurance, the holder shall deliver or mail to the buyer at his address shown on the agreement, within 25 days after delivery of the goods, a copy of each insurance policy or an owner's certificate representing the policy, which sets forth:

    (i) The amount of the premium, type of insurance, scope of coverage, and each term, exception, limitation, restriction, and condition of the insurance contract; and

    (ii) If the goods sold include a motor vehicle, a definite statement in 12-point bold type or larger as to whether the insurance includes coverage for personal liability and for property damage caused to others.

  (2) If the holder assigns the agreement and has not complied with the requirements of this subsection, the assignee shall deliver or mail in like manner to the buyer the copy or certificate, within the same period or within five days after the assignment, whichever is later.

(d) Each cancellation, surrender, or other refund and each dividend received under the insurance policy by the holder immediately shall be remitted to the buyer or credited against any amount then due by the buyer to the holder under the agreement.

(e)

  (1) If the amount charged for insurance exceeds the amount authorized by subsection (b) of this section, the buyer may deduct the overcharge from the amount of any payment.

  (2) If the buyer does not deduct the overcharge from his payment, the holder shall credit the amount of the overcharge against the last installment or installments under the agreement.

(f)

  (1) If the seller or his assignee does not comply with the requirements of subsection (c) of this section, the buyer may deduct the full amount charged to him for the insurance from the amount of any payment.

  (2) If the buyer does not deduct the amount charged from his payment, the holder shall credit the amount charged against the last installment or installments under the agreement.

#### Section 12-614

(a) Except as provided in subsection (b) of this section, a holder may not directly or indirectly contract for, charge, or receive from a buyer or a surety for a buyer on account of or in connection with any agreement, any charge or amount for the extension of credit, interest, fees, commissions, delinquency, collection, repossession, and foreclosure or otherwise.

(b) A holder may charge the buyer the following charges or fees:

  (1) Subject to the provisions of Sec. 12-630 of this subtitle, the time balance of an installment sale agreement;

  (2) If allowed by a court as costs, the official fees paid to a public official in connection with a proceeding to:

    (i) Recover possession of the goods;

    (ii) Enforce any obligation of the buyer or his surety; or

    (iii) Realize on any security interest or collateral security;

  (3) If no charge was made in the agreement on account of the insurance for the period covered, the premiums for insurance as provided by Sec. 12-613 of this subtitle;

  (4) The amount paid for copies of agreements and statements of accounts pursuant to Sec. 12-621 of this subtitle;

  (5) Charges permitted by:

    (i) Sec.Sec. 12-623 and 12-626 of this subtitle for delinquencies and repossession expenses; and

    (ii) Law for extensions and refunds; and

  (6) An amount not exceeding $15 if payment is made with a check that is dishonored on the second presentment.

#### Section 12-615

(a)

  (1) If, in addition to any down payment, a buyer is required under an installment sale agreement to make a payment to a seller before the seller is obligated to deliver the goods sold, the buyer may cancel the installment sale agreement before delivery or tender of the goods by the seller.

  (2) Notwithstanding any provision of the installment sale agreement, if it is canceled pursuant to this subsection, the seller shall refund to the buyer within ten days after notice of the cancellation an amount equal to at least 90 percent of all payments made by the buyer under the installment sale agreement, including any down payment.

(b) If, because of a down payment made under an installment sale agreement, the buyer is entitled to delivery of the goods before making any further payment and the buyer refuses to accept delivery of the goods in accordance with the installment sale agreement, all or part of his down payment may be forfeited to the extent provided in the installment sale agreement.

#### Section 12-616

(a) If the holder does not pay out to a public official the full amount charged to the buyer for filing and recording instruments, the buyer shall receive credit for the amount so charged to him and not paid out.

(b) The holder shall credit the amount of the overcharge against the last installment or installments under the agreement.

#### Section 12-617

(a)

  (1) If a payment is made on account of an agreement, the person receiving the payment shall give the buyer on his request, or, if payment is made in cash, without request, a complete written receipt for the payment.

  (2) If the buyer specifies that the payment is made on one of several obligations, the receipt shall so indicate. However, this provision does not affect the allocation of payments under an add-on contract pursuant to Sec. 12-618 of this subtitle.

(b)

  (1) Unless a written notice of actual or intended assignment of an agreement is given to the buyer, he may pay or tender any amount due under the agreement or give any notice required by the agreement or this subtitle to the last known holder of the agreement.

  (2) A payment, tender, or notice so given is binding on any subsequent holder or assignee as fully as if made to him.

#### Section 12-618

(a) In this section, "add-on contract" means an installment sale agreement which allows the inclusion in it of additional goods subsequently purchased and under which the amount due on the subsequent purchase is combined with an unpaid balance on any prior purchase so as to permit the seller to retain a security interest in all goods under that agreement.

(b) If goods are purchased under an add-on contract, the seller shall deliver to the buyer and attach to the add-on contract, at the time of the additional purchase, a statement which:

  (1) Contains all information regarding the additional purchase required by Sec. 12-606 of this subtitle; and

  (2) Shows:

    (i) The amount due on the installment sale agreement immediately before the additional purchase;

    (ii) The amount due after the additional purchase;

    (iii) The payments agreed to be made subsequently; and

    (iv) The number of additional months required to complete the payments.

(c)

  (1) If a payment is made on an add-on contract after an additional purchase is added, the payment is considered as applied to each of the separate purchases in the same proportion which the cash price of each purchase bears to the total cash price of all goods in which the seller retains a security interest.

  (2) Before repossessing or attempting to repossess any goods under an add-on contract, the seller shall apply all payments made to him by the buyer in the manner provided by paragraph (1) of this subsection.

  (3) If the amount due on any separate purchase is paid fully, the goods paid for are the absolute property of the buyer and may not be subject to repossession for any subsequent default on the agreement.

(d) The buyer under an add-on contract may prepay at any time the amount due on any of the separate purchases in the manner provided by Sec. 12-620 of this subtitle.

(e) If the goods subject to an add-on contract are repossessed, the buyer may redeem any of the separate purchases by payment of the amount due on that purchase alone.

#### Section 12-619

(a) The holder of an installment sale agreement on which the finance charge is computed in advance may:

  (1) By agreement with the buyer, extend the scheduled due date or defer the scheduled payment of all or part of the installments payable under it; and

  (2) Charge the buyer an extension or deferral charge.

(b) The extension or deferral charge may not exceed an amount equal to 1 percent per month of the amount extended or deferred for the period of extension or deferral.

(c) The period of extension or deferral may not exceed the period from the date when the extended or deferred amount would have been payable in the absence of the extension or deferral to the date when the amount is made payable under the agreement of extension or deferral.

#### Section 12-620

(a) Notwithstanding the provisions of Sec. 12-601(k) of this subtitle and any provision of an installment sale agreement to the contrary, a buyer may prepay at any time, without penalty, all or any part of the unpaid time balance payable under the installment sale agreement if such agreement is for the retail sale of personal property purchased primarily for personal, family, or household purposes, regardless of the original price of that personal property.

(b)

  (1) Except as provided in paragraph (2) of this subsection, if the buyer pays the time balance in full before maturity, the holder immediately shall refund to him a portion of the finance charge. The amount of the refund shall be calculated by the actuarial method based on the original schedule of payments.

  (2) If the amount of the credit for prepayment is less than $1, no refund need be made.

#### Section 12-621

(a) At any time after execution of an agreement, but not later than one year after the last payment is made under it, the holder shall deliver or mail to the buyer at his last known address, within 10 days after the holder receives a written request from the buyer, a copy of the agreement and a signed statement which sets forth:

  (1) The amount paid by or on behalf of the buyer, and the allocation of the amount between principal obligations and charges, including charges for delinquencies, expenses of repossession, extensions, and refunds;

  (2) Any amount which remains payable, and the allocation of the amount between principal obligations and charges, including charges for delinquencies, expenses of repossessions, extensions, and refunds; and

  (3) The number of installments payable in the future, and the amount and time of each.

(b) The statement shall be supplied free of charge, except that a fee of 50 cents may be charged for any statement supplied within 60 days after a prior statement was supplied.

#### Section 12-622

(a)

  (1) After the buyer has paid all sums due under an agreement, the holder shall deliver or mail to the buyer at his last known address, within 15 days after the holder receives a written request from the buyer:

  (i) A signed statement which describes the goods and states that all payments due or to become due under the agreement are paid in full;

  (ii) Good and sufficient instruments to release all security interests in the goods and collateral security owned by the buyer; and

  (iii) Good and sufficient assignments and instruments necessary to vest the buyer with complete evidence of title.

  (2) If the release required by this subsection pertains to a motor vehicle, the release shall be filed electronically with the Motor Vehicle Administration in accordance with Sec. 13-108.1 of the Transportation Article within 5 business days after the holder has received full payment.

(b) After the buyer has paid all sums due under an agreement, the holder shall deliver or mail to each surety for the buyer and to each person who is the owner of collateral security, within 15 days after the holder receives a request from the buyer, surety, or other person:

  (1) A signed statement which shows that the suretyship is completely discharged; and

  (2) Good and sufficient instruments to release any collateral security owned by that person.

(c) If the holder fails to comply with the requirements of this section, he shall forfeit $10 to the buyer and is liable for damages.

#### Section 12-623

(a) If an agreement on which the finance charge is computed in advance so provides, the holder of the agreement may collect a delinquency or collection charge of the lesser of $10 or 5 percent of the amount of any payment in default, if the default has continued for at least 10 days.

(b)

  (1) In addition to the delinquency or collection charge, the agreement may provide for the payment of:

    (i) Attorney's fees not exceeding 15 percent of the amount due and payable under the agreement; and

    (ii) Court costs.

  (2) Attorney's fees may be collected only if the agreement is referred for collection to an attorney who is not a salaried employee of the holder.

#### Section 12-624

(a) The holder may repossess goods sold under an agreement if:

  (1) The buyer is in default in:

    (i) The payment of any sum due under the agreement;

    (ii) The performance of any other condition which the agreement lawfully requires him to perform in order to obtain unencumbered title to the goods; or

    (iii) The performance of any promise the breach of which is expressly made a ground for repossessing the goods; or

  (2) The goods were seized by a police department, bureau, or force.

(b)

  (1) The holder may repossess goods only by:

    (i) Legal process; or

    (ii) Self-help, without use of force.

  (2) Nothing in this section authorizes a violation of criminal law.

(c)

  (1) At least 10 days before he repossesses any goods, the holder may serve a written notice on the buyer of his intention to repossess the goods.

  (2) The notice shall:

    (i) State the default and any period at the end of which the goods will be repossessed; and

    (ii) Briefly state the rights of the buyer in case the goods are repossessed.

  (3) The notice may be delivered to the buyer personally or sent to him at his last known address by registered or certified mail.

(d) Within five days after he repossesses the goods, the holder shall deliver to the buyer personally or send to him at his last known address by registered or certified mail, a written notice which briefly states:

  (1) The right of the buyer to redeem the goods, and the amount payable for them;

  (2) The rights of the buyer as to a resale, and his liability for a deficiency; and

  (3) The exact location where the goods are stored and the address where any payment is to be made or notice delivered.

#### Section 12-625

(a) For 15 days after the holder gives the notice required by Sec. 12-624(d) of this subtitle, the holder shall retain any repossessed goods in the county where the goods were sold to the buyer or were repossessed.

(b) During the period provided for in subsection (a) of this section, the buyer may:

  (1) Redeem and take possession of the goods; and

  (2) Resume the performance of the agreement.

(c) To redeem the goods, the buyer shall:

  (1) Tender the amount due under the agreement at the time of redemption, without giving effect to any provision which allows acceleration of any installment otherwise payable after that time;

  (2) Tender performance of any other promise for the breach of which the goods were repossessed; and

  (3) If the discretionary notice provided for in Sec. 12-624(c) of this subtitle was given, pay the actual and reasonable expenses of retaking and storing the goods.

(d) This section does not apply if the goods were seized by a police department, bureau, or force and the goods were repossessed because of that seizure, in which event, the buyer shall have no right to redeem or take possession, even if the buyer tenders payment of the entire balance due under the agreement.

(e) Notwithstanding subsections (b) and (c) of this section:

  (1) The holder shall have the right to require the buyer to tender payment of the entire balance due under the agreement if:

    (i) The date of the default in the payments due under the agreement that led to the present repossession occurred within 18 months after the last repossession; or

    (ii) The buyer was guilty of fraudulent conduct, intentionally and wrongfully concealed, removed, damaged, or destroyed the goods, or attempted to do so, and the goods were repossessed because of that conduct.

  (2) Under paragraph (1) of this subsection, the payment by the buyer of the entire balance due under the agreement shall:

    (i) Constitute redemption by the buyer; and

    (ii) Entitle the buyer to take possession of the goods.

#### Section 12-626

(a) Subject to the provisions of subsection (b) of this section, the holder shall sell any repossessed goods at public auction if the buyer:

  (1) Has paid at least 50 percent of the cash price of the goods; and

  (2) Within the 15-day period provided for in Sec. 12-625(a) of this subtitle, requests sale of the goods in writing sent to the holder by registered or certified mail.

(b)

  (1) To cover the costs of the sale, at the time a buyer requests sale of the goods he shall deposit with the holder an amount equal to the lesser of:

    (i) 10 percent of the time balance due at the time of repossession; or

    (ii) $10.

  (2) If the buyer does not make the deposit at the time of his request, the holder promptly shall notify the buyer in writing sent by registered or certified mail of the deposit requirement. If the buyer fails to make the deposit within five days after he receives the notice from the holder, his right to have the goods sold at public auction is forfeited.

(c) The sale of goods at public auction shall take place within 30 days from the date the buyer requested the sale.

(d) At least 10 days before the sale, the holder shall notify the buyer in writing sent by registered or certified mail of the time and place of the sale.

(e)

  (1) The provisions of this subsection (e) apply to:

    (i) A public sale held under the provisions of this section; and

    (ii) Any other bona fide public or private sale of goods which had a cash price in excess of $2,000 at the time of their purchase by the buyer, if the buyer has not paid at least 50 percent of the cash price of the goods or if he has paid that amount but has not requested a public sale under subsection (a) of this section.

  (2) The proceeds of a sale to which this subsection applies, including the deposit required by subsection (b) of this section, shall be applied, in the following order, to:

    (i) The actual and reasonable cost of the sale;

    (ii) The actual and reasonable cost of retaking and storing the goods; and

    (iii) The unpaid balance owing under the agreement at the time the goods are repossessed.

  (3) After application of the proceeds and deposit in accordance with paragraph (2) of this subsection, any remaining balance shall be paid to the buyer, unless the sale occurred because of the seizure of the goods by a police department, bureau, or force, in which event the remaining balance shall be paid to the police department, bureau, or force that seized the goods, to be disposed of in accordance with the provisions of Title 12 of the Criminal Procedure Article or any other law that applies to the seizure and forfeiture of the goods.

  (4) If the proceeds and deposit are insufficient to pay the items enumerated in paragraph (2) of this subsection, the buyer is liable for the deficiency if:

    (i) The agreement provides for liability for a deficiency; and

    (ii) The holder has complied with all requirements of this subtitle, including the notice requirement of Sec. 12-624(d) of this subtitle.

(f) The holder shall furnish to the buyer a written statement which shows the disposition of the proceeds and deposit.

#### Section 12-627

If there is no resale of repossessed goods under Sec. 12-626 of this subtitle, all obligations of the buyer under the agreement shall be discharged, and the holder may retain the goods as his own property without obligation to account to the buyer.

#### Section 12-628

(a) If, as part of an installment sale, a promissory note is taken by a seller or sales finance company, the note shall refer to the agreement out of which it arises.

(b) If the note is assigned, it is subject to all defenses which the buyer might have asserted against the seller or sales finance company, except that an acknowledgment by the buyer of delivery of a copy of the agreement pursuant to Sec. 12-605 of this subtitle is conclusive proof of the delivery in favor of an assignee of the note without actual knowledge to the contrary.

#### Section 12-629

No act, agreement, or statement of a buyer in an agreement may constitute a valid waiver of any benefit or protection provided to him under this subtitle.

#### Section 12-630

(a) Except as provided by subsections (b) and (c) of this section, a holder may not collect or receive any finance, delinquency, or collection charge from the buyer if:

  (1) The agreement does not contain the information required by Sec.Sec. 12-604 through 12-606 of this subtitle;

  (2) The seller fails to deliver to the buyer a required copy of the agreement; or

  (3) The agreement contains a finance charge in excess of the applicable charge permitted by Sec. 12-609 or Sec. 12-610 of this subtitle.

(b) Written acknowledgment by the buyer of delivery of a copy of the agreement pursuant to Sec. 12-605 of this subtitle is conclusive proof of the delivery as between the buyer and any assignee of the agreement without actual knowledge to the contrary.

(c) If the seller or any subsequent holder unintentionally and in good faith fails to comply with any provision of Sec.Sec. 12-609 through 12-612 of this subtitle, the holder may correct the error within 10 days after:

  (1) He notices it; or

  (2) The buyer notifies him in writing of the error.

(d) If an instrument contains any provision prohibited by Sec. 12-607 of this subtitle, that provision is void and the holder may not collect or receive from the buyer, in connection with the transaction to which the instrument relates, any finance, delinquency, or collection charge.

(e) The penalties of this section are in addition to those provided in Part IV of this subtitle or in any other statutory law.

#### Section 12-631

(a) If a complaint for violation of any provision of Part II of this subtitle is filed with the Commissioner of Financial Regulation, he may investigate the complaint and hold a hearing on it in accordance with Sec. 11-413 of the Financial Institutions Article.

(b) The Commissioner shall give to the person complained against at least ten days' written notice of the complaint and the time and place of any hearing. The notice shall be in writing and sent by registered or certified mail to his principal place of business.

(c)

  (1) If, after the hearing, the Commissioner finds that a person has engaged or is engaging in any act or practice prohibited by Part II of this subtitle, he shall order the person to cease and desist from the act or practice.

  (2) The order of the Commissioner shall comply with the Administrative Procedure Act.

(d)

  (1) If no appeal is filed, the order becomes final after expiration of the time allowed by the Administrative Procedure Act for appeals from the Commissioner's order.

  (2) If an appeal is filed, the order becomes final after final decision of the court affirming the order or dismissing the appeal.

(e) For the purposes of this section, the Commissioner's order may not apply to any:

  (1) Incorporated bank, savings institution, or trust company;

  (2) A savings and loan association; or

  (3) A federal credit union or State chartered credit union.

#### Section 12-632

In connection with an installment sale agreement, a sales finance company may:

(1) Renew or extend the time for payment of any installment sale agreement or any installment; or

(2) Refund to the buyer, for subsequent repayment by him, the amount of any installment previously paid.

#### Section 12-633

(a)

  (1) Except as provided in paragraph (2) of this subsection, any renewal, extension, or refund made under Sec. 12-632 of this subtitle shall be by a written agreement signed by each party.

  (2) If an extension is granted without any additional charge, the agreement need be signed only by the sales finance company.

(b)

  (1) At the time a renewal, extension, or refund is made, the sales finance company shall deliver to the buyer an exact copy of the agreement.

  (2) The agreement shall:

    (i) State the name and post office address of each party;

    (ii) Identify the prior agreement to which it relates;

    (iii) Describe the goods;

    (iv) Describe any security interest or collateral security which was reserved or taken to secure the prior agreement and which is retained to secure the renewal, extension, or refund; and

    (v) State the amount of the extended principal, the agreed rate of charge, the number of scheduled installments, and the time and amount of each installment.

#### Section 12-634

(a) A sales finance company may charge the buyer for a renewal, extension, or refund made under Sec. 12-632 of this subtitle, an amount not exceeding an annual effective rate of simple interest, as defined in Subtitle 1 of this title, of 15 percent per annum on the balances outstanding from time to time of the extended principal, from the date of the renewal, extension, or refund to the date set for the final payment.

(b) The extended principal may not exceed the aggregate amount of the unpaid portion of the time balance under the agreement, any delinquency charges lawfully payable, and any amount of cash actually refunded to the buyer, less a credit for prepayment computed as if the unpaid portion of the time balance had been paid in full at the time of the renewal, extension, or refund.

(c) Notwithstanding the provisions of subsection (a) of this section, a sales finance company may charge an annual effective rate of simple interest of 24 percent on renewals or extensions on contracts made on or after July 1, 1982, on the balances outstanding from time to time.

(d) No sales finance company may charge the rates permitted by subsection (c) of this section unless the sales finance company complies with the limitations of Sec.Sec. 12-610.1 and 12-610.2 of this subtitle and provided that such a renewal or extension agreement may not provide for a balloon payment.

#### Section 12-635

(a) A sales finance company shall permit a buyer to prepay in full or in part at any time, without penalty, the outstanding balance payable under a renewal, extension, or refund agreement.

(b) If a buyer prepays the entire outstanding balance, the sales finance company shall pay or credit to him the unearned portion of the charge.

#### Section 12-636

(a) Any person who knowingly violates or participates in the violation of any provision of Part II of this subtitle is guilty of a misdemeanor and on conviction is subject to a fine not exceeding $100 for the first offense and not exceeding $500 for any subsequent offense.

(b) Any person who violates or participates in the violation of any provision of Part III of this subtitle is guilty of a misdemeanor and on conviction is subject to a fine not exceeding $500 or imprisonment not exceeding six months or both.

### Subtitle 7. Equal Credit Opportunity Act

#### Section 12-701

(a) In this subtitle the following words have the meanings indicated.

(b) "Applicant" means any person who applies to a creditor:

  (1) Directly for an extension, renewal, or continuation of credit; or

  (2) Indirectly by use of an existing credit plan for an amount exceeding a previously established credit limit.

(c) "Commissioner" means the Commissioner of Financial Regulation.

(d) "Credit" means the right granted by a creditor to a debtor to:

  (1) Defer payment of a debt;

  (2) Incur a debt and defer its payment; or

  (3) Purchase property or services and defer payment for it.

(e) "Creditor" means any person who regularly:

  (1) Extends, renews, or continues credit for personal, family or household purposes; or

  (2) Arranges for the extension, renewal, or continuation of credit.

(f) "Person" includes an individual, corporation, business trust, statutory trust, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal or commercial entity.

#### Section 12-702

(a) The General Assembly finds that there is a need to insure that the various financial institutions and other persons and firms engaged in the extension of credit exercise their responsibility to make credit available with fairness, impartiality, and without discrimination on the basis of sex or marital status. Economic stabilization would be enhanced, and competition among the various financial institutions and other persons and firms engaged in the extension of credit would be strengthened by an absence of discrimination on the basis of sex, sexual orientation, gender identity, disability, marital status, race, color, religion, national origin, or age (provided the applicant has capacity to contract).

(b) It is the purpose of this subtitle to require that financial institutions and other persons and firms engaged in the extension of credit do not deny credit on the basis of sex, sexual orientation, gender identity, disability, marital status, race, color, religion, national origin, or age (provided the applicant has capacity to contract).

#### Section 12-703

(a) If a complaint for violation of any provisions of this subtitle is filed with the Commissioner, the Commissioner shall investigate the complaint and may hold a hearing on it in accordance with the Administrative Procedure Act.

(b) The Commissioner shall give to the creditor complained against at least 10 days' written notice of the complaint and the time and place of any hearing. The notice shall be in writing and sent by registered or certified mail to the creditor's principal place of business.

(c)

  (1) If, after the hearing, the Commissioner finds that the creditor has engaged or is engaging in any act or practice prohibited by this subtitle, the Commissioner shall order the creditor to cease and desist from the act or practice.

  (2) The order of the Commissioner shall comply with the Administrative Procedure Act.

(d)

  (1) If no appeal is filed, the order becomes final after expiration of the time allowed by the Administrative Procedure Act for appeals from the Commissioner's orders.

  (2) If an appeal is filed, the order becomes final after final decision of the court affirming the order or dismissing the appeal.

#### Section 12-704

With respect to any aspect of a credit transaction:

(1) A creditor may not discriminate against any applicant on the basis of sex, sexual orientation, gender identity, disability, marital status, race, color, religion, national origin, or age;

(2) A creditor that complies with the applicable provisions of the federal Equal Credit Opportunity Act, or regulations adopted under the federal Equal Credit Opportunity Act, is in compliance with the requirements of this subtitle; and

(3) Any violation of the federal Equal Credit Opportunity Act, or any regulation adopted under the federal Equal Credit Opportunity Act, is a violation of the provisions of this subtitle.

#### Section 12-705

Prohibited discriminatory practices include any:

(1) Refusal to consider both applicants' income when both parties of a marriage party apply for a joint account;

(2) Refusal to consider alimony or child support awarded by a court and received by the applicant as a valid source of income, where that source can be verified as to its amount, length of time received, and regularity of receipt;

(3) Refusal to extend credit to any person solely because of marital status or change in marital status;

(4) Refusal to issue separate accounts to married persons where each would be credit worthy if unmarried;

(5) Request for or consideration of the credit rating of an applicant's spouse where the applicant is otherwise credit worthy and is not applying for a joint account unless the applicant lists credit references in the name of spouse or former spouse or has no individual prior credit history or the creditor permits the applicant to designate the applicant's spouse as an authorized purchaser on the account;

(6) Refusal to recognize the legal name of any married person; and

(7) Requests for or consideration of information about birth control practices in evaluating any credit application.

#### Section 12-706

The provisions of this subtitle shall be administered by the Commissioner.

#### Section 12-707

(a) Notwithstanding the provisions of Sec. 12-703 of this subtitle, any creditor who violates any provisions of this subtitle is liable to the applicant in an amount equal to the sum of any actual damages sustained by the applicant acting either in an individual capacity or as a representative of a class.

(b) Any creditor who fails to comply with any requirement imposed under this subtitle shall be liable to the aggrieved applicant for punitive damages in an amount not greater than $10,000, as determined by the court, in addition to any actual damages provided in subsection (a) of this section. In pursuing the recovery allowed under this subsection, the applicant may proceed only in an individual capacity and not as a representative of a class.

(c) Notwithstanding subsection (b) of this section, any creditor who fails to comply with any requirement imposed under this subtitle may be liable for punitive damages in the case of a class action in such amount as the court may allow, except that as to each member of the class no minimum recovery shall be applicable, and the total recovery in such action shall not exceed the lesser of $100,000 or 1 percent of the net worth of the creditor. In determining the amount of award in any class action, the court shall consider, among other relevant factors, the amount of any actual damages awarded, the frequency and persistence of failures of compliance by the creditor, the resources of the creditor, the number of persons adversely affected, and the extent to which the creditor's failure of compliance was intentional.

(d) When a creditor fails to comply with any requirement imposed under this subtitle, an aggrieved applicant may institute a civil action for preventive relief, including an application for a permanent or temporary injunction, restraining order, or other action.

(e) In the case of any successful action to enforce the foregoing liability, the costs of the action together with a reasonable attorney's fee as determined by the court shall be added to any damages awarded by the court under the provisions of subsections (a), (b), and (d) of this section.

(f) A creditor does not violate this subtitle if the creditor shows by a preponderance of evidence in any administrative or judicial proceeding that the violation was not willful or resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.

(g) An action under this title may be brought in any district court or circuit court, depending upon the amount in controversy, within one year from the date of the occurrence of the violation.

#### Section 12-708

This subtitle may be cited as the Maryland Equal Credit Opportunity Act.

### Subtitle 8. Loans -- Finder's Fees

#### Section 12-801

(a) In this subtitle the following words have the meanings indicated.

(b) "Borrower" means an individual who obtains a loan or advance of money.

(c) "Commissioner" means the Commissioner of Financial Regulation.

(d) "Finder's fee" means any compensation or commission directly or indirectly imposed by a broker and paid by or on behalf of the borrower for the broker's services in procuring, arranging, or otherwise assisting a borrower in obtaining a loan or advance of money.

(e) "Lender" means a person defined as a mortgage lender under Sec. 11-501(j)(1)(ii) of the Financial Institutions Article.

(f) "Mortgage broker" means a person defined as a mortgage lender under Sec. 11-501(j)(1)(i) of the Financial Institutions Article.

(g) "Person" includes an individual, corporation, business trust, statutory trust, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal or commercial entity.

#### Section 12-802

This subtitle does not apply to any loan:

(1) Described in Sec. 12-103(e) of this title; or

(2) Made by motor vehicle or recreational vehicle dealers in connection with the sale of their vehicles.

#### Section 12-803

A mortgage broker may not be a director, officer, or employee of any lender where he places a loan.

#### Section 12-804

(a) A mortgage broker may charge a finder's fee not in excess of 8 percent of the amount of the loan or advance.

(b) In addition to a finder's fee, a mortgage broker may charge a borrower for the actual cost of:

  (1) Any appraisal, credit report, condominium document, or subordination agreement document obtained by the mortgage broker at the written request of the borrower; and

  (2) Any other good or service, as specified in regulations adopted by the Commissioner, that is required to complete a loan application process and that, at the written request of the borrower, is paid by the mortgage broker to a third-party provider of the good or service.

(c) A mortgage broker obtaining a mortgage loan with respect to the same property more than once within a 24-month period may charge a finder's fee if the fee is not in excess of 8% of the initial loan amount when combined with the finder's fee charged on the initial loan and on any other finder's fee collected during that 24-month period.

(d) The provisions of this section do not apply to:

  (1) The charging of fees and charges otherwise permitted under this title; or

  (2) Attorney's fees unless the attorney is functioning as a mortgage broker.

(e) A mortgage broker may not charge a finder's fee in any transaction in which the mortgage broker or an owner, part owner, partner, director, officer, or employee of the mortgage broker is the lender or an owner, part owner, partner, director, officer, or employee of the lender.

#### Section 12-805

(a) A mortgage broker may not receive any fee in the form of a note, mortgage, or other evidence of indebtedness.

(b) Payment of the finder's fee to the mortgage broker out of the proceeds of the loan is not considered as interest to the lender if the finder's fee is not in excess of that permitted by this subtitle.

(c) If the finder's fee is paid from the proceeds of the loan, the lender shall comply with the disclosure provisions of Sec. 12-106 of this title or the federal Truth in Lending Act and in addition shall advise the borrower, in writing, of the borrower's right to a refund of the finder's fee upon the exercise of any right of rescission of the loan.

(d)

  (1) A finder's fee may not be charged unless it is pursuant to a written agreement between the mortgage broker and the borrower which is separate and distinct from any other document.

  (2) The terms of the proposed agreement shall:

    (i) Be disclosed to the borrower before the mortgage broker undertakes to assist the borrower in obtaining a loan or advance of money;

    (ii) Specify the amount of the finder's fee; and

    (iii) Contain a representation by the mortgage broker that the mortgage broker is acting as a mortgage broker and not as a lender in the transaction.

  (3) A copy of the agreement, dated and signed by the mortgage broker and the borrower, shall be provided to the borrower within 10 business days after the date the loan application is completed.

#### Section 12-806

A borrower is entitled to a refund of any finder's fee paid to a mortgage broker if:

(1) The loan transaction is not made to the borrower; or

(2) The borrower exercises his right to rescind the loan transaction under the federal Truth in Lending Act or any similar federal or State law.

#### Section 12-807

Any mortgage broker who violates any provision of this subtitle shall forfeit to the borrower the greater of:

(1) Three times the amount of the finder's fee collected; or

(2) The sum of $500.

#### Section 12-808

A licensed real estate broker, insurer, salesman, attorney-at-law, or agent thereof who arranges or procures a mortgage may not collect a finder's fee if, in addition to acting as broker under this subtitle, he is also acting as a real estate broker, insurer, salesman, attorney-at-law, or agent thereof in connection with the subject property or transaction.

#### Section 12-809

The provisions of this subtitle may not be used to circumvent the provisions of Sec. 12-108 of this title.

### Subtitle 9. Credit Grantor Revolving Credit Provisions

#### Section 12-901

(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, statutory 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)

  (1) "Loan" means a cash advance to be paid to or for the account of the borrower.

  (2) "Loan" includes an advance made in accordance with the terms of a shared appreciation agreement.

(h) "Mobile home" has the meaning stated in Sec. 11-501 of the Financial Institutions Article.

(i) "Nonconsumer borrower" means any borrower other than a consumer borrower.

(j)

  (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.

(k) "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.

(l) "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.

(m) "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.

(n) "Shared appreciation agreement" has the meaning stated in Sec. 11-501 of the Financial Institutions Article.

#### Section 12-902

(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.

#### Section 12-903

(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 Sec. 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 Sec. 12-905(a) of this subtitle.

#### Section 12-904

(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 Sec. 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 creditworthy 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.

#### Section 12-905

(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)

  (1) 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:

    (i) Attorney's fees for services rendered in connection with the preparation, closing, or disbursement of the loan;

    (ii) Any expense, tax, or charge paid to a governmental agency;

    (iii) Examination of title, appraisal, or other costs necessary or appropriate to the security of the loan; and

    (iv) Premiums for any insurance coverage permitted under this subtitle.

  (2) The additional fees or charges permitted under this subsection may be imposed, charged, and collected at any time.

(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)

  (1) For purposes of this section, the additional charges listed in subsections (a)(1) and (3), (b), and (f) of this section are not interest or finance charges with respect to a plan.

  (2) Any fees or charges permitted under subsection (a)(2) of this section, when combined with any interest charged, may not exceed an effective rate of 33% per annum simple interest.

(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.

#### Section 12-906

(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.

#### Section 12-907

(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.

#### Section 12-908

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.

#### Section 12-909

(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 Sec. 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)

    (i) In this subsection the following words have the meanings indicated.

    (ii) "Improvements" means buildings or structures erected upon or affixed to real property that enhance the value of the real property.

    (iii) "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".

    (iv)

      (1) "Replacement cost" means the amount needed to repair damage to or rebuild improvements on real property to restore the improvements to their pre-loss condition.

      (2) "Replacement cost" does not include the value of land.

  (2)

    (i) A credit grantor may not require a borrower, as a condition to receiving or maintaining a loan secured by a lien, to provide or purchase property insurance coverage against risks to any improvements on any real property in an amount exceeding the replacement cost of the improvements on the real property.

    (ii) In determining the replacement cost of the improvements on any real property, the credit grantor may:

      (1) Accept the value placed on the improvements by the insurer; or

      (2) Use the value placed on the improvements by the credit grantor's appraisal of the improvements.

  (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 lien securing the loan.

#### Section 12-909.1

(a) In this section, "binder" means a binder or other temporary contract of insurance as provided under Sec. 12-106 of the Insurance Article.

(b) A credit grantor shall comply with this section if the credit grantor:

  (1) Makes any loan secured by a first lien on any interest in owner-occupied residential real property; and

  (2) As a condition of making the loan, requires the consumer borrower to purchase property insurance or credit loss insurance.

(c) A credit grantor who makes a loan subject to this section shall accept as evidence of insurance a written binder issued by any authorized insurer or its insurance producer if the binder includes or is accompanied by:

  (1) The name and address of the insured consumer borrower;

  (2) The name and address of the credit grantor;

  (3) A description of the insured residential real property;

  (4) A provision that the binder may not be canceled within the term of the binder unless the credit grantor and the insured consumer borrower receive written notice of the cancellation at least 10 days prior to the cancellation;

  (5) Except in the case of the renewal of a policy subsequent to the closing of the loan, a paid receipt for the full amount of the applicable premium; and

  (6) The amount of coverage.

(d) This section does not prohibit a credit grantor from refusing to honor a binder in cases where:

  (1) The credit grantor receives notice of the cancellation of the binder by the insurer; or

  (2) At the expiration of 30 days of the date the binder was given, the insurer has failed to issue the policy of insurance.

#### Section 12-910

(a) If the agreement governing a revolving credit plan permits, a credit grantor may:

  (1) For a nonconsumer borrower, charge a higher periodic percentage rate of interest on outstanding unpaid payments or portions of payments under the plan which are in default; and

  (2) For any borrower, impose:

    (i) A late or delinquency charge on payments or portions of payments; and

    (ii) If payment is made with a check that is dishonored on the second presentment, a charge not to exceed $15.

(b)

  (1) No more than one late or delinquency charge may be imposed for any single scheduled payment or portion regardless of the period during which it remains in default.

  (2) For the purpose of this subsection, all payments by the borrower shall be applied to satisfaction of scheduled payments in the order in which they become due.

  (3) Charges permitted by this section may not be considered interest or finance charges under the plan.

#### Section 12-911

(a) If a borrower defaults under the terms of a plan and the credit grantor refers the borrower's account to an attorney who is not a salaried employee of the credit grantor for collection, the credit grantor may, if the agreement governing the revolving credit plan permits, charge and collect from the borrower a reasonable attorney's fee.

(b) If the agreement governing the revolving credit plan permits, the credit grantor may recover from the borrower all court or other collection costs actually incurred by the credit grantor relating to the borrower's default.

#### Section 12-912

(a) A credit grantor may, if the agreement governing a revolving credit plan permits, at any time amend the terms of the agreement in accordance with the provisions of this section 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 rate is applied;

  (3) The amounts of other charges; and

  (4) The applicable repayment schedule.

(b)

  (1) The credit grantor shall notify each affected borrower of an amendment in the manner set forth in the agreement governing the plan and in compliance with the requirements of the federal Truth in Lending Act, and regulations promulgated thereunder. If the amendment has the effect of increasing the interest, finance charges, or other fees and charges to be paid by the borrower, including, but not limited to those enumerated in Sec. 12-905 of this subtitle, the credit grantor shall mail or deliver to the borrower, at least 25 days before the effective date of the amendment, a clear and conspicuous written notice which shall describe the amendment, including:

    (i) A clear statement comparing the original terms and the terms under the amended agreement; and

    (ii) Any other pertinent information required by the provisions of this section.

  (2) If the amendment has the effect of increasing the interest, finance charges, or other charges to be paid by the borrower, the amendment shall become effective as provided in subsections (c) and (d) of this section.

(c)

  (1) Subject to the provisions of this paragraph, an amendment made under this section shall become effective as to a particular borrower on:

    (i) The first day of the billing cycle during which the effective date of the amendment occurs; or

    (ii) Any later date specified in the notice of amendment.

  (2) After receiving the notice of amendment under subsection (b) of this section, the borrower may send a signed, written notice of refusal to the creditor that the borrower refuses to accept the amendment.

  (3) The notice of refusal sent by the borrower may be accompanied by a payment on the borrower's account and shall be mailed within 25 days of the mailing of the notice of amendment.

  (4) Any borrower who gives timely notice of refusal may use the account pursuant to its original, unamended terms for:

    (i)

      (1) The duration of the time for which a fee was paid for use of the plan through the borrower's credit device; or

      (2) Any longer period of time as determined by the credit grantor; or

    (ii) If no fee is paid for use of the plan or if the remaining time period for which a fee was paid for use of the plan through the borrower's credit device is less than 3 months, a period of time of not less than 3 months from the date of mailing of the notice of refusal.

  (5) At the expiration of the periods provided under paragraph (4) of this subsection, the borrower who has given a timely notice of refusal may pay any outstanding unpaid indebtedness in the account under the terms of the unamended agreement governing the plan.

  (6) A credit grantor amending the agreement governing a revolving credit plan under this subsection shall include in the notice of amendment under subsection (b) of this section a statement in at least 10 point type that:

    (i) If a written notice of refusal from the borrower in which the borrower refuses to accept the amendment is not received by the credit grantor within 25 days of the mailing of the notice of amendment, the amendment will become effective on the first day of the billing cycle during which the effective date of the amendment occurs or at any later date specified in the notice of amendment;

    (ii) Enumerates the borrower's rights under paragraphs (4) and (5) of this subsection upon timely notice of refusal by the borrower; and

    (iii) Includes the address to which the borrower may send notice of a refusal.

  (7) The notice of amendment under subsection (b) of this section shall be enclosed in an envelope that contains on its face a statement in 10 point type that an important notice of an increase in rates or fees of the revolving credit plan is enclosed.

(d)

  (1) Notwithstanding subsection (c) of this section, at the election of the credit grantor, an amendment made under this section may become effective as to a particular borrower on the first day of the billing cycle in which the borrower:

    (i) Makes a purchase or obtains a loan under the plan, after the date specified in the notice of amendment which is not less than 25 days after the date the notice of amendment was mailed; or

    (ii) Sends a notice of agreement to the credit grantor in which the borrower expressly agrees to the amendment.

  (2) In addition to the requirements of subsection (b) of this section, a credit grantor electing to amend the agreement governing a revolving credit plan under this subsection shall include in the notice of amendment a statement that the amendment will become effective on the first date of the billing cycle during which the borrower:

    (i) Makes a purchase or obtains a loan under the plan, so long as the purchase is made or the loan is obtained after a specific date which is at least 25 days after the mailing of the notice of amendment; or

    (ii) Sends a notice of agreement to the credit grantor in which the borrower expressly agrees to the amendment.

  (3) A borrower who receives a notice of amendment under this subsection may pay any outstanding unpaid indebtedness in the account under the terms of the unamended agreement governing the plan if the borrower does not:

    (i) Make any purchase or obtain any loan under the plan after the date specified in the notice of amendment; or

    (ii) Send a notice of agreement to the credit grantor in which the borrower expressly agrees to the amendment.

(e) If the terms of the agreement governing the plan, as originally drawn or as amended provide, any amendment may, on and after the date on which it becomes effective as to a particular borrower, apply to all then outstanding unpaid indebtedness in the borrower's account under the plan, including any indebtedness which shall have arisen out of purchases made or loans obtained prior to the effective date of the amendment.

(f) For purposes of this section, a decrease in the required amount of scheduled payments shall not be deemed an amendment which has the effect of increasing the interest or finance charges to be paid by the borrower.

(g) The procedures for amendment by a credit grantor of the terms of a plan to which a nonconsumer borrower is a party may, notwithstanding the provisions of this section, be as the agreement governing the plan may otherwise provide.

#### Section 12-913

(a) Unless otherwise provided under the express terms of the agreement governing a revolving credit plan, the provisions of Subtitle 1, 3, 4, 5, 6, or 10 of this title do not apply to any extension of credit made pursuant to a revolving credit plan if:

  (1) The plan is established before October 1, 1993; and

  (2) The extension of credit is made under this subtitle before October 1, 1993.

(b) For the purposes of subsection (a) of this section, an extension of credit is made under this subtitle if:

  (1) The credit grantor has made a written election to do so in the agreement governing the plan; or

  (2) The agreement governing the plan is offered pursuant to the provisions of this subtitle.

(c) For the purposes of subsection (a) of this section, if there is no written election to extend credit under this subtitle in the agreement governing the plan, the burden of proof is on the credit grantor to show the agreement governing the plan was offered pursuant to this subtitle.

(d) Any plan established before October 1, 1993 is not subject to Sec. 12-913.2 of this subtitle.

#### Section 12-913.1

(a)

  (1) On or after October 1, 1993, a credit grantor may at its option elect to offer a plan to any borrower either pursuant to this subtitle or as otherwise permitted by applicable law.

  (2) In order for a plan to be established under and governed by this subtitle, a credit grantor shall make a written election to that effect in the agreement governing the plan.

(b)

  (1) If a credit grantor elects in accordance with this section to establish a plan under this subtitle, the provisions of Subtitle 1, 3, 4, 5, 6, or 10 of this title do not apply to the plan.

  (2) If a person fails to elect in accordance with this section to establish a plan under this subtitle, the provisions of this subtitle do not apply.

(c) Notwithstanding any other provision of this title, a loan shall be subject to the provisions of this subtitle, whether or not elected, if the loan:

  (1) Is a shared appreciation agreement; and

  (2) Allows the borrower to repay advances and have any repaid amounts subsequently readvanced to the borrower.

#### Section 12-913.2

(a) The credit grantor shall deliver a copy of the agreement governing the plan to the borrower no later than 30 days after the credit grantor establishes the account governed by the agreement for the borrower's use.

(b) If there is more than one borrower, a copy of the agreement governing the plan may be delivered to any borrower who is primarily liable on the account.

(c) Written acknowledgment by a borrower of delivery in accordance with this section of a copy of the agreement governing the plan is conclusive proof of delivery as between the borrower and any assignee of the account established under the plan without actual knowledge to the contrary.

#### Section 12-914

(a) If any provision of this subtitle is held invalid, the invalidity shall not affect any other provision of this subtitle which can be given effect without the invalid provision.

(b) Notwithstanding any other provisions of this title, a plan under this subtitle is subject only to the disclosure requirements of this subtitle and, to the extent applicable, of the federal Truth in Lending Act and regulations promulgated thereunder.

#### Section 12-915

(a) A credit grantor making a loan or extension of credit under this subtitle is subject to the licensing, investigatory, enforcement and penalty provisions of Title 11, Subtitle 3 of the Financial Institutions Article unless the credit grantor or the loan or extension of credit is exempt under Title 11, Subtitle 3 of the Financial Institutions Article.

(b) In addition to any license which may be required by subsection (a) of this section, a credit grantor making a loan or extension of credit under this subtitle secured by any lien on residential real property is subject to the licensing, investigatory, enforcement and penalty provisions of Title 11, Subtitle 5 of the Financial Institutions Article unless the credit grantor or the loan or extension of credit is exempt under Title 11, Subtitle 5 of the Financial Institutions Article.

(c) If a license is required by this section, it shall be issued by the Commissioner of Financial Regulation.

(d)

  (1) An extension of credit made under this subtitle prior to October 1, 1994 by a home improvement contractor may not be deemed unenforceable or violative of this section because the contractor was not licensed under Title 11, Subtitle 3 of the Financial Institutions Article.

  (2) Paragraph (1) of this subsection does not apply to any person engaged in the business of making loans at the time the credit was extended.

#### Section 12-916

(a) If a written complaint for violation of any provision of this subtitle, including the disclosure requirements of this subtitle and the federal Truth in Lending Act and regulations promulgated thereunder, or any other law of this State that regulates loans or other extensions of credit is filed with the Commissioner of Financial Regulation, the Commissioner may investigate the complaint and hold a hearing on it in accordance with Sec. 11-413 of the Financial Institutions Article.

(b)

  (1) The Commissioner shall give to the credit grantor against whom a complaint is filed at least 10 days' written notice of the complaint and the time and place of any hearing. The notice shall be in writing and sent by registered or certified mail to the credit grantor's principal place of business.

  (2) Before a hearing under this section may be scheduled, the Commissioner shall:

    (i) Send a written notice to the complaining party that describes the provisions in paragraph (3) of this subsection concerning preclusion; and

    (ii) Obtain from the complaining party a written:

      (1) Election to proceed with a hearing in accordance with this section; and

      (2) Waiver of any right to pursue any cause of action or remedy as to the matters addressed in the complaint or the hearing.

  (3)

    (i) If a complaining party provides a written election and waiver as described in paragraph (2)(ii) of this subsection, the complaining party shall be precluded from raising or asserting against the credit grantor in any subsequent forum any claim, defense, setoff, recoupment, penalty for violation, or right of any kind based on the matters addressed in the complaint or the hearing.

    (ii) The preclusion in subparagraph (i) of this paragraph does not apply to an appeal from the order of the Commissioner resulting from the hearing.

  (4) If a complaining party fails to provide a written election and waiver as described in paragraph (2) (ii) of this subsection, the Commissioner shall not schedule a hearing on the complaint.

(c)

  (1) If, after the hearing, the Commissioner finds that the credit grantor has engaged or is engaging in any act or practice prohibited by this subtitle, the Commissioner shall order the credit grantor to cease and desist from the act or practice.

  (2)

    (i) If the Commissioner finds that the act or practice described in paragraph (1) of this subsection resulted in the credit grantor collecting an amount from the complaining party not permitted under this subtitle, the Commissioner may direct the credit grantor to make a refund to the complaining party.

    (ii) The Commissioner may direct a refund only up to the amount collected by the credit grantor from the complaining party that:

      (1) Exceeds the amount expressly permitted under this subtitle; or

      (2) The credit grantor is expressly not permitted to collect.

  (3)

    (i) If an order issued under this section directs the credit grantor to make a refund as authorized in paragraph (2) of this subsection, the credit grantor may make the refund before the order becomes final.

    (ii) If a credit grantor makes the refund directed by the Commissioner's order, the order for the refund shall not become final and shall be withdrawn by the Commissioner.

    (iii) Any order withdrawn by the Commissioner may not be considered evidence of the Commissioner's interpretation of this subtitle.

  (4) The order of the Commissioner shall comply with the Administrative Procedure Act.

(d)

  (1) If no appeal is filed, the order becomes final after expiration of the time allowed by the Administrative Procedure Act for appeals from the Commissioner's orders.

  (2) If an appeal is filed, the order becomes final after final decision of the court affirming the order or dismissing the appeal.

(e) For purposes of this section, "complaining party" means an individual who files a written complaint with the Commissioner of Financial Regulation pursuant to this section.

#### Section 12-917

Any credit grantor or his officer or employee who willfully violates any provision of this subtitle is guilty of a misdemeanor and on conviction is subject to a fine not exceeding $1,000 or imprisonment not exceeding 1 year, or both.

#### Section 12-918

(a)

  (1) In this subsection, "notice" means the first to occur of the following:

    (i) When the credit grantor receives a written notice from the borrower notifying the credit grantor of an error or violation;

    (ii) When the credit grantor receives a written notice from the Commissioner of Financial Regulation or the appropriate regulatory authority notifying the credit grantor of an error or violation; or

    (iii) When the credit grantor receives service of process in a civil action for an error or violation instituted by the borrower in a court of competent jurisdiction.

  (2) Except for a bona fide error of computation, if a credit grantor violates any provision of this subtitle the credit grantor may collect only the principal amount of credit extended and may not collect any interest, costs, fees, or other charges with respect to the credit extension.

  (3) The penalty provided under paragraph (2) of this subsection does not apply where a credit grantor:

    (i) Unintentionally and in good faith fails to comply with Sec. 12-903, Sec. 12-904, Sec. 12-905, Sec. 12-910, Sec. 12-911, Sec. 12-913.2, Sec. 12-923(d), or Sec. 12-924 of this subtitle; and

    (ii) Corrects the error or violation and makes the borrower whole for all losses, including reasonable attorney's fees and interests, where appropriate, within 10 days after the credit grantor receives notice of the error or violation.

  (4) The burden shall be on the credit grantor to show that the credit grantor's failure to comply with Sec. 12-903, Sec. 12-904, Sec. 12-905, Sec. 12-910, Sec. 12-911, Sec. 12-913.2, Sec. 12-923(d), or Sec. 12-924 of this subtitle was unintentional and in good faith.

(b) A credit grantor who knowingly violates any provision of this subtitle shall forfeit to the borrower 3 times the amount of interest, fees, and charges collected in excess of that authorized by this subtitle.

#### Section 12-918.1

(a) In this section, "Commissioner" means the Commissioner of Financial Regulation.

(b) Except as provided in subsection (c) of this section, the penalty provided under Sec. 12-918(a)(2) of this subtitle does not apply if a credit grantor:

  (1) Performed or omitted to perform an act in conformity with or in reliance on:

    (i) A written opinion of the Attorney General of Maryland or a regulation adopted by the Commissioner;

    (ii) A written opinion by the Commissioner or Deputy Commissioner; 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.

(c) The provisions of subsection (b) 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.

(d) 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.

#### Section 12-919

An action for violation of this subtitle may not be brought more than 6 months after the credit extension is repaid in full.

#### Section 12-920

A credit grantor is not liable for any failure to comply with a provision of this subtitle if, within 60 days after discovering an error and prior to institution of an action under this subtitle or the receipt of written notice from the borrower, the credit grantor notifies the borrower of the error and makes whatever adjustments are necessary to correct the error.

#### Section 12-921

(a)

  (1) A credit grantor may repossess tangible personal property securing a plan under an agreement if the consumer borrower is in default.

  (2) The credit grantor may repossess tangible personal property from a consumer borrower only by:

    (i) Legal process; or

    (ii) Self-help, without use of force.

(b) Nothing in this section authorizes a violation of criminal law.

(c)

  (1) Except as provided in paragraph (2) of this subsection, at least 10 days before a credit grantor repossesses any tangible personal property, the credit grantor may serve a written notice on the consumer borrower of the intention of the credit grantor to repossess the tangible personal property.

  (2)

    (i) Except as provided in subparagraph (ii) of this paragraph, at least 30 days before a credit grantor repossesses a mobile home that is primarily for personal, family, or household use, the credit grantor shall serve on the borrower a written notice of the credit grantor's intention to repossess the mobile home.

    (ii) The notice required under subparagraph (i) of this paragraph may be served by the credit grantor less than 30 days before repossession if:

      (1) The mobile home:

      (A) Is vacant and abandoned, based on a determination by the credit grantor that at least three of the circumstances listed in Sec. 7-105.18(d) of the Real Property Article have been met; or

      (B) Has been voluntarily surrendered by the borrower to the credit grantor; and

      (2) The notice is accompanied by a certification from the credit grantor identifying the circumstances demonstrating that the mobile home is vacant and abandoned or that the mobile home has been surrendered.

  (3) The notice shall:

    (i) State the default and any period at the end of which the tangible personal property will be repossessed; and

    (ii) Briefly state the rights of the consumer borrower in case the tangible personal property is repossessed.

(d) The notice may be delivered to the consumer borrower personally or sent to the borrower's last known address by registered or certified mail.

(e) Within 5 days after the credit grantor repossesses the tangible personal property the credit grantor shall deliver to the consumer borrower personally or send to him at his last known address by registered or certified mail, a written notice which briefly states:

  (1) The right of the consumer borrower to redeem the tangible personal property, and the amount payable for it;

  (2) The rights of the consumer borrower as to a resale, and his liability for a deficiency; and

  (3) The exact location where the tangible personal property is stored and the address where any payment is to be made.

(f) For 15 days after the credit grantor gives the notice required by subsection (e) of this section, the credit grantor shall retain any repossessed property.

(g) During the period provided for in subsection (f) of this section, the consumer borrower may:

  (1) Redeem and take possession of the property; and

  (2) Resume the performance of the agreement.

(h) To redeem the property, the consumer borrower shall:

  (1) Tender the amount due under the agreement at the time of redemption, without giving effect to any provision which allows acceleration of any installment otherwise payable after that time;

  (2) Tender performance of any other promise for the breach of which the property was repossessed; and

  (3) If the discretionary notice provided for in subsection (c) of this section was given, pay the actual and reasonable expenses of retaking and storing the property.

(i) This section does not apply if the consumer borrower was guilty of fraudulent conduct, intentionally and wrongfully concealed, removed, damaged, or destroyed the property, or attempted to do so, and the property was repossessed because of that conduct, or if the property has been previously repossessed from the consumer borrower and redeemed by the consumer borrower.

(j)

  (1)

    (i) Subject to subsection (l) of this section, the credit grantor shall sell the property that was repossessed at:

      (1) Subject to paragraph (2) of this subsection, a private sale; or

      (2) A public auction.

    (ii) At least 10 days before the sale, the credit grantor shall notify the consumer borrower in writing of the time and place of the sale, by certified mail, return receipt requested, sent to the consumer borrower's last known address.

    (iii) Any sale of repossessed property must be accomplished in a commercially reasonable manner.

  (2) In all cases of a private sale of repossessed goods under this section, a full accounting shall be made to the borrower in writing and the seller shall retain a copy of this accounting for at least 24 months. This accounting shall contain the following information:

    (i) The unpaid balance at the time the goods were repossessed;

    (ii) The refund credit of unearned finance charges and insurance premiums, if any;

    (iii) The remaining net balance;

    (iv) The proceeds of the sale of the goods;

    (v) The remaining deficiency balance, if any, or the amount due the buyer;

    (vi) All expenses incurred as a result of the sale;

    (vii) The purchaser's name, address, and business;

    (viii) The number of bids sought and received; and

    (ix) Any statement as to the condition of the goods at the time of repossession which would cause their value to be increased or decreased above or below the market value for goods of like kind and quality.

  (3) The Commissioner of Financial Regulation may make a determination concerning any private sale that the sale was not accomplished in a commercially reasonable manner. Upon that determination, the Commissioner may enter an order disallowing any claim for a deficiency balance.

(k)

  (1) The provisions of this subsection apply to a public sale of property which secured a plan in excess of $2,000 at the time the plan was made.

  (2) The proceeds of a sale to which this subsection applies shall be applied, in the following order, to:

    (i) The actual and reasonable cost of the sale;

    (ii) The actual and reasonable cost of retaking and storing the property; and

    (iii) The unpaid balance owing under the agreement at the time the property was repossessed.

  (3) The credit grantor shall furnish to the consumer borrower a written statement which shows the distribution of the proceeds.

  (4) If the provisions of this section, including the requirement of furnishing a notice following repossession, are not followed, the credit grantor shall not be entitled to any deficiency judgment to which he would be entitled under the plan.

(l)

  (1)

    (i) In this subsection, "consumer goods" means tangible personal property used or bought for use primarily for personal, family, or household purposes that is:

      (1) Movable at the time a security interest attaches; or

      (2) A fixture.

    (ii) "Consumer goods" does not include money, documents, instruments, accounts, chattel paper, or general intangibles.

  (2) This subsection applies to tangible personal property securing a plan that:

    (i) Has been repossessed by the credit grantor; or

    (ii) Is in actual or constructive possession of the credit grantor where the perfection of the security interest in the property depends on the possession of the property.

  (3) In the case of a purchase money security interest in consumer goods, if a consumer borrower has paid 60 percent of the cash price and, after default, has not signed a statement renouncing or modifying the consumer borrower's rights under this subsection, a credit grantor who has repossessed the consumer goods must take reasonable action within 90 days after the repossession to commence disposal of them in the manner provided under subsection (j) of this section.

  (4)

    (i) In any other case involving tangible personal property securing a plan, a credit grantor may, after default, propose to retain the property in full satisfaction of the obligations of the borrower under the plan.

    (ii) If, as authorized by subparagraph (i) of this paragraph, a credit grantor proposes to retain property in full satisfaction of the obligations of the borrower under the plan, the credit grantor shall send written notice of the proposal to:

      (1) The consumer borrower; and

      (2) Except in the case of consumer goods, any other person who has a security interest in the property and who:

      (A) Has duly filed a financing statement indexed in the name of the consumer borrower in this State; or

      (B) Is known by the credit grantor to have a security interest in the property.

    (iii)

      (1) If the consumer borrower or other person entitled to receive notification objects in writing within 30 days from the sending of the notification, the credit grantor must take reasonable action to dispose of the property in the manner provided under subsection (j) of this section.

      (2) In the absence of written objection, the credit grantor may retain the property in full satisfaction of the outstanding unpaid indebtedness under the plan.

  (5) If despite complying with the requirements of this section there is no sale of tangible personal property securing a plan under subsection (j) of this section:

    (i) The credit grantor may retain the property without obligation to account to the borrower; and

    (ii) If the property is retained, all obligations of the borrower under the plan shall be discharged.

#### Section 12-922

(a)

  (1) In this section the following words have the meanings indicated.

  (2) "Borrower" means a consumer borrower who makes an application for a loan secured by a first mortgage or first deed of trust on residential real property to be occupied by the borrower as the borrower's primary residence.

  (3) "Commitment" means a written, specific, binding agreement between a borrower and a lender which sets forth the terms of a loan being extended to the borrower.

  (4) "Financing agreement" means a written agreement between a borrower and a lender that:

    (i) Sets forth the terms of a purchase money loan or a refinancing of an existing loan that:

      (1) Results in or is secured by a first mortgage or a first deed of trust on residential real property to be occupied by the borrower; and

      (2) Is offered or extended to the borrower; or

    (ii) Is a shared appreciation agreement.

  (5)

    (i) "Lender" means a credit grantor subject to the licensing requirements of Title 11, Subtitle 5 of the Financial Institutions Article.

    (ii) "Lender" does not include a credit grantor exempt from licensing under Sec. 11-502 of the Financial Institutions Article.

  (6)

    (i) "Loan application" means any oral or written request for an extension of credit that is made in accordance with procedures established by a lender for the purpose of inducing the lender to seek to procure or make a mortgage loan.

    (ii) "Loan application" does not include the use of an account or line of credit to obtain a loan within a previously established credit limit.

(b)

  (1) A lender who offers to make or procure a loan secured by a first mortgage or first deed of trust on residential real property to be occupied by the borrower shall provide the borrower with a financing agreement executed by the lender within 10 business days after the date the loan application is completed.

  (2) The financing agreement shall provide:

    (i) The term and principal amount of the loan;

    (ii) An explanation of the type of mortgage loan being offered;

    (iii) The rate of interest that will apply to the loan and, if the rate is subject to change or is a variable rate or is subject to final determination at a future date based on some objective standard, a specific statement of those facts;

    (iv) The points, if any, to be paid by the borrower or the seller, or both; and

    (v) The term during which the financing agreement remains in effect.

  (3) If all the provisions of the financing agreement are not subject to future determination, change, or alteration during its term, the financing agreement shall constitute the final binding agreement between the parties as to the items covered by the financing agreement.

(c)

  (1) If any of the provisions of the financing agreement are subject to change or determination after its execution, the lender shall provide the borrower with a commitment, executed by the lender, at least 72 hours before the time of settlement agreed to by the parties, providing:

    (i) The effective fixed interest rate or initial interest rate that will be applied to the loan; and

    (ii) A restatement of all the remaining unchanged provisions of the financing agreement.

  (2) Subsequent to execution of the financing agreement, the borrower may waive in writing the 72-hour advance presentation requirement and accept the commitment at settlement only if compliance with the 72-hour requirement is shown by the lender to be infeasible.

(d)

  (1) A borrower aggrieved by any violation of this section shall be entitled to bring a civil suit for damages, including reasonable attorney's fees, against the lender.

  (2) The penalties set out under Sec. 12-918 of this subtitle do not apply to any violation of this section.

#### Section 12-923

(a) This section applies only to a plan established by a credit grantor under this subtitle for a consumer borrower.

(b)

  (1) Paragraph (2) of this subsection applies only to a loan or an extension of credit primarily for personal, household, or family purposes.

  (2) An agreement governing a revolving credit plan or any instrument which evidences or secures an extension of credit under the plan may not contain:

    (i) An assignment or order for the payment of wages, whether earned or to be earned, or of any chose in action covering lost wages;

    (ii) An acceleration clause under which any part or all of the unpaid balance of any extension of credit not yet matured may be declared due and payable because the credit grantor deems itself insecure;

    (iii) A confession of judgment or any power of attorney authorizing the credit grantor to appear in court to confess judgment against the borrower or a surety or guarantor of the borrower, or any other waiver of the right to notice and an opportunity to be heard in the event of suit or process thereon; or

    (iv) A provision by which a person acting on behalf of a holder of the agreement is treated as an agent of the borrower in connection with its formation or execution.

  (3) Except as expressly allowed by law, an agreement governing a revolving credit plan or any instrument which evidences or secures an extension of credit under the plan may not contain a provision by which the borrower waives any right accruing to the borrower under this subtitle.

  (4)

    (i) Any clause or provision in an agreement governing the plan or in any instrument which evidences or secures an extension of credit under a plan that is in violation of this subsection shall be unenforceable.

    (ii) Subject to subparagraph (iii) of this paragraph, the penalties set out under Sec.Sec. 12-917 and 12-918 of this subtitle do not apply unless the credit grantor attempts to enforce a provision prohibited under this subsection.

    (iii) The penalties set out under Sec.Sec. 12-917 and 12-918 of this subtitle do not apply to the enforcement by a credit grantor of a provision otherwise prohibited under this subsection where the enforcement was initiated by the credit grantor prior to October 1, 1993.

(c) Unless a borrower has notice of an assignment of the account established under the plan, any payments made by the borrower to the last known holder of the account shall discharge the borrower's obligation to the extent of the payments.

(d) Upon receipt of a cash payment from a borrower, a credit grantor shall give the borrower a written receipt for the payment.

#### Section 12-923.1

(a) Any statement or characterization that indicates the borrower intends to use a plan to obtain loans or other extensions of credit solely to acquire an interest in or to carry on a business or commercial enterprise may be relied upon by a credit grantor in establishing a plan, unless the credit grantor knows or should know that the statement or characterization is false or misleading.

(b) As a condition to the establishment of a plan, a credit grantor may not require a borrower to make any false or misleading statement or characterization that loans or other extensions of credit to be obtained under a plan are commercial loans or for a commercial purpose if the credit grantor knows or should know they are not commercial loans or for a commercial purpose.

(c) The borrower has the burden of proving that a credit grantor knew or should have known that a statement or characterization described in subsection (a) or (b) of this section was false or misleading when made and that loans or other extensions of credit obtained under a plan were not commercial loans or extensions of credit for a commercial purpose.

(d) Unless a credit grantor knew or should have known that a statement or characterization described in subsection (a) or (b) of this section was false or misleading when made, a credit grantor shall have no liability under this subtitle if loans or other extensions of credit under a plan are actually used by the borrower other than as commercial loans or other extensions of credit for a commercial purpose.

#### Section 12-924

(a)

  (1) Except as provided in paragraph (2) of this subsection, this section applies only to a plan between a credit grantor and a consumer borrower under which a credit grantor has taken any property as security for credit extended under the plan.

  (2) This section does not apply to a loan to which Sec. 3-105.1 of the Real Property Article applies.

(b) A credit grantor shall release any recorded mortgage, deed of trust, security agreement, or other lien securing the extension of credit within a reasonable time after:

  (1) The outstanding unpaid indebtedness under a plan has been paid in full;

  (2) There are no further obligations of the credit grantor or the consumer borrower under the plan; and

  (3) The account under the plan is closed.

(c) The release shall be:

  (1) In writing; and

  (2) Prepared at the expense of the credit grantor.

(d)

  (1) If the credit grantor does not record the release, the credit grantor shall furnish the consumer borrower with the release in a recordable form.

  (2) If the credit grantor records the release, the credit grantor shall furnish the consumer borrower with a copy of the release.

(e)

  (1) If a fee is collected by a credit grantor for the recording of a release:

    (i) The release shall be recorded by the credit grantor; and

    (ii) Any portion of the fee not paid to a governmental entity for recording the release shall be refunded to the borrower.

  (2) If a fee is not collected by a credit grantor for the recording of a release, the credit grantor is not obligated to record the release.

#### Section 12-925

(a)

  (1) In this section the following words have the meanings indicated.

  (2) "Fully indexed rate" means the index rate, as defined in the mortgage loan documents, prevailing at the time the mortgage loan is approved by the credit grantor, plus the margin that will apply after the expiration of an introductory interest rate.

  (3)

    (i) "Mortgage loan" has the meaning stated in Sec. 11-501 of the Financial Institutions Article.

    (ii) "Mortgage loan" does not include a reverse mortgage loan.

(b) A credit grantor may not make a mortgage loan without giving due regard to the borrower's ability to repay the mortgage loan in accordance with its terms, including the fully indexed rate of the mortgage loan, if applicable, and property taxes and homeowner's insurance whether or not an escrow account is established for the collection and payment of these expenses.

(c)

  (1) Due regard to a borrower's ability to repay a mortgage loan must include:

    (i) Consideration of the borrower's debt to income ratio, including existing debts and other obligations; and

    (ii) Verification of the borrower's gross monthly income and assets by review of third-party written documentation reasonably believed by the credit grantor to be accurate and complete.

  (2) Acceptable third-party written documentation includes:

    (i) The borrower's Internal Revenue Service form W-2;

    (ii) A copy of the borrower's income tax return;

    (iii) Payroll receipts;

    (iv) The records of a financial institution; or

    (v) Other third-party documents that provide reasonably reliable evidence of the borrower's income or assets.

  (3) This subsection does not apply to a mortgage loan:

    (i) Approved for government guaranty by the Federal Housing Administration, the Veterans Administration, the United States Department of Agriculture, the Maryland Department of Housing and Community Development, or the Community Development Administration; or

    (ii) That refinances an existing mortgage loan if the refinance mortgage loan is:

      (1) Offered under the federal Homeowner Affordability and Stability Plan; and

      (2) Made available by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association.

#### Section 12-926

The Commissioner of Financial Regulation may adopt regulations regarding the enforcement of and compliance with this subtitle as to credit grantors who offer or make shared appreciation agreements under this subtitle.

### Subtitle 10. Credit Grantor Closed End Credit Provisions

#### Section 12-1001

(a) In this subtitle the following words have the meanings indicated.

(b)

  (1) "Balloon payment" means any scheduled payment on an installment loan that is more than 2 times the average of all other payments scheduled to repay the installment loan.

  (2) "Balloon payment" does not include a down payment.

(c) "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.

(d) "Closed end credit" means the extension of credit by a credit grantor to a borrower under an arrangement or agreement which is not a revolving credit plan as defined in Subtitle 9 of this title.

(e) "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.

(f) "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.

(g)

  (1) "Credit grantor" means any individual, corporation, business trust, statutory 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) A person not required to be licensed under this subtitle, who is exempt from the licensing provisions of Title 11, Subtitle 5 of the Financial Institutions Article, who makes a loan or extension of credit under this subtitle secured by a secondary mortgage on residential real property; and

    (iii) Any person who acquires or obtains the assignment of an agreement for an extension of credit made under this subtitle.

(h) "Debt cancellation agreement" means an agreement between a credit grantor and a borrower which provides for cancellation of the remaining loan balance in the event of theft or total destruction of the collateral for the loan minus the proceeds of any insurance maintained on the collateral for the loan or, if the borrower does not have insurance, the actual cash value of the collateral at the time of loss, determined as provided in the agreement.

(i) "Installment loan" means a loan repayable in scheduled periodic payments of principal and interest.

(j)

  (1) "Loan" means any single extension of closed end credit, whether repayable in installments, on demand, or otherwise and whether extended in one or more advances.

  (2) "Loan" includes an advance made in accordance with the terms of a shared appreciation agreement.

(k) "Mechanical repair contract" has the meaning stated in Title 15, Subtitle 3 of the Transportation Article.

(l) "Mobile home" has the meaning stated in Sec. 11-501 of the Financial Institutions Article.

(m) "Remaining loan balance", when used in reference to a debt cancellation agreement, does not include:

  (1) Any delinquent or deferred payments;

  (2) Past due charges;

  (3) Late payment charges;

  (4) Unearned interest;

  (5) Unearned rental payments;

  (6) The portion of any financed taxes or charges, including charges for credit life insurance, credit health insurance, credit involuntary unemployment benefit insurance, and mechanical repair contracts, actually refunded to the borrower or credited as a reduction to the loan balance; or

  (7) By agreement of the parties, the amount of any primary insurance deductible.

(n) "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.

(o) "Shared appreciation agreement" has the meaning stated in Sec. 11-501 of the Financial Institutions Article.

#### Section 12-1002

(a) Any credit grantor may, subject to the other provisions of this subtitle, offer and extend closed end credit to a borrower.

(b) In connection with closed end credit offered and extended under this subtitle, a credit grantor may charge and collect the interest and other charges permitted by this subtitle and may take any security as collateral as may be acceptable to the credit grantor.

#### Section 12-1003

(a) A credit grantor may charge and collect interest on a loan at any daily, weekly, monthly, annual, or other periodic percentage rate as the agreement, the note, or other evidence of the loan provides if the effective rate of simple interest is not in excess of 24 percent per year. The rate of interest chargeable on a loan must be expressed in the agreement as a simple interest rate or rates.

(b)

  (1) Interest may be calculated by way of simple interest or by any other method as the agreement, note, or other evidence of the loan provides. If the interest is precomputed, it may be calculated on the assumption that all scheduled payments will be made when due.

  (2) For purposes of this section, a year may be any period of from 360 to 366 days, including or disregarding the effect of leap year, as the credit grantor may determine.

(c)

  (1)

    (i) Except as provided in paragraph (2) of this subsection, if an installment loan under this subtitle made to a consumer borrower is secured by collateral other than a lien on residential real property, the credit grantor may not require a schedule of repayment under which a consumer borrower may be required to pay a balloon payment at maturity.

    (ii) If an installment loan under this subtitle made to a consumer borrower is secured by a secondary lien on residential real property, the credit grantor may require a schedule of repayment providing for a balloon payment at maturity. On request, the consumer borrower is permitted to postpone payment of the balloon payment once for a period not to exceed 6 months. The borrower must continue to make installment payments in the amount required prior to maturity during the extension period. The credit grantor may not impose any charges or fees as a result of allowing an extension period.

  (2)

    (i)

      (1) In this paragraph the following words have the meanings indicated.

      (2) "Motorcycle" has the meaning stated in Sec. 11-136 of the Transportation Article.

      (3) "Passenger car" has the meaning stated in Sec. 11-144.2 of the Transportation Article.

    (ii) A credit grantor may require a schedule of repayment under which a consumer borrower may be required to pay a balloon payment at maturity if:

      (1) The installment loan is secured by a lien on a motor vehicle that is a motorcycle or passenger car; and

      (2) The amount of the installment loan exceeds:

      (A) $10,000, if the motor vehicle is a motorcycle; and

      (B) $30,000, if the motor vehicle is a passenger car.

#### Section 12-1004

(a) If the agreement, note, or other evidence of the loan permits, the periodic percentage rate of interest charged and collected on the loan may, if the interest is not precomputed, vary in accordance with an index that is made readily available to and verifiable by the borrower and is beyond the control of the credit grantor.

(b) The periodic percentage rate, as varied, may be made applicable to any outstanding indebtedness on the loan on and after the effective date of the variation.

(c) This section does not limit the authority of a credit grantor to charge and collect interest on a loan in the manner and at the rate authorized in any other section of this subtitle.

(d) The periodic percentage rate, as varied, may not exceed the maximum rate permitted pursuant to Sec. 12-1003(a) of this subtitle.

#### Section 12-1005

In addition to interest at a periodic percentage rate or rates permitted by Sec.Sec. 12-1003 and 12-1004 of this subtitle, a credit grantor may charge and collect:

(a)

  (1) Subject to the limitations in this section, loan fees, points, finder's fees, and other charges; however, all such charges, when combined with any finder's fee imposed by a mortgage broker under Sec. 12-804 of this title, may not exceed 10 percent of the original extension of credit;

  (2) In the case of a loan to a consumer borrower, no loan fees, points, finder's fees, or other charges may be charged and collected unless:

    (i) The agreement, note, or other evidence of the loan so provides and the borrower agrees in writing to pay those charges;

    (ii) The loan is secured by a lien on residential real property; however, all such charges, when combined with any finder's fee imposed by a mortgage broker under Sec. 12-804 of this title, may not exceed 10 percent of the original extension of credit; and

    (iii) The charges are disclosed to the borrower in accordance with the federal Truth in Lending Act; and

  (3) The limitations imposed by paragraphs (1) and (2) of this subsection do not apply to a credit extension:

    (i) Secured by a first lien on residential real property; or

    (ii) Made for a bona fide commercial purpose in excess of $75,000.

(b) Reasonable fees for services rendered or for reimbursement of expenses incurred in good faith by the credit grantor or its agents in connection with the loan, including:

  (1) Commitment fees;

  (2) Official fees and taxes;

  (3) Premiums or other charges for any guarantee or insurance protecting the credit grantor against the borrower's default or other credit loss;

  (4) Costs incurred by reason of examination of title, inspection, recording, and other formal acts necessary or appropriate to the security of the loan;

  (5) Filing fees;

  (6) Attorney's fees; and

  (7) Travel expenses.

(c)

  (1) The cost to the borrower of an optional debt cancellation agreement, provided that the cost of the debt cancellation agreement is separately itemized in the financing agreement.

  (2) This cost is in addition to the charges permitted under subsections (a), (b), and (d) of this section.

(d)

  (1) In the case of a loan to a consumer borrower, a fee permitted under subsection (b) of this section may not be charged and collected unless:

    (i) The agreement, note, or other evidence of the loan permits;

    (ii) The fee is an actual and verifiable expense of the credit grantor not retained by him; and

    (iii) Limited to charges for:

      (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.

  (2) Notwithstanding Sec. 12-1009(e) of this subtitle, fees and charges permitted under this subsection may be imposed, charged, and collected at any time.

(e) For purposes of this subtitle, fees and charges permitted under this section are not interest with respect to a loan.

#### Section 12-1006

A credit grantor may at any time permit a borrower to defer scheduled payments of a loan and may, in connection with the deferral and by agreement of the credit grantor and borrower:

(1) Charge and collect deferral charges; and

(2) Require payment by the borrower of the additional cost to the credit grantor of premiums for continuing in force, until the end of the period of deferral, any insurance coverage provided in connection with the loan.

#### Section 12-1007

(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 and Equity Protection Act set forth in 15 U.S.C. Sec. 1602(bb), as modified from time to time by Regulation Z, 12 C.F.R. Part 1026, except that the comparison percentages for the mortgage loan shall be one percentage point less than those specified in 15 U.S.C. Sec. 1602(bb), as modified from time to time by Regulation Z, 12 C.F.R. Part 1026.

  (3) "Credit health insurance" has the meaning stated in Sec. 13-101 of the Insurance Article.

  (4) "Credit involuntary unemployment benefit insurance" has the meaning stated in Sec. 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 Sec. 11-501 of the Financial Institutions Article.

  (7) "Premium" has the meaning stated in Sec. 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) In connection with a loan to a consumer borrower:

  (1) The purchase of credit life insurance, credit health insurance, credit involuntary unemployment benefit insurance, and similar insurance coverages is optional with the consumer borrower; and

  (2) Subject to Sec. 12-1007.1 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.

  (3)

    (i) Except as provided in this subsection, a credit grantor 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 subsection shall prohibit the financing of any insurance coverage in connection with a mobile home or its premises, as those terms are defined in Sec. 8A-101 of the Real Property Article.

(c) The provisions of this section do not alter or modify rights, privileges, or restrictions heretofore existing between the credit grantor and a borrower other than a consumer borrower.

(d) Premiums for any insurance coverage permitted by this section are not interest with respect to a loan.

(e) The offer and placement of insurance under this section shall be subject to the provisions of the Insurance Article.

(f)

  (1)

    (i) In this subsection the following words have the meanings indicated.

    (ii) "Improvements" means buildings or structures erected upon or affixed to real property that enhance the value of the real property.

    (iii) "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".

    (iv)

      (1) "Replacement cost" means the amount needed to repair damage to or rebuild improvements on real property to restore the improvements to their pre-loss condition.

      (2) "Replacement cost" does not include the value of land.

  (2)

    (i) A credit grantor may not require a borrower, as a condition to receiving or maintaining a loan secured by a lien, to provide or purchase property insurance coverage against risks to any improvements on any real property in an amount exceeding the replacement cost of the improvements on the real property.

    (ii) In determining the replacement cost of the improvements on any real property, the credit grantor may:

      (1) Accept the value placed on the improvements by the insurer; or

      (2) Use the value placed on the improvements by the credit grantor's appraisal of the improvements.

  (3) A violation of this subsection shall entitle the borrower to seek:

    (i) 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 lien securing the loan.

#### Section 12-1007.1

(a) In this section, "binder" means a binder or other temporary contract of insurance as provided under Sec. 12-106 of the Insurance Article.

(b) A credit grantor shall comply with this section if the credit grantor:

  (1) Makes any loan secured by a first lien on any interest in owner-occupied residential real property; and

  (2) As a condition of making the loan, requires the consumer borrower to purchase property insurance or credit loss insurance.

(c) A credit grantor who makes a loan subject to this section shall accept as evidence of insurance a written binder issued by any authorized insurer or its insurance producer if the binder includes or is accompanied by:

  (1) The name and address of the insured consumer borrower;

  (2) The name and address of the credit grantor;

  (3) A description of the insured residential real property;

  (4) A provision that the binder may not be canceled within the term of the binder unless the credit grantor and the insured consumer borrower receive written notice of the cancellation at least 10 days prior to the cancellation;

  (5) Except in the case of the renewal of a policy subsequent to the closing of the loan, a paid receipt for the full amount of the applicable premium; and

  (6) The amount of coverage.

(d) This section does not prohibit a credit grantor from refusing to honor a binder in cases where:

  (1) The credit grantor receives notice of the cancellation of the binder by the insurer; or

  (2) At the expiration of 30 days of the date the binder was given, the insurer has failed to issue the policy of insurance.

#### Section 12-1008

(a) If the agreement governing a loan permits, a credit grantor may:

  (1) For a nonconsumer borrower, charge a higher periodic percentage rate or rates of interest on the amount of outstanding unpaid payments or portions of payments under the loan which are in default; and

  (2) For any borrower, impose:

    (i) A late or delinquency charge on payment or portions of payments; and

    (ii) If payment is made with a check that is dishonored on the second presentment, a charge not to exceed $15.

(b) In the case of a loan to a consumer borrower, no late or delinquency charge may be charged unless the agreement, note, or other evidence of the loan permits. No more than 1 late or delinquency charge may be imposed for any single payment or portion of payment, regardless of the period during which it remains in default.

(c) For the purposes of subsection (b) of this section, all payments by the borrower shall be applied to satisfaction of scheduled payments in the order in which they become due.

(d) Charges permitted under this section may not be considered interest or finance charges under the agreement.

#### Section 12-1009

(a) A consumer borrower may prepay a loan in full at any time.

(b) If interest charged pursuant to Sec. 12-1003 of this subtitle in respect of a loan to a consumer borrower has been precomputed, then, in the event of prepayment of the entire loan, the credit grantor shall refund or credit to the borrower the unearned portion of the precomputed interest charge. This refund or credit shall be in an amount not less than the amount which would be refunded or credited if the unearned precomputed interest charge were calculated in accordance with the actuarial method, except that the borrower may not be entitled to a refund or credit of less than $5. The unearned portion of the precomputed interest charge is, at the option of the credit grantor, either:

  (1) That portion of the precomputed interest charge which is allocable to all originally scheduled or, if deferred, all deferred payment periods, or portions of payment periods, ending subsequent to the date of prepayment. The unearned precomputed interest charge is the total of that which would have been earned for each period, or portion of a period, had the loan not been prepaid, by applying to the unpaid balances of principal, according to the actuarial method, an annual percentage rate based on the precomputed interest charges, assuming that all payments were made as scheduled, or as deferred, if deferred. The credit grantor, at its option, may round this annual percentage rate to the nearest 1/4 of 1 percent; or

  (2) The total precomputed interest charge less the earned precomputed interest charge. The earned precomputed interest charge shall be determined by applying an annual percentage rate based on the total precomputed interest charge, under the actuarial method, to the unpaid balances for the actual time those balances were unpaid up to the date of prepayment.

(c)

  (1) As used in subsection (b) of this section, the following terms have the meanings indicated.

  (2) "Actuarial method" means the method of allocating payments made on a loan between the outstanding principal balance of the loan and interest, by which a payment is applied first to the accumulated interest, and any remainder is subtracted from the outstanding principal balance of the loan.

  (3) "Payment period" means the time period within which scheduled payments on a loan are due as provided in the agreement, note, or other evidence of the loan.

  (4) "Precomputed interest charge" means interest as computed by an add on, discount, or other similar method.

(d) If a charge is made to a consumer borrower for premiums for insuring the borrower under an insurance policy pursuant to Sec. 12-1007 of this subtitle, then, in the event of prepayment in full, the credit grantor shall refund or credit to the borrower any unearned premiums paid by the borrower, provided that no refund or credit of less than $5 shall be required.

(e) Except as provided in Sec. 12-1005(d) of this subtitle, in connection with any prepayment of any loan by a consumer borrower, the credit grantor may not impose any prepayment charge.

(f) The terms of prepayment of any loan made to a borrower other than a consumer borrower shall be those agreed to by the credit grantor and the borrower.

#### Section 12-1010

(a) Except as provided under subsection (c) of this section, a consumer borrower may, with the consent of the credit grantor, refinance the entire outstanding and unpaid amount of a loan, and the credit grantor may charge and collect a refinancing charge in connection with any refinancing in an amount agreed to by the credit grantor and the borrower.

(b) For purposes of this section, "the entire outstanding and unpaid amount of a loan" is:

  (1) If the interest and charges in respect of the loan were not precomputed, the total of the unpaid balance and the accrued and unpaid interest and charges on the date of refinancing; or

  (2) If the interest and charges on the loan were precomputed, the total of the unpaid balance and the accrued and unpaid charges on the date of refinancing, less the amount which the credit grantor would have been required to refund or credit upon prepayment on the date of refinancing under Sec. 12-1009 of this subtitle governing refunds upon prepayment.

(c) A credit grantor may not impose any refinancing charges on the refinancing of an installment loan more often than once during any 12-month period of the loan if the loan is:

  (1) Made by the credit grantor;

  (2) Secured by a secondary lien on residential real property; and

  (3) Made to cure a default on the loan being refinanced where the default has been in existence for more than 30 days.

#### Section 12-1011

(a) If a consumer borrower defaults under the terms of a loan and the credit grantor refers the borrower's account to an attorney who is not a salaried employee of the credit grantor for collection, the credit grantor may, if the agreement, note, or other evidence of the loan permits, charge and collect from the borrower a reasonable attorney's fee.

(b) If the agreement, note, or other evidence of the loan permits, the credit grantor may recover from the borrower all court and other collection costs actually incurred by the credit grantor relating to the borrower's default.

#### Section 12-1012

(a)

  (1) This subtitle does not prohibit a credit grantor from including in the loan amount the cost to the borrower of a mechanical repair contract sold in connection with a motor vehicle, provided that the cost of the mechanical repair contract is separately itemized in the financing agreement.

  (2) The cost of a mechanical repair contract sold in connection with a motor vehicle may be included in the loan amount whether or not the motor vehicle is covered by an original manufacturer's warranty.

  (3) A credit grantor may not require a buyer of a motor vehicle, as a condition of receiving a loan, to enter a mechanical repair contract.

(b) This subtitle does not prohibit a credit grantor, in connection with a loan to a nonconsumer borrower, from:

  (1) Extending or deferring all or any portion of any scheduled payment under the loan;

  (2) Permitting prepayment or refinancing of the loan in whole or in part;

  (3) Charging and collecting any charges in connection with the matters referred to in paragraphs (1) and (2) of this subsection; or

  (4) Charging and collecting late or delinquency charges, attorney's fees, or collection charges.

(c)

  (1) This subtitle does not prohibit a credit grantor, in connection with a sale, from including in the loan amount the amounts actually paid or to be paid by the credit grantor pursuant to an agreement with the borrower, on behalf of the borrower to discharge any amount financed under an outstanding loan agreement or installment sale agreement or the unpaid portion of the early termination obligation under any lease or other obligation of the lessee, with respect to a motor vehicle or other property traded in.

  (2) A credit grantor who is a seller of goods or services may not be deemed to be making loans for purposes of Sec. 11-301(b)(6)(i) of the Financial Institutions Article merely by engaging in activities described in paragraph (1) of this subsection.

#### Section 12-1013

(a) Unless otherwise provided under the express terms of the agreement, note, or other evidence of the extension of closed end credit, the provisions of Subtitle 1, 3, 4, 5, 6, or 9 of this title do not apply to an extension of closed end credit if:

  (1) The agreement, note, or other evidence of the extension of credit is made before October 1, 1993; and

  (2) The extension of credit is made under this subtitle before October 1, 1993.

(b) For the purposes of subsection (a) of this section, an extension of credit is made under this subtitle if:

  (1) The credit grantor has made a written election to do so in the agreement, note, or other evidence of the extension of credit; or

  (2) The agreement, note, or other evidence of the extension of credit is made pursuant to the provisions of this subtitle.

(c) For the purposes of subsection (a) of this section, if there is no written election to extend credit under this subtitle, the burden of proof is on the credit grantor to show the agreement, note, or other evidence of the extension of credit was made pursuant to this subtitle.

(d) Any agreement, note, or other evidence of an extension of credit made before October 1, 1993 is not subject to Sec. 12-1013.2 of this subtitle.

(e) Notwithstanding any other provision of this title, a loan shall be subject to the provisions of this subtitle, whether or not elected, if the loan:

  (1) Is a shared appreciation agreement; and

  (2) Does not allow the borrower to repay advances and have any repaid amounts subsequently readvanced to the borrower.

#### Section 12-1013.1

(a)

  (1) On or after October 1, 1993, a credit grantor may at its option elect to make a loan to any borrower either pursuant to this subtitle or as otherwise permitted by applicable law.

  (2) In order to make a loan under this subtitle, a credit grantor shall make a written election to that effect in the agreement, note, or other evidence of the loan.

(b)

  (1) If a credit grantor elects in accordance with this section to make a loan under this subtitle, the provisions of Subtitle 1, 3, 4, 5, 6, or 9 of this title do not apply to the loan.

  (2) If a person fails to elect in accordance with this section to extend closed end credit under this subtitle, the provisions of this subtitle do not apply.

#### Section 12-1013.2

(a)

  (1) Except as provided under paragraph (2) of this subsection, the credit grantor shall deliver a copy of the agreement, note, or other evidence of the loan to the borrower no later than the time of consummation of the loan.

  (2) If consummation of the loan does not occur in a face-to-face transaction between the credit grantor and the borrower, the credit grantor may delay delivering a copy of the agreement, note, or other evidence of the loan to the borrower until the due date of the first payment.

(b) If there is more than one borrower, a copy of the agreement, note, or other evidence of the loan may be delivered to any borrower who is primarily liable on the loan.

(c) Written acknowledgment by a borrower of delivery made in accordance with this section of a copy of the agreement, note, or other evidence of the loan is conclusive proof of the delivery as between the borrower and any assignee of the agreement, note, or other evidence of the loan without actual knowledge to the contrary.

#### Section 12-1014

(a) If any provision of this subtitle is held invalid, such invalidity shall not affect any other provisions of this subtitle which can be given effect without the invalid provision.

(b) Notwithstanding any provisions of this title, a loan under this subtitle is subject only to the disclosure requirements of this subtitle, and, to the extent applicable, of the federal Truth in Lending Act and regulations promulgated thereunder.

#### Section 12-1015

(a) A credit grantor making a loan or an extension of credit under this subtitle is subject to the licensing, investigatory, enforcement and penalty provisions of Title 11, Subtitle 3 of the Financial Institutions Article unless the credit grantor or the loan or extension of credit is exempt under Title 11, Subtitle 3 of the Financial Institutions Article.

(b) In addition to any license which may be required by subsection (a) of this section, a credit grantor making a loan or extension of credit under this subtitle secured by any lien on residential real property is subject to the licensing, investigatory, enforcement and penalty provisions of Title 11, Subtitle 5 of the Financial Institutions Article unless the credit grantor or the loan or extension of credit is exempt under Title 11, Subtitle 5 of the Financial Institutions Article.

(c) If a license is required by this section, it shall be issued by the Commissioner of Financial Regulation.

(d)

  (1) An extension of credit made under this subtitle prior to October 1, 1994 by a home improvement contractor may not be deemed unenforceable or violative of this section because the contractor was not licensed under Title 11, Subtitle 3 of the Financial Institutions Article.

  (2) Paragraph (1) of this subsection does not apply to any person engaged in the business of making loans at the time the credit was extended.

#### Section 12-1016

(a) If a written complaint for violation of any provision of this subtitle, including the disclosure requirements of this subtitle and the federal Truth in Lending Act and regulations promulgated thereunder, or any other law of this State that regulates loans or other extensions of credit is filed with the Commissioner of Financial Regulation, the Commissioner may investigate the complaint and hold a hearing on it in accordance with Sec. 11-413 of the Financial Institutions Article.

(b)

  (1) The Commissioner shall give to the credit grantor against whom a complaint is filed at least 10 days' written notice of the complaint and the time and place of any hearing. The notice shall be in writing and sent by registered or certified mail to the credit grantor's principal place of business.

  (2) Before a hearing under this section may be scheduled, the Commissioner shall:

    (i) Send a written notice to the complaining party that describes the provisions in paragraph (3) of this subsection concerning preclusion; and

    (ii) Obtain from the complaining party a written:

      (1) Election to proceed with a hearing in accordance with this section; and

      (2) Waiver of any right to pursue any cause of action or remedy as to the matters addressed in the complaint or the hearing.

  (3)

    (i) If a complaining party provides a written election and waiver as described in paragraph (2)(ii) of this subsection, the complaining party shall be precluded from raising or asserting against the credit grantor in any subsequent forum any claim, defense, setoff, recoupment, penalty for violation, or right of any kind based on the matters addressed in the complaint or the hearing.

    (ii) The preclusion in subparagraph (i) of this paragraph does not apply to an appeal from the order of the Commissioner resulting from the hearing.

  (4) If a complaining party fails to provide a written election and waiver as described in paragraph (2)(ii) of this subsection, the Commissioner shall not schedule a hearing on the complaint.

(c)

  (1) If, after the hearing, the Commissioner finds that the credit grantor has engaged or is engaging in any act or practice prohibited by this subtitle, the Commissioner shall order the credit grantor to cease and desist from the act or practice.

  (2)

    (i) If the Commissioner finds that the act or practice described in paragraph (1) of this subsection resulted in the credit grantor collecting an amount from the complaining party not permitted under this subtitle, the Commissioner may direct the credit grantor to make a refund to the complaining party.

    (ii) The Commissioner may direct a refund only up to the amount collected by the credit grantor from the complaining party that:

      (1) Exceeds the amount expressly permitted under this subtitle; or

      (2) The credit grantor is expressly not permitted to collect.

  (3)

    (i) If an order issued under this section directs the credit grantor to make a refund as authorized in paragraph (2) of this subsection, the credit grantor may make the refund before the order becomes final.

    (ii) If a credit grantor makes the refund directed by the Commissioner's order, the order for the refund shall not become final and shall be withdrawn by the Commissioner.

    (iii) Any order withdrawn by the Commissioner may not be considered evidence of the Commissioner's interpretation of this subtitle.

  (4) The order of the Commissioner shall comply with the Administrative Procedure Act.

(d)

  (1) If no appeal is filed, the order becomes final after expiration of the time allowed by the Administrative Procedure Act for appeals from the Commissioner's orders.

  (2) If an appeal is filed, the order becomes final after final decision of the court affirming the order or dismissing the appeal.

(e) For purposes of this section, "complaining party" means an individual who files a written complaint with the Commissioner of Financial Regulation pursuant to this section.

#### Section 12-1017

Any credit grantor or his officer or employee who willfully violates any provision of this subtitle is guilty of a misdemeanor and on conviction is subject to a fine not exceeding $1,000 or imprisonment not exceeding 1 year, or both.

#### Section 12-1018

(a)

  (1) In this subsection, "notice" means the first to occur of the following:

    (i) When the credit grantor receives a written notice from the borrower notifying the credit grantor of an error or violation;

    (ii) When the credit grantor receives a written notice from the Commissioner of Financial Regulation or the appropriate regulatory authority notifying the credit grantor of an error or violation; or

    (iii) When the credit grantor receives service of process in a civil action for an error or violation instituted by the borrower in a court of competent jurisdiction.

  (2) Except for a bona fide error of computation, if a credit grantor violates any provision of this subtitle the credit grantor may collect only the principal amount of the loan and may not collect any interest, costs, fees, or other charges with respect to the loan.

  (3) The penalty provided under paragraph (2) of this subsection does not apply where a credit grantor:

    (i) Unintentionally and in good faith fails to comply with Sec. 12-1003, Sec. 12-1004, Sec. 12-1005, Sec. 12-1008, Sec. 12-1011, Sec. 12-1013.2, Sec. 12-1023(d), Sec. 12-1024, Sec. 12-1025, Sec. 12-1026, Sec. 12-1027, or Sec. 12-1028 of this subtitle; and

    (ii) Corrects the error or violation and makes the borrower whole for all losses, including reasonable attorney's fees and interests, where appropriate, within 10 days after the credit grantor receives notice of the error or violation.

  (4) The burden shall be on the credit grantor to show that the credit grantor's failure to comply with Sec. 12-1003, Sec. 12-1004, Sec. 12-1005, Sec. 12-1008, Sec. 12-1011, Sec. 12-1013.2, Sec. 12-1023(d), Sec. 12-1024, Sec. 12-1025, Sec. 12-1026, Sec. 12-1027, or Sec. 12-1028 of this subtitle was unintentional and in good faith.

(b) In addition, a credit grantor who knowingly violates any provision of this subtitle shall forfeit to the borrower 3 times the amount of interest, fees, and charges collected in excess of that authorized by this subtitle.

#### Section 12-1018.1

(a) In this section, "Commissioner" means the Commissioner of Financial Regulation.

(b) Except as provided in subsection (c) of this section, the penalty provided under Sec. 12-1018(a)(2) of this subtitle does not apply if a credit grantor:

  (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 or the Deputy Commissioner; 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.

(c) The provisions of subsection (b) 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.

(d) 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.

#### Section 12-1019

An action for violation of this subtitle may not be brought more than 6 months after the loan is satisfied.

#### Section 12-1020

A credit grantor is not liable for any failure to comply with a provision of this subtitle if, within 60 days after discovering an error and prior to institution of an action under this subtitle or the receipt of written notice from the borrower, the credit grantor notifies the borrower of the error and makes whatever adjustments are necessary to correct the error.

#### Section 12-1021

(a)

  (1) A credit grantor may repossess tangible personal property securing a loan under an agreement, note, or other evidence of the loan if the consumer borrower is in default.

  (2) The credit grantor may repossess tangible personal property from a consumer borrower only by:

    (i) Legal process; or

    (ii) Self-help, without use of force.

(b) Nothing in this section authorizes a violation of criminal law.

(c)

  (1) Except as provided in paragraph (2) of this subsection, at least 10 days before a credit grantor repossesses any tangible personal property, the credit grantor may serve a written notice on the consumer borrower of the intention of the credit grantor to repossess the tangible personal property.

  (2)

    (i) Except as provided in subparagraph (ii) of this paragraph, at least 30 days before a credit grantor repossesses a mobile home that is primarily for personal, family, or household use, the credit grantor shall serve on the borrower a written notice of the credit grantor's intention to repossess the mobile home.

    (ii) The notice required under subparagraph (i) of this paragraph may be served by the credit grantor less than 30 days before repossession if:

      (1) The mobile home:

      (A) Is vacant and abandoned, based on a determination by the credit grantor that at least three of the circumstances listed in Sec. 7-105.18(d) of the Real Property Article have been met; or

      (B) Has been voluntarily surrendered by the borrower to the credit grantor; and

      (2) The notice is accompanied by a certification from the credit grantor identifying the circumstances demonstrating that the mobile home is vacant and abandoned or that the mobile home has been surrendered.

  (3) The notice shall:

    (i) State the default and any period at the end of which the tangible personal property will be repossessed; and

    (ii) Briefly state the rights of the consumer borrower in case the tangible personal property is repossessed.

(d) The notice may be delivered to the consumer borrower personally or sent to the consumer borrower's last known address by registered or certified mail.

(e) Within 5 days after the credit grantor repossesses the tangible personal property the credit grantor shall deliver to the consumer borrower personally or send to him at his last known address by registered or certified mail, a written notice which briefly states:

  (1) The right of the consumer borrower to redeem the tangible personal property, and the amount payable for it;

  (2) The rights of the consumer borrower as to a resale, and his liability for a deficiency; and

  (3) The exact location where the tangible personal property is stored and the address where any payment is to be made.

(f) For 15 days after the credit grantor gives the notice required by subsection (e) of this section, the credit grantor shall retain any repossessed property.

(g) During the period provided for in subsection (f) of this section, the consumer borrower may:

  (1) Redeem and take possession of the property; and

  (2) Resume the performance of the agreement.

(h) To redeem the property, the consumer borrower shall:

  (1) Tender the amount due under the agreement at the time of redemption, without giving effect to any provision which allows acceleration of any installment otherwise payable after that time;

  (2) Tender performance of any other promise for the breach of which the property was repossessed; and

  (3) If the discretionary notice provided for in subsection (c) of this section was given, pay the actual and reasonable expenses of retaking and storing the property.

(i)

  (1) Notwithstanding subsections (g) and (h) of this section, the credit grantor shall have the right to require the consumer borrower to tender payment of the entire balance due under the agreement if:

    (i) The date of the default in the payments due under the agreement that led to the present repossession occurred within 18 months after the last repossession; or

    (ii) The consumer borrower was guilty of fraudulent conduct, intentionally and wrongfully concealed, removed, damaged, or destroyed the property, or attempted to do so, and the property was repossessed because of that conduct.

  (2) Under paragraph (1) of this subsection, the payment by the consumer borrower of the entire balance due under the agreement shall:

    (i) Constitute redemption by the consumer borrower; and

    (ii) Entitle the consumer borrower to take possession of the property.

(j)

  (1)

    (i) Subject to subsection (l) of this section, the credit grantor shall sell the property that was repossessed at:

      (1) Subject to paragraph (2) of this subsection, a private sale; or

      (2) A public auction.

    (ii) At least 10 days before the sale, the credit grantor shall notify the consumer borrower in writing of the time and place of the sale, by certified mail, return receipt requested, sent to the consumer borrower's last known address.

    (iii) Any sale of repossessed property must be accomplished in a commercially reasonable manner.

  (2) In all cases of a private sale of repossessed goods under this section, a full accounting shall be made to the borrower in writing and the seller shall retain a copy of this accounting for at least 24 months. This accounting shall contain the following information:

    (i) The unpaid balance at the time the goods were repossessed;

    (ii) The refund credit of unearned finance charges and insurance premiums, if any;

    (iii) The remaining net balance;

    (iv) The proceeds of the sale of the goods;

    (v) The remaining deficiency balance, if any, or the amount due the buyer;

    (vi) All expenses incurred as a result of the sale;

    (vii) The purchaser's name, address, and business address;

    (viii) The number of bids sought and received; and

    (ix) Any statement as to the condition of the goods at the time of repossession which would cause their value to be increased or decreased above or below the market value for goods of like kind and quality.

  (3) The Commissioner of Financial Regulation may make a determination concerning any private sale that the sale was not accomplished in a commercially reasonable manner. Upon that determination, the Commissioner may enter an order disallowing any claim for a deficiency balance.

(k)

  (1) The provisions of this subsection apply to a public sale of property which secured a loan in excess of $2,000 at the time the loan was made.

  (2) The proceeds of a sale to which this subsection applies shall be applied, in the following order, to:

    (i) The actual and reasonable cost of the sale;

    (ii) The actual and reasonable cost of retaking and storing the property; and

    (iii) The unpaid balance owing under the agreement at the time the property was repossessed.

  (3) The credit grantor shall furnish to the consumer borrower a written statement which shows the distribution of the proceeds.

  (4) If the provisions of this section, including the requirement of furnishing a notice following repossession, are not followed, the credit grantor shall not be entitled to any deficiency judgment to which he would be entitled under the loan agreement.

(l)

  (1)

    (i) In this subsection, "consumer goods" means tangible personal property used or bought for use primarily for personal, family, or household purposes that is:

      (1) Movable at the time a security interest attaches; or

      (2) A fixture.

    (ii) "Consumer goods" does not include money, documents, instruments, accounts, chattel paper, or general intangibles.

  (2) This subsection applies to tangible personal property securing a loan that:

    (i) Has been repossessed by the credit grantor; or

    (ii) Is in actual or constructive possession of the credit grantor where the perfection of the security interest in the property depends on the possession of the property.

  (3) In the case of a purchase money security interest in consumer goods, if a consumer borrower has paid 60 percent of the cash price or 60 percent of the loan in the case of another security interest in consumer goods and, after default, has not signed a statement renouncing or modifying the consumer borrower's rights under this subsection, a credit grantor who has repossessed the consumer goods must take reasonable action within 90 days after the repossession to commence disposal of them in the manner provided under subsection (j) of this section.

  (4)

    (i) In any other case involving tangible personal property securing a loan, a credit grantor may, after default, propose to retain the property in full satisfaction of the obligations of the borrower under the loan.

    (ii) If, as authorized by subparagraph (i) of this paragraph, a credit grantor proposes to retain property in full satisfaction of the obligations of the borrower under the loan, the credit grantor shall send written notice of the proposal to:

      (1) The consumer borrower; and

      (2) Except in the case of consumer goods, any other person who has a security interest in the property and who:

      (A) Has duly filed a financing statement indexed in the name of the consumer borrower in this State; or

      (B) Is known by the credit grantor to have a security interest in the property.

    (iii)

      (1) If the consumer borrower or other person entitled to receive notification objects in writing within 30 days from the sending of the notification, the credit grantor must take reasonable action to dispose of the property in the manner provided under subsection (j) of this section.

      (2) In the absence of written objection, the credit grantor may retain the property in full satisfaction of the outstanding unpaid indebtedness under the loan.

  (5) If despite complying with the requirements of this section there is no sale of tangible personal property securing a loan under subsection (j) of this section:

    (i) The credit grantor may retain the property without obligation to account to the borrower; and

    (ii) If the property is retained, all obligations of the borrower under the loan shall be discharged.

#### Section 12-1022

(a)

  (1) In this section the following words have the meanings indicated.

  (2) "Borrower" means a consumer borrower who makes an application for a loan secured by a first mortgage or first deed of trust on residential real property to be occupied by the borrower as the borrower's primary residence.

  (3) "Commitment" means a written, specific, binding agreement between a borrower and a lender which sets forth the terms of a loan being extended to the borrower.

  (4) "Financing agreement" means a written agreement between a borrower and a lender which sets forth the terms of a purchase money loan or a refinancing of an existing loan that:

    (i) Results in or is secured by a first mortgage or a first deed of trust on residential real property to be occupied by the borrower; and

    (ii) Is offered or extended to the borrower.

  (5)

    (i) "Lender" means a credit grantor subject to the licensing requirements of Title 11, Subtitle 5 of the Financial Institutions Article.

    (ii) "Lender" does not include a credit grantor exempt from licensing under Sec. 11-502 of the Financial Institutions Article.

  (6)

    (i) "Loan application" means any oral or written request for an extension of credit that is made in accordance with procedures established by a lender for the purpose of inducing the lender to seek to procure or make a mortgage loan.

    (ii) "Loan application" does not include the use of an account or line of credit to obtain a loan within a previously established credit limit.

(b)

  (1) A lender who offers to make or procure a loan secured by a first mortgage or first deed of trust on residential real property to be occupied by the borrower shall provide the borrower with a financing agreement executed by the lender within 10 business days after the date the loan application is completed.

  (2) The financing agreement shall provide:

    (i) The term and principal amount of the loan;

    (ii) An explanation of the type of mortgage loan being offered;

    (iii) The rate of interest that will apply to the loan and, if the rate is subject to change or is a variable rate or is subject to final determination at a future date based on some objective standard, a specific statement of those facts;

    (iv) The points, if any, to be paid by the borrower or the seller, or both; and

    (v) The term during which the financing agreement remains in effect.

  (3) If all the provisions of the financing agreement are not subject to future determination, change, or alteration during its term, the financing agreement shall constitute the final binding agreement between the parties as to the items covered by the financing agreement.

  (4) A disclosure provided by a lender to a borrower in compliance with 12 C.F.R. Sec. 1026.37 shall satisfy the requirements of this subsection.

(c)

  (1) If any of the provisions of the financing agreement are subject to change or determination after its execution, the lender shall provide the borrower with a commitment, executed by the lender, at least 72 hours before the time of settlement agreed to by the parties, providing:

    (i) The effective fixed interest rate or initial interest rate that will be applied to the loan; and

    (ii) A restatement of all the remaining unchanged provisions of the financing agreement.

  (2) Subsequent to execution of the financing agreement, the borrower may waive in writing the 72-hour advance presentation requirement and accept the commitment at settlement only if compliance with the 72-hour requirement is shown by the lender to be infeasible.

  (3) A disclosure provided by a lender to a borrower in compliance with 12 C.F.R. Sec. 1026.38 shall satisfy the requirements of this subsection.

(d) If a lender fails to comply with the requirements of this section, the lender shall be subject to the penalties set forth in Sec. 11-523 of the Financial Institutions Article.

(e)

  (1) A borrower aggrieved by any violation of this section shall be entitled to bring a civil suit for damages, including reasonable attorney's fees, against the lender.

  (2) The penalties set out under Sec. 12-1018 of this subtitle do not apply to any violation of this section.

(f) This section may not be construed to exempt a lender from the provisions of Sec.Sec. 12-1027 and 12-1028 of this subtitle.

#### Section 12-1023

(a) This section applies only to a loan made by a credit grantor under this subtitle to a consumer borrower.

(b)

  (1) Paragraph (2) of this subsection applies only to a loan or an extension of credit primarily for personal, household, or family purposes.

  (2) An agreement, note, or other evidence of a loan may not contain:

    (i) An assignment or order for the payment of wages, whether earned or to be earned, or of any chose in action covering lost wages;

    (ii) An acceleration clause under which any part or all of the unpaid balance of the loan not yet matured may be declared due and payable because the credit grantor deems itself insecure;

    (iii) A confession of judgment or any power of attorney authorizing the credit grantor to appear in court to confess judgment against the borrower or a surety or guarantor of the borrower, or any other waiver of the right to notice and an opportunity to be heard in the event of suit or process thereon; or

    (iv) A provision by which a person acting on behalf of a holder of the agreement, note, or other evidence of the loan is treated as an agent of the borrower in connection with its formation or execution.

  (3) Except as expressly allowed by law, an agreement, note, or other evidence of a loan may not contain a provision by which the borrower waives any right accruing to the borrower under this subtitle.

  (4)

    (i) Any clause or provision in an agreement, note, or other evidence of a loan that is in violation of this subsection shall be unenforceable.

    (ii) Subject to subparagraph (iii) of this paragraph, the penalties set out under Sec.Sec. 12-1017 and 12-1018 of this subtitle do not apply unless the credit grantor attempts to enforce a provision prohibited under this subsection.

    (iii) The penalties set out under Sec.Sec. 12-1017 and 12-1018 of this subtitle do not apply to the enforcement by a credit grantor of a provision otherwise prohibited under this subsection where the enforcement was initiated by the credit grantor prior to October 1, 1993.

(c) Unless a borrower has notice of an assignment of an agreement, note, or other evidence of a loan, any payments made by the borrower to the last known holder of the agreement, note, or other evidence of the loan shall discharge the borrower's obligation to the extent of the payments.

(d) Upon receipt of a cash payment from a borrower, a credit grantor shall give the borrower a written receipt for the payment.

#### Section 12-1023.1

(a) Any statement or characterization that indicates the borrower intends to obtain a loan solely to acquire an interest in or to carry on a business or commercial enterprise may be relied upon by a credit grantor in making the loan, unless the credit grantor knows or should know that the statement or characterization is false or misleading.

(b) As a condition to making a loan, a credit grantor may not require a borrower to make any false or misleading statement or characterization that the loan is a commercial loan or for a commercial purpose if the credit grantor knows or should know it is not a commercial loan or for a commercial purpose.

(c) The borrower has the burden of proving that a credit grantor knew or should have known that a statement or characterization described in subsection (a) or (b) of this section was false or misleading when made and that the loan was not a commercial loan or for a commercial purpose.

(d) Unless a credit grantor knew or should have known that a statement or characterization described in subsection (a) or (b) of this section was false or misleading when made, a credit grantor shall have no liability under this subtitle if a loan is actually used by the borrower other than as a commercial loan or for a commercial purpose.

#### Section 12-1024

(a)

  (1) Except as provided in paragraph (2) of this subsection, this section applies only to a loan made by a credit grantor to a consumer borrower.

  (2) This section does not apply to a loan to which Sec. 3-105.1 of the Real Property Article applies.

(b) Within a reasonable time after a loan to a consumer borrower has been repaid in full and all other obligations under the agreement, note, or other evidence of the loan have been fulfilled, a credit grantor shall:

  (1)

    (i) Indelibly mark with the word "paid" or "canceled" and return to the consumer borrower each agreement, note, or other evidence of the loan; or

    (ii) Furnish the consumer borrower with a written statement that identifies the loan transaction and states that the loan has been paid in full; and

  (2) Release any recorded mortgage, deed of trust, security agreement, or other lien securing the loan.

(c)

  (1) The release shall be:

    (i) In writing; and

    (ii) Prepared at the expense of the credit grantor.

  (2) If the release required by this section pertains to a motor vehicle, the release shall be filed electronically with the Motor Vehicle Administration in accordance with Sec. 13-108.1 of the Transportation Article within 5 business days after the credit grantor has received full payment.

(d)

  (1) If the credit grantor does not record the release, the credit grantor shall furnish the consumer borrower with the release in a recordable form.

  (2) If the credit grantor records the release, the credit grantor shall furnish the consumer borrower with a copy of the release.

(e)

  (1) If a fee is collected by a credit grantor for the recording of a release:

    (i) The release shall be recorded by the credit grantor; and

    (ii) Any portion of the fee not paid to a governmental entity for recording the release shall be refunded to the borrower.

  (2) If a fee is not collected by a credit grantor for the recording of a release, the credit grantor is not obligated to record the release.

#### Section 12-1025

(a) A credit grantor who receives scheduled monthly periodic payments on more than five loans secured by any interest in residential real property or tangible personal property shall furnish to the consumer borrower a written statement informing the consumer borrower of the amount of:

  (1) If the interest and charges on the loan were precomputed:

    (i) Payments credited to reducing the outstanding unpaid balance of the loan, either in terms of a total dollar figure or individually itemized; and

    (ii) The remaining outstanding unpaid balance of the loan; or

  (2) If the interest and charges on the loan were not precomputed:

    (i) Payments credited to reducing the outstanding unpaid principal balance of the loan, either in terms of a total dollar figure or individually itemized;

    (ii) Payments credited to interest and fees, either in terms of a total dollar figure or individually itemized; and

    (iii) The remaining outstanding unpaid principal balance of the loan.

(b) At the option of the credit grantor, each written statement shall contain the information required in subsection (a)(1)(i) and (2)(i) and (ii) of this section either from the date the loan was made or, if previous written statements have been furnished to the consumer borrower, from the date of the last written statement.

(c) The written statement shall be furnished to the consumer borrower:

  (1) In the case of loans secured by any interest in residential real property, at least annually; and

  (2) In the case of loans secured by any interest in residential real property or tangible personal property, within a reasonable time after receipt of a written request of a consumer borrower provided the request is made at a reasonable time or interval since the furnishing of the last written statement.

(d) A credit grantor may charge a fee of up to $5 for each written statement requested by a consumer borrower.

#### Section 12-1026

(a)

  (1) In this section the following words have the meanings indicated.

  (2) "Escrow account" means an expense or escrow account which tends to protect the security of a loan by the accumulation of funds for the payment of taxes, insurance premiums, water and sewer facilities assessments, or other expenses.

  (3) "Lending institution" means a bank, savings bank, or savings and loan association doing business in Maryland.

  (4)

    (i) "Water and sewer facilities assessment" means a fee or charge that is:

      (1) Assessed on an owner of residential real property that is served by public water or wastewater facilities for which deferred water or sewer charges have been established by a recorded covenant or declaration to cover or defray the cost of installing or maintaining during construction all or part of the public water or wastewater facilities constructed by the developer; and

      (2) Paid to the lienholder of the lien recorded on the residential real property for public water and wastewater facilities.

    (ii) "Water and sewer facilities assessment" includes a front foot benefit fee or charge.

(b)

  (1) A lending institution that makes a loan to a consumer borrower secured by a first mortgage or first deed of trust on residential real property and creates or is the assignee of an escrow account in connection with that loan shall pay interest to the consumer borrower on the funds in the escrow account at an annual rate not less than the weekly average yield on United States Treasury securities adjusted to a constant maturity of 1 year, as published by the Federal Reserve in "Selected Interest Rates (Daily) - H.15", as of the first business day of the calendar year.

  (2) Interest on these funds shall be:

    (i) Adjusted, if applicable, as of the first day of each calendar year to reflect the rate to be paid during that year, as determined under paragraph (1) of this subsection;

    (ii) Computed on the average monthly balance in the escrow account; and

    (iii) Paid annually to the borrower by crediting the escrow account with the amount of interest due.

  (3) The lending institution shall annually provide the consumer borrower with a statement of the escrow balance.

  (4) The provisions of this subsection do not apply to a lending institution that provides for the payment of taxes, insurance, water and sewer facilities assessments, or other expenses under the direct reduction method by which these expenses, when paid by the lending institution, are added to the outstanding principal balance of the loan.

  (5)

    (i) This subsection does not apply if the loan:

      (1) Is purchased by an out-of-state lender through the Federal National Mortgage Association, the Government National Mortgage Association, or the Federal Home Loan Mortgage Corporation; and

      (2) The out-of-state lender elects to service the loan as a condition of purchase.

    (ii) Notwithstanding subparagraph (i) of this paragraph, this subsection shall apply if the out-of-state lender:

      (1) Sells the loan to a Maryland lender; or

      (2) Places the loan with a Maryland lender for servicing.

(c)

  (1) Except upon foreclosure, release, or as provided in paragraph (2) of this subsection, funds in any escrow account maintained by a credit grantor on behalf of a consumer borrower for use in paying taxes, insurance premiums, ground rents, and water and sewer facilities assessments may not be used:

    (i) To reduce the principal; or

    (ii) To pay interest or other loan charges.

  (2) If there is periodically a balance in the escrow account maintained by a credit grantor on behalf of a consumer borrower which exceeds the amount stated in the agreement, note, or other evidence of the loan, the consumer borrower shall be given at least annually the option of:

    (i) Receiving a refund of the excess amount;

    (ii) Applying the excess amount to the payment of principal and interest; or

    (iii) Leaving the excess amount in the escrow account.

  (3) A refund of any excess amount shall be made:

    (i) Within 60 days after the receipt by the credit grantor of the consumer borrower's request for a refund; or

    (ii) If the consumer borrower has not notified the credit grantor of the option chosen by the consumer borrower, within 60 days after the date the credit grantor mailed notice of an excess amount.

  (4)

    (i) Subject to subparagraph (iii) of this paragraph, if, after recalculating the amount that is required to be maintained in escrow under a first mortgage or first deed of trust on residential real property, a credit grantor or a servicer of a loan determines that the amount that a consumer borrower is required to pay must increase, the credit grantor or servicer may not include, for a 1-year period after the determination is made, the amount of the increase in escrow payments in any calculation of the amount of interest or any fee due under the loan.

    (ii) This paragraph may not be construed to limit the ability of a credit grantor or a servicer of a loan to impose a late fee for any escrow payment that is due and not timely paid.

    (iii)

      (1) In this subparagraph, "other expenses" does not include money required by a credit grantor or a servicer of a loan for an escrow account cushion as permitted by the federal Real Estate Settlement Procedures Act.

      (2) A credit grantor or a servicer of a loan may charge interest to a consumer borrower on the amount of funds the credit grantor or servicer advances to pay taxes, insurance premiums, or other expenses owed by the consumer borrower in order to protect the security of the loan.

      (3) Interest may be charged by a credit grantor or a servicer of a loan under subsubparagraph 2 of this subparagraph only if:

      (A) The credit grantor or servicer advances its own funds because funds of the consumer borrower were not available to pay the taxes, insurance premiums, or other expenses owed by the consumer borrower;

      (B) The need for the advance was not caused by an error of the credit grantor or servicer in servicing the loan;

      (C) The credit grantor or servicer provides notice to the consumer borrower that the advance was made and that interest will be charged on the advance;

      (D) Interest does not begin to accrue until 60 days after notice has been provided to the consumer borrower in accordance with item C of this subsubparagraph;

      (E) Interest is charged only on the amount of funds actually advanced by the credit grantor or servicer after the credit grantor or servicer has used all available funds of the consumer borrower to pay taxes, insurance premiums, or other expenses owed by the consumer borrower; and

      (F) The consumer borrower is permitted to repay the advance as permitted by the federal Real Estate Settlement Procedures Act.

(d)

  (1) Funds in any escrow account shall be kept separate from and may not be commingled with the funds of the credit grantor.

  (2) A credit grantor may place escrow funds received in connection with more than one loan into a single escrow account.

  (3) In the event of the bankruptcy of the credit grantor, any escrow funds placed in any escrow account may not be considered to be part of the bankrupt estate of the credit grantor.

(e) A credit grantor may not impose a collection fee or service charge on the maintenance of an escrow account on a first mortgage or first deed of trust.

(f) On request of a consumer borrower, a lending institution that makes a loan to the consumer borrower secured by a first mortgage or first deed of trust on residential real property may, at the option of the lending institution, create an escrow account in connection with that loan solely for the payment of water and sewer facilities assessments.

#### Section 12-1027

(a) In this section, "lender's inspection fee" means a fee imposed by a credit grantor to pay for a visual inspection of residential real property.

(b) Except as provided in subsection (c) of this section, a credit grantor may not impose a lender's inspection fee in connection with a loan made to a consumer borrower that is secured by residential real property.

(c) A lender's inspection fee may be imposed on a consumer borrower if the inspection is needed to ascertain completion of:

  (1) Construction of a new home; or

  (2) Repairs, alterations, or other work required by the credit grantor.

(d) This section does not apply to an appraisal of the value of real property by a credit grantor or to fees imposed in connection with an appraisal.

#### Section 12-1028

(a) This section applies only to a loan to a consumer borrower secured by a first mortgage or first deed of trust on residential real property used as the consumer borrower's primary residence.

(b) A credit grantor may require a consumer borrower to pay for services rendered by the credit grantor's attorney only if the attorney's fee:

  (1) Is limited to legal services attributable to processing and closing the loan and not to unrelated services performed by the attorney for the credit grantor;

  (2) If in excess of $100, is supported by a statement provided to the borrower at or prior to settlement that:

    (i) Describes the services performed;

    (ii) Sets forth the time spent by the attorney and the hourly rate or other basis for determining the fee;

    (iii) States that the legal services are being performed on behalf of the credit grantor and not on behalf of the consumer borrower; and

    (iv) States that the services are being paid for by the consumer borrower;

  (3) Is reasonable on the basis of the legal services performed; and

  (4) Is separately itemized on the loan settlement sheet and identified as a fee to the credit grantor's attorney.

(c)

  (1) A credit grantor may not require as a condition of settlement that a consumer borrower employ a particular attorney or title insurance company to perform a title search, examination of title, or closing if:

    (i) The consumer borrower notifies the credit grantor, within 7 days after application for the loan, of the name and business address of the borrower's choice of attorney or title insurance company to perform the title search, examination of title, or closing; and

    (ii) The credit grantor does not reject the consumer borrower's choice of attorney or title insurance company for good cause within 7 days after the receipt of the notice under item (i) of this paragraph.

  (2) Subject to the requirements of subsection (b) of this section, this subsection may not be construed to prohibit a credit grantor from requiring a consumer borrower to pay for:

    (i) Preparation of loan closing documents;

    (ii) Title insurance;

    (iii) Review of documents prepared by the borrower's attorney; or

    (iv) Attendance at settlement by the credit grantor's attorney.

(d)

  (1) Any credit grantor that imposes fees on a consumer borrower for settlement services, or document review services, performed by an attorney designated by the credit grantor, or who conditions settlement on the employment of a particular attorney or title insurance company, shall provide a prospective consumer borrower with a written notice stating:

    (i) The credit grantor's requirements concerning selection of an attorney, title insurance company, or other person to perform settlement services relating to the purchase of the residential real property;

    (ii) The consumer borrower's ability to choose an attorney or title insurance company under subsection (c) of this section; and

    (iii) A good faith estimate of the fee or fees to be charged to the borrower.

  (2)

    (i) The notice required under this subsection shall be provided at the time of or within 3 business days after the application for a loan, or earlier upon request.

    (ii) A copy of the notice, signed by the applicant, shall accompany any executed application for a loan.

#### Section 12-1029

(a)

  (1) In this section the following words have the meanings indicated.

  (2) "Fully indexed rate" means the index rate, as defined in the mortgage loan documents, prevailing at the time the mortgage loan is approved by the credit grantor, plus the margin that will apply after the expiration of an introductory interest rate.

  (3)

    (i) "Mortgage loan" has the meaning stated in Sec. 11-501 of the Financial Institutions Article.

    (ii) "Mortgage loan" does not include a reverse mortgage loan.

(b) A credit grantor may not make a mortgage loan without giving due regard to the borrower's ability to repay the mortgage loan in accordance with its terms, including the fully indexed rate of the mortgage loan, if applicable, and property taxes and homeowner's insurance whether or not an escrow account is established for the collection and payment of these expenses.

(c)

  (1) Due regard to a borrower's ability to repay a mortgage loan must include:

    (i) Consideration of the borrower's debt to income ratio, including existing debts and other obligations; and

    (ii) Verification of the borrower's gross monthly income and assets by review of third-party written documentation reasonably believed by the credit grantor to be accurate and complete.

  (2) Acceptable third-party written documentation includes:

    (i) The borrower's Internal Revenue Service form W-2;

    (ii) A copy of the borrower's income tax return;

    (iii) Payroll receipts;

    (iv) The records of a financial institution; or

    (v) Other third-party documents that provide reasonably reliable evidence of the borrower's income or assets.

  (3) This subsection does not apply to a mortgage loan:

    (i) Approved for government guaranty by the Federal Housing Administration, the Veterans Administration, the United States Department of Agriculture, the Maryland Department of Housing and Community Development, or the Community Development Administration; or

    (ii) That refinances an existing mortgage loan if the refinance mortgage loan is:

      (1) Offered under the federal Homeowner Affordability and Stability Plan; and

      (2) Made available by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association.

#### Section 12-1030

The Commissioner of Financial Regulation may adopt regulations regarding the enforcement of and compliance with this subtitle as to credit grantors who offer or make shared appreciation agreements under this subtitle.

### Subtitle 11. Maryland Rental-Purchase Agreement Act

#### Section 12-1101

(a) In this subtitle the following words have the meanings indicated.

(b)

  (1) "Advertisement" means a commercial message in any medium that aids, promotes, or assists, directly or indirectly, a rental-purchase agreement.

  (2) "Advertisement" does not include in-store merchandising ads.

(c) "Cash price" means the price at which the lessor would have sold rental property covered by a rental-purchase agreement to the consumer unconditionally for cash on the date of consummation.

(d) "Consumer" means an individual who rents personal property under a rental-purchase agreement primarily for personal, family, or household purposes.

(e) "Consummation" means the time at which a consumer enters into a rental-purchase agreement.

(f) "Cost of lease services" means the difference between the final purchase price of rental property and the cash price of rental property.

(g) "Lessor" means a person who regularly provides the use of personal property through rental-purchase agreements to consumers and to whom rental payments are initially payable on the face of a rental-purchase agreement.

(h) "Rental property" means personal property that is the subject of a rental-purchase agreement.

(i) "Rental-purchase agreement" means an agreement that:

  (1) Is for the use of personal property by an individual primarily for personal, family, or household purposes;

  (2) Is for an initial period of 4 months or less;

  (3) Is automatically renewable for a weekly or monthly period with each rental payment after the initial period; and

  (4) Allows but does not obligate the consumer to become the owner of the property.

#### Section 12-1102

(a) A rental-purchase agreement that complies with this subtitle may not be deemed to be:

  (1) A "retail sale", as defined in Sec. 12-601(s) of this title;

  (2) An "installment sale agreement", as defined in Sec. 12-601(m) of this title; or

  (3) A "security interest", as defined in Sec. 1-201(37) of this article.

(b) This subtitle does not apply to:

  (1) A rental-purchase agreement made primarily for business, commercial, or agricultural purposes, or made with governmental agencies, instrumentalities, or organizations;

  (2) A rental of a safe deposit box;

  (3) A lease or bailment of personal property that:

    (i) Is incidental to the rental of real property; and

    (ii) Provides that the consumer has no option to purchase the rented real property; or

  (4) A lease of an automobile.

#### Section 12-1103

(a)

  (1) A lessor shall disclose to a consumer the information required under this subtitle.

  (2) In a transaction involving more than 1 lessor, only 1 lessor need make the disclosures required under this subtitle, but all lessors shall be bound by the disclosures made.

(b) A lessor shall make the disclosures required under this subtitle before consummation of the rental-purchase agreement.

(c) A lessor shall:

  (1) Make the disclosures required under this subtitle in a written form that is simple and understandable and is written or typed in a size not less than 10 point type;

  (2) Make the disclosures required under this subtitle in English or in any other language used by the lessor in advertisements related to the rental-purchase transaction;

  (3) Make the disclosures required under this subtitle on the face of the rental-purchase agreement and summary of costs chart above the consumer's signature lines; and

  (4) Deliver a copy of the rental-purchase agreement and the summary of costs chart to the consumer.

(d) If a disclosure becomes inaccurate as a result of any act, occurrence, or agreement by the consumer after delivery of the rental property, the resulting inaccuracy is not a violation of this subtitle.

#### Section 12-1104

(a) The lessor shall disclose in each rental-purchase agreement, as applicable:

  (1) The total number, total amount, and timing of all rental payments necessary to acquire ownership of the rental property;

  (2) A statement that the consumer will not own the rental property until the consumer has paid the total of payments necessary to acquire ownership;

  (3) A brief description of the rental property sufficient to identify the rental property to the consumer and the lessor, including an identification number and a statement indicating whether the rental property is new or used;

  (4)

    (i) A statement of the cash price of the rental property; or

    (ii) If a single rental-purchase agreement involves a lease of 2 or more items of rental property as a set, a statement of the aggregate cash price of all items;

  (5) The cost of lease services of the rental property;

  (6) The total of initial payments paid or required to be paid at or before consummation of the rental-purchase agreement or delivery of the rental property, whichever is later;

  (7) A statement that the total of rental payments does not include other charges, such as reinstatement fees, damage fees, or pickup fees;

  (8) A statement that the consumer has the right to exercise an early purchase option and the price, formula, or method for determining the early purchase option price;

  (9) A statement that the consumer must pay the early purchase option price for the rental property if, and when, the rental property is lost, stolen, damaged, or destroyed;

  (10)

    (i) A statement identifying the lessor as the party responsible for maintaining or servicing the rental property while it is being rented;

    (ii) A description of that responsibility; and

    (iii) A statement that if any part of a manufacturer's express warranty covers the rental property at the time the consumer acquires ownership of the rental property, it shall be transferred to the consumer, if allowed by the terms of the warranty;

  (11) The date of consummation and the identities of the lessor and consumer;

  (12) A statement that the consumer may terminate the rental-purchase agreement without penalty by voluntarily surrendering or returning the rental property in good repair, normal wear and tear excepted, upon expiration of any rental term and payment of any past due rental payments;

  (13) Notice of the consumer's right to reinstate an agreement as provided in Sec. 12-1106 of this subtitle; and

  (14) Any other charges, including reinstatement fees, damage fees, and pickup fees.

(b) The lessor shall disclose in each summary of costs chart, as applicable:

  (1) The cash price of the rental property;

  (2) The timing of the payments for the rental property;

  (3) The total purchase price if the payment schedule under item (2) of this subsection is completed according to the schedule; and

  (4) The cost of lease services of the rental property.

(c) A lessor shall place on property which is to be leased as a part of a rental-purchase agreement and is displayed in the lessor's place of business a tag which shall indicate:

  (1) The number and amount of individual renewal payments necessary to purchase the property;

  (2) The total amount necessary to purchase the property; and

  (3) Whether the property is new or used.

#### Section 12-1105

A rental-purchase agreement may not contain:

(1) A confession of judgment;

(2) A negotiable instrument;

(3) A security interest or any other claim of a property interest in any goods except the rental property delivered by the lessor pursuant to the rental-purchase agreement;

(4) A wage assignment;

(5) A waiver by the consumer of claims or defenses; or

(6) A provision authorizing the lessor or a person acting on the lessor's behalf to enter upon the consumer's premises or to commit any breach of the peace in the repossession of rental property.

#### Section 12-1106

(a) A consumer who fails to make a timely rental payment may reinstate the rental-purchase agreement, without losing any rights or options that exist under the rental-purchase agreement, if within 5 days of the renewal date, for a consumer who renews on a monthly basis, or within 2 days of the renewal date, for a consumer who renews on a weekly basis, the consumer pays:

  (1) All past due rental charges;

  (2) If the rental property has been picked up or repossessed, the reasonable costs of pickup and redelivery; and

  (3) Any applicable reinstatement fee, which may not exceed $5.

(b) A consumer who has paid less than two-thirds of the total of payments necessary to acquire ownership of the rental property and who has returned or voluntarily surrendered the rental property without judicial process during the applicable reinstatement period under subsection (a) of this section or who has made the property available for pickup at the request of the lessor, whichever occurs last, may reinstate the rental-purchase agreement prior to a date not less than 21 days after the date of the return of the rental property.

(c) A consumer who has paid two-thirds or more of the total of payments necessary to acquire ownership of the rental property and who has returned or voluntarily surrendered the rental property without judicial process during the applicable period set forth in subsection (a) of this section or who has made the property available for pickup at the request of the lessor, whichever occurs last, may reinstate the rental-purchase agreement prior to a date not less than 45 days after the date of the return of the rental property.

(d) Nothing in this section shall prevent a lessor from repossessing the property during the reinstatement period, but a repossession may not affect the consumer's right to reinstate. After reinstatement, the lessor shall provide the consumer with the same rental property or a substitute property of comparable quality and condition.

(e)

  (1) A lessor may repossess property under a rental-purchase agreement if the consumer is in default of:

    (i) Any sum due under the agreement; or

    (ii) The performance of any promise the breach of which is expressly made a ground for repossessing the property.

  (2) A lessor may repossess property only by legal process or self-help without the use of force. Nothing in this section authorizes a violation of criminal law.

  (3) At the time of repossession of the property, the lessor shall deliver to the consumer a written notice which states the right of the buyer to reinstate the rental-purchase agreement, the last date by which the consumer may reinstate the agreement, and the amount payable for reinstatement.

  (4) The consumer may reinstate the rental-purchase agreement within 15 days after the date of repossession by paying:

    (i) All past due rental charges;

    (ii) The reasonable costs of pickup and redelivery; and

    (iii) A reinstatement fee of $5.

#### Section 12-1106.1

A lessor shall maintain a copy of the rental-purchase agreement for 3 years after the final payment on a rental-purchase agreement.

#### Section 12-1107

(a) A lessor shall provide the consumer with a written receipt for each payment under a rental-purchase agreement made in person by cash or money order, or, if the payment is made in any other form, on request.

(b) The written receipt shall contain the:

  (1) Total amount paid;

  (2) Total amount due that week or month; and

  (3) Total remaining rental payments necessary to acquire ownership of the item.

(c) The lessor shall provide the consumer with a written statement of account within 3 days after the consumer's request.

#### Section 12-1108

(a) When a rental-purchase agreement is satisfied and replaced by a new rental-purchase agreement between the lessor and consumer, the lessor and consumer shall negotiate a new rental-purchase agreement requiring new disclosures.

(b) The following do not require the negotiation of a new rental-purchase agreement:

  (1) The addition or return of rental property under a multiple-item agreement or the substitution of the rental property, if in either case the average payment allocable to a payment period is not changed by more than 25 percent;

  (2) A deferral or extension of 1 or more rental payments, or portions of a rental payment;

  (3) A reduction in charges in the rental-purchase agreement; or

  (4) A rental-purchase agreement involved in a court proceeding.

#### Section 12-1109

(a) An advertisement for a rental-purchase agreement that refers to or states the dollar amount of any payment and the right to acquire ownership for any 1 specific item shall clearly and conspicuously state, as applicable:

  (1) That the transaction advertised is a rental-purchase agreement;

  (2) The total cost and the number of payments necessary to acquire ownership; and

  (3) That the consumer acquires no ownership right if the total amount necessary to acquire ownership is not paid.

(b) Any owner, employee, or agent of any medium in which an advertisement appears or through which it is disseminated may not be liable for violations under this section.

(c) The requirements under subsection (a) of this section do not apply to an advertisement that:

  (1) Does not refer to or state the amount of any payment; or

  (2) Is published in the yellow pages of a telephone directory or in any similar directory of business.

#### Section 12-1110

(a) A person who willfully and intentionally violates any provision of this subtitle is guilty of a misdemeanor and on conviction is subject to a fine not to exceed $500 per violation.

(b) For a violation of a provision of this subtitle, a consumer under a rental-purchase agreement may recover from the lessor committing the violation, or may set off by way of a counterclaim in an action brought by the lessor or its assignee, an amount equal to:

  (1) Actual damages; and

  (2) $500 plus reasonable attorney's fees and court costs.

(c) A lessor or its assignee may not be held liable under this subtitle if the lessor or its assignee proves by a preponderance of the evidence:

  (1) That the violation was unintentional and resulted from a bona fide error, notwithstanding the maintenance of procedures reasonably adopted to avoid that type of error; and

  (2) That the lessor or its assignee corrected the error and refunded any money excessively charged due to the error, within 30 days after discovering or receiving notice of the error.

#### Section 12-1110.1

(a) A lessor may not bring a court action to recover property subject to a rental-purchase agreement until 15 days after the consumer has been sent notice of a default.

(b) Notice of default sent by certified mail to the consumer's last known address constitutes notice.

(c) The notice shall include any amount the consumer must pay to reinstate the rental-purchase agreement, if applicable.

#### Section 12-1111

(a) The following is an example of a form which shall be used to satisfy the disclosure requirements of Sec.Sec. 12-1103(c) and 12-1104(a) of this subtitle:

"Rental-Purchase Agreement 

(1.)    Lessor(s):                  Lessee(s):

Name ____________________________    Name ______________________________

Address __________________________    Address ____________________________

Telepohon no. _____________________    Telephone no.  ______________________

(2.)    Description of Rental Property:

Identification

Item        Quantity            Number            Condition

______________   _______________   __________________     New _________________

Used _________________

Cash Price: ___________________________

(3.)    Total Initial Payment

Rental Payment:        $______________

Delivery Charge:        $______________

Tax                 $______________

Other (specify):        $______________

Total:                 $______________

(4.)    Rental Payments:

Total Weekly Rental Payment:        _________________  (includes tax)

Total Monthly Rental Payment:        _________________  (includes tax)

(5.)    Other Charges:

In Home Pick-up Fee:        $___________ 

Reinstatement Fee:        $___________ 

Other (specify):             $___________ 

(6.)    Total Cost To Acquire Ownership:

If you renew this rental agreement each week/month, for __________

weeks/months, you will pay a total of $____________ to own the rental property.    This amount includes your total initial payment but does not include other    charges such as damage, reinstatement or pick-up fees for which you may be    liable.

(7.)    Cost of Lease Services:

The cost of lease services is the difference between the final purchase price of     the rental property and the cash price of the rental property. The cost of lease     services for the rental property is $__________.

(8.)    No Ownership Until Total Paid:

You will not acquire ownership of the rental property until you pay the total     rental payments necessary to acquire ownership, or unless you exercise an     early purchase option. 

(9.)    Early Purchase Option:

You may purchase the rental property at any time after your first rental     payment. 

(Describe formula or method here)

(10.)    Maintenance:

We (lessor) are responsible for maintaining the rental property in good working     condition while it is being rented. We will provide all necessary service, repair     or replacement (specify if in home or in store) if you notify us by phone or mail     that service is needed. We will not be responsible for repairs done by anyone     other than us. 

(11.)    Warranty:

If allowed by the manufacturer, the manufacturer's express warranty covering     the rental property rented under this agreement will be transferred to you if,     and at the time, you acquire ownership of the rental property. 

(12.)    Damages:

You (lessee) are entirely responsible for loss, damages, theft or destruction of     the rental property while it is in your possession. Your liability for such     damage will not exceed the early purchase option price of the rental property     as of the date it is lost, stolen, damaged or destroyed. 

(13.)    Termination:

You (lessee) may terminate this agreement without penalty at the end of any     weekly or monthly term by returning the rental property to us in good     condition. You will be liable for any unpaid rental payments due upon the date     of return.

(14.)    Reinstatement:

If you (lessee) fail to make a timely payment, you may reinstate the agreement     without penalty, if: 

(1) )    You pay all past due rental charges and a reinstatement fee within 2              days (weekly renters) or 5 days (monthly renters) of your renewal date;         or

(2) )    You return or voluntarily surrender the rental property within 2 days              (weekly renters) or 5 days (monthly renters) of your renewal date. If you          choose to reinstate the agreement after returning the rental property,              you will have up to 21 days (or longer depending on how long you have              rented the rental property) to pay all past due rental charges, a                  reinstatement fee and a reasonable redelivery fee if we deliver the rental         property.

I have read the above disclosures before signing this rental-purchase agreement. 

Lessee(s):  ______________________________                   Date: ___________________

______________________________ ."

(b) The following is an example of a form which shall be used to satisfy the disclosure requirements of Sec.Sec. 12-1103(c) and 12-1104(b) of this subtitle:

Summary of Costs of Your Rental-Purchase Agreement

Cash Price        Scheduled        Final Purchase    Cost of Lease

Payments        Price             Services

The price of the    The amount you    The amount you    The cost of your

rental property if    pay per        will have paid    rental-purchase.

purchased in-    week/month.        after all payments

store at the time                 made all payments

of consummation.                 as scheduled.

$ __________        $ __________        $ __________        $ __________

Timing of Payments: Payment in the amount of $ ________________ is due on a (weekly/bi-weekly/semi-monthly/monthly) basis.

Early Payment Option: You have the right to purchase the rental property prior to the date listed above for (enter formula).

Termination: You have the right to terminate this rental-purchase agreement at the end of any term by surrendering the rental property to the lessor.

The disclosures above are part of the terms and conditions of your rental-purchase agreement with (company name).                                Lessee(s):    _________________________________    Date: ________________________             _________________________________

#### Section 12-1111.1

The Attorney General's Web site shall include the sample forms in Sec. 12-1111 of this subtitle.

#### Section 12-1112

This subtitle may be cited as the Maryland Rental-Purchase Agreement Act.

### Subtitle 12. Reverse Mortgage Loans Act

#### Section 12-1201

(a) In this subtitle the following words have the meanings indicated.

(b) "Arranger of financing" means a person that:

  (1) For a fee or other valuable consideration, whether received directly or indirectly, aids or assists a borrower in obtaining a reverse mortgage loan; and

  (2) Is not named as the lender in the reverse mortgage loan agreement.

(c) "Borrower" means an individual who makes a loan application for or receives a reverse mortgage loan.

(d) "Counseling agency" means an entity approved by the U.S. Department of Housing and Urban Development to provide counseling regarding reverse mortgage loans.

(e) "Dwelling" has the meaning stated in Sec. 11-501 of the Financial Institutions Article.

(f) "Lender" means a person who makes a reverse mortgage loan.

(g) "Person" includes an individual, corporation, business trust, statutory trust, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal or commercial entity.

(h) "Reverse mortgage loan" means a nonrecourse loan that:

  (1) Is secured by the borrower's principal dwelling;

  (2) Provides the borrower with purchase money proceeds, a lump sum payment, periodic cash advances, a line of credit, or any combination of those payment plans based on the equity in or value of the borrower's principal dwelling; and

  (3) Requires no payment of principal or interest until the full loan becomes due and payable.

#### Section 12-1202

(a) The provisions of this subtitle:

  (1) Apply to a reverse mortgage loan secured by a borrower's principal dwelling in the State; and

  (2) Are in addition to any other applicable provisions of law.

(b) If a provision of this subtitle conflicts with any provision of this title, the provision of this subtitle applies.

#### Section 12-1203

This subtitle does not require a lender that offers to make a reverse mortgage loan to offer a reverse mortgage loan:

(1) With any one or more particular payment plans; or

(2) To a prospective borrower who holds title to a dwelling in other than fee simple interest.

#### Section 12-1204

(a) Except as otherwise provided in this subtitle, a lender that offers or makes a reverse mortgage loan secured by a dwelling in the State shall conform to the requirements of 12 U.S.C. Sec. 1715z-20, and any regulations and guidance adopted under 12 U.S.C. Sec. 1715z-20, regardless of whether the reverse mortgage loan is insured under 12 U.S.C. Sec. 1715z-20.

(b) Except as otherwise provided in this subtitle, an arranger of financing that aids or assists, or offers to aid or assist, a borrower in obtaining a reverse mortgage loan secured by a dwelling in the State shall conform to the requirements of 12 U.S.C. Sec. 1715z-20, and any regulations and guidance adopted under 12 U.S.C. Sec. 1715z-20, regardless of whether the reverse mortgage loan is insured under 12 U.S.C. Sec. 1715z-20.

#### Section 12-1205

(a) A reverse mortgage loan that is not insured under 12 U.S.C. Sec. 1715z-20 is not subject to the provisions in 12 U.S.C. Sec. 1715z-20, or in any regulations or guidance adopted under 12 U.S.C. Sec. 1715z-20, that:

  (1) Limit origination fees to $6,000 as adjusted under 12 U.S.C. Sec. 1715z-20(r);

  (2) Impose maximum claim amounts or other loan limit restrictions; or

  (3) Require government insurance for the loan.

(b) A lender or an arranger of financing is not subject to the federal regulatory approval requirements of 24 C.F.R., Part 202 when making or arranging a reverse mortgage loan that is not insured under 12 U.S.C. Sec. 1715z-20.

#### Section 12-1206

(a)

  (1) Except as provided in paragraph (2) of this subsection, a lender or an arranger of financing may not require a borrower to purchase an annuity, a long-term care policy, or other financial or insurance product as a condition to obtaining a reverse mortgage loan.

  (2) A lender or an arranger of financing may require a borrower to purchase title insurance, hazard, flood, or other peril insurance, and any other financial or insurance product that is required for reverse mortgage loans insured under 12 U.S.C. Sec. 1715z-20.

(b) A lender or an arranger of financing may not refer a borrower to any person for the purchase of an annuity or any other financial or insurance product before the later of:

  (1) The closing of the reverse mortgage loan; or

  (2) The expiration of the borrower's right to rescind the reverse mortgage loan agreement.

(c) This section does not prohibit a lender or an arranger of financing from offering to a borrower, or referring a borrower to a person for the purchase of:

  (1) Title insurance;

  (2) Hazard, flood, or other peril insurance; or

  (3) Other products that are customary under a reverse mortgage loan.

#### Section 12-1207

(a) On receiving an application for a reverse mortgage loan, a lender or an arranger of financing shall provide a prospective borrower with a written checklist, written in 12 point type or larger, advising the borrower to discuss the following issues with a counseling agency counselor:

  (1) How unexpected medical or other events that cause the borrower to move out of the borrower's home earlier than anticipated will impact the total annual cost of the reverse mortgage loan;

  (2) The extent to which the borrower's financial needs would be better met by options other than a reverse mortgage loan, including less costly home equity lines of credit, property tax deferral programs, or governmental aid programs;

  (3) Whether the borrower intends to use the proceeds of the reverse mortgage loan to purchase an annuity or other financial or insurance product and the consequences of doing so;

  (4) The effect of repayment of the reverse mortgage loan on other residents of the home securing the reverse mortgage loan after all borrowers have died or permanently left the home;

  (5) The borrower's ability to finance routine or catastrophic home repairs, especially if maintenance is a factor that may determine when the reverse mortgage loan becomes payable;

  (6) The impact that the reverse mortgage loan may have on the borrower's tax obligations and eligibility for government assistance programs, and the effect that losing equity in the home securing the reverse mortgage loan will have on the borrower's estate and heirs; and

  (7) The ability of the borrower to finance alternative living accommodations, such as assisted living or long-term care, after the borrower's equity is depleted.

(b) If an individual obtains counseling on reverse mortgage loans from a counseling agency before applying for a reverse mortgage loan, the counseling agency shall provide the individual with the written checklist required under subsection (a) of this section.

#### Section 12-1208

(a) Except as otherwise provided in this section:

  (1) A lender or arranger of financing for a reverse mortgage loan insured under 12 U.S.C. Sec. 1715z-20 that violates this subtitle is subject to the penalties provided in 12 U.S.C. Sec. 1715z-20, and in any regulations and guidance adopted under 12 U.S.C. Sec. 1715z-20; and

  (2) A lender or arranger of financing for a reverse mortgage loan not insured under 12 U.S.C. Sec. 1715z-20 that violates this subtitle:

    (i) Engages in an unfair or deceptive trade practice within the meaning of Title 13 of this article; and

    (ii) Is subject to the enforcement and penalty provisions contained in Title 13 of this article, except Sec. 13-411.

(b) A violation of this subtitle does not constitute a violation of any other subtitle of this title.

### Subtitle 13. Mortgage Loans -- Notice of Housing Counseling Programs and Services

#### Section 12-1301

(a) In this subtitle the following words have the meanings indicated.

(b) "Borrower" has the meaning stated in Sec. 11-501 of the Financial Institutions Article.

(c) "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.

(d) "Lender" means a person that makes a mortgage loan.

(e) "Mortgage loan" has the meaning stated in Sec. 11-501 of the Financial Institutions Article.

(f) "Secondary mortgage loan" means a mortgage loan secured by residential real property that is subject to the lien of one or more prior mortgage loans.

#### Section 12-1302

(a) This subtitle applies to any lender that makes a mortgage loan secured by owner-occupied residential real property located in the State.

(b) This subtitle does not apply to:

  (1) A secondary mortgage loan;

  (2) An open-end or revolving home equity line of credit;

  (3) A construction loan;

  (4) An individual who takes back a deferred purchase money mortgage in connection with the sale of residential real property owned by, and titled in the name of, the individual; or

  (5) An individual who makes a mortgage loan to a borrower who is the individual's spouse, child, child's spouse, parent, sibling, grandparent, grandchild, or grandchild's spouse.

#### Section 12-1303

(a) Unless the lender is otherwise required by federal or State law to refer the borrower to housing counseling, a lender shall provide to a borrower a written notice, in the form specified in regulations adopted by the Department of Housing and Community Development, in consultation with the Commissioner of Financial Regulation, that includes:

  (1) A statement recommending that the borrower complete home buyer education or housing counseling; and

  (2) Information about home buyer education and housing counseling programs and services provided by nonprofit and government organizations certified by the U.S. Department of Housing and Urban Development that are available to residents of the State.

(b) The Department of Housing and Community Development shall provide and maintain the information required under subsection (a)(2) of this section.

#### Section 12-1304

A lender may not close on a mortgage loan unless the lender has provided to the borrower the notice required under Sec. 12-1303 of this subtitle.

### Subtitle 14. Credit Card Processors

#### Section 12-1401

(a) In this subtitle the following words have the meanings indicated.

(b)

  (1) "Credit card processor" means a person that processes credit card or electronic commerce transactions on behalf of a business entity for a fee.

  (2) "Credit card processor" includes:

    (i) A merchant services provider;

    (ii) A financial institution;

    (iii) An independent sales organization; and

    (iv) Any subsidiary or affiliate of an entity listed in items (i) through (iii) of this paragraph.

(c) "Merchant processing agreement" means a contract between a credit card processor and a business entity under which the business entity agrees to pay the credit card processor for processing credit card or electronic commerce transactions on behalf of the business entity.

#### Section 12-1402

This subtitle does not apply to a merchant processing agreement between a credit card processor and a business entity:

(1) That may be terminated without assessment of fees, fines, penalties, or liquidated damages; or

(2) If at the time of entry into the merchant processing agreement, the business entity employs 50 or more employees or reasonably estimates that it will generate more than $2,000,000 in credit card or electronic commerce transactions each year.

#### Section 12-1403

(a) If a business entity cancels a merchant processing agreement before the expiration of the initial term agreed on by the credit card processor and the business entity, the credit card processor may not assess or charge a fee, fine, or penalty that exceeds $500.

(b) If a business entity terminates the merchant processing agreement after the expiration of the initial term agreed on by a credit card processor and a business entity, the credit card processor may not assess a fee, fine, or penalty, unless a credit card processor and a business entity have entered into a separate renewal merchant processing agreement.

(c) Subject to subsection (d) of this section, a merchant processing agreement shall disclose clearly and conspicuously in bold, 12 point font the following information:

  (1) The amount of any early termination fee, fine, penalty, or liquidated damages that may be assessed by the credit card processor for termination of a merchant processing agreement before the expiration of the initial term;

  (2) The expiration date of the merchant processing agreement;

  (3) The renewal date of the merchant processing agreement; and

  (4) The customer service contact information of the credit card processor, including telephone number, mailing address, and e-mail address.

(d) The information required under subsection (c) of this section shall be:

  (1) Provided on the signature page of a merchant  processing agreement; and

  (2) Initialed separately by the business entity.

(e) The credit card processor shall provide a copy of the merchant processing agreement in electronic or paper form to the business entity at the time the business entity signs the merchant processing agreement.

#### Section 12-1404

If a complaint about a violation of Sec. 12-1403 of this subtitle is filed with the Commissioner of Financial Regulation, the Commissioner may investigate the complaint and use any of the investigative and enforcement powers provided under Title 2, Subtitle 1 of the Financial Institutions Article.

### Subtitle 15. Earned Wage Access

#### Section 12-1501

(a) In this subtitle the following terms have the meanings indicated.

(b) "Bank" has the meaning stated in Sec. 1-201 of this article.

(c) "Consumer-directed earned wage access" means delivery to a consumer of access to unpaid but earned wages:

  (1) That is provided to a consumer by a third party who does not have a relationship with the consumer's employer;

  (2) That is based on employment, income, or attendance data obtained directly from the consumer; and

  (3) Where the consumer does not pay the provider interest.

(d) "Consumer reporting agency" has the meaning stated in Sec. 14-1201 of this article.

(e) "Earned wage" means salary, wages, compensation, or other income earned:

  (1) On an hourly, project-based, piecework, or other basis; or

  (2) Through services rendered as an independent contractor.

(f) "Earned wage access" means:

  (1) Consumer-directed earned wage access; or

  (2) Employer-integrated earned wage access.

(g) "Employer-integrated earned wage access" means delivery of unpaid but earned wages:

  (1) That are provided to a consumer directly by a person the employer has contracted to provide the service;

  (2) That are determined based on employment, income, or attendance data obtained directly or indirectly from the consumer's employer, including a payroll service provider; and

  (3) Where the consumer does not pay the provider interest.

(h)

  (1) "Fee" means:

    (i) A fee imposed by a provider for delivery or expedited delivery of earned wage access to a consumer; or

    (ii) A subscription or membership fee imposed by a provider for a group of services that includes earned wage access.

  (2) "Fee" does not include a voluntary tip, gratuity, or other donation.

(i)

  (1) "Interest" has the meaning stated in Sec. 12-101 of this title.

  (2) "Interest" does not include a fee imposed by an earned wage access provider licensed under Title 11, Subtitle 2 of the Financial Institutions Article.

(j)

  (1) "Loan" has the meaning stated in Sec. 12-101 of this title.

  (2) "Loan" includes earned wage access, subject to the provisions of this subtitle.

(k) "Payroll period" means a period of time during which a consumer earns wages that an employer owes to the employee at the end of the period.

(l) "Proceeds" means a payment to a consumer by a provider that is based on unpaid but earned wages.

(m)

  (1) "Provider" means a person who provides to consumers either consumer-directed earned wage access or employer-integrated earned wage access.

  (2) "Provider" does not include:

    (i) A service provider, such as a payroll service provider, that may verify the available earnings of a consumer but that is not contractually obligated to fund any proceeds delivered as part of an earned wage access service; or

    (ii) An employer that offers a portion of salary, wages, or other compensation directly to its employees or independent contractors before a normally scheduled pay date for a payroll period.

(n) "Tip" has the meaning stated in Sec. 12-101 of this title.

(o) "Wages" has the meaning stated in Sec. 12-101 of this title.

#### Section 12-1502

(a) A person may not engage in the business of providing earned wage access unless the person is licensed under or is exempt from the licensing requirements of Title 11, Subtitle 2 of the Financial Institutions Article.

(b) Failure to obtain a consumer loan license shall subject a provider to the enforcement provisions of Title 11, Subtitle 2 of the Financial Institutions Article.

(c) An earned wage access provider licensed under Title 11, Subtitle 2 of the Financial Institutions Article and subject to this subtitle is exempt from other provisions of State law governing lending, credit, or debt, including the provisions of Subtitle 1, Subtitle 3, Subtitle 9, and Subtitle 10 of this title.

(d) Earned wage access services provided in accordance with this subtitle may not be considered:

  (1) A money transmission; or

  (2) A violation of or noncompliance with State laws governing deductions from payroll, salary, wages, compensation, or other income or the purchase, sale, assignment, or order for unpaid but earned wages.

#### Section 12-1503

(a) A provider of earned wage access shall:

  (1) Develop and implement policies and procedures to respond to questions raised by consumers;

  (2) Address complaints from consumers in an expedient manner;

  (3) Whenever the provider offers a consumer the option to receive earned wage access services for a fee, offer the consumer at least one reasonable option to obtain earned wage access at no cost to the consumer;

  (4) Clearly explain to a consumer how to elect a no-cost option described in item (3) of this subsection;

  (5) Before entering into an agreement with a consumer for the provision of earned wage access services:

    (i) Inform the consumer of the consumer's rights under the agreement; and

    (ii) Fully and clearly disclose all fees associated with the earned wage access services;

  (6) Inform a consumer of any material changes to the terms and conditions of the earned wage access services before implementing those changes for that consumer;

  (7) Allow a consumer to cancel use of the provider's earned wage access services at any time without incurring a cancellation fee imposed by the provider;

  (8) Comply with all applicable local, state, and federal privacy and information security laws;

  (9) Clearly and conspicuously disclose in the provider's service contract with the consumer that the provider is prohibited by law from soliciting or retaining tips, gratuities, or other donations;

  (10) Provide proceeds to a consumer by any means mutually agreed upon by the consumer and the provider; and

  (11) Except as provided in subsection (b) of this section, if the provider will seek repayment of outstanding proceeds or payment of fees or other amounts owed or incurred from a consumer's account at a bank in connection with earned wage access services covered by this subtitle, including by means of electric fund transfer:

    (i) Comply with the federal Electronic Fund Transfer Act and regulations adopted to implement the Act; and

    (ii) Reimburse the consumer within 5 business days for the full amount of any overdraft or nonsufficient fund fees imposed on a consumer by the consumer's bank that were caused by the provider attempting to seek repayment of any outstanding proceeds or payment of fees in connection with earned wage access services covered by this subtitle.

(b) Subsection (a)(11) of this section does not apply to a provider seeking repayment of outstanding proceeds or payment of fees or other amounts owed that were received or incurred by a consumer through fraudulent or other unlawful means.

#### Section 12-1504

A provider of earned wage access may not:

(1) Share with an employer any charges received from a consumer for earned wage access;

(2) Solicit or charge a tip;

(3) Condition a consumer's ability to obtain earned wage access on the consumer's ability or willingness to pay the provider a tip;

(4) Charge a consumer a late fee, interest, or other penalty for failure to pay any proceeds or fees;

(5) Report any information about a consumer's failure to pay any proceeds or fees to any consumer reporting agency;

(6) Obtain a consumer's credit report as a method of qualifying the consumer for earned wage access;

(7) Receive interest from a consumer; or

(8) Compel or attempt to compel payment by a consumer of any proceeds, fees, tips, gratuities, or other donations through:

  (i) A civil action against the consumer;

  (ii) The use of a third party to pursue collection from the consumer on the provider's behalf; or

  (iii) The sale or assignment of outstanding amounts to a third-party collector or debt buyer for collection from the consumer.

#### Section 12-1505

A provider of earned wage access may charge a fee for delivery or expedited delivery of earned wage access to a consumer not exceeding:

(1) $5.00 for any advance of proceeds equal to or less than $75.00; or

(2) $7.50 for any advance of proceeds greater than $75.00.

#### Section 12-1506

On or before July 1 each year, beginning in 2026, a provider of earned wage access shall submit a report to the Office of Financial Regulation that includes any information considered necessary by the Commissioner, as prescribed by regulation, to assess the size and status of the earned wage access market in the State.

#### Section 12-1507

(a) A provider may not directly or indirectly print, publish, distribute, or broadcast any false, misleading, or deceptive statement regarding the fees, rates, terms, or conditions of earned wage access.

(b)

  (1) If fees or rates of fees are advertised by a licensee, the Commissioner may require the licensee to state the fees or rates of fees fully and clearly in any manner the Commissioner considers necessary to prevent misunderstanding by a prospective consumer.

  (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 authorize or require a licensee to refer to the fact that the licensee is under State supervision in the advertising materials of the licensee.

#### Section 12-1508

(a) In granting or denying a consumer request for earned wage access, a licensee may not discriminate against any consumer on the basis of race, color, creed, national origin, sex, sexual orientation, gender identity, disability, marital status, or age.

(b) Denying a request for earned wage access by a consumer who is a minor is not discrimination on the basis of age.

#### Section 12-1509

(a) A licensee or a person exempt from licensing under this subtitle is not subject to a penalty 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 on:

    (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 consumer of money collected in violation of this subtitle.

#### Section 12-1510

The Commissioner may adopt regulations to carry out this subtitle.

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Md. Code Ann., Com. Law (as displayed at mgaleg.maryland.gov, October 16, 2026)