# Insurance (GIN)

## Title 23. Premium Financing

### Subtitle 1. Definitions; General Provisions

#### Section 23-101

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

(b) "Actuarial method" has the meaning stated in Sec. 12-1009 of the Commercial Law Article.

(c)

  (1) "Premium finance agreement" means an agreement:

    (i) by which an insured or prospective insured promises to pay a premium finance company the amount advanced or to be advanced under the agreement, together with interest and a service fee, to an insurer or an insurance producer in payment of premiums; and

    (ii) that contains an assignment of or is otherwise secured by the unearned premium or refund obtainable from the insurer on cancellation of the insurance contract.

  (2) "Premium finance agreement" does not include a premium financed in connection with a time sale of goods or services or an extension of credit without charge by an insurance producer.

(d) "Premium finance company" means a person that engages in the business of entering into or accepting premium finance agreements.

#### Section 23-102

No bank, savings bank, trust company, savings and loan association, credit union, industrial finance company, small loan company, or other similar organization that is regulated under the laws of the State or the United States nor any bank, savings bank, trust company, savings and loan association, or credit union that is organized in another state and has a branch in this State nor any authorized insurer that does not engage in the insurance financing business is subject to this title.

#### Section 23-103

(a) The Commissioner may conduct investigations and examine the books, records, and accounts of a person under this title to the same extent as is authorized with respect to insurers under this article.

(b) The expense of an examination shall be paid by the person examined as provided in Sec. 2-208 of this article.

(c) The Commissioner or an examiner shall make a complete report of each investigation or examination as provided in Sec. 2-209 of this article.

### Subtitle 2. Registration

#### Section 23-201

(a) A premium finance company must register with the Commissioner before engaging in business as a premium finance company in the State.

(b) An insurer or insurance producer must register with the Commissioner before engaging in the business of financing premiums in the State.

#### Section 23-202

(a) To engage in business as a premium finance company in the State, each premium finance company shall elect to:

  (1) maintain a net worth of at least $250,000 calculated under generally accepted accounting principles;

  (2) file with the Commissioner an irrevocable letter of credit in the amount of $50,000 issued by a financial institution;

  (3) deposit with the State Treasurer cash in the amount of $50,000; or

  (4) file with the Commissioner a bond that:

    (i) is in favor of the State;

    (ii) is in the penal sum of $50,000;

    (iii) is executed by an authorized surety insurer; and

    (iv) is conditioned that the premium finance company will account for and pay over to the person entitled to receive it all money belonging to the person that comes into the possession of the premium finance company, including unearned premiums due to an insured and unearned commissions due to an insurer.

(b) A bond shall remain in force until the surety insurer is released from liability by the Commissioner or until the bond is canceled by the surety insurer.

(c) The total liability of the surety insurer under a bond may not exceed the penal sum of the bond.

(d)

  (1)

    (i) The surety insurer may cancel a bond after filing written notice with the Commissioner at least 30 days before the effective date of the cancellation.

    (ii) A cancellation under this paragraph does not affect any liability that accrued before the cancellation.

  (2) After notification of the cancellation of the bond, the premium finance company shall act promptly to replace the bond.

  (3) If the premium finance company fails to act promptly to replace the bond, the Commissioner shall deny, suspend, revoke, or refuse to renew the registration of the premium finance company until the required bond is filed.

(e) If, at any time, the premium finance company fails to comply with subsection (a) of this section, the Commissioner shall deny, suspend, revoke, or refuse to renew the registration of the premium finance company until the premium finance company complies with subsection (a) of this section.

#### Section 23-203

(a) An applicant for initial registration shall:

  (1) file with the Commissioner:

    (i) an application on the form that the Commissioner requires;

    (ii) in the case of a corporation or limited liability company, a certificate of good standing issued by the State Department of Assessments and Taxation;

    (iii) evidence of compliance with Sec. 23-202 of this subtitle;

    (iv) the form of the premium finance agreement to be used; and

    (v) the finance charge, initial service fee, and all other fees and charges to be applied; and

  (2) pay to the Commissioner an application fee of $250.

(b) The registration application shall include the following information:

  (1) the name, business address, and telephone number of the premium finance company; and

  (2) the name and business address of each officer, director, principal, and partner of the premium finance company.

(c) A registration application may require the applicant to disclose the identity, trade names, and names of managers and owners of the applicant.

#### Section 23-204

(a) When an applicant complies with the filing requirements and pays the registration fee to the Commissioner in accordance with Sec. 23-203 of this subtitle, the Commissioner shall determine whether the applicant meets the requirements of this title.

(b) The Commissioner shall deny registration to an applicant if the Commissioner determines that the applicant has submitted an incomplete registration.

(c) The Commissioner shall register each applicant that meets the requirements of this title.

#### Section 23-205

(a) A registration expires on the first July 1 after its effective date unless it is renewed as provided in this section.

(b) Before a registration expires, the registrant may renew it for an additional 1-year term if the registrant:

  (1) files with the Commissioner:

    (i) a renewal application on the form that the Commissioner requires;

    (ii) in the case of a corporation or limited liability company, a certificate of good standing issued by the State Department of Assessments and Taxation; and

    (iii) evidence of compliance with Sec. 23-202 of this subtitle; and

  (2) pays to the Commissioner a renewal fee of $50.

(c) The Commissioner shall renew the registration of each registrant that meets the requirements of this section.

#### Section 23-206

(a) The Commissioner shall require a premium finance company to report, on forms provided by the Commissioner, changes in officers, directors, owners, trade names, principals, partners, business addresses, and telephone numbers within 30 days after a change occurs.

(b)

  (1) A premium finance company shall file all changes to:

    (i) the form of the premium finance agreement used by the premium finance company; and

    (ii) the finance charge, initial service fee, and any other fees and charges applied by the premium finance company.

  (2) A premium finance company may not use a premium finance agreement form or apply a fee or charge unless the filing required under paragraph (1) of this subsection is approved by the Commissioner.

  (3) A premium finance company shall disclose to the Commissioner, on written request, the method or formula used to calculate the finance charges and amount of refund on cancellation of the insurance contract.

#### Section 23-207

Each premium finance company:

(1) shall maintain records of its premium finance transactions for at least 3 years after making the final entry with respect to a premium finance agreement;

(2) shall allow the Commissioner to examine the records; and

(3) may keep the records in photographic, imaging, microfilm, microfiche, electronic data processing, computer, or facsimile form.

#### Section 23-208

(a) Subject to the hearing provisions of Title 2 of this article, the Commissioner may deny a registration to an applicant or suspend, revoke, or refuse to renew the registration of a registrant if the Commissioner finds that the applicant or registrant has:

  (1) failed to comply with a lawful requirement of the Commissioner under this title;

  (2) violated a provision of this title;

  (3) made a material misstatement in the application for registration;

  (4) engaged in fraudulent or dishonest practices; or

  (5) demonstrated incompetency or untrustworthiness to engage in the business of a premium finance company.

(b)

  (1) Instead of or in addition to suspending, revoking, or refusing to renew a registration, the Commissioner may:

    (i) impose on the registrant a penalty of not less than $25 but not exceeding $1,000 for each violation of this article, up to a maximum of $20,000 in the event of multiple violations; or

    (ii) require that restitution be made by a registrant that violates this title to a person that has suffered financial injury as a result of a violation of this title.

  (2) For purposes of this subsection, restitution means the sum of money that, if paid to a person that suffers financial injury as a result of violation of this title, will restore the person to the same financial position the person would have been in had the violation not occurred.

(c)

  (1) A premium finance company that delegates administration of a premium finance agreement to a third party is responsible for a violation of any provision of this title by the third party in the administration of the premium finance agreement, regardless of the delegation.

  (2) For purposes of this subsection, the following acts by an insurance producer in relation to a premium finance agreement are not considered to be the administration of the premium finance agreement:

    (i) signing a premium finance agreement;

    (ii) accepting payments; or

    (iii) issuing receipts.

#### Section 23-209

(a) A registrant may surrender a registration by delivering to the Commissioner written notice of the surrender.

(b) Surrender of a registration does not affect the registrant's civil or criminal liability for acts committed before the surrender.

#### Section 23-210

Suspension, revocation, or surrender of a registration does not affect the obligation of an insured under a lawful premium finance agreement previously acquired or held by the registrant.

### Subtitle 3. Premium Finance Agreements; Charges and Fees

#### Section 23-301

(a)

  (1) A premium finance agreement shall be dated and signed by or on behalf of the insured.

  (2) Except as provided under subsection (b)(5)(viii) of this section, the printed part of the premium finance agreement shall be in approximately 8-point type and be easily readable by an average individual.

(b) A premium finance agreement shall contain:

  (1) the name and place of business of the insurance producer negotiating the related insurance contract;

  (2) the name and residence or place of business of the insured as specified by the insured;

  (3) the name and place of business of the premium finance company to which payments may be made;

  (4) an itemized list for each insurance contract or coverage financed under the premium finance agreement that includes:

    (i) the applicable application number, binder number, or policy number;

    (ii) the effective date of the insurance contract or coverage;

    (iii) the name of the company issuing the insurance contract or coverage; and

    (iv) the premium for the insurance contract or coverage; and

  (5) if applicable, the following items:

    (i) the total amount of the premiums;

    (ii) the amount of the down payment;

    (iii) the principal balance (the difference between items (i) and (ii) of this item);

    (iv) the amount of the finance charge;

    (v) the balance payable by the insured (the sum of items (iii) and (iv) of this item);

    (vi) the number of installments required, the amount of each installment expressed in dollars, and the due date or period of each installment;

    (vii) the electronic payment fee; and

    (viii) in at least 12-point type, the following statement: "If this agreement is canceled or the loan is prepaid in full before the end of its term, the actuarial method will be used to calculate the earned finance charge. Under this method, most of the finance charge is earned in the early months of the loan term rather than equally in each month. You may request a sample illustration of how the finance charge is earned.".

(c)

  (1) The items set out in subsection (b)(5) of this section need not be stated in the sequence in which they appear.

  (2) Additional items may be included to explain the computations made in determining the amount to be paid by the insured.

  (3) With respect to commercial automobile, fire, or liability insurance, a premium finance agreement may include separate provisions requiring representations, warranties, or other obligations of the insurance producer who sells, solicits, or negotiates the insurance policy, the premiums for which are financed under the premium finance agreement.

(d) A premium finance agreement may provide for additional insurance premiums to be financed and added to the initial premium finance agreement.

(e) Subject to Sec.Sec. 23-501.1 and 23-505.2 of this title, a premium finance agreement may include monthly payments for the purchase price of a motor club service contract.

#### Section 23-301.1

In addition to financing the premium of a surplus lines insurance contract, a premium finance agreement may include any:

(1) premium receipts tax that a surplus lines broker is required to charge under Sec. 3-324 of this article and pay to the Commissioner under Sec. 3-325 of this article;

(2) policy fee that a surplus lines broker is allowed to charge under Sec. 27-216 of this article; and

(3) inspection fee that a surplus lines broker is allowed to charge under Sec. 27-216 of this article.

#### Section 23-301.2

(a)

  (1) With respect to private passenger motor vehicle insurance and personal insurance, a premium finance company may:

    (i) assign all rights and obligations under a premium finance agreement to another premium finance company that is registered in the State under this title; or

    (ii) pledge a premium finance agreement as collateral for a loan.

  (2) If a premium finance company assigns the obligation to service a premium finance agreement to another premium finance company under paragraph (1)(i) of this subsection, the assigning premium finance company shall notify the insured in accordance with subsection (c) of this section:

    (i) that the obligation to service the premium finance agreement has been assigned to another premium finance company that is registered in the State under this title; and

    (ii) of the name, address, and telephone number of the premium finance company to which the obligation has been assigned.

(b)

  (1) With respect to commercial automobile, fire, or liability insurance, a premium finance company:

    (i) except as provided in paragraph (2) of this subsection, may assign all rights and obligations under a premium finance agreement to another person if the premium finance agreement expressly confers the right to assign all rights and obligations under the premium finance agreement; or

    (ii) may pledge a premium finance agreement as collateral for a loan.

  (2) A premium finance company that assigns rights and obligations under paragraph (1)(i) of this subsection shall:

    (i) retain the obligation to service the premium finance agreement; or

    (ii) assign the obligation to service the premium finance agreement to another premium finance company that is registered in the State under this title.

  (3) If a premium finance company assigns the obligation to service a premium finance agreement to another premium finance company under paragraph (2)(ii) of this subsection, the assigning premium finance company shall notify the insured in accordance with subsection (c) of this section:

    (i) that the obligation to service the premium finance agreement has been assigned to another premium finance company that is registered in the State under this title; and

    (ii) of the name, address, and telephone number of the premium finance company to which the obligation has been assigned.

(c) A notice required under subsection (a)(2) or (b)(3) of this section shall be by:

  (1) first-class mail; or

  (2) if the premium finance company meets the requirements for delivering a notice under Sec. 27-601.2 of this article, electronic means.

#### Section 23-302

(a) A copy of each premium finance agreement or other notice of a premium finance agreement that describes the policy or policies involved shall be given to the agency issuing the policy or policies or to the insurers involved.

(b)

  (1) If a policy is procured through a surplus lines broker licensed in the State, and payment is not made directly to the surplus lines broker or the insurer, a copy of the premium finance agreement or other notice of the premium finance agreement shall be sent to the surplus lines broker by the insurance producer or premium finance company.

  (2) A premium finance company may require an insurance producer who procures premium financing to:

    (i) send to the surplus lines broker the notice required under paragraph (1) of this subsection within 10 business days of the execution of a premium finance agreement; and

    (ii) provide to the premium finance company, within 10 business days of receipt of a policy, the insurer's name, policy number, and any other information necessary to complete a premium finance agreement.

(c) When a premium finance agreement is signed, the premium finance company, or the insurance producer, if applicable, shall provide the insured with, or cause the insured to be provided with, a legible copy of the fully completed and executed premium finance agreement.

#### Section 23-302.1

(a) An insured may finance an additional premium if:

  (1) the insured has paid the down payment, if any, required by the premium finance company on the additional premium; and

  (2) the premium finance company delivers or mails a written notice to the insured at the last known address of the insured indicating that:

    (i) there is a revised premium finance agreement; and

    (ii) in the event of default in payment of the revised premium finance agreement, the policy may be canceled.

(b) An insurer may not delay cancellation for the sole purpose of applying premiums on deposit to any additional premium.

#### Section 23-302.2

If an insurer receives notice of a financed insurance premium, the insurer shall, within 10 business days after its calculation, notify the insured, the insurer's insurance producer, and premium finance company of any additional premium arising under the financed policy.

#### Section 23-303

(a) The maximum charges stated in Sec.Sec. 23-304 and 23-305 of this subtitle shall include all interest, fees, and charges incident to the premium finance agreement and the resulting extension of credit.

(b) Notwithstanding subsection (a) of this section, delinquency, collection, cancellation, reinstatement, and electronic payment fee charges may be made in accordance with the limitations of Sec.Sec. 23-306, 23-307, and 23-307.1 of this subtitle.

#### Section 23-304

(a) The finance charge shall be computed:

  (1) on the amount of the entire premium loan advanced, including any taxes or fees that are financed under Sec. 23-301.1 of this subtitle, after subtracting any down payment on the premium loan made by the insured;

  (2) from the inception date of the insurance contract or from the due date of the premium, disregarding any grace period or credit allowed for payment of the premium, through the date when the final installment under the premium finance agreement is payable; and

  (3) in an amount not exceeding the sum of 1.15% for each 30 days of the loan, computed in advance.

(b)

  (1) An insured shall receive a refund of a finance charge that exceeds any amount due under the premium finance agreement if:

    (i) the insurance contract is canceled; or

    (ii) the insured prepays the loan in full at any time.

  (2) The amount of the refund under paragraph (1) of this subsection may be calculated by the actuarial method.

  (3)

    (i) A finance charge:

      (1) is earned in 30-day increments; and

      (2) in accordance with subparagraph (ii) of this paragraph, may be earned on the first day of each 30-day period.

    (ii) If a finance charge is earned on the first day of each 30-day period, the premium finance agreement shall contain a notification that the finance charge is earned on the first day of each 30-day period.

  (4) A premium finance company may not retain more of the finance charge than is earned under this section.

(c) With respect to commercial automobile, fire, or liability insurance only, a finance charge may be imposed on any unpaid principal balance of the loan remaining after all unearned premiums have been returned if the unearned premiums are less than the unpaid principal balance due to:

  (1) an audit by the insurer resulting in additional premium;

  (2) the application of a minimum premium on a policy;

  (3) an endorsement that is made after a policy is issued and results in additional premium; or

  (4) a lawful delay in canceling an insurance policy that is beyond the control of the premium finance company.

(d) Notwithstanding any other provision of law, a premium finance company may not use the Rule of 78s in computing a finance charge under this section.

#### Section 23-305

(a) A premium finance company may charge an initial service fee, which may not exceed $20, for actual expenses.

(b) The initial service fee may not be refunded on cancellation or repayment.

#### Section 23-306

(a) A premium finance agreement may require the insured to pay a delinquency and collection charge on each installment that is in default for a period of not less than 5 days.

(b) A delinquency and collection charge shall be at least $1, up to a maximum of 5% of the installment in default, but may not exceed:

  (1) $8, with respect to private passenger automobile or personal fire or liability insurance; and

  (2) $100, with respect to commercial automobile, fire, or liability insurance.

(c) Only one delinquency and collection charge may be collected on an installment, regardless of the period during which the installment remains in default.

#### Section 23-307

(a) Except as provided in subsection (d) of this section, a premium finance agreement may require the insured to pay a cancellation charge if a default in paying an installment results in the cancellation of an insurance contract listed in the premium finance agreement.

(b) A cancellation charge shall be:

  (1) with respect to private passenger automobile or personal fire or liability insurance, equal to the difference between a delinquency and collection charge imposed under Sec. 23-306 of this subtitle with respect to the installment in default and:

    (i) $15 for a default before or during calendar year 2014;

    (ii) $16 for a default during calendar year 2015;

    (iii) $17 for a default during calendar year 2016;

    (iv) $18 for a default during calendar year 2017;

    (v) $19 for a default during calendar year 2018; and

    (vi) $20 for a default during or after calendar year 2019; and

  (2) with respect to commercial automobile, fire, or liability insurance, 5% of the installment, not to exceed an amount equal to the difference between a delinquency and collection charge imposed under Sec. 23-306 of this subtitle with respect to the installment in default and $100.

(c) A premium finance company may require the payment of a reinstatement charge that is in place of and in the same amount as the cancellation charge if, after a cancellation charge is imposed in accordance with the requirements of subsection (d) of this section, the insured pays the defaulted installment.

(d) A premium finance agreement may impose a cancellation charge:

  (1) on or after the effective date stated in the notice of cancellation issued to the insurer under Sec. 23-403 of this title; or

  (2) on or after the cancellation effective date stated in the notice of intent to cancel delivered or mailed to the insured under Sec. 23-402 of this title, if:

    (i) the premium finance company has notified the insured in the notice of intent to cancel that a cancellation fee will be imposed on the cancellation effective date stated in the notice of intent to cancel; and

    (ii) the notice of intent to cancel includes the following statement in 12-point or larger type: "If you do not pay the delinquent amount before the cancellation effective date stated in this notice, at any time within 30 days of the cancellation effective date, your insurance policy is subject to cancellation on the cancellation effective date. This means that if you have a loss on or after the cancellation effective date stated in this notice, you may not have coverage for the loss.".

#### Section 23-307.1

(a)

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

  (2)

    (i) "Electronic check" means a form of payment in which a fund transfer is made electronically from a payer's bank account to a premium finance company's bank account.

    (ii) "Electronic check" does not include a written check that is delivered to a premium finance company or an agent by hand delivery, regular mail, or other form of personal delivery.

  (3) "Electronic payment" includes payment by credit card, debit card, or electronic check.

(b) A premium finance agreement may require the insured to pay an electronic payment fee if the insured elects to pay a premium finance company by means of an electronic payment.

(c) A premium finance company may charge an electronic payment fee, which may not exceed $8, for actual expenses incurred by the premium finance company for the electronic payment.

#### Section 23-308

A premium finance company may charge a dishonored check fee, which may not exceed $25, for actual expenses incurred in the processing of a dishonored check.

#### Section 23-309

A premium finance company may not charge an insured or a prospective insured any fee for the expense that the premium finance company incurs in obtaining a comprehensive loss underwriting exchange automobile report (CLUE report) regarding the insured or prospective insured if a producer already has charged the insured or prospective insured for obtaining the report.

#### Section 23-310

Filing of a premium finance agreement is not needed to perfect the validity of the premium finance agreement as a secured transaction as against creditors, subsequent purchasers, pledgees, encumbrancers, trustees in bankruptcy or any other insolvency proceeding under any law, or anyone having the status or power of any of those persons, their successors, or assigns.

#### Section 23-311

A premium finance company is not required to reinstate a policy if:

(1) the insurer requires a reinstatement fee, as authorized under Sec. 27-216(b)(5) of this article, to be paid by the insured; and

(2) the insured does not timely pay the reinstatement fee.

### Subtitle 4. Cancellation of Insurance Contract Under Power of Attorney

#### Section 23-401

When in connection with a premium finance agreement a power of attorney or other authority to cancel an insurance contract on behalf of an insured is given to a premium finance company, the premium finance company may not cancel the insurance contract except in accordance with this subtitle.

#### Section 23-401.1

(a) Subject to subsection (b) of this section, at the option of the insured a premium finance company may send any notice required under this subtitle by personal delivery, first-class mail, commercial delivery service, electronic mail, or facsimile transmission.

(b) A premium finance company may send any notice required under this subtitle by electronic means only if the premium finance company meets the requirements for delivering a notice under Sec. 27-601.2 of this article.

#### Section 23-402

(a) At least 10 days before canceling an insurance contract, a premium finance company shall deliver or mail to the insured written notice of intent to cancel the insurance contract unless the defaulted installment payment is received within the 10-day notice period.

(b) For an automobile liability insurance contract, the notice of intent to cancel shall include a statement in clear and specific terms that if the insured fails to replace the automobile liability insurance within the 10-day notice period, Sec. 17-106 of the Transportation Article provides that uninsured motorist penalties be assessed and that all evidences of registration be surrendered to the Motor Vehicle Administration and that failure to surrender the evidences of registration may result in suspension of current and future registration privileges.

(c) The cancellation of an insurance contract on the date stated in a notice of intent to cancel or a notice of cancellation is not superseded by a premium finance company's issuance of a subsequent notice of intent to cancel sent under this section or a notice of cancellation sent under Sec. 23-403 of this subtitle.

#### Section 23-403

(a)

  (1) After the end of the notice period under Sec. 23-402(a) of this subtitle, the premium finance company may cancel the insurance contract by submitting to the insurer a notice of cancellation that specifies the effective date of the cancellation.

  (2)

    (i) The premium finance company shall deliver or mail a copy of the notice of cancellation to the insured at the last known address of the insured.

    (ii) With respect to commercial automobile, fire, or liability insurance, the premium finance company shall deliver the notice in accordance with the insured's request under Sec. 23-401.1 of this subtitle.

(b)

  (1) If the insurer receives a notice of cancellation issued under subsection (a) of this section within 30 days after the effective date of cancellation specified in the notice, the insurer shall cancel the insurance contract effective on the date specified in the notice.

  (2) Subject to paragraph (3) of this subsection, if the insurer receives a notice of cancellation issued under subsection (a) of this section more than 30 days after the effective date of cancellation specified in the notice, the insurance contract shall be canceled effective on the date the insurer receives the notice.

  (3) If a premium finance company fails to meet the 30-day notice requirement under paragraph (1) of this subsection because the installment payment of the insured is dishonored after the effective date specified in the notice of cancellation, the dishonored payment is ineffective and the insurer may waive the 30-day notice requirement.

(c) A cancellation under this section shall be made as if the notice of cancellation had been submitted by the insured, but without requiring the return of the policy.

#### Section 23-403.1

If, within 15 business days after the date of written notice from a financial institution that the initial down payment for the coverage being financed has been dishonored, an insurer receives notice of the dishonor from an insurance producer or premium finance company, there is no valid insurance contract or insurance contracts, and the policy shall be voided.

#### Section 23-404

(a) All statutory, regulatory, and contractual restrictions that provide that the insured may not cancel an insurance contract unless notice is given to a governmental agency, mortgagee, or other third party shall apply to a cancellation made under this subtitle.

(b) If an insurer is required under subsection (a) of this section to give notice on behalf of itself or the insured, the insurer shall:

  (1) give notice to the governmental agency, mortgagee, or other third party; and

  (2) compute the effective date of cancellation from the day the insurer receives the notice of cancellation from the premium finance company.

#### Section 23-405

(a)

  (1) Notwithstanding any other provision of this article, when an insurance contract is canceled, whether by a premium finance company, an insurer, or an insured, the insurer shall return any gross unearned premiums that are due under the insurance contract, computed pro rata, and excluding any expense constant, administrative fee, or any nonrefundable charge filed with and approved by the Commissioner, to the premium finance company for the account of the insured within a reasonable time not exceeding 45 days after:

    (i) receipt by the insurer of a notice of cancellation from the premium finance company or the insured;

    (ii) the date the insurer cancels the insurance contract; or

    (iii) with respect to commercial automobile, fire, or liability insurance, completion of any audit necessary to determine the amount of premium earned while the insurance contract was in force.

  (2) An audit under paragraph (1)(iii) of this subsection shall be performed within 45 days after the insurer receives the notice of cancellation.

(b)

  (1) After the insurer returns to the premium finance company any gross unearned premiums that are due under the insurance contract, the premium finance company shall refund to the insured the amount of unearned premium that exceeds any amount due under the premium finance agreement.

  (2) A premium finance company need not make a refund to the insured if the amount of the refund would be less than $5.

(c) Whenever an insurer, after receiving notice of the existence of a premium finance agreement, returns any unearned premiums to a person other than the premium finance company named in the premium finance agreement, the insurer shall be directly responsible to the premium finance company for all unearned premiums arising from the cancellation of the premium finance agreement.

(d)

  (1) An insurer that fails to return any premium required under this section shall pay interest of 1% per month on the unearned premium that has not been returned until the unearned premium is returned.

  (2) Any payment under this subsection to the premium finance company shall be credited to the account of the insured.

(e) An insurer may not deduct from any return premium any amount owed to the insurer by the insured under any other insurance contract.

(f) An insurance producer shall return any gross unearned commissions, calculated as provided in subsection (a)(1) of this section, to an insurer within a reasonable period of time as required by the insurer.

#### Section 23-406

Whenever an insurance contract is canceled in accordance with this subtitle, the premium finance company may not collect from an insured an amount due under the premium finance agreement that is less than $5.

### Subtitle 5. Prohibited Acts; Penalties

#### Section 23-501

A premium finance company, or an insurance producer, if applicable, may not require an insured or prospective insured to purchase or finance add-on coverage, as defined in Sec. 20-504 of this article, as a condition of financing the premium for an insurance contract issued by the Maryland Automobile Insurance Fund.

#### Section 23-501.1

(a) A premium finance company may not impose any finance charge or other charge on any payment for the purchase price of a motor club service contract.

(b) A premium finance company may not cancel an insurance contract if any payment under the premium finance agreement:

  (1) is sufficient to pay the installment due under the premium finance agreement that is related to the insurance contract obligation; but

  (2) is not sufficient to cover the amount of the monthly payment for the motor club service contract.

#### Section 23-502

(a) A person may not pay any part of an initial service fee or any other fee or charge to an insurance producer, employee of an insurance producer, or to any other person as an inducement to financing an insurance contract with a premium financing company.

(b) An insurance producer, employee of an insurance producer, or any other person may not accept, directly or indirectly, any valuable consideration as an inducement to facilitate an agreement to finance an insurance premium that contains an assignment of or is otherwise secured by the unearned premium or refund obtainable from an insurer on cancellation of an insurance contract.

#### Section 23-503

A premium finance company may not induce an insured to enter into more than one premium finance agreement in order to obtain more than one initial service fee.

#### Section 23-504

Unless otherwise authorized by law, a person may not charge, take, receive from, reserve, or impose on an insured or prospective insured greater charges than those allowed by this title.

#### Section 23-505

The holder of a power of attorney may not cancel an insurance contract because a delinquency and collection charge under Sec. 23-306 of this title has not been paid.

#### Section 23-505.1

An insurer that markets through independent insurance producers as defined in this article may not:

(1) refuse to issue or deny the issuance of a policy because premiums have been advanced by a registered premium finance company not affiliated with the insurer; or

(2) require an insured to use a particular premium finance company or other installment plan.

#### Section 23-505.2

(a) An insurer that markets through independent insurance producers as defined in this article may not discriminate, intimidate, or retaliate against an insurance producer or insured that uses premium financing by denying the insurance producer or insured the same rights accorded to insurance producers or insureds who pay premiums in a different manner.

(b) With respect to personal lines automobile insurance, an insurance producer, who directly or indirectly has an ownership interest in a premium finance company, shall provide a disclosure to be signed by the insured comparing the costs and terms of premium financing with the insurer's alternative payment plan.

(c) The disclosure required by subsection (b) of this section shall:

  (1) state the total amount to be paid by the insured under the premium finance agreement during the policy term, including premium, any down payment, and all interest, fees, and charges incident to the premium finance agreement and resulting extension of credit; and

  (2) state the total amount to be paid by the insured under the insurer's alternative payment plan during the policy term, including premium, any down payment, and all fees and charges incident to the alternative payment plan.

(d) An insurance producer, or an employee or agent of the insurance producer, who directly or indirectly has an ownership interest in a motor club shall provide a disclosure to be signed by the insured informing the insured of the insurance producer's or the insurance producer's employee's or agent's interest in the motor club.

#### Section 23-506

In addition to any other applicable administrative or civil penalty, a premium finance company, insurer, or insurance producer that willfully and knowingly violates any provision of this title 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.

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Md. Code Ann., Ins. (as displayed at mgaleg.maryland.gov, October 16, 2026)