Citation: Md. Financial Institutions Code Ann. § 12-901 et seq. (2021)
- 12-901. Definitions
In general
(a) In this subtitle the following words have the meanings indicated.
Annual gross revenue
(b) “Annual gross revenue” means income or revenue from all sources, before any expenses or taxes, computed according to generally accepted accounting principles for the preceding fiscal year.
Branch location
(c) “Branch location” means any location other than the principal executive office of a licensee or license applicant at which the licensee conducts, or the license applicant, on licensure, will conduct, activities required to be licensed under this subtitle.
Consultation fee
(d) “Consultation fee” means a fee paid by a consumer to a debt management services provider in connection with the processing of any application that the consumer makes for debt management services.
Consumer
(e) “Consumer” means an individual who:
(1) Resides in the State; and
(2) Is seeking debt management services or has entered into a debt management services agreement.
Consumer education program
(f) “Consumer education program” means a program or plan that:
(1) Seeks to improve the financial literacy of consumers regarding personal finance, budgeting, and credit and debt management; and
(2) Provides counseling tailored to the needs and circumstances of the consumer with regard to options and strategies for addressing the consumer’s debt problems, including:
(i) Creating and maintaining a budget;
(ii) Establishing debt management payment plans with creditors;
(iii) Negotiating directly with creditors on payment or interest rate relief; and
(iv) Filing for bankruptcy.
Control person
(g)(1) “Control person” means a person who has the power, directly or indirectly, to direct the management or policies of a licensee or license applicant, whether through ownership of securities, by contract, or otherwise.
(2) “Control person” includes a person who:
(i) Is a general partner, an officer, or a director of a licensee or license applicant, or a member that occupies a similar position or performs a similar function;
(ii) Directly or indirectly has the right to vote 10% or more of a class of voting securities, or has the power to sell or direct the sale of 10% or more of a class of voting securities, of a licensee or license applicant; or
(iii) In the case of a partnership, a limited partnership, a limited liability partnership, a limited liability company, or any other business entity:
- Has the right to receive on liquidation or dissolution of a licensee or license applicant 10% or more of the capital of the licensee or license applicant; or
- Has contributed 10% or more of the capital of a licensee or license applicant.
Debt management counselor
(h) “Debt management counselor” means a permanent, temporary, or contractual employee of a debt management services provider or its agent who provides counseling to consumers on behalf of the debt management services provider.
Debt management services
(i) “Debt management services” means receiving funds periodically from a consumer under an agreement with the consumer for the purpose of distributing the funds among the consumer’s creditors in full or partial payment of the consumer’s debts.
Debt management services agreement
(j) “Debt management services agreement” means a written contract, plan, or agreement between a debt management services provider and a consumer for the performance of debt management services.
Debt management services provider
(k) “Debt management services provider” means a person that provides or offers to provide debt management services to a consumer.
License
(k-1) “License” means a license issued in any form by the Commissioner under this subtitle to provide debt management services, including as provided for through NMLS.
Licensee
(l) “Licensee” means a person licensed under this subtitle to provide debt management services.
Maintenance fee
(m) “Maintenance fee” means a fee paid by a consumer to a debt management services provider for the maintenance or servicing of the consumer’s accounts with the consumer’s creditors in accordance with a debt management services agreement.
Relative
(n) “Relative” means any of the following who are related to an individual by blood, marriage, or adoption:
(1) A spouse;
(2) A child;
(3) A sibling;
(4) A parent;
(5) A grandparent;
(6) A grandchild;
(7) A stepparent;
(8) A stepchild;
(9) A stepsibling;
(10) An aunt; or
(11) An uncle.
Resident agent
(o) “Resident agent” means an individual residing in the State or a Maryland corporation whose name, address, and designation as a resident agent are filed or recorded with the State Department of Assessments and Taxation in accordance with the provisions of the Corporations and Associations Article.
Trust account
(p) “Trust account” means an account that is:
(1) Established in a financial institution that is federally insured;
(2) Separate from the debt management services provider’s operating account;
(3) Designated as a “trust account” or by another appropriate designation indicating that the funds in the account are not the funds of the licensee or its officers, employees, or agents;
(4) Unavailable to creditors of the debt management services provider; and
(5) Used to hold funds paid by consumers to a debt management services provider for disbursement to creditors of the consumers.
Unique identifier
(q) “Unique identifier” means a number or another identifier assigned by NMLS.
- 12-902. Application of subtitle
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This subtitle does not apply to:
(1) The following persons when engaged in the regular course of their respective businesses and professions:
(i) An attorney at law;
(ii) An escrow agent;
(iii) A certified public accountant;
(iv) A banking institution, other-state bank, national banking association, credit union, or savings and loan association;
(v) A person that:
- Provides bill payer services, as defined in § 12-401 of this title;
- Does not initiate any contract with individual creditors of the debtor to compromise a debt or arrange a new payment schedule; and
- Does not provide any debt counseling services;
(vi) A person that provides accelerated mortgage payment services, as defined in § 12-401 of this title;
(vii) A title insurer, title insurance agency, or abstract company; or
(viii) A judicial officer or a person acting under a court order;
(2) A person while performing services incidental to the dissolution, winding up, or liquidation of a partnership, corporation, or other business enterprise;
(3) A trade or mercantile association acting in the course of arranging the adjustment of debts with a business establishment; or
(4) A mortgage lender, as defined in § 11-501 of this article, that:
(i) Is licensed by the Commissioner; and
(ii) Does not receive funds from a consumer for the purpose of distributing the funds among the consumer’s creditors in full or partial payment of the consumer’s debts.
- 12-904. Separate applications and fees
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Separate applications
(a) An applicant shall submit separate applications for the applicant’s principal executive office and each branch location.
Principal executive office
(b) With the license application for the principal executive office of an applicant, the applicant shall pay to the Commissioner:
(1) A nonrefundable investigation fee of $1,000 for an initial license; and
(2) A license fee for an initial license or a license renewal for an additional 1-year term, as follows:
(i) $500, if the applicant’s annual gross revenue is not more than $3,000,000;
(ii) $1,000, if the applicant’s annual gross revenue is more than $3,000,000 but not more than $6,000,000;
(iii) $2,000, if the applicant’s annual gross revenue is more than $6,000,000 but not more than $15,000,000;
(iv) $3,000, if the applicant’s annual gross revenue is more than $15,000,000 but not more than $30,000,000; or
(v) $4,000, if the applicant’s annual gross revenue is more than $30,000,000.
Branch locations
(c) With the license application for each branch location of an applicant, the applicant shall pay to the Commissioner a $100 license fee for an initial license or a license renewal for an additional 1-year term.
- 12-905. Debt Management Services Fund
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Contents of Fund
(a) All revenue received for the licensing of persons under this subtitle and, except as provided in subsection (b) of this section, any other fee, examination assessment, or revenue received by the Commissioner under this subtitle shall be:
(1) Credited to the Nondepository Special Fund established under § 11-610 of this article; and
(2) Used in accordance with § 11-610(c) of this article.
Fines and penalties paid into General Fund
(b) Notwithstanding subsection (a) of this section, the Commissioner shall pay all fines and penalties collected by the Commissioner under this subtitle into the General Fund of the State.
- 12-906. License required to provide debt management services to consumers
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In general
(a) Whether or not the person maintains an office in this State, a person may not provide debt management services to consumers unless the person:
(1) Is licensed by the Commissioner under this subtitle; or
(2) Is exempt from licensing under this subtitle.
Separate licenses required
(b) A separate license is required for the principal executive office of the license applicant or licensee and each branch location.
Duties of licensee
(c) During the time period established by the Commissioner under subsection (d) of this section, each licensee shall:
(1) Obtain and maintain a valid unique identifier issued by NMLS when an account is created with NMLS;
(2) Transfer licensing information to NMLS; and
(3) Pay to the Commissioner a license extension fee calculated in accordance with subsection (d)(5) of this section.
Transfer of licensing information to NMLS
(d)(1) The Commissioner shall establish a time period that is not less than 2 months within which a licensee must transfer licensing information to NMLS.
(2) The time period that the Commissioner establishes under this subsection shall begin on or after July 1, 2017.
(3) At least 30 days before the transfer period begins, the Commissioner shall:
(i) Notify all licensees of the transfer period; and
(ii) Provide instructions for the transfer of licensing information to NMLS.
(4) For each licensee that complies with subsection (c) of this section, the term of the licensee’s license shall extend to December 31 of the year in which the license otherwise would have expired.
(5) The license extension fee required under subsection (c)(3) of this section is nonrefundable and, based on the annual license fee, shall be prorated to the number of days between the date the license otherwise would have expired and December 31 of the same year.
Application through NMLS
(e) Subject to subsection (c) of this section, an applicant for an initial license or a license renewal shall apply for the initial license or license renewal through NMLS:
(1) On or after July 1, 2017; or
(2) If the Commissioner has not joined NMLS with respect to persons required to be licensed under this subtitle as of July 1, 2017, on or after the date that the Commissioner joins, as specified by the Commissioner by public notice.
- 12-907. License qualifications
In general
(a) To qualify for a license, an applicant shall satisfy the Commissioner that:
(1) The applicant and each of the owners, officers, directors, and principals of the applicant has sufficient experience, character, financial responsibility, and general fitness to:
(i) Engage in the business of providing debt management services;
(ii) Warrant the belief that the debt management services business will be conducted lawfully, honestly, fairly, and efficiently; and
(iii) Command the confidence of the public;
(2) Each agent acting on behalf of the applicant to manage a trust account required under § 12-917 of this subtitle has sufficient experience, character, financial responsibility, and general fitness to:
(i) Engage in the business of managing a trust account;
(ii) Warrant the belief that the management of the trust account will be conducted lawfully, honestly, fairly, and efficiently; and
(iii) Command the confidence of the public;
(3) The applicant has a net worth computed according to generally accepted accounting principles of at least $50,000, plus an additional net worth of $10,000 for each location at which debt management services will be provided to consumers, up to a maximum of $500,000 as provided in subsection (b) of this section; and
(4) Before providing counseling to a consumer, each debt management counselor employed by the applicant or the applicant’s agent will receive comprehensive training in counseling skills, personal finance, budgeting, and credit and debt management.
Net worth requirements
(b) The Commissioner may require a net worth of up to $500,000, subject to a consideration of the following:
(1) The nature and volume of the business or proposed business of the applicant;
(2) The amount, nature, quality, and liquidity of the assets of the applicant;
(3) The amount and nature of the liabilities, including contingent liabilities, of the applicant;
(4) The history of and prospects for the applicant to earn and retain income;
(5) The quality of the operations of the applicant;
(6) The quality of the management of the applicant;
(7) The nature and quality of the person that has control of the applicant; and
(8) Any other factor that the Commissioner considers relevant.
- 12-908. License applications
Form of application
(a) To apply for a license, an applicant shall:
(1) Complete, sign, and submit to the Commissioner an application made under oath in the form, and in accordance with the process, that the Commissioner requires; and
(2) Provide all the information that the Commissioner requests.
Contents of application
(b) The application shall include:
(1) The applicant’s name, principal executive office address, and website address, if any, and, if the applicant is not an individual, the name and residence address of each control person, if any;
(2) The address of each branch location, if any, at which the applicant will provide debt management services;
(3) The name and address of each owner, officer, director, and principal of the applicant who is not a control person;
(4) The name, address, and telephone number of the applicant’s resident agent in the State;
(5) A description of the ownership interest of any officer, director, agent, or employee of the applicant in any affiliate or subsidiary of the applicant or in any other business entity that provides any service to the applicant or any consumer relating to the applicant’s debt management services business;
(6) The name and address of any agent acting on behalf of the applicant to manage a trust account required under § 12-917 of this subtitle;
(7) The applicant’s federal employer identification number;
(8) A list of any state in which:
(i) The applicant engages in the business of providing debt management services;
(ii) The applicant is registered or licensed to provide debt management services; and
(iii) The applicant’s registration or license has been suspended or revoked;
(9) A statement of whether any pending judgment, tax lien, material litigation, or administrative action by any government agency exists against the applicant;
(10) The most recent, unconsolidated financial statement of the applicant that:
(i) Is prepared in accordance with generally accepted accounting principles applied on a consistent basis;
(ii) Includes a certified opinion audit prepared by an independent certified public accountant; and
(iii) Was prepared no more than 12 months before the date of application;
(11) If applicable, evidence of nonprofit status under § 501(c) of the Internal Revenue Code;
(12) If the applicant is a corporation, a detailed description of the applicant’s corporate structure, including parent companies, subsidiaries, and affiliates;
(13) The applicant’s business credit report;
(14) Evidence of general liability or fidelity insurance that insures against dishonesty, fraud, theft, or other malfeasance on the part of an employee of the applicant;
(15) A description of the applicant’s consumer education program that is provided to consumers;
(16) A description of the applicant’s financial analysis and initial budget plan, including any form or electronic model, that are used to evaluate the financial condition of consumers;
(17) A copy of the debt management services agreement that the applicant will use in its debt management services business;
(18) A copy of the applicant’s plan to ensure that each debt management counselor is certified by an independent organization within 6 months after the debt management counselor is hired, and that any employee who is a supervisor or manager of a debt management counselor is certified by an independent organization within 3 months after the employee is hired;
(19) The most recent financial statement of each affiliate, subsidiary, or other person that provides services related to debt management services for the applicant or for any consumer;
(20) A copy of each contract or fee-for-service arrangement between the applicant and any person that provides services related to the debt management services business;
(21) A surety bond as required under § 12-914 of this subtitle; and
(22) Any other information that the Commissioner reasonably requires.
Refusal of application
(c) The Commissioner may refuse an application if it contains erroneous or incomplete information.
- 12-909. Criminal history records checks
Fingerprints provided by applicants or licensees
(a) In connection with an initial application, a renewal application, and at any other time the Commissioner requests, an applicant or licensee shall provide fingerprints to NMLS for use by the Federal Bureau of Investigation to conduct criminal history records checks.
Processing or other required feed
(b) An applicant or licensee required to provide fingerprints under this section shall pay any processing or other required fee.
Fingerprints provided by presidents and other officers
(c) If the applicant or licensee is a corporation, the fingerprinting and criminal history records check requirements shall apply to the president and any other officer, director, principal, or owner of the corporation as required by the Commissioner.
Fingerprints provided by agents
(d) Any agent acting on behalf of a licensee to manage a trust account required under § 12-917 of this subtitle, and any agent of the licensee who has access to the account, shall provide to NMLS fingerprints for use by the Federal Bureau of Investigation to conduct criminal history records checks.
- 12-910. Approval or denial of application
Investigation by Commissioner
(a) After an applicant for a license files a complete application, files a surety bond, and pays the license and investigation fees required under this subtitle, the Commissioner shall investigate the facts relevant to the application to determine if the applicant meets the requirements of this subtitle.
Deadline for decision
(b) Unless the Commissioner notifies an applicant that a different time period is necessary, the Commissioner shall approve or deny each application for a license within 60 days after the date on which the complete application is filed, the surety bond is filed, and the fees are paid.
Duty of Commissioner to issue license to qualified applicants
(c) The Commissioner shall issue a license to any applicant that meets the requirements of this subtitle.
Denial of application
(d)(1) If an applicant does not meet the requirements of this subtitle, the Commissioner:
(i) Subject to the hearing provisions of § 12-927 of this subtitle, shall deny the application;
(ii) Shall notify the applicant immediately of the denial;
(iii) Shall refund the license fee; and
(iv) Shall keep the investigation fee.
(2)(i) Within 30 days after the Commissioner denies an application, the Commissioner shall send a written notice to the applicant stating the reasons for the denial.
(ii) The notice shall be sent by United States mail, e-mail, or any means provided through NMLS to the address listed in the application.
- 12-911. Contents and transferability of license
Contents of license
(a)(1) Each license provided for through NMLS shall include the following information:
(i) The name of the licensee;
(ii) The address of the location at which the business is to be conducted; and
(iii) The unique identifier of the licensee.
(2) The unique identifier of the licensee shall constitute the license number for the license.
Authorization to provide debt management services
(b) A license authorizes the licensee to provide debt management services.
License not transferable
(c) A license may not be transferred, assigned, or pledged.
Prominent display of license
(d) Each licensee shall conspicuously post, in 48 point or larger type, at the licensee’s licensed location the following information:
(1) The licensee’s unique identifier; and
(2) A statement advising consumers of the availability of the NMLS Consumer Access website to verify the licensing status of the licensee.
Information to display on website
(e) Each licensee shall conspicuously display the following information on the licensee’s website, any software application accessible to the public and used to provide debt management services, and profile page within each social media platform the licensee uses:
(1) The licensee’s unique identifier;
(2) A link to the NMLS Consumer Access website; and
(3) A notice stating, “The Commissioner of Financial Regulation for the State of Maryland will accept any questions and complaints from Maryland residents regarding (name and unique identifier of the debt management services provider) at (address of Commissioner), phone (toll-free number of the Commissioner).
One location maintained under license
(f) Only one location may be maintained under any one license.
Exception to posting of information
(g) A licensee is not required to post the information required in subsection (d) of this section if the licensee does not regularly grant access to the licensed location to members of the general public.
- 12-912. Expiration and renewal of license
Initial license term
(a) An initial license term shall:
(1) Begin on the date the license is issued; and
(2) Expire on December 31 of the year:
(i) In which the license is issued, if the license is issued before November 1; or
(ii) Immediately following the year that the license is issued, if the license is issued on or after November 1.
Renewal of license
(b) On or after November 1 of the year in which a license expires, the license may be renewed for an additional 1-year term if the licensee:
(1) Otherwise is entitled to be licensed;
(2) Pays to the Commissioner the renewal fee established under § 12-904 of this subtitle;
(3) Files with the Commissioner a surety bond renewal certificate or a new surety bond required under § 12-914 of this subtitle; and
(4) Submits to the Commissioner a renewal application in the form, and in accordance with the process, that the Commissioner requires.
Staggered expiration dates
(c) To the extent required or permitted by NMLS, the Commissioner may determine that licenses issued under this subtitle shall expire on a staggered basis.
Transfer of licensing information to NMLS
(d) A licensee may not renew a license unless, before the submission of the license renewal application, the licensee has transferred the licensee’s licensing information to NMLS in accordance with § 12-906(c) of this subtitle.
- 12-913. Surrender of license
Manner of surrender
(a)(1) A licensee may surrender a license through NMLS in accordance with the process that the Commissioner requires.
(2) With the surrender of a license, a licensee shall provide:
(i) The reason for the license surrender;
(ii) For each consumer for whom the licensee is providing debt management services, the following information:
- The name of the consumer;
- The total amount of funds held by the licensee for distribution to the consumer’s creditors; and
- The name of each creditor of the consumer that is receiving payments from the licensee for debts owed by the consumer to the creditor, and the outstanding balance owed to each creditor.
Liability of licensee for acts committed before surrender of license
(b) The surrender of a license does not:
(1) Affect any administrative, civil, or criminal liability of the licensee for acts committed before the license is surrendered;
(2) Affect the surety bond required under § 12-914 of this subtitle; or
(3) Entitle the licensee to the return of any fee paid to the Commissioner under § 12-904 of this subtitle.
- 12-914. Surety bond requirements
Surety bond filed with application for new license
(a) With the application for a new license, an applicant shall file a surety bond with the Commissioner.
Requirements of surety bond
(b)(1) The bond shall run to the Commissioner, as obligee, for the benefit of:
(i) The State; and
(ii) Any consumer who is injured by a violation of this subtitle or a regulation adopted under this subtitle committed by a licensee or an agent of a licensee, including an agent managing a trust account.
(2) The bond shall be:
(i) In an amount not less than $10,000 and not more than $1,000,000, as set by the Commissioner;
(ii) Issued by a surety company that:
- Is authorized to do business in the State; and
- Holds a certificate of authority issued by the Maryland Insurance Commissioner; and
(iii) Conditioned that the licensee and its agent shall comply with all State and federal laws and regulations governing the business of providing debt management services.
(3) The liability of the surety:
(i) Shall be continuous;
(ii) May not be aggregated or cumulative, whether or not the bond is renewed, continued, replaced, or modified;
(iii) May not be determined by adding together the penal sum of the bond, or any part of the penal sum of the bond, in existence at any two or more points in time;
(iv) Shall be considered to be one continuous obligation, regardless of increases or decreases in the penal sum of the bond;
(v) May not be affected by:
- The insolvency or bankruptcy of the licensee or its agent;
- Any misrepresentation, breach of warranty, failure to pay a premium, or any other act or omission of the licensee or its agent; or
- The suspension of the licensee’s license;
(vi) May not require an administrative enforcement action by the Commissioner as a prerequisite to liability; and
(vii) Shall continue for 3 years after the later of the date on which:
- The bond is canceled; or
- The licensee, for any reason, ceases to be licensed.
(4)(i) A bond may be canceled by the surety or the licensee by giving notice of cancellation to the Commissioner.
(ii) Notice under subparagraph (i) of this paragraph shall:
- Be in writing; and
- Be sent by certified mail, return receipt requested.
(iii) A cancellation of a bond under this paragraph is not effective until 90 days after receipt of a notice of cancellation by the Commissioner.
(5) A claim against the bond may be filed with the surety by:
(i) A claimant; or
(ii) The Commissioner for the benefit of a claimant or the State.
(6) If the amount of claims under a bond exceeds the amount of the bond, the surety:
(i) Shall pay the amount of the bond to the Commissioner for pro rata distribution to claimants; and
(ii) Is relieved of liability under the bond.
(7) The Commissioner may allow the amount of the surety bond to be reduced if the amount of the licensee’s outstanding debt management services liabilities in the State is reduced.
(8) In setting the amount of the surety bond, the Commissioner shall consider:
(i) The financial condition and business experience of the applicant or licensee and the agent of the applicant or licensee;
(ii) For an applicant, the projected monthly and annual volume of debt management services to be provided in the State;
(iii) For a licensee, the average monthly and annual volume of debt management services provided in the State during the previous 12-month period;
(iv) The potential loss to consumers who remit funds to the applicant or licensee if the applicant or licensee becomes financially impaired; and
(v) Any other factor the Commissioner considers appropriate.
Reduction of penal amount of surety bond
(c) If the penal amount of a surety bond is reduced by payment of a claim or judgment, the licensee shall file with the Commissioner any new or additional surety bond in the amount that the Commissioner sets.
Waiver of requirement
(d) The Commissioner may waive the surety bond requirement under this section if the Commissioner determines that the volume of debt management services provided by the applicant or licensee does not warrant the need for a surety bond.
Penalties paid and collected from proceeds of surety bond
(e) A penalty imposed against a licensee under § 12-928 or § 12-929 of this subtitle may be collected and paid from the proceeds of a surety bond required under this section.
- 12-915. Change of information included in application
Update through NMLS
(a)(1) A licensee shall update through NMLS any change in the information required to be included in the licensee’s application under § 12-908(b)(1) and (2) of this subtitle at least 30 days before the change is effective.
(2) The licensee shall ensure that, after the change described in this subsection, the licensee will continue to satisfy the surety bond requirement under § 12-914 of this subtitle.
Change of control person of licensee or agent
(b) Unless approved by the Commissioner through NMLS, a licensee may not change a control person of the licensee, or an agent who is acting on behalf of the licensee to manage a trust account, listed on the licensee’s application under § 12-908(b)(3) and (6) of this subtitle.
Request for approval of proposed change
(c)(1) To request approval of a proposed change described in subsection (b) of this section, the licensee shall notify the Commissioner through NMLS of the proposed change and submit any information that the Commissioner requires.
(2) For a proposed change in owner or agent acting on behalf of the licensee to manage a trust account, the Commissioner may determine that the filing of a new application for the issuance of a license is warranted.
(3) Unless the Commissioner notifies the licensee that a different time period is necessary, the Commissioner shall approve or deny a request for a change described in subsection (b) of this section within 60 days after the date the Commissioner receives all information required under paragraph (1) of this subsection.
- 12-916. Debt management services
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In general
(a)(1) A licensee may not perform debt management services for a consumer unless:
(i) 1. The licensee provides the consumer with a consumer education program;
- The licensee provides the consumer with a written summary of the counseling options and strategies for addressing the consumer’s debt problems developed under § 12-901(f)(2) of this subtitle; and
- The consumer signs an acknowledgment stating that the consumer has reviewed the written summary and has decided to proceed with entering into a debt management services agreement with the licensee;
(ii) The licensee, through a debt management counselor certified by an independent organization, has:
- Prepared a financial analysis of and an initial budget plan for the consumer’s debt obligations;
- Provided a copy of the financial analysis and the initial budget plan to the consumer; and
- Provided to the consumer, for all creditors identified by the consumer, a list of:
- The creditors that the licensee reasonably expects to participate in the management of the consumer’s debt under the debt management services agreement; and
- The creditors that the licensee reasonably expects not to participate in the management of the consumer’s debt under the debt management services agreement;
(iii) The licensee and the consumer have executed a debt management services agreement that describes the debt management services to be provided by the licensee to the consumer;
(iv) The licensee has a reasonable expectation based on the licensee’s past experience that each creditor of the consumer that is listed as a participating creditor in the consumer’s debt management services agreement will accept payment of the consumer’s debts owed to the creditor as provided in the consumer’s debt management services agreement;
(v) The licensee has made a determination, based on the licensee’s analysis of the information provided by the consumer and otherwise available to it, that:
- The debt management services are suitable for the consumer; and
- The consumer will be able to meet the payment obligations under the debt management services agreement; and
(vi) A copy of the completed debt management services agreement has been provided to the consumer.
(2)(i) A licensee may provide to a consumer the materials required under paragraph (1)(ii) of this subsection using the Internet if:
- A debt management counselor of the licensee has reviewed and approved the computer program or application used to create the financial analysis and initial budget plan; and
- The consumer is:
- Advised of the availability of counseling; and
- Afforded the opportunity for counseling and for discussion of the financial analysis and initial budget plan with a debt management counselor at any time.
(ii) Title 21 of the Commercial Law Article applies to the provision of materials and associated transactions under this paragraph.
(3) In addition to the requirements under paragraph (1) of this subsection, before providing debt management services for a consumer, a debt management services provider shall provide a written notice to the consumer stating:
(i) That if the consumer elects to file for bankruptcy, the consumer will be required under federal bankruptcy law to receive pre-bankruptcy credit counseling services from a nonprofit credit counseling agency that is approved by the United States Trustee Program;
(ii) Whether the debt management services provider is approved by the United States Trustee Program to provide pre-bankruptcy credit counseling services; and
(iii) That the consumer should contact a federal bankruptcy court to obtain a list of credit counseling agencies that are approved by the United States Trustee Program.
Debt management services agreements
(b) Each debt management services agreement shall:
(1) Be signed and dated by the licensee and the consumer; and
(2) Include, in at least 12 point type:
(i) The name, address, and phone number of the consumer;
(ii) The name, address, phone number, and license number of the licensee;
(iii) A description of the debt management services to be provided to the consumer and any fees to be charged to the consumer for the debt management services;
(iv) A disclosure of the existence of the surety bond required under § 12-914 of this subtitle;
(v) The name and address of the financial institution in which funds, paid by the consumer to the licensee for disbursement to the consumer’s creditors, will be held;
(vi) A notice of the right of a party to the debt management services agreement to rescind the debt management services agreement at any time by giving written notice of rescission to the other party;
(vii) A schedule of payments that the consumer must make to the debt management services provider, including:
- The amount of each payment and the date on which each payment is due; and
- An itemization of the maintenance fees that will be retained by the debt management services provider, and the amount of money that will be paid to the consumer’s creditors, from each payment the consumer makes to the debt management services provider;
(viii) A list of:
- A. Each participating creditor of the consumer to which payments will be made under the debt management services agreement;
- The amount owed to each creditor; and
- A schedule of payments that the debt management services provider will make to each participating creditor from the consumer’s payments, including the amount of each payment and the date on which each payment will be made; and
- Each creditor that the licensee reasonably expects not to participate in the management of the consumer’s debt under the debt management services agreement;
(ix) A disclosure that the licensee also may receive compensation from the consumer’s creditors for providing debt management services to the consumer;
(x) A disclosure that the licensee may not, as a condition of entering into a debt management services agreement, require a consumer to purchase for a fee a counseling session, an educational program, or materials and supplies;
(xi) A disclosure that the licensee may not require a voluntary contribution from a consumer for any service provided by the licensee to the consumer;
(xii) A disclosure that, by executing the debt management services agreement, the consumer authorizes any financial institution in which the licensee has established a trust account for deposit of the consumer’s funds to disclose to the Commissioner any financial records relating to the trust account during the course of any investigation or examination of the licensee by the Commissioner;
(xiii) A disclosure that execution of a debt management services agreement may impact the consumer’s credit rating and credit scores; and
(xiv) The following notice:
“The Commissioner of Financial Regulation for the State of Maryland will accept questions and complaints from Maryland residents regarding (name and license number of the debt management services provider) at (address of the Commissioner) phone (toll-free number of the Commissioner). Do not sign this agreement before you read it. You must be given a copy of this agreement.”.
Agreements between consumers and unlicensed persons null and void
(c) A debt management services agreement between a consumer and a person that is not a licensee under this subtitle shall be null and void, and all fees paid to the person under the debt management services agreement shall be recoverable by the consumer, together with reasonable attorney’s fees.
- 12-917. Trust accounts
In general
(a) Within 2 business days after receipt, a licensee shall deposit, in a trust account established for the benefit of consumers, any funds paid to the licensee by or on behalf of a consumer for disbursement to the consumer’s creditors.
Duties of licensee relating to trust accounts
(b) A licensee shall:
(1) Maintain separate records of account for each consumer to whom the licensee is providing debt management services;
(2) Disburse any funds paid by or on behalf of a consumer to the consumer’s creditors within 8 business days after receipt of the funds; and
(3)(i) Correct any misdirected payments resulting from an error by the licensee; and
(ii) Reimburse the consumer for any actual fees or other charges imposed by a creditor as a result of the misdirection.
Commingling of trust accounts prohibited
(c) A licensee may not commingle any trust account established for the benefit of consumers with any operating accounts of the licensee.
- 12-918. Fees or charges for debt management services
In general
(a) With respect to the provision of debt management services, a licensee may not impose any fees or other charges on a consumer, or receive any funds or other payments from a consumer or another person on behalf of a consumer:
(1) Except as provided in subsections (g)(3) and (i) of this section, until after the licensee and consumer have executed a debt management services agreement; and
(2) Only as allowed under this section.
Consultation fees
(b)(1) A licensee may charge a consultation fee not exceeding $50.
(2) The cost of a credit report on a consumer shall be paid from the consultation fee paid by the consumer.
Monthly maintenance fees
(c)(1) Subject to paragraph (2) of this subsection, a licensee may charge a monthly maintenance fee not exceeding $8 for each creditor of a consumer that is listed in the debt management services agreement between the licensee and the consumer.
(2) The total fees charged to a consumer under paragraph (1) of this subsection may not exceed $40 per month.
Collection of funds the consumer has agreed to pay
(d) A licensee may collect from or on behalf of a consumer the funds the consumer has agreed to pay to the licensee under the debt management services agreement.
Other prohibited fees
(e) A licensee may not charge a fee to:
(1) Prepare a financial analysis or an initial budget plan for the consumer;
(2) Counsel a consumer about debt management;
(3) Provide a consumer with the consumer education program described in the licensee’s license application; or
(4) Rescind a debt management services agreement.
Voluntary contributions from consumers
(f)(1) A licensee may not require a voluntary contribution from a consumer for any service provided by the licensee to the consumer.
(2) A licensee may accept a voluntary contribution from a consumer for a debt management service provided by the licensee to the consumer if the aggregate amount of the voluntary contribution and any other fees received by the licensee from the consumer for debt management services does not exceed the total amount the licensee is authorized to charge the consumer under subsections (b) and (c) of this section.
List of services and their charges provided to consumer
(g)(1) Before providing debt management services to a consumer, a licensee shall provide the consumer a list of services and their charges describing:
(i) Those services that the licensee offers:
- Free of charge if the consumer enters into a debt management services agreement with the licensee; and
- For a charge if the consumer does not enter into a debt management services agreement with the licensee; and
(ii) Those services that the licensee offers for a charge that are not offered as a part of debt management services.
(2) A licensee may not, as a condition of entering into a debt management services agreement, require a consumer to purchase for a fee a counseling session, an educational program, or materials and supplies.
(3) A licensee may charge a consumer a fee for a counseling session, an educational program, or materials and supplies if the consumer does not enter into a debt management services agreement with the licensee.
Modification or rescission of debt management services agreement
(h)(1) In addition to any other right of rescission contained in the debt management services agreement, a consumer may modify or rescind a debt management services agreement if the consumer is notified of a creditor’s nonparticipation under this subsection.
(2) If a creditor that is listed as participating in the debt management services agreement declines to participate in debt management services under the agreement, the licensee shall notify the consumer by certified mail, or other verifiable means approved by the consumer, at least 5 business days before the consumer’s next scheduled payment under the agreement.
(3) The notice shall include:
(i) The identity of the creditor; and
(ii) The right of the consumer to modify or rescind the agreement.
(4) A consumer who rescinds a debt management services agreement under this subsection is entitled to a refund of all unexpended funds that the consumer has paid to the licensee for the reduction of the consumer’s debt.
Dishonored payments by consumers
(i) If a payment by a consumer under this section to a licensee is dishonored, the licensee may charge the consumer the amount allowable for dishonored checks or other instruments under § 15-802 of the Commercial Law Article, whether or not the consumer has entered into a debt management services agreement with the licensee.
Receipt of funds or payments not authorized by section
(j) With respect to the provision of debt management services, if a licensee imposes any fee or other charge or receives any funds or other payments not authorized under this section, except as a result of an accidental and bona fide error:
(1) The debt management services agreement shall be void; and
(2) The licensee shall return the amount of the unauthorized fees, charges, funds, or payments to the consumer.
- 12-919. Written accountings provided to consumers
In general
(a) A licensee shall provide to each consumer with whom the licensee has a debt management services agreement a written accounting of:
(1) The amount of funds received from the consumer for payment to the consumer’s creditors since the last report; and
(2) The amounts and dates of disbursements made to each creditor of the consumer since the last report.
Frequency of accountings
(b) A licensee shall provide the accounting required under subsection (a) of this section:
(1) At least once during each calendar quarter; and
(2) On cancellation or termination of the debt management services agreement.
- 12-920. Prohibited conduct by licensees
In general
(a) A licensee may not:
(1) Purchase any debt or obligation of a consumer;
(2) Lend money or provide credit to a consumer;
(3) Obtain a mortgage or other security interest in property owned by a consumer;
(4) Operate as a collection agency, as defined in § 7-101 of the Business Regulation Article;
(5) Structure a debt management services agreement in a manner that would result in a negative amortization of any of the consumer’s debts;
(6) Make any false, misleading, or deceptive representations or omissions of information in connection with the offer, sale, or performance of any service;
(7) Offer, pay, or give a substantial gift, bonus, premium, reward, or other compensation to a person for referring a prospective customer to the licensee;
(8) Offer an incentive, including a gift, bonus, premium, reward, or other compensation, to a consumer for executing a debt management services agreement with the licensee;
(9) Charge for or provide credit insurance;
(10) Compromise any debts of a consumer unless the licensee has obtained the prior written approval of the consumer, and the compromise benefits the consumer;
(11) Enter into a contract or fee-for-service arrangement with a person owned, controlled by, or affiliated with an officer, a director, or an employee of the debt management services provider, or with a relative of an officer, a director, or an employee, that benefits an officer, a director, or an employee of the debt management services provider;
(12) Advertise, display, distribute, broadcast, televise, or otherwise publish debt management service rates, terms, or services in a false, misleading, or deceptive manner;
(13) Pay an incentive to an employee for enrolling a consumer in a debt management services plan or agreement; or
(14) Violate any provision of federal or State law governing debt management services or other related services.
Collection of fees for referring, advising, procuring, arranging, or assisting consumers with credit
(b)(1) Notwithstanding any other provision of State law, a licensee may not, directly or indirectly, collect any fee for referring, advising, procuring, arranging, or assisting a consumer in obtaining any extension of credit or other consumer service from a lender or service provider if the licensee, or any owner, officer, director, principal, or employee of the licensee, is an owner, partner, director, officer, or employee of the lender or service provider.
(2) This subsection does not prohibit a licensee from referring, advising, procuring, arranging, or assisting a consumer in obtaining any extension of credit or other consumer service from a lender or service provider of which the licensee, or any owner, officer, director, principal, or employee of the licensee, is an owner, partner, director, officer, or employee, if:
(i) The licensee does not directly or indirectly collect any fee; and
(ii) The consumer is provided with a written disclosure of the relationship.
- 12-921. Reporting requirements
In general
(a)(1) On or before April 30 of each year, a licensee shall report to the Commissioner on the debt management services business of the licensee conducted during the preceding calendar year.
(2) The annual report shall be on the form that the Commissioner requires.
(3) The report shall include:
(i) An audited financial statement that is prepared in accordance with generally accepted accounting principles and includes a balance sheet, income statement, statement of changes in fund balances, and statement of cash flow;
(ii) An alphabetical list of all debt management counselors who provided services for the licensee during the previous calendar year;
(iii) The number of consumers for whom the licensee provided debt management services under a debt management services agreement during the preceding calendar year;
(iv) The number of consumers who signed new debt management services agreements with the licensee during the preceding calendar year;
(v) The highest number of consumers for whom the licensee provided debt management services under a debt management services agreement during any month in the preceding calendar year;
(vi) The amounts paid by consumers to the licensee, both in total and for each month, during the preceding calendar year, broken down by:
- Payments to be disbursed to creditors; and
- Payments for the licensee’s services;
(vii) The percentage of all consumers who received a consumer education program and subsequently executed a debt management services agreement during the preceding calendar year;
(viii) The number of consumers who successfully completed a debt management plan during the preceding calendar year;
(ix) The number of consumers who ceased participating in a debt management plan without successfully completing the plan during the preceding calendar year; and
(x) A representative sample of the written summary required under § 12-916(a)(1)(i)2 of this subtitle.
Reports required upon triggering events
(b)(1) Within 15 days after the occurrence of any of the following events, a licensee shall file a written report with the Commissioner describing the event and its expected impact on the licensee’s activities in the State:
(i) The filing for bankruptcy or reorganization by the licensee;
(ii) The institution of a revocation or suspension proceeding against the licensee by a governmental authority that is related to the licensee’s debt management services business in any state;
(iii) A felony indictment or conviction of the licensee, or any of its officers, directors, or debt management counselors, that is related to the licensee’s debt management services business;
(iv) The commencement of a civil action by a consumer against the licensee, or its owners, officers, directors, principals, or debt management counselors, that is related to the licensee’s debt management services business;
(v) The filing of any material litigation against the licensee, or its owners, officers, directors, principals, or debt management counselors, that is related to the licensee’s debt management services business; and
(vi) A list of all third-party vendors and other service providers that the licensee used in providing debt management services at any time in the preceding calendar year.
(2) The written report required under paragraph (1) of this subsection shall be sent to the Commissioner by certified mail, return receipt requested, and include details sufficient to identify the event.
Other reports the Commissioner considers necessary
(c) The Commissioner may require any other reports from a licensee that the Commissioner considers necessary.
Failure to make report
(d) If a licensee fails to make any report required by this subtitle, the Commissioner may require the licensee to pay a surcharge not exceeding $50 for each day that the report is overdue.
- 12-922. Retention of records
In general
(a) To enable the Commissioner to determine compliance with this subtitle, a licensee shall make and preserve the following books, accounts, and records for a period of at least 7 years:
(1) A general ledger containing all assets, liability, capital, income, and expense accounts;
(2) Each debt management services agreement between the licensee and a consumer;
(3) Books and records for each consumer with whom the licensee has a debt management services agreement;
(4) Bank statements and bank reconciliation records;
(5) A copy of each written summary required under § 12-916(a)(1)(i)2 of this subtitle; and
(6) A copy of each signed acknowledgment required under § 12-916(a)(1)(i)3 of this subtitle.
Records retained at any location
(b) A licensee may retain the books, accounts, and records required under this section at any location, provided that the licensee:
(1) Notifies the Commissioner in writing of the location of the books, accounts, and records; and
(2) Makes the books, accounts, and records available at a location in the State, as agreed by the Commissioner and the licensee, within 7 days after a written request for examination by the Commissioner.
Form of books, accounts, and records
(c) A licensee shall retain the books, accounts, and records required under this section in:
(1) Original form; or
(2) Photographic, electronic, or other similar form approved by the Commissioner.
Finding that books, accounts, and records of licensee are insufficient
(d) If the Commissioner finds that the books, accounts, and records of the licensee are insufficient to determine compliance with this subtitle, the Commissioner may require the licensee to have a certified public accountant audit the licensee, at the licensee’s expense, for any period of time that the Commissioner considers necessary.
Confidentiality of books, accounts, and records
(e)(1) A licensee shall keep all books, accounts, and records relating to a consumer confidential, and may not disclose any information about a consumer except to a duly authorized government official, the consumer, or the consumer’s representative.
(2) A duly authorized government official may disclose information obtained under paragraph (1) of this subsection only in accordance with Title 4 of the General Provisions Article.
Subsidiaries, affiliates, or other persons relating to operation of business
(f) The requirements of this section also apply to books, accounts, and records in the possession of a subsidiary, affiliate, or other person that relate to the operation of and services provided by the licensee’s debt management services business.
- 12-923. Investigations by Commissioner
In general
(a) To discover any violations of this subtitle or to obtain any information required by this subtitle, the Commissioner at any time may investigate the business of:
(1) A licensee;
(2) A person that is engaged or participating in the business of providing debt management services; and
(3) Any other person that the Commissioner has cause to believe is violating this subtitle or any regulation adopted under this subtitle, whether that person claims to be within or beyond the scope of this subtitle.
Access to place of business, books and records, and persons
(b) For the purposes of this section, the Commissioner:
(1) Shall be given access to the place of business, books, papers, records, safes, and vaults of the person under investigation; and
(2) May summon and examine under oath any person whose testimony the Commissioner requires.
Costs of investigation
(c) If, after an investigation conducted under this section, the Commissioner finds that the person that was investigated violated this subtitle or any regulation adopted under this subtitle, the person shall pay all reasonably incurred costs of the investigation.
Failure to comply with subpoena or summons of Commissioner
(d)(1) If a person fails to comply with a subpoena or summons of the Commissioner under this subtitle or to testify concerning any matter about which the person may be interrogated under this subtitle, the Commissioner may file a petition for enforcement with the circuit court for any county.
(2) On petition by the Commissioner, the court may order the person to attend and testify or produce evidence.
- 12-924. On-site examinations by Commissioner
In general
(a) The Commissioner may conduct an on-site examination of a licensee with or without prior notice.
Costs relating to examination
(b) The licensee shall pay all reasonably incurred costs directly related to an examination conducted under this section, including the travel expenses, lodging expenses, and a per diem for examiners.
Examinations conducted with supervisory agencies of another state
(c) An on-site examination may be conducted in conjunction with an examination performed by a representative of a responsible supervisory agency of another state.
Examination reports from supervisory agencies of another state
(d)(1) The Commissioner, in lieu of an on-site examination, may accept the examination report of a responsible supervisory agency of another state.
(2) A report accepted under paragraph (1) of this subsection is considered for all purposes as an official report of the Commissioner.
Examination of books, accounts, records, officers, directors, and employees
(e) The Commissioner may:
(1) Examine all books, accounts, and records that the Commissioner determines are necessary to conduct a complete examination, including the books, accounts, and records in the possession of a subsidiary, affiliate, or other person that relate to the operation of and services provided by the licensee’s debt management services business; and
(2) Examine under oath any owner, officer, director, principal, and employee of the licensee or any other individual who may provide information on behalf of the licensee.
- 12-925. Advertisements
A licensee shall include in any advertisement the licensee’s unique identifier.
- 12-926. Denial, suspension, or revocation of license
Grounds for discipline
(a) Except as provided in subsection (c) of this section, and subject to the hearing provisions of § 12-927 of this subtitle, the Commissioner may deny a license to an applicant, reprimand a licensee, or suspend or revoke the license of a licensee if the applicant or licensee or an owner, officer, director, or principal of the applicant or licensee:
(1) Fraudulently or deceptively obtains or attempts to obtain a license;
(2) Fraudulently or deceptively uses a license or debt management services license number;
(3) Presents or attempts to present the debt management services license number of another licensee as the applicant’s or licensee’s debt management services license number;
(4) Violates any provision of this subtitle or any regulation adopted under this subtitle;
(5) Is convicted under the laws of the United States or of any state of:
(i) A felony; or
(ii) A misdemeanor that is directly related to the fitness and qualification of the applicant or licensee to engage in the business of providing debt management services;
(6) In connection with the provision of debt management services:
(i) Commits a fraud;
(ii) Engages in an illegal or dishonest activity;
(iii) Has engaged or participated in an unsafe or unsound act; or
(iv) Misrepresents or fails to disclose a material fact to a person entitled to that information;
(7) Engages in false, misleading, or deceptive advertising; or
(8) Otherwise demonstrates unworthiness, bad faith, dishonesty, or any other quality that indicates that the business of the applicant or licensee has not been or will not be conducted honestly, fairly, and equitably.
Factors considered in determining appropriate discipline
(b) In determining whether to deny a license to an applicant, reprimand a licensee, or suspend or revoke the license of a licensee for a reason listed in subsection (a)(5) of this section, the Commissioner shall consider:
(1) The nature of the crime;
(2) The relationship of the crime to the activities authorized by the license;
(3) With respect to a felony, the relevance of the conviction to the fitness and qualification of the applicant or licensee to provide debt management services;
(4) The length of time since the conviction; and
(5) The behavior and activities of the applicant or licensee since the conviction.
Violations resulting in property damage or monetary loss
(c) Subject to the hearing provisions of § 12-927 of this subtitle, the Commissioner shall deny a license to an applicant and suspend or revoke the license of a licensee if the applicant or licensee or an owner, officer, director, or principal of the applicant or licensee has:
(1) Committed a violation of subsection (a) of this section that directly results in property damage or monetary loss by any other person; and
(2) Has not restored the property or money to the person or paid the value of the property to the person.
- 12-927. Hearing
In general
(a) Before the Commissioner denies an application for a license under § 12-910 of this subtitle or takes any action under § 12-926 of this subtitle, the Commissioner shall give the applicant or licensee an opportunity for a hearing.
Notice of hearing
(b) Notice of the hearing shall be given and the hearing shall be held in accordance with Title 10, Subtitle 2 of the State Government Article.
- 12-928. Cease and desist orders
In general
(a)(1) The Commissioner may enforce the provisions of this subtitle and regulations adopted under this subtitle by:
(i) Issuing an order requiring the violator:
- To cease and desist from the violation and any further similar violations; and
- To take affirmative action to correct the violation, including the restitution of money or property to any person aggrieved by the violation; and
(ii) Imposing a civil penalty not exceeding $10,000 for each violation.
(2) An order issued under this subsection may apply to a licensee’s agent that violates any provision of this subtitle or the regulations adopted under this subtitle.
(3) If a violator fails to comply with an order issued under paragraph (1)(i) of this subsection, the Commissioner may impose a civil penalty not exceeding $25,000 for each violation from which the violator failed to cease and desist or for which the violator failed to take corrective affirmative action.
Enforcement of orders
(b) The Commissioner may file a petition in the circuit court for any county seeking enforcement of an order issued under this section.
Factors considered in determining amount of financial penalty
(c) In determining the amount of financial penalty to be imposed under subsection (a) of this section, the Commissioner shall consider the following:
(1) The seriousness of the violation;
(2) The good faith of the violator;
(3) The violator’s history of previous violations;
(4) The deleterious effect of the violation on the public;
(5) The assets of the violator; and
(6) Any other factors relevant to the determination of the financial penalty.
- 12-929. Fines or imprisonment for violation of subtitle
A person who knowingly and willfully violates any provision of this subtitle is guilty of a felony and on conviction is subject to a fine not exceeding $1,000 for the first violation and not exceeding $5,000 for each subsequent violation or imprisonment not exceeding 5 years or both.
- 12-930. Civil actions
In addition to any other remedies provided in this subtitle, a consumer may bring a civil action to recover for any damages caused by a violation of this subtitle, including court costs and reasonable attorney’s fees.
- 12-931. Short title
This subtitle may be cited as the Maryland Debt Management Services Act.