Maryland’s Strict Consumer Protection Law Takes Effect Oct. 1

Changes in the law align state regulations with the Dodd-Frank statutes followed by the Bureau of Consumer Financial Protection. Agencies collecting debts in Maryland should review their policies and procedures, making sure that they conform to statutory requirements

9/28/2018 12:30 PM

Maryland’s Strict Consumer Protection Law Takes Effect Oct. 1

A state law in Maryland that includes significant changes to consumer finance laws and enforcement processes goes into effect Monday, Oct. 1.

The Maryland Financial Consumer Protection Act of 2018, passed by the Maryland General Assembly  May, includes the following changes:

  • The definition of “unfair or deceptive trade practice” is now “unfair, abusive, or deceptive trade practice; (UADTP)”
  • The purpose of the act is to support enforcement by and funding of the Office of the Attorney General and the Commissioner of Financial Regulation to protect state residents when conducting financial transactions and receiving certain services;
  • The state will also have a designated student loan ombudsman.

Members of ACA International’s Mid-Atlantic Collectors Association engaged in discussion about the legislation throughout the approval process.

According to an analysis of the law from BloombergBNA, the updated “unfair, abusive, or deceptive trade practice” language aligns the state’s law with the Bureau of Consumer Financial Protection’s authority over unfair, deception and abusive acts or practices (UDAAP) in the Dodd-Frank Act. Financial regulators are also encouraged to initiate enforcement actions under the federal UDAAP statute, according to the article.

With the addition of a student loan ombudsman in Maryland, student loan servicers are required to assign an individual to work with the ombudsman. The ombudsman will evaluate student loan servicers and provide reports to the state, review complaint data from student loan borrowers and forward enforcement actions to the state’s attorney general office and Commission of Financial Regulation, according to BloombergBNA. The article notes a previous draft of the legislation required a state license for student loan servicers.

“Finally, the law subjects unlicensed entities to the same compliance and consumer protection provisions as licensed entities by explicitly stating that such laws apply ‘regardless of whether the person is actually licensed,’” BloombergBNA reports. “This change provides a foundation for state regulators to pursue unlicensed companies that have previously attempted to evade state laws.”

Violations of consumer finance laws in Maryland also now come with higher penalties, including $10,000 per UADTP violation, compared to the previous cap of $1,000 per violation, according to the article.

Overall, BloombergBNA reports the state’s financial services industry will see “sweeping changes” in regulations as a result of the law. “The state’s financial regulators now have increased enforcement power, and will conduct studies that could ultimately lead to increased regulation of fintech, student lending, and the use of arbitration clauses in financial services agreements.”

Those collecting debts in Maryland should review their policies and procedures, making sure that they conform to statutory requirements. They should also review policies and procedures to make sure they include provisions for the list of statutes that are considered to be per se violations of the UDAAP proscription. Agencies that collect in Maryland should make sure that they have a license to collect in that state and that it is current. Members who want to obtain a license may want to contact ACA’s licensing department. Members interested in reviewing state collection laws and licensing requirements may visit the SearchPoint library on ACA’s website.

Read more on the changes in the law in the BloombergBNA report.

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