Maryland Financial Disclosures Bill Dies in Committee

Leslie J. Polt, Esq., Adelberg Rudow, provided the following analysis of Maryland’s Commercial Financing Transactions Act (SB825). He can be reached at lpolt@adelberg.com. 

SFNet will continue to track this along with all other state disclosure legislation and work to influence favorable outcomes for our industry. 

The Maryland General Assembly 2022 Session adjourned on Monday, April 11. Senate Bill 825 passed the Senate, but was not reported out of the House Economic Matters Committee. Thus, the bill is dead for 2022.

Commercial Financing Transactions (herein, “CFT”’s), defined to include non-consumer open- and closed-end credit, factoring transactions, and sales finance, would have been subject to statutory disclosure requirements. Notably, the following were exempted:

• Transactions made by federal and state banks, credit unions and savings associations, as well as their subsidiaries and affiliates
• Transactions in excess of $2,500,000
• Transactions secured by real property
• Leases falling within the scope of UCC Article 2A
• Certain forms of motor vehicle financing provided by dealers or lessors
• Transactions by a provider making not more than 5 commercial transactions annually
• Factoring or similar transactions involving certain health care receivables relating to treatment for personal injury

As introduced, SB 825 contained provisions substantially similar to the New York legislation. The Bill was amended to remove a safe harbor provision that would permit a lender to rely on a statement of the borrower concerning the borrower’s intended purpose of the loan, when determining if the loan was a commercial financing transaction. Further amendments removed provisions finding that a violation of the CFT would also constitute a violation of the Maryland Consumer Protection Act.

The bill directed the Office of the Commissioner of Financial Regulation to adopt regulations adopted by the New York Department of Financial Services. The Bill further directed the Commissioner to approve any disclosure form approved in any other state whose commercial financing disclosure requirements were substantially the same or exceed the Maryland requirements.