by Miroslav Nikolov, Esq.

Rosenberg & Associates, LLC *

USFN Member (DC, MD, VA)

On May 8, 2023, Maryland Governor Wes Moore signed into law Maryland House Bill 686. House Bill 686 permits mortgage lenders, collection agencies, and certain non-depository financial institutions conducting business in the State of Maryland to operate under a single license obtained from the Maryland Office of Financial Regulation (“OFR”). House Bill 686 also requires license applicants to pay a surety bond and sets the criteria for how the amount of the surety bond will be determined.

House Bill 686 became effective on July 1, 2023. Financial institutions affected by the new law include financial services companies regulated by OFR, such as collection agencies, consumer loan lenders, installment loan lenders, sales finance companies, mortgage lenders, check cashing services, money transmitters, and debt-management businesses. The passage of this new law indicates Maryland is aiming to modernize and streamline licensing of financial service providers operating in the state. Previously, OFR required each branch of a collection agency, mortgage lender, and certain other non-depository financial services companies to obtain individual, separate licenses from OFR for each branch they maintained in the state, resulting in additional fees, paperwork, and other administrative burdens.

With respect to the licensing of mortgage lenders and originators, the new Maryland law eliminates the need for each branch to obtain a separate license from OFR. In order to comply with licensing requirements, Section 11-505 of House Bill 686 requires the applicant to maintain the following information in NMLS: “the [lender’s] legal name and any trade name used by the [lender], the address of the [lender’s] principal executive office, the address of each additional location, if any, where the [lender] does business and that the general public may reasonably view as a location that does business as a mortgage lender including any location that investigates consumer complaints or directly communicates with customers verbally, electronically, or in writing or that houses any core operational infrastructure or technology systems; conducts any core management, information security, and technology, risk and compliance, or finance functions or is otherwise required to be listed in NMLS by regulation [OFR] adopts.” Also, under Section 11-505, the mortgage lender has a duty to monitor, maintain, and update the accuracy of the aforementioned information in NMLS at all times.

Section 11-507 of House Bill 686 sets the criteria that applicants must meet to apply for a license. Under Section 11-507, to apply for a license from OFR, the mortgage lender must submit an application under oath containing the applicant’s legal name and any trade name used, the applicant’s principal executive office address, or if the applicant is not an individual, the name and residence of each control person, and the address of any additional location of the lender.

Section 11-508 requires the applicant to also post a surety bond in the amount of at least $50,000 and no more than $750,000. Factors that OFR considers in determining the amount of the surety bond include, but are not limited to, the nature and volume of the business or proposed business of the applicant, the financial condition of the licensee or applicant including the applicant’s liquidity, the applicant’s liabilities, the history of and prospects for the licensee or applicant to earn and retain income, the potential harm to consumers if licensee becomes insolvent, the quality of operations of the licensee or applicant, the quality of the management of the licensee or applicant, the nature and quality of the person that has control of the licensee or applicant and any other factor that OFR considers to be relevant.

By centralizing and streamlining the licensing process and by creating a single license under which multiple branches may operate, Maryland hopes to reduce red tape, improve efficiency, and increase transparency regarding licensing requirements for the financial services industry and consumers alike. The actual positive or negative impact the law will have on the licensing of financial service providers in Maryland remains to be seen.

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USFN e-Update - August