July 13, 2005
On May 26, 2005, Governor Robert L. Ehrlich, Jr. signed House Bill 753 which amends the Maryland Debt Management Services Act ("DMSA"). The new law clarifies that debt management services providers must be licensed whether or not they maintain an office in the State. It also alters licensing fees, surety bond amounts, and prohibits certain advertising practices, incentives, and insider activities.
The purpose of this Advisory is to outline the amended provisions of the
DMSA. A copy of the enrolled House Bill 753 (enacted as Ch. 574) can be found at the
Maryland General Assembly web
address, and will be codified under Title 12, Subtitle 9, Financial Institutions Article, Md. Code Annotated. The effective date Chapter 574 is October 1, 2005.
Highlights of Chapter 574
Section 12-901 Amendments. - Definitions -
annual gross income and relative are defined.
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;
Relative - Means any of the following who are related to an individual by blood, marriage, or adoption:
- Spouse, child, or sibling;
- Parent, grandparent, or grandchild;
- Stepparent, stepchild, or stepsibling;
- An aunt or uncle.
Section 12-904 Amendments. - New Provision requiring the following licensing and renewal fees:
- $1,000 if the applicant's annual gross revenue is not more than $3,000,000;
- $2,000 if the applicant's annual gross income is more than $3,000,000 but not more than $6,000,000;
- $4,000 if the applicant's annual gross income is more than $6,000,000 but not more than $15,000,000;
- $6,000 if an applicant's annual gross income is more than $15,000,000 but not more than $30,000,000;
- $8,000 if the applicant's annual gross income is more that $30,000,000.
Applications for a license are issued on a staggered basis, and the license will expire two years from the date of issuance. Please refer to Advisory Notice 04-03 -
"Staggered Expiration of Various Two-Year Licenses" for additional information.
Section 12-906 Amendment. - Some additional language was added to this section clarifying that a company providing debt management services in Maryland, unless exempt, must be licensed whether or not the person maintains an office in this State.
Section 12-908 Amendments. - New Provision regarding the filing of financial information at the time of application for a license:
- A provision requiring 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;
- A provision requiring 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.
Amendment. - Required Bond - The maximum amount of the required bond has been increased from $350,000 to $1,000,000. The basis for determining the bond amount has not changed.
(Note - Some licensees may experience an increase in their bonds during the renewal period.)
Amendments. - New provisions prohibiting a licensee from engaging in the following:
- Entering 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 service provider, or with any relative of an officer, a director, or employee, that benefits an officer, a director, or an employee of the debt management service provider;
- Advertise, display, distribute, broadcast, televise, or otherwise publish debt management service rates, terms, or services in a false, misleading, or deceptive manner; or
- Pay an incentive to an employee for enrolling a consumer in a debt management services plan or agreement.
This Office strongly encourages all debt management services providers to review the new requirements imposed by Chapter 574 with their counsel to assure compliance.