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May 15, 2008
This Advisory addresses the application of the Credit Services Businesses Act (Md. Code Ann., Com. Law § 14-1901 et seq.) (the "Act") to companies that assist taxpayers in obtaining Refund Anticipation Loans ("RALs"). It rescinds and supersedes all previous Advisories, Press Releases, or specific statements issued by the Commissioner of Financial Regulation (the "Commissioner") to companies that assist taxpayers in obtaining RALs. The purpose of this Advisory is to clarify the applicability of the Act to certain parties in light of applicable federal law (the National Bank Act and the Home Owner's Loan Act) and relevant case law interpreting those statutes.
The Act applies to all businesses (except those specifically excluded from coverage under the law) that assist consumers in obtaining extensions of credit. The Commissioner has interpreted this law to include businesses that assist consumers in obtaining loans from federally insured national banks or thrifts. The Commissioner has also interpreted the Act to apply to tax preparers who are compensated in any manner (either by the consumer or the lender) to assist consumers in obtaining RALs from third-party lenders.
Section 14-1902(8) of the Act prohibits a credit services business from assisting consumers to obtain loans at interest rates that exceed those permitted by Maryland law. Where the lender in these transactions is a federally-chartered depository institution, however, the Commissioner recognizes certain unique circumstances that may arise related to the doctrine of federal preemption in the RAL (consumer credit) context.
Consistent with the foregoing, the Commissioner hereby exercises her enforcement discretion and concludes that the interest rate prohibition set forth in § 14-1902(8) of the Act will not be enforced against third-party agents of national banks or federally-chartered thrifts, when such agents are properly registered and regulated as electronic refund originators that assist consumers in obtaining
RALs.
All other provisions of the Act continue to be applicable to, and will be enforced against tax preparers which facilitate RALs, even when such businesses act as agents of national banks or federally-chartered thrifts. Such requirements include, but are not limited to: licensing under § 14-1903 of the Act; certain disclosures to consumers under §§ 14-1904 and 1905 of Act; the surety bond requirement under § 14-1908 of the Act; the investigatory and regulatory authority of the Commissioner under § 14-1911 of the Act; civil penalties and sanctions for noncompliance under § 14-1912 of the Act; and criminal sanctions under §14-1915 of the Act.
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