Alert

March 31, 2017

Maryland On Verge of Limiting Fees and Charges on Unsecured Lines of Credit

The Maryland General Assembly is about to pass legislation (HB 1270/SB 527) that will severely restrict the fees and charges unsecured open-end lenders may impose under the Credit Grantor Revolving Credit Provisions, Md. Code Ann., Com. Law §§ 12-901 et seq. ("Subtitle 9"). In addition to interest at a rate of 24% per year, unsecured open-end lenders that offer lines of credit under Subtitle 9 may currently charge:

• an annual charge in any amount agreed to by the parties;
• a transaction charge in the amount agreed to by the parties for each advance under the line of credit; and
• a minimum charge for each scheduled billing period during which there is an outstanding unpaid balance under the line.

The legislation permits lenders to continue to impose the fees and charges outlined above. However, lenders will only be able to impose those fees and charges if, when combined with any interest charged on the line of credit, the total of these fees, charges, and interest is not greater than an effective rate of 33% per year.

The House passed HB 1270 by a vote of 139-0 on March 13th and on March 30th the Senate Finance Committee issued a favorable report on SB 527. The Senate is expected to pass the legislation before the legislative session end on April 10th. We predict Governor Hogan will sign the legislation, which will become effective on July 1, 2017.