Earlier this month, Maryland State Senator Benjamin K. Kramer introduced Senate Bill 825 titled “Consumer Credit – Commercial Financing Transactions.” Although not obvious from the bill’s title, it contains legislation substantially similar to the Commercial Finance Disclosure Law (CFDL) passed in New York last year. (N.Y. Fin. Serv. Law § 801 et seq.). Patterned after New York’s CFDL, the Senate proposal would require certain providers of commercial financings to disclose consumer-like loan information, similar to certain federal Truth-in–Lending Act disclosures made to consumers in consumer loans. The bill further instructs the Office of the Commissioner of Financial Regulation to adopt regulations that may be adopted by the New York Department of Financial Services’ rules related to the CFDL.
Commercial loans up to $2,500,000 would be subject to the law’s disclosure requirements, unless an exemption applies. Although Senate Bill 825 is substantially similar to New York’s CFDL, one noticeable difference relates to exemptions. Under New York’s law and the Maryland Senate bill, a “financial institution” is exempt from compliance. New York defines “financial institution” very broadly to include virtually all federal and state banks, savings and loan associations, and credit unions, authorized to do business in New York. By contrast, Senate Bill 825 provides no definition of “financial institution.” The Financial Institutions Article of the Maryland Code, where the text of Senate Bill 825 will be housed if enacted, does provide a definition: “financial institution” is defined as “any financial institution of the type supervised under [the Financial Institutions] article, whether or not State-chartered.” (Md. Code Ann., Fin. Inst., § 1-101(j)). As a result of the limitation of the exemption to financial institutions supervised, the proposed exemption under Maryland law may exempt fewer entities than the statutory exemption under New York law.
In our last report, we provided an update on pending laws and now provide a further update. New York and California are two states that have enacted similar CFDLs. The effective dates of these laws await final rulemaking in their respective states. Similar CFDL legislation has been introduced in other states. While these laws are similar in theme, they are not the same. A number of proposed laws would apply mandatory disclosures in all commercial loans without regard to loan size, unless an exemption applies. As of the date of this post, states proposing similar disclosure laws include Connecticut (2021 Senate Bill 745 (failed)), Mississippi (2022 Senate Bill 2629 (failed); 2022 House Bill 1178 (failed)), Missouri (2022 Senate Bill 963), New Jersey (2022 Senate Bill 819), North Carolina (2021 House Bill 969), Pennsylvania (2021 House Bill 1793), and Utah (2022 House Bill 183). Shortly prior to this publication, House Bill 1211 was introduced in the Maryland House of Delegates as a companion bill to Senate Bill 825. It contains no material changes from Senate Bill 825 as introduced.
Miles & Stockbridge is closely monitoring developments in this area and remains ready to assist clients with navigating these proposed changes.
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