Senate Bill 741/House Bill 1022, the Maryland Debt Settlement Services Act (the Act), was passed by the General Assembly of Maryland in the 2011 legislative session and signed into law as Chapter 281 by the Governor in May, 2011. The Act was set to expire or "sunset" on June 30, 2016. The General Assembly of Maryland, in the 2016 legislative session, repealed the "sunset" provision via Senate Bill 471/House Bill 1450 and it was signed into law by the Governor.
As explained below, debt settlement services providers will be required to register with the Maryland Office of the Commissioner of Financial Regulation ("Commissioner"). The Commissioner's Office began accepting registration applications on October 1, 2011. The Act, as referenced in Maryland Code Annotated, Financial Institutions (FI) § 12-1001, et seq., requires among other mandates:
1. Required Registration of Maryland Debt Settlement Services Providers
Pursuant to the Act, a person who offers or provides debt settlement services to a consumer in Maryland is required to register as a debt settlement services provider. Debt settlement services is defined in the Act as "any service or program represented, directly or by implication, to renegotiate, settle, reduce, or in any way alter the terms of payment or other terms of a debt between a consumer and one or more unsecured creditors or debt collectors, including a reduction in the balance, interest rate, or fees owed by a consumer to an unsecured creditor or debt collector." This definition of "debt settlement services" excludes debt management services. "Debt management services" is defined in § FI 12-901.
2. Nonrefundable Registration Fee
A person registering as a debt settlement services provider with the Commissioner under the Act shall pay to the Commissioner a nonrefundable fee in the amount of $1,000 for a registration period that expires December 31st of the next odd numbered year. For example, if registration form is submitted on January 15, 2017, the registration will expire on December 31, 2017. In order to renew a registration for a two year period, debt settlement services provider must pay a $1,000 fee. You can access the Debt Settlement Services Provider Registration form and instructions on the
3. If Registrant Has Established a Dedicated Account In Accordance with the Act - A $50,000 Surety Bond Needs To Be Filed With the Commissioner
Pursuant to the Act, a registrant needs to file a $50,000 surety bond with the Commissioner if a registrant establishes a dedicated account in accordance with the Act. A registrant that has filed the surety bond with the Commissioner may request or require that a consumer deposit funds in an account to be used for debt settlement services fees and for payments to creditors or debt collectors in connection with a debt settlement services agreement, if:
- The funds are held in an account at an insured financial institution, as defined in FI § 1-101;
- The consumer owns the funds held in the account, including any accrued interest;
- The financial institution or entity administering the account is not owned or controlled by, or in any way affiliated with, the registrant;
- The financial institution or entity administering the account does not pay or accept any money or other compensation in exchange for referrals or business involving the registrant, but may charge account related fees; and
- If the consumer requests to withdraw from the debt settlement services agreement, within 7 days after the consumer's request, all funds in the account, including accrued interest, less any debt settlement services fees earned by the registrant in compliance with this section, are paid to the consumer.
The surety bond shall be filed with the Commissioner at the time the dedicated account is established. Furthermore, all of the provisions in FI § 12-1014 must be followed in reference to the filing of this surety bond. The surety bond form is located on the
4. Debt Settlement Services Provider's Annual Report of Business - Due March 15th every year.
The Act requires each debt settlement services provider to report to the Commissioner on the debt settlement services business the registrant conducted during the preceding calendar year. The annual report shall be on the form that the Commissioner requires. This report is due on or before March 15 of each year. The report must include information specified in the Act. The Commissioner will provide more information regarding the required report in the coming months.
Failure to submit the report will result in the inability to renew the registration with the Commissioner.
5. Violations of Act
A violation of the Act constitutes an unfair and deceptive trade practice under Title 13 of the Commercial Law Article of the Maryland Annotated Code and is subject to enforcement and the penalties under those provisions. Under Title 13, consumers may file complaints against debt settlement services providers with the Consumer Protection Division of the Office of the Attorney General. The Consumer Protection Division is vested with enforcement authority by Title 13.
For any questions or additional information, you may contact Juan M. Sempertegui, Director of Licensing, at 410-230-6102 or via email at Juan.Sempertegui@Maryland.gov.