Maryland recently introduced the Commercial Finance Disclosure Law (CFDL) in both the House (HB 693) and Senate (SB 754). This legislation follows a trend seen in other states, which require consumer-style disclosures for certain commercial loans. While Maryland has attempted similar legislation in the past, it has not garnered enough support to pass into law.
In the current legislative session, the bills have been amended to include a new exemption. This exemption would exclude certain loan products, including insurance premium finance loans, from the provisions of the proposed law, should it pass. Insurance premium financing is a short-term, secured loan that allows businesses to finance insurance premiums, instead of paying them upfront. These loans are commonly used by businesses of all sizes that need commercial, property, casualty, or liability insurance to mitigate operational risks and protect both their interests and those of their customers.
While some businesses can pay their premiums in full at the time of purchase, others either lack sufficient funds or prefer to finance the premiums to maintain cash flow. Maryland, like most states, already regulates insurance premium financing transactions.
The proposed exemption appears justified given the existing regulatory framework. In Maryland, the Department of Insurance extensively regulates insurance premium finance transactions, and there are already detailed disclosure requirements in place under the Maryland Insurance Code (Md. Code Ann., Ins., §§ 23-101 et seq.). These regulations require insurers to disclose specific terms in the finance agreement, such as:
The total amount of premiums purchased
The down payment amount
The principal balance
The finance charge
The balance payable by the insured
Installment details, including amounts and due dates
Any electronic payment fees
Prepayment terms
The disclosures mandated by the CFDL bills largely mirror those already required under current Maryland insurance premium finance law. Imposing the additional CFDL disclosure standards would seem redundant and unnecessary. Moreover, requiring multiple sets of disclosure laws could lead to conflicting obligations for insurance premium finance companies, duplicative oversight by multiple state departments, and inconsistent information for borrowers comparing different finance options.
Given this, the exemption for insurance premium finance loans under the CFDL seems to be a sensible approach that would avoid regulatory overlap and ensure clarity for both businesses and insurers.
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