Governor Moore to sign bill into law, restoring some protections and banning “tips”

Annapolis, Md. — Maryland Governor Wes Moore this morning will sign legislation (SB 94) that re-establishes some of the vital consumer protections that were lost last year when the legislature passed a bill (HB 1294) that exempted app-based payday lenders from the state’s small dollar lending law. While the pro-consumer SB 94 will not eliminate payday loan apps’ exemption from Maryland’s 33% interest rate cap, the bill does restore the requirement that these apps comply with the small dollar lending law’s ban on lending discrimination based on consumers’ personal traits, like race or gender, and its ban on business practices that are unfair or deceptive. SB 94 also prohibits app-based payday lenders, which regularly charge above 300% APR and include billionaire-backed companies like Dave and Earnin, from soliciting borrowers for a “tip,” a method for harvesting fees.

“This law will restore some protections to Marylanders by ending the exploitative practice of app-based payday lenders disguising fees as tips and by reinstating laws for fair, nondiscriminatory treatment of consumers – laws that all other small dollar lenders must follow,” said Whitney Barkley-Denney, deputy director of state policy at the Center for Responsible Lending. “While the measure is a step in the right direction, continued oversight of the industry is needed as are further reforms to prevent multiple app-based companies from lending against the same paycheck, to establish a monthly fee cap, and to lower the per-transaction cost cap, which still allows triple-digit annual interest rates.”

“This new law helps restore important safeguards for low-wage Marylanders targeted by payday loan apps. While the state should never have legalized this form of loan sharking, the law will limit the damage and save people money,” said Marceline White, executive director at Economic Action Maryland.

“Maryland is right to ban the swindle of lenders soliciting tips. These are junk fees that many consumers pay often because of pernicious pressure through app design, confusion, or the inherent power imbalance between a borrower experiencing hard times and their lender,” said Robin McKinney, co-founder and CEO of the CASH Campaign of Maryland. “This law closes a loophole whereby lenders could use tipping – which faces no cost limit – to evade the limit on fees that they could charge. That subterfuge is no longer available to unscrupulous lenders.”

The pro-consumer SB 94 was officially introduced “by request of the governor” and supported by the NAACP.

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Press Contacts:

The Center for Responsible Lending is a non-partisan, nonprofit research and policy advocacy organization working to promote financial fairness and economic opportunity for all, end predatory lending, and close racial wealth gaps.

Economic Action Maryland Fund champions economic rights, equal opportunity, and housing justice through advocacy, research, and direct service.

CASH Campaign of Maryland is a non-partisan nonprofit that improves the financial security of low-to-moderate income Marylanders.