Alston & Bird Consumer Finance Blog

Consumer Finance

Maryland Update: Legislature Clarifies Licensing Treatment for Passive Trusts and Loan Assignees Through SB 784

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What Happened?

In April 2026, Maryland Governor Wes Moore signed Senate Bill 784 (Chapter 40 of the Laws of 2026), a measure addressing the application of licensing requirements under the Maryland Financial Institutions Article. SB 784 repeals Section 11‑102, a provision addressing whether entities that acquire or are assigned mortgages, mortgage loans, or installment loans are subject to Maryland consumer credit licensing requirements.

The General Assembly expressly characterized SB 784 as a “clarifying corrective measure” intended to repeal a provision of law that was “erroneously enacted” in 2025. The bill takes effect July 1, 2026.

SB 784 follows a period of uncertainty triggered by the Maryland Appellate Court’s 2024 decision in Estate of H. Gregory Brown v. Carrie M. Ward, et al., No. 1009 (App. Ct. Sept. Term 2023), and the Legislature’s subsequent emergency response through the Maryland Secondary Market Stability Act of 2025.

As we previously discussed, in Brown, the court concluded that a statutory trust holding a defaulted HELOC was required to be licensed before proceeding to foreclosure. Following that decision, the Maryland Office of Financial Regulation issued guidance suggesting that assignees of certain Maryland loans—including trusts—could be subject to licensing requirements.

The 2025 Legislative Response

In April 2025, Governor Moore signed the Maryland Secondary Market Stability Act of 2025 (HB 1516 and its companion SB 1026) with an immediate effective date. We covered that legislation and its regulatory impact in detail here.

As enacted, HB 1516 was intended to be the controlling law. It took a targeted approach by:

  • Defining and expressly exempting “passive trusts” from Maryland mortgage lender licensing requirements; and
  • Making conforming amendments to ensure that securitization and similar trust vehicles that acquire Maryland mortgage loans—but do not originate or service them—would not be required to obtain licenses.

Although similar language appeared in SB 1026 adding new Section 11‑102, market participants and regulators generally treated HB 1516 as reflecting the Legislature’s operative intent. SB 784 confirms that understanding.

What SB 784 Does—and Does Not Do

SB 784 repeals Section 11‑102 and states expressly that the provision was erroneously enacted. Importantly, SB 784 does not disturb the passive trust exemption adopted in 2025. The definition of “passive trust” and the express exemption for such trusts remain part of Maryland law.

In practical terms, SB 784 eliminates a stand‑alone statutory provision that could be read to create a broad exemption for all loan assignees, while preserving the narrower exemption the General Assembly intended to adopt in 2025.

Current State of Maryland Law

Following SB 784:

  • Passive trusts—as defined in the Maryland Mortgage Lender Law—remain exempt from Maryland mortgage lender licensing requirements.
  • Other entities that acquire or hold loans do not appear to require licensure solely by virtue of assignment, consistent with historical practice and legislative intent, provided they are not otherwise engaged in lending or servicing activity.
  • The analysis remains fact‑specific, and licensing exposure will continue to depend on an entity’s role in the credit lifecycle.

Although the Legislature has now clarified its intent, the area remains somewhat unsettled and could be subject to further judicial or regulatory scrutiny, particularly given the reasoning in Brown and the possibility of future challenges.

Why Does It Matter?

SB 784 provides welcome clarity for securitization sponsors, trustees, and other secondary‑market participants holding Maryland loan assets. By confirming that Section 11‑102 was a drafting error, the Legislature has reduced the risk that passive trust structures will again be drawn into licensing disputes based on technical anomalies.

At the same time, SB 784 underscores that Maryland has not adopted a blanket statutory exemption for all assignees. Licensing risk remains tied to actual conduct, not merely loan ownership.

What Do I Need to Do?

Companies that acquire or hold Maryland mortgage or consumer loan assets should:

  • Confirm whether their structures qualify as passive trusts under Maryland law;
  • Review servicing and operational arrangements to ensure borrower‑facing activity is conducted by appropriately licensed entities;
  • Monitor ongoing developments, including any additional guidance from the Office of Financial Regulation or future litigation interpreting Brown in light of the Legislature’s corrective actions; and
  • Reassess licensing strategies adopted during the 2024–2025 period of uncertainty.

Alston & Bird’s Consumer Financial Services Team continues to monitor these developments and can assist with licensing analysis, transaction structuring, and risk assessments related to secondary‑market and servicing activity in Maryland.

Oregon Opts-Out of Federal Preemption for Certain Consumer Loan Products

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What Happened?

On April 7, 2026, Oregon Governor Tina Kotek signed into law Oregon HB 4116 which prohibits out-of-state FDIC insured, state-chartered banks from making consumer finance loans of $50,000 or less to Oregon borrowers using the banks’ home-state interest rates if those rates exceed Oregon’s 36% interest rate cap. According to the Oregon Legislative website, the law takes effect on June 5, 2026.

Why It Matters

In recent years, certain states (i.e., Illinois, New Mexico, Washington State, Maine, among others ) have adopted anti-evasion restrictions for marketplace lending arrangements and with notable exceptions, do not recognize the bank’s rate exportation authority if the interest rates of the loans originated in these partnerships exceed certain proscribed state usury caps. The new Oregon law follows this trend by opting Oregon out of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA), and expressly providing that state chartered banks must adhere to usury restrictions (36%) of “consumer finance loans”, namely secured and unsecured consumer loans in amounts of $50,000 or less. Congress enacted DIDMCA during a time of very high interest rates, and the statute aimed to improve competition between state and national banks by allowing interest rate “exportation” across state lines, though it permitted states to “opt out” of these preemption provisions.

The new law does not apply to national banks, however, who apparently are still able to preempt restrictions applicable to “consumer finance loans.” With an eye toward marketplace lending arrangements, the law applies to anyone originating, brokering and facilitating consumer loans to Oregon residents, whether by mail, telephone or the Internet.

What to Do Now

With the enactment of Oregon HR 4116, Oregon becomes the fourth jurisdiction to opt out of DIDMCA, following Puerto Rico, Iowa and Colorado. Notably, however, Colorado’s recent opt out of DIDMCA has been subject to a constitutional challenge in the Tenth Circuit Court of Appeals, which if ultimately successful, could jeopardize the enforceability of Oregon HR 4116. Further, there is pending federal legislation, the fate of which is uncertain, that would prohibit additional DIDMC opt-outs. Nevertheless, legislation has been introduced in other states that would either opt the state out of DIDMCA or would enact anti-evasion provisions that would disallow the exportation of interest rates exceeding the particular state limitations in a marketplace lending arrangement.

Alston & Bird and Collateral Risk Network Webinar – Section 6: Appraisal Modernization and Market Implications

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Alston & Bird and the Collateral Risk Network (CRN) are hosting a three-part roundtable series examining Section 6 of the March 13 Executive Order, “Promoting Access to Mortgage Credit” and its implications for the mortgage finance, collateral risk, and valuation sectors.

The first roundtable, taking place on April 23, 2026, at 2:00 PM EST, will feature Alston & Bird Financial Services partner Nanci Weissgold as a speaker and focus specifically on Section 6 of the Executive Order and begin developing industry insight into its meaning, likely implications, and practical impact on lenders, investors, valuation providers, regulators, and policymakers. Other speakers include Dallin Merrill (Head of Policy, Structured Finance Association), Sharon Whitaker (Vice President, American Bankers Association), and Ron Haynie (Mortgage Finance Policy and Executive Vice President ICBA Mortgage, Independent Community Bankers of America).

Q&A will be available as time allows.

About the Series

This series is designed to provide the industry, regulators, and legislators with practical insight into what the Executive Order means, how it may affect collateral valuation policy and practice, and where the most important opportunities and risks may emerge.

Questions?

Please contact Amanda Vercruysse at amanda.vercruysse@alston.com or +1 202 239 3068.

Registration

Sign-up or the event by completing our Registration Form.

New York’s FAIR Act Update: Governor Hochul Signs Chapter Amendment SB 8811 Refining the New UDAP/UDAAP Framework

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What Happened?

On March 27, 2026, New York Governor Kathy Hochul signed into law SB 8811 (Chapter 94 of the Laws of 2026), a chapter amendment relating to the Attorney General’s ability to protect New Yorkers from unfair, deceptive, and abusive business practices. As we highlighted in March following its introduction, New York’s Fostering Affordability and Integrity through Reasonable Business Practices (“FAIR”) Act represents a fundamental transformation of the state’s consumer protection framework, expanding enforcement authority beyond “deceptive” practices to include “unfair” and “abusive” acts. And, as we further noted, Governor Hochul, in initially signing the FAIR Act into law, noted an agreement with legislators to ensure the act “does not override” existing case law on the consumer-oriented standard. These amendments confirm that intent and make other changes to narrow and focus the scope of the law.

SB 8811 primarily revises the 2025 FAIR Act legislation (Chapter 708 of the Laws of 2025) by (1) removing the FAIR Act’s standalone “purpose and intent” provision, (2) refining the treatment of “substantial injury” under the unfairness standard, and (3) extending the Attorney General’s pre-suit notice response timeline.

Repeal of the Legislative Intent Section (GBL Section 348)

SB 8811 repeals Section 348 of the General Business Law, which the 2025 FAIR Act added as a “purpose and intent” statement for Article 22-A.

The repealed Section 348 was an unusually detailed statement of legislative purpose. Among other things, it declared that New York has a responsibility to protect New Yorkers from unfair, deceptive, and abusive business acts and practices, and that prior law, which focused on deception, was insufficient to protect New Yorkers and the New York economy. It emphasized that certain groups were left vulnerable to unscrupulous business practices. It also stated an intent for New York to adopt a comprehensive statute and “level the playing field” for honest businesses and non-profits that treat customers fairly.

The original intent provision also anticipated future unfair, deceptive, and abusive acts arising from new and emerging technology. It expressly framed the FAIR Act as eliminating court-imposed limitations that had constrained enforcement to conduct which is “consumer-oriented” or with a public-facing impact, while extending protections to businesses and non-profits as well as individuals.

What its removal may signal. SB 8811 is expressly described as a chapter amendment intended to “repeal the legislative intent,” “redefine the scope of substantial injury,” and make technical amendments. Against that backdrop, removing Section 348 may reflect a desire to reduce the extent to which broad purpose language could be used to push interpretive outcomes beyond the operative text of Section 349. Put differently, the Legislature may have concluded that the statute should stand or fall on the substantive prohibitions and definitions in Section 349, rather than a sweeping preamble that invites expansive arguments about scope.

From a practical perspective, this change may be read as tightening the language in response to stakeholder concerns about uncertainty and litigation risk. In particular, Section 348 explicitly spoke to eliminating “consumer-oriented” constraints and to protecting businesses and non-profits, and it also framed the law as a tool for both government and private parties. Its repeal may help the State defend the law as a more traditional, text-driven consumer protection update, while leaving the Attorney General to advance enforcement theories based primarily on the revised statutory elements rather than a broad statement of legislative purpose.

Refinement of the Unfairness Standard and “Substantial Injury”

SB 8811 amends the “unfair” prong in GBL Section 349(a)(1). The statute continues to define “unfair” acts or practices using the familiar three-part framework (substantial injury, not reasonably avoidable, not outweighed by countervailing benefits). However, SB 8811 ties “substantial injury” to the meaning of that term under the Federal Trade Commission Act and removes language that had expressly treated “substantial injury” to persons other than consumers as “substantial injury” for purposes of that section.

Notice and Response Timeline Extended

SB 8811 amends GBL Section 349(c) to revise the Attorney General’s pre-suit notice and response timeline. The Attorney General must still provide notice by certified mail and an opportunity to respond in writing before commencing an action or proceeding, but the response period is extended from five business days to ten calendar days after receipt of the notice.

Other Technical Repeals/Edits

The bill also repeals paragraph (3) of subdivision (b) of GBL Section 349 and makes additional technical amendments to the 2025 chapter. Notably, paragraph (3) of subdivision (b) of GBL Section 349 stated, “An act or practice made unlawful by this section is actionable by the attorney general regardless of whether or not that act or practice is consumer-oriented.” This language was notable because “consumer-oriented” has long been a recurring limitation in Section 349 case law. The paragraph functioned as a direct textual instruction that the Attorney General could bring Section 349 actions even where the challenged conduct was not consumer-oriented. By deleting the explicit “regardless of whether or not consumer-oriented” sentence, the Legislature removes a clear statutory hook that would have supported the broadest reading of the Attorney General’s authority in situations that look more like private commercial disputes or one-off transactions.

Why Does it Matter?

The FAIR Act’s headline expansion remains: New York’s consumer protection regime now addresses “unfair” and “abusive” conduct in addition to deception, with the Attorney General as the primary enforcer for unfairness and abusiveness. SB 8811 does not reverse that direction. Instead, it changes how the statute is likely to be argued and applied by removing an expansive legislative purpose statement that, by design, sought to broaden the interpretive lens.

With Section 348 repealed, parties should expect disputes about reach, especially around business-to-business implications and the continued relevance of prior “consumer-oriented” case law, to focus more heavily on the operative text of Section 349 (and any accompanying interpretive materials outside the now-repealed purpose clause).

By explicitly tying “substantial injury” to the FTC Act standard and deleting language that expressly deemed non-consumer injury to be “substantial injury” for purposes of the unfairness prong, SB 8811 may narrow certain theories that would otherwise emphasize harms to non-consumers under the “unfair” definition itself.

What Do I Need to Do?

Given the removal of the legislative intent provision, compliance programs should map controls to the operative statutory elements: what constitutes unfairness (including the “substantial injury” standard as tied to FTC Act concepts), what constitutes abusiveness, and what constitutes deception.

Even as federal enforcement priorities shift, New York’s framework continues to position the Attorney General as a central enforcement actor for unfair and abusive conduct. Companies operating in or touching New York should assume continued scrutiny, especially where practices can be characterized as causing unavoidable harm or taking unreasonable advantage of consumer vulnerabilities.

Alston & Bird’s Consumer Financial Services Team is actively monitoring these developments and can assist with impact assessments, updates to compliance management systems, and enforcement readiness planning in light of New York’s evolving consumer protection landscape.

Executive Order Targets Smaller Bank Participation in Mortgage Markets

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What Happened?

On March 13, President Trump issued an Executive Order titled “Promoting Access to Mortgage Credit,” addressing factors that may have negatively impacted the ability of community banks and other smaller financial institutions to participate in mortgage lending and servicing.

In order to expand access to mortgage credit, the Executive Order directs the Consumer Financial Protection Bureau (“CFPB”) and other financial regulators (the Board of Governors of the Federal Reserve System, the National Credit Union Administration, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency (collectively, the “Regulators”)) to take action to reduce regulatory burdens, modernize reporting requirements, and utilize digital mortgage processes, among other actions.

Why Does it Matter?

The Executive Order includes broad directives to the Regulators to update regulations and processes that impact the mortgage markets, including:

  • Changes to Origination Regulations: The Executive Order directs the CFPB to consider regulatory changes including tailoring Regulation Z requirements as applicable to smaller banks (including ATR and QM, TILA, RESPA, and TILA-RESPA Integrated Disclosure (TRID) rules), updating TRID timing rules, modifying or exempting small mortgage loans from caps on QM points and fees, and amending rescission rights.
  • HMDA Modernization: The Executive Order requires the CFPB to consider proposing amendments to Regulation C to increase the asset threshold for exemption from HMDA data collection and reporting requirements for smaller banks, exclude inquiries from the scope of HMDA, and reduce burdens related to disclosures.
  • Alignment of Capital and Liquidity Standards: The Executive Order directs the Regulators to consider: (a) updating capital regulations and collateral valuation and transfer systems between the Federal Reserve and Federal Home Loan Banks; (b) expanding access to longer‑dated FHLB advances tied to residential mortgage assets; (c) creating targeted FHLB liquidity programs for entry‑level housing, owner‑occupied purchase loans, and small residential builders; and (d) modernizing collateral boarding and valuation processes.
  • Construction and Housing Supply: The Executive Order directs the Regulators to consider revising supervisory guidance to: (a) exclude one-to four-family residential development and construction lending from commercial real estate concentration guidance; and (b) ensure that supervisory expectations support responsible construction lending by community banks.
  • Appraisal Modernization: The Executive Order directs the Regulators to consider certain changes to appraisal processes, including with respect to valuations performed in connection with FHA-insured and VA-guaranteed loans and with respect to the use of alternative valuations (AVMs, desktop and hybrid appraisals, and artificial intelligence valuation tools).
  • Digital Mortgage Modernization: The Executive Order requires the Regulators to consider certain changes to facilitate digital mortgages, namely eliminating unnecessary wet signature requirements, standardizing acceptance of electronic signatures, e-notes, and remote online notarization, and promoting digital mortgage standards.
  • Servicing and Supervisory Certainty: The Executive Order directs the Regulators to consider supervisory changes relating to mortgage loan servicing, including: (a) aligning supervisory expectations to support portfolio mortgage servicing as a core community banking function; (b) extending cure‑first standards to good‑faith servicing errors; (c) simplifying loss mitigation requirements; (d) issuing a proposed rule providing exemptions from complex mortgage services for smaller banks; and (e) ensuring that supervisory evaluations of performing, prudently underwritten portfolio loans do not focus on technical defects or rely on evolving supervisory interpretations.
  • Duplicative or Unnecessary Licensing Requirements: The Executive Order requires the Regulators to consider eliminating duplicative or unnecessary requirements regarding licensing or registration (i.e., MLO licensing) for mortgage loan officers of any smaller bank.

What Do You Need to Do?

While the Executive Order does not directly impose obligations on mortgage lenders and servicers, it has the potential to significantly impact the mortgage market by changing the rules of the game, particularly for community banks and smaller banks. Industry participants appear open to the possibility of reform – for example, Mortgage Bankers Association President and CEO Bob Broeksmit issued a statement applauding the focus on “addressing costly mortgage regulations that have increased costs and limited access to credit,” and supporting efforts to address other structural factors (including valuations and construction regulations) impacting access to housing.

We will continue to monitor the Regulators’ activities to implement the directives of the Executive Order, particularly as the 21st Century ROAD to Housing Act (which includes provisions on some of the same topics) advances in Congress; we encourage mortgage market participants to do the same.