Maryland OFR: New Student Financing Company Act Guidance Clarifies Registration

• The Office of Financial Regulation (OFR) has issued new supplemental guidance for the Maryland Student Financing Company Act, 2023 House Bill 913.
• All Student Financing Companies (SFCs) must register with the OFR and submit an annual report by March 15.
• Failure to comply with registration or reporting requirements can render student financing products void and unenforceable for Maryland residents.
• SFC NMLS registration requirements vary based on whether an entity is a standard SFC, an acquiring higher education institution, or a lending higher education institution.
• SFCs must provide ADA-compliant PDF versions of promissory notes, adhering to specific accessibility standards, for OFR publication.

Compliance officers and legal counsel must note the severe implications of non-compliance: any student financing product, such as a loan or tuition payment plan, can be declared void and unenforceable if the Commissioner determines, after due notice and hearing, that the SFC knowingly violated the subtitle or failed to meet any registration or reporting obligation.

The Office of Financial Regulation (OFR) has released new supplemental guidance concerning the Maryland Student Financing Company Act, specifically referencing 2023 House Bill 913. This updated information supersedes prior guidance issued to entities involved in providing financing for post-secondary education expenses, commonly known as Student Financing Companies (SFCs). The Act itself is formally codified within the Financial Institutions Article §12-1101 et seq. of the Annotated Code of Maryland, with all statutory references in the guidance pertaining to this article.

While this Maryland Student Financing Company Act guidance offers general direction, the OFR explicitly advises all entities to thoroughly review the legislation directly and seek counsel from their own legal advisors regarding the Act's specific applicability to their operations.

A fundamental requirement under the Act is that every Student Financing Company must register with the OFR and submit an annual report. Compliance officers and legal counsel must note the severe implications of non-compliance: any student financing product, such as a loan or tuition payment plan, can be declared void and unenforceable if the Commissioner determines, after due notice and hearing, that the SFC knowingly violated the subtitle or failed to meet any registration or reporting obligation. This applies to products provided or acquired by an SFC to a resident of the State.

Standard SFCs are mandated to register through the Nationwide Multistate Licensing System (NMLS) under the Student Financing Company category. This NMLS registration must be completed before any required data is submitted to the OFR. Higher education institutions operating as Acquiring SFCs are also required to register with NMLS. However, higher education institutions functioning as Lending SFCs are exempt from NMLS registration; instead, they must register directly with the OFR using the specific Higher Education Student Financing Company Registration Form. All SFCs, including higher education institutions, are required to utilize the designated annual reporting form for data submission, ensuring all additional attachments specified within the form are included. SFCs that engage in both lending and acquiring activities must submit separate documents for each role. All required information must be uploaded to the Maryland Office of Financial Regulation - Student Finance Company Uploads portal by March 15.

A critical aspect of the Maryland OFR student financing requirements involves the accessibility of promissory notes. The OFR is obligated to publish promissory notes, as per requirement XV, in a digitally accessible format on its website. This necessitates adherence to Americans with Disabilities Act (ADA) Title II standards, the Maryland Non-Visual Access Clause, and Web Content Accessibility Guidelines (WCAG, 2.1 Level AA). Consequently, SFCs must provide a fully compliant PDF version of each promissory note that does not require any further remediation by the OFR to meet these stringent accessibility benchmarks. Scanned documents that have not been properly remediated for accessibility concerns will not be accepted.

The Act also outlines specific reporting requirements for student financing data, with distinctions based on whether the SFC is a Lending SFC (securing, making, or extending financing) or an Acquiring SFC (acquiring or assuming financing). Acquiring SFCs are generally required to report the same data points as Lending SFCs, though with minor modifications in certain instances, and with specific exceptions for requirements (X), (XI), and (XV), which are also detailed in the annual reporting form. Higher education institution SFCs are subject to the same reporting obligations as other SFCs, with the primary difference being their NMLS registration status as previously outlined. For the sake of consistent data reporting across all SFCs, the OFR provides an interpretation of the term "fiscal year."

Compliance officers and legal counsel for Student Financing Companies (SFCs) in Maryland, including higher education institutions, must review this supplemental guidance to ensure timely registration, accurate annual reporting by March 15, and ADA-compliant promissory notes. Failure to comply with these requirements, particularly regarding registration and reporting, can render student financing products void and unenforceable under the Act.

Source: Original reporting via Maryland Office of Financial Regulation