Maryland Legislative Committee to Meet On Merchant Cash Advance Prohibition (Rescheduled to Wednesday)

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Legislators in the Maryland State House will meet today on Wednesday at 1pm EST to discuss HB-1478, a bill to make merchant cash advances illegal in the state. A similar meeting is taking place tomorrow in the State Senate. The House meeting was originally scheduled for Monday but was postponed.

All four of the House bill’s sponsors are republicans. Today’s committee is expected to discuss the potential small business effect of prohibition. A legislative note that circulated before hand cautions that:

Any small businesses that utilize merchant cash advances, as defined by the bill, may be impacted, as the bill no longer allows such transactions. The Office of Commissioner of Financial Regulation advises that small businesses are likely to engage in merchant cash advance transactions, as they accept credit card payments and those receivables are their greatest source of liquidity. As such, prohibiting the use of such transactions may remove a source of financing that has traditionally been available to small businesses in the State. Additionally, prohibiting the use of merchant cash advance transactions may also affect small business lenders in the State that engage in these types of activities.

The bill, as written, would outlaw credit and debit card split transactions if it passed.

This bill prohibits a buyer from arranging, facilitating, or consummating a “merchant cash
advance transaction” with a seller in the State. The bill defines “merchant cash advance
transaction” as an arrangement between a buyer and a seller in which the buyer agrees to
purchase an agreed-on percentage of future credit or debit card revenues that are due to a
seller for a predetermined purchase price.

Last modified: March 2, 2020

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