The state of Maryland recently passed legislation that will require changes to merchant processing agreements in that state. What does this mean for payment facilitators?

Signed by Maryland’s governor on April 30, the law requires payments providers to include specific disclosures regarding early termination fees, expiration and renewal dates and contact information – and to do so in a specific, conspicuous way, according to a post on Electronic Payments Law, a blog written by attorneys at law firm Jaffe Raitt Heuer & Weiss, P.C. 

The new legislation also restricts termination fees or penalties, prohibiting fees of more than $500 for termination before the initial term of the contract expires, and prohibiting any fees at all for cancelling the initial agreement after that term, the post said. 

Payment facilitators should seek guidance from their sponsors regarding the new law, according to Holli Targan, attorney and partner with Jaffe. 

 “The PF sponsor contract most likely requires the PF sponsored merchant agreement to comply with laws. Our interpretation of the law would indicate that it applies to PFs, and therefore the PF should revise its sponsored merchant application and agreement to incorporate the terms required by the law,” she told PaymentFacilitator.

The new law applies to Maryland merchants only, leaving PFs with a couple of options for implementing it. 

“If the PF does or might process for a Maryland merchant, it could take the ‘lowest common denominator’ approach and revise the form of a merchant agreement across the board in order to comply with the law, or it could set out a separate section in the contract that indicates that the provisions set forth in that Section apply to Maryland business entities,” Targan said.

She pointed out that the law – which is geared to protecting smaller merchants – doesn’t apply to certain contracts, including those “that may be terminated without the assessment of fees, fines, penalties or liquidated damages, or to contracts entered into with a merchant that employs 50 or more employees or estimates that it will generate more than $2,000,000 in credit card or electronic transactions per year.” 

“PFs should analyze whether either of those exemptions apply to their business practices, and if not, then PFs will need to revise their merchant applications and agreements to incorporate the law’s requirements,” Targan said.

The law goes into effect on October 1.