Maryland House Bill 777

Bill signing

From left to right: Jaron Rice (CEO, Magothy Payments), Senator Kramer, Delagate Howard, and Cailey Locklair-Tolle (CEO, Maryland Retailers Association)

The Problem:


Unfortunately, a few bad apples in the payment processing space have given the entire industry a bad reputation.  While the standard merchant services agreement is a three contract with a $495 cancellation fee, most business owners don’t know that until they go to cancel and are assessed or threatened with a penalty.  The reason they don’t know it is because this fee often isn’t disclosed on the agreement that they sign.  Rather, the signature page will say something like, “By signing this document, you are agreeing to our terms of services which can be found here:” and then there’s a url to a .pdf document that often 75+ pages long. Buried deep within that document are the terms of the contract.  These include but are not limited to the cancellation fee(s), liquidated damages, and renewal terms.  Even worse, some companies require you to be an account holder and login to view/download the terms of services agreement.  So, you have to agree to terms and services that you cannot review until after you've agreed to them.  That's not only absurd, it's unethical.


For clarification, liquidated damages are fees/fines assessed to the small business because the merchant services provider (MSP) is claiming that by the merchant going elsewhere, they are causing financial harm to the MSP, thus they’ll assess an additional fee for the remaining time on the agreement.  The fee is anywhere from $25 to $250 per month for every month remaining on the cancelled agreement.  So, if the MSP states in the terms and services that the cancellation fee is $495 and the liquidated damages are $100/mo for every month remaining on the contract, a business who terminates their agreement 12 months in with 24 months remaining, will be assed a total penalty of $495 + $2400 = $2895.


Again, none of this is disclosed to the merchant at the time the agreement was signed.  To make matters worse, the MSP will often make the agreement automatically renew if it isn’t cancelled and they usually only give a 30-day window in which it’s allowed to be cancelled without penalty.  Then, when the agreement renews, the fees and penalties reset – leaving the business owner essentially stuck.


The Solution:


On April 30, 2019 Governor Hogan signed HB 777 into law after it passed through both the house and the senate unanimously.  This legislation is the most comprehensive of its kind in the entire nation and will protect Maryland small business owners from the underhanded sales tactics of banks and merchant services providers.  Hopefully, it will become a template for other states to use in order to shape the industry nationwide. The law takes effect on October 1st 2019 and will apply to agreements that are initiated or renewed on or after that date.


HB777 was created to bring more transparency and fairness to the payment processing industry. It requires that the length of the contract, the cancellation fee(s), liquidated damages, contract renewal date, and contact information for the MSP be conspicuously listed on the agreement that the business owner signs in 12pt bold font, and each term needs to be acknowledged by being initialed. The bill also requires that the merchant be provided with a copy of the agreement (either physically or digitally) at the time the agreement is signed.


Furthermore, HB777 caps the total penalties of early termination at $500.  This includes the cancellation fee, liquidated damages, and any other fees associated with terminating the agreement.  It also mandates that the MSP must notify the merchant in writing 60 days prior to their agreement renewing.


Lastly, it does not allow for MSP’s to reset their cancellation fee(s), liquidated damages, or any other penalties upon renewal of the agreement.  This means that once a merchant has completed the original term of the agreement and it renews into an additional term, the MSP cannot charge any fines or penalties if the merchant cancels the agreement and goes with another provider.


This bill applies to any bank, merchant services provider, independent sales organization, or any of their affiliates, subsidiaries, and representatives regardless of where said companies or persons are located.  It protects any business located in Maryland that has 50 employees or less and processes $2 Million or less in credit card transactions per year.


If a bank or MSP offers a month-to-month agreement with no cancellation fees or any other penalties for cancelling the agreement, they are not bound by this legislation.


House Bill 777 is enforced by the Commissioner of Financial Regulation under the authorities granted in Title 2, Subtitle 1.  The fines assessed are up to $10,000 for the first offense and up to $25,000 for each subsequent violation.  The full text of the bill can be found here


Any business who believes their bank or merchant services provider has violated this law is encouraged to report them to the Commission of Financial Regulation:

500 North Calvert Street, Suite 402
Baltimore, Maryland 21202
Telephone: 410-230-6100 or 888-784-0136
Fax: 410-333-3866 or 410-333-0475


bill signing


What Magothy Payments means to the people we serve...

Magothy Payments came as a recommendation from our accountant who realized how much we were paying with our old company. Jaron made the process very easy by reviewing our old statements to see if there was any room for saving. After our consultation, he offered to use Magothy payments for one month and if we didn't see any savings we had the option to walk away without losing anything. Jaron has been upfront from the beginning and has been there promptly to address any concerns we have with our system. I highly recommended Magothy Payments!

Dr. Hetal Rana, Eye Associates

Worldwide Waterproofing changed payment processing companies in 2016 after 14 years of being with the same provider. We had a great initial meeting with Jaron and felt comfortable with his knowledge and expertise. Working with a local company that is easily accessible made sense for us. We hadn't really tracked our credit card costs over the last several years, so we were BLOWN AWAY when we saved more than $2000 in our first month alone. This was the by far the best decision we could have made. We get our deposits next day, the platform is easy to use, and we finally have a relationship with the company funding our transactions. I couldn't recommend Magothy Payments enough.

Summer Hoder, Worldwide Waterproofing

Magothy Payments has been GREAT for our business. We get calls from merchant services vendors every day. But when you need service from THEM, they are nowhere to be found. This never happens with Jaron and his team. Their personalized service is outstanding, and our costs are down too! I highly recommend you consider Magothy Payments for your business.

Bruce Spencer, Walt Eger's Service Center

The team at Magothy Payments is nothing short of SPECTACULAR and I can't recommend them enough! If you are tired of wondering if you are paying too much for your credit card processing and harassing daily calls about saving you money, I can assure you that Magothy Payments is your BEST option. Local, Personal and Professional, their integrity shines through at every service opportunity. The statements are transparent, the rates are the lowest, and they are focused on a long-term relationship that will save you money. Everyone that I have referred comes back to me very satisfied and glad that they made the change.

Andy Byrd, Victory Awards & Promotions


Do you want to find out how we became Maryland's highest-rated merchant services provider? Give us a call!