§ 11-203. Bonds or guarantees of institutions; guaranty fund.

   (a) May be required. -- The Commission may require any institution of postsecondary education that is required to obtain a certificate of approval or an institution of higher education that is required to register under § 11-202.2 of this subtitle to furnish a performance bond or other form of financial guarantee for either the certificate of approval or the registration to the State conditioned that the institution will:

   (1) Perform faithfully all agreements or contracts it makes with its students; and

   (2) Comply with this article.

(b) Form and amount. -- Any bond or guarantee required under this section shall be in the form and amount the Secretary requires.

(c) Liability of surety; payment. --

   (1) The total liability of a surety on a bond or guarantee under this section may not exceed the amount of the bond or guarantee.

   (2) If the total amount of claims filed against a bond or guarantee exceeds the amount of the bond or guarantee, the surety shall pay the amount of the bond or guarantee to the Secretary for distribution to the claimants.

(d) Guaranty fund for for-profit institutions of higher education and private career schools. --

   (1) By rule and regulation, the Commission may create and provide for the operation of three separate guaranty funds for:

      (i) For-profit institutions of higher education;

      (ii) Private career schools; and

      (iii) Institutions of higher education that are required to register under § 11-202.2 of this subtitle.

   (2) (i) The private career school fund shall be used:

         1. To reimburse any student at a private career school who is entitled to a refund of tuition and fees because the institution has failed to perform faithfully any agreement or contract with the student or failed to comply with any provision of this article; or

         2. For any other function directly related to the original purpose of the fund deemed appropriate by the Secretary.

      (ii) The for-profit institution of higher education fund shall be used to reimburse any student at a for-profit institution of higher education who is entitled to a refund of tuition and fees because the institution has failed to perform faithfully any agreement or contract with the student or failed to comply with any provision of this article.

      (iii) 1. The fund for institutions of higher education that are required to register under § 11-202.2 of this subtitle shall be used to reimburse any student at any of these institutions who is entitled to a refund of tuition and fees because the institution has failed to perform faithfully any agreement or contract with the student or failed to comply with any provision of this article.

         2. A. After 3 years of claims history during which no claim against the fund has been sustained on behalf of a Maryland student participating in a fully online distance education program offered in the State by an institution registered under § 11-202.2 of this subtitle, the Commission shall exempt that institution from the requirement to contribute to the fund.

            B. Notwithstanding subsubsubparagraph A of this subsubparagraph, an institution shall be required to contribute to the fund following a claim against the fund being sustained on behalf of a Maryland student participating in a fully online distance education program offered in the State by the institution.

         3. Notwithstanding subsubparagraph 2 of this subparagraph, a student who takes courses from an institution exempted from contribution to the fund under subsubparagraph 2 of this subparagraph may make a claim against the fund in accordance with subsubparagraph 1 of this subparagraph.

      (iv) 1. The funds shall be continuing, nonlapsing funds, not subject to § 7-302 of the State Finance and Procurement Article.

         2. Any unspent portions of the funds may not be transferred or revert to the General Fund of the State, but shall remain in the funds to be used for the purposes specified in this subsection.

         3. No other State money may be used to support the funds.

      (v) The Commission shall be subrogated to and may enforce the claim of any student to the extent of any actual or authorized reimbursement from the funds.

   (3) (i) Each for-profit institution of higher education or private career school that is required to obtain a certificate of approval and, subject to paragraph (2)(iii)2 of this subsection, each institution of higher education required to register under § 11-202.2 of this subtitle shall pay an annual fee into the appropriate fund.

   (ii) The Commission shall determine the amount of the fee based on the probable amount of money needed for the funds for each fiscal year. If the moneys in the guaranty funds are insufficient to satisfy duly authorized claims, the participating institutions may be reassessed and shall pay the additional amounts required.

      (iii) The Commission may not issue a certificate of approval or registration to, and shall revoke any certificate of approval or registration previously issued to, an institution that fails to pay any annual fee or reassessment.

      (iv) The Commission shall deposit into the appropriate fund any penalty assessed against a for-profit institution of higher education, institution of higher education required to register under § 11-202.2 of this subtitle, or private career school, respectively, under the terms of § 11-204 of this subtitle.

   (4) (i) The funds shall be maintained by the State Comptroller who may deposit the assets of the funds in any manner that is consistent with the purposes of the funds.

      (ii) All interest or other return on fund investments shall be credited to the funds.

   (5) The Commission, through the Attorney General, may enforce any claim to which the Commission has been subrogated under this subsection.

(e) Report. -- On or before December 1 each year, the Commission shall report to the Governor and, in accordance with § 2-1246 of the State Government Article, the General Assembly, regarding:

   (1) The number of claims made against each guaranty fund established under this section;

   (2) The type, size, and program of the institutions against which the claims are made;

   (3) The number of claims that are approved and the associated payouts from the funds; and

   (4) The number of claims that are denied.

HISTORY: 1988, ch. 246, § 2; 1992, ch. 10; 2001, ch. 29, § 6; 2011, ch. 277, § 1, 2; 2012, ch. 66, § 1, 6; chs. 595, 596; 2013, ch. 43, § 1, 5; ch. 490.