H 4591 Session 109 (1991-1992)
H 4591 General Bill, By Wilkins, Harvin, B.H. Harwell, Haskins, K.G. Kempe,
H.H. Keyserling, Kirsh, Meacham, R. Smith, Vaughn, Wilkes and R.M. Young
A Bill to amend Title 34, Code of Laws of South Carolina, 1976, relating to
banking, financial institutions, and money by adding Chapter 36 so as to
regulate loan brokers not otherwise regulated by federal or state law, to
provide definitions, to prohibit loan brokers from performing certain acts, to
provide for the responsibility of principals, to provide for investigations,
cease and desist orders, and hearing procedures with respect to loan brokers,
to provide for administrative fines and other sanctions, to provide for
examinations, subpoenas, hearings, and witnesses, to provide for injunctions
to restrain violations, to provide criminal penalties for violations, and to
authorize actions for damages.
03/24/92 House Introduced and read first time HJ-12
03/24/92 House Referred to Committee on Labor, Commerce and
Industry HJ-12
A BILL
TO AMEND TITLE 34, CODE OF LAWS OF SOUTH CAROLINA,
1976, RELATING TO BANKING, FINANCIAL INSTITUTIONS,
AND MONEY BY ADDING CHAPTER 36 SO AS TO REGULATE
LOAN BROKERS NOT OTHERWISE REGULATED BY FEDERAL
OR STATE LAW, TO PROVIDE DEFINITIONS, TO PROHIBIT
LOAN BROKERS FROM PERFORMING CERTAIN ACTS, TO
PROVIDE FOR THE RESPONSIBILITY OF PRINCIPALS, TO
PROVIDE FOR INVESTIGATIONS, CEASE AND DESIST ORDERS,
AND HEARING PROCEDURES WITH RESPECT TO LOAN
BROKERS, TO PROVIDE FOR ADMINISTRATIVE FINES AND
OTHER SANCTIONS, TO PROVIDE FOR EXAMINATIONS,
SUBPOENAS, HEARINGS, AND WITNESSES, TO PROVIDE FOR
INJUNCTIONS TO RESTRAIN VIOLATIONS, TO PROVIDE
CRIMINAL PENALTIES FOR VIOLATIONS, AND TO AUTHORIZE
ACTIONS FOR DAMAGES.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 34 of the 1976 Code is amended by adding:
"CHAPTER 36
Loan Brokers
Section 34-36-10. As used in this chapter, unless the context
otherwise requires:
(1) `Advance fee' means any consideration which is assessed or
collected, prior to the closing of a loan, by a loan broker.
(2) `Borrower' means a person obtaining or desiring to obtain a
loan of money, a credit card, or a line of credit.
(3) `Department' means the Securities Department of the
Secretary of State.
(4) `Loan broker' means any person who:
(a) for or in expectation of consideration arranges or attempts to
arrange or offers to fund a loan of money, a credit card, or a line of
credit;
(b) for or in expectation of consideration assists or advises a
borrower in obtaining or attempting to obtain a loan of money, a credit
card, a line of credit, or related guarantee, enhancement, or collateral of
any kind or nature;
(c) acts for or on behalf of a loan broker for the purpose of
soliciting borrowers; or
(d) holds himself out as a loan broker.
A `loan broker' does not include any bank or savings and loan
association, trust company, building and loan association, credit union,
consumer finance company, retail installment sales company, securities
broker-dealer, real estate broker or salesperson, attorney, Federal
Housing Administration or Veterans Administration approved lender,
credit card company, installment loan licensee, mortgage broker or
lender, or insurance company, who is licensed by and subject to
regulation or supervision of any agency of the United States, the South
Carolina Department of Consumer Affairs, the South Carolina Board of
Financial Institutions, or other agency of this State and is acting within
the scope of the license; and also does not include subsidiaries of
licensed or chartered consumer finance companies, banks, or savings
and loan associations.
(5) `Principal' means any officer, director, partner, joint venturer,
branch manager, or other person with similar managerial or supervisory
responsibilities for a loan broker.
Section 34-36-20. No loan broker shall:
(1) assess or collect an advance fee from a borrower to provide
services as a loan broker.
(2) make or use any false or misleading representations or omit
any material fact in the offer or sale of the services of a loan broker or
engage, directly or indirectly, in any act that operates or would operate
as fraud or deception upon any person in connection with the offer or
sale of the services of a loan broker, notwithstanding the absence of
reliance by the buyer.
(3) make or use any false or deceptive representation in its
business dealings or to the department or conceal a material fact from
the department.
Section 34-36-30. Each principal of a loan broker may be
sanctioned for the actions of the loan broker, including its agents or
employees, in the course of business of the loan broker.
Section 34-36-40. (A) The department may investigate the
actions of any person for compliance with this chapter.
(B) The department may order a loan broker to cease and desist
whenever the department determines that the loan broker has violated,
is violating, or will violate any provision of this chapter, any regulation
promulgated by the department, or any written agreement entered into
with the department.
(C) The department may impose and collect a civil administrative
fine against any person found to have violated any provision of this
chapter, any regulation promulgated by the department, or any written
agreement entered into with the department, in any amount not to exceed
five thousand dollars for each violation.
Section 34-36-50. (A) The department may make
investigations and examinations upon reasonable suspicion within or
outside of this State as it considers necessary to determine whether a
person has violated or will violate any provision of this chapter or any
regulation promulgated hereunder.
(B) The department may gather evidence in the matter. The
department may administer oaths, examine witnesses, and issue
subpoenas.
(C) Subpoenas for witnesses whose evidence is deemed material
to any investigation or examination may be issued by the department
commanding the witnesses to be or appear before the department at a
time and place named and to bring those books, records, and documents
as may be specified or to submit the books, records, and documents to
inspection. The subpoenas may be served by an authorized
representative of the department.
(D)(1) In the event of substantial noncompliance with a subpoena
or subpoena duces tecum issued by the department, the department may
petition the circuit court of the county in which the person subpoenaed
resides or has its principal place of business for an order requiring the
person to appear and fully comply with the subpoena. The court may
also grant injunctive relief restraining a violation of this chapter and may
grant that other relief, including but not limited to, the restraint, by
injunction or appointment of a receiver, of any transfer, pledge,
assignment, or other disposition of the person's assets or any
concealment, alteration, destruction, or other disposition of subpoenaed
books, records, or documents, as the court deems appropriate until the
person has fully complied with the subpoena or subpoena duces tecum
and the department has completed its investigation or examination.
Costs incurred by the department to obtain an order granting, in whole
or in part, the petition for enforcement of a subpoena or subpoena duces
tecum must be taxed against the subpoenaed person, and failure to
comply with the order is a contempt of court.
(2) When it shall appear to the department that the compliance
with a subpoena or subpoena duces tecum issued by the department is
essential to an investigation or examination, the department, in addition
to the other remedies provided for in this chapter, may by verified
petition setting forth the appropriate facts, apply to the circuit court of
the county in which the subpoenaed person resides or has its principal
place of business for a writ of ne exeat. The court may direct the
issuance of the writ against the subpoenaed person requiring sufficient
bond conditioned on compliance with the subpoena or subpoena duces
tecum. The court shall cause to be endorsed on the writ a suitable
amount of bond on payment of which the person named in the writ shall
be freed, having a due regard to the nature of the case.
(E) Witnesses are entitled to the same fees and mileage as they
may be entitled by law for attending as witnesses in the circuit court,
except where the examination or investigation is held at the place of
business or residence of the witness.
(F) The material compiled by the department in an investigation
or examination under this chapter is confidential until the investigation
or examination is complete. The investigation or examination is not
deemed complete if the department has submitted the material or any
part of it to any law enforcement agency or other regulatory agency for
further investigation or for the filing of a criminal or civil prosecution
and the investigation and prosecution have not been completed or
become inactive.
Section 34-36-60. (A) Whenever the department determines,
from evidence satisfactory to it, that any person has engaged, is engaged,
or is about to engage in an act or practice constituting a violation of this
chapter or a regulation promulgated hereunder, the department may
bring action in the name and on behalf of the State against the person
and any other person concerned in that practice in violation of this
chapter to enjoin the person or persons from continuing the violation. In
the court proceedings, the department may apply for and on due showing
is entitled to have issued, the court's subpoena requiring the appearance
of any defendant and his employees or agents to testify or give evidence
concerning the acts or conduct or things complained of in the application
for injunction, and requiring the production of documents, books, and
records that may appear necessary for the hearing of the petition.
(B) In addition to all other means provided by law for the
enforcement of any temporary restraining order, temporary injunction,
or permanent injunction issued in the court proceedings, the court shall
have the power, upon application of the department, to impound and to
appoint a receiver or administrator for the property, assets, and business
of the defendant, including, but not limited to, the books, records,
documents, and papers appertaining thereto. The receiver or
administrator, when appointed and qualified, shall have all powers and
duties as to custody, collection, administration, winding up, and
liquidation of this property and business as is from time to time
conferred upon him by the court. In the action, the court may issue
orders and decrees staying all pending suits and enjoining any further
suits affecting the receiver's or administrator's custody or possession of
this property, assets, and business, or in its discretion may with the
consent of the chief administrative judge of the circuit, require that all
these suits be assigned to the circuit court judge appointing this receiver
or administrator.
(C) In addition to any other remedies provided by this chapter, the
department may apply to the court hearing this matter for an order of
restitution whereby the defendants in the action must be ordered to make
restitution of those sums shown by the department to have been obtained
by them in violation of any of the provisions of this chapter. The
restitution, at the option of the court, must be payable to the
administrator or receiver appointed pursuant to this section or directly
to the persons whose assets were obtained in violation of this chapter.
Section 34-36-70. Any person violating any provision of this
chapter is guilty of a misdemeanor and, upon conviction, must be
punished by a fine not exceeding five thousand dollars or by a term of
imprisonment not exceeding one year, or both. Each violation of this
chapter constitutes a separate offense.
Section 34-36-80. (A) Any borrower injured by a violation
of this chapter may bring an action for recovery of damages. Judgment
may be entered for actual damages, but in no case less than the amount
paid by the borrower to the loan broker, plus reasonable attorney's fees
and costs. An award may also be entered for punitive damages.
(B) Any borrower injured by a violation of this chapter may bring
an action against the surety bond or trust account, if any, of the loan
broker.
(C) The remedies provided under this chapter are in addition to
any other procedures or remedies for any violation or conduct authorized
by law.
Section 34-36-90. (A) The department is responsible for the
administration and enforcement of this chapter.
(B) The department is authorized to promulgate those regulations
necessary to implement and administer the provisions of this
chapter."
SECTION 2. This act takes effect upon approval by the Governor.
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