H 3996 Session 109 (1991-1992)
H 3996 General Bill, By J.J. Bailey
A Bill to amend the Code of Laws of South Carolina, 1976, by adding Chapter 6
to Title 39 so as to provide for the regulation of a credit services
organization and provide penalties for violation.
05/14/91 House Introduced and read first time HJ-4
05/14/91 House Referred to Committee on Labor, Commerce and
Industry HJ-5
01/29/92 House Committee report: Favorable with amendment Labor,
Commerce and Industry HJ-2
01/30/92 House Amended HJ-17
01/30/92 House Read second time HJ-19
02/04/92 House Read third time and sent to Senate HJ-21
02/04/92 Senate Introduced and read first time SJ-12
02/04/92 Senate Referred to Committee on Banking and Insurance SJ-1
AMENDED
January 30, 1992
H. 3996
Introduced by REP. J. Bailey
S. Printed 1/30/92--H.
Read the first time May 14, 1991.
A BILL
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976,
BY ADDING CHAPTER 6 TO TITLE 39 SO AS TO PROVIDE FOR
THE REGULATION OF A CREDIT SERVICES ORGANIZATION
AND PROVIDE PENALTIES FOR VIOLATION.
Amend Title to Conform
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. The 1976 Code is amended by adding:
"CHAPTER 6
Regulation of Credit Services Organizations
Section 39-6-10. In this chapter:
(1) `Buyer' means an individual who is solicited to purchase or
who purchases the services of a credit services organization.
(2) `Consumer reporting agency' has the meaning assigned by
Section 603(f), Fair Credit Reporting Act (15 U.S.C. Section 1681a(f)).
(3) `Extension of credit' means the right to defer payment of debt
or to incur debt and defer its payment offered or granted primarily for
personal, family, or household purposes.
Section 39-6-20. (A) A credit services organization is a person
who with respect to the extension of credit by others and in return for the
payment of money or other valuable consideration provides, or
represents that the person can or will provide, any of the following
services:
(1) improving a buyer's credit record, history, or rating;
(2) obtaining an extension of credit for a buyer; or
(3) providing advice or assistance to a buyer with regard to
item (1) or (2).
(B) Exempt from this chapter are:
(1) a person authorized to make loans or extension of credit
under the laws of this State or the United States who is subject to
regulation and supervision by this State or the United States, or a lender
approved by the United States Secretary of Housing and Urban
Development for participation in a mortgage insurance program under
the National Housing Act (12 U.S.C. Section 1701 et seq.);
(2) a bank or savings and loan association whose deposit or
accounts are eligible for insurance by the Federal Deposit Insurance
Corporation or the Federal Savings and Loan Insurance Corporation, or
a subsidiary of such a bank or savings and loan association;
(3) a credit union doing business in this State;
(4) a nonprofit organization exempt from taxation under
Section 501(c)(3) of the Internal Revenue Code of 1986;
(5) a person licensed as a real estate broker or salesman under
the provisions of Chapter 57 of Title 40 acting within the course and
scope of that license;
(6) a person licensed to practice law in this State acting within
the course and scope of the person's practice as an attorney;
(7) a broker-dealer registered with the Securities and
Exchange Commission or the Commodity Future Trading Commission
acting within the course and scope of that regulation;
(8) a consumer reporting agency; and
(9) a person whose primary business is making loans secured
by liens on real property.
Section 39-6-30. A credit services organization, a salesperson,
agent, or representative of a credit services organization, or an
independent contractor who sells or attempts to sell the services of a
credit services organization may not:
(1) charge a buyer or receive from a buyer money or other
valuable consideration before completing performance of all services the
credit services organization has agreed to perform for the buyer, unless
the credit services organization has obtained in accordance with Section
39-6-40 a surety bond in the amount required by Section 39-6-40(E)
issued by a surety company authorized to do business in this State or
established and maintained a surety account at a federally insured bank
or savings and loan association located in this State in which the amount
required by Section 39-6-40(E) is held in trust as required by Section
39-6-40(C);
(2) charge a buyer or receive from a buyer money or other
valuable consideration solely for referral of the buyer to a retail seller
who will or may extend credit to the buyer if the credit that is or will be
extended to the buyer is substantially the same as that available to the
general public;
(3) make or use a false or misleading representation in the offer
or sale of the services of a credit services organization, including:
(a) guaranteeing to `erase bad credit' or words to that effect unless
the representation clearly discloses that this can be done only if the
credit history is inaccurate or obsolete; and
(b) guaranteeing an extension of credit regardless of the
person's previous credit problem or credit history unless the
representation clearly discloses the eligibility requirements for obtaining
an extension of credit;
(4) engage, directly or indirectly, in a fraudulent or deceptive act,
practice, or course of business in connection with the offer or sale of the
services of a credit services organization;
(5) make, or advise a buyer to make, a statement with respect to
a buyer's credit worthiness, credit standing, or credit capacity that is
false or misleading or that should be known by the exercise of
reasonable care to be false or misleading, to a consumer reporting
agency or to a person who has extended credit to a buyer or to whom a
buyer is applying for an extension of credit;
(6) advertise, or cause to be advertised, in any manner
whatsoever, the services of a credit services organization without filing
a registration statement with the Department of Consumer Affairs unless
otherwise provided by this chapter.
Section 36-6-40. (A) This section applies to a credit services
organization required by Section 39-6-30(1) to obtain a surety bond or
establish a surety account.
(B) If a bond is obtained, a copy of it must be filed with the
Department of Consumer Affairs. If a surety account is established,
notification of the depository, the trustee, and the account number must
be filed with the Department of Consumer Affairs.
(C) The bond or surety account required must be in favor of the
State for the benefit of any person who is damaged by a violation of this
chapter. The bond or surety account also must be in favor of a person
damaged by the violation.
(D) A person claiming against the bond or surety account for a
violation of this chapter may bring an action against the credit services
organization and against the surety or trustee. The surety or trustee is
liable only for damages awarded under Section 39-6-90(A) and not the
punitive damages permitted under that section. The aggregate liability
of the surety or trustee to all persons damaged by a credit services
organization's violation of this chapter may not exceed the amount of the
surety account or bond.
(E) The bond or the surety account must be in the amount of ten
thousand dollars.
(F) A depository holding money in a surety account under this
chapter may not convey money in the account to the credit services
organization that established the account or a representative of the credit
services organization unless the credit services organization or
representative presents a statement issued by the Department of
Consumer Affairs indicating that Section 39-6-50(F) has been satisfied
in relation to the account. The Department of Consumer Affairs may
conduct investigations and require submission of information as
necessary to enforce this subsection.
Section 39-6-50. (A) A credit services organization shall file
a registration statement with the Department of Consumer Affairs before
conducting business in this State. The registration statement must
contain:
(1) the name and address of the credit services organization;
and
(2) the name and address of a person who, directly or
indirectly, owns or controls ten percent or more of the outstanding
shares of stock in the credit services organization.
(B) The registration statement also must contain either:
(1) a full and complete disclosure of a litigation or unresolved
complaint filed with a governmental authority of this State relating to the
operation of the credit services organization; or
(2) a notarized statement that states that there has been no
litigation or unresolved complaint filed with a governmental authority
of this State relating to the operation of the credit services organization.
(C) The credit services organization shall update the statement not
later than the ninetieth day after the date on which a change in the
information required in the statement occurs.
(D) Each credit services organization registering under this section
shall maintain a copy of the registration statement in the files of the
credit services organization. The credit services organization shall allow
a buyer to inspect the registration statement on request.
(E) The Department of Consumer Affairs may charge each credit
services organization that files a registration statement with the
Department of Consumer Affairs a reasonable fee not to exceed one
hundred dollars to cover the cost of filing. The Department of
Consumer Affairs may not require a credit services organization to
provide information other than that provided in the registration
statement.
(F) The bond or surety account must be maintained until two
years after the date that the credit services organization ceases
operations.
Section 39-6-60. (A) Before executing a contract or agreement
with a buyer or receiving money or other valuable consideration, a credit
services organization shall provide the buyer with a statement in writing
containing:
(1) a complete and detailed description of the services to be
performed by the credit services organization for the buyer and the total
cost of the services;
(2) a statement explaining the buyer's right of proceed against
the bond or surety account required by Section 39-6-30;
(3) the name and address of the surety company that issued the
bond, or the name and address of the depository and the trustee, and the
account number of the surety account;
(4) a complete and accurate statement of the buyer's right to
review any file on the buyer maintained by a consumer reporting agency,
as provided by the Fair Credit Reporting Act (15 OSC. Sec. 1681 et
seq.);
(5) a statement that the buyer's file is available for review at
no charge on request made to the consumer reporting agency within
thirty days after the date of receipt of notice that credit has been denied
and that the buyer's file is available for a minimal charge at any other
time;
(6) a complete and accurate statement of the buyer's right to
dispute directly with the consumer reporting agency the completeness
or accuracy of any item contained in a file on the buyer maintained by
that consumer reporting agency;
(7) a statement that accurate information permanently cannot
be removed from the files of a consumer reporting agency;
(8) a complete and accurate statement of when consumer
information becomes obsolete and of when consumer reporting agencies
are prevented from issuing reports containing obsolete information; and
(9) a complete and accurate statement of the availability of
nonprofit credit counseling services.
(B) The credit services organization shall maintain on file, for two
years after the date the statement is provided, an exact copy of the
statement, signed by the buyer, acknowledging receipt of the statement.
Section 39-6-70. (A) Each contract between the buyer and
credit services organization for the purchase of the services of the credit
services organization must be in writing, dated, signed by the buyer and
must include:
(1) a statement in type that is boldfaced, capitalized,
underlined, or otherwise set out from surrounding written materials so
as to be conspicuous, in immediate proximity to the space reserved for
the signature of the buyer, as follows: `You, the buyer, may cancel this
contract at any time before midnight of the third day after the date of the
transaction. See the attached notice of cancellation form for an
explanation of this right';
(2) the terms and conditions of payment, including the total of
all payments to be made by the buyer, whether to the credit services
organization or to another person;
(3) a full and detailed description of the services to be
performed by the credit services organization for the buyer, including all
guarantees and all promises of full or partial refunds, and the estimated
length of time not to exceed one hundred eighty days for performing the
services; and
(4) the address of the credit services organization's principal
place of business and the name and address of its agent in the State
authorized to receive service or process.
(B) The contract must have attached two easily detachable copies
of a notice of cancellation. The notice must be in boldfaced type and in
the following form:
`Notice of Cancellation
You may cancel this contract, without any penalty or obligation
within three days after the date the contract is signed.
If you cancel, any payment made by you under this contract will be
returned within ten days after the date of receipt by the seller of your
cancellation notice.
To cancel this contract, mail or deliver a signed dated copy of this
cancellation notice or other written notice to:
(name of seller) at
(address of seller)
(place of business) not later than midnight
(date). I hereby cancel this transaction.
(date)
(purchaser's signature)'
(C) The credit services organization shall give to the buyer a copy
of the completed contract and all other documents the credit services
organization requires the buyer to sign at the time they are signed.
(D) The breach by a credit services organization of a contract
under this chapter, or of any obligation arising from a contract under this
chapter, is a violation of this chapter.
Section 39-6-80. (A) A credit services organization may not
attempt to cause a buyer to waive a right under this chapter.
(B) A waiver by a buyer of any part of this chapter is void.
Section 39-6-90. (A) A buyer injured by a violation of this
chapter may bring any action for recovery of damages. The damages
awarded may not be less than the amount paid by the buyer to the credit
services organization plus reasonable attorney's fees and court costs.
(B) The buyer also may be awarded punitive damages.
Section 39-6-100. The Attorney General or a buyer may bring an
action in circuit court to enjoin a violation of this chapter.
Section 39-6-110. A violation of this chapter is an unfair trade
practice under the provisions of Chapter 5 of Title 39.
Section 39-6-120. An action may not be brought under the
provisions of Sections 39-6-90 or 39-6-110 after four years after the date
of the execution of the contract for services to which the action relates.
Section 39-6-130. A person who violates the provisions of this
chapter is guilty of a misdemeanor and, upon conviction, is punishable
under the provisions of Section 17-25-30.
Section 39-6-140. In an action under this chapter, the burden of
proving an exemption under Section 39-6-20 is on the person claiming
the exemption.
Section 39-6-150. The remedies provided by this chapter are in
addition to other remedies provided by law."
SECTION 2. This act takes effect upon approval by the Governor.
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