S*602 Session 111 (1995-1996)
S*0602(Rat #0113, Act #0135 of 1995) General Bill, By Short, Giese, Gregory and
Jackson
Similar(H 3766)
A Bill to amend Section 34-29-100, Code of Laws of South Carolina, 1976,
relating to records and reports of restricted lenders, by adding information
required to be reported in the Annual Report made by restricted lenders; to
amend Section 34-29-140, as amended, relating to charges permitted to
restricted lenders, so as to revise the finance charges and to provide
limitations on loan renewals; to amend Section 34-29-160, as amended, relating
to insurance on the security of a consumer finance loan and on the borrower,
so as to further provide for the conditions, minimum charges, and premiums of
this insurance; to amend Section 37-1-301, relating to definitions under the
Consumer Protection Code, so as to add and revise certain definitions; to
amend Section 37-1-303, relating to the index of definitions in Title 37, so
as to add certain definitions; to amend Section 37-2-207, relating to credit
services charges for revolving charge accounts, so as to further provide for
what constitutes the minimum allocation to principal reduction in a billing
cycle; to amend Section 37-3-201, relating to loan finance charges for
supervised loans, so as to revise these finance charges; to amend Section
37-3-305, as amended, relating to the posting and filing of maximum rate
schedules by supervised lenders, so as to provide that for loans not exceeding
six hundred dollars, a rate may not be posted which exceeds the charges
imposed in Section 34-29-140; to amend Section 37-3-501, relating to specified
definition, so as to revise the definition of a "supervised loan"; to amend
Section 37-3-505, relating to records and annual reports for supervised
lenders, so as to add information required to be included in the annual report
of supervised lenders; to amend Section 37-3-511, relating to a schedule of
payments and the maximum loan term of supervised loans, so as to further
provide for what constitutes a supervised loan within the meaning of this
Section; to amend Part 5, Chapter 3, Title 37 of the 1976 Code, by adding
Section 37-3-515 so as to provide a limitation on certain loan renewals; to
amend Section 37-4-203, as amended, relating in part to credit life insurance
premiums which may be charged in regard to certain transactions, so as to
revise the minimum charges and the premiums which may be charged; to amend
Section 37-5-108, relating to unconscionability under the Consumer Protection
Code, by adding particular circumstances which constitute unconscionability
and further providing for remedies; to amend Section 37-6-117, as amended,
relating to the administrative responsibilities of the administrator of the
Department of Consumer Affairs, so as to require the administrator to devise a
pamphlet for distribution to certain consumers; and to amend Section 37-9-102,
relating to the licensure election, so as to provide that certain supervised
lenders may elect to be restricted lenders; and to provide for reviews of the
consumer finance industry by legislative study committees and to provide for
the composition of these committees.-amended title
03/02/95 Senate Introduced, read first time, placed on calendar
without reference SJ-13
03/08/95 Senate Read second time SJ-18
03/14/95 Senate Read third time and sent to House SJ-136
03/14/95 House Introduced and read first time HJ-165
03/14/95 House Referred to Committee on Labor, Commerce and
Industry HJ-166
04/25/95 House Committee report: Favorable with amendment Labor,
Commerce and Industry HJ-5
04/27/95 House Debate adjourned until Tuesday, May 2, 1995 HJ-36
05/02/95 House Debate adjourned until Wednesday, May 3, 1995 HJ-18
05/03/95 House Debate adjourned until Tuesday, May 9, 1995 HJ-59
05/09/95 House Objection by Rep. Cain & Phillips HJ-24
05/09/95 House Debate adjourned until Thursday, May 11, 1995 HJ-24
05/11/95 House Amended HJ-17
05/11/95 House Read second time HJ-32
05/11/95 House Unanimous consent for third reading on next
legislative day HJ-32
05/12/95 House Read third time and returned to Senate with
amendments HJ-2
05/16/95 Senate Non-concurrence in House amendment SJ-11
05/17/95 House House insists upon amendment and conference
committee appointed Reps. Rep. Cato, Gamble &
Neal HJ-3
05/17/95 Senate Conference committee appointed Sens. Gregory,
Jackson, and Short SJ-3
05/30/95 Senate Free conference powers granted SJ-19
05/30/95 Senate Free conference committee appointed Sens. Short,
Gregory, Jackson SJ-19
05/30/95 House Free conference powers granted HJ-102
05/30/95 House Free conference committee appointed Reps. Cato,
Gamble & Neal HJ-105
05/30/95 House Free conference report received and adopted HJ-105
05/30/95 Senate Free conference report received and adopted SJ-19
05/31/95 Senate Ordered enrolled for ratification
06/06/95 Ratified R 113
06/13/95 Became law without Governor's signature
06/13/95 Effective date 01/01/96
06/13/95 See act for exception to or explanation of
effective date
08/18/95 Copies available
08/18/95 Act No. 135
(A135, R113, S602)
AN ACT TO AMEND SECTION 34-29-100, CODE OF LAWS OF
SOUTH CAROLINA, 1976, RELATING TO RECORDS AND
REPORTS OF RESTRICTED LENDERS, BY ADDING
INFORMATION REQUIRED TO BE REPORTED IN THE ANNUAL
REPORT MADE BY RESTRICTED LENDERS; TO AMEND
SECTION 34-29-140, AS AMENDED, RELATING TO CHARGES
PERMITTED TO RESTRICTED LENDERS, SO AS TO REVISE THE
FINANCE CHARGES AND TO PROVIDE LIMITATIONS ON LOAN
RENEWALS; TO AMEND SECTION 34-29-160, AS AMENDED,
RELATING TO INSURANCE ON THE SECURITY OF A
CONSUMER FINANCE LOAN AND ON THE BORROWER, SO AS
TO FURTHER PROVIDE FOR THE CONDITIONS, MINIMUM
CHARGES, AND PREMIUMS OF THIS INSURANCE; TO AMEND
SECTION 37-1-301, RELATING TO DEFINITIONS UNDER THE
CONSUMER PROTECTION CODE, SO AS TO ADD AND REVISE
CERTAIN DEFINITIONS; TO AMEND SECTION 37-1-303,
RELATING TO THE INDEX OF DEFINITIONS IN TITLE 37, SO AS
TO ADD CERTAIN DEFINITIONS; TO AMEND SECTION 37-2-207,
RELATING TO CREDIT SERVICES CHARGES FOR REVOLVING
CHARGE ACCOUNTS, SO AS TO FURTHER PROVIDE FOR WHAT
CONSTITUTES THE MINIMUM ALLOCATION TO PRINCIPAL
REDUCTION IN A BILLING CYCLE; TO AMEND SECTION
37-3-201, RELATING TO LOAN FINANCE CHARGES FOR
SUPERVISED LOANS, SO AS TO REVISE THESE FINANCE
CHARGES; TO AMEND SECTION 37-3-305, AS AMENDED,
RELATING TO THE POSTING AND FILING OF MAXIMUM RATE
SCHEDULES BY SUPERVISED LENDERS, SO AS TO PROVIDE
THAT FOR LOANS NOT EXCEEDING SIX HUNDRED DOLLARS,
A RATE MAY NOT BE POSTED WHICH EXCEEDS THE CHARGES
IMPOSED IN SECTION 34-29-140; TO AMEND SECTION 37-3-501,
RELATING TO SPECIFIED DEFINITIONS, SO AS TO REVISE THE
DEFINITION OF A "SUPERVISED LOAN"; TO AMEND
SECTION 37-3-505, RELATING TO RECORDS AND ANNUAL
REPORTS FOR SUPERVISED LENDERS, SO AS TO ADD
INFORMATION REQUIRED TO BE INCLUDED IN THE ANNUAL
REPORT OF SUPERVISED LENDERS; TO AMEND SECTION
37-3-511, RELATING TO A SCHEDULE OF PAYMENTS AND THE
MAXIMUM LOAN TERM OF SUPERVISED LOANS, SO AS TO
FURTHER PROVIDE FOR WHAT CONSTITUTES A SUPERVISED
LOAN WITHIN THE MEANING OF THIS SECTION; TO AMEND
PART 5, CHAPTER 3, TITLE 37 OF THE 1976 CODE, BY ADDING
SECTION 37-3-515 SO AS TO PROVIDE A LIMITATION ON
CERTAIN LOAN RENEWALS; TO AMEND SECTION 37-4-203, AS
AMENDED, RELATING IN PART TO CREDIT LIFE INSURANCE
PREMIUMS WHICH MAY BE CHARGED IN REGARD TO
CERTAIN TRANSACTIONS, SO AS TO REVISE THE MINIMUM
CHARGES AND THE PREMIUMS WHICH MAY BE CHARGED; TO
AMEND SECTION 37-5-108, RELATING TO UNCONSCIONABILITY
UNDER THE CONSUMER PROTECTION CODE, BY ADDING
PARTICULAR CIRCUMSTANCES WHICH CONSTITUTE
UNCONSCIONABILITY AND FURTHER PROVIDING FOR
REMEDIES; TO AMEND SECTION 37-6-117, AS AMENDED,
RELATING TO THE ADMINISTRATIVE RESPONSIBILITIES OF
THE ADMINISTRATOR OF THE DEPARTMENT OF CONSUMER
AFFAIRS, SO AS TO REQUIRE THE ADMINISTRATOR TO DEVISE
A PAMPHLET FOR DISTRIBUTION TO CERTAIN CONSUMERS;
AND TO AMEND SECTION 37-9-102, RELATING TO THE
LICENSURE ELECTION, SO AS TO PROVIDE THAT CERTAIN
SUPERVISED LENDERS MAY ELECT TO BE RESTRICTED
LENDERS; AND TO PROVIDE FOR REVIEWS OF THE
CONSUMER FINANCE INDUSTRY BY LEGISLATIVE STUDY
COMMITTEES AND TO PROVIDE FOR THE COMPOSITION OF
THESE COMMITTEES.
Be it enacted by the General Assembly of the State of South
Carolina:
Additional information required
SECTION 1. Section 34-29-100 of the 1976 Code is amended to
read:
"Section 34-29-100. (a) Each licensee shall keep and use in his
business such full and correct books and accounting records as are in
accordance with sound and accepted accounting principles and practices
and such books and records, including cards used in the card system, if
any, as are in accord with the rules and regulations lawfully made by the
board. Each licensee shall preserve such books, accounts and records,
including cards used in the card system, if any, for at least two years
after making the final entry on any loan recorded thereon. The renewal or
refinancing of a loan shall constitute a final entry.
(b) Every licensee shall file in the office of the board, on or before
the first day of April, a report for the preceding calendar year. The report
shall give information with respect to the financial condition of such
licensee, and shall include the name and address of the licensee, balance
sheets at the beginning and end of the accounting period, a statement of
income and expenses for the period, a reconciliation of surplus with the
balance sheets, a schedule of assets used and useful in the consumer
finance business in the State, an analysis of charges, size of loans and
types of actions undertaken to effect collection and such other relevant
information in form and detail as the board may prescribe.
(c) In addition to the information required to be reported under
subsection (b), the annual report shall include the following:
(1) the total number of loans and aggregate dollar amounts made by
the lender which renewed existing accounts;
(2) the total number of new loans and aggregate dollar amounts
made to former borrowers;
(3) the total number of loans and aggregate dollar amounts made to
new borrowers;
(4) the total number of loans and aggregate dollar amounts which
received a final entry, as provided in subsection (a), other than by
renewal;
(5) the total number of renewals in which the borrower received a
cash advance which was less than ten percent of the net outstanding loan
balance at the time of renewal;
(6) the total number of loans and aggregate dollar amounts
outstanding at the beginning of the reporting period; and
(7) the total number of loans and aggregate dollar amounts
outstanding at the end of the reporting period.
(d) Such report shall be made under oath and shall be in the form
prescribed by the board and consistent with this section. The board shall
make and publish annually an analysis and recapitulation of such
reports.
(e) In addition to the report required by the provisions of Section
34-29-100 (b) and (c), the board may under rules and regulations
promulgated by it under the procedure provided in this chapter require
quarterly and/or semiannual reports from licensees to facilitate the
performance of its duties and to effectively regulate the making of loans
under this chapter."
Limits on renewals
SECTION 2. Section 34-29-140 of the 1976 Code, as last amended by
Act 98 of 1991, is further amended by adding an appropriately numbered
subsection to read:
"( ) Dollar Limits on Renewals. A licensee under this chapter
may not renew a loan more than one time during any fifteen-month
period where the actual dollars given to the customer is less than ten
percent of the net outstanding loan balance at the time of
renewal."
Finance charges revised
SECTION 3. Section 34-29-140(a) of the 1976 Code, as last amended
by Act 98 of 1991, is further amended to read:
"(a) Maximum finance charges permitted; initial charge. A
licensee under this chapter may lend any sum of money not exceeding
seventy-five hundred dollars, excluding charges, and notwithstanding the
fact that the loan may be repayable in substantially equal monthly
installments, may contract for and receive finance charges not to
exceed:
(1) Loans Not Exceeding One Hundred Fifty Dollars. On loans with
cash advance not exceeding one hundred fifty dollars, a charge not to
exceed two dollars and fifty cents per month if contracted for in writing
by the borrower, may be charged in lieu of interest, and such loans may
be repaid in weekly payments, with four weeks constituting a month.
(2) Loans Over One Hundred Fifty Dollars But Not Exceeding Two
Thousand Dollars. On loans with a cash advance exceeding one hundred
fifty dollars but not exceeding two thousand dollars, twenty-five dollars
per one hundred dollars on that portion of the cash advance not
exceeding six hundred dollars; eighteen dollars per one hundred dollars
on that portion of the cash advance exceeding six hundred dollars but not
exceeding one thousand dollars; and twelve dollars per one hundred
dollars on that portion of the cash advance exceeding one thousand
dollars but not exceeding two thousand dollars when the loan is made
payable over a period of one year, and proportionately at those rates over
a longer or shorter period of time.
In addition to the finance charges authorized in subparagraphs (1) and
(2) of this subsection (a), a licensee under this chapter may contract for
and receive an initial charge in such an amount as may be agreed upon in
writing with the borrower, but not to exceed seven percent of the cash
advance or fifty-six dollars, whichever is the lesser, for the expenses
including, but not limited to, any attorney's fees and broker's fees, then
or theretofore incurred and the services then or theretofore rendered by
the lender incident to the loan or the security therefor, such as
investigating the moral and financial standing of the borrower,
investigating the security, title and similar investigations and for closing
the loan, including any and all expenses incurred or services rendered at
the request of the borrower or on his behalf in connection with the loan.
Such initial charge may not be contracted for and received on any
renewal loan more often than once in a three-month period. Upon any
loan made to the borrower of a sum in excess of the amount on which
the initial charge may have been charged within the three-month period,
then the initial charge may be contracted for and received on the excess.
The initial charge on loans not exceeding one hundred fifty dollars is a
one-time charge, not a per annum charge and is not subject to refund.
The initial charge on loans in excess of one hundred fifty dollars is a
one-time charge, not a per annum charge and shall be subject to refund
upon prepayment of the loan. The amount of the refund or refund credit
shall represent at least as great a proportion of the total charges as the
sum of the periodical time balances after the date of the prepayment
bears to the sum of all periodical time balances under the schedule of
payments in the loan contract.
(3) Loans Over Two Thousand But Not Over Seventy-Five Hundred
Dollars. On loans with a cash advance exceeding two thousand dollars
but not exceeding seventy-five hundred dollars, the finance charges
authorized in subparagraphs (1) and (2) of this subsection (a) shall not be
permitted on any part of the loan. On such loans a licensee under this
chapter may contract for and receive finance charges not to exceed nine
dollars per one hundred dollars of the cash advance, when the loan is
made payable over a period of one year, and proportionately at that rate
over a longer or shorter period.
In addition to the finance charges authorized in subparagraph (3) of
this subsection (a), a licensee under this chapter may contract for and
receive an initial charge in such an amount as may be agreed upon in
writing with the borrower, but not to exceed five percent of the cash
advance or two hundred dollars, whichever is lesser, for the expenses
including, but not limited to, any attorney's fees and broker's fees, then
or theretofore incurred and the services then and theretofore rendered by
the lender incident to the loan or the security therefor, such as
investigating the morals and financial standing of the borrower,
investigating the security, title and similar investigations and for closing
the loan, including any and all expenses incurred or services rendered at
the request of the borrower or on his behalf in connection with the loan.
The initial charge may not be contracted for or received on any renewal
loan made to the same borrower more often than once in a twelve-month
period. Upon any loan made to the borrower of a sum in excess of the
amount on which the initial charge may have been charged within the
twelve-month period, then the initial charge may be contracted for and
received on the excess. If a loan is renewed or financed after the
expiration of the initial twelve-month period, the initial charge may not
exceed two percent of the cash advance. The initial charge is a one-time
charge, not a per annum charge and shall be subject to refund upon
prepayment of the loan. The amount of the refund or refund credit shall
represent at least as great a proportion of the total charges as the sum of
the periodical time balances after the date of the prepayment bears to the
sum of all periodical time balances under the schedule of payments in the
loan contract."
Conditions, premiums, and charges of insurance
SECTION 4. Section 34-29-160 of the 1976 Code, as last amended by
Act 181 of 1993, Section 524, is further amended to read:
"Section 34-29-160. Subject to the conditions provided in this
section and notwithstanding any other provisions of this chapter,
reasonable insurance may be sold to and required of the borrower for
insuring personal property securing a loan and for insuring the life and
earning capacity of not more than two parties obligated on the loan other
than accommodation parties.
Property insurance shall be in an amount not to exceed the reasonable
value of the property insured and for the customary term approximating
the term of the loan contract. It shall be optional with the borrower to
obtain such insurance in an amount greater than the amount of the loan
or for a longer term.
Life insurance must be in an amount not to exceed the approximate
amount of the loan and for a term not exceeding the approximate term of
the loan contract. Accident and health insurance and unemployment
insurance, or both, must provide periodic benefits which may not exceed
an amount which approximately equals the amount of each periodic
installment payment to be made under the loan contract. However, when
a loan is discharged or a new policy or policies of insurance are issued,
the life, property, or accident and health insurance or all three on the
prior obligation must be canceled and the unearned portion of the
insurance premium or premiums, or identifiable charge, must be refunded
to the borrower. However, the method of refunding the premiums on the
policies must be pursuant to the Rule of 78 or the Sum of the Digits
Method, except that no refund under two dollars must be made; the
insurance company shall calculate its reserves on the policies in the same
manner or, in the case of credit life insurance, in accordance with a
mortality table and interest assumption used for ordinary life policies.
Notwithstanding this requirement, if the property insurance policy or
policies cover the insurable interest of the borrower as well as the lender,
the policy or policies may be continued in force at the request of the
borrower.
This section does not require a creditor to grant a refund or credit of a
life insurance premium to the debtor if any refund or credit due to the
debtor under this section is less than two dollars.
If the coverage provides accident and health benefits, the policy or
certificate shall contain a provision that if the insured obligor is disabled,
as defined in the policy, for a period of more than three days, benefits
shall commence as of the first day of disability, provided that accident
and health insurance shall not be allowed on loans with a cash advance
of less than one hundred dollars.
All insurance sold or provided pursuant to this section shall bear a
reasonable and bona fide relation to the existing hazard or risk of loss
and shall be written by an agent or agency licensed in this State in an
insurance company authorized to conduct such business in this State. A
licensee shall not require the purchasing of insurance from the licensee or
any employee, affiliate, or associate of the licensee, as a condition
precedent to the making of a loan and shall not decline existing insurance
where such insurance is provided by an insurance company authorized to
conduct such business in this State.
The licensee shall within thirty days after the loan is made, deliver to
the borrower, or if more than one, to one of them, a policy or certificate
of insurance covering any insurance procured by or through the licensee
or any employee, affiliate or associate of the licensee, which shall set
forth the amount of any premium or identifiable charge which the
borrower has paid or is obligated to pay, the amount of insurance, the
term of insurance, and a complete description of the risks insured. Such
policy or certificate may contain a mortgage clause or other appropriate
provisions to protect the insurable interest of the licensee.
Notwithstanding any other provision of this chapter, any gain or
advantages in the form of commission, dividend, identifiable charge or
otherwise, to the licensee or to any employee, affiliate or associate of the
licensee from such insurance or its sale shall not be deemed to be
additional or further interest or charge in connection with such a
loan.
Any accident and health or property insurance sold in conjunction with
this chapter must be written on forms and at rates approved by the South
Carolina Department of Insurance, provided that a minimum charge of
two dollars may be made, pursuant to reasonable regulations adopted by
it and having as their purpose the establishment and maintenance of
premium rates which are reasonably commensurate with the coverage
afforded and which are adequate, not excessive, and not unfairly
discriminatory giving due consideration to past or prospective loss
experience within or without this State, to dividends, savings, or
unabsorbed premium deposits allowed or returned by insurers to
borrowers, to reasonable expense allowances necessary to achieve proper
risk distribution and spread, and to all other relevant factors within or
without this State. These regulations may include reasonable
classification systems or programs based upon identifiable and
measurable variations in the hazards or expense requirements and may
include statistical plans, systems, or programs, which the insurers may be
required to adopt, for the purpose of providing that statistical information
and data as may be necessary or reasonably appropriate to the
determination of premium rates or rate levels. The premium rates and
rate levels must be calculated to produce and maintain a ratio of losses
incurred, or reasonably expected to be incurred, to premiums earned, or
reasonably expected to be earned, of not less than fifty percent, and rates
producing a lesser loss ratio are considered excessive.
Credit life insurance premiums for each one hundred dollars of
indebtedness are considered reasonable and may be charged if they are
not greater than the amounts given in the following table times the
number of years, or fraction of a year, that the indebtedness is scheduled
to continue, subject to a minimum charge of three dollars:
Decreasing Balance Level Balance
Individual $ .65 $1.30
Joint Insurance $1.08 $2.16"
Definitions added
SECTION 5. Section 37-1-301 of the 1976 Code is amended by adding
appropriately numbered subsections to read:
"( ) `Debt collector' means any person who collects, attempts
to collect, directly or indirectly, debts due or asserted to be owed or due
another. The term also includes a creditor who collects, attempts to
collect, directly or indirectly, his own debts.
( ) `Licensee' means a supervised lender licensed under Section
37-3-503.
( ) `Cash advance' means the amount of cash or its equivalent that
the borrower actually receives or is paid out at his direction or on his
behalf."
Definition revised
SECTION 6. Section 37-1-301(10) of the 1976 Code is amended to
read:
"(10) `Consumer' means the buyer, lessee, or debtor to whom
credit is extended in a consumer credit transaction. In addition, for
purposes of Chapters 10, 11, 13, and 15 of this title, as well as Sections
37-5-108, 37-6-108, 37-6-117(i), and 37-6-118, the term also
includes:
(1) a natural person who is a purchaser or lessee or prospective
purchaser or lessee in any transaction arising out of the production,
promotion, sale, or lease of consumer goods or services; or
(2) a natural person who is the object of a solicitation or offer
relating to a contest, game, or prize offer subject to Chapter
15."
Index of definitions revised
SECTION 7. Section 37-1-303 of the 1976 Code is amended to read:
"Section 37-1-303. Definitions in this title and the sections in
which they appear are:
`Actuarial method' - Section 37-1-301(1)
`Administrator' - Section 37-1-301(2)
`Administrator' - Section 37-6-103
`Agreement' - Section 37-1-301(3)
`Agricultural purpose' - Section 37-1-301(4)
`Alternative mortgage loan' - Section 37-1-301(5)
`Amount financed' - Section 37-2-111
`Assumption' - Section 37-1-301(5A)
`Billing cycle' - Section 37-1-301(6)
`Card holder' - Section 37-1-301(7)
`Card issuer' - Section 37-1-301(8)
`Cash price' - Section 37-2-110
`Cash Advance' - Section 37-1-301( )
`Conspicuous' - Section 37-1-301(9)
`Consumer' - Section 37-1-301(10)
`Consumer credit insurance' - Section 37-4-103
`Consumer credit sale' - Section 37-2-104
`Consumer credit transaction' - Section 37-1-301(11)
`Consumer lease' - Section 37-2-106
`Consumer loan' - Section 37-3-104
`Contested case' - Section 37-6-402(1)
`Credit' - Section 37-1-301(12)
`Credit Insurance Act' - Section 37-4-103
`Creditor' - Section 37-1-301(13)
`Credit service charge' - Section 37-2-109
`Debt Collector' - Section 37-1-301( )
`Debtor' - Section 37-1-301(14)
`Earnings' - Section 37-1-301(15)
`Federal Truth-in-Lending Act' - Section 37-1-302
`Goods' - Section 37-2-105(1)
`Home solicitation sale' - Section 37-2-501
`Lender' - Section 37-3-107(1)
`Lender credit card or similar arrangement' - Section
37-1-301(16)
`License' - Section 37-6-402(2)
`Licensee' - Section 37-1-301( )
`Licensing' - Section 37-6-402(3)
`Loan' - Section 37-3-106
`Loan finance charge' - Section 37-3-109
`Merchandise certificate' - Section 37-2-105(2)
`Official fees' - Section 37-1-301(17)
`Organization' - Section 37-1-301(18)
`Party' - Section 37-6-402(4)
`Payable in installments' - Section 37-1-301(19)
`Person' - Section 37-1-301(20)
`Person related to' - Section 37-1-301(21)
`Precomputed' (loan) - Section 37-3-107(2)
`Precomputed' (sale) - Section 37-2-105(7)
`Presumed' or `presumption' - Section 37-1-301(22)
`Principal' - Section 37-3-107(3)
`Residence' - Section 37-1-301(23)
`Residential manufactured home' - Section 37-1-301(24)
`Residential real property' - Section 37-1-301(25)
`Restricted lender' - Section 37-3-501(4)
`Restricted loan' - Section 37-3-501(3)
`Revolving charge account' - Section 37-2-108
`Revolving loan account' - Section 37-3-108
`Rule' - Section 37-6-402(5)
`Sale of an interest in land' - Section 37-2-105(6)
`Sale of goods' - Section 37-2-105(4)
`Sale of services' - Section 37-2-105(5)
`Seller' - Section 37-2-107
`Seller credit card' - Section 37-1-301(26)
`Services' - Section 37-2-105(3)
`Supervised financial organization' - Section 37-1-301(27)
`Supervised lender' - Section 37-3-501(2)
`Supervised loan' - Section 37-3-501(1)."
Allocation to principal
SECTION 8. Section 37-2-207(5) of the 1976 Code is amended to
read:
"(5) Notwithstanding subsection (3), and except for subsection
(4), no less than forty percent of any scheduled minimum payment for
that billing cycle must be applied to principal reduction in that billing
cycle, provided, however, that failure to apply the forty percent of a
scheduled minimum payment is not a violation of this subsection when
the consumer has agreed in writing to a promotion offered by the creditor
that includes deferred payments, deferred or waived finance charges, a
combination thereof, or other special financing terms. Such exception
shall only apply during the period of time necessary to comply with the
provisions of the promotional agreement identified in writing to the
customer."
Finance charges revised
SECTION 9. Section 37-3-201(1) of the 1976 Code is amended to
read:
"(1) With respect to a consumer loan, including a loan pursuant
to open-end credit, a lender who is not a supervised lender may contract
for and receive a finance charge, calculated according to the actuarial
method, not exceeding twelve percent per year. With respect to a
consumer loan made pursuant to open-end credit, the finance charge shall
be deemed not to exceed twelve percent per year if the finance charge
contracted for and received does not exceed a charge for each monthly
billing cycle which is one percent of the average daily balance of the
open-end account in the billing cycle for which the charge is made. The
average daily balance of the open-end account is the sum of the amount
unpaid each day during that cycle divided by the number of days in the
cycle. The amount unpaid on a day is determined by adding to any
balance unpaid as of the beginning of that day all purchases, loans, and
other debits and deducting all payments and other credits made or
received as of that day. If the billing cycle is not monthly, the finance
charge shall be deemed not to exceed twelve percent per year if the
finance charge contracted for and received does not exceed a percentage
which bears the same relation to one percent as the number of days in the
billing cycle bears to three hundred sixty-five divided by twelve. A
billing cycle is monthly if the closing date of the cycle is the same date
each month or does not vary by more than four days from the regular
date."
Finance charges revised
SECTION 10. Section 37-3-201(2) of the 1976 Code is amended to
read:
"(2) With respect to a consumer loan, including a loan pursuant
to open-end credit, a supervised lender may contract for and receive a
loan finance charge as provided:
(a) on loans with a cash advance not exceeding six hundred dollars,
a maximum charge not exceeding the maximum charges imposed in
Section 34-29-140 as disclosed as an annual percentage rate, provided
that a supervised lender may impose a finance charge at a rate less than
provided in Section 34-29-140, and provided further that the maximum
charge shall not exceed the rate posted and filed pursuant to Section
37-3-305;
(b) on loans with a cash advance exceeding six hundred dollars, and
on all loans, regardless of the dollar amount, made by Supervised
Financial Organizations, any rate filed and posted pursuant to Section
37-3-305; or
(c) on loans of any amount, eighteen percent per year on the unpaid
balances of principal."
Posting of rates
SECTION 11. Section 37-3-305 of the 1976 Code, as last amended by
Act 142 of 1991, is further amended by adding an appropriately
numbered subsection to read:
"( ) On loans with a cash advance not exceeding six hundred
dollars, a licensed lender may not post a rate which exceeds the
maximum charges imposed in Section 34-29-140 as disclosed as an
annual percentage rate or that rate filed and posted pursuant to this
section, whichever is less."
Meaning of supervised loan
SECTION 12. Section 37-3-501(1) of the 1976 Code is amended to
read:
"(1) `Supervised loan' means a consumer loan in which the rate
of the loan finance charge exceeds twelve percent per year as determined
according to the provisions on the loan finance charge for consumer
loans (Section 37-3-201)."
Information required
SECTION 13. Section 37-3-505 of the 1976 Code is amended to
read:
"Section 37-3-505. (1) Every licensee shall maintain records in
conformity with generally accepted accounting principles and practices in
a manner that will enable the State Board of Financial Institutions to
determine whether the licensee is complying with the provisions of this
title. The recordkeeping system of a licensee shall be sufficient if he
makes the required information reasonably available. The records need
not be kept in the place of business where supervised loans are made, if
the board is given free access to the records wherever located. The
records pertaining to any loan, including the certified maximum rate chart
in effect at the time the loan was made, need not be preserved for more
than two years after making the final entry relating to the loan, but in the
case of a revolving loan account the two years is measured from the date
of each entry.
(2) On or before April fifteenth each year every licensee shall file
with the board a composite annual report in the form prescribed by the
board relating to all supervised loans made by him. The board shall
consult with comparable officials in other states for the purpose of
making the kinds of information required in annual reports uniform
among the states.
(3) The report shall include, but is not limited to, the following:
(a) the total number of loans and aggregate dollar amounts made by
the lender which renewed existing accounts;
(b) the total number of new loans and aggregate dollar amounts
made to former borrowers;
(c) the total number of loans and aggregate dollar amounts made to
new borrowers;
(d) the total number of loans and aggregate dollar amounts which
received a final entry, as provided in subsection (a), other than by
renewal;
(e) the total number of renewals in which the borrower received a
cash advance which was less than ten percent of the net outstanding loan
balance at the time of renewal;
(f) the total number of loans and aggregate dollar amounts
outstanding at the beginning of the reporting period;
(g) the total number of loans and aggregate dollar amounts
outstanding at the end of the reporting period;
(h) the highest annual percentage rate charged by the lender on
loans of various sizes; and
(i) the most frequent annual percentage rate charged by the lender
on loans of various sizes.
(4) Information contained in annual reports shall be confidential and
may be published only in composite form."
What constitutes a supervised loan
SECTION 14. Section 37-3-511 of the 1976 Code is amended to
read:
"Section 37-3-511. Supervised loans, in which the rate of loan
finance charge exceeds twelve percent per annum, not made pursuant to a
revolving loan account, in which the principal is one thousand dollars or
less, shall be scheduled to be payable in substantially equal installments
at equal periodic intervals except to the extent that the schedule of
payments is adjusted to the seasonal or irregular income of the debtor,
and
(a) over a period of not more than thirty-seven months if the
principal is more than three hundred dollars, or
(b) over a period of not more than twenty-five months if the
principal is three hundred dollars or less."
Loan renewal limitations
SECTION 15. Chapter 3 of Title 37 of the 1976 Code is amended by
adding:
"Section 37-3-515. A licensed lender may not renew a loan of
one thousand dollars or less more than one time during any fifteen-month
period where the dollars actually given to the customer is less than ten
percent of the net outstanding loan balance at the time of
renewal."
Premium and charges for insurance
SECTION 16. Section 37-4-203(5) of the 1976 Code, as last amended
by Act 363, Section 1 of 1994, is further amended to read:
"(5) Credit life insurance premiums for each one hundred
dollars of indebtedness are considered reasonable and may be charged if
they are not greater than the amounts given in the following table times
the number of years, or fraction of a year, that the indebtedness is
scheduled to continue, subject to a minimum charge of three dollars:
Decreasing Balance Level Balance
Individual $ .65 $1.30
Joint Insurance $1.08 $2.16"
Unconscionability; remedies
SECTION 17. Section 37-5-108 of the 1976 Code is amended to
read:
"Section 37-5-108. (1) With respect to a transaction that is,
gives rise to, or leads the debtor to believe will give rise to, a consumer
credit transaction, if the court as a matter of law finds:
(a) the agreement or transaction to have been unconscionable at the
time it was made, or to have been induced by unconscionable conduct,
the court may refuse to enforce the agreement; or
(b) any term or part of the agreement or transaction to have been
unconscionable at the time it was made, the court may refuse to enforce
the agreement, enforce the remainder of the agreement without the
unconscionable term or part, or so limit the application of any
unconscionable term or part as to avoid any unconscionable result and
award the consumer any actual damages he has sustained.
(2) With respect to a consumer credit transaction, if the court as a
matter of law finds that a person has engaged in, is engaging in, or is
likely to engage in unconscionable conduct in collecting a debt arising
from that transaction, the court may grant an injunction. In addition, the
consumer has a cause of action to recover actual damages and, in an
action other than a class action, a right to recover from the person
violating this section a penalty in the amount determined by the court of
not less than one hundred dollars nor more than one thousand dollars.
For purposes of this subsection and subsection (3), the term `collecting a
debt' in a consumer credit transaction includes the collection or the
attempt to collect any rental charge or any other fee or charge or any
item rented to a lessee in connection with a consumer rental-purchase
agreement as described in Section 37-2-701(6).
(3) If it is claimed or appears to the court that the agreement or
transaction or any term or part thereof may be unconscionable, or that a
person has engaged in, is engaging in, or is likely to engage in
unconscionable conduct in collecting a debt, the parties shall be afforded
a reasonable opportunity to present evidence as to the setting, purpose,
and effect of the agreement or transaction or term or part thereof, or of
the conduct, to aid the court in making the determination.
(4) In applying subsection (1), consideration must be given to each of
the following factors, among others, as applicable:
(a) belief by the seller, lessor, or lender at the time a transaction is
entered into that there is no reasonable probability of payment in full of
the obligation by the consumer or debtor; provided, however, that the
rental renewals necessary to acquire ownership in a consumer
rental-purchase agreement shall not be construed to be the obligation
contemplated in this code section;
(b) in the case of a consumer credit sale, consumer lease, or
consumer rental-purchase agreement, knowledge by the seller or lessor at
the time of the sale or lease of the inability of the consumer to receive
substantial benefits from the property or services sold or leased;
(c) in the case of a consumer credit sale, consumer lease, consumer
rental-purchase agreement, or consumer loan, gross disparity between the
price of the property or services sold, leased, or loaned and the value of
the property, services, or loan measured by the price at which similar
property, services, or loans are readily obtainable in consumer credit
transactions by like consumers;
(d) the fact that the creditor contracted for or received separate
charges for insurance with respect to a consumer credit sale, consumer
loan, or consumer rental-purchase agreement with the effect of making
the sale or loan considered as a whole, unconscionable, including the sale
of insurance where the consumer could receive no potential benefit as
referenced in Section 37-4-106(1)(a);
(e) the fact that the seller, lessor, or lender has knowingly taken
advantage of the inability of the consumer or debtor reasonably to protect
his interests by reason of physical or mental infirmities, ignorance,
illiteracy, inability to understand the language of the agreement, or
similar factors;
(f) taking a nonpurchase money nonpossessory security interest in
household goods defined as the following: clothing, furniture,
appliances, one radio and one television, linens, china, crockery,
kitchenware, and personal effects (including wedding rings) of the
consumer and his or her dependents; provided, that when a purchase
money consumer credit transaction is refinanced or consolidated, the
security lawfully collateralizing the prior consumer credit transaction can
continue to secure the new consumer credit transaction, even if the new
consumer credit transaction is for a larger amount or is in other respects
a nonpurchase money consumer credit transaction; and provided further,
that a nonpurchase money, nonpossessory security interest may be taken
in the following:
(i) work of art;
(ii) electronic entertainment equipment (except one television and
one radio);
(iii) items acquired as antiques which are over one hundred years
of age;
(iv) jewelry (except wedding rings).
In construing subsection (f), the courts shall be guided by the
interpretations and rulings of the federal courts and the Federal Trade
Commission to the Credit Trade Regulation Rule (16 C.F.R. PART
444).
(5) In applying subsection (2), consideration shall be given to each of
the following factors, among others, as applicable:
(a) using or threatening to use force, violence, or criminal
prosecution against the consumer or members of his family, including
harm to the physical person, reputation, or property of any person;
(b) communicating with the consumer or a member of his family at
frequent intervals during a twenty-four hour period or at unusual hours or
under other circumstances so that it is a reasonable inference that the
primary purpose of the communication was to harass the consumer. The
term `communication' means the conveying of information regarding a
debt directly or indirectly to any person through any medium. A creditor
or debt collector may not:
(i) communicate with a consumer at any unusual time or place
known or which should be known to be inconvenient to the consumer. In
the absence of knowledge of circumstances to the contrary, it may be
assumed that a convenient time to communicate with a consumer is
between 8 a.m. and 9 p.m.; or
(ii) communicate with a consumer who is represented by an
attorney when such fact is known to the creditor or debt collector unless
the attorney consents to direct communication or fails to respond within
ten days to a communication;
(iii) contact a consumer at his place of employment after the
consumer or his employer has requested in writing that no contacts be
made at such place of employment or except as may be otherwise
permitted by statute or to verify the consumer's employment;
(iv) communicate with anyone other than the consumer, his
attorney, a consumer reporting agency if otherwise permitted by law, the
attorney of the creditor or debt collector, unless the consumer or a court
of competent jurisdiction has given prior direct permission;
(v) use obscene or profane language or language the natural
consequence of which is to abuse the hearer or reader;
(vi) publish a list of consumers who allegedly refuse to pay
debts, except to a consumer reporting agency;
(vii) cause a telephone to ring repeatedly during a twenty-four
hour period or engage any person in a telephone conversation with intent
to annoy, abuse, or harass any person at the called number;
(viii) advertise for sale any debt to coerce payment of the debt;
(ix) communicate with a consumer regarding a debt by
postcard;
(x) deposit or threaten to deposit any postdated check or other
postdated payment instrument requested by the creditor prior to the date
on such check or instrument;
(xi) take or threaten to take any nonjudicial action to effect
dispossession or disablement of property if:
(aa) there is no present right to possession of the property
claimed as collateral through an enforceable security interest or other
ownership interest;
(bb) there is no present intention to take possession of the
property; or
(cc) the property is exempt by law from such dispossession or
disablement; or
(xii) cause charges to be incurred by any person for
communications to the consumer by concealment of the true purpose of
the communication, such charges include, but are not limited to, collect
telephone calls and telegram fees.
(c) using fraudulent, deceptive, or misleading representations in
connection with the collection of a consumer credit transaction. Such
false representations shall include:
(i) the character, amount, or legal status of any debt;
(ii) any services rendered or fees which may be received, unless
such fees are expressly authorized by law;
(iii) a claim of an individual that he is an attorney or that any
communication is from an attorney;
(iv) any claim or implication that nonpayment of any debt will
result in arrest, imprisonment, garnishment, seizure, or attachment unless
the remedy is legally permitted to the creditor and the claim or
implication is not used for the purpose of harassment or abuse of
process;
(v) a claim or implication that the consumer committed any crime
or other conduct to disgrace the consumer; or
(vi) any written communication which simulates or appears to be
a document authorized, issued, or approved by any state or federal
agency or court or creates a false impression as to its source;
(d) causing or threatening to cause injury to the consumer's
reputation or economic status by disclosing information affecting the
consumer's reputation for creditworthiness with knowledge or reason to
know that the information is false; communicating with the consumer's
employer before obtaining a final judgment against the consumer, except
as permitted by statute or to verify the consumer's employment;
disclosing to a person, with knowledge or reason to know that the person
does not have a legitimate business need for the information, or in any
way prohibited by statute, information affecting the consumer's credit or
other reputation; or disclosing information concerning the existence of a
debt known to be disputed by the consumer without disclosing that
fact;
(e) engaging in conduct with knowledge that like conduct has been
restrained or enjoined by a court in a civil action by the administrator
against any person pursuant to the provisions on injunctions against
fraudulent or unconscionable agreements or conduct (Section
37-6-111).
(6) No action at law claiming unconscionable debt collection may be
commenced in any court until at least thirty days after the facts and
circumstances of any claim of unconscionable conduct in collecting a
debt arising out of a consumer credit transaction has been filed in writing
with the administrator of the Department of Consumer Affairs. The
administrator shall immediately provide to the person or organization
complained against with a copy of any complaint alleging unconscionable
debt collection practices filed with the Department of Consumer Affairs.
The administrator shall immediately provide to the Director of the
Consumer Finance Division of the Board of Financial Institutions a copy
of any written claim of unconscionable conduct in collecting a debt filed
against a supervised lender under this title or a restricted lender under
Title 34. A creditor or debt collector may only take such action as is
authorized by law to protect its collateral during the thirty-day state
agency review period. The administrator shall take immediate steps to
investigate, evaluate, and attempt to resolve such complaints. The
administrator and director shall jointly take immediate steps to
investigate, evaluate, and attempt to resolve complaints involving
supervised and restricted lenders. If in an action, properly filed after the
thirty-day state agency review period with regard to conduct in collecting
a debt arising out of a consumer credit transaction, in which
unconscionability is claimed the court finds unconscionability pursuant to
subsection (1) or (2), the court shall award reasonable fees to the attorney
for the consumer or debtor. If the court does not find unconscionability
and the consumer or debtor claiming unconscionability has brought or
maintained an action he knew to be groundless, the court may award
reasonable fees to the attorney for the party against whom the claim is
made. In determining attorney's fees, the amount of the recovery on
behalf of the consumer is not controlling.
(7) The remedies of this section are in addition to remedies available
for the same conduct under law other than this title.
(8) For the purpose of this section, a charge or practice expressly
permitted by this title is not in itself unconscionable.
(9) Nothing in this title may be construed to prevent a finding of
unconscionability where a creditor assesses an origination charge, prepaid
finance charge, service, or other prepaid charge which substantially
exceeds the usual and customary charge for the particular type of
consumer credit transaction. In such a transaction the court shall
consider the relative sophistication of the debtor and the creditor, the
relative bargaining power of the debtor and creditor, and any oral or
written representations made by the creditor regarding the credit service
charge or the loan finance charge of the consumer credit
transaction." Development of a pamphlet
SECTION 18. Section 37-6-117 of the 1976 Code, as last amended by
Act 142 of 1991, is further amended by adding an appropriately
numbered subsection to read:
"( ) Develop a written pamphlet that explains the rights and
responsibilities of consumers who obtain from a licensed lender consumer
loans under this title and Title 34 for distribution in all licensed consumer
loan offices. Such pamphlet shall include the names, addresses, and
telephone numbers of state agencies responsible for enforcing the
provisions of this title and Title 34. Such pamphlet shall be given to a
consumer at the time the initial loan by a licensed lender is made
whenever the amount financed is two thousand dollars or less and shall
be readily available to all consumers at all times in each licensed
consumer loan office. The administrator shall consult with, and seek
input from representatives of consumers, the consumer finance industry,
and the Director of the Consumer Finance Division of the Board of
Financial Institutions. Each licensed lender shall be responsible for
reproducing and distributing the pamphlet finally approved and
authorized by the administrator. The pamphlet developed under this
subsection shall be provided to consumers as of January 1,
1996."
Election
SECTION 19. Section 37-9-102 of the 1976 Code is amended to
read:
"Section 37-9-102. (A) All persons now or hereafter holding a
license under the provisions of Chapter 29 of Title 34, as amended, may
elect to be licensed to make supervised loans under this title pursuant to
the part on Supervised Loans (Part 5) of the Chapter on Loans (Chapter
3), provided, however, that all persons related to such persons shall make
the same election. Upon such election at any time hereafter in writing to
the Board of Financial Institutions, the lender shall be deemed to have
surrendered his license to lend under Chapter 29 of Title 34 and to have
obtained a license to lend under this title. As soon as is practicable after
the board receives such writing it shall issue a new certificate identifying
the lender as a Supervised Lender. The only requirements that the board
may impose for licensure under this section are:
(1) the election must be stated in writing;
(2) all persons related to the electing lender must also have made
such election; and
(3) the person making any such election must then hold a currently
valid license under Chapter 29 of Title 34.
(B) A lender licensed to make supervised loans under this title under
Chapter 3 of Title 37, who was previously licensed under the provisions
of Chapter 29 of Title 34, as amended, may elect to again be licensed
under Chapter 29 of Title 34, provided, however, that all persons related
to such persons shall make the same election. Upon such election, which
must be made in writing to the Board of Financial Institutions prior to
January 1, 1997, the lender shall be deemed to have surrendered his
license to lend under Chapter 3 of Title 37 and to have obtained a license
to lend under Title 34. As soon as practicable after the board receives
such writing, it shall issue a new certificate identifying the lender as a
Restricted Lender under Title 34. The only requirements that the board
may impose for licensure under this section are:
(1) the election must be stated in writing;
(2) all persons related to the electing lender must also have made
such election; and
(3) the person making any such election must then hold a currently
valid license under Chapter 3 of Title 37."
Committee reviews of industry
SECTION 20. (A) On or after July 1, 1997, a review of the consumer
finance industry shall be commenced by a legislative study committee in
order to study the impact of this act. The committee shall report its
findings and recommendations, if any, to the General Assembly by
January 1, 1998. The committee shall be composed of three members of
the House of Representatives, to be appointed by the Speaker; three
members of the Senate, to be appointed by the President Pro Tempore;
the State Consumer Advocate, or his designee; and the Director of the
Consumer Finance Division of the State Board of Financial Institutions,
or his designee. The committee shall elect its chairman from among its
members. The committee shall utilize the existing staff of the Senate
Banking and Insurance Committee, or its successor in interest; the
existing staff of the Labor, Commerce and Industry Committee of the
House of Representatives, or its successor in interest; and such other
legislative staff members as may be available to the chairman. The
committee shall dissolve upon presentation of its report.
(B) On or after July 1, 1998, a second review of the consumer finance
industry shall be commenced by a legislative study committee in order to
further study the impact of this act and any subsequent amendments to
the consumer finance laws. The committee shall report its findings and
recommendations, if any, to the General Assembly by January 1, 1999.
The committee shall be composed of three members of the House of
Representatives, to be appointed by the Speaker; three members of the
Senate, to be appointed by the President Pro Tempore; the State
Consumer Advocate, or his designee; and the Director of the Consumer
Finance Division of the State Board of Financial Institutions, or his
designee. The committee shall elect its chairman from among its
members. The committee shall utilize the existing staff of the Senate
Banking and Insurance Committee, or its successor in interest; the
existing staff of the Labor, Commerce and Industry Committee of the
House of Representatives, or its successor in interest; and such other
legislative staff members as may be available to the chairman. The
committee shall dissolve upon presentation of its report.
Time effective
SECTION 21. This act takes effect January 1, 1996, except that Section
37-2-207(5) of the 1976 Code, as amended by this act, takes effect upon
approval by the Governor.
Became law without the signature of the Governor -- 6/13/95. |