S*1398 Session 109 (1991-1992)
S*1398(Rat #0541, Act #0452 of 1992) General Bill, By Bryan, Courtney,
S.S. Martschink, M.F. Mullinax, M.T. Rose, J.V. Smith, H.S. Stilwell, Thomas and
Wilson
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; to add Section 29-3-325 so as to provide that
the mortgagee or assignee of a mortgage is responsible for recording the
satisfaction or cancellation thereof under certain conditions and provide for
the mortgages to which this provision applies.-amended title
03/18/92 Senate Introduced and read first time SJ-8
03/18/92 Senate Referred to Committee on Banking and Insurance
04/23/92 Senate Committee report: Favorable with amendment
Banking and Insurance SJ-21
04/23/92 Senate Read second time SJ-22
04/23/92 Senate Ordered to third reading with notice of
amendments SJ-22
04/28/92 Senate Amended
04/28/92 Senate Read third time and sent to House
04/29/92 House Introduced and read first time HJ-247
04/29/92 House Referred to Committee on Labor, Commerce and
Industry HJ-247
05/19/92 House Recalled from Committee on Labor, Commerce and
Industry HJ-58
05/27/92 House Amended HJ-51
05/27/92 House Read second time HJ-52
05/27/92 House Motion noted- Reconsider vote whereby read second
time HJ-54
05/28/92 House Reconsider vote whereby read second time HJ-31
05/28/92 House Amended HJ-31
05/28/92 House Read second time HJ-32
05/28/92 House Unanimous consent for third reading on next
legislative day HJ-32
05/29/92 House Read third time and returned to Senate with
amendments HJ-42
06/02/92 Senate Non-concurrence in House amendment SJ-56
06/03/92 House House insists upon amendment and conference
committee appointed Reps. TC Alexander, L Martin
& Whipper HJ-9
06/03/92 Senate Conference committee appointed Sens. Bryan,
Fielding, Stilwell SJ-100
06/03/92 House Conference report received and adopted HJ-100
06/04/92 Senate Conference report received and adopted SJ-65
06/04/92 Senate Ordered enrolled for ratification SJ-72
06/04/92 Ratified R 541
06/15/92 Signed By Governor
06/15/92 Effective date 06/15/92
06/15/92 Act No. 452
07/09/92 Copies available
(A452, R541, S1398)
AN ACT 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; TO ADD SECTION 29-3-325 SO
AS TO PROVIDE THAT THE MORTGAGEE OR ASSIGNEE
OF A MORTGAGE IS RESPONSIBLE FOR RECORDING THE
SATISFACTION OR CANCELLATION THEREOF UNDER
CERTAIN CONDITIONS AND PROVIDE FOR THE
MORTGAGES TO WHICH THIS PROVISION
APPLIES.
Be it enacted by the General Assembly of the State of South
Carolina:
Regulation of loan brokers
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 Department of Consumer
Affairs.
(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 loan broker registered under
Chapter 58, Title 40 and acting within the scope of its certificate
of registration, or insurance company, who is licensed by and
subject to regulation or supervision of any agency of the United
States, 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 or
conceal a material fact in its business dealings with the borrower
or with the department.
Section 34-36-30. Each principal of a loan broker may be
sanctioned for the actions of the loan broker, including the loan
broker's agents or employees acting 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 order a loan broker to refund or
reimburse any advance fee or any other fee taken in violation of
Section 34-36-20 or taken as a result of a false, misleading, or
deceptive representation as described in Section 34-36-20. Such
an order may, but need not, be sought by the department in
conjunction with a cease and desist order pursuant to subsection
(B).
(D) 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 regarding any broker
if the department has reasonable suspicion the loan broker has
violated or will violate any provision of this chapter or any
regulation promulgated under it. The department may administer
oaths, examine witnesses, and issue subpoenas.
(C) The department may issue subpoenas for witnesses whose
evidence is deemed material to any investigation or examination
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 for inspection. The subpoenas may be served by
an authorized representative of the department.
(D) 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.
(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 or final action
by the department is otherwise taken. 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.
This confidentiality provision shall not prohibit:
(1) the disclosure of investigative material in
investigations that are otherwise final if the material submitted to
the other law enforcement agency is not directly related to loan
brokering business; or
(2) the disclosure of such material as is public
information after civil or criminal prosecution is filed.
(G) The department shall cooperate with and assist other state
or federal agencies in enforcing applicable regulation of loan
brokers to the extent such cooperation and assistance does not
violate this chapter or the public policy of this State. The
department may authorize such state or federal agencies to
represent it for the purpose of administering oaths, examining
witnesses, or issuing subpoenas under this chapter.
Section 34-36-60. (A) In addition to other remedies set forth
in this chapter, 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) A violation of this chapter shall
constitute an unfair trade practice under Chapter 5, Title 39, and
individual borrowers or prospective borrowers injured by
violations of this chapter have an action for damages as set forth
in Section 39-5-140.
(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."
Satisfaction of mortgages
SECTION 2. Article 5, Chapter 3, Title 29 of the 1976 Code is
amended by adding:
"Section 29-3-325. When no written instructions to the
contrary are given by the mortgagor or a closing agent, acting on
behalf of the mortgagor, to the mortgagee or to an assignee of the
mortgage, and when the mortgagee or assignee of the mortgage is
a financial institution, the mortgagee or assignee is responsible for
recording the satisfaction or cancellation of the mortgage it holds.
The financial institution may charge a reasonable fee not to
exceed twenty-five dollars to cover the cost of recording the
satisfaction or cancellation.
If the financial institution fails to record the satisfaction or
cancellation within ninety days of receipt of the full amount
necessary to satisfy the debt or obligation secured by the
mortgage, it must pay to the mortgagor upon demand a penalty in
the amount of one hundred dollars or in the alternative the
mortgagor is entitled to the remedies provided by Sections 29-3-310 and 29-3-320 if these sections apply. However, a violation of
this section is not considered to be a violation of Sections 29-3-310 and 29-3-320. Failure to pay this one hundred dollar penalty
within ten days after demand subjects the financial institution to
additional penalties of one hundred dollars for each ten days or
portion thereof the penalty remains unpaid after receipt of
demand.
The provisions of this section do not apply to `open-end credit'
plans as defined by federal law, or to mortgages containing future
advance clauses even though they secure closed-end
transactions."
Applicability
SECTION 3. Section 29-3-325 of the 1976 Code, as added by
this act, applies with respect to mortgages executed after
December 31, 1992.
Time effective
SECTION 4. This act takes effect upon approval by the
Governor.
Approved the 15th day of June, 1992. |