H 4407 Session 109 (1991-1992)
H 4407 General Bill, By H.H. Keyserling
A Bill to amend the Code of Laws of South Carolina, 1976, by adding Chapter
17, Title 37 so as to provide for the regulation and licensing by the South
Carolina Department of Consumer Affairs of businesses selling checks and money
orders and cashing checks for consideration; to provide licensing
requirements; to authorize license fees; to require financial surety,
including bonds; to permit examination of records and books; to provide
restrictions on fees charged for services; to provide grounds for revocation
and suspension; and to provide penalties.
02/12/92 House Introduced and read first time HJ-24
02/12/92 House Referred to Committee on Labor, Commerce and
Industry HJ-24
A BILL
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976,
BY ADDING CHAPTER 17, TITLE 37 SO AS TO PROVIDE FOR
THE REGULATION AND LICENSING BY THE SOUTH
CAROLINA DEPARTMENT OF CONSUMER AFFAIRS OF
BUSINESSES SELLING CHECKS AND MONEY ORDERS AND
CASHING CHECKS FOR CONSIDERATION; TO PROVIDE
LICENSING REQUIREMENTS; TO AUTHORIZE LICENSE FEES;
TO REQUIRE FINANCIAL SURETY, INCLUDING BONDS; TO
PERMIT EXAMINATION OF RECORDS AND BOOKS; TO
PROVIDE RESTRICTIONS ON FEES CHARGED FOR SERVICES;
TO PROVIDE GROUNDS FOR REVOCATION AND SUSPENSION;
AND TO PROVIDE PENALTIES.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 37 of the 1976 Code is amended by adding:
"CHAPTER 17
Licensing of Check and Money Order Sales
and Check Cashing Businesses
Article 1
Sale of Checks or Money Orders
Section 37-17-10. (A) As used in this article:
(1) `Check' means a check, money order, or other instrument
for the payment or transmission of money, whether or not it is a
negotiable instrument under the terms of Chapter 3, Title 36 relating to
commercial paper under the Uniform Commercial Code.
(2) `Department' means the South Carolina Department of
Consumer Affairs.
(3) `Licensee' means a corporation licensed by the department
pursuant to this article.
(4) `Sale' and `selling' mean the passing of title from the seller
or the seller's agent to a holder or remitter for a price.
(B) Other statutory definitions applying to this article are:
(1) `delivery' as defined in Section 36-1-201(14).
(2) `issue' as defined in Section 36-3-102(1)(a).
(3) `signed' as defined in Section 36-1-201(39).
Section 37-17-15. No person or corporation, other than a bank or
trust company, a credit union, a savings and loan association, or a
savings bank, whether state or federally chartered but domiciled in this
State, the authorized agent of a licensee, or the United States Postal
Service may engage in the business of selling or issuing checks without
having first obtained a license under this article. This restriction applies
to a nonresident person or corporation that engages in this State in the
business of selling or issuing checks through a branch, subsidiary,
affiliate, or agent in this State.
Section 37-17-20. To qualify for a license under this article an
applicant shall:
(1) satisfy the department that it is financially responsible and
appears able to conduct the business of selling checks in an honest and
efficient manner and with confidence and trust of the community;
(2) comply with the bonding requirements, furnish the statements,
and pay the fees prescribed in this article.
Section 37-17-25. (A) An application for a license must be in
writing and under oath to the department, in the form the department
prescribes, and must include:
(1) the legal name and principal office address of the
corporation applying for the license;
(2) the name, residence, and business address of each director
or equivalent official and of each officer who will be involved in selling
checks in this State;
(3) the date and place of incorporation;
(4) if the applicant has one or more branches, subsidiaries,
affiliates, agents, or other locations at or through which the applicant
proposes to engage in the business of selling or issuing checks within the
State of South Carolina, the complete name of each and the address of
each location;
(5) the location where its initial registered office will be
located in this State;
(6) other data, financial statements, and pertinent information
as the department may require with respect to the applicant, its directors,
trustees, officers, members, branches, subsidiaries, affiliates, or agents.
(B) The application must be filed with:
(1) an investigation and supervision fee established by
regulation of the department, which is not refundable but which, if the
license is granted, satisfies the fee requirement for the first license year
or the remaining part of the year;
(2) a corporate surety bond issued by a bonding company or
insurance company authorized to do business in this State and approved
by the department. The bond must be in the principal sum of one
hundred thousand dollars and in an additional principal sum of five
thousand dollars for each location, in excess of one, at or through which
the applicant proposes to engage in this State in the business of selling
or issuing checks, until the aggregate principal sum is two hundred fifty
thousand dollars, provided that the department may require additional
coverage for the adequate protection of check holders if the average
daily balances outstanding exceed two hundred fifty thousand dollars
when the department conducts its annual examination and review. If
additional coverage is required, it must be limited to one million, two
hundred fifty thousand dollars or the average daily balances outstanding
in the State for the preceding year, whichever is less. The bond must be
in a form satisfactory to the department and must run to the State of
South Carolina for the benefit of any check holder against the licensee
or agents of the licensee. The condition of the bond must be that the
licensee will pay all monies that may become due and owing any
creditor of or claimant against the licensee arising out of the licensee's
business of selling or issuing checks in this State, whether through its
own act or the acts of an agent. The aggregate liability of the surety in
no event may exceed the principal sum of the bond. Claimants against
the licensee themselves may bring an action directly on the bond. The
liability arising under this paragraph is limited to the receipt, handling,
transmission, and payment of money arising out of the licensee's
business of selling or issuing checks in this State.
(C) In lieu of a corporate surety bond or bonds or of any portion
of the principal of a bond or bonds, the applicant may deposit with the
department or a bank or trust company located in this State, as the
applicant designates and the department approves, bonds, notes,
debentures, or other obligations of the United States or an agency or
instrumentality of the United States or guaranteed by the United States
or of the State of South Carolina or of a municipality, county, school
district, or instrumentality of the State of South Carolina or guaranteed
by the State to an aggregate amount, based upon principal amount or
market value, whichever is lower, of not less than the amount of the
required corporate surety bond or portion of the bond. The securities
must be held to secure the same obligations as would the surety bond;
but the depositor is entitled to receive all interest on the securities and
has the right, with the approval of the department, to substitute other
securities for those deposited and must be required to do so on written
order of the department made for good cause shown. In the event of the
failure or insolvency of the license, the securities, any proceeds from the
securities, and the funds deposited pursuant to this section must be
applied to the payment in full of claims arising out of transactions in this
State for the sale or issuance of checks.
Section 37-17-30. Upon the filing of an application in proper form,
accompanied by the documents and fee prescribed in Section 37-17-25,
the department shall conduct an investigation to determine if the criteria
established by Section 37-17-20 have been satisfied. If the department
determines to its satisfaction that the criteria of Section 37-17-20 have
been met, it shall issue to the applicant a license to engage in the
business of selling and issuing checks in this State. A license issued
pursuant to this article remains in force and effect through the remainder
of the calendar year following its date of issuance unless earlier
surrendered, suspended, or revoked pursuant to this article. Where a
corporation engages only in the business of selling checks issued by
another corporation which is primarily obligated for payment of the
checks and the seller is a wholly owned subsidiary of or is wholly owned
by the sole corporate shareholder of the issuer, the department may grant
a single license naming both the seller and issuer as joint licensees. In
such cases, only a single license fee may be collected and only one
corporate surety bond pursuant to Section 37-17-25 may be required
where the bond names both the seller and issuer.
Section 37-17-35. A license may be renewed for the ensuing
twelve-month period upon the filing of an application conforming to the
requirements of Section 37-17-25 with modifications as the department
may allow. A renewal application must be filed on or after June first of
the year in which the existing license expires. No investigation fee may
be payable in connection with a renewal application; but an annual
license fee established by regulation of the department to defray the cost
of supervision must be paid with a renewal application and the fee may
not be refunded or prorated if the renewal application is approved and
the renewal license goes into effect on the following January first. If a
renewal application is filed with the department before July first of any
year, the license sought to be renewed continues in force until the
issuance by the department of the renewal license applied for or for
twenty days after the department refused to issue the renewal license.
Section 37-17-40. (A) A licensee shall give notice to the
department by registered or certified mail of any action which may be
brought against it and of any judgment which may be entered against it
by a creditor or a claimant, with respect to a check sold or issued in this
State, with details sufficient to identify the action or judgment, within
thirty days after the commencement of the action or the entry of the
judgment. The corporate surety, within ten days after it pays a claim to
a creditor or claimant, shall give notice to the department by registered
or certified mail of the payment with details sufficient to identify the
claimant or creditor and the claim or judgment paid. Whenever the
principal sum of a bond is reduced by one or more recoveries or
payments on the bond, the licensee shall furnish a new or an additional
bond so that the total or aggregate principal sum of the bond or bonds
equals the sum required under Section 37-17-25 or shall furnish an
endorsement executed by the corporate surety reinstating the bond to the
required principal sum of the bond. The department, by regulations,
may provide for corresponding measures with respect to deposits made
in lieu of a bond under Section 37-17-25(C).
(B) A licensee shall give notice to the department by registered or
certified mail of any increase in the number of locations at which it
engages in the business of selling or issuing checks over the number
previously reported in either its original or renewal application and shall
show to the department that the bond or securities required under
Section 37-17-25 have been increased accordingly. This notice must be
given quarterly, within thirty days after the end of each calendar quarter;
and, if not given, any new location will not be considered as included
under the licensee's license under this article. At any time the
department is shown that a licensee has decreased the number of
locations at or through which it proposes to engage in the business, the
department may decrease the bond or security requirements accordingly.
(C) A bond filed with the department for the purpose of
compliance with Section 37-17-25 may not be canceled by either the
licensee or the corporate surety except upon notice to the department by
registered or certified mail with return receipt requested, the cancellation
to be effective not less than thirty days after receipt by the department
of the notice and only with respect to a breach of condition occurring
after the effective date of the cancellation.
Section 37-17-45. A licensee may conduct its business at one or
more locations in this State, so long as the locations have been included
in the licensee's application and reports under Sections 37-17-25 and
37-17-40, and through agents as it may designate. The department
within ten days after application, for cause, may refuse to approve a
licensee's designation of an agent or, for cause, suspend a licensee's
designation of an agent. In these cases, the agent has the same
procedural rights as are provided in this article for the denial,
suspension, or revocation of a licensee's license. No additional license
other than that obtained by the licensee may be required of any properly
reported agent of a licensee. An agent of a licensee shall sell or issue
checks only at the location designated in the licensee's report to the
department or at other locations of which the department has been
notified.
Section 37-17-50. (A) The department may suspend or revoke
an original or renewal license or the designation of an agent of a licensee
on any ground on which it might refuse to issue an original license or for
a violation of a provision of this article or regulation issued under this
article or for failure of the licensee to pay, within thirty days after it
becomes final, a judgment recovered in a court within this State by a
claimant or creditor in an action arising out of the licensee's business in
this State of selling or issuing checks.
(B) No application for a license under this article may be denied
and no license granted under this article may be suspended or revoked
unless the applicant or licensee is given a reasonable opportunity to be
heard by the department. For this purpose the department shall give the
applicant or licensee at least twenty days' written notice of the time and
place of the hearing by registered or certified mail addressed to the
principal place of business of the applicant or licensee. An order of the
department denying, suspending, or revoking a license must state the
grounds upon which it is based and may not be effective for twenty days
after its rendition. A copy of the order must be forwarded promptly by
registered or certified mail addressed to the principal place of business
of the applicant or licensee.
(C) A decision of the department denying a license, original or
renewal, is conclusive, except that it may be subject to judicial review
under the Administrative Procedures Act.
Section 37-17-55. At the written request of a claimant or creditor
of a licensee whose claim is based on a transaction in this State for the
sale or issuance of a check subject to regulation under this article, the
department may take an assignment of the claim in trust for the benefit
of the assigning claimant or creditor and may bring any legal action
necessary to collect the claim. Two or more claims against a licensee
may be combined in one action.
Section 37-17-60. A check issued in the conduct of the business
regulated by this article must be signed by the licensee or the licensee's
authorized representative; and the licensee is liable for the payment of
the check to the same extent as a drawer of a negotiable instrument,
whether or not the check is a negotiable instrument under Chapter 3,
Title 36.
Section 37-17-65. (A) No person or corporation may sell checks
as an agent of a principal seller when the principal seller is subject to
licensing under this article but has not obtained a license; and a person
who does so is deemed to be the principal seller of the checks and not
merely an agent and is liable to the holder or remitter as the principal
seller.
(B) No person or corporation, other than a bank or trust company,
an agent of a bank or trust company, a licensee, or an agent of a licensee,
may undertake, in the course of carrying on the business regulated in this
article, to receive, transmit, or handle money on behalf of another to
whom the person or corporation issues a money order or a similar
payment paper; and any person or corporation who does so is liable to
the owner of the money order or similar payment paper for the payment
of the money order or similar payment paper to the same extent as a
drawer of a negotiable instrument, whether or not the money order or
similar payment paper is a negotiable instrument under Chapter 3, Title
36.
Section 37-17-70. The department may promulgate regulations for
the enforcement of this article.
Article 3
Cashing Checks, Drafts, or Money Orders
for Consideration
Section 37-17-305. As used in this article:
(1) `Department' means the South Carolina Department of
Consumer Affairs.
(2) `Licensed casher of checks' means an individual, partnership,
association, or corporation licensed by the department to engage in
business pursuant to this article.
(3) `Licensee' means a licensed casher of checks, drafts, or money
orders.
Section 37-17-310. (A) No person, partnership, association, or
corporation may engage in the business of cashing checks, drafts, or
money orders for a consideration without first obtaining a license under
this article. The term `consideration' includes a premium charged for the
sale of goods in excess of the cash price of the goods.
(B) An application for a license must be in writing and under oath
to the department, in the form the department prescribes, and must
include:
(1) the legal name, residence, and business address of the
applicant and, if the applicant is a partnership, association, or
corporation, of every member, officer, and director of the partnership,
association, or corporation;
(2) the location where the initial registered office of the
applicant will be located in this State;
(3) the complete address of any other locations at which the
applicant proposes to engage in cashing checks; and
(4) other data, financial statements, and pertinent information
as the department may require with respect to the applicant, its directors,
trustees, officers, members, or agents.
(C) The application must be filed with an investigation and
supervision fee established by regulation which is not refundable but
which, if the license is granted, satisfies the fee requirement for the first
license year or the remaining part of that year.
Section 37-17-315. (A) The department shall conduct an
investigation of every applicant to determine the financial responsibility,
experience, character, and general fitness of the applicant. The
department shall issue the applicant a license to engage in the business
of cashing checks if the department determines to its general
satisfaction:
(1) that the applicant is financially responsible and appears to
be able to conduct the business of cashing checks in an honest, fair, and
efficient manner and with the confidence and trust of the community;
(2) that the granting of the application will promote the
convenience and advantage of the area in which the business is to be
conducted.
(B) The department may not issue a license if its finds that the
applicant, or a person who is a director, officer, partner, agent,
employee, or substantial stockholder of the applicant, has been
convicted of a felony involving moral turpitude in any jurisdiction or of
a crime which, if committed within this State, would constitute a felony
involving moral turpitude under the laws of this State. For the purposes
of this article, a person is deemed to have been convicted of a crime if
the person has pleaded guilty to a charge before a court or federal
magistrate, or has been found guilty by the decision or judgment of a
court or federal magistrate or by the verdict of a jury, irrespective of the
pronouncement of sentence or the suspension of the sentence unless the
plea of guilty, or the decision, judgment, or verdict has been set aside,
reversed, or otherwise abrogated by lawful judicial process or unless the
person convicted of the crime has received a pardon from the President
of the United States or the governor or other pardoning authority in the
jurisdiction where the person was convicted. The term `substantial
stockholder', as used in this subsection, means a person owning or
controlling ten percent or more of the total outstanding stock of the
corporation in which the person is a stockholder.
(C) The license must be kept conspicuously posted in the place of
business of the licensee. The license is not transferable or assignable.
(D) A license issued pursuant to this article remains in force and
effect through the remainder of the calendar year following its date of
issuance unless earlier surrendered, suspended, or revoked pursuant to
this article.
Section 37-17-320. A license may be renewed for the ensuing
twelve-month period upon the filing of an application substantially
conforming to the requirements of Section 37-17-310 with modifications
as the department may specify and as may be necessary. A renewal
application must be filed on or after June first of the year in which the
existing license expires. No investigation fee is payable in connection
with a renewal application; but an annual license fee established by
regulation of the department to defray the cost of supervision must be
paid with a renewal application and the fee may not be refunded or
prorated if the renewal application is approved and the renewal license
goes into effect on the following January first. If a renewal application
is filed with the department before July first of any year, the license
sought to be renewed continues in force until the issuance by the
department of the renewal license applied for or for twenty days after the
department refused to issue the renewal license. The annual license fee
established by the department pursuant to this section for a licensee
which cashes checks, drafts, or money orders incidental to the retail sale
of goods and services may not exceed two hundred fifty dollars.
Section 37-17-325. To assure compliance with the provisions of this
article and in consideration of an application to renew a license pursuant
to the provisions of Section 37-17-320, the department may examine the
books and records of any licensee. Each licensee shall pay an
examination fee as established by regulation of the department to cover
the cost of an examination.
Section 37-17-330. (A) In a location licensed under this article,
there must be conspicuously posted and at all times displayed a notice
stating the charges for cashing checks.
(B) A licensee shall keep and use in its business those books,
accounts, and records as the department may require to carry into effect
the provisions of this article and the regulations promulgated under this
article. Every licensee shall preserve these books, accounts, and records
for at least two years.
(C) Before a licensee deposits with a bank a check, draft, or
money order cashed by a licensee, the check, draft, or money order must
be endorsed with the actual name under which the licensee is doing
business.
(D) No licensee may receive a check, draft, or money order with
payment deferred pending collection. Payment must be made
immediately in cash for a check, draft, or money order accepted by the
licensee. However, drafts may be accepted for collection with payment
deferred where the licensee has posted a surety bond in the same manner
as prescribed for check sales licensees under Section 37-17-25. The
amount of the surety bond must be ten thousand dollars for each location
operated by the licensee if the licensee operates three or fewer locations.
For a fourth or fifth location operated by a licensee, the amount of the
surety bond must be five thousand dollars for each location. For each
location operated by a licensee in excess of a fifth location, the amount
of the surety bond must be one thousand dollars.
(E) No licensee may cash a check, draft, or money order made
payable to a payee other than a natural person unless the licensee has
obtained previously appropriate documentation from the executive entity
of that payee clearly indicating the authority of the natural person or
persons cashing the check, draft, or money order on behalf of the payee.
(F) No licensee may indicate through advertising, signs, billhead,
or otherwise that checks may be cashed without identification of the
bearer of the check, and a person seeking to cash a check must be
required to submit reasonable identification as prescribed by the
department; however, this subsection does not prohibit a licensee from
cashing a check simultaneously with the verification and establishment
of the identity of the presenter by means other than the presentation of
identification.
(G) Within five business days after being advised by the payor
financial institution that a check, draft, or money order has been altered,
forged, stolen, obtained through fraudulent or illegal means, negotiated
without proper legal authority, or represents the proceeds of illegal
activity, the licensee shall notify the department and the solicitor for the
judicial circuit in which the check was received. In the event a check,
draft, or money order is returned to the licensee by the payor financial
institution for any of these reasons, the licensee may not release the
check, draft, or money order without the consent of the solicitor or other
investigating law enforcement authority.
Section 37-17-335. No licensed casher of checks may:
(1) charge check-cashing fees, except as otherwise provided in
this section, in excess of five percent of the face amount of the check or
draft or five dollars, whichever is greater;
(2) charge check-cashing fees in excess of three percent of the
face amount of the check or draft or five dollars, whichever is greater,
if the check or draft is the payment of any kind of state public assistance
or federal social security benefit payable to the bearer of the check or
draft; or
(3) charge check-cashing fees for personal checks or money
orders in excess of ten percent of the face amount of the personal check
or money order or five dollars, whichever is greater.
Section 37-17-340. (A) The department may suspend or revoke
a license issued pursuant to this article if, after notice and a hearing:
(1) It finds that the licensee:
(a) has committed fraud, engaged in dishonest activity, or
made a misrepresentation;
(b) has violated any provision of the banking law or any
regulation issued pursuant to the banking law or has violated any other
law in the course of the licensee's dealings as a licensed casher of
checks;
(c) has made a false statement in the application for the license
or failed to give a true reply to a question in the application;
(d) has demonstrated incompetency or untrustworthiness
to act as a licensed casher of checks; or
(e) has charged check-cashing fees, exclusive of direct costs
of verification, in unconscionable amounts which do not adequately
reflect:
(i) the level of risk associated with the cashing of
checks of a particular class using ordinary prudence and commercially
reasonable standards of identification and acceptance;
(ii) the cost of funds necessary to operate a
check-cashing business; and
(iii) the extraordinary costs for security safeguards
associated with the business location of the licensee; or
(2) It finds that a ground exists which would require or
warrant the refusal of an application for the issuance of the license if an
application were then before it.
(B) No application for a license under this article may be denied
and no license granted under this article may be suspended or revoked
unless the applicant or licensee is given a reasonable opportunity to be
heard by the department. For this purpose, the department shall give the
applicant or licensee at least twenty days' written notice of the time and
place of the hearing by registered or certified mail addressed to the
principal place of business of the applicant or licensee. A copy of the
notice of hearing must be mailed to an association of licensees registered
with the department for the purpose of receiving such notices, and the
association must be permitted to participate in the hearing, either on
behalf of the applicant or in opposition to the application. An order of
the department denying, suspending, or revoking a license must state the
grounds upon which it is based and is not effective for twenty days after
its rendition. A copy of the order must be forwarded promptly by
registered or certified mail addressed to the principal place of business
of the applicant or licensee.
(C) A decision of the department denying a license, original or
renewal, is conclusive, except that it is subject to judicial review under
the Administrative Procedures Act.
Section 37-17-345. A person, partnership, association, or
corporation and the members, officers, directors, agents, and employees
of the person, partnership, association, or corporation who violate any
of the provisions of this article are guilty of a misdemeanor and, upon
conviction, must be imprisoned for not more than one year or fined not
more than five hundred dollars, or both.
Section 37-17-350. (A) This article does not apply to a bank, trust
company, credit union, building and loan association, or savings and
loan association which is chartered under the laws of this State or under
federal law and domiciled in this State.
(B) Sections 37-7-310, 37-7-315, 37-7-320, and 37-17-340 do not
apply to a person, partnership, association, or corporation engaged in the
business of cashing checks, drafts, or money orders:
(1) incidental to the retail sale of goods or services for a
consideration of not more than one percent of the face amount of the
check, draft, or money order or one dollar a check, draft, or money
order, whichever is greater, and where the aggregate gross income
received by the person, partnership, association, or corporation as
consideration for the cashing of checks does not exceed twenty-five
thousand dollars a year for each business location; or
(2) where the aggregate gross income received by the person,
partnership, association, or corporation as consideration for cashing
checks, drafts, or money orders does not exceed the lesser of twelve
thousand dollars for each location at which checks are cashed or five
percent of the total gross income from the retail sale of goods or services
by the person, partnership, association, or corporation during its most
recently completed fiscal year.
In all other respects, these persons, partnerships, associations, or
corporations are deemed to be licensees under this article.
(C) A person, partnership, association, or corporation claiming
exemption under subsection (B)(2) shall register with the department on
or before June first of each year certifying the basis for the exemption.
A single registration accompanied by a registration fee to be established
by regulations of the department covers all locations operated by the
person, partnership, association, or corporation.
Section 37-17-355. Pursuant to the Administrative Procedures Act
the department may promulgate regulations for the enforcement of this
article."
SECTION 2. This act takes effect upon approval by the Governor.
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