H 3333 Session 111 (1995-1996)
H 3333 General Bill, By W.D. Keyserling, J.M. Baxley, J. Brown, A.W. Byrd, Cave,
Cobb-Hunter, J.L. Harris, J. Hines, H.G. Hutson, Inabinett, Jennings, Lloyd,
McCraw, Moody-Lawrence, J.H. Neal, Phillips, Richardson, Scott, Sharpe,
J.S. Shissias and Spearman
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 business 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.
01/19/95 House Introduced and read first time HJ-9
01/19/95 House Referred to Committee on Labor, Commerce and
Industry HJ-9
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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