H 4196 Session 110 (1993-1994)
H 4196 General Bill, By Harvin and L.S. Whipper
A Bill to enact the "South Carolina Sale of Checks Act", provide for the
administration and enforcement of this Act by the Department of Consumer
Affairs, and provide for related matters, including a licensing procedure and
the promulgation of regulations.
05/13/93 House Introduced and read first time HJ-33
05/13/93 House Referred to Committee on Labor, Commerce and
Industry HJ-33
04/20/94 House Committee report: Favorable with amendment Labor,
Commerce and Industry HJ-2
05/04/94 House Amended HJ-27
05/04/94 House Objection by Rep. Trotter, Kirsh, Simrill &
Witherspoon HJ-34
05/04/94 House Objection by Rep. Marchbanks HJ-34
05/19/94 House Objection withdrawn by Rep. Simrill HJ-44
06/01/94 House Tabled HJ-385
AMENDED--NOT PRINTED IN THE HOUSE
Amendment No. 1 (Doc Name
L:\council\legis\amend\BBM\9100JM.94)
May 4, 1994
H. 4196
Introduced by REPS. Harvin and Whipper
S. Printed 4/20/94--H.
Read the first time May 13, 1993.
A BILL
TO ENACT THE "SOUTH CAROLINA SALE OF CHECKS
ACT", PROVIDE FOR THE ADMINISTRATION AND
ENFORCEMENT OF THIS ACT BY THE DEPARTMENT OF
CONSUMER AFFAIRS, AND PROVIDE FOR RELATED MATTERS,
INCLUDING A LICENSING PROCEDURE AND THE
PROMULGATION OF REGULATIONS.
Amend Title To Conform
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. This act is known and may be cited as the "South
Carolina Sale of Checks Act".
SECTION 2. (1) The following financial institutions are exempt from
the licensing requirements of this act when the sale of checks takes place
in or through places of business located in this State which are
authorized to accept deposits on behalf of the financial institutions:
(a) state and federally-chartered banks;
(b) state and federally-chartered savings and loan or building and
loan associations;
(c) state and federally-chartered credit unions.
(2) Sales of checks by any of the foregoing through business
locations in this State which are not authorized to accept deposits or
through other agents, where the financial institution is domiciled outside
of this State shall be subject to the provisions of this act.
(3) A financial institution domiciled within this State may designate
agents to sell its checks at nonbanking outlets, and the place of business
of such agents shall not be construed as a branch bank, office, or facility.
The agent must be bonded and the financial institution made solely
liable for the payment of the money orders upon proper presentation and
demand. The responsibility of both the financial institution and its agent
must be carefully defined in a written agreement setting forth the duties
of both parties and providing for remuneration of the agent. Agents are
required to report on sales and transmit funds therefrom not later than
the end of the third business day following receipt of the funds.
Arrangements for daily transmission of proceeds of sales is preferable,
particularly if the volume of sales justifies. The financial institution's
blanket bond coverage shall extend to cover agency transactions and
transmission of the funds to the financial institution.
SECTION 3. (A) As used in this act, the term or terms:
(1) "Check" means any check, money order, or any
other instrument for the payment or transmission of money, whether or
not it is a negotiable instrument under the terms of Chapter 3 of Title 36,
relating to commercial paper.
(2) "Licensee" means a corporation duly licensed
pursuant to this act.
(3) "Sale" and "selling" means the
passing of title from the seller or his agent to a holder or remitter for a
price.
(4) "Board" means the State Board of Financial
Institutions.
(B) Other statutory definitions applying to this act are:
(1) "Delivery" as defined in item (14) of Section
36-1-201.
(2) "Issue" as defined in item (a) of subsection (1) of
Section 36-3-102.
(3) "Signed" as defined in item (39) of Section
36-1-201.
SECTION 4. No person or corporation, other than a bank or trust
company, the authorized agent of a licensee, or an incorporated
telegraph company which has received money at any of its offices or
agencies for immediate transmission by telegraph, shall engage in the
business of selling or issuing checks without having first obtained a
license under this act. This restriction applies to any 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 5. In order to qualify for a license under this act, an
applicant shall:
(1) satisfy the board 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; and
(2) comply with the bonding requirements, furnish the statements,
and pay the fees prescribed in this act.
SECTION 6. (A) Each application for a license must be in writing
and under oath to the board, in such form as the board prescribes, and
shall include the following:
(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 such location;
(5) the location where its initial registered office will be located
in this State; and
(6) such other data, financial statements, and pertinent
information as the board may require with respect to the applicant, its
directors, trustees, officers, members, branches, subsidiaries, affiliates,
or agents.
(B) The application must be filed together with:
(1) An investigation and supervision fee established by regulation
of the board, which is not refundable but which, if the license is granted,
shall satisfy the fee requirement for the first license year or the
remaining part thereof; and
(2) A corporate surety bond issued by a bonding company or
insurance company authorized to do business in this State and approved
by the board. The bond shall be in the principal sum of $100,000.00 and
in an additional principal sum of $5,000.00 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 principal sum shall
aggregate $250,000.00. The bond must be in a form satisfactory to the
board and shall run to the State of South Carolina for the benefit of any
check holders against the licensee or his agents. The condition of the
bond must be that the licensee will pay any and all monies that may
become due and owing the 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 shall exceed the principal sum of the
bond. Claimants against the licensee may themselves 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 and issuing checks in this State.
(C) In lieu of such corporate surety bond or bonds or of any portion
of the principal thereof, the applicant may deposit with the board or a
bank or trust company located in this State, as such applicant may
designate and the board may approve, bonds, notes, debentures, or other
obligations of the United States or any agency or instrumentality thereof
or guaranteed by the United States or the State of South Carolina or of
a municipality, county, school district, or an instrumentality of the State
of South Carolina or guaranteed by the State to an aggregate amount,
based upon the principal amount of market value, whichever is lower,
of not less than the amount of the required corporate surety bond or
portion thereof. The securities must be held to secure the same
obligations as would the surety bond; but the depositor is entitled to
receive all interest thereon and shall have the right, with the approval of
the board, to substitute other securities for those deposited and is
required to do so on written order of the board made for good cause
shown. In the event of the failure or insolvency of such licensee, the
securities, and proceeds therefrom, and the funds deposited pursuant to
this section must be applied to the payments in full of claims arising out
of transactions in this State for the sale and issuance of checks.
SECTION 7. Every licensee shall forward to the board annually a copy
of its certified audit reflecting its condition at the end of the normal
accounting period. Each licensee is also required to furnish the board an
interim financial statement on a quarterly basis between annual closing
periods. Interim financial statements may be prepared by outside
accountants or by the licensee's own accountants. In either event, such
interim financial statement must be signed by the person responsible for
preparing the same. All copies of certified audits and interim financial
statements must be forwarded to the board within forty-five days after
receipt of the report from outside accountants; however, interim
financial statements prepared internally must be provided to the board
within forty-five days from the end of the fiscal quarter.
SECTION 8. Each applicant for a license to engage in the business of
selling checks shall demonstrate its financial responsibility in
accordance with the requirements contained in Section 5 of this act. As
a minimum requirement, each applicant must exhibit tangible net worth
in accordance with generally accepted accounting practices of not less
than five percent of total assets or $50,000.00, whichever is greater;
provided, however, such required net worth may be reduced by the
aggregate amount of outstanding surety bonds in favor of all licensing
jurisdictions similar to that bond required under the provisions of
Section 6; and provided further, that the residual tangible net worth is
not less than $50,000.00.
SECTION 9. Every licensee or agent or other representative of a
licensee under this act shall display prominently on the premises where
checks, money orders, or other instruments are issued and sold a
certificate in prescribed form indicating that such sales are licensed
under the South Carolina Sale of Checks Act. Failure or refusal to so
display such certificate where such sales are made shall constitute cause
for revocation or suspension of the designation of a representative or
agent of a licensee.
SECTION 10. Upon the filing of the application in due form,
accompanied by the documents and fee prescribed in this act, the board
shall conduct an investigation to determine whether the criteria
established by Section 5 have been satisfied. If the board determines to
its satisfaction that the criteria of Section 5 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 act shall remain
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 act. 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 board may grant a single license naming both the seller
and issuer as joint licensees. In such cases, only a single license fee
shall be collected and only one corporate surety bond pursuant to
Section 6 may be required where such bond names both the seller and
issuer.
SECTION 11. A license may be renewed for the ensuing
twelve-month period upon the filing of an application conforming to the
requirements of Section 6 with such modifications as the board may
allow. Such renewal application must be filed on or after June first of
the year in which the existing license expires. No investigation fee shall
be payable in connection with such renewal application; but an annual
license fee established by regulation of the board to defray the cost of
supervision must be paid with each renewal application, which fee shall
not be refunded or prorated if the renewal application is approved and
the renewal license thereunder goes into effect on the following January
first. If a renewal application is filed with the board before July first of
any year, the license sought to be renewed shall continue in force until
the issuance by the board of the renewal license applied for or until
twenty days after the board shall have refused to issue such renewal
license.
SECTION 12. (A) A licensee shall give notice to the board 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 any creditor
or any 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 any such action or the entry of any such
judgment. The corporate surety shall, within ten days after it pays any
claim to any creditor or claimant, give notice to the board by registered
or certified mail of such payment with details sufficient to identify the
claimant or creditor and the claim or judgment so paid. Whenever the
principal sum of such bond is reduced by one or more recoveries or
payments thereon, the licensee shall furnish a new or additional bond so
that the total or aggregate principal sum of such bond or bonds shall
equal the sum required under Section 6 or shall furnish an endorsement
duly executed by the corporate surety reinstating the bond to the
required principal sum thereof. The board may, by reasonable
regulations, provide for corresponding measures with respect to deposits
made in lieu of a bond under subsection (C) of Section 6.
(B) A licensee shall give notice to the board 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 satisfaction of the board that the bond or securities required under
Section 6 have been increased accordingly. This notice must be given
quarterly, within thirty days after the end of each calendar quarter, and,
if not given, such new location shall not be considered as included under
the licensee's license under this act. At any time the board is shown that
a licensee has decreased the number of locations at or through which it
proposes to engage in the business, the board may decrease the bond or
security requirements accordingly.
(C) A bond filed with the board for the purpose of compliance with
Section 6 may not be canceled by either the licensee or the corporate
surety except upon notice to the board by registered or certified mail
with return receipt requested, the cancellation to be effective not less
than thirty days after receipt by the board of such notice and only with
respect to any breach of condition occurring after the effective date of
such cancellation.
SECTION 13. A licensee may conduct its business at one or more
locations in this State, so long as such locations have been included in
the licensee's application and reports under Section 6 and Section 12
through such agents as it may designate. The board may within ten days
after application, for cause, refuse to approve a licensee's designation of
any agent or, for cause, suspend a licensee's designation of an agent. In
such cases, the agent shall have the same procedural rights as are
provided in this act for the denial, suspension, or revocation of a
licensee's license. No additional license other than that obtained by the
licensee shall be required of any duly reported agent of a licensee. An
agent of a licensee shall sell or issue checks only at the location
designated in the licensee report to the board or at other locations of
which the board has been notified.
SECTION 14. The board shall promulgate regulations for the
administration and enforcement of this act.
SECTION 15. (A) The board 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 any provision of this act or of any regulation issued pursuant
to authority of this act or for failure of the licensee to pay, within thirty
days after it becomes final, a judgment recovered in any 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 act shall be denied and no
license granted under this article shall be suspended or revoked unless
the applicant or licensee is given a reasonable opportunity to be heard
by the board. For this purpose, the board shall give the applicant or
licensee at least twenty days' written notice of the time and place of such
hearing by registered or certified mail addressed to the principal place
of business of such applicant or licensee. Any order of the board
denying, suspending, or revoking a license shall state the grounds upon
which it is based and shall not be effective for twenty days after its
issuance. A copy thereof must be forwarded promptly by registered or
certified mail addressed to the principal place of business of such
applicant or licensee.
(C) A decision of the board denying a license, original or renewal,
is conclusive, except that it is subject to judicial review. A decision of
the board suspending or revoking a license is subject to judicial review
in accordance with the laws of this State.
SECTION 16. At the written request of any 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 act, the board
may, in its discretion, take an assignment of such claim in trust for the
benefit of the assigning claimant or creditor and may bring any legal
action necessary to collect such claim. Two or more such claims against
a licensee may be combined in one action.
SECTION 17. Every check issued in the conduct of the business
regulated by this act must be signed by the licensee or its authorized
representative, and the licensee is liable for the payment thereof to the
same extent as a drawer of a negotiable instrument, whether or not the
check is a negotiable instrument under Chapter 3 of Title 36.
SECTION 18. (A) No person or corporation shall sell checks as an
agent of a principal seller when such principal seller is subject to
licensing under this act but has not obtained a license hereunder, and any
person who does so shall be deemed to be the principal seller thereof and
not merely an agent and shall be liable to the holder or remitter as the
principal seller.
(B) No person or corporation, other than a bank or trust company,
and agent thereof, a licensee, or an agent of a licensee, shall undertake
in the course of carrying on the business regulated in this act to receive,
transmit, or handle money on behalf of another to whom he issues a
money order or a similar payment paper, and any person who does so
shall be liable to the owner of the money order or similar payment paper
for the payment thereof to the same extent as a drawer of a negotiable
instrument under Chapter 3 of Title 36.
SECTION 19. This act takes effect January 1, 1995.
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