South Carolina Legislature


 

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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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