H 4591 General Bill, By Wilkins, Harvin, B.H. Harwell, Haskins, K.G. Kempe, 
H.H. Keyserling, Kirsh, Meacham, R. Smith, Vaughn, Wilkes and R.M. Young
 A Bill to amend Title 34, Code of Laws of South Carolina, 1976, relating to
 banking, financial institutions, and money by adding Chapter 36 so as to
 regulate loan brokers not otherwise regulated by federal or state law, to
 provide definitions, to prohibit loan brokers from performing certain acts, to
 provide for the responsibility of principals, to provide for investigations,
 cease and desist orders, and hearing procedures with respect to loan brokers,
 to provide for administrative fines and other sanctions, to provide for
 examinations, subpoenas, hearings, and witnesses, to provide for injunctions
 to restrain violations, to provide criminal penalties for violations, and to
 authorize actions for damages.

   03/24/92  House  Introduced and read first time HJ-12
   03/24/92  House  Referred to Committee on Labor, Commerce and
                     Industry HJ-12

A BILL

TO AMEND TITLE 34, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO BANKING, FINANCIAL INSTITUTIONS, AND MONEY BY ADDING CHAPTER 36 SO AS TO REGULATE LOAN BROKERS NOT OTHERWISE REGULATED BY FEDERAL OR STATE LAW, TO PROVIDE DEFINITIONS, TO PROHIBIT LOAN BROKERS FROM PERFORMING CERTAIN ACTS, TO PROVIDE FOR THE RESPONSIBILITY OF PRINCIPALS, TO PROVIDE FOR INVESTIGATIONS, CEASE AND DESIST ORDERS, AND HEARING PROCEDURES WITH RESPECT TO LOAN BROKERS, TO PROVIDE FOR ADMINISTRATIVE FINES AND OTHER SANCTIONS, TO PROVIDE FOR EXAMINATIONS, SUBPOENAS, HEARINGS, AND WITNESSES, TO PROVIDE FOR INJUNCTIONS TO RESTRAIN VIOLATIONS, TO PROVIDE CRIMINAL PENALTIES FOR VIOLATIONS, AND TO AUTHORIZE ACTIONS FOR DAMAGES.

Be it enacted by the General Assembly of the State of South Carolina:

SECTION 1. Title 34 of the 1976 Code is amended by adding:

Section 34-36-10. As used in this chapter, unless the context otherwise requires:

(1) `Advance fee' means any consideration which is assessed or collected, prior to the closing of a loan, by a loan broker.

(2) `Borrower' means a person obtaining or desiring to obtain a loan of money, a credit card, or a line of credit.

(3) `Department' means the Securities Department of the Secretary of State.

(4) `Loan broker' means any person who:

(a) for or in expectation of consideration arranges or attempts to arrange or offers to fund a loan of money, a credit card, or a line of credit;

(b) for or in expectation of consideration assists or advises a borrower in obtaining or attempting to obtain a loan of money, a credit card, a line of credit, or related guarantee, enhancement, or collateral of any kind or nature;

(c) acts for or on behalf of a loan broker for the purpose of soliciting borrowers; or

(d) holds himself out as a loan broker.

A `loan broker' does not include any bank or savings and loan association, trust company, building and loan association, credit union, consumer finance company, retail installment sales company, securities broker-dealer, real estate broker or salesperson, attorney, Federal Housing Administration or Veterans Administration approved lender, credit card company, installment loan licensee, mortgage broker or lender, or insurance company, who is licensed by and subject to regulation or supervision of any agency of the United States, the South Carolina Department of Consumer Affairs, the South Carolina Board of Financial Institutions, or other agency of this State and is acting within the scope of the license; and also does not include subsidiaries of licensed or chartered consumer finance companies, banks, or savings and loan associations.

(5) `Principal' means any officer, director, partner, joint venturer, branch manager, or other person with similar managerial or supervisory responsibilities for a loan broker.

Section 34-36-20. No loan broker shall:

(1) assess or collect an advance fee from a borrower to provide services as a loan broker.

(2) make or use any false or misleading representations or omit any material fact in the offer or sale of the services of a loan broker or engage, directly or indirectly, in any act that operates or would operate as fraud or deception upon any person in connection with the offer or sale of the services of a loan broker, notwithstanding the absence of reliance by the buyer.

(3) make or use any false or deceptive representation in its business dealings or to the department or conceal a material fact from the department.

Section 34-36-30. Each principal of a loan broker may be sanctioned for the actions of the loan broker, including its agents or employees, in the course of business of the loan broker.

Section 34-36-40. (A) The department may investigate the actions of any person for compliance with this chapter.

(B) The department may order a loan broker to cease and desist whenever the department determines that the loan broker has violated, is violating, or will violate any provision of this chapter, any regulation promulgated by the department, or any written agreement entered into with the department.

(C) The department may impose and collect a civil administrative fine against any person found to have violated any provision of this chapter, any regulation promulgated by the department, or any written agreement entered into with the department, in any amount not to exceed five thousand dollars for each violation.

Section 34-36-50. (A) The department may make investigations and examinations upon reasonable suspicion within or outside of this State as it considers necessary to determine whether a person has violated or will violate any provision of this chapter or any regulation promulgated hereunder.

(B) The department may gather evidence in the matter. The department may administer oaths, examine witnesses, and issue subpoenas.

(C) Subpoenas for witnesses whose evidence is deemed material to any investigation or examination may be issued by the department commanding the witnesses to be or appear before the department at a time and place named and to bring those books, records, and documents as may be specified or to submit the books, records, and documents to inspection. The subpoenas may be served by an authorized representative of the department.

(D)(1) In the event of substantial noncompliance with a subpoena or subpoena duces tecum issued by the department, the department may petition the circuit court of the county in which the person subpoenaed resides or has its principal place of business for an order requiring the person to appear and fully comply with the subpoena. The court may also grant injunctive relief restraining a violation of this chapter and may grant that other relief, including but not limited to, the restraint, by injunction or appointment of a receiver, of any transfer, pledge, assignment, or other disposition of the person's assets or any concealment, alteration, destruction, or other disposition of subpoenaed books, records, or documents, as the court deems appropriate until the person has fully complied with the subpoena or subpoena duces tecum and the department has completed its investigation or examination. Costs incurred by the department to obtain an order granting, in whole or in part, the petition for enforcement of a subpoena or subpoena duces tecum must be taxed against the subpoenaed person, and failure to comply with the order is a contempt of court.

(2) When it shall appear to the department that the compliance with a subpoena or subpoena duces tecum issued by the department is essential to an investigation or examination, the department, in addition to the other remedies provided for in this chapter, may by verified petition setting forth the appropriate facts, apply to the circuit court of the county in which the subpoenaed person resides or has its principal place of business for a writ of ne exeat. The court may direct the issuance of the writ against the subpoenaed person requiring sufficient bond conditioned on compliance with the subpoena or subpoena duces tecum. The court shall cause to be endorsed on the writ a suitable amount of bond on payment of which the person named in the writ shall be freed, having a due regard to the nature of the case.

(E) Witnesses are entitled to the same fees and mileage as they may be entitled by law for attending as witnesses in the circuit court, except where the examination or investigation is held at the place of business or residence of the witness.

(F) The material compiled by the department in an investigation or examination under this chapter is confidential until the investigation or examination is complete. The investigation or examination is not deemed complete if the department has submitted the material or any part of it to any law enforcement agency or other regulatory agency for further investigation or for the filing of a criminal or civil prosecution and the investigation and prosecution have not been completed or become inactive.

Section 34-36-60. (A) Whenever the department determines, from evidence satisfactory to it, that any person has engaged, is engaged, or is about to engage in an act or practice constituting a violation of this chapter or a regulation promulgated hereunder, the department may bring action in the name and on behalf of the State against the person and any other person concerned in that practice in violation of this chapter to enjoin the person or persons from continuing the violation. In the court proceedings, the department may apply for and on due showing is entitled to have issued, the court's subpoena requiring the appearance of any defendant and his employees or agents to testify or give evidence concerning the acts or conduct or things complained of in the application for injunction, and requiring the production of documents, books, and records that may appear necessary for the hearing of the petition.

(B) In addition to all other means provided by law for the enforcement of any temporary restraining order, temporary injunction, or permanent injunction issued in the court proceedings, the court shall have the power, upon application of the department, to impound and to appoint a receiver or administrator for the property, assets, and business of the defendant, including, but not limited to, the books, records, documents, and papers appertaining thereto. The receiver or administrator, when appointed and qualified, shall have all powers and duties as to custody, collection, administration, winding up, and liquidation of this property and business as is from time to time conferred upon him by the court. In the action, the court may issue orders and decrees staying all pending suits and enjoining any further suits affecting the receiver's or administrator's custody or possession of this property, assets, and business, or in its discretion may with the consent of the chief administrative judge of the circuit, require that all these suits be assigned to the circuit court judge appointing this receiver or administrator.

(C) In addition to any other remedies provided by this chapter, the department may apply to the court hearing this matter for an order of restitution whereby the defendants in the action must be ordered to make restitution of those sums shown by the department to have been obtained by them in violation of any of the provisions of this chapter. The restitution, at the option of the court, must be payable to the administrator or receiver appointed pursuant to this section or directly to the persons whose assets were obtained in violation of this chapter.

Section 34-36-70. Any person violating any provision of this chapter is guilty of a misdemeanor and, upon conviction, must be punished by a fine not exceeding five thousand dollars or by a term of imprisonment not exceeding one year, or both. Each violation of this chapter constitutes a separate offense.

Section 34-36-80. (A) Any borrower injured by a violation of this chapter may bring an action for recovery of damages. Judgment may be entered for actual damages, but in no case less than the amount paid by the borrower to the loan broker, plus reasonable attorney's fees and costs. An award may also be entered for punitive damages.

(B) Any borrower injured by a violation of this chapter may bring an action against the surety bond or trust account, if any, of the loan broker.

(C) The remedies provided under this chapter are in addition to any other procedures or remedies for any violation or conduct authorized by law.

Section 34-36-90. (A) The department is responsible for the administration and enforcement of this chapter.

(B) The department is authorized to promulgate those regulations necessary to implement and administer the provisions of this chapter."

SECTION 2. This act takes effect upon approval by the Governor.