Current Status Introducing Body:House Bill Number:3996 Primary Sponsor:J. Bailey Committee Number:02 Type of Legislation:GB Subject:Credit services organizations, regulation of Residing Body:Senate Computer Document Number:436/11658.DW Introduced Date:May 14, 1991 Date of Last Amendment:Jan 30, 1992 Last History Body:Senate Last History Date:Feb 04, 1992 Last History Type:Introduced, read first time, referred to Committee Scope of Legislation:Statewide All Sponsors:J. Bailey Type of Legislation:General Bill
Bill Body Date Action Description CMN
---- ------ ------------ ------------------------------ ---
3996 Senate Feb 04, 1992 Introduced, read first time, 02
referred to Committee
3996 House Feb 04, 1992 Read third time, sent to
Senate
3996 House Jan 30, 1992 Amended, read second time
3996 House Jan 29, 1992 Committee Report: Favorable 26
with amendment
3996 House May 14, 1991 Introduced, read first time, 26
referred to Committee
View additional legislative information at the LPITS web site.
AMENDED
January 30, 1992
H. 3996
S. Printed 1/30/92--H.
Read the first time May 14, 1991.
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING CHAPTER 6 TO TITLE 39 SO AS TO PROVIDE FOR THE REGULATION OF A CREDIT SERVICES ORGANIZATION AND PROVIDE PENALTIES FOR VIOLATION.
Amend Title to Conform
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. The 1976 Code is amended by adding:
Section 39-6-10. In this chapter:
(1) `Buyer' means an individual who is solicited to purchase or who purchases the services of a credit services organization.
(2) `Consumer reporting agency' has the meaning assigned by Section 603(f), Fair Credit Reporting Act (15 U.S.C. Section 1681a(f)).
(3) `Extension of credit' means the right to defer payment of debt or to incur debt and defer its payment offered or granted primarily for personal, family, or household purposes.
Section 39-6-20. (A) A credit services organization is a person who with respect to the extension of credit by others and in return for the payment of money or other valuable consideration provides, or represents that the person can or will provide, any of the following services:
(1) improving a buyer's credit record, history, or rating;
(2) obtaining an extension of credit for a buyer; or
(3) providing advice or assistance to a buyer with regard to item (1) or (2).
(B) Exempt from this chapter are:
(1) a person authorized to make loans or extension of credit under the laws of this State or the United States who is subject to regulation and supervision by this State or the United States, or a lender approved by the United States Secretary of Housing and Urban Development for participation in a mortgage insurance program under the National Housing Act (12 U.S.C. Section 1701 et seq.);
(2) a bank or savings and loan association whose deposit or accounts are eligible for insurance by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation, or a subsidiary of such a bank or savings and loan association;
(3) a credit union doing business in this State;
(4) a nonprofit organization exempt from taxation under Section 501(c)(3) of the Internal Revenue Code of 1986;
(5) a person licensed as a real estate broker or salesman under the provisions of Chapter 57 of Title 40 acting within the course and scope of that license;
(6) a person licensed to practice law in this State acting within the course and scope of the person's practice as an attorney;
(7) a broker-dealer registered with the Securities and Exchange Commission or the Commodity Future Trading Commission acting within the course and scope of that regulation;
(8) a consumer reporting agency; and
(9) a person whose primary business is making loans secured by liens on real property.
Section 39-6-30. A credit services organization, a salesperson, agent, or representative of a credit services organization, or an independent contractor who sells or attempts to sell the services of a credit services organization may not:
(1) charge a buyer or receive from a buyer money or other valuable consideration before completing performance of all services the credit services organization has agreed to perform for the buyer, unless the credit services organization has obtained in accordance with Section 39-6-40 a surety bond in the amount required by Section 39-6-40(E) issued by a surety company authorized to do business in this State or established and maintained a surety account at a federally insured bank or savings and loan association located in this State in which the amount required by Section 39-6-40(E) is held in trust as required by Section 39-6-40(C);
(2) charge a buyer or receive from a buyer money or other valuable consideration solely for referral of the buyer to a retail seller who will or may extend credit to the buyer if the credit that is or will be extended to the buyer is substantially the same as that available to the general public;
(3) make or use a false or misleading representation in the offer or sale of the services of a credit services organization, including:
(a) guaranteeing to `erase bad credit' or words to that effect unless the representation clearly discloses that this can be done only if the credit history is inaccurate or obsolete; and
(b) guaranteeing an extension of credit regardless of the person's previous credit problem or credit history unless the representation clearly discloses the eligibility requirements for obtaining an extension of credit;
(4) engage, directly or indirectly, in a fraudulent or deceptive act, practice, or course of business in connection with the offer or sale of the services of a credit services organization;
(5) make, or advise a buyer to make, a statement with respect to a buyer's credit worthiness, credit standing, or credit capacity that is false or misleading or that should be known by the exercise of reasonable care to be false or misleading, to a consumer reporting agency or to a person who has extended credit to a buyer or to whom a buyer is applying for an extension of credit;
(6) advertise, or cause to be advertised, in any manner whatsoever, the services of a credit services organization without filing a registration statement with the Department of Consumer Affairs unless otherwise provided by this chapter.
Section 36-6-40. (A) This section applies to a credit services organization required by Section 39-6-30(1) to obtain a surety bond or establish a surety account.
(B) If a bond is obtained, a copy of it must be filed with the Department of Consumer Affairs. If a surety account is established, notification of the depository, the trustee, and the account number must be filed with the Department of Consumer Affairs.
(C) The bond or surety account required must be in favor of the State for the benefit of any person who is damaged by a violation of this chapter. The bond or surety account also must be in favor of a person damaged by the violation.
(D) A person claiming against the bond or surety account for a violation of this chapter may bring an action against the credit services organization and against the surety or trustee. The surety or trustee is liable only for damages awarded under Section 39-6-90(A) and not the punitive damages permitted under that section. The aggregate liability of the surety or trustee to all persons damaged by a credit services organization's violation of this chapter may not exceed the amount of the surety account or bond.
(E) The bond or the surety account must be in the amount of ten thousand dollars.
(F) A depository holding money in a surety account under this chapter may not convey money in the account to the credit services organization that established the account or a representative of the credit services organization unless the credit services organization or representative presents a statement issued by the Department of Consumer Affairs indicating that Section 39-6-50(F) has been satisfied in relation to the account. The Department of Consumer Affairs may conduct investigations and require submission of information as necessary to enforce this subsection.
Section 39-6-50. (A) A credit services organization shall file a registration statement with the Department of Consumer Affairs before conducting business in this State. The registration statement must contain:
(1) the name and address of the credit services organization; and
(2) the name and address of a person who, directly or indirectly, owns or controls ten percent or more of the outstanding shares of stock in the credit services organization.
(B) The registration statement also must contain either:
(1) a full and complete disclosure of a litigation or unresolved complaint filed with a governmental authority of this State relating to the operation of the credit services organization; or
(2) a notarized statement that states that there has been no litigation or unresolved complaint filed with a governmental authority of this State relating to the operation of the credit services organization.
(C) The credit services organization shall update the statement not later than the ninetieth day after the date on which a change in the information required in the statement occurs.
(D) Each credit services organization registering under this section shall maintain a copy of the registration statement in the files of the credit services organization. The credit services organization shall allow a buyer to inspect the registration statement on request.
(E) The Department of Consumer Affairs may charge each credit services organization that files a registration statement with the Department of Consumer Affairs a reasonable fee not to exceed one hundred dollars to cover the cost of filing. The Department of Consumer Affairs may not require a credit services organization to provide information other than that provided in the registration statement.
(F) The bond or surety account must be maintained until two years after the date that the credit services organization ceases operations.
Section 39-6-60. (A) Before executing a contract or agreement with a buyer or receiving money or other valuable consideration, a credit services organization shall provide the buyer with a statement in writing containing:
(1) a complete and detailed description of the services to be performed by the credit services organization for the buyer and the total cost of the services;
(2) a statement explaining the buyer's right of proceed against the bond or surety account required by Section 39-6-30;
(3) the name and address of the surety company that issued the bond, or the name and address of the depository and the trustee, and the account number of the surety account;
(4) a complete and accurate statement of the buyer's right to review any file on the buyer maintained by a consumer reporting agency, as provided by the Fair Credit Reporting Act (15 OSC. Sec. 1681 et seq.);
(5) a statement that the buyer's file is available for review at no charge on request made to the consumer reporting agency within thirty days after the date of receipt of notice that credit has been denied and that the buyer's file is available for a minimal charge at any other time;
(6) a complete and accurate statement of the buyer's right to dispute directly with the consumer reporting agency the completeness or accuracy of any item contained in a file on the buyer maintained by that consumer reporting agency;
(7) a statement that accurate information permanently cannot be removed from the files of a consumer reporting agency;
(8) a complete and accurate statement of when consumer information becomes obsolete and of when consumer reporting agencies are prevented from issuing reports containing obsolete information; and
(9) a complete and accurate statement of the availability of nonprofit credit counseling services.
(B) The credit services organization shall maintain on file, for two years after the date the statement is provided, an exact copy of the statement, signed by the buyer, acknowledging receipt of the statement.
Section 39-6-70. (A) Each contract between the buyer and credit services organization for the purchase of the services of the credit services organization must be in writing, dated, signed by the buyer and must include:
(1) a statement in type that is boldfaced, capitalized, underlined, or otherwise set out from surrounding written materials so as to be conspicuous, in immediate proximity to the space reserved for the signature of the buyer, as follows: `You, the buyer, may cancel this contract at any time before midnight of the third day after the date of the transaction. See the attached notice of cancellation form for an explanation of this right';
(2) the terms and conditions of payment, including the total of all payments to be made by the buyer, whether to the credit services organization or to another person;
(3) a full and detailed description of the services to be performed by the credit services organization for the buyer, including all guarantees and all promises of full or partial refunds, and the estimated length of time not to exceed one hundred eighty days for performing the services; and
(4) the address of the credit services organization's principal place of business and the name and address of its agent in the State authorized to receive service or process.
(B) The contract must have attached two easily detachable copies of a notice of cancellation. The notice must be in boldfaced type and in the following form:
You may cancel this contract, without any penalty or obligation within three days after the date the contract is signed.
If you cancel, any payment made by you under this contract will be returned within ten days after the date of receipt by the seller of your cancellation notice.
To cancel this contract, mail or deliver a signed dated copy of this cancellation notice or other written notice to:
(name of seller) at
(address of seller)
(place of business) not later than midnight (date). I hereby cancel this transaction.
(date)
(purchaser's signature)'
(C) The credit services organization shall give to the buyer a copy of the completed contract and all other documents the credit services organization requires the buyer to sign at the time they are signed.
(D) The breach by a credit services organization of a contract under this chapter, or of any obligation arising from a contract under this chapter, is a violation of this chapter.
Section 39-6-80. (A) A credit services organization may not attempt to cause a buyer to waive a right under this chapter.
(B) A waiver by a buyer of any part of this chapter is void.
Section 39-6-90. (A) A buyer injured by a violation of this chapter may bring any action for recovery of damages. The damages awarded may not be less than the amount paid by the buyer to the credit services organization plus reasonable attorney's fees and court costs.
(B) The buyer also may be awarded punitive damages.
Section 39-6-100. The Attorney General or a buyer may bring an action in circuit court to enjoin a violation of this chapter.
Section 39-6-110. A violation of this chapter is an unfair trade practice under the provisions of Chapter 5 of Title 39.
Section 39-6-120. An action may not be brought under the provisions of Sections 39-6-90 or 39-6-110 after four years after the date of the execution of the contract for services to which the action relates.
Section 39-6-130. A person who violates the provisions of this chapter is guilty of a misdemeanor and, upon conviction, is punishable under the provisions of Section 17-25-30.
Section 39-6-140. In an action under this chapter, the burden of proving an exemption under Section 39-6-20 is on the person claiming the exemption.
Section 39-6-150. The remedies provided by this chapter are in addition to other remedies provided by law."
SECTION 2. This act takes effect upon approval by the Governor.