Current Status Bill Number:602 Ratification Number:113 Act Number:135 Type of Legislation:General Bill GB Introducing Body:Senate Introduced Date:19950302 Primary Sponsor:Short All Sponsors:Short, Jackson, Gregory and Giese Drafted Document Number:res9653.lhs Companion Bill Number:3766 Date Bill Passed both Bodies:19950531 Date of Last Amendment:19950530 Governor's Action:U Became law without signature of Governor Date of Governor's Action:19950613 Subject:Restricted and supervised lenders
Body Date Action Description Com Leg Involved
______ ________ _______________________________________ _______ ____________
------ 19950613 Act No. A135
------ 19950613 Unsigned, became law without
signature of Governor
------ 19950606 Ratified R113
Senate 19950531 Ordered enrolled for ratification
Senate 19950530 Free Conference Committee Report 89 SFCC
adopted
Senate 19950530 Free Conference Powers granted, 89 SFCC Short
appointed Senators to Committee Jackson
of Free Conference Gregory
House 19950530 Free Conference Committee Report 99 HFCC
adopted
House 19950530 Free Conference Powers granted, 99 HFCC Cato
appointed Reps. to Committee of Gamble
Free Conference Neal
Senate 19950517 Conference powers granted, 88 SCC Gregory
appointed Senators to Committee Jackson
of Conference Short
House 19950517 Conference powers granted, 98 HCC Cato
appointed Reps. to Committee of Gamble
Conference Neal
House 19950517 Insists upon amendment
Senate 19950516 Non-concurrence in House amendment
House 19950512 Read third time, returned with
amendment
House 19950511 Unanimous consent for third
reading on the next Legislative day
House 19950511 Amended, read second time
House 19950509 Debate adjourned until
Thursday, 19950511
House 19950509 Objection by Representative Cain
Phillips
House 19950503 Debate adjourned until
Tuesday, 19950509
House 19950502 Debate adjourned until
Wednesday, 19950503
House 19950427 Debate adjourned until
Tuesday, 19950502
House 19950425 Committee report: Favorable with 26 HLCI
amendment
House 19950314 Introduced, read first time, 26 HLCI
referred to Committee
Senate 19950314 Read third time, sent to House
Senate 19950308 Read second time
Senate 19950302 Introduced, read first time,
placed on Calendar without reference
View additional legislative information at the LPITS web site.
(A135, R113, S602)
AN ACT TO AMEND SECTION 34-29-100, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO RECORDS AND REPORTS OF RESTRICTED LENDERS, BY ADDING INFORMATION REQUIRED TO BE REPORTED IN THE ANNUAL REPORT MADE BY RESTRICTED LENDERS; TO AMEND SECTION 34-29-140, AS AMENDED, RELATING TO CHARGES PERMITTED TO RESTRICTED LENDERS, SO AS TO REVISE THE FINANCE CHARGES AND TO PROVIDE LIMITATIONS ON LOAN RENEWALS; TO AMEND SECTION 34-29-160, AS AMENDED, RELATING TO INSURANCE ON THE SECURITY OF A CONSUMER FINANCE LOAN AND ON THE BORROWER, SO AS TO FURTHER PROVIDE FOR THE CONDITIONS, MINIMUM CHARGES, AND PREMIUMS OF THIS INSURANCE; TO AMEND SECTION 37-1-301, RELATING TO DEFINITIONS UNDER THE CONSUMER PROTECTION CODE, SO AS TO ADD AND REVISE CERTAIN DEFINITIONS; TO AMEND SECTION 37-1-303, RELATING TO THE INDEX OF DEFINITIONS IN TITLE 37, SO AS TO ADD CERTAIN DEFINITIONS; TO AMEND SECTION 37-2-207, RELATING TO CREDIT SERVICES CHARGES FOR REVOLVING CHARGE ACCOUNTS, SO AS TO FURTHER PROVIDE FOR WHAT CONSTITUTES THE MINIMUM ALLOCATION TO PRINCIPAL REDUCTION IN A BILLING CYCLE; TO AMEND SECTION 37-3-201, RELATING TO LOAN FINANCE CHARGES FOR SUPERVISED LOANS, SO AS TO REVISE THESE FINANCE CHARGES; TO AMEND SECTION 37-3-305, AS AMENDED, RELATING TO THE POSTING AND FILING OF MAXIMUM RATE SCHEDULES BY SUPERVISED LENDERS, SO AS TO PROVIDE THAT FOR LOANS NOT EXCEEDING SIX HUNDRED DOLLARS, A RATE MAY NOT BE POSTED WHICH EXCEEDS THE CHARGES IMPOSED IN SECTION 34-29-140; TO AMEND SECTION 37-3-501, RELATING TO SPECIFIED DEFINITIONS, SO AS TO REVISE THE DEFINITION OF A "SUPERVISED LOAN"; TO AMEND SECTION 37-3-505, RELATING TO RECORDS AND ANNUAL REPORTS FOR SUPERVISED LENDERS, SO AS TO ADD INFORMATION REQUIRED TO BE INCLUDED IN THE ANNUAL REPORT OF SUPERVISED LENDERS; TO AMEND SECTION 37-3-511, RELATING TO A SCHEDULE OF PAYMENTS AND THE MAXIMUM LOAN TERM OF SUPERVISED LOANS, SO AS TO FURTHER PROVIDE FOR WHAT CONSTITUTES A SUPERVISED LOAN WITHIN THE MEANING OF THIS SECTION; TO AMEND PART 5, CHAPTER 3, TITLE 37 OF THE 1976 CODE, BY ADDING SECTION 37-3-515 SO AS TO PROVIDE A LIMITATION ON CERTAIN LOAN RENEWALS; TO AMEND SECTION 37-4-203, AS AMENDED, RELATING IN PART TO CREDIT LIFE INSURANCE PREMIUMS WHICH MAY BE CHARGED IN REGARD TO CERTAIN TRANSACTIONS, SO AS TO REVISE THE MINIMUM CHARGES AND THE PREMIUMS WHICH MAY BE CHARGED; TO AMEND SECTION 37-5-108, RELATING TO UNCONSCIONABILITY UNDER THE CONSUMER PROTECTION CODE, BY ADDING PARTICULAR CIRCUMSTANCES WHICH CONSTITUTE UNCONSCIONABILITY AND FURTHER PROVIDING FOR REMEDIES; TO AMEND SECTION 37-6-117, AS AMENDED, RELATING TO THE ADMINISTRATIVE RESPONSIBILITIES OF THE ADMINISTRATOR OF THE DEPARTMENT OF CONSUMER AFFAIRS, SO AS TO REQUIRE THE ADMINISTRATOR TO DEVISE A PAMPHLET FOR DISTRIBUTION TO CERTAIN CONSUMERS; AND TO AMEND SECTION 37-9-102, RELATING TO THE LICENSURE ELECTION, SO AS TO PROVIDE THAT CERTAIN SUPERVISED LENDERS MAY ELECT TO BE RESTRICTED LENDERS; AND TO PROVIDE FOR REVIEWS OF THE CONSUMER FINANCE INDUSTRY BY LEGISLATIVE STUDY COMMITTEES AND TO PROVIDE FOR THE COMPOSITION OF THESE COMMITTEES.
Be it enacted by the General Assembly of the State of South Carolina:
Additional information required
SECTION 1. Section 34-29-100 of the 1976 Code is amended to read:
"Section 34-29-100. (a) Each licensee shall keep and use in his business such full and correct books and accounting records as are in accordance with sound and accepted accounting principles and practices and such books and records, including cards used in the card system, if any, as are in accord with the rules and regulations lawfully made by the board. Each licensee shall preserve such books, accounts and records, including cards used in the card system, if any, for at least two years after making the final entry on any loan recorded thereon. The renewal or refinancing of a loan shall constitute a final entry.
(b) Every licensee shall file in the office of the board, on or before the first day of April, a report for the preceding calendar year. The report shall give information with respect to the financial condition of such licensee, and shall include the name and address of the licensee, balance sheets at the beginning and end of the accounting period, a statement of income and expenses for the period, a reconciliation of surplus with the balance sheets, a schedule of assets used and useful in the consumer finance business in the State, an analysis of charges, size of loans and types of actions undertaken to effect collection and such other relevant information in form and detail as the board may prescribe.
(c) In addition to the information required to be reported under subsection (b), the annual report shall include the following:
(1) the total number of loans and aggregate dollar amounts made by the lender which renewed existing accounts;
(2) the total number of new loans and aggregate dollar amounts made to former borrowers;
(3) the total number of loans and aggregate dollar amounts made to new borrowers;
(4) the total number of loans and aggregate dollar amounts which received a final entry, as provided in subsection (a), other than by renewal;
(5) the total number of renewals in which the borrower received a cash advance which was less than ten percent of the net outstanding loan balance at the time of renewal;
(6) the total number of loans and aggregate dollar amounts outstanding at the beginning of the reporting period; and
(7) the total number of loans and aggregate dollar amounts outstanding at the end of the reporting period.
(d) Such report shall be made under oath and shall be in the form prescribed by the board and consistent with this section. The board shall make and publish annually an analysis and recapitulation of such reports.
(e) In addition to the report required by the provisions of Section 34-29-100 (b) and (c), the board may under rules and regulations promulgated by it under the procedure provided in this chapter require quarterly and/or semiannual reports from licensees to facilitate the performance of its duties and to effectively regulate the making of loans under this chapter."
Limits on renewals
SECTION 2. Section 34-29-140 of the 1976 Code, as last amended by Act 98 of 1991, is further amended by adding an appropriately numbered subsection to read:
"( ) Dollar Limits on Renewals. A licensee under this chapter may not renew a loan more than one time during any fifteen-month period where the actual dollars given to the customer is less than ten percent of the net outstanding loan balance at the time of renewal."
Finance charges revised
SECTION 3. Section 34-29-140(a) of the 1976 Code, as last amended by Act 98 of 1991, is further amended to read:
"(a) Maximum finance charges permitted; initial charge. A licensee under this chapter may lend any sum of money not exceeding seventy-five hundred dollars, excluding charges, and notwithstanding the fact that the loan may be repayable in substantially equal monthly installments, may contract for and receive finance charges not to exceed:
(1) Loans Not Exceeding One Hundred Fifty Dollars. On loans with cash advance not exceeding one hundred fifty dollars, a charge not to exceed two dollars and fifty cents per month if contracted for in writing by the borrower, may be charged in lieu of interest, and such loans may be repaid in weekly payments, with four weeks constituting a month.
(2) Loans Over One Hundred Fifty Dollars But Not Exceeding Two Thousand Dollars. On loans with a cash advance exceeding one hundred fifty dollars but not exceeding two thousand dollars, twenty-five dollars per one hundred dollars on that portion of the cash advance not exceeding six hundred dollars; eighteen dollars per one hundred dollars on that portion of the cash advance exceeding six hundred dollars but not exceeding one thousand dollars; and twelve dollars per one hundred dollars on that portion of the cash advance exceeding one thousand dollars but not exceeding two thousand dollars when the loan is made payable over a period of one year, and proportionately at those rates over a longer or shorter period of time.
In addition to the finance charges authorized in subparagraphs (1) and (2) of this subsection (a), a licensee under this chapter may contract for and receive an initial charge in such an amount as may be agreed upon in writing with the borrower, but not to exceed seven percent of the cash advance or fifty-six dollars, whichever is the lesser, for the expenses including, but not limited to, any attorney's fees and broker's fees, then or theretofore incurred and the services then or theretofore rendered by the lender incident to the loan or the security therefor, such as investigating the moral and financial standing of the borrower, investigating the security, title and similar investigations and for closing the loan, including any and all expenses incurred or services rendered at the request of the borrower or on his behalf in connection with the loan. Such initial charge may not be contracted for and received on any renewal loan more often than once in a three-month period. Upon any loan made to the borrower of a sum in excess of the amount on which the initial charge may have been charged within the three-month period, then the initial charge may be contracted for and received on the excess. The initial charge on loans not exceeding one hundred fifty dollars is a one-time charge, not a per annum charge and is not subject to refund. The initial charge on loans in excess of one hundred fifty dollars is a one-time charge, not a per annum charge and shall be subject to refund upon prepayment of the loan. The amount of the refund or refund credit shall represent at least as great a proportion of the total charges as the sum of the periodical time balances after the date of the prepayment bears to the sum of all periodical time balances under the schedule of payments in the loan contract.
(3) Loans Over Two Thousand But Not Over Seventy-Five Hundred Dollars. On loans with a cash advance exceeding two thousand dollars but not exceeding seventy-five hundred dollars, the finance charges authorized in subparagraphs (1) and (2) of this subsection (a) shall not be permitted on any part of the loan. On such loans a licensee under this chapter may contract for and receive finance charges not to exceed nine dollars per one hundred dollars of the cash advance, when the loan is made payable over a period of one year, and proportionately at that rate over a longer or shorter period.
In addition to the finance charges authorized in subparagraph (3) of this subsection (a), a licensee under this chapter may contract for and receive an initial charge in such an amount as may be agreed upon in writing with the borrower, but not to exceed five percent of the cash advance or two hundred dollars, whichever is lesser, for the expenses including, but not limited to, any attorney's fees and broker's fees, then or theretofore incurred and the services then and theretofore rendered by the lender incident to the loan or the security therefor, such as investigating the morals and financial standing of the borrower, investigating the security, title and similar investigations and for closing the loan, including any and all expenses incurred or services rendered at the request of the borrower or on his behalf in connection with the loan. The initial charge may not be contracted for or received on any renewal loan made to the same borrower more often than once in a twelve-month period. Upon any loan made to the borrower of a sum in excess of the amount on which the initial charge may have been charged within the twelve-month period, then the initial charge may be contracted for and received on the excess. If a loan is renewed or financed after the expiration of the initial twelve-month period, the initial charge may not exceed two percent of the cash advance. The initial charge is a one-time charge, not a per annum charge and shall be subject to refund upon prepayment of the loan. The amount of the refund or refund credit shall represent at least as great a proportion of the total charges as the sum of the periodical time balances after the date of the prepayment bears to the sum of all periodical time balances under the schedule of payments in the loan contract."
Conditions, premiums, and charges of insurance
SECTION 4. Section 34-29-160 of the 1976 Code, as last amended by Act 181 of 1993, Section 524, is further amended to read:
"Section 34-29-160. Subject to the conditions provided in this section and notwithstanding any other provisions of this chapter, reasonable insurance may be sold to and required of the borrower for insuring personal property securing a loan and for insuring the life and earning capacity of not more than two parties obligated on the loan other than accommodation parties.
Property insurance shall be in an amount not to exceed the reasonable value of the property insured and for the customary term approximating the term of the loan contract. It shall be optional with the borrower to obtain such insurance in an amount greater than the amount of the loan or for a longer term.
Life insurance must be in an amount not to exceed the approximate amount of the loan and for a term not exceeding the approximate term of the loan contract. Accident and health insurance and unemployment insurance, or both, must provide periodic benefits which may not exceed an amount which approximately equals the amount of each periodic installment payment to be made under the loan contract. However, when a loan is discharged or a new policy or policies of insurance are issued, the life, property, or accident and health insurance or all three on the prior obligation must be canceled and the unearned portion of the insurance premium or premiums, or identifiable charge, must be refunded to the borrower. However, the method of refunding the premiums on the policies must be pursuant to the Rule of 78 or the Sum of the Digits Method, except that no refund under two dollars must be made; the insurance company shall calculate its reserves on the policies in the same manner or, in the case of credit life insurance, in accordance with a mortality table and interest assumption used for ordinary life policies. Notwithstanding this requirement, if the property insurance policy or policies cover the insurable interest of the borrower as well as the lender, the policy or policies may be continued in force at the request of the borrower.
This section does not require a creditor to grant a refund or credit of a life insurance premium to the debtor if any refund or credit due to the debtor under this section is less than two dollars.
If the coverage provides accident and health benefits, the policy or certificate shall contain a provision that if the insured obligor is disabled, as defined in the policy, for a period of more than three days, benefits shall commence as of the first day of disability, provided that accident and health insurance shall not be allowed on loans with a cash advance of less than one hundred dollars.
All insurance sold or provided pursuant to this section shall bear a reasonable and bona fide relation to the existing hazard or risk of loss and shall be written by an agent or agency licensed in this State in an insurance company authorized to conduct such business in this State. A licensee shall not require the purchasing of insurance from the licensee or any employee, affiliate, or associate of the licensee, as a condition precedent to the making of a loan and shall not decline existing insurance where such insurance is provided by an insurance company authorized to conduct such business in this State.
The licensee shall within thirty days after the loan is made, deliver to the borrower, or if more than one, to one of them, a policy or certificate of insurance covering any insurance procured by or through the licensee or any employee, affiliate or associate of the licensee, which shall set forth the amount of any premium or identifiable charge which the borrower has paid or is obligated to pay, the amount of insurance, the term of insurance, and a complete description of the risks insured. Such policy or certificate may contain a mortgage clause or other appropriate provisions to protect the insurable interest of the licensee.
Notwithstanding any other provision of this chapter, any gain or advantages in the form of commission, dividend, identifiable charge or otherwise, to the licensee or to any employee, affiliate or associate of the licensee from such insurance or its sale shall not be deemed to be additional or further interest or charge in connection with such a loan.
Any accident and health or property insurance sold in conjunction with this chapter must be written on forms and at rates approved by the South Carolina Department of Insurance, provided that a minimum charge of two dollars may be made, pursuant to reasonable regulations adopted by it and having as their purpose the establishment and maintenance of premium rates which are reasonably commensurate with the coverage afforded and which are adequate, not excessive, and not unfairly discriminatory giving due consideration to past or prospective loss experience within or without this State, to dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to borrowers, to reasonable expense allowances necessary to achieve proper risk distribution and spread, and to all other relevant factors within or without this State. These regulations may include reasonable classification systems or programs based upon identifiable and measurable variations in the hazards or expense requirements and may include statistical plans, systems, or programs, which the insurers may be required to adopt, for the purpose of providing that statistical information and data as may be necessary or reasonably appropriate to the determination of premium rates or rate levels. The premium rates and rate levels must be calculated to produce and maintain a ratio of losses incurred, or reasonably expected to be incurred, to premiums earned, or reasonably expected to be earned, of not less than fifty percent, and rates producing a lesser loss ratio are considered excessive.
Credit life insurance premiums for each one hundred dollars of indebtedness are considered reasonable and may be charged if they are not greater than the amounts given in the following table times the number of years, or fraction of a year, that the indebtedness is scheduled to continue, subject to a minimum charge of three dollars:
Decreasing Balance Level Balance
Individual $ .65 $1.30
Joint Insurance $1.08 $2.16"
Definitions added
SECTION 5. Section 37-1-301 of the 1976 Code is amended by adding appropriately numbered subsections to read:
"( ) `Debt collector' means any person who collects, attempts to collect, directly or indirectly, debts due or asserted to be owed or due another. The term also includes a creditor who collects, attempts to collect, directly or indirectly, his own debts.
( ) `Licensee' means a supervised lender licensed under Section 37-3-503.
( ) `Cash advance' means the amount of cash or its equivalent that the borrower actually receives or is paid out at his direction or on his behalf."
Definition revised
SECTION 6. Section 37-1-301(10) of the 1976 Code is amended to read:
"(10) `Consumer' means the buyer, lessee, or debtor to whom credit is extended in a consumer credit transaction. In addition, for purposes of Chapters 10, 11, 13, and 15 of this title, as well as Sections 37-5-108, 37-6-108, 37-6-117(i), and 37-6-118, the term also includes:
(1) a natural person who is a purchaser or lessee or prospective purchaser or lessee in any transaction arising out of the production, promotion, sale, or lease of consumer goods or services; or
(2) a natural person who is the object of a solicitation or offer relating to a contest, game, or prize offer subject to Chapter 15."
Index of definitions revised
SECTION 7. Section 37-1-303 of the 1976 Code is amended to read:
"Section 37-1-303. Definitions in this title and the sections in which they appear are:
`Actuarial method' - Section 37-1-301(1)
`Administrator' - Section 37-1-301(2)
`Administrator' - Section 37-6-103
`Agreement' - Section 37-1-301(3)
`Agricultural purpose' - Section 37-1-301(4)
`Alternative mortgage loan' - Section 37-1-301(5)
`Amount financed' - Section 37-2-111
`Assumption' - Section 37-1-301(5A)
`Billing cycle' - Section 37-1-301(6)
`Card holder' - Section 37-1-301(7)
`Card issuer' - Section 37-1-301(8)
`Cash price' - Section 37-2-110
`Cash Advance' - Section 37-1-301( )
`Conspicuous' - Section 37-1-301(9)
`Consumer' - Section 37-1-301(10)
`Consumer credit insurance' - Section 37-4-103
`Consumer credit sale' - Section 37-2-104
`Consumer credit transaction' - Section 37-1-301(11)
`Consumer lease' - Section 37-2-106
`Consumer loan' - Section 37-3-104
`Contested case' - Section 37-6-402(1)
`Credit' - Section 37-1-301(12)
`Credit Insurance Act' - Section 37-4-103
`Creditor' - Section 37-1-301(13)
`Credit service charge' - Section 37-2-109
`Debt Collector' - Section 37-1-301( )
`Debtor' - Section 37-1-301(14)
`Earnings' - Section 37-1-301(15)
`Federal Truth-in-Lending Act' - Section 37-1-302
`Goods' - Section 37-2-105(1)
`Home solicitation sale' - Section 37-2-501
`Lender' - Section 37-3-107(1)
`Lender credit card or similar arrangement' - Section 37-1-301(16)
`License' - Section 37-6-402(2)
`Licensee' - Section 37-1-301( )
`Licensing' - Section 37-6-402(3)
`Loan' - Section 37-3-106
`Loan finance charge' - Section 37-3-109
`Merchandise certificate' - Section 37-2-105(2)
`Official fees' - Section 37-1-301(17)
`Organization' - Section 37-1-301(18)
`Party' - Section 37-6-402(4)
`Payable in installments' - Section 37-1-301(19)
`Person' - Section 37-1-301(20)
`Person related to' - Section 37-1-301(21)
`Precomputed' (loan) - Section 37-3-107(2)
`Precomputed' (sale) - Section 37-2-105(7)
`Presumed' or `presumption' - Section 37-1-301(22)
`Principal' - Section 37-3-107(3)
`Residence' - Section 37-1-301(23)
`Residential manufactured home' - Section 37-1-301(24)
`Residential real property' - Section 37-1-301(25)
`Restricted lender' - Section 37-3-501(4)
`Restricted loan' - Section 37-3-501(3)
`Revolving charge account' - Section 37-2-108
`Revolving loan account' - Section 37-3-108
`Rule' - Section 37-6-402(5)
`Sale of an interest in land' - Section 37-2-105(6)
`Sale of goods' - Section 37-2-105(4)
`Sale of services' - Section 37-2-105(5)
`Seller' - Section 37-2-107
`Seller credit card' - Section 37-1-301(26)
`Services' - Section 37-2-105(3)
`Supervised financial organization' - Section 37-1-301(27)
`Supervised lender' - Section 37-3-501(2)
`Supervised loan' - Section 37-3-501(1)."
Allocation to principal
SECTION 8. Section 37-2-207(5) of the 1976 Code is amended to read:
"(5) Notwithstanding subsection (3), and except for subsection (4), no less than forty percent of any scheduled minimum payment for that billing cycle must be applied to principal reduction in that billing cycle, provided, however, that failure to apply the forty percent of a scheduled minimum payment is not a violation of this subsection when the consumer has agreed in writing to a promotion offered by the creditor that includes deferred payments, deferred or waived finance charges, a combination thereof, or other special financing terms. Such exception shall only apply during the period of time necessary to comply with the provisions of the promotional agreement identified in writing to the customer."
Finance charges revised
SECTION 9. Section 37-3-201(1) of the 1976 Code is amended to read:
"(1) With respect to a consumer loan, including a loan pursuant to open-end credit, a lender who is not a supervised lender may contract for and receive a finance charge, calculated according to the actuarial method, not exceeding twelve percent per year. With respect to a consumer loan made pursuant to open-end credit, the finance charge shall be deemed not to exceed twelve percent per year if the finance charge contracted for and received does not exceed a charge for each monthly billing cycle which is one percent of the average daily balance of the open-end account in the billing cycle for which the charge is made. The average daily balance of the open-end account is the sum of the amount unpaid each day during that cycle divided by the number of days in the cycle. The amount unpaid on a day is determined by adding to any balance unpaid as of the beginning of that day all purchases, loans, and other debits and deducting all payments and other credits made or received as of that day. If the billing cycle is not monthly, the finance charge shall be deemed not to exceed twelve percent per year if the finance charge contracted for and received does not exceed a percentage which bears the same relation to one percent as the number of days in the billing cycle bears to three hundred sixty-five divided by twelve. A billing cycle is monthly if the closing date of the cycle is the same date each month or does not vary by more than four days from the regular date."
Finance charges revised
SECTION 10. Section 37-3-201(2) of the 1976 Code is amended to read:
"(2) With respect to a consumer loan, including a loan pursuant to open-end credit, a supervised lender may contract for and receive a loan finance charge as provided:
(a) on loans with a cash advance not exceeding six hundred dollars, a maximum charge not exceeding the maximum charges imposed in Section 34-29-140 as disclosed as an annual percentage rate, provided that a supervised lender may impose a finance charge at a rate less than provided in Section 34-29-140, and provided further that the maximum charge shall not exceed the rate posted and filed pursuant to Section 37-3-305;
(b) on loans with a cash advance exceeding six hundred dollars, and on all loans, regardless of the dollar amount, made by Supervised Financial Organizations, any rate filed and posted pursuant to Section 37-3-305; or
(c) on loans of any amount, eighteen percent per year on the unpaid balances of principal."
Posting of rates
SECTION 11. Section 37-3-305 of the 1976 Code, as last amended by Act 142 of 1991, is further amended by adding an appropriately numbered subsection to read:
"( ) On loans with a cash advance not exceeding six hundred dollars, a licensed lender may not post a rate which exceeds the maximum charges imposed in Section 34-29-140 as disclosed as an annual percentage rate or that rate filed and posted pursuant to this section, whichever is less."
Meaning of supervised loan
SECTION 12. Section 37-3-501(1) of the 1976 Code is amended to read:
"(1) `Supervised loan' means a consumer loan in which the rate of the loan finance charge exceeds twelve percent per year as determined according to the provisions on the loan finance charge for consumer loans (Section 37-3-201)."
Information required
SECTION 13. Section 37-3-505 of the 1976 Code is amended to read:
"Section 37-3-505. (1) Every licensee shall maintain records in conformity with generally accepted accounting principles and practices in a manner that will enable the State Board of Financial Institutions to determine whether the licensee is complying with the provisions of this title. The recordkeeping system of a licensee shall be sufficient if he makes the required information reasonably available. The records need not be kept in the place of business where supervised loans are made, if the board is given free access to the records wherever located. The records pertaining to any loan, including the certified maximum rate chart in effect at the time the loan was made, need not be preserved for more than two years after making the final entry relating to the loan, but in the case of a revolving loan account the two years is measured from the date of each entry.
(2) On or before April fifteenth each year every licensee shall file with the board a composite annual report in the form prescribed by the board relating to all supervised loans made by him. The board shall consult with comparable officials in other states for the purpose of making the kinds of information required in annual reports uniform among the states.
(3) The report shall include, but is not limited to, the following:
(a) the total number of loans and aggregate dollar amounts made by the lender which renewed existing accounts;
(b) the total number of new loans and aggregate dollar amounts made to former borrowers;
(c) the total number of loans and aggregate dollar amounts made to new borrowers;
(d) the total number of loans and aggregate dollar amounts which received a final entry, as provided in subsection (a), other than by renewal;
(e) the total number of renewals in which the borrower received a cash advance which was less than ten percent of the net outstanding loan balance at the time of renewal;
(f) the total number of loans and aggregate dollar amounts outstanding at the beginning of the reporting period;
(g) the total number of loans and aggregate dollar amounts outstanding at the end of the reporting period;
(h) the highest annual percentage rate charged by the lender on loans of various sizes; and
(i) the most frequent annual percentage rate charged by the lender on loans of various sizes.
(4) Information contained in annual reports shall be confidential and may be published only in composite form."
What constitutes a supervised loan
SECTION 14. Section 37-3-511 of the 1976 Code is amended to read:
"Section 37-3-511. Supervised loans, in which the rate of loan finance charge exceeds twelve percent per annum, not made pursuant to a revolving loan account, in which the principal is one thousand dollars or less, shall be scheduled to be payable in substantially equal installments at equal periodic intervals except to the extent that the schedule of payments is adjusted to the seasonal or irregular income of the debtor, and
(a) over a period of not more than thirty-seven months if the principal is more than three hundred dollars, or
(b) over a period of not more than twenty-five months if the principal is three hundred dollars or less."
Loan renewal limitations
SECTION 15. Chapter 3 of Title 37 of the 1976 Code is amended by adding:
"Section 37-3-515. A licensed lender may not renew a loan of one thousand dollars or less more than one time during any fifteen-month period where the dollars actually given to the customer is less than ten percent of the net outstanding loan balance at the time of renewal."
Premium and charges for insurance
SECTION 16. Section 37-4-203(5) of the 1976 Code, as last amended by Act 363, Section 1 of 1994, is further amended to read:
"(5) Credit life insurance premiums for each one hundred dollars of indebtedness are considered reasonable and may be charged if they are not greater than the amounts given in the following table times the number of years, or fraction of a year, that the indebtedness is scheduled to continue, subject to a minimum charge of three dollars:
Decreasing Balance Level Balance
Individual $ .65 $1.30
Joint Insurance $1.08 $2.16"
Unconscionability; remedies
SECTION 17. Section 37-5-108 of the 1976 Code is amended to read:
"Section 37-5-108. (1) With respect to a transaction that is, gives rise to, or leads the debtor to believe will give rise to, a consumer credit transaction, if the court as a matter of law finds:
(a) the agreement or transaction to have been unconscionable at the time it was made, or to have been induced by unconscionable conduct, the court may refuse to enforce the agreement; or
(b) any term or part of the agreement or transaction to have been unconscionable at the time it was made, the court may refuse to enforce the agreement, enforce the remainder of the agreement without the unconscionable term or part, or so limit the application of any unconscionable term or part as to avoid any unconscionable result and award the consumer any actual damages he has sustained.
(2) With respect to a consumer credit transaction, if the court as a matter of law finds that a person has engaged in, is engaging in, or is likely to engage in unconscionable conduct in collecting a debt arising from that transaction, the court may grant an injunction. In addition, the consumer has a cause of action to recover actual damages and, in an action other than a class action, a right to recover from the person violating this section a penalty in the amount determined by the court of not less than one hundred dollars nor more than one thousand dollars. For purposes of this subsection and subsection (3), the term `collecting a debt' in a consumer credit transaction includes the collection or the attempt to collect any rental charge or any other fee or charge or any item rented to a lessee in connection with a consumer rental-purchase agreement as described in Section 37-2-701(6).
(3) If it is claimed or appears to the court that the agreement or transaction or any term or part thereof may be unconscionable, or that a person has engaged in, is engaging in, or is likely to engage in unconscionable conduct in collecting a debt, the parties shall be afforded a reasonable opportunity to present evidence as to the setting, purpose, and effect of the agreement or transaction or term or part thereof, or of the conduct, to aid the court in making the determination.
(4) In applying subsection (1), consideration must be given to each of the following factors, among others, as applicable:
(a) belief by the seller, lessor, or lender at the time a transaction is entered into that there is no reasonable probability of payment in full of the obligation by the consumer or debtor; provided, however, that the rental renewals necessary to acquire ownership in a consumer rental-purchase agreement shall not be construed to be the obligation contemplated in this code section;
(b) in the case of a consumer credit sale, consumer lease, or consumer rental-purchase agreement, knowledge by the seller or lessor at the time of the sale or lease of the inability of the consumer to receive substantial benefits from the property or services sold or leased;
(c) in the case of a consumer credit sale, consumer lease, consumer rental-purchase agreement, or consumer loan, gross disparity between the price of the property or services sold, leased, or loaned and the value of the property, services, or loan measured by the price at which similar property, services, or loans are readily obtainable in consumer credit transactions by like consumers;
(d) the fact that the creditor contracted for or received separate charges for insurance with respect to a consumer credit sale, consumer loan, or consumer rental-purchase agreement with the effect of making the sale or loan considered as a whole, unconscionable, including the sale of insurance where the consumer could receive no potential benefit as referenced in Section 37-4-106(1)(a);
(e) the fact that the seller, lessor, or lender has knowingly taken advantage of the inability of the consumer or debtor reasonably to protect his interests by reason of physical or mental infirmities, ignorance, illiteracy, inability to understand the language of the agreement, or similar factors;
(f) taking a nonpurchase money nonpossessory security interest in household goods defined as the following: clothing, furniture, appliances, one radio and one television, linens, china, crockery, kitchenware, and personal effects (including wedding rings) of the consumer and his or her dependents; provided, that when a purchase money consumer credit transaction is refinanced or consolidated, the security lawfully collateralizing the prior consumer credit transaction can continue to secure the new consumer credit transaction, even if the new consumer credit transaction is for a larger amount or is in other respects a nonpurchase money consumer credit transaction; and provided further, that a nonpurchase money, nonpossessory security interest may be taken in the following:
(i) work of art;
(ii) electronic entertainment equipment (except one television and one radio);
(iii) items acquired as antiques which are over one hundred years of age;
(iv) jewelry (except wedding rings).
In construing subsection (f), the courts shall be guided by the interpretations and rulings of the federal courts and the Federal Trade Commission to the Credit Trade Regulation Rule (16 C.F.R. PART 444).
(5) In applying subsection (2), consideration shall be given to each of the following factors, among others, as applicable:
(a) using or threatening to use force, violence, or criminal prosecution against the consumer or members of his family, including harm to the physical person, reputation, or property of any person;
(b) communicating with the consumer or a member of his family at frequent intervals during a twenty-four hour period or at unusual hours or under other circumstances so that it is a reasonable inference that the primary purpose of the communication was to harass the consumer. The term `communication' means the conveying of information regarding a debt directly or indirectly to any person through any medium. A creditor or debt collector may not:
(i) communicate with a consumer at any unusual time or place known or which should be known to be inconvenient to the consumer. In the absence of knowledge of circumstances to the contrary, it may be assumed that a convenient time to communicate with a consumer is between 8 a.m. and 9 p.m.; or
(ii) communicate with a consumer who is represented by an attorney when such fact is known to the creditor or debt collector unless the attorney consents to direct communication or fails to respond within ten days to a communication;
(iii) contact a consumer at his place of employment after the consumer or his employer has requested in writing that no contacts be made at such place of employment or except as may be otherwise permitted by statute or to verify the consumer's employment;
(iv) communicate with anyone other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the attorney of the creditor or debt collector, unless the consumer or a court of competent jurisdiction has given prior direct permission;
(v) use obscene or profane language or language the natural consequence of which is to abuse the hearer or reader;
(vi) publish a list of consumers who allegedly refuse to pay debts, except to a consumer reporting agency;
(vii) cause a telephone to ring repeatedly during a twenty-four hour period or engage any person in a telephone conversation with intent to annoy, abuse, or harass any person at the called number;
(viii) advertise for sale any debt to coerce payment of the debt;
(ix) communicate with a consumer regarding a debt by postcard;
(x) deposit or threaten to deposit any postdated check or other postdated payment instrument requested by the creditor prior to the date on such check or instrument;
(xi) take or threaten to take any nonjudicial action to effect dispossession or disablement of property if:
(aa) there is no present right to possession of the property claimed as collateral through an enforceable security interest or other ownership interest;
(bb) there is no present intention to take possession of the property; or
(cc) the property is exempt by law from such dispossession or disablement; or
(xii) cause charges to be incurred by any person for communications to the consumer by concealment of the true purpose of the communication, such charges include, but are not limited to, collect telephone calls and telegram fees.
(c) using fraudulent, deceptive, or misleading representations in connection with the collection of a consumer credit transaction. Such false representations shall include:
(i) the character, amount, or legal status of any debt;
(ii) any services rendered or fees which may be received, unless such fees are expressly authorized by law;
(iii) a claim of an individual that he is an attorney or that any communication is from an attorney;
(iv) any claim or implication that nonpayment of any debt will result in arrest, imprisonment, garnishment, seizure, or attachment unless the remedy is legally permitted to the creditor and the claim or implication is not used for the purpose of harassment or abuse of process;
(v) a claim or implication that the consumer committed any crime or other conduct to disgrace the consumer; or
(vi) any written communication which simulates or appears to be a document authorized, issued, or approved by any state or federal agency or court or creates a false impression as to its source;
(d) causing or threatening to cause injury to the consumer's reputation or economic status by disclosing information affecting the consumer's reputation for creditworthiness with knowledge or reason to know that the information is false; communicating with the consumer's employer before obtaining a final judgment against the consumer, except as permitted by statute or to verify the consumer's employment; disclosing to a person, with knowledge or reason to know that the person does not have a legitimate business need for the information, or in any way prohibited by statute, information affecting the consumer's credit or other reputation; or disclosing information concerning the existence of a debt known to be disputed by the consumer without disclosing that fact;
(e) engaging in conduct with knowledge that like conduct has been restrained or enjoined by a court in a civil action by the administrator against any person pursuant to the provisions on injunctions against fraudulent or unconscionable agreements or conduct (Section 37-6-111).
(6) No action at law claiming unconscionable debt collection may be commenced in any court until at least thirty days after the facts and circumstances of any claim of unconscionable conduct in collecting a debt arising out of a consumer credit transaction has been filed in writing with the administrator of the Department of Consumer Affairs. The administrator shall immediately provide to the person or organization complained against with a copy of any complaint alleging unconscionable debt collection practices filed with the Department of Consumer Affairs. The administrator shall immediately provide to the Director of the Consumer Finance Division of the Board of Financial Institutions a copy of any written claim of unconscionable conduct in collecting a debt filed against a supervised lender under this title or a restricted lender under Title 34. A creditor or debt collector may only take such action as is authorized by law to protect its collateral during the thirty-day state agency review period. The administrator shall take immediate steps to investigate, evaluate, and attempt to resolve such complaints. The administrator and director shall jointly take immediate steps to investigate, evaluate, and attempt to resolve complaints involving supervised and restricted lenders. If in an action, properly filed after the thirty-day state agency review period with regard to conduct in collecting a debt arising out of a consumer credit transaction, in which unconscionability is claimed the court finds unconscionability pursuant to subsection (1) or (2), the court shall award reasonable fees to the attorney for the consumer or debtor. If the court does not find unconscionability and the consumer or debtor claiming unconscionability has brought or maintained an action he knew to be groundless, the court may award reasonable fees to the attorney for the party against whom the claim is made. In determining attorney's fees, the amount of the recovery on behalf of the consumer is not controlling.
(7) The remedies of this section are in addition to remedies available for the same conduct under law other than this title.
(8) For the purpose of this section, a charge or practice expressly permitted by this title is not in itself unconscionable.
(9) Nothing in this title may be construed to prevent a finding of unconscionability where a creditor assesses an origination charge, prepaid finance charge, service, or other prepaid charge which substantially exceeds the usual and customary charge for the particular type of consumer credit transaction. In such a transaction the court shall consider the relative sophistication of the debtor and the creditor, the relative bargaining power of the debtor and creditor, and any oral or written representations made by the creditor regarding the credit service charge or the loan finance charge of the consumer credit transaction." Development of a pamphlet
SECTION 18. Section 37-6-117 of the 1976 Code, as last amended by Act 142 of 1991, is further amended by adding an appropriately numbered subsection to read:
"( ) Develop a written pamphlet that explains the rights and responsibilities of consumers who obtain from a licensed lender consumer loans under this title and Title 34 for distribution in all licensed consumer loan offices. Such pamphlet shall include the names, addresses, and telephone numbers of state agencies responsible for enforcing the provisions of this title and Title 34. Such pamphlet shall be given to a consumer at the time the initial loan by a licensed lender is made whenever the amount financed is two thousand dollars or less and shall be readily available to all consumers at all times in each licensed consumer loan office. The administrator shall consult with, and seek input from representatives of consumers, the consumer finance industry, and the Director of the Consumer Finance Division of the Board of Financial Institutions. Each licensed lender shall be responsible for reproducing and distributing the pamphlet finally approved and authorized by the administrator. The pamphlet developed under this subsection shall be provided to consumers as of January 1, 1996."
Election
SECTION 19. Section 37-9-102 of the 1976 Code is amended to read:
"Section 37-9-102. (A) All persons now or hereafter holding a license under the provisions of Chapter 29 of Title 34, as amended, may elect to be licensed to make supervised loans under this title pursuant to the part on Supervised Loans (Part 5) of the Chapter on Loans (Chapter 3), provided, however, that all persons related to such persons shall make the same election. Upon such election at any time hereafter in writing to the Board of Financial Institutions, the lender shall be deemed to have surrendered his license to lend under Chapter 29 of Title 34 and to have obtained a license to lend under this title. As soon as is practicable after the board receives such writing it shall issue a new certificate identifying the lender as a Supervised Lender. The only requirements that the board may impose for licensure under this section are:
(1) the election must be stated in writing;
(2) all persons related to the electing lender must also have made such election; and
(3) the person making any such election must then hold a currently valid license under Chapter 29 of Title 34.
(B) A lender licensed to make supervised loans under this title under Chapter 3 of Title 37, who was previously licensed under the provisions of Chapter 29 of Title 34, as amended, may elect to again be licensed under Chapter 29 of Title 34, provided, however, that all persons related to such persons shall make the same election. Upon such election, which must be made in writing to the Board of Financial Institutions prior to January 1, 1997, the lender shall be deemed to have surrendered his license to lend under Chapter 3 of Title 37 and to have obtained a license to lend under Title 34. As soon as practicable after the board receives such writing, it shall issue a new certificate identifying the lender as a Restricted Lender under Title 34. The only requirements that the board may impose for licensure under this section are:
(1) the election must be stated in writing;
(2) all persons related to the electing lender must also have made such election; and
(3) the person making any such election must then hold a currently valid license under Chapter 3 of Title 37."
Committee reviews of industry
SECTION 20. (A) On or after July 1, 1997, a review of the consumer finance industry shall be commenced by a legislative study committee in order to study the impact of this act. The committee shall report its findings and recommendations, if any, to the General Assembly by January 1, 1998. The committee shall be composed of three members of the House of Representatives, to be appointed by the Speaker; three members of the Senate, to be appointed by the President Pro Tempore; the State Consumer Advocate, or his designee; and the Director of the Consumer Finance Division of the State Board of Financial Institutions, or his designee. The committee shall elect its chairman from among its members. The committee shall utilize the existing staff of the Senate Banking and Insurance Committee, or its successor in interest; the existing staff of the Labor, Commerce and Industry Committee of the House of Representatives, or its successor in interest; and such other legislative staff members as may be available to the chairman. The committee shall dissolve upon presentation of its report.
(B) On or after July 1, 1998, a second review of the consumer finance industry shall be commenced by a legislative study committee in order to further study the impact of this act and any subsequent amendments to the consumer finance laws. The committee shall report its findings and recommendations, if any, to the General Assembly by January 1, 1999. The committee shall be composed of three members of the House of Representatives, to be appointed by the Speaker; three members of the Senate, to be appointed by the President Pro Tempore; the State Consumer Advocate, or his designee; and the Director of the Consumer Finance Division of the State Board of Financial Institutions, or his designee. The committee shall elect its chairman from among its members. The committee shall utilize the existing staff of the Senate Banking and Insurance Committee, or its successor in interest; the existing staff of the Labor, Commerce and Industry Committee of the House of Representatives, or its successor in interest; and such other legislative staff members as may be available to the chairman. The committee shall dissolve upon presentation of its report.
Time effective
SECTION 21. This act takes effect January 1, 1996, except that Section 37-2-207(5) of the 1976 Code, as amended by this act, takes effect upon approval by the Governor.
Became law without the signature of the Governor -- 6/13/95.