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Current Status Bill Number:View additional legislative information at the LPITS web site.337 Ratification Number:112 Act Number:66 Type of Legislation:General Bill GB Introducing Body:Senate Introduced Date:19990114 Primary Sponsor:McConnell All Sponsors:McConnell, Matthews, Courtney, Patterson, Reese, Hayes, Jackson, Passailaigue Drafted Document Number:l:\council\bills\nbd\11087jm99.doc Date Bill Passed both Bodies:19990527 Date of Last Amendment:19990520 Governor's Action:S Date of Governor's Action:19990611 Subject:Life insurance, amount not exceeding amount of debt rather than loan; Banks, Consumer Affairs, credit life coverage History Body Date Action Description Com Leg Involved ______ ________ ______________________________________ _______ ____________ ------ 19990702 Act No. A66 ------ 19990611 Signed by Governor ------ 19990609 Ratified R112 House 19990527 Concurred in Senate amendment, enrolled for ratification Senate 19990520 House amendments amended, returned to House with amendment House 19990512 Read third time, returned to Senate with amendment House 19990511 Amended, read second time House 19990505 Committee report: Favorable with 26 HLCI amendment House 19990315 Introduced, read first time, 26 HLCI referred to Committee Senate 19990311 Amended, read third time, sent to House Senate 19990302 Read second time, ordered to third reading with notice of general amendments Senate 19990302 Committee amendment adopted Senate 19990225 Committee report: Favorable with 02 SBI amendment Senate 19990114 Committed to Committee, 02 SBI retaining its place on the Calendar Senate 19990114 Introduced, read first time, placed on Calendar without reference Versions of This Bill Revised on February 25, 1999 - Word format Revised on March 2, 1999 - Word format Revised on March 11, 1999 - Word format Revised on May 5, 1999 - Word format Revised on May 11, 1999 - Word format Revised on May 20, 1999 - Word format
(A66, R112, S337)
AN ACT TO AMEND SECTION 34-29-160, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE CONSUMER FINANCE LAW AND INSURANCE ON SECURITY AND BORROWER, SO AS TO, AMONG OTHER THINGS, PROVIDE FOR PURPOSES OF CREDIT COVERAGE, A DEFINITION OF THE APPROXIMATE AMOUNT OF THE DEBT; TO AMEND THE 1976 CODE BY ADDING SECTIONS 34-29-161, SO AS TO PROVIDE THAT NO PERSON MAY ACT OR ATTEMPT IN A LOAN TRANSACTION TO PREVENT THE FILING OR RECEIVING OF PAYMENT ON A LEGITIMATE INSURANCE CLAIM, 34-29-162, SO AS TO PROVIDE FOR THE CIRCUMSTANCES GOVERNING THE SITUATION OCCURRING WHEN A CONSUMER DEFERS, REFINANCES, OR CONSOLIDATES A LOAN AND THE INSURANCE COVERAGE ON THE ORIGINAL LOAN HAS NOT LAPSED, 34-29-163, SO AS TO PROVIDE THAT, FOR PURPOSES OF THE CONSUMER FINANCE LAW, A POLICY OR CERTIFICATE OF INSURANCE MAY NOT BE DECLARED VOID AND THE INSURER MAY NOT AVOID LIABILITY BASED UPON A MISREPRESENTATION MADE BY THE INSURED WITH RESPECT TO INFORMATION PROVIDED REGARDING MEDICAL CONDITIONS OR HEALTH HISTORY REQUIRED IN FURNISHING CERTAIN EVIDENCE OF INSURABILITY, 34-29-164, SO AS TO PROVIDE THAT THE AMOUNT CHARGED FOR NONFILING INSURANCE COVERAGE MAY NOT EXCEED SEVENTY-FIVE PERCENT OF THE DEFINED OFFICIAL FEE, 34-29-165, SO AS TO PROVIDE THAT CONSUMER CREDIT INSURANCE PROVIDED BY A CREDITOR MAY BE SUBJECT TO FURNISHING EVIDENCE OF INSURABILITY SATISFACTORY TO THE INSURER, AND 34-29-166, SO AS TO PROVIDE THAT IF A CREDITOR PROVIDES INSURANCE, THE INSURANCE SHALL BE EVIDENCED BY AN INDIVIDUAL POLICY OR CERTIFICATE DELIVERED TO THE DEBTOR AT THE TIME OF THE TRANSACTION WHERE THE DEBTOR IS PRESENT AT THE CREDITOR'S PLACE OF BUSINESS; TO AMEND SECTION 37-1-301, AS AMENDED, RELATING TO DEFINITIONS FOR THE CONSUMER PROTECTION CODE, SO AS TO PROVIDE FOR WHAT "OFFICIAL FEES" DOES NOT MEAN; TO AMEND SECTION 37-4-105, RELATING TO THE CONSUMER PROTECTION CODE AND THE REQUIREMENT THAT CONDITIONS APPLYING TO INSURANCE BE PROVIDED BY THE CREDITOR, SO AS TO PROVIDE, AMONG OTHER THINGS, THAT EACH POLICY OR CERTIFICATE OF CREDIT LIFE INSURANCE OR CREDIT ACCIDENT AND SICKNESS INSURANCE SHALL SET FORTH CERTAIN INFORMATION ON THE FIRST PAGE OF THE POLICY, OR BE ATTACHED THERETO, IN A MANNER THAT IS CLEAR AND CONSPICUOUS AND ACHIEVES A CERTAIN MAXIMUM GRADE LEVEL SCORE; TO AMEND SECTION 37-4-110, RELATING TO THE CONSUMER PROTECTION CODE AND THE CHARGE FOR INSURANCE IN CONNECTION WITH A DEFERRAL, REFINANCING, OR CONSOLIDATION, SO AS TO PROVIDE, AMONG OTHER THINGS, THAT A CREDITOR MAY NOT CONTRACT FOR OR RECEIVE A SEPARATE CHARGE FOR INSURANCE IN CONNECTION WITH A DEFERRAL, A REFINANCING OR A CONSOLIDATION UNLESS CERTAIN ACTIONS OCCUR; TO AMEND SECTION 37-4-201, RELATING TO CONSUMER CREDIT INSURANCE AND THE TERM OF THE INSURANCE, SO AS TO PROVIDE, AMONG OTHER THINGS, THAT IF EVIDENCE OF INSURABILITY IS REQUIRED AND THE INSURED'S ELIGIBILITY IS TO BE DETERMINED BY INQUIRIES ABOUT EXISTING OR PAST MEDICAL CONDITIONS, THE MEDICAL CONDITIONS INQUIRED ABOUT MUST BE CLEARLY AND CONSPICUOUSLY DISCLOSED IN PLAIN LANGUAGE ON FORMS PROMULGATED OR APPROVED BY THE DEPARTMENT OF INSURANCE WHICH ACHIEVE A CERTAIN MAXIMUM GRADE LEVEL SCORE; TO AMEND SECTION 37-4-202, RELATING TO THE AMOUNT OF CONSUMER CREDIT INSURANCE, SO AS TO PROVIDE THAT, FOR PURPOSES OF CREDIT COVERAGE, THE "APPROXIMATE AMOUNT OF THE DEBT" MEANS THE PERIODIC INSTALLMENT PAYMENT MULTIPLIED BY THE NUMBER OF SCHEDULED PERIODIC INSTALLMENT PAYMENTS FOR A LOAN WITH A TERM OF SIXTY MONTHS OR LESS AND FURTHER MEANS THE AMOUNT NECESSARY TO LIQUIDATE THE REMAINING DEBT IN A SINGLE LUMP-SUM PAYMENT EXCLUDING ALL UNEARNED INTEREST AND OTHER UNEARNED FINANCE CHARGES PLUS SIX MONTHLY INSTALLMENT PAYMENTS FOR A LOAN WITH A TERM IN EXCESS OF SIXTY MONTHS; TO AMEND SECTION 37-4-203, AS AMENDED, RELATING TO CONSUMER CREDIT INSURANCE AND THE FILING AND APPROVAL OF RATES AND FORMS, SO AS TO, AMONG OTHER THINGS, DELETE REFERENCE TO THE EXCEPTION REGARDING LIFE INSURANCE, PROVIDE THAT, EFFECTIVE JANUARY 1, 2001, 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 SPECIFIED TABLE TIMES THE NUMBER OF YEARS, OR FRACTION OF A YEAR THAT THE INDEBTEDNESS COVERED BY INSURANCE IS SCHEDULED TO CONTINUE, AND PROVIDE SIMILARLY FOR THE PERIOD COMMENCING JANUARY 1, 2003; TO AMEND THE 1976 CODE BY ADDING SECTIONS 37-4-205, SO AS TO PROVIDE THAT NO PERSON MAY ACT OR ATTEMPT IN A CONSUMER CREDIT TRANSACTION TO PREVENT THE FILING OR RECEIVING OF PAYMENT ON A LEGITIMATE INSURANCE CLAIM, AND PROVIDE FOR DAMAGES, FEES, AND COSTS, 37-4-206, SO AS TO PROVIDE THAT REQUIRED DISCLOSURES MUST BE GIVEN AND ACKNOWLEDGED, BUT NEED NOT BE SIGNED BY THE DEBTOR, IN A CONSUMER TRANSACTION THAT MEETS CERTAIN ENUMERATED REQUIREMENTS, 37-4-207, SO AS TO PROVIDE A POLICY OR CERTIFICATE OF INSURANCE IN A CONSUMER CREDIT TRANSACTION MAY NOT BE DECLARED VOID AND THE INSURER MAY NOT AVOID LIABILITY BASED UPON A MISREPRESENTATION MADE BY THE INSURED WITH RESPECT TO INFORMATION PROVIDED REGARDING MEDICAL CONDITIONS OR HEALTH HISTORY REQUIRED IN FURNISHING EVIDENCE OF INSURABILITY THAT IS NOT CAUSALLY RELATED TO THE CONTINGENCY OR EVENT BY WHICH THE POLICY CLAIM ARISES, 37-4-208, SO AS TO PROVIDE THAT, FOR CONSUMER CREDIT TRANSACTIONS, THE AMOUNT CHARGED FOR NONFILING INSURANCE COVERAGE MAY NOT EXCEED SEVENTY-FIVE PERCENT OF THE "OFFICIAL FEE", 37-4-209, SO AS TO PROVIDE THAT NOTHING IN CHAPTER 4 OF TITLE 37 (CONSUMER PROTECTION CODE AND INSURANCE) SHALL BE CONSTRUED TO PROHIBIT THE CREDITOR FROM COMBINING CERTAIN REQUIRED DISCLOSURES WITH OTHER DISCLOSURES REQUIRED UNDER STATE AND FEDERAL LAW IN ORDER TO AVOID REDUNDANCY, AND 37-4-210, SO AS TO PROVIDE, FOR PURPOSES OF CONSUMER CREDIT TRANSACTIONS AND INSURANCE, THAT DISABILITY SHALL NOT BE DEFINED MORE RESTRICTIVELY THAN THE INABILITY OF THE INSURED TO ENGAGE IN HIS OWN OCCUPATION DURING THE FIRST YEAR OF DISABILITY OR FOR THE LENGTH OF THE BENEFIT PERIOD IF LESS THAN ONE YEAR; TO PROVIDE A SEVERABILITY PROVISION FOR THIS ACT; TO AMEND SECTION 38-39-10, AS AMENDED, RELATING TO INSURANCE PREMIUM SERVICE COMPANIES, SO AS TO PROVIDE THAT CHAPTER 39 OF TITLE 38 (INSURANCE PREMIUM SERVICE COMPANIES) DOES NOT APPLY TO A SUPERVISED LENDER PROVIDED FOR IN TITLE 37 AUTHORIZED TO DO BUSINESS IN SOUTH CAROLINA; TO AMEND SECTION 37-3-202, AS AMENDED, RELATING TO THE CONSUMER PROTECTION CODE, LOANS, AND ADDITIONAL CHARGES, SO AS TO PROVIDE THAT AN ADDITIONAL CHARGE MAY BE MADE FOR INSURANCE WRITTEN IN CONNECTION WITH A CONSUMER LOAN OTHER THAN INSURANCE PROTECTING THE LENDER AGAINST THE DEBTOR'S DEFAULT OR OTHER CREDIT LOSS WITH RESPECT TO NONCREDIT TERM LIFE INSURANCE, UNDER CERTAIN CIRCUMSTANCES AND CONDITIONS; TO AMEND SECTION 37-5-202, RELATING TO THE CONSUMER PROTECTION CODE, DEBTORS' REMEDIES, AND THE EFFECT OF CERTAIN VIOLATIONS ON THE RIGHTS OF PARTIES, SO AS TO PROVIDE THAT IF A CREDITOR HAS VIOLATED ANY PROVISIONS OF TITLE 37 APPLYING TO NONCREDIT TERM LIFE INSURANCE UNDER SECTION 37-3-202(2), THE CONSUMER HAS A CAUSE OF ACTION TO RECOVER ACTUAL DAMAGES AND ALSO A RIGHT IN AN ACTION, OTHER THAN A CLASS ACTION TO RECOVER A PENALTY IN AN AMOUNT DETERMINED BY THE COURT OF NOT LESS THAN ONE HUNDRED DOLLARS NOR MORE THAN ONE THOUSAND DOLLARS; AND TO AUTHORIZE THE SOUTH CAROLINA DEPARTMENT OF INSURANCE, PRIOR TO THE EFFECTIVE DATE OF THIS ACT, TO REVIEW ANY POLICIES AND FILINGS NECESSARY TO IMPLEMENT THE PROVISIONS OF THIS ACT IN ORDER TO "TRANSITION" INTO ANY ADDITIONAL OR ALTERED REQUIREMENT PROVIDED THEREIN BY THIS ACT, AND PROVIDE THAT ANY ACTION OF THE DEPARTMENT TO IMPLEMENT THIS ACT PRIOR TO JANUARY 1, 2000, IS SUBJECT TO THE PROVISIONS, REQUIREMENTS, AND LAW OF THIS ACT EFFECTIVE ON JANUARY 1, 2000.
Be it enacted by the General Assembly of the State of South Carolina:
Definition of approximate amount of debt; etc.
SECTION 1. Section 34-29-160 of the 1976 Code, as last amended by Act 135 of 1995, 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 debt and for a term not exceeding the approximate term of the loan contract. For purposes of credit coverage, the 'approximate amount of the debt' is defined as follows: (1) the periodic installment payment multiplied by the number of scheduled periodic installment payments for a loan with a term of sixty months or less; (2) the amount necessary to liquidate the remaining debt in a single lump sum payment, excluding all unearned interest and other unearned finance charges, plus six monthly installment payments for a loan with a term in excess of sixty months. 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 three 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 three 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. Disability shall not be defined more restrictively than the inability of the insured to engage in his own occupation during the first year of disability or for the length of the benefit period if less than one year. After the first year of disability, disability shall not be defined more restrictively than the inability of the insured to engage in the substantial duties of any gainful occupation for substantially equivalent remuneration to the insured's own occupation. Substantially equivalent remuneration means not less than seventy-five percent of the insured's base wage, exclusive of overtime and bonus, as of the date disability commences.
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.
Until January 1, 2001, 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 covered by insurance 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
Effective January 1, 2001, 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 covered by insurance is scheduled to continue:
Decreasing Balance Level Balance
Individual $ .57 $1.14
Joint Insurance $ .95 $1.89
Effective January 1, 2003, 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 covered by insurance is scheduled to continue:
Decreasing Balance Level Balance
Individual $ .55 $1.10
Joint Insurance $ .91 $1.83"
Payment on insurance claim; damages, fees, costs
SECTION 2. The 1976 Code is amended by adding:
"Section 34-29-161. No person may act or attempt in a loan transaction to prevent the filing or receiving of payment on a legitimate insurance claim. In an action in which it is found that a person has violated this section, the court shall award to the borrower the actual damages and consequential damages, if any, and to his attorneys their reasonable fees and costs. In determining attorney's fees and costs, the amount of recovery on behalf of the consumer is not controlling."
Refinancing loan; nonlapsed insurance coverage
SECTION 3. The 1976 Code is amended by adding:
"Section 34-29-162. If a consumer defers, refinances, or consolidates a loan and the insurance coverage upon the original loan has not lapsed:
(1) incontestability and waiting periods for insurance coverage, up to the amount of the coverage remaining at the time of the deferral, refinancing, or consolidation and for an additional period not to exceed the length of the term of the original insurance, must be based upon the date on which the insurer originally insured the debtor with respect to the insurance coverage on the indebtedness that is deferred, refinanced, or consolidated; and
(2) the insurance coverage, up to the amount of the coverage remaining at the time of the deferral, refinancing, or consolidation and for an additional period not to exceed the length of the term of the original insurance, on the indebtedness that is deferred, refinanced, or consolidated may not be subject to evidence of insurability.
The provisions of this section do not apply to insurance for which no identifiable charge is made to the debtor."
Insured's misrepresentation, effect
SECTION 4. The 1976 Code is amended by adding:
"Section 34-29-163. A policy or certificate may not be declared void and the insurer may not avoid liability based upon a misrepresentation made by the insured, with respect to information provided regarding medical conditions or health history required in furnishing evidence of insurability, that is not causally related to the contingency or event by which the policy claim arises."
Nonfiling insurance coverage; amount charged therefor
SECTION 5. The 1976 Code is amended by adding:
"Section 34-29-164. The amount charged for nonfiling insurance coverage may not exceed seventy-five percent of the official fee as defined in Section 37-1-301(17)."
Evidence of insurability
SECTION 6. The 1976 Code is amended by adding:
"Section 34-29-165. (1) Consumer credit insurance provided by a creditor may be subject to the furnishing of evidence of insurability satisfactory to the insurer. Whether or not such evidence is required, the term of the insurance shall commence when the debtor becomes obligated to the creditor or when the debtor applies for the insurance, whichever is later, except as follows:
(a) if any required evidence of insurability is not furnished until more than thirty days after the term would otherwise commence, the term may commence on the date when the insurer determines the evidence to be satisfactory; or
(b) if the creditor provides insurance not previously provided covering debts previously created, the term may commence on the effective date of the policy.
(2) If evidence of insurability is required and the insured's eligibility is to be determined by inquiries about existing or past medical conditions, the medical conditions inquired about shall be clearly and conspicuously disclosed in plain language on forms promulgated or approved by the Department of Insurance which achieve a grade level score of no higher than seventh grade on the Flesch-Kincaid readability test. The disclosure shall be made in a clear and conspicuous manner in bold type, with space for the insured to personally acknowledge the disclosure by a dated signature or initial immediately adjacent to the disclosure. Insurance coverage shall not be denied on the basis of any medical condition not so disclosed. Coverage shall not be denied if the insured's dated acknowledgment does not appear on the form."
Creditor providing insurance
SECTION 7. The 1976 Code is amended by adding:
"Section 34-29-166. If a creditor provides insurance, the insurance shall be evidenced by an individual policy or certificate of insurance delivered to the debtor at the time of the transaction where the debtor is present at the creditor's place of business.
If the debtor is not present at the creditor's place of business at the time of the transaction, the individual policy or certificate of insurance must be sent to him at his address as stated by him, within thirty days after the term of the insurance commences under the agreement between the creditor and debtor or the creditor shall promptly notify the debtor of any failure or delay in providing the insurance.
Each policy or certificate of credit life insurance or credit accident and sickness insurance shall set forth the following on the first page of the policy or attached thereto in a manner that is clear and conspicuous and achieves a grade level score of no higher than seventh grade on the Flesch-Kincaid readability test:
(a) the name, address, and telephone number of the insurer and the process to be followed in submitting a claim;
(b) the name or names of the debtor, or in the case of a certificate, the identity by name or otherwise of the debtor;
(c) the age or date of birth of the debtor;
(d) the premium or amount payable by the debtor separately for credit life insurance and credit accident and sickness insurance;
(e) a description of the coverage including the amount and term of the coverage, and any exceptions, limitations, or restrictions;
(f) a statement that the benefits shall be paid to the creditor to reduce or extinguish the unpaid indebtedness;
(g) a statement that, if the amount of insurance exceeds the amount necessary to discharge the indebtedness, any excess shall be payable to a beneficiary, other than the creditor, named by the debtor or to the debtor's estate;
(h) a conspicuous statement that the insured debtor shall have the right to cancel the insurance policy or group certificate and have all the premiums paid by or charged to the insured debtor refunded or credited, upon giving written notice to the insurer within thirty days from the date the insured debtor received the policy or certificate;
(i) a conspicuous statement which reads as follows: 'For specific information about credit insurance issued in conjunction with your loan, contact your creditor or your insurance company. For general information about credit insurance or complaints regarding your credit insurance, please contact the South Carolina Department of Insurance at [current toll-free number].'; and
(j) the provisions of this section do not apply to insurance for which no identifiable charge is made to the debtor."
Official fees, definition
SECTION 8. Section 37-1-301(17) of the 1976 Code is amended to read:
"(17)(a) 'Official fees' means:
(i) fees and charges prescribed by law which actually are or will be paid to public officials for determining the existence of or for perfecting, releasing, or satisfying a security interest related to a consumer credit sale, consumer lease, or consumer loan; or
(ii) premiums payable for insurance in lieu of perfecting a security interest otherwise required by the creditor in connection with the sale, lease or loan, if the premium does not exceed the fees and charges described in paragraph (a) which would otherwise be payable.
(b) 'Official fees' does not mean:
(i) effective April 1, 2000, a premium payable for insurance in lieu of perfecting a security interest when the security interest is a purchase money security interest as defined in Section 36-9-107, for which, in accordance with Section 36-9-302(1)(d), perfection by the filing of a financing statement is not required; or
(ii) a premium payable for insurance in lieu of perfecting a security interest when the collateral is such that it cannot be used as a security for a loan pursuant to the Federal Credit Practices Rule or Section 37-5-108 of the South Carolina Code of Laws, annotated."
Information to be set forth; etc.
SECTION 9. Section 37-4-105 of the 1976 Code is amended to read:
"Section 37-4-105. (A) If a creditor agrees with a debtor to provide insurance, the insurance shall be evidenced by an individual policy or certificate of insurance delivered to the debtor at the time of the transaction where the debtor is present at the creditor's place of business.
If the debtor is not present at the creditor's place of business at the time of the transaction, the individual policy or certificate of insurance must be sent to him at his address as stated by him, within thirty days after the term of the insurance commences under the agreement between the creditor and debtor or the creditor shall promptly notify the debtor of any failure or delay in providing the insurance.
(B) Each policy or certificate of credit life insurance or credit accident and sickness insurance shall set forth the following on the first page of the policy or attached thereto in a manner that is clear and conspicuous and achieves a grade level score of no higher than seventh grade on the Flesch-Kincaid readability test:
(1) the name, address, and telephone number of the insurer and the process to be followed in submitting a claim;
(2) the name or names of the debtor, or in the case of a certificate, the identity by name or otherwise of the debtor;
(3) the age or date of birth of the debtor;
(4) the premium or amount payable by the debtor separately for credit life insurance and credit accident and sickness insurance;
(5) a description of the coverage including the amount and term of the coverage, and any exceptions, limitations, or restrictions;
(6) a statement that the benefits shall be paid to the creditor to reduce or extinguish the unpaid indebtedness;
(7) a statement that, if the amount of insurance exceeds the amount necessary to discharge the indebtedness, any such excess shall be payable to a beneficiary, other than the creditor, named by the debtor or to his estate;
(8) a conspicuous statement that the insured debtor shall have the right to cancel the insurance policy or group certificate and have all the premiums paid by or charged to the insured debtor refunded or credited, upon giving written notice to the insurer within thirty days from the date the insured debtor received the policy or certificate; and
(9) a conspicuous statement which reads as follows: 'For specific information about credit insurance issued in conjunction with your loan, contact your creditor or your insurance company. For general information about credit insurance or complaints regarding your credit insurance, please contact the South Carolina Department of Insurance at [current toll-free number]'.
(C) If a credit life or a credit accident and sickness insurance policy or certificate provides truncated or critical period coverage or any other type of similar coverage that does not provide benefits or coverage for the entire term or amount of the indebtedness, the credit life or credit accident and sickness insurance policy or certificate shall include a statement printed on the face of the policy or first page of the certificate which clearly describes the limited nature of the insurance.
(D) The provisions of subsections (B) and (C) do not apply to insurance for which no identifiable charge is made to the consumer."
Creditor to offer debtor choice; etc.
SECTION 10. Section 37-4-110 of the 1976 Code is amended to read:
"Section 37-4-110. (1) A creditor may not contract for or receive a separate charge for insurance in connection with a deferral (Section 37-2-204 or Section 37-3-204), a refinancing (Section 37-2-205 or Section 37-3-205), or a consolidation (Section 37-2-206 or Section 37-3-206), unless:
(a) the debtor agrees at or before the time of the deferral, refinancing, or consolidation that the charge may be made;
(b) the debtor is or is to be provided with insurance for an amount or a term, or insurance of a kind, in addition to that to which he would have been entitled had there been no deferral, refinancing, or consolidation;
(c) the debtor receives a refund or credit on account of any unexpired term of existing insurance in the amount that would be required if the insurance were terminated (Section 37-4-108); and
(d) the charge does not exceed the amount permitted by this chapter (Section 37-4-107).
The provisions of this subsection do not apply to insurance for which no identifiable charge is made to the debtor.
(2) A creditor may not contract for or receive a separate charge for insurance which duplicates insurance with respect to which the creditor has previously contracted for or received a separate charge.
(3) A creditor may not contract for or receive a separate charge for insurance in connection with a deferral (Section 37-2-204 or Section 37-3-204), a refinancing (Section 37-2-205 or Section 37-3-205), or a consolidation (Section 37-2-206 or Section 37-3-206), unless:
(a) the creditor offers the debtor a choice to continue disability or life insurance coverage, if the debtor does not qualify for disability or life insurance in connection with the deferral, refinancing, or consolidation, up to the amount of the insurance coverage remaining at the time of the deferral, refinancing, or consolidation and for an additional period not to exceed the length of the term of the original insurance. If the insurance coverage upon the original loan has not lapsed, the creditor must offer the debtor the choice to continue such coverage. The election of the debtor must be evidenced by an affirmatively signed, clear and conspicuous statement. Coverage may not be required upon deferral, refinancing, or consolidation. Such continued insurance may be subject to earlier termination according to insurance termination provisions of the policy or certificate that apply generally without regard to whether the insurance relates to a transaction that is or is not a deferral, refinancing, or consolidation; provided, however, that if:
(i) a debtor's insurance under a group policy is terminated due to a termination of the group policy; and
(ii) a plan is made available to provide coverage to the same class of debtors, but subject to submission of evidence of individual insurability, then the evidence of individual insurability requirement shall be waived with respect to all debtors whose insurance terminates due to termination of the original group policy or of the class eligibility, at least to the extent of the amount and term of the insurance in effect immediately before the original coverage is terminated;
(b) incontestability and waiting periods for insurance coverage, up to the amount of the coverage remaining at the time of the deferral, refinancing, or consolidation and for an additional period not to exceed the length of the term of the original insurance, are based upon the date on which the insurer originally insured the debtor with respect to the insurance coverage on the indebtedness that is deferred, refinanced, or consolidated, if the insurance coverage upon the original loan has not lapsed; and
(c) insurance coverage, up to the amount of the coverage remaining at the time of the deferral, refinancing, or consolidation and for an additional period not to exceed the length of the term of the original insurance, on the indebtedness that is deferred, refinanced, or consolidated is not subject to evidence of insurability, if the insurance coverage upon the original loan has not lapsed.
The provisions of this subsection do not apply to insurance for which no identifiable charge is made to the debtor."
Medical conditions to be clearly disclosed; etc.
SECTION 11. Section 37-4-201 of the 1976 Code is amended to read:
"Section 37-4-201. (1) Consumer credit insurance provided by a creditor may be subject to the furnishing of evidence of insurability satisfactory to the insurer. Whether or not such evidence is required, the term of the insurance shall commence no later than when the debtor becomes obligated to the creditor or when the debtor applies for the insurance, whichever is later, except as follows:
(a) if any required evidence of insurability is not furnished until more than thirty days after the term would otherwise commence, the term may commence on the date when the insurer determines the evidence to be satisfactory; or
(b) if the creditor provides insurance not previously provided covering debts previously created, the term may commence on the effective date of the policy.
(2) If evidence of insurability is required, and the insured's eligibility is to be determined by inquiries about existing or past medical conditions, the medical conditions inquired about shall be clearly and conspicuously disclosed in plain language on forms promulgated or approved by the Department of Insurance which achieve a grade level score of no higher than seventh grade on the Flesch-Kincaid readability test. The disclosure shall be made in a clear and conspicuous manner in bold type, with space for the insured to personally acknowledge the disclosure by a dated signature or initial immediately adjacent to the disclosure. Insurance coverage shall not be denied on the basis of any medical condition not so disclosed. Coverage shall not be denied if the insured's dated acknowledgment does not appear on the form.
(3) The originally scheduled term of the insurance shall extend at least until the due date of the last scheduled payment of the debt, except as follows:
(a) if the insurance relates to a revolving charge account or revolving loan account, the term need extend only until the payment of the debt under the account and may be sooner terminated after at least thirty days' notice to the debtor; or
(b) if the consumer chooses to purchase insurance for less than the term of the consumer credit transaction and if the debtor is advised in writing that the insurance will be written for a specified shorter time as described in subitems (ii) and (iii) below, the term need extend only until the end of the specified time:
(i) For all closed-end credit transactions in which the debtor's age at loan maturity would not exceed any applicable age limit, the debtor shall be given a disclosure that the insurance is for the length of the loan.
(ii) The disclosure may allow the consumer to affirmatively sign a statement that the term of the insurance is less than the length of the loan, in which event, the coverage shall be for the duration so agreed to and the disclosure must clearly and conspicuously indicate the length of the insurance coverage and that the length of the insurance coverage is less than the term of the loan.
(iii) All insurance may be subject to a provision by which the insurance terminates when the insured debtor attains a specified age, which shall not be less than sixty-six years; provided, that any premium paid by or charged to a debtor for a period of coverage beyond such termination age shall result in coverage being continued until the end of the period for which the premium payment or charge is made.
(iv) The disclosures must achieve a grade level score of no higher than seventh grade on the Flesch-Kincaid readability test.
(4) The term of the insurance shall not extend more than fifteen days after the originally scheduled due date of the last scheduled payment of the debt unless it is extended without additional cost to the debtor or as an incident to a deferral, refinancing, or consolidation."
Approximate amount of the debt defined
SECTION 12. Section 37-4-202(1)(a) of the 1976 Code is amended to read:
"(a) In the case of consumer credit insurance providing life coverage, the amount of insurance may not initially exceed the debt and, if the debt is payable in installments, may not at any time exceed the greater of the scheduled or actual amount of the debt. For purposes of credit coverage, the 'approximate amount of the debt' is defined as follows: (1) the periodic installment payment multiplied by the number of scheduled periodic installment payments for a loan with a term of sixty months or less; (2) the amount necessary to liquidate the remaining debt in a single lump sum payment, excluding all unearned interest and other unearned finance charges, plus six monthly installment payments for a loan with a term in excess of sixty months.
In the case of a consumer lease contract, the residual value of the consumer credit lease may be included in the debt; however, the lessor shall not require the lessee to buy insurance covering the residual value of the leased item; or"
Exception regarding life insurance deleted; etc.
SECTION 13. Section 37-4-203(2) of the 1976 Code is amended to read:
"(2) Except as provided in subsection (3), all policies, certificates of insurance, notices of proposed insurance, applications for insurance, endorsements, and riders relating to consumer credit insurance, delivered or issued for delivery in this State, and the schedule of premium rates or charges pertaining thereto, shall be filed by the insurer with the Director of Insurance. Within ninety days after the filing of any form or schedule, he shall disapprove it if the premium rates or charges are unreasonable in relation to the benefits provided under the form, or if the form contains provisions which are unjust, unfair, inequitable or deceptive, or encourage misrepresentation of the coverage, or are contrary to any provision of the Insurance Code or of any rule or regulation promulgated thereunder."
Credit life insurance premiums; etc.
SECTION 14. Section 37-4-203(5) of the 1976 Code, as last amended by Act 135 of 1995, is further amended to read:
"(5) Until January 1, 2001, 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 covered by insurance 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
Effective January 1, 2001, 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 covered by insurance is scheduled to continue:
Decreasing Balance Level Balance
Individual $ .57 $1.14
Joint Insurance $ .95 $1.89
Effective January 1, 2003, 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 covered by insurance is scheduled to continue:
Decreasing Balance Level Balance
Individual $ .55 $1.10
Joint Insurance $ .91 $1.83"
Payment on a legitimate insurance claim; damages, fees, costs
SECTION 15. The 1976 Code is amended by adding:
"Section 37-4-205. No person may act or attempt in a consumer credit transaction to prevent the filing or receiving of payment on a legitimate insurance claim. In an action in which it is found that a person has violated this section, the court shall award to the consumer the actual damages and consequential damages, if any, and to his attorneys their reasonable fees and costs. In determining attorney's fees and costs, the amount of recovery on behalf of the consumer is not controlling."
Required disclosures need not be signed by debtor
SECTION 16. The 1976 Code is amended by adding:
"Section 37-4-206. Notwithstanding the requirements of Sections 37-2-202(2), 37-3-202(2), 37-4-110(1)(e), and 37-4-201(3)(b) required disclosures must be given and acknowledged, but need not be signed by the debtor, in a transaction that meets all of the following requirements:
(a) the plan is an open-end loan or open-end credit plan;
(b) the insurance election or change is made by the debtor at a time after the plan documents are initially completed and the plan is established;
(c) the premiums or insurance charges are to be added to the account monthly on an outstanding balance basis;
(d) the insurance election or change is requested by the debtor by telephone or other electronic means;
(e) the consumer has the ability to cancel the credit insurance at any time; and
(f) the consumer is given a clear and conspicuous disclosure in plain language on the first statement in which the additional charge is included stating that there has been an increase in the insurance premium and that the coverage may be canceled at any time. In lieu of providing the disclosure on the first statement in which the additional charge is included, a separate disclosure may be mailed to the consumer no later than in conjunction with the mailing of the first statement in which the additional charge is included."
Policy, certificate of insurance cannot be declared void; etc.
SECTION 17. The 1976 Code is amended by adding:
"Section 37-4-207. A policy or certificate may not be declared void and the insurer may not avoid liability based upon a misrepresentation made by the insured, with respect to information provided regarding medical conditions or health history required in furnishing evidence of insurability, that is not causally related to the contingency or event by which the policy claim arises."
Amount for nonfiling insurance coverage
SECTION 18. The 1976 Code is amended by adding:
"Section 37-4-208. The amount charged for nonfiling insurance coverage may not exceed seventy-five percent of the official fee as defined in Section 37-1-301(17)."
Certain disclosures may be combined by creditor
SECTION 19. The 1976 Code is amended by adding:
"Section 37-4-209. Nothing in this chapter shall be construed to prohibit the creditor from combining disclosures required in this chapter with other disclosures required under state and federal law, in order to avoid redundancy."
Consumer credit, insurance; disability
SECTION 20. The 1976 Code is amended by adding:
"Section 37-4-210. Disability shall not be defined more restrictively than the inability of the insured to engage in his own occupation during the first year of disability or for the length of the benefit period if less than one year. After the first year of disability, disability shall not be defined more restrictively than the inability of the insured to engage in the substantial duties of any gainful occupation for substantially equivalent remuneration to the insured's own occupation. Substantially equivalent remuneration means not less than seventy-five percent of the insured's base wage, exclusive of overtime and bonus, as of the date disability commences."
Severability clause
SECTION 21. If any provision of this act or the application of such provision to any person or circumstance is held to be unconstitutional, the remainder of this act and the application of the provisions of such to any person or circumstance shall not be affected thereby.
Supervised lenders exempted
SECTION 22. Section 38-39-10(b) of the 1976 Code, as amended by Section 653 of Act 181 of 1993, is further amended to read:
"(b) a banking institution, savings and loan association, cooperative credit union, consumer finance company provided for in Sections 34-29-10 to 34-29-260 authorized to do business in this State, or a supervised lender provided for in Title 37 authorized to do business in this State;"
Noncredit term life insurance
SECTION 23. Section 37-3-202(2) of the 1976 Code, as last amended by Act 326 of 1996, is further amended by adding:
"(d) noncredit term life insurance; provided, that the person soliciting the sale of such insurance is properly licensed as required under South Carolina insurance laws and the lender is properly licensed as an agency as required under South Carolina insurance laws and clearly and conspicuously discloses to the insured, prior to the consummation of the insurance purchase, the right to cancel and provides the insured at that time with a form in duplicate signed by the insured. This form shall clearly and conspicuously state in a manner that achieves a grade level score of no higher than seventh grade on the Flesch-Kincaid readability test:
(i) that the purchase of this insurance is not a condition of any loan or extension of credit by including the following language: 'The purchase of this insurance is not required to obtain credit and will not be provided unless you sign this form and agree to pay the additional cost.';
(ii) that the interest rates and charges do not depend upon the purchase of this insurance;
(iii) that the insured has the option to pay the insurance premium from his own funds or to pay the premium with a portion of the loan proceeds;
(iv) the premium and a description of the coverage, including the face amount, term of the coverage, and any exceptions, limitations, or restrictions;
(v) that the insured may cancel this insurance by mailing a signed request to cancel, together with the policy, to the lender or the insurance company within thirty days after receipt of the policy and, that in the event of cancellation by the insured within thirty days after receipt of the policy, the insured will be promptly refunded the entire premium for such insurance;
(vi) that the insurance laws of South Carolina apply with respect to any type of termination other than as contained in subitem (v) of this item (d) and that the policy should be consulted for more information;
(vii) that the insurance is not tied to the loan in any manner and that if the loan is terminated, the insurance will remain in force unless it is otherwise terminated under the terms of the agreement between the debtor and the insurer;
(viii) the name, address, and phone number of the lender; and
(ix) the name, address, and phone number of the insurance company and the process to be followed in submitting a claim.
The noncredit term life insurance must be underwritten by an insurance company which is properly licensed as required under South Carolina insurance laws. In addition, the noncredit term life insurance must be filed for approval prior to use in accordance with South Carolina insurance laws, and the terms and conditions of the transaction must comply with any other applicable provisions of the South Carolina insurance laws.
If the creditor contracts for or receives a separate charge for insurance, the amount charged for the insurance may not exceed the premium to be charged by the insurer, as computed at the time the charge to the debtor is determined, conforming to any rate filings required by law and made by the insurer with the Director of the Department of Insurance.
Any attempt to tie the sale of the noncredit term life insurance to any loan or extension of credit or otherwise to coerce the debtor into purchasing the insurance is prohibited, and any party engaged in the tying or coercion is subject to penalties in accordance with Section 37-5-202."
Consumer course of action; damages; penalty
SECTION 24. Section 37-5-202(1) of the 1976 Code is amended to read:
"(1) If a creditor has violated any provisions of this title applying to receipts, statements of account, and evidences of payment (Sections 37-2-302 and 37-3-302), notice to cosigners and similar parties (Sections 37-2-302 and 37-3-303), schedule of maximum loan finance charges to be filed and posted (Sections 37-2-305 and 37-3-305), certain negotiable instruments prohibited (Section 37-2-403), assignee subject to claims and defenses (Sections 37-2-404(5) and 37-2-709), security in sales or leases (Section 37-2-407), no assignment of earnings (Sections 37-2-410, 37-3-403 and 37-2-710), referral sales and leases (Section 37-2-411), attorney's fees (Sections 37-2-413 and 37-3-404), limitations on default charges (Sections 37-2-414, 37-2-706, and 37-3-405), authorizations to confess judgment (Sections 37-2-415, 37-2-713, and 37-3-407), consumer rental-purchase disclosure (Section 37-2-702), consumer rental-purchase reinstatement (Section 37-2-714), noncredit term life insurance (Section 37-3-202(2)), lender subject to claims and defenses arising from sales and leases (Section 37-3-410(4)), card issuer subject to claims and defenses (Section 37-3-411(5)), authority to make supervised loans (Section 37-3-502), restrictions on interest in land as security (Section 37-3-510), limitations on the schedule of payments on loan terms for supervised loans (Section 37-3-511), or assurance of discontinuance (Section 37-6-109), the consumer has a cause of action to recover actual damages and also a right in an action other than a class action, to recover from the person violating this title a penalty in an amount determined by the court not less than one hundred dollars nor more than one thousand dollars. With respect to violations arising from sales or loans made pursuant to a revolving charge or a revolving loan account no action pursuant to this subsection may be brought more than two years after the violation occurred. With respect to violations arising from other consumer credit transactions, no action pursuant to this subsection may be brought more than one year after the scheduled or accelerated maturity of the debt."
Time effective; Department of Insurance authorized to review policies, filing; etc.
SECTION 25. Upon approval by the Governor, this act takes effect January 1, 2000. The provisions in Section 1 and Section 14 relating to changes in credit life insurance rates are effective as indicated in the respective sections. The South Carolina Department of Insurance may, prior to the effective date of this act, review any policies and filings necessary to implement the provisions of this act in order to transition into any additional or altered requirement provided therein by this act. Any action of the department to implement this act prior to January 1, 2000, shall be subject to the provisions, requirements, and law of this act effective on January 1, 2000.
Ratified the 9th day of June, 1999.
Approved the 11th day of June, 1999.
This web page was last updated on Wednesday, December 9, 2009 at 9:05 A.M.