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Bill 3832

                    Current Status

Bill Number:                      3832
Type of Legislation:              General Bill GB
Introducing Body:                 House
Introduced Date:                  19990406
Primary Sponsor:                  Townsend
All Sponsors:                     Townsend
Drafted Document Number:          l:\council\bills\dka\3374mm99.doc
Residing Body:                    House
Current Committee:                Judiciary Committee 25 HJ
Subject:                          Student loan agreement, garnishment of 
                                  wages when defaults on; Colleges and 
                                  Universities, Tuition


                        History

Body    Date      Action Description                     Com     Leg Involved
______  ________  ______________________________________ _______ ____________
House   19990406  Introduced, read first time,           25 HJ
                  referred to Committee


                             Versions of This Bill

TO AMEND ARTICLE 1, CHAPTER 111, TITLE 59, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO EDUCATIONAL SCHOLARSHIPS AND LOANS, BY ADDING SECTION 59-111-70 SO AS TO PROVIDE FOR GARNISHMENT OF THE WAGES OF AN INDIVIDUAL WHO DEFAULTS ON A STUDENT LOAN AGREEMENT WITH THE FEDERAL FAMILY EDUCATION LOAN PROGRAM OR THE SOUTH CAROLINA STUDENT LOAN CORPORATION OR STATE EDUCATION ASSISTANCE AUTHORITY TO THE EXTENT IT MAKES, INSURES, OR GUARANTEES A LOAN THROUGH THAT FEDERAL PROGRAM, OR OTHER GUARANTY OF SUCH A LOAN, TO ESTABLISH PROCEDURES FOR NOTICE, TO PROHIBIT EMPLOYER RETALIATION AGAINST AN EMPLOYEE WHOSE WAGES ARE GARNISHED, TO PROVIDE FOR ATTORNEY'S FEES IN A SUIT TO ENFORCE THAT PROTECTION, TO PROVIDE FOR DEFENSES AGAINST AND APPEAL OF A GARNISHMENT ACTION, AND TO SPECIFY EXEMPT DEBTORS.

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

SECTION 1. Article 1, Chapter 111, Title 59 of the 1976 Code is amended by adding:

"Section 59-111-70. (A) For the purpose of this section:

(1) 'Claimant entity' means the United States Secretary of Education in connection with loans made through the Federal Family Education Loan Program or a guaranty agency in connection with those loans, or the South Carolina Student Loan Corporation or the State Education Assistance Authority, to the extent that the corporation or the authority makes, insures, or guarantees loans through the Federal Family Education Loan Program.

(2) 'Guaranty agency' means a state or private nonprofit organization that has an agreement with the United States Secretary of Education under which it will administer a loan guarantee in connection with loans made through the Federal Family Education Loan Program pursuant to the Federal Higher Education Act of 1965, as amended.

(3) 'Disposable pay' means that part of the compensation of an individual from an employer which remains after the deduction of any amounts required by law to be withheld.

(4) 'Employer' means a person, business, or the State of South Carolina and all of its departments, agencies, subdivisions, institutions, or political subdivisions that hires one or more persons to work for wages or salary.

(B) Notwithstanding any other provision of law, the claimant entity may garnish the disposable pay of an individual debtor to collect the amount owed by an individual who is not making payments required by a repayment agreement with the claimant entity.

(1) The amount deducted from a pay period may not exceed ten percent of disposable pay, except that a greater percentage may be deducted with the written consent of the individual involved.

(2) The individual debtor must be given written notice, mailed by the claimant entity to the individual's last known address, at least thirty days before initiation of proceedings to garnish his disposable pay. The notice must state:

(a) the nature and amount of the loan obligation;

(b) the intention of the claimant entity to initiate proceedings to collect the debt through deduction from pay;

(c) the debtor's right to a hearing on the issues of existence and amount of the debt, in absentia and based on written statements and records in his file, by telephone, or in person at the Office of the State Education Assistance Authority;

(d) appeal procedures available to the debtor, as provided in subsection (F) of this section; and

(e) alternatives available to the individual debtor which may prevent garnishment.

(3) The individual debtor must be given an opportunity to inspect and copy records relating to the debt.

(4) The individual debtor must be given an opportunity to enter into a written agreement, pursuant to terms agreeable to the claimant entity, to establish a schedule for the repayment of the debt.

(5) The employer must make payments to the claimant entity as directed in the order of withholding issued in the garnishment action.

(C) The notice of the order of withholding to the employer must state clearly and unambiguously that sums withheld from an employee's wages pursuant to a family court order for child support or spousal support take precedence over garnishment provided for in this section.

(D) The notice of the order of withholding to the employer may contain only the information necessary for the employer to comply with the order.

(E) An employer may not discharge from employment, refuse to employ, or take disciplinary action against an individual because his wages are withheld in accordance with this section. The court shall award attorney's fees to an employee who prevails in an action against an employer pursuant to this subsection, in addition to other remedies.

(F)(1) The debtor or the employer may contest the withholding by requesting a hearing before the appropriate forum as provided in the Administrative Procedures Act, within thirty days from the date of the notice of the order of withholding to the employer. The grounds for contesting the withholding are:

(a) a mistake of fact has occurred;

(b) the garnishment would impose an extreme financial hardship;

(c) the debtor has a total and permanent disability;

(d) the institution that the debtor was attending permanently ceased operation while the debtor was enrolled or within ninety days after the debtor withdrew from it; or

(e) the institution did not properly test, assess, and inform the debtor of his ability to benefit from the institution's programs.

(2) 'Mistake of fact' means that the debtor:

(a) is not the actual person named in the notice of withholding;

(b) has satisfied the obligation represented by the judgment in full and is entitled to have the judgment canceled;

(c) does not have monthly disposable earnings or is not employed by the employer as stated in the notice of withholding;

(d) has family income at or below two hundred percent of the annual federal poverty guidelines;

(e) is already making payments pursuant to an agreement reached with the lender or its successor;

(f) has had his name signed, without his permission, on the loan application, the promissory note, loan check, or authorization for the loan to be disbursed by electronic funds transfer or master check; or

(g) is deceased.

(G) The following borrowers are exempt from the garnishment provisions of this section:

(1) a debtor in an officially filed bankruptcy proceeding;

(2) an individual who has been employed for less than six months at his current place of employment after having been unemployed; and

(3) a borrower in the South Carolina Teachers' Loan Program, as provided in Section 59-26-20."

SECTION 2. Section 59-115-50 of the 1976 Code is amended by adding:

"(i) To garnish the disposable pay of an individual to collect the amount owed by him if he is in default on a repayment agreement with the Authority, subject to the provisions of Section 59-111-70."

SECTION 3. This act takes effect six months after approval by the Governor.

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