Bill 3703

                    Current Status

Bill Number:               3703
Ratification Number:       504
Act Number                 433
Introducing Body:          House
Subject:                   Charges on certain consumer credit
                           sales

(A433, R504, H3703)

AN ACT TO AMEND SECTION 37-2-207, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO CREDIT SERVICE CHARGES FOR REVOLVING CHARGE ACCOUNTS, SO AS TO PROVIDE THAT THE MONTHLY BILLING CYCLE BE TWO PERCENT OF THAT PART OF FIVE HUNDRED DOLLARS OR LESS INSTEAD OF ONE AND ONE-HALF PERCENT OF THAT PART OF ONE THOUSAND DOLLARS OR LESS AND ONE AND ONE-HALF PERCENT OF AN AMOUNT OVER FIVE HUNDRED DOLLARS INSTEAD OF ONE PERCENT OF AN AMOUNT OVER ONE THOUSAND DOLLARS, PROVIDE THAT NO LESS THAN FORTY PERCENT OF MINIMUM PAYMENT BE APPLIED TO REDUCTION OF A BILLING CYCLE INSTEAD OF FORTY-TWO PERCENT AND TO REMOVE THE EIGHTEEN PERCENT PER ANNUM CEILING; TO AMEND SECTION 37-3-201, RELATING TO MAXIMUM CHARGES ON LOANS, SO AS TO CONSOLIDATE INTO SUCH SECTION THE PROVISIONS OF SECTIONS 37-3-508 AND 37-3-515 CONCERNING LOAN FINANCE CHARGES; TO AMEND SECTION 37-3-605, AS AMENDED, RELATING TO FINANCE CHARGES FOR LOANS OTHER THAN CONSUMER LOANS, SO AS TO REMOVE THE LIMIT ON THE FINANCE CHARGES ON A LOAN IN EXCESS OF TWENTY-FIVE THOUSAND DOLLARS EXCEPT LOANS SECURED BY A FIRST LIEN ON LAND OR LOANS FOR AGRICULTURAL PURPOSE, AND TO PERMIT HOLDERS OF CREDIT ACCOUNTS TO PAY ACCOUNTS IN ACCORDANCE WITH ORIGINAL CONTRACT; TO AMEND SECTION 37-2-416, AS AMENDED, RELATING TO CHANGE IN TERMS OF REVOLVING CHARGE ACCOUNTS, SO AS TO REQUIRE THE CREDITOR TO DELIVER OR MAIL ONE WRITTEN NOTICE OF CHANGE AT LEAST THIRTY DAYS BEFORE DATE OF CHANGE INSTEAD OF TWO NOTICES THREE MONTHS BEFORE DATE OF CHANGE; TO AMEND SECTION 37-3-408, AS AMENDED, RELATING TO THE CHANGING OF TERMS OF A REVOLVING LOAN ACCOUNT, SO AS TO CHANGE THE TERM REVOLVING LOAN ACCOUNT TO REVOLVING CHARGE ACCOUNT, LOAN FINANCE CHARGE TO CREDIT SERVICE CHARGE AND DEBTOR TO CONSUMER AND TO REQUIRE THE CREDITOR TO MAIL TO THE CONSUMER ONE WRITTEN DISCLOSURE OF THE CHANGE INSTEAD OF TWO SUCH DISCLOSURES; TO AMEND SECTION 37-3-601, RELATING TO LOANS SUBJECT TO THE CONSUMER PROTECTION CODE, SO AS TO PERMIT THE PARTIES TO AGREE OR NOT TO MAKE SUPERVISED LOANS OR SUCH LOANS PURSUANT TO A CREDIT CARD SUBJECT TO SUCH CODE; TO PROVIDE THAT THE PROVISIONS OF THIS ACT EXPIRE ON JULY 1, 1982, AND TO PROVIDE EXCEPTIONS THERETO; AND TO REPEAL SECTIONS 37-3-508 AND 37-3-515 MENTIONED ABOVE AND CHAPTER 17 OF TITLE 56, THE SOUTH CAROLINA MOTOR VEHICLES SALES FINANCE ACT.

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

Charges on certain consumer credit sales

Section 1. Section 37-2-207 of the 1976 Code is amended to read:

"Section 37-2-207. (1) With respect to a consumer credit sale made pursuant to a revolving charge account, the parties to the sale may contract for the payment by the buyer of a credit service charge not exceeding that permitted in this section but, if they do not so contract in writing, no charge shall be made.

(2) A charge may be made in each billing cycle which is a percentage of an amount no greater than:

(a) the average daily balance of the account,

(b) the unpaid balance of the account on the same day of the billing cycle,

(c) the median amount within a specified range within which the average daily balance of the account or the unpaid balance of the account on the same day of the billing cycle is included. A charge may be made pursuant to this paragraph only if the seller, subject to classifications and differentiations he may reasonably establish, makes the same charge on all balances within the specified range and if the percentage when applied to the median amount within the range does not produce a charge exceeding the charge resulting from applying that percentage to the lowest amount within the range by more than eight percent of the charge on the median amount.

(3) If the billing cycle is monthly, the charge may not exceed two percent of that part of the amount pursuant to subsection (2) which is five hundred dollars or less and one and one-half percent on that part of this amount which is more than five hundred dollars. If the billing cycle is not monthly, the maximum charge is that percentage which bears the same relation to the applicable monthly percentage as the number of days in the billing cycle bears to thirty. For the purposes of this section, a variation of not more than four days from month to month is 'the same day of the billing cycle'.

(4) Notwithstanding subsection (3), if there is an unpaid balance on the same date as of which the credit service charge is applied, the seller may contract for and receive a charge not exceeding fifty cents if the billing cycle is monthly or longer, or the pro- rata part of fifty cents which bears the same relation to fifty cents as the number of days in the billing cycle bears to thirty if the billing cycle is shorter than monthly.

(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."

Finance charges on consumer loans

Section 2. Section 37-3-201 of the 1976 Code, which was added pursuant to Section 1 of Act 686 of 1976, is amended to read:

"Section 37-3-201. (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 eighteen percent per year. With respect to a consumer loan made pursuant to open-end credit, the finance charge shall be deemed not to exceed eighteen percent per year if the finance charge contracted for and received does not exceed a charge for each monthly billing cycle which is one and one-half 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 eighteen percent per year if the finance charge contracted for and received does not exceed a percentage which bears the same relation to one and one-half 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.

(2) With respect to a consumer loan, including a loan pursuant to open-end credit, a supervised lender may contract for and receive a finance charge, calculated according to the actuarial method, not exceeding the equivalent of the greater of either of the following:

(a) the total of:

(i) thirty-six percent per year on that part of the unpaid balances of the amount financed which is three hundred dollars or less;

(ii) twenty-one percent per year on that part of the unpaid balances of the amount financed which exceeds three hundred dollars but does not exceed one thousand dollars;

(iii) fifteen percent per year on that part of the unpaid balances of the amount financed which exceeds one thousand dollars; or

(b) eighteen percent per year on the unpaid balances of the amount financed; provided, however, that with respect to a consumer loan pursuant to a lender credit card a supervised lender may contract for a finance charge not exceeding that specified in Section 37-2-207 for revolving charge accounts.

(3) This section does not limit or restrict the manner of calculating the finance charge, whether by way of add-on, discount, single annual percentage rate, or otherwise, so long as the rate of the finance charge does not exceed that permitted by this section.

The finance charge may be contracted for and earned at the single annual percentage rate that would earn the same finance charge as the graduated rates when the debt is paid according to the agreed terms and the calculations are made according to the actual method. If the loan is a precomputed consumer credit transaction:

(a) the finance charge may be calculated on the assumption that all scheduled payments will be made when due

(b) the effect of prepayment is governed by the provisions on rebate upon prepayment (Section 37-3-210).

(4) Except as provided in subsection (5), the term of a loan for purposes of this section commences on the day the loan is made. Any month may be counted as one-twelfth of a year but a day is counted as one-three hundred sixty-fifths of a year. Subject to classifications and differentiations the lender may reasonably establish, a part of a month in excess of fifteen days may be treated as a full month if periods of fifteen days or less are disregarded and that procedure is not consistently used to obtain a greater yield than would otherwise be permitted. The administrator may adopt regulations not inconsistent with the Federal Truth in Lending Act with respect to treating as regular other minor irregularities in amount or time.

(5) Subject to classifications and differentiations the lender may reasonably establish, he may make the same finance charge on all amounts financed within a specified range. A finance charge so made does not violate subsection (1) or (2) if:

(a) when applied to the median amount within each range, it does not exceed the maximum permitted by the applicable subsection,

(b) when applied to the lowest amount within each range, it does not produce a rate of finance charge exceeding the rate calculated according to item (a) by more than eight percent of the rate calculated according to item (a)."

Loans other than consumer loans

Section 3. Section 3.605 of Article 3, Part 6 of Act 1241 of 1974, as last amended by Section 4 of Act 326 of 1980, is officially designated Section 37-3-605 of the 1976 Code and is further amended to read:

"Section 37-3-605. With respect to a loan other than a consumer loan, in excess of twenty-five thousand dollars, the parties may contract for the payment by the debtor of any finance or other charge except such loans that are primarily secured by a first lien which is a purchase money security interest in land or such loans made primarily for agricultural purposes."

Changing terms of revolving charge accounts

Section 4. Subsection (1) of Section 37-2-416 of the 1976 Code, as last amended by Act 686 of 1976, is further amended to read:

"(1) Whether or not a change is authorized by prior agreement, a creditor may change the terms of a revolving charge account applying to any balance incurred before or after the effective date of the change. If the change increases the rate of the credit service charge or of additional charges, alters the method of determining the balance upon which charges are made so that increased charges may result, or imposes or increases minimum charges, the change is effective with respect to a balance incurred before the effective date of the change only if the consumer after receiving disclosure of the change agrees that it in writing or the creditor delivers or mails to the consumer one written disclosure of the change at least thirty days before the effective date and the consumer incurs additional debt on or after that date."

Further

Section 5. Subsection (1) of Section 37-3-408 of the 1976 Code, as last amended by Act 686 of 1976, is further amended to read:

"(1) Whether or not a change is authorized by prior agreement, a creditor may change the terms of a revolving loan account applying to any balance incurred before or after the effective date of the change. If the change increases the rate of the loan finance charge or of additional charges, alters the method of determining the balance upon which charges are made so that increased charges may result, or imposes or increases minimum charges, the change is effective with respect to a balance incurred before the effective date of the change only if the debtor after receiving disclosure of the change agrees to it in writing or the creditor delivers or mails to the debtor one written disclosure of the change at least thirty days before the effective date and the debtor incurs additional debt on or after that date."

Loans subject to Title 37

Section 6. Section 37-3-601 of the 1976 Code, added by Act 686 of 1976, is amended to read:

"Section 37-3-601. Except in the case of a loan primarily secured by a first lien which is a purchase money security interest in land, the parties to a loan other than a consumer loan may agree in writing signed by the parties that the loan is subject to the provisions of this title applying to consumer loans. If the parties so agree, the loan is a consumer loan for all purposes of this title."

Repeal

Section 7. Sections 37-3-508 and 37-3-515 of the 1976 Code, added pursuant to Section 2 of Act 686 of 1976, and Chapter 17 of Title 56 are repealed.

Provisions to expire

Section 8. The provisions of this act shall expire on July 1, 1982, and those provisions of law affected by this act shall regain the force of law according to their terms as existing before this act.

Time effective

Section 9. This act shall take effect July 1, 1980.