S*303 Session 106 (1985-1986)
S*0303(Rat #0235, Act #0153 of 1985) General Bill, By
Senate Banking and Insurance
A Bill to amend Sections 37-3-105, Code of Laws of South Carolina, 1976,
relating to first mortgage real estate loans, so as to provide that if the
origination charge and other prepaid charges substantially exceed the
customary charge for a consumer loan the creditor is subject to the
investigation by the Administrator of Consumer Affairs; 37-3-201 relating to
loan finance charge for consumer loans other than supervised loans, so as to
delete the provisions stating that the finance charge may be contracted for
and earned at the single annual percentage rate; 37-5-108, as amended,
relating to unconscionable acts to induce a consumer to secure a loan or to
collect a debt, so as to provide that there may be a finding of
unconscionability with regard to a consumer loan when there is a gross
disparity between price of property or services sold and the value of the
property or services or when prepaid charges substantially exceed the
customary charge for a loan and provide that the court may consider any
bargaining disparity between the parties to determine
unconscionability.-amended title
02/28/85 Senate Introduced, read first time, placed on calendar
without reference SJ-705
03/13/85 Senate Read second time SJ-846
03/14/85 Senate Read third time and sent to House SJ-877
03/14/85 Senate Reconsidered SJ-879
04/23/85 Senate Amended SJ-1729
04/23/85 Senate Read third time and sent to House SJ-1731
04/24/85 House Introduced and read first time HJ-2680
04/24/85 House Referred to Committee on Labor, Commerce and
Industry HJ-2681
05/23/85 House Committee report: Favorable with amendment Labor,
Commerce and Industry HJ-3449
05/29/85 House Debate adjourned HJ-3607
05/29/85 House Reconsidered HJ-3611
05/29/85 House Amended HJ-3613
05/29/85 House Read second time HJ-3614
05/30/85 House Read third time HJ-3644
05/30/85 House Returned HJ-3644
05/30/85 Senate Concurred in House amendment and enrolled SJ-2398
05/31/85 Senate Recalled from Legislative Council SJ-2426
05/31/85 Senate Reconsidered SJ-2427
05/31/85 Senate Non-concurrence in House amendment SJ-2427
06/01/85 Senate Reconsidered SJ-2481
06/01/85 Senate House amendment amended SJ-2481
06/01/85 Senate Returned SJ-2482
06/03/85 House Concurred in Senate amendment and enrolled HJ-3756
06/18/85 Ratified R 235
06/20/85 Signed By Governor
06/20/85 Effective date 06/20/85
06/20/85 Act No. 153
07/10/85 Copies available
(A153, R235, S303)
AN ACT TO AMEND SECTIONS 37-3-105, CODE OF LAWS OF SOUTH CAROLINA, 1976,
RELATING TO FIRST MORTGAGE REAL ESTATE LOANS, SO AS TO PROVIDE THAT IF THE
ORIGINATION CHARGE AND OTHER PREPAID CHARGES SUBSTANTIALLY EXCEED THE CUSTOMARY
CHARGE FOR A CONSUMER LOAN THE CREDITOR IS SUBJECT TO THE INVESTIGATION BY THE
ADMINISTRATOR OF CONSUMER AFFAIRS; 37-3-201 RELATING TO LOAN FINANCE CHARGE FOR
CONSUMER LOANS OTHER THAN SUPERVISED LOANS, SO AS TO DELETE THE PROVISION STATING
THAT THE FINANCE CHARGE MAY BE CONTRACTED FOR AND EARNED AT THE SINGLE ANNUAL
PERCENTAGE RATE; 37-5-108, AS AMENDED, RELATING TO UNCONSCIONABLE ACTS TO INDUCE
A CONSUMER TO SECURE A LOAN OR TO COLLECT A DEBT, SO AS TO PROVIDE THAT THERE MAY
BE A FINDING OF UNCONSCIONABILITY WITH REGARD TO A CONSUMER LOAN WHEN THERE IS
A GROSS DISPARITY BETWEEN PRICE OF PROPERTY OR SERVICES SOLD AND THE VALUE OF THE
PROPERTY OR SERVICES OR WHEN PREPAID CHARGES SUBSTANTIALLY EXCEED THE CUSTOMARY
CHARGE FOR A LOAN AND PROVIDE THAT THE COURT MAY CONSIDER ANY BARGAINING
DISPARITY BETWEEN THE PARTIES TO DETERMINE UNCONSCIONABILITY.
Whereas, the General Assembly finds that since the passage of Act 385 of 1982,
certain creditors have charged points, origination fees, or other prepaid finance
charges in a manner and in an amount which may have misled debtors about the true
nature of their obligations. It is not the intent of the General Assembly that
deregulation of rates should lead to misrepresentation of rates or unconscionable
rates of credit service charges, loan finance charges, or unconscionable prepaid
charges of any kind. These amendments are adopted to clarify the application of
the unconscionability provisions of the Consumer Protection Code to consumer
credit transactions and to prevent deception, misdisclosure, and overreaching in
consumer credit transactions. The General Assembly intends this act should in
no way impair or affect in any manner any causes of action which may have accrued
prior to the effective date of this act, whether based upon charges substantially
exceeding usual and customary charges or for any other reason. The General
Assembly also intends that no negative implication may be drawn from this act.
Now, therefore, Be it enacted by the General Assembly of the State of South
Carolina:
Charges
SECTION 1. Item (c) of subsection (2) of Section 37-3-105 of the 1976 Code is
amended by adding at the end:
"If an origination charge, prepaid finance charge, prepaid points,
service, or other prepaid charge substantially exceeds the usual and customary
charge for a particular type of loan, the creditor is subject to the provisions
of Part 1 of Chapter 6 of Title 37, notwithstanding that the origination charge,
prepaid finance charge, prepaid points, service, or other prepaid charge is
properly disclosed as part of the finance charge for purposes of complying with
the Federal Truth in Lending Act or part or all of the origination charge,
prepaid finance charge, prepaid points charge, service, or other prepaid charges
are rebatable or refundable upon prepayment or acceleration of the
obligation."
Limitation on section
SECTION 2. Subsection (3) of Section 37-3-201 of the 1976 Code is amended to
read:
"(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.
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; and
(b) the effect of prepayment is governed by the provisions on rebate upon
prepayment (Section 37-3-210)."
Finding of unconscionability
SECTION 3. Subsection (4)(c) of Section 37-5-108 of the 1976 Code, as amended
by an Act of 1985 bearing Ratification Number 185, is further amended to read:
"(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;".
Further
SECTION 4. Section 37-5-108 of the 1976 Code is amended by adding:
"(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."
Time effective
SECTION 5. This act shall take effect upon approval by the Governor. |