Bill 461

                    Current Status

Bill Number:               461
Ratification Number:       402
Act Number:                355
Introducing Body:          Senate
Subject:                   Provide that the Federal Alternative
                           Mortgage Transaction Parity Act not apply in this
                           state

(A355, R402, S461)

AN ACT TO PROVIDE THAT THE FEDERAL ALTERNATIVE MORTGAGE TRANSACTION PARITY ACT NOT APPLY IN THIS STATE; TO AMEND SECTIONS 37-1-201, 37-2-104, 37-2-413, 37-3-404, 37-5-110, AND 37-5-111, ALL AS AMENDED, AND 37-2-305, 37-3-305, 37-10-102, AND 37-10-103, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE CONSUMER PROTECTION CODE, SO AS TO DELETE THE PROVISION LIMITING THE CHARGES A CREDITOR MAY COLLECT PURSUANT TO OUT OF STATE TRANSACTIONS, PROVIDE THAT CREDIT SALES EXCLUDED FROM THE CONSUMER PROTECTION CODE ARE SUBJECT TO ITS PROVISIONS FOR VIOLATION OF DISCLOSURE, SELECTION OF ATTORNEY OR INSURANCE AGENT, INCREASE THE FEE FROM FOUR DOLLARS TO TEN DOLLARS FOR A RATE SCHEDULE FILED BY A CREDITOR AND INCREASE THE CHARGE FOR CERTIFIED COPIES OF THIS SCHEDULE FROM TWO DOLLARS TO FOUR DOLLARS, APPLY THE SAME PROVISIONS FOR THE PURCHASE OF TITLE INSURANCE AS TO ATTORNEY'S FEES WHEN A CREDIT SALE IS SECURED BY REAL ESTATE, PROVIDE FOR A NOTICE OF CONSUMER'S RIGHT TO CURE A SECURED OR UNSECURED CONSUMER CREDIT TRANSACTION THAT IS IN DEFAULT, EXEMPT THE CREDITOR FROM ASCERTAINING THE BORROWER'S PREFERENCE OF INSURANCE AGENT WHEN A LOAN ON PROPERTY IS SUBJECT TO THE HORIZONTAL PROPERTY ACT, TO PROVIDE THE LOAN FINANCE CHARGE MAY BE AT A VARIABLE RATE FOR LOANS NOT EXCEEDING ONE HUNDRED THOUSAND DOLLARS MADE FOR BUSINESS OR AGRICULTURAL PURPOSES, TO PROVIDE THAT IN RESIDENTIAL LOANS NOT EXCEEDING ONE HUNDRED THOUSAND DOLLARS THE RATE MAY BE VARIABLE IF THE LOAN IS MADE IN ACCORDANCE WITH REGULATIONS OF THE STATE BOARD OF FINANCIAL INSTITUTIONS OR A FEDERAL REGULATORY AGENCY; AND TO AMEND THE CODE BY ADDING SECTION 37-3-412 SO AS TO PROVIDE THAT A CONSUMER LOAN NOT IN EXCESS OF ONE HUNDRED THOUSAND DOLLARS SECURED BY REAL ESTATE MAY BE MADE AT A VARIABLE RATE IF THE CREDITOR MAKES THE LOAN IN ACCORDANCE WITH REGULATIONS FOR ALTERNATIVE MORTGAGES BY THE STATE BOARD OF FINANCIAL INSTITUTIONS OR A FEDERAL REGULATORY AGENCY.

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

Provisions not to apply

SECTION 1. The provisions of Section 804 of the Alternative Mortgage Transaction Parity Act of 1982, Title VIII of P.L. 97-320 (96 Stat. 1545), known as the Garn-St. Germain Depository Institutions Act of 1982, do not apply to any alternative mortgage transaction as the term alternative mortgage transaction is defined in Section 803(1) of the Alternative Mortgage Transaction Parity Act of 1982, and that this State does not want the provisions of Section 804 of the Alternative Mortgage Transaction Parity Act of 1982 to apply with respect to any alternative mortgage transaction made in this State.

Applicability of title

SECTION 2. Section 37-1-201 of the 1976 Code, as last amended by Act 385 of 1982, is further amended to read:

"Section 37-1-201. (1) Except as otherwise provided in this section, this title applies to consumer credit transactions made in this State. For purposes of this title, a consumer credit transaction is made in this State if:

(a) A signed writing evidencing the obligation or offer of the consumer is received by the creditor in this State; or

(b) The creditor induces the consumer who is a resident of this State to enter into the transaction by face-to-face solicitation in this State.

(2) With respect to consumer credit transactions entered into pursuant to open-end credit this title applies if the consumer's communication or indication of his intention to establish the arrangement is received by the creditor in this State. If no communication or indication of intention is given by the consumer before the first transaction, this title applies if the creditor's communication notifying the consumer of the privilege of using the arrangement is mailed or personally delivered in this State.

(3) The subdivision on limitations on creditors' remedies (Part 1) of the chapter on remedies and penalties (Chapter 5) applies to actions or other proceedings brought in this State to enforce rights arising from consumer credit transactions or extortionate extensions of credit, wherever made.

(4) A consumer credit transaction to which this title does not apply entered into with a person who is a resident of this State at the time of the transaction is valid and enforceable in this State to the extent that it is valid and enforceable under the laws of the jurisdiction applicable to the transaction.

A creditor may not enforce rights against the consumer with respect to the provisions of agreements which violate the provisions on limitations on agreements and practices (Part 4) of the chapter on credit sales (Chapter 2) or of the chapter on loans (Chapter 3).

(5) Except as provided in subsections (3), (4), and (8), a consumer credit transaction made in another jurisdiction is valid and enforceable in this State according to its terms to the extent that it is valid and enforceable under the laws of the jurisdiction applicable to the transaction.

(6) For the purposes of this title, the residence of a consumer is the address given by him as his residence in a writing signed by him in connection with a credit transaction. Until he notifies the creditor of a new or different address, the given address is presumed to be unchanged.

(7) For purposes of this section:

(a) 'Consumer' means the buyer, lessee, or debtor to whom credit is granted in a consumer credit transaction.

(b) 'Consumer credit transaction' means a consumer credit sale or consumer loan or a refinancing or consolidation thereof, or a consumer lease.

(c) 'Creditor' means the person who grants credit in a consumer credit transaction or, except as otherwise provided, an assignee of a creditor's right to payment, but use of the term does not in itself impose on an assignee any obligation of his assignor. In the case of credit granted pursuant to a credit card, the 'person who grants credit' is the card issuer and not another person honoring the credit card.

(d) 'Open-end credit' means an arrangement pursuant to which:

(i) A creditor may permit a consumer, from time to time, to purchase or lease on credit from the creditor or pursuant to a credit card, or to obtain loans from the creditor or pursuant to a credit card,

(ii) The amounts financed and the finance and other appropriate charges are debited to an account,

(iii) The finance charge, if made, is computed on the account periodically, and

iv) The consumer has the privilege of paying in full or in installments.

(8) With respect to a consumer credit sale or consumer loan to which this title does not otherwise apply, if, pursuant to solicitation in this State, a consumer who is a resident of this State sends a signed writing evidencing the obligation or offer of the consumer to a creditor in another state and receives the goods or services purchased or the cash proceeds of the loan in this State:

(a) The creditor may not contract for or receive charges exceeding those permitted by this title;

(b) The provisions on Powers and Functions of Administrator (Part 1 of Chapter 6 of this title) shall apply as though the consumer credit sale or consumer loan were entered into in this State.

(9) Notwithstanding other provisions of this section:

(a) except as provided in subsection (3), this title does not apply if the consumer is not a resident of this State at the time of a consumer credit transaction and the parties have agreed that the law of his residence applies;

(b) this title applies if the consumer is a resident of this State at the time of a consumer credit transaction and the parties have agreed that the law of his residence applies.

(10) Each of the following agreements or provisions of an agreement by a consumer who is a resident of this State at the time of a consumer credit transaction is invalid with respect to the transaction:

(a) that the law of another jurisdiction apply;

(b) that the consumer consents to be subject to the process of another jurisdiction;

(c) that the consumer appoints an agent to receive service of process;

(d) that fixes venue;

(e) that the consumer consents to the jurisdiction of the court that does not otherwise have jurisdiction.

(11) The following provisions of this title specify the applicable law governing certain cases:

(a) applicability (Section 37-6-102) of the Part on Powers and Functions of Administrator (Part 1) of the Chapter on Administration (Chapter 6);

(b) applicability (Section 37-6-201) of the Chapter on Notification and Fees (Part 2) of the Chapter on Administration (Chapter 6)."

"Consumer Credit Sale" not to include

SECTION 3. Subsection (2) of Section 37-2-104 of the 1976 Code, as last amended by Section 10 of Act 385 of 1982, is further amended to read:

"(2) Unless the sale is made subject to this title by agreement (Section 37-2-601), 'consumer credit sale' does not include:

(a) a sale in which a seller allows the buyer to purchase goods or services pursuant to a lender credit card or similar arrangement, or

(b) a sale of an interest in land if the debt is secured by a first lien or equivalent security interest in real estate.

Credit sales excluded from the definition of a consumer credit sale pursuant to this subsection are subject to the following provisions of this title: civil liability for violation of disclosure (Section 37-5-203) and voluntary complaint resolution (Section 37-6-117); and in credit sales excluded pursuant to item (b) limitations on selection of a closing attorney and insurance agent [Section 37-10-102(a)] and notice of assumption rights [Section 37-10-102(c)]."

Department to maintain file

SECTION 4. (A) Subsection (6) of Section 37-2-305 of the 1976 Code, added by Section 20 of Act 385 of 1982, is amended to read:

"(6) The Department of Consumer Affairs must maintain a file for each creditor containing the original and all revised rate schedules by the creditor. A certified copy of each filing showing the date and time that it was received must be sent to the creditor making the filing at the time of its receipt. A fee of ten dollars for each rate schedule filed by a creditor is payable to the Department of Consumer Affairs for its services in maintaining the rate schedule files and providing one certified copy of each rate filing to the creditor. Additional certified copies of a filing shall be provided at a charge of four dollars per copy."

(B) Section 37-2-305 of the 1976 Code, added by Section 20 of Act 385 of 1982, is amended by adding at the end:

"(8) Every creditor must file at least one maximum rate schedule and pay at least one ten dollar filing fee during each state fiscal year disclosing that creditor's existing maximum rates. If this filing does not change any maximum rates previously filed, the creditor will not be required to alter posted maximum rates. If any creditor has not filed a maximum rate schedule with the Department of Consumer Affairs since the beginning of the previous state fiscal year then on July first of the following year the filing will no longer be effective and the maximum credit service charge that the creditor may impose on any credit extended after that date may not exceed eighteen percent per annum until such time as the creditor files a revised maximum rate schedule that complies with this section."

"Consumer Credit Sale"

SECTION 5. Subsection (2) of Section 37-2-413 of the 1976 Code, as last amended by Section 24 of Act 385 of 1982, is further amended to read:

"(2) With respect to a consumer credit sale that is secured in whole or in part by a lien on real estate the provisions of Section 37-10-102(a) apply whenever the seller requires the debtor to purchase insurance or pay any attorney's fees in connection with examining the title and closing the transaction."

Consumer loan

SECTION 6. Subsection (2) of Section 37-3-404 of the 1976 Code, as last amended by Section 36 of Act 385 of 1982, is further amended to read:

"(2) With respect to a consumer loan that is secured in whole or in part by a lien on real estate the provisions of Section 37-10-102(a) apply whenever the lender requires the debtor to purchase insurance or pay any attorney's fees in connection with examining the title and closing the transaction."

Consumer loan secured by lien

SECTION 7. The 1976 Code is amended by adding:

"Section 37-3-412. With respect to a consumer loan which is secured in whole or in part by a lien on real estate under which the aggregate of all sums advanced or contemplated by the parties in good faith to be advanced will not exceed one hundred thousand dollars, the rate of the loan finance charge shall be a fixed nonvariable rate unless the creditor makes the transaction in accordance with any regulation governing alternative mortgages promulgated by the State Board of Financial Institutions or a federal regulatory agency."

Secured or unsecured consumer credit transactions

SECTION 8. Subsection (1) of Section 37-5-110 of the 1976 Code, as last amended by Section 44 of Act 385 of 1982, is further amended to read:

"(1) With respect to a secured or unsecured consumer credit transaction payable in two or more installments, after a consumer has been in default for ten days for failure to make a required payment and has not voluntarily surrendered possession of goods that are collateral, a creditor may give the consumer the notice described in this section. A creditor gives notice to the consumer under this section when he delivers the notice to the consumer or mails the notice to him at his residence [Section 37-1-201(6)]."

Further

SECTION 9. Subsection (1) of Section 37-5-111 of the 1976 Code, as last amended by Section 45 of Act 385 of 1982, is further amended to read:

"(1) With respect to a secured or unsecured consumer credit transaction payable in two or more installments, except as provided in subsection (2), after a default consisting only of the consumer's failure to make a required payment, a creditor, because of that default, may neither accelerate maturity of the unpaid balance of the obligation, nor take possession of or otherwise enforce a security interest in goods that are collateral until twenty days after a notice of the consumer's right to cure (Section 37-5-110) is given. Until expiration of the minimum applicable period after the notice is given, the consumer may cure all defaults consisting of a failure to make the required payment by tendering the amount of all unpaid sums due at the time of the tender, without acceleration, plus any unpaid delinquency or deferral charges. Cure restores the consumer to his rights under the agreement as though the defaults had not occurred."

Legal counsel

SECTION 10. Item (a) of Section 37-10-102 of the 1976 Code, added by Section 56 of Act 385 of 1982, is amended to read:

"(a) The creditor must ascertain the preference of the borrower as to the legal counsel that is employed to represent the debtor in all matters of the transaction relating to the closing of the transaction and except in the case of a loan on property that is subject to the South Carolina Horizontal Property Act (Section 27-31-10 et seq.) the insurance agent to furnish required hazard and flood property insurance in connection with the mortgage and comply with such preference, and the credit application on the first page thereof must contain information as is necessary to ascertain these preferences of the borrower. The creditor may require that the attorney or agent so chosen be able to provide reasonable security to the creditor by way of mortgage title insurance in a company acceptable to the creditor and other insurance in a company acceptable to the creditor. If title insurance is made a condition of the loan at any point during the negotiations, it must remain a condition all the time thereafter regardless of which attorney ultimately closes the transaction. Any legal fees other than for examination and certification of the title, the preparation of all required documents, and the closing of the transaction required or incurred by the creditor in connection with the transaction is the responsibility of the creditor regardless of which party pays for the title work, document preparation, and closing."

Secured loan agreement

SECTION 11. Section 37-10-103 of the 1976 Code, added by Section 56 of Act 385 of 1982, is amended to read:

"Section 37-10-103. With respect to a loan agreement which is secured in whole or in part by a first or junior lien on real estate under which the aggregate of all sums advanced or contemplated by the parties in good faith to be advanced will not exceed one hundred thousand dollars.

(1) The debtor has the right to prepay the debt in full at any time without penalty;

(2) The rate of the loan finance charge is a fixed, nonvariable rate. This subsection does not apply:

(a) If the borrower otherwise agrees; and either

(b) The loan is primarily for a business or agricultural purpose or is used for the construction of any improvements on the real estate which provides the security for the loan; or

(c) The creditor makes the loan in accordance with any regulation governing alternative mortgage loans promulgated by the State Board of Financial Institutions or a federal regulatory agency."

Department to maintain file

SECTION 12. (A) Subsection (6) of Section 37-3-305 of the 1976 Code, added by Section 33 of Act 385 of 1982, is amended to read:

"(6) The Department of Consumer Affairs must maintain a file for each creditor containing the original and all revised rate schedules filed by the creditor. A certified copy of each filing showing the date and time that it was received must be sent to the creditor making the filing at the time of its receipt. A fee of ten dollars for each rate schedule filed by a creditor is payable to the Department of Consumer Affairs for its services in maintaining the rate schedule files and providing one certified copy of each rate filing to the creditor. Additional certified copies of a filing shall be provided at a charge of four dollars per copy."

(B) Section 37-3-305 of the 1976 Code, added by Section 33 of Act 385 of 1982, is amended by adding:

"(8) Every creditor must file at least one maximum rate schedule and pay at least one ten dollar filing fee during each state fiscal year disclosing that creditor's existing maximum rates. If this filing does not change any maximum rates previously filed, the creditor will not be required to alter posted maximum rates. If any creditor has not filed a maximum rate schedule with the Department of Consumer Affairs since the beginning of the previous state fiscal year then on July first of the following year the filing will no longer be effective and the maximum finance charge that the creditor may impose on any credit extended after that date may not exceed eighteen percent per annum until such time as the creditor files a revised maximum rate schedule that complies with this section."

Time effective

SECTION 13. This act shall take effect upon approval by the Governor.