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(vii) cause a telephone to ring repeatedly during a twenty-four hour period or engage any person in a telephone conversation with intent to annoy, abuse, or harass any person at the called number;

(viii) advertise for sale any debt to coerce payment of the debt;

(ix) communicate with a consumer regarding a debt by postcard;

(x) deposit or threaten to deposit any postdated check or other postdated payment instrument requested by the creditor prior to the date on such check or instrument;

(xi) take or threaten to take any nonjudicial action to effect dispossession or disablement of property if:

(aa) there is no present right to possession of the property claimed as collateral through an enforceable security interest or other ownership interest;

(bb) there is no present intention to take possession of the property; or

(cc) the property is exempt by law from such dispossession or disablement; or

(xii) cause charges to be incurred by any person for communications to the consumer by concealment of the true purpose of the communication, such charges include, but are not limited to, collect telephone calls and telegram fees.

(c) using fraudulent, deceptive, or misleading representations such as a communication which simulates legal process or which gives the appearance of being authorized, issued, or approved by a government, governmental agency, or attorney at law when it is not, or threatening or attempting to enforce a right with knowledge or reason to know that the right does not exist; in connection with the collection of a consumer credit transaction. Such false representations shall include:

(i) the character, amount, or legal status of any debt;

(ii) any services rendered or fees which may be received, unless such fees are expressly authorized by law;

(iii) a claim of an individual that he is an attorney or that any communication is from an attorney;

(iv) any claim or implication that nonpayment of any debt will result in arrest, imprisonment, garnishment, seizure, or attachment unless the remedy is legally permitted to the creditor and the claim or implication is not used for the purpose of harassment or abuse of process;

(v) a claim or implication that the consumer committed any crime or other conduct to disgrace the consumer; or

(d) causing or threatening to cause injury to the consumer's reputation or economic status by disclosing information affecting the consumer's reputation for credit-worthiness with knowledge or reason to know that the information is false; communicating with the consumer's employer before obtaining a final judgment against the consumer, except as permitted by statute or to verify the consumer's employment; disclosing to a person, with knowledge or reason to know that the person does not have a legitimate business need for the information, or in any way prohibited by statute, information affecting the consumer's credit or other reputation; or disclosing information concerning the existence of a debt known to be disputed by the consumer without disclosing that fact;

(e) engaging in conduct with knowledge that like conduct has been restrained or enjoined by a court in a civil action by the administrator against any person pursuant to the provisions on injunctions against fraudulent or unconscionable agreements or conduct (Section 37-6-111).

(6) No action at law claiming unconscionable debt collection may be commenced in any court until at least thirty days after the facts and circumstances of any claim of unconscionable conduct in collecting a debt arising out of a consumer credit transaction has been filed in writing with the administrator of the Department of Consumer Affairs. The administrator shall immediately provide to the person or organization complained against with a copy of any complaint alleging unconscionable debt collection practices filed with the Department of Consumer Affairs. The administrator shall immediately provide to the Director of the Consumer Finance Division of the Board of Financial Institutions a copy of any written claim of unconscionable conduct in collecting a debt filed against a supervised lender under this title or a restricted lender under Title 34. A creditor or debt collector may only take such action as is authorized by law to protect its collateral during the thirty-day state agency review period. The administrator shall take immediate steps to investigate, evaluate, and attempt to resolve such complaints. The administrator and director shall jointly take immediate steps to investigate, evaluate, and attempt to resolve complaints involving supervised and restricted lenders. If in an action, properly filed after the thirty-day state agency review period with regard to conduct in collecting a debt arising out of a consumer credit transaction, in which unconscionability is claimed the court finds unconscionability pursuant to subsection (1) or (2), the court shall award reasonable fees to the attorney for the consumer or

(7) The remedies of this section are in addition to remedies available for the same conduct under law other than this title.

(8) For the purpose of this section, a charge or practice expressly permitted by this title is not in itself unconscionable.

(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."

SECTION 11. Section 37-6-117 of the 1976 Code is amended by adding an appropriately numbered subsection to read:

"( ) Develop a written pamphlet that explains the rights and responsibilities of consumers who obtain from a licensed lender consumer loans under this title and Title 34 for distribution in all licensed consumer loan offices. Such pamphlet shall include the names, addresses, and telephone numbers of state agencies responsible for enforcing the provisions of this title and Title 34. Such pamphlet shall be given to a consumer at the time the initial loan by a licensed lender is made whenever the amount financed is two thousand dollars or less and shall be readily available to all consumers at all times in each licensed consumer loan office. The administrator shall consult with, and seek input from representatives of consumers, the consumer finance industry, and the Director of the Consumer Finance Division of the Board of Financial Institutions. Each licensed lender shall be responsible for reproducing and distributing the pamphlet finally approved and authorized by the administrator. The pamphlet developed under this subsection shall be provided to consumers as of January 1, 1996."

SECTION 12. Section 37-9-102 of the 1976 Code is amended to read:

"Section 37-9-102. (A) All persons now or hereafter holding a license under the provisions of Chapter 29 of title Title 34, as amended, may elect to be licensed to make supervised loans under this title pursuant to the Part

(1) The election must be stated in writing;

(2) All persons related to the electing lender must also have made such election; and

(3) The person making any such election must then hold a currently valid license under Chapter 29 of title Title 34.

(B) A lender licensed to make supervised loans under this title under Chapter 3 of Title 37, who was previously licensed under the provisions of Chapter 29 of Title 34, as amended, may elect to again be licensed under Chapter 29 of Title 34, provided, however, that all persons related to such persons shall make the same election. Upon such election, which must be made in writing to the Board of Financial Institutions prior to January 1, 1997, the lender shall be deemed to have surrendered his license to lend under Chapter 3 of Title 37 and to have obtained a license to lend under Title 34. As soon as practicable after the board receives such writing, it shall issue a new certificate identifying the lender as a Restricted Lender under Title 34. The only requirements that the board may impose for licensure under this section are:

(1) The election must be stated in writing;

(2) All persons related to the electing lender must also have made such election; and
(3) The person making any such election must then hold a currently valid license under Chapter 3 of Title 37."

SECTION 13. (A) On or after July 1, 1997, a review of the consumer finance industry shall be commenced by a legislative study committee in order to study the impact of this act. The committee shall report its findings and recommendations, if any, to the General Assembly by January 1, 1998. The committee shall be composed of three members of the House of Representatives, to be appointed by the Speaker; three members of the Senate, to be appointed by the President Pro Tempore; the State Consumer Advocate, or his designee; and the Director of the Consumer Finance Division of the State Board of Financial Institutions,

(B) On or after July 1, 1998, a second review of the consumer finance industry shall be commenced by a legislative study committee in order to further study the impact of this act and any subsequent amendments to the consumer finance laws. The committee shall report its findings and recommendations, if any, to the General Assembly by January 1, 1999. The committee shall be composed of three members of the House of Representatives, to be appointed by the Speaker; three members of the Senate, to be appointed by the President Pro Tempore; the State Consumer Advocate, or his designee; and the Director of the Consumer Finance Division of the State Board of Financial Institutions, or his designee. The committee shall elect its chairman from among its members. The committee shall utilize the existing staff of the Senate Banking and Insurance Committee, or its successor in interest; the existing staff of the Labor, Commerce and Industry Committee of the House of Representatives, or its successor in interest; and such other legislative staff members as may be available to the chairman. The committee shall dissolve upon presentation of its report.

SECTION 14. Section 37-3-201(1) of the 1976 Code is amended to read:

"(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 twelve 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 twelve 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,

SECTION 15. Section 37-3-501(1) of the 1976 Code is amended to read:

"(1) `Supervised loan' means a consumer loan in which the rate of the loan finance charge exceeds eighteen twelve percent per year as determined according to the provisions on the loan finance charge for consumer loans (Section 37-3-201)."

SECTION 16. Section 37-3-511 of the 1976 Code is amended to read:

"Section 37-3-511. Supervised loans, in which the rate of loan finance charge exceeds eighteen twelve percent per annum, not made pursuant to a revolving loan account, in which the principal is one thousand dollars or less, shall be scheduled to be payable in substantially equal installments at equal periodic intervals except to the extent that the schedule of payments is adjusted to the seasonal or irregular income of the debtor, and

(a) over a period of not more than thirty-seven months if the principal is more than three hundred dollars, or

(b) over a period of not more than twenty-five months if the principal is three hundred dollars or less."

SECTION 17. Section 37-1-301(10) of the 1976 Code is amended to read:

"(10) `Consumer' means the buyer, lessee, or debtor to whom credit is extended in a consumer credit transaction. In addition, for purposes of Chapters 10, 11, 13, and 15 of this Title, as well as Sections 37-5-108, 37-6-108, 37-6-117(i), and 37-6-118, the term also includes:

(1) A natural person who is a purchaser or lessee or prospective purchaser or lessee in any transaction arising out of the production, promotion, sale, or lease of consumer goods or services; or

(2) a natural person who is the object of a solicitation or offer relating to a contest, game, or prize offer subject to Chapter 15."

SECTION 18. Section 34-29-160 of the 1976 Code, as last amended by Act 181 of 1993, Section 524, 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

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 loan and for a term not exceeding the approximate term of the loan contract. 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 two 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 two 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.

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

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.

Decreasing Balance Level Balance

Individual $ .75 .65 $1.50$1.30

Joint Insurance $1.25$1.08 $2.50$2.16"

SECTION 19. Section 37-4-203(5) of the 1976 Code, as last amended by Act 363, Section 1 of 1994, is further amended to read:

"(5) 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 is scheduled to continue, subject to a minimum charge of three dollars:

Decreasing Balance Level Balance

Individual $ .65 $1.50$1.30

Joint Insurance $1.25$1.08 $2.16"

SECTION 20. Section 37-2-207(5) of the 1976 Code is amended to read:

"(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., provided, however, that failure to apply the forty percent of a scheduled minimum payment is not a violation of this subsection when the consumer has agreed in writing to a promotion offered by the creditor that includes deferred payments, deferred or waived finance charges, a combination thereof, or other special financing terms. Such exception shall only apply during the period of time necessary to comply with the provisions of the promotional agreement identified in writing to the customer."

SECTION 21. This act takes effect January 1, 1996, except that Section 37- 2-207(5) of the 1976 Code, as amended by this act, takes effect upon approval by the Governor.

Amend title to conform.

/s/Senator Linda Short /s/Rep. Harry Cato
/s/Senator Greg Gregory /s/Rep. Margaret Gamble
/s/Senator Darrell Jackson /s/Rep. Joe Neal

On Part of the Senate. On Part of the House.

The Senate respectfully informs your Honorable Body that it has granted Free Conference Powers on S. 602:
S. 602 -- Senators Short, Jackson, Gregory and Giese: A BILL TO AMEND SECTION 34-29-100, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO RECORDS AND REPORTS OF RESTRICTED LENDERS, BY ADDING INFORMATION REQUIRED TO BE REPORTED IN THE ANNUAL REPORT MADE BY RESTRICTED LENDERS; TO AMEND SECTION 34-29-140 OF THE 1976 CODE, RELATING TO CHARGES PERMITTED TO RESTRICTED LENDERS, SO AS TO REVISE THE FINANCE CHARGES AND TO PROVIDE LIMITATIONS ON LOAN RENEWALS; TO AMEND SECTION 37-1-301 OF THE 1976 CODE, RELATING TO DEFINITIONS UNDER THE CONSUMER PROTECTION CODE, SO AS TO ADD A DEFINITION FOR "DEBT COLLECTOR"; TO AMEND SECTION 37-1-303 OF THE 1976 CODE, RELATING TO THE INDEX OF DEFINITIONS IN TITLE 37, SO AS TO ADD "DEBT COLLECTOR"; TO AMEND SECTION 37-3-201 OF THE 1976 CODE, RELATING TO LOAN FINANCE CHARGES FOR SUPERVISED LOANS, SO AS TO PROVIDE THAT SUPERVISED LOANS NOT EXCEEDING SIX HUNDRED DOLLARS SHALL BE MADE IN ACCORDANCE WITH SECTION 34-29-140 RELATING TO FINANCE CHARGES FOR RESTRICTED LOANS; TO AMEND SECTION 37-3-305 OF THE 1976 CODE, RELATING TO THE POSTING AND FILING OF MAXIMUM RATE SCHEDULES BY SUPERVISED LENDERS, SO AS TO PROVIDE THAT FOR LOANS NOT EXCEEDING SIX HUNDRED DOLLARS, A RATE MAY NOT BE POSTED WHICH EXCEEDS THE CHARGES IMPOSED IN SECTION 34-29-140; TO AMEND SECTION 37-3-505 OF THE 1976 CODE, RELATING TO RECORDS AND ANNUAL REPORTS FOR SUPERVISED LENDERS, SO AS TO ADD INFORMATION REQUIRED TO BE INCLUDED IN THE ANNUAL REPORT OF SUPERVISED LENDERS; TO AMEND PART 5, CHAPTER 3, TITLE 37 OF THE 1976 CODE, BY ADDING SECTION 37-3-515 SO AS TO PROVIDE A LIMITATION ON LOAN RENEWALS; TO AMEND SECTION 37-5-108 OF THE 1976 CODE,

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