Journal of the Senate
of the First Session of the 111th General Assembly
of the State of South Carolina
being the Regular Session Beginning Tuesday, January 10, 1995

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| Printed Page 3300, May 30 | Printed Page 3320, May 30 |
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`Rule'-Section 37-6-402(5)

`Sale of an interest in land'-Section 37-2-105(6)

`Sale of goods'-Section 37-2-105(4)

`Sale of services'-Section 37-2-105(5)

`Seller'-Section 37-2-107

`Seller credit card'-Section 37-1-301(26)

`Services'-Section 37-2-105(3)

`Supervised financial organization'-Section 37-1-301(27)

`Supervised lender'-Section 37-3-501(2)

`Supervised loan'-Section 37-3-501(1)."

SECTION 6. Section 37-3-201(2) of the 1976 Code is amended to read:

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

(a)any rate filed and posted pursuant to Section 37-3-305; or

(b)eighteen percent per year on the unpaid balances of principal. as provided:

(a)on loans with a cash advance not exceeding six hundred dollars, a maximum charge not exceeding the maximum charges imposed in Section 34-29-140 as disclosed as an annual percentage rate, provided that a supervised lender may impose a finance charge at a rate less than provided in Section 34-29-140, and provided further that the maximum charge shall not exceed the rate posted and filed pursuant to Section 37-3-305;

(b)on loans with a cash advance exceeding six hundred dollars, and on all loans, regardless of the dollar amount, made by Supervised Financial Organizations, any rate filed and posted pursuant to Section 37-3-305; or

(c) on loans of any amount, eighteen percent per year on the unpaid balances of principal."

SECTION 7. Section 37-3-305 of the 1976 Code is amended by adding an appropriately numbered subsection to read:

"( ) On loans with a cash advance not exceeding six hundred dollars, a licensed lender may not post a rate which exceeds the maximum charges imposed in Section 34-29-140 as disclosed as an annual percentage rate or that rate filed and posted pursuant to this section, whichever is less."

SECTION 8. Section 37-3-505 of the 1976 Code is amended to read:

"Section 37-3-505. (1) Every licensee shall maintain records in conformity with generally accepted accounting principles and practices in a manner that will enable the State Board of Financial Institutions to determine whether the licensee is complying with the provisions of this

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title. The record keeping system of a licensee shall be sufficient if he makes the required information reasonably available. The records need not be kept in the place of business where supervised loans are made, if the board is given free access to the records wherever located. The records pertaining to any loan, including the certified maximum rate chart in effect at the time the loan was made, need not be preserved for more than two years after making the final entry relating to the loan, but in the case of a revolving loan account the two years is measured from the date of each entry.

(2) On or before April 15 each year every licensee shall file with the Board board a composite annual report in the form prescribed by the Board board relating to all supervised loans made by him. The Board board shall consult with comparable officials in other states for the purpose of making the kinds of information required in annual reports uniform among the states.

(3)The report shall include, but is not limited to, the following:

(a)the total number of loans and aggregate dollar amounts made by the lender which renewed existing accounts;

(b)the total number of new loans and aggregate dollar amounts made to former borrowers;

(c)the total number of loans and aggregate dollar amounts made to new borrowers;

(d)the total number of loans and aggregate dollar amounts which received a final entry, as provided in subsection (a), other than by renewal;

(e)the total number of renewals in which the borrower received a cash advance which was less than ten percent of the net outstanding loan balance at the time of renewal;

(f)the total number of loans and aggregate dollar amounts outstanding at the beginning of the reporting period;

(g)the total number of loans and aggregate dollar amounts outstanding at the end of the reporting period;

(h)the highest annual percentage rate charged by the lender on loans of various sizes; and

(i)the most frequent annual percentage rate charged by the lender on loans of various sizes.

(4)Information contained in annual reports shall be confidential and may be published only in composite form."

SECTION 9. Chapter 3 of Title 37 of the 1976 Code is amended by adding:

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"Section 37-3-515. A licensed lender may not renew a loan of one thousand dollars or less more than one time during any fifteen-month period where the dollars actually given to the customer is less than ten percent of the net outstanding loan balance at the time of renewal."

SECTION 10. Section 37-5-108 of the 1976 Code is amended to read:

"Section 37-5-108. (1) With respect to a transaction that is, gives rise to, or leads the debtor to believe will give rise to, a consumer credit transaction, if the court as a matter of law finds:

(a) the agreement or transaction to have been unconscionable at the time it was made, or to have been induced by unconscionable conduct, the court may refuse to enforce the agreement; or

(b) any term or part of the agreement or transaction to have been unconscionable at the time it was made, the court may refuse to enforce the agreement, enforce the remainder of the agreement without the unconscionable term or part, or so limit the application of any unconscionable term or part as to avoid any unconscionable result and award the consumer any actual damages he has sustained.

(2) With respect to a consumer credit transaction, if the court as a matter of law finds that a person has engaged in, is engaging in, or is likely to engage in unconscionable conduct in collecting a debt arising from that transaction, the court may grant an injunction and award the consumer any treble damages he has sustained. In addition, the consumer has a cause of action to recover actual damages and, in an action other than a class action, a right to recover from the person violating this section a penalty in the amount determined by the court of not less than one hundred dollars nor more than one thousand dollars. For purposes of this subsection and subsection (3), the term `collecting a debt' in a consumer credit transaction includes the collection or the attempt to collect any rental charge or any other fee or charge or any item rented to a lessee in connection with a consumer rental-purchase agreement as described in Section 37-2-701(6).

(3) If it is claimed or appears to the court that the agreement or transaction or any term or part thereof may be unconscionable, or that a person has engaged in, is engaging in, or is likely to engage in unconscionable conduct in collecting a debt, the parties shall be afforded a reasonable opportunity to present evidence as to the setting, purpose, and effect of the agreement or transaction or term or part thereof, or of the conduct, to aid the court in making the determination.

(4) In applying subsection (1), consideration must be given to each of the following factors, among others, as applicable:

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(a) belief by the seller, lessor, or lender at the time a transaction is entered into that there is no reasonable probability of payment in full of the obligation by the consumer or debtor; provided, however, that the rental renewals necessary to acquire ownership in a consumer rental-purchase agreement shall not be construed to be the obligation contemplated in this code section;

(b) in the case of a consumer credit sale, consumer lease, or consumer rental-purchase agreement, knowledge by the seller or lessor at the time of the sale or lease of the inability of the consumer to receive substantial benefits from the property or services sold or leased;

(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;

(d) the fact that the creditor contracted for or received separate charges for insurance with respect to a consumer credit sale, consumer loan, or consumer rental-purchase agreement with the effect of making the sale or loan considered as a whole, unconscionable, including the sale of insurance where the consumer could receive no potential benefit as referenced in Section 37-4- 106(1)(a);

(e) the fact that the seller, lessor, or lender has knowingly taken advantage of the inability of the consumer or debtor reasonably to protect his interests by reason of physical or mental infirmities, ignorance, illiteracy, inability to understand the language of the agreement, or similar factors.
(f) taking a nonpurchase money nonpossessory security interest in household goods defined as the following: clothing, furniture, appliances, one radio and one television, linens, china, crockery, kitchenware, and personal effects (including wedding rings) of the consumer and his or her dependents; provided, that when a purchase money consumer credit transaction is refinanced or consolidated, the security lawfully collateralizing the prior consumer credit transaction can continue to secure the new consumer credit transaction, even if the new consumer credit transaction is for a larger amount or is in other respects a nonpurchase money consumer credit transaction; and provided further, that a nonpurchase money, nonpossessory security interest may be taken in the following:

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(i) work of art;

(ii) electronic entertainment equipment (except one television and one radio);

(iii) items acquired as antiques which are over 100 years of age;

(iv) jewelry (except wedding rings).

In construing subsection (f), the courts shall be guided by the interpretations and rulings of the federal courts and the Federal Trade Commission to the Credit Trade Regulation Rule (16 C.F.R. PART 444).
 (5) In applying subsection (2), consideration shall be given to each of the following factors, among others, as applicable:

(a) using or threatening to use force, violence, or criminal prosecution against the consumer or members of his family, including harm to the physical person, reputation, or property of any person;

(b) communicating with the consumer or a member of his family at frequent intervals during a twenty-four hour period or at unusual hours or under other circumstances so that it is a reasonable inference that the primary purpose of the communication was to harass the consumer;. The term `communication' means the conveying of information regarding a debt directly or indirectly to any person through any medium. A creditor or debt collector may not:
 (i) communicate with a consumer at any unusual time or place known or which should be known to be inconvenient to the consumer. In the absence of knowledge of circumstances to the contrary, it may be assumed that a convenient time to communicate with a consumer is between 8 a.m. and 9 p.m.; or
 (ii) communicate with a consumer who is represented by an attorney when such fact is known to the creditor or debt collector unless the attorney consents to direct communication or fails to respond within ten days to a communication;

(iii) contact a consumer at his place of employment after the consumer or his employer has requested in writing that no contacts be made at such place of employment or except as may be otherwise permitted by statute or to verify the consumer's employment;

(iv) communicate with anyone other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the attorney of the creditor or debt collector, unless the consumer or a court of competent jurisdiction has given prior direct permission;

(v) use obscene or profane language or language the natural consequence of which is to abuse the hearer or reader;

(vi) publish a list of consumers who allegedly refuse to pay debts, except to a consumer reporting agency;

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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

(vi) any written communication which simulates or appears to be a document authorized, issued, or approved by any state or federal agency or court or creates a false impression as to its source.

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(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 debtor. If the court does not find unconscionability and the consumer or debtor claiming unconscionability has brought or maintained an action he knew to be groundless, the court may award reasonable fees to the

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attorney for the party against whom the claim is made. In determining attorney's fees, the amount of the recovery on behalf of the consumer is not controlling.

(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 on Supervised Loans (Part 5) of the Chapter on Loans (Chapter 3), provided, however, that all persons related to such persons shall make the same election. Upon such election at any time hereafter in writing to the

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Board of Bank Control Financial Institutions, the lender shall be deemed to have surrendered his license to lend under Chapter 29 of title Title 34 and to have obtained a license to lend under this title. As soon as is practicable after the Board board receives such writing it shall issue a new certificate identifying the lender as a Supervised Lender. The only requirements that the Board 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 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, 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

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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.

(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, 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 percentage which bears the same relation to one and one-half percent as

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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."

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