South Carolina General Assembly
115th Session, 2003-2004

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H. 3109

STATUS INFORMATION

General Bill
Sponsors: Reps. Kirsh, Sheheen and Coleman
Document Path: l:\council\bills\dka\3001mm03.doc

Introduced in the House on January 14, 2003
Currently residing in the House Committee on Labor, Commerce and Industry

Summary: Predatory Lending Bill

HISTORY OF LEGISLATIVE ACTIONS

     Date      Body   Action Description with journal page number
-------------------------------------------------------------------------------
   12/4/2002  House   Prefiled
   12/4/2002  House   Referred to Committee on Labor, Commerce and Industry
   1/14/2003  House   Introduced and read first time HJ-47
   1/14/2003  House   Referred to Committee on Labor, Commerce and Industry 
                        HJ-47
   1/22/2003  House   Member(s) request name added as sponsor: Bailey, Sheheen
   1/29/2003  House   Member(s) request name added as sponsor: Coleman
   4/23/2003  House   Member(s) request name removed as sponsor: Bailey

View the latest legislative information at the LPITS web site

VERSIONS OF THIS BILL

12/4/2002

(Text matches printed bills. Document has been reformatted to meet World Wide Web specifications.)

A BILL

TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 37-10-109 SO AS TO PROHIBIT A LENDER FROM KNOWINGLY ENGAGING IN FLIPPING A HOME LOAN AND TO DEFINE "FLIPPING" AND "HOME LOAN"; BY ADDING SECTION 37-10-113 SO AS TO LIMIT THE IMPOSITION OF CHARGES FOR POINTS AND FEES IN CONNECTION WITH A LOAN MADE BY A CONSUMER LENDER AND A MORTGAGE LOAN BROKER AND TO DEFINE "POINTS AND FEES" AND "TOTAL LOAN AMOUNT"; BY ADDING SECTIONS 37-2-417, 37-3-413, AND 37-10-117 ALL SO AS TO PROHIBIT THE FINANCING OF CERTAIN INSURANCE PREMIUMS OR DEBT CANCELLATION OR SUSPENSION PAYMENTS IN CONNECTION WITH A CREDIT SALE OR LOAN SECURED BY A HOME; TO AMEND SECTION 37-10-103, RELATING TO PREPAYMENT WITHOUT PENALTY OF CERTAIN LOANS, SO AS TO INCREASE THE LOAN LIMIT FROM ONE HUNDRED THOUSAND DOLLARS TO ONE HUNDRED FIFTY THOUSAND DOLLARS; TO AMEND SECTION 37-5-108, AS AMENDED, RELATING TO UNCONSCIONABILITY IN CONSUMER CREDIT TRANSACTIONS, SO AS TO PROVIDE THAT IF, CONSIDERING CERTAIN FACTORS, THE CONSUMER IS UNABLE TO MAKE SCHEDULED PAYMENTS ON THE OBLIGATION WHEN DUE OR IS PERMITTED TO ENTER INTO A TRANSACTION FROM WHICH HE DERIVES NO SUBSTANTIAL BENEFIT, THE COURT MAY FIND THE TRANSACTION UNCONSCIONABLE; AND TO AMEND SECTION 37-10-105, AS AMENDED, RELATING TO DEBTOR REMEDIES IN CERTAIN LOANS, SO AS TO INCLUDE CERTAIN FACTORS ON WHICH THE COURT MAY BASE A FINDING THAT THE LOAN IS UNCONSCIONABLE.

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

SECTION    1.    Chapter 10, Title 37 of the 1976 Code is amended by adding:

"Section 37-10-109.    (A)    A lender may not knowingly or intentionally engage in the unfair act or practice of flipping a home loan. 'Flipping' means making a home loan that refinances an existing home loan when:

(1)    more than one-half of the original debt bears an interest rate lower than that of the new loan;

(2)    the reduction of the interest rate is the result of payment of prepaid finance charges and closing costs to the extent that the borrower does not recover the transactions costs until after two years of completion of the transaction; or

(3)    a special mortgage originated, subsidized, or guaranteed by or through a government or nonprofit organization is refinanced with the loss of either a below-market interest rate or one or more of the nonstandard borrower benefits as a result of the refinancing.

(B)    A lender may not recommend or encourage default on an existing loan or other debt before and in connection with the closing or planned closing of a home loan that refinances all or a portion of the existing loan or debt.

(C)    For purposes of this section, a 'home loan' means a loan, other than an open-end credit plan or a reverse mortgage transaction, in which the:

(1)    principal amount of the home loan does not exceed the conforming home loan size limit for a single-family dwelling as established by the Federal National Mortgage Association;

(2)    borrower is a natural person;

(3)    debt is incurred by the borrower primarily for personal, family, or household purposes; and

(4)    loan is secured by a mortgage or deed of trust on real estate that is the current or future site of a structure or structures designed principally for occupancy of from one to four families and occupied by the borrower as the borrower's principal dwelling."

SECTION    2.    Chapter 10, Title 37 of the 1976 Code is amended by adding:

"Section 37-10-113.    (A)    As used in this section:

(1)    'Points and fees' means:

(a)    an amount payable pursuant to a point, discount, or other system of additional charges;

(b)    a service or carrying charge;

(c)    a loan or finder's fee or similar charge;

(d)    an excessive fee paid to a third party for investigation or credit report, preparation of a loan-related document, escrows for future payments of taxes and insurance, notarizing a deed and other documents, or appraisal or inspection for pest infestation or flood hazard;

(e)    other compensation, paid directly or indirectly, to a mortgage broker, including a broker that originates a loan in its own name;

(f)    the cost of all premiums, directly or indirectly, financed by the lender for credit life, credit disability, credit unemployment, or credit property insurance, or other life or health insurance, or payments financed, directly or indirectly, by the lender for debt cancellation or suspension agreement, except that insurance premiums or debt cancellation or suspension fees calculated and paid on a monthly basis are not considered to be financed by the lender. For purposes of this subitem, 'cost' includes prepayment fees or penalties charged to the borrower if the loan refinances a previous loan made by the same lender or an affiliate of the lender.

(2)    'Total loan amount' means the principal of the loan less those points and fees defined in item (1).

(B)    A lender or mortgage broker may not impose a charge, directly or indirectly, for points and fees as defined in subsection (A)(1) that exceeds a total of four percent of the total loan amount as defined in subsection (A)(2) for services in connection with qualifying for and receiving a loan.

(C)    The limitation in subsection (B) applies to the following persons and their assignees:

(1)    lender of consumer loans, as defined in Section 37-3-102, including a supervised lender, as defined in Section 37-3-501(1), and a restricted lender licensed pursuant to Chapter 29, Title 34; and

(2)    mortgage loan broker, as defined in Section 40-58-20(3)."

SECTION    3.    Chapter 2, Title 37 of the 1976 Code is amended by adding:

"Section 37-2-417.    A credit seller making a consumer credit sale secured by a security interest in the buyer's dwelling may not finance, directly or indirectly, credit life, credit disability, credit unemployment, credit property insurance, or other life or health insurance, or payments, directly or indirectly, for a debt cancellation or suspension agreement. Insurance premiums or debt cancellation or suspension fees calculated and paid on a monthly basis are not considered premiums or payments financed by the credit seller."

SECTION    4.    Chapter 3, Title 37 of the 1976 Code is amended by adding:

"Section 37-3-413.    A lender making a home loan may not finance, directly or indirectly, credit life, credit disability, credit unemployment, credit property insurance, or other life or health insurance, or payments, directly or indirectly, for a debt cancellation or suspension agreement. Insurance premiums or debt cancellation or suspension fees calculated and paid on a monthly basis are not considered premiums or payments financed by the lender."

SECTION    5.    Chapter 10, Title 37 of the 1976 Code is amended by adding:

"Section 37-10-117.    A lender making a home loan may not finance, directly or indirectly, credit life, credit disability, credit unemployment, credit property insurance, or other life or health insurance, or payments, directly or indirectly, for a debt cancellation or suspension agreement. Insurance premiums or debt cancellation or suspension fees calculated and paid on a monthly basis are not considered premiums or payments financed by the lender."

SECTION    6.    Section 37-10-103 of the 1976 Code 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. The debtor may prepay in full at any time the debt represented by a personal, family, or household purpose loan agreement that is secured in whole or in part by a first or junior lien on real estate if the aggregate of all sums advanced or contemplated by the parties to be advanced does not exceed one hundred fifty thousand dollars."

SECTION    7.    Section 37-5-108(4)(a) and (b) of the 1976 Code, as last amended by Act 135 of 1995, is further amended to read:

"(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 the extension of credit to a consumer if, considering the consumer's current and expected income, current obligations, and employment status, the consumer is unable to make the scheduled payment on the obligation when due; provided, however, that the rental renewals necessary to acquire ownership in a consumer rental-purchase agreement shall are not be construed to be the obligation obligations contemplated in by this code section item;

(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 permitting a consumer to enter into a transaction from which the consumer derives no substantial benefit;"

SECTION    8.    Section 37-10-105 of the 1976 Code, as last amended by Act 99 of 1997, is further amended by adding an appropriately lettered subsection to read:

"( )    In applying subsection (C), consideration must be given to the following factors, among others, as applicable:

(1)    the extension of credit to a debtor if, considering the debtor's current and expected income, current obligations, and employment status, the debtor is unable to make the scheduled payment on the obligation when due; and

(2)    permitting the debtor to enter into a transaction from which the debtor derives no substantial benefit."

SECTION    9.    This act takes effect upon approval by the Governor.

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