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COMMITTEE REPORT
April 12, 2007
S. 398
S. Printed 4/23/07--S.
Read the first time February 6, 2007.
To whom was referred a Bill (S. 398) to amend the Code of Laws of South Carolina, 1976, by adding Section 16-13-480 so as to create the crime of engaging in the business of deferred, etc., respectfully
That they have duly and carefully considered the same and recommend that the same do pass with amendment:
Amend the bill, as and if amended by striking all after the enacting words and inserting:
/ SECTION 1. Section 34-39-130(A) of the 1976 Code is amended to read:
"(A) A person, including a person doing business over the internet, may not engage in the business of deferred presentment services with a person in South Carolina without first obtaining a license pursuant to this chapter. A separate license is required for each location or internet website from which the business is conducted. The licensee shall post its license to engage in the business of deferred presentment services at each location or on each internet website licensed pursuant to this chapter."
SECTION 2. Section 34-39-180 of the 1976 Code is amended to read:
"Section 34-39-180. (A) A licensee may defer the presentment or deposit of a check for up to thirty-one days pursuant to the provisions of this section.
(B) The face amount of a check taken for deferred presentment or deposit may not exceed three four hundred dollars, exclusive of the fees allowed in Section 34-39-180(E).
(C) Each check must be documented by a written agreement signed by both the customer and the licensee. The written agreement must contain the name or trade name of the licensee, the transaction date, the amount of the check, and a statement of the total amount of fees charged, expressed both as a dollar amount and as an effective annual percentage rate (APR). The written agreement must authorize expressly the licensee to defer presentment or deposit of the check until a specific date, not later than thirty-one days from the date the check is accepted by the licensee. The written agreement must also contain plain language developed by the board that sufficiently informs the customer regarding the nature of deferred presentment services, the deferred presentment service process, the customer's rights pursuant to this act, and any other information the board may require.
(D) The board shall require each licensee to issue a standardized consumer notification and disclosure form in compliance with state and federal truth-in-lending laws before entering into a deferred presentment agreement.
(E) Except as otherwise provided in this chapter, A a licensee shall not charge, directly or indirectly, a fee or other consideration in excess of fifteen percent of the face amount of the check advanced for accepting a check for deferred presentment or deposit. The fee or other consideration authorized by this subsection may be imposed only once for each written agreement. Records must be kept by each licensee with sufficient detail to ensure that the fee or other consideration authorized by this subsection may be imposed only once for each written agreement.
(F) A check accepted for deferred presentment or deposit pursuant to this chapter may not be repaid from the proceeds of another check accepted for deferred presentment or deposit by the same licensee or an affiliate of the licensee. A Except as provided in this chapter, a licensee shall not renew or otherwise extend presentment of a check or withhold the check from deposit, for old or new consideration, for a period beyond the time set forth in the written agreement with the customer.
(G) If a check is returned to the licensee from a payer financial institution due to insufficient funds, closed account, or stop payment order, the licensee may pursue all legally available civil means to collect the check including, but not limited to, the imposition of a returned check charge as provided in Section 34-11-70(a), except that the service charge imposed by the licensee shall not exceed the lesser of ten dollars or the fee imposed by the financial institution on the licensee for the returned check. An individual who issues a personal check to a licensee under a deferred presentment agreement is not subject to criminal penalty."
SECTION 3. Section 34-39-200 of the 1976 Code is amended to read:
"Section 34-39-200. A person required to be licensed pursuant to this chapter may not:
(1) charge fees in excess of those authorized by this chapter;
(2) engage in the business of:
(i) making loans of money or extension of credit;
(ii) discounting notes, bills of exchange, items, or other evidences of debt; or
(iii) accepting deposits or bailments of money or items, except as expressly provided by Section 34-39-180;
(3) use or cause to be published or disseminated advertising communication which contains false, misleading, or deceptive statements or representations;
(4) conduct business at premises or locations other than locations licensed by the board;
(5) engage in unfair, deceptive, or fraudulent practices, including unconscionable conduct in violation of Section 37-5-108;
(6) alter or delete the date on a check accepted by the licensee;
(7) accept an undated check or a check dated on a date other than the date on which the licensee accepts the check;
(8) require a customer to provide security for the transaction or require the customer to provide a guaranty from another person;
(9) engage in the retail sale of goods or services, other than deferred presentment services and Level I check-cashing services as defined in Section 34-41-10, at the location licensed pursuant to this chapter, provided, however, that a sale of money orders, postage stamps, payment of utility bills with no additional fee to the customer, vending machines for food or beverage, facsimile services, Western Union money transmission services, or postal boxes at rates not higher than allowed by the United States Postal Service is not the sale of goods or services prohibited by this subsection;
(10) be licensed pursuant to Section 12-21-2720(a)(3) to operate a video poker machine; or
(11) permit others to engage in an activity prohibited by this section at a location licensed pursuant to this chapter; or
(12) broker or arrange a deferred presentment transaction on behalf of a third-party lender, unless the transaction complies with the provisions of this act and is not preempted by federal law."
SECTION 4. Chapter 39, Title 34 of the 1976 Code is amended by adding:
"Section 34-39-270. (A) Subject to the terms and conditions contained in this section, a person may pay any outstanding deferred presentment transaction by means of an extended payment plan.
(B) During any twelve-month period, a person may enter into no more than one plan with any licensee.
(C) A licensee must enter into a written plan agreement with the person if the person, before the deferred presentment transaction's due date, requests a plan, pays all accrued finance charges, and signs an amendment to the written agreement that memorializes the plan's terms.
(D) The plan's terms must allow the person, at no additional cost, to repay the deferred presentment transaction in four substantially equal installments. Each plan installment must coincide with a date on which the person receives regular income. The person may prepay a plan in full at any time without penalty. If the person fails to pay any plan installment when due, then the plan is terminated and the licensee may immediately accelerate and collect the unpaid transaction balance.
(E) A licensee must notify a person of the person's plan rights by displaying the following statement, in at least ten-point bold type, on the first page of the written agreement:
'You should use a deferred presentment transaction only for a short-term credit need. If you have a long-term credit need, then you should consider a less-expensive credit alternative or seek the advice of a non-profit credit counselor. If you have not entered into an extended payment plan with any deferred presentment licensee during the previous twelve months, then you may repay this transaction by means of an extended payment plan. If you elect to exercise your extended payment plan rights, then you must, before this transaction's due date, request an extended payment plan, pay all accrued finance charges, and sign an amendment to this agreement that memorializes the extended payment plan terms. The extended payment plan terms will allow you, at no additional cost, to repay this transaction in four substantially equal installments. Each extended payment plan installment must coincide with a date on which you receive regular income. You may prepay an extended payment plan in full at any time without penalty. If you fail to pay any extended payment plan installment when due, then the extended payment plan is terminated and we may immediately accelerate and collect the unpaid transaction balance.'"
SECTION 5. Chapter 39, Title 34 of the 1976 Code is amended by adding:
"Section 34-39-280. (A) A licensee shall not enter into a deferred presentment transaction with a person who has:
(1) an outstanding deferred presentment transaction with any licensee;
(2) had a deferred presentment transaction with any licensee in the previous seven days; or
(3) had five or more deferred presentment transactions with any licensee within the previous twelve months.
(B) Before entering into a deferred presentment transaction with a person, a licensee shall verify whether the person is eligible to enter into the transaction by inquiring of the person, checking the licensee's records, and accessing the deferred presentment transaction database established pursuant to subsection (C).
(C) The board shall contract with a single third party database provider to establish and operate a deferred presentment transaction database for the purpose of verifying whether a person is eligible to enter into a deferred presentment transaction. The board shall supervise the establishment and operation of the database and shall ensure that the database provider establishes and operates the database pursuant to the provisions of this section. The board shall have full access to the database and all records related to the database for purposes of supervising the establishment and operation of the database. If the database provider violates a provision of this section, the board shall terminate the contract. The database must have real-time access through an internet connection and be accessible at all times to the board and licensees. The database provider shall establish and maintain a process for responding to transaction verification requests when technical difficulties prevent the licensee from accessing the database through the internet, including, but not limited to, verification by telephone. The database must be set up to notify the board if a licensee or a person enters into a transaction in violation of the provisions of this section.
(D) To conduct an inquiry as to whether a person is eligible to enter into a deferred presentment transaction, a licensee shall submit to the database provider such information as the board may require. The response to an inquiry to the database provider by a licensee must only state that a person is eligible or ineligible to enter into a transaction and describe the reason for that determination. The person seeking to enter into the transaction may make a direct inquiry to the database provider to request a more detailed explanation of the basis for the database provider's determination that the person is ineligible to enter into the transaction.
(E) A licensee shall notify the database provider immediately when the licensee has entered into a deferred presentment transaction with a person. The licensee shall submit to the database provider such information as the board may require. When the transaction is closed, the licensee shall designate the transaction as closed and immediately notify the database provider. When the database provider receives notification that the transaction has been closed, the database provider shall immediately designate the transaction as closed in the database.
(F) A licensee shall notify a person seeking to enter into a deferred presentment transaction that the licensee will be accessing the database to verify whether the person is eligible to enter into a transaction. The licensee shall also notify the person that information related to any new transaction will be entered into the database.
(G) The database provider may charge a database verification fee to a licensee for an inquiry as to whether a person is eligible to enter into a deferred presentment transaction. The fee must be established by the board and must not exceed the actual cost of verifying a person's eligibility. A licensee may charge a person seeking to enter into a deferred presentment transaction one half of the actual cost of the verification fee.
(H) Except as otherwise provided in this section, all personally identifiable information regarding any person contained within or obtained by way of the database is strictly confidential and is exempt from disclosure under the Freedom of Information Act. The database provider and licensees shall only use the information collected under this section as prescribed in this section and for no other purpose.
(I) A licensee may rely on the information contained in the database as accurate and is not subject to any administrative penalty or civil liability as a result of relying on inaccurate information contained in the database."
SECTION 6. This act takes effect January 1, 2008. /
Renumber sections to conform
Amend title to conform.
JOHN D. HAWKINS for Committee.
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 16-13-480 SO AS TO CREATE THE CRIME OF ENGAGING IN THE BUSINESS OF DEFERRED PRESENTMENT IN THIS STATE, TO PROVIDE THAT A VIOLATION IS A FELONY, AND TO PROVIDE FOR A MANDATORY MINIMUM PENALTY; AND TO REPEAL CHAPTER 39 OF TITLE 34 RELATING TO THE SOUTH CAROLINA DEFERRED PRESENTMENT SERVICES ACT.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Article 1, Chapter 13, Title 16 is amended by adding:
"Section 16-13-480. (A) For purposes of this section:
(1) 'deferred presentment services' means a transaction pursuant to an agreement involving the following combination of activities in exchange for a fee:
(a) accepting a check dated on the date it was written; and
(b) holding the check for a period of time before presentment for payment or deposit.
(2) 'person' means an individual, group of individuals, partnerships, association, corporation, or other business unit or legal entity, and includes a person who was previously licensed by this State to engage in the business of deferred presentment services pursuant to Chapter 39 of Title 34.
(B) It is unlawful for a person to engage in the business of deferred presentment services in this State.
(C) A person who violates this section is guilty of a felony and, upon conviction, must be fined the mandatory minimum amount of ten thousand dollars or imprisoned for the mandatory minimum period of five years, or both, no part of which may be suspended nor probation granted."
SECTION 2. Chapter 39 of Title 34 is hereby repealed.
SECTION 3. The repeal or amendment by this act of any law, whether temporary or permanent or civil or criminal, does not affect pending actions, rights, duties, or liabilities founded thereon, or alter, discharge, release or extinguish any penalty, forfeiture, or liability incurred under the repealed or amended law, unless the repealed or amended provision shall so expressly provide. After the effective date of this act, all laws repealed or amended by this act must be taken and treated as remaining in full force and effect for the purpose of sustaining any pending or vested right, civil action, special proceeding, criminal prosecution, or appeal existing as of the effective date of this act, and for the enforcement of rights, duties, penalties, forfeitures, and liabilities as they stood under the repealed or amended laws.
SECTION 4. This act takes effect upon approval by the Governor.
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