Bill 400

                    Current Status

Bill Number:               400
Ratification Number:       89
Act Number                 52
Introducing Body:          Senate
Subject:                   Bond and security requirements for
                           mortgage loan brokers

(A52, R89, S400)

AN ACT TO AMEND SECTION 40-58-40, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO BOND AND SECURITY REQUIREMENTS FOR MORTGAGE LOAN BROKERS, SO AS TO CHANGE THE REQUIRED AMOUNTS FOR SECURITY AND BOND REQUIREMENTS FROM FIFTY THOUSAND DOLLARS TO FIVE THOUSAND DOLLARS; TO AMEND SECTION 40-58-80, RELATING TO ORDERS AND PENALTIES ADMINISTERED TO MORTGAGE LOAN BROKERS AND REVOCATION OF REGISTRATION, SO AS TO PROVIDE FOR THE ASSESSMENT OF A MINIMUM FINE OF ONE THOUSAND DOLLARS AND A MAXIMUM FINE OF TWO THOUSAND DOLLARS FOR VIOLATING AN ADMINISTRATOR'S ORDER AND TO PROVIDE THAT THE ADMINISTRATOR MAY INCREASE THE REQUIRED BOND TO A MAXIMUM OF TWENTY-FIVE THOUSAND DOLLARS FOR VIOLATIONS; AND TO AMEND SECTIONS 38-45-20 AND 38-45-30, RELATING TO REQUIREMENTS FOR RESIDENTS AND NONRESIDENTS TO BE LICENSED INSURANCE BROKERS, SO AS TO PROVIDE THAT THE REQUIRED BOND AMOUNTS MAY BE EXECUTED IN THE AMOUNT OF TEN THOUSAND DOLLARS UNTIL MAY 1, 1990.

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

Bond and security; requirements; amount reduced

SECTION 1. Section 40-58-40 of the 1976 Code, as added by Act 544 of 1988, is amended to read:

"Section 40-58-40. No person or organization may offer or agree to offer loan brokerage services in this State without first depositing and continuously maintaining the amount of five thousand dollars in cash or securities approved by the administrator or a bond in the amount of five thousand dollars executed by a surety company authorized by the laws of this State to transact business within this State. The bond must be executed to the State of South Carolina and must be for the use of the State and for any consumers who may have a cause of action against the loan broker."

Maximum, minimum fines; bond, increase for violations

SECTION 2. Section 40-58-80 of the 1976 Code, as added by Act 544 of 1988, is amended to read:

"Section 40-58-80. (A) Upon the finding that an action of a mortgage loan broker may be in violation of this chapter, or of a law or regulation of this State or of the federal government or an agency of them, the administrator, after reasonable notice to the mortgage loan broker and an opportunity for the mortgage loan broker to be heard, shall order it to cease and desist from the action.

(B) If the mortgage loan broker fails to appeal the cease and desist order of the administrator in accordance with Section 40-58-90 and continues to engage in the action in violation of the administrator's order, he is subject to a penalty of not less than one thousand nor more than two thousand five hundred dollars, in the discretion of the administrator, for each action he takes in violation of the administrator's order. The penalty provision of this section is in addition to and not in lieu of any other provision of law applicable to a mortgage loan broker for the mortgage loan broker's failure to comply with an order of the administrator.

(C) The administrator, upon the finding that a mortgage loan broker has engaged in a course of conduct in violation of this chapter, may revoke the registration of the mortgage loan broker temporarily or permanently in his discretion, and may increase the required bond up to a maximum of twenty-five thousand dollars to insure that the public is protected adequately. The administrator, if he determines that the required bond must be increased, shall state in writing the reasons for the increase and immediately serve it upon the mortgage loan broker. The mortgage loan broker shall provide the new bond within thirty days or the administrator permanently shall revoke the registration of the mortgage loan broker.

(D) Nothing in this chapter limits a statutory or common law right of a person to bring an action in a court for an act or the right of the State to punish a person for a violation of a law."

Resident insurance broker; bond; temporary reduction

SECTION 3. Section 38-45-20 of the 1976 Code is amended to read:

"Section 38-45-20. A resident may be licensed as an insurance broker by the commissioner if the following requirements are met:

(1) the resident has been a licensed insurance agent for the same lines of insurance for which he proposes to apply as a broker of this State for at least two years;

(2) the payment of an annual license fee of one hundred dollars which is fully earned when received, not refundable;

(3) the filing of a bond with the commissioner in form approved by the Attorney General in favor of the State of South Carolina in the sum of fifty thousand dollars which has been executed by a corporate surety licensed to transact surety insurance in this State and personally countersigned by a licensed resident agent of the surety. Until May 1, 1990, the bond may be executed in the amount of ten thousand dollars. The bond must be conditioned to pay a person insured or seeking insurance through the broker who sustains loss as a result of:

(a) the broker's violation of or failure to comply with any insurance law or regulation of this State;

(b) the broker's failure to transmit properly a payment received by him, cash or credit, for transmission to an insurer or an insured; or

(c) an act of fraud committed by the broker in connection with an insurance transaction. In lieu of a bond, the broker may file with the commissioner certificates of deposit in the sum of fifty thousand dollars of building and loan associations or federal savings and loan associations located within the State in which deposits are guaranteed by the Federal Savings and Loan Insurance Corporation, not to exceed the amount of insurance, or of banks located within the State in which deposits are guaranteed by the Federal Deposit Insurance Corporation, not to exceed the amount of insurance. Until May 1, 1990, these substitute securities may be deposited in the amount of ten thousand dollars. An aggrieved person may institute an action in the county of his residence against the broker or his surety or both to recover on the bond or against the broker to recover from the certificates of deposit and a copy of the summons and complaint in the action must be served on the commissioner, who is not required to be made a party to the action;

(4) the payment to the commissioner, within thirty days after March thirty-first, June thirtieth, September thirtieth, and December thirty-first of each year, of a broker's premium tax of four percent upon the premiums approved for policies of insurers not licensed in this State. Credit may be given for tax on policies canceled flat within forty-five days of the date of approval as long as the broker certifies to the commissioner that the business was placed in good faith and the policy was canceled at the request of the insured."

Nonresident insurance broker; bond; temporary reduction

SECTION 4. Section 38-45-30 of the 1976 Code is amended to read:

"Section 38-45-30. A nonresident may be licensed as an insurance broker by the commissioner if the following requirements are met:

(1) filing an application on a form prescribed by the commissioner;

(2) filing an affidavit stating that he will not during the period of the license place, directly or indirectly, insurance on a risk located in this State except through licensed agents of insurers licensed to do business in this State;

(3) filing an affidavit stating that he is a licensed broker in another State;

(4) the payment of an annual license fee of one hundred dollars which is fully earned when received, not refundable;

(5) the filing of a bond with the commissioner in form approved by the Attorney General in favor of the State of South Carolina in the sum of fifty thousand dollars which has been executed by a corporate surety licensed to transact surety insurance in this State and personally countersigned by a licensed resident agent of the surety. Until May 1, 1990, the bond may be executed in the amount of ten thousand dollars. The bond must be conditioned to pay any person insured or seeking insurance through the broker who sustains loss as a result of:

(a) the broker's violation of or failure to comply with any insurance law or regulation of this State;

(b) the broker's failure to transmit properly a payment received by him, cash or credit, for transmission to an insurer or an insured; or

(c) an act of fraud committed by the broker in connection with an insurance transaction.

In lieu of a bond, the broker may file with the commissioner certificates of deposit in the sum of fifty thousand dollars of building and loan associations or federal savings and loan associations located within the State in which deposits are guaranteed by the Federal Savings and Loan Insurance Corporation, not to exceed the amount of insurance, or of banks located within the State in which deposits are guaranteed by the Federal Deposit Insurance Corporation, not to exceed the amount of insurance. Until May 1, 1990, these substitute securities may be deposited in the amount of ten thousand dollars. An aggrieved person may institute an action in the county of his residence against the broker or his surety or both to recover on the bond or against the broker to recover from the certificates of deposit and a copy of the summons and complaint in the action must be served on the commissioner, who is not required to be made a party to the action;

(6) the payment to the commissioner, within thirty days after March thirty-first, June thirtieth, September thirtieth, and December thirty-first of each year, of a broker's premium tax of four percent upon the premiums approved for policies of insurers not licensed in this State. Credit may be given for tax on policies canceled flat within forty-five days of the date of approval as long as the broker certifies to the commissioner that the business was placed in good faith and the policy was canceled at the request of the insured."

Time effective

SECTION 5. This act takes effect upon approval by the Governor.