South Carolina General Assembly
115th Session, 2003-2004

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Indicates Matter Stricken
Indicates New Matter

S. 1110

STATUS INFORMATION

General Bill
Sponsors: Senator Sheheen
Document Path: l:\s-jud\bills\sheheen\jud0126.vas.doc

Introduced in the Senate on March 31, 2004
Currently residing in the Senate Committee on Judiciary

Summary: Unsolicited checks, lenders who send must disclose that the check is to secure a loan

HISTORY OF LEGISLATIVE ACTIONS

     Date      Body   Action Description with journal page number
-------------------------------------------------------------------------------
   3/31/2004  Senate  Introduced and read first time SJ-8
   3/31/2004  Senate  Referred to Committee on Judiciary SJ-8

View the latest legislative information at the LPITS web site

VERSIONS OF THIS BILL

3/31/2004

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

A BILL

TO AMEND CHAPTER 5, TITLE 39, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO UNSOLICITED CHECKS TO SECURE LOANS, BY ADDING ARTICLE 6, SO AS TO PROVIDE THAT LENDERS WHO SEND UNSOLICITED CHECKS MUST DISCLOSE THAT THE CHECK IS TO SECURE A LOAN, MUST PROVIDE NOTICE OF THE TERMS OF THE LOAN, AND MUST PROVIDE NOTICE TO RECIPIENTS THAT BY CASHING THE CHECK THEY HAVE ENTERED INTO A LOAN AGREEMENT, TO PROVIDE PROTECTION FOR INTENDED PAYEES WHEN THE UNSOLICITED CHECK IS CASHED FRAUDULENTLY, AND TO PROVIDE THAT A VIOLATION OF THIS SECTION IS AN UNFAIR TRADE PRACTICE AND SUBJECT TO PENALTIES AND ENFORCEMENT AS PROVIDED FOR UNDER THIS CHAPTER.

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

SECTION    1.    Chapter 5, Title 39 of the 1976 Code is amended by adding:

"Article 6

Unsolicited Checks to Secure Loans

Section 39-5-610.    (A)    No person, firm, or corporation engaged in lending money shall deliver to a person an unsolicited check made out to the recipient that upon cashing, obligates the recipient to repay the amount of the check plus interest and fees, unless all of the following requirements are satisfied:

(1)    In addition to any disclosures and restrictions required by the South Carolina Consumer Protection Code and the provisions and regulations applicable to consumer credit loans, the solicitation for loans using a facsimile or negotiable check shall disclose all of the following on the face of the check:

(a)    In at least 10-point boldface type a statement in substantially the following form: 'THIS IS A SOLICITATION FOR A LOAN. READ THE ATTACHED DISCLOSURES BEFORE SIGNING THIS AGREEMENT.'

(b)    In at least 14-point type, if the interest rate exceeds ten percent, a statement, in bold, in substantially the following form: 'THIS IS A HIGH-INTEREST LOAN.'

(c)    In at least 6-point type a statement in substantially the following form: 'By endorsing the back of this check, you accept our offer and agree to the terms of your loan agreement contained in the disclosure statement attached to this check.'

(2)    Notification that the loan agreement is activated by endorsement must be conspicuously printed in at least 6-point type on the back of the check in substantially the following form: 'By endorsing this check, you agree to repay this loan according to the terms of the attached loan agreement.'

(3)    The check is attached to a disclosure statement that is detachable and that contains in at least 10-point boldface type a statement conspicuously placed in substantially the following form:

'This is a loan solicitation. If you cash this check, you are agreeing to borrow the sum of $_____ at the ___% rate of interest for a period of ______ months. Your monthly payments will be $_____ for ______ months. This interest rate is subject to the limitations, if any, established by the South Carolina Consumer Protection Code. If you are late with a payment, you will be charged the following fees in addition to your monthly payment: (list fees). All other terms of this loan are clearly identified as loan terms and appear on the back of the check or on this attachment. Read these terms carefully before you cash this check. Cashing this check constitutes a loan transaction. You may cancel this loan by returning the amount of the check to the lender within ten days of the date this check is cashed. You may prepay this loan agreement at anytime without penalty. READ THE AGREEMENT BEFORE SIGNING.'

(4)    The recipient has a right to cancel the loan by refunding to the lender the amount of the check within ten days of the date the check is cashed. The loan is considered refunded when the lender receives a refund of the amount of the check within ten days of the date the check is cashed.

(B)    In the event an unsolicited check is stolen or otherwise obtained by someone other than the intended payee, and the check is cashed fraudulently or without authorization from the payee, the lender who issued the check shall provide the following recourse to the intended payee:

(1)    The lender, upon receipt of notification that intended payee did not negotiate the check, shall promptly provide the intended payee with a statement or affidavit to be signed by the intended payee confirming that the intended payee did not deposit or cash the check or receive the proceeds of the check. The lender shall also provide the intended payee with the name and telephone number of a contact person designated by the lender to provide assistance to intended payees who have been victimized by the fraudulent negotiation of unsolicited checks. The lender shall cease all collection activity against the intended payee until the lender completes an investigation into the transaction.

(2)    The intended payee shall be directed to complete and return the confirmation statement to the lender or an affiliate of the lender.

(3)    Within thirty days of the receipt of the confirmation statement, the lender shall conduct a reasonable investigation and determine whether the check was fraudulently negotiated. Absent evidence to the contrary, the presumption shall be that the confirmation statement submitted by the intended payee is accurate. The lender shall notify the intended payee in writing of the results of the investigation. If it is determined that the check was cashed fraudulently, the lender shall take immediate action to remove the intended payee from all liability on the account and to request all credit reporting agencies to remove references to the transaction, if any, from the consumer's credit reports.

(4)    A consumer who is an intended payee of an unsolicited check under this section may bring a civil action to recover damages, costs, and attorney fees for any violation of this subsection.

(C)    The provisions of this section shall not apply to a transaction in which a consumer has submitted an application or requested an extension of credit from the lender before receiving the check or instrument, or where the lender has an existing account relationship with the consumer.

(D)    A violation of this section is an unfair trade practice pursuant to Chapter 5 of Title 39 and is subject to all of the enforcement and penalty provisions of an unfair trade practice under this chapter."

SECTION    2.    This act takes effect upon approval by the Governor.

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