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S. 17
STATUS INFORMATION
General Bill
Sponsors: Senators Thomas, Hayes, Ravenel and Short
Document Path: l:\council\bills\pt\1135mm03.doc
Companion/Similar bill(s): 438, 3125, 3616
Introduced in the Senate on January 14, 2003
Currently residing in the Senate Committee on Banking and Insurance
Summary: High Cost and Consumer Home Loans Act, Predatory Lending Bill
HISTORY OF LEGISLATIVE ACTIONS
Date Body Action Description with journal page number ------------------------------------------------------------------------------- 12/4/2002 Senate Prefiled 12/4/2002 Senate Referred to Committee on Banking and Insurance 1/14/2003 Senate Introduced and read first time SJ-27 1/14/2003 Senate Referred to Committee on Banking and Insurance SJ-27
View the latest legislative information at the LPITS web site
VERSIONS OF THIS BILL
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA. 1976, BY ADDING CHAPTER 23 TO TITLE 37, RELATING TO CONSUMER PROTECTION SO AS TO ENACT THE SOUTH CAROLINA HIGH-COST AND CONSUMER HOME LOANS ACT; TO DEFINE THE SUBJECT LOANS; TO PROHIBIT PROVISIONS IN A HIGH-COST HOME LOAN AGREEMENT FOR ACCELERATION, BALLOON PAYMENT, NEGATIVE AMORTIZATION, INTEREST INCREASE, ADVANCE PAYMENTS FROM LOAN PROCEEDS, AND ADDITIONAL FEES IN CERTAIN CIRCUMSTANCES; TO REQUIRE A HIGH-COST HOME LOAN LENDER TO ENSURE THAT THE BORROWER RECEIVES LOAN COUNSELING AND IS REASONABLY ABLE TO MEET HIS LOAN OBLIGATIONS; TO PROHIBIT THE FINANCING OF CERTAIN FEES IN CONNECTION WITH MAKING A HIGH-COST HOME LOAN AND THE CHARGING OF POINTS AND FEES IN CONNECTION WITH THE REFINANCING OF AN EXISTING HIGH-COST HOME LOAN; TO REGULATE THE PAYMENT OF A HOME IMPROVEMENT CONTRACTOR FROM THE PROCEEDS OF A HIGH-COST HOME LOAN; TO PROVIDE THAT A VIOLATION OF THE HIGH-COST HOME LOAN PROHIBITIONS OR RESTRICTIONS RENDERS THE LOAN UNENFORCEABLE; TO PROVIDE FOR ENFORCEMENT BY THE ADMINISTRATOR OF THE DEPARTMENT OF CONSUMER AFFAIRS, ATTORNEY GENERAL, COMMISSIONER OF BANKING, OR A PARTY TO THE LOAN; TO PROVIDE THAT THE REMEDIES AND PENALTIES FOR VIOLATIONS OF THE HIGH-COST HOME LOAN RESTRICTIONS AND PROHIBITIONS ARE CUMULATIVE; TO PROVIDE FOR ESTABLISHMENT OF GOOD FAITH BY A HIGH-COST HOME LOAN LENDER; TO PROVIDE CERTAIN RESTRICTIONS AND PROHIBITIONS IN THE MAKING OF A CONSUMER HOME LOAN, INCLUDING RESTRICTIONS ON THE CHARGING OF POINTS AND FEES AND THE PROHIBITION OF "FLIPPING" A LOAN, FINANCING CERTAIN INSURANCE PREMIUMS, AND ENCOURAGING DEFAULT OF A PREVIOUS LOAN; TO PROVIDE THAT A VIOLATION OF THE CONSUMER HOME LOAN RESTRICTIONS OR PROHIBITIONS RENDERS THE LOAN UNENFORCEABLE; TO PROVIDE FOR ENFORCEMENT BY THE ADMINISTRATOR OF THE DEPARTMENT OF CONSUMER AFFAIRS, ATTORNEY GENERAL, COMMISSIONER OF BANKING, OR A PARTY TO THE CONSUMER HOME LOAN; TO PROVIDE FOR PENALTIES AND REMEDIES, INCLUDING ATTORNEY'S FEES, AND TO MAKE THEM CUMULATIVE OF AND IN ADDITION TO OTHER REMEDIES AND PENALTIES PROVIDED AT LAW; TO PROVIDE FOR REPAYMENT WITHOUT PENALTY OF CERTAIN LOANS; 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 37-1-109, RELATING TO THE CHANGE OF DOLLAR AMOUNTS IN THE CONSUMER PROTECTION CODE, SO AS TO ADD THAT LIMIT OF ONE HUNDRED FIFTY THOUSAND DOLLARS AS AN AMOUNT SUBJECT TO CHANGE ACCORDING TO CERTAIN INDICES; BY ADDING SECTIONS 37-2-309 AND 37-3-308 SO AS TO REQUIRE CERTAIN DISCLOSURES IN CONNECTION WITH THE CREDIT SALE OF A PURCHASER-OCCUPIED MANUFACTURED HOME OR A LOAN FOR THE PURCHASE, REFINANCING, OR CONSOLIDATION OF A LOAN SECURED BY A BORROWER-OCCUPIED MANUFACTURED HOME; TO AMEND SECTION 37-5-203, RELATING TO CIVIL PENALTIES FOR VIOLATION OF DISCLOSURE PROVISIONS, SO AS TO REFERENCE THE DISCLOSURES REQUIRED IN CONNECTION WITH A CREDIT SALE OF OR LOAN SECURED BY A MANUFACTURED HOME AND TO INCREASE THE PENALTY AMOUNT; 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 37-3-201, AS AMENDED, RELATING TO LOAN FINANCE CHARGES ON CONSUMER LOANS, SO AS TO PROVIDE THAT CERTAIN FINANCE CHARGE LIMITS APPLY TO A LOAN BY A SUPERVISED LENDER WITH SCHEDULED LOAN PAYMENTS OF FEWER THAN ONE HUNDRED TWENTY DAYS AND TO PROVIDE FOR AN ABSOLUTE LIMIT OF THIRTY-SIX PERCENT ON THE PAYOFF BALANCE AT MATURITY.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 37 of the 1976 Code is amended by adding:
Section 37-23-10. This chapter may be cited as the 'South Carolina High-Cost and Consumer Home Loans Act'.
Section 37-23-20. For purposes of this chapter:
(1) 'Affiliate' means a company that controls, is controlled by, or is under common control with another company, as described in the Bank Holding Company Act of 1956 (12 U.S.C. Section 1841 et seq.), as amended.
(2) 'Annual percentage rate' means the annual percentage rate for the loan calculated according to the provisions of the federal Truth-in-Lending Act (15 U.S.C. Section 1601, et seq.), and the regulations promulgated under it by the Federal Reserve Board, both as amended.
(3) 'Bona fide loan discount points' means loan discount points knowingly paid by the borrower for the purpose of reducing, and which in fact result in a bona fide reduction of, the interest rate or time-price differential applicable to the loan, so long as the amount of the interest rate reduction purchased by the discount points is reasonably consistent with established industry norms and practices for secondary mortgage market transactions.
(4) 'Consumer home loan' means a loan in which:
(a) the borrower is a natural person;
(b) the debt is incurred by the borrower primarily for personal, family, or household purposes; and
(c) the loan is secured by a mortgage on real estate upon which is located or is to be located a structure designed principally for occupancy of from one to four families and that is or is to be occupied by the borrower as the borrower's principal dwelling.
(5) 'Flipping' a consumer home loan means the making of a consumer home loan that refinances an existing consumer home loan of the borrower when the new loan does not have a reasonable, tangible net benefit to the borrower, considering all the circumstances, including the terms of both the new and refinanced loans, the cost of the new loan, and the borrower's circumstances.
(6) 'High-cost home loan' means a loan, other than an open-end credit plan or a reverse mortgage transaction, in which the:
(a) principal amount of the loan does not exceed the lesser of:
(i) the conforming loan size limit for a single-family dwelling as established from time to time by the Federal National Mortgage Association; or
(ii) three hundred thousand dollars;
(b) borrower is a natural person;
(c) debt is incurred by the borrower primarily for personal, family, or household purposes;
(d) loan is secured by either:
(i) a security interest in a residential manufactured home, as defined in Section 37-1-301(24) which is to be occupied by the borrower as the borrower's principal dwelling; or
(ii) a mortgage on real estate upon which there is located or there is to be located a structure designed principally for occupancy of from one to four families and which is or is to be occupied by the borrower as the borrower's principal dwelling; and
(e) terms of the loan exceed one or more of the thresholds as defined in item (10) of this section.
(7) 'Lender' includes, but is not limited to:
(a) a mortgage broker or a mortgage banker originating a loan in a table-funded loan transaction in which the broker or banker is identified as the original payee of the note; and
(b) the assignee of the note or mortgage or other loan documents representing the obligation of the loan agreement.
(8) 'Obligor' means each borrower, co-borrower, cosigner, or guarantor obligated to repay a loan.
(9) 'Points and fees' means:
(a) items required to be disclosed pursuant to Sections 226.4(a) and 226.4(b) of Title 12 of the Code of Federal Regulations, as amended, except interest or the time-price differential;
(b) charges for items listed in Section 226.4(c)(7) of Title 12 of the Code of Federal Regulations, as amended from time to time, but only if the lender receives direct or indirect compensation in connection with the charge or the charge is paid to an affiliate of the lender; otherwise, the charges are not included within the meaning of the phrase 'points and fees';
(c) compensation paid directly by the borrower to a mortgage broker not otherwise included in subitem (a) or (b) of this item;
(d) the maximum prepayment fees and penalties that may be charged or collected pursuant to the terms of the loan documents; and
(e) 'points and fees' does not include:
(i) taxes, filing fees, recording, and other charges and fees paid or to be paid to public officials for determining the existence of or for perfecting, releasing, or satisfying a security interest; and (ii) fees paid to a person other than a lender or an affiliate of the lender or to the mortgage broker or an affiliate of the mortgage broker for the following: fees for tax payment services, fees for flood certification, fees for pest infestation and flood determinations, appraisal fees, fees for inspections performed before closing, credit reports, surveys, attorneys' fees if the borrower has the right to select the attorney from an approved list or otherwise, notary fees, escrow charges not otherwise included pursuant to subitem (a) of this item, title insurance premiums, and fire insurance and flood insurance premiums, so long as the conditions in Section 226.4(d)(2) of Title 12 of the Code of Federal Regulations are met.
(10) 'Thresholds' means:
(a) without regard to whether the loan transaction is a 'residential mortgage transaction' as the term 'residential mortgage transaction' is defined in Section 226.2(a)(24) of Title 12 of the Code of Federal Regulations, as amended, the annual percentage rate of the loan at the time the loan is consummated is such a rate that the loan is considered to be a 'mortgage' pursuant to Section 152 of the Home Ownership and Equity Protection Act of 1994 (Pub. Law 103-25, [15 U.S.C. Section 1602(aa)]), as amended, and regulations adopted pursuant to it by the Federal Reserve Board, including Section 226.32 of Title 12 of the Code of Federal Regulations, as amended;
(b) the total points and fees payable by the borrower at or before the loan closing exceed five percent of the total loan amount if the total loan amount is twenty thousand dollars or more, or the lesser of eight percent of the total loan amount or one thousand dollars if the total loan amount is less than twenty thousand dollars, except that the following discount points and prepayment fees and penalties are excluded from the calculation of the total points and fees payable by the borrower:
(i) up to and including two bona fide loan discount points payable by the borrower in connection with the loan transaction, but only if the interest rate from which the loan's interest rate is discounted does not exceed by more than one percentage point the required net yield for a ninety-day standard mandatory delivery commitment for a reasonably comparable loan from either the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, whichever is greater;
(ii) up to and including one bona fide loan discount point payable by the borrower in connection with the loan transaction, but only if the interest rate from which the loan's interest rate is discounted does not exceed by more than two percentage points the required net yield for a ninety-day standard mandatory delivery commitment for a reasonably comparable loan from either the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, whichever is greater;
(iii) prepayment fees and penalties charged or collected pursuant to the terms of the loan documents, not exceeding one percent of the amount prepaid, provided the loan documents do not permit the lender to charge or collect prepayment fees or penalties more than thirty months after the loan closing; or
(c) the loan documents permit the lender to charge or collect prepayment fees or penalties more than thirty months after the loan closing or that exceed, in the aggregate, more than two percent of the amount prepaid.
(11) 'Total loan amount' means the same as the term 'total loan amount' means in Section 226.32 of Title 12 of the Code of Federal Regulations, and must be calculated in accordance with the Federal Reserve Board's Official Staff Commentary to that section.
Section 37-23-30. A high-cost home loan agreement may not contain:
(1) a call provision that permits the lender, in its sole discretion, to accelerate the indebtedness. This item does not apply when repayment of the loan is accelerated by default, or pursuant to a due-on-sale provision or some other provision of the loan documents unrelated to the payment schedule;
(2) a balloon payment provision that contains a scheduled payment more than twice as large as the average of earlier scheduled payments. This provision does not apply when the payment schedule is adjusted to the seasonal or irregular income of the borrower;
(3) a negative amortization provision with a periodic payment schedule that causes the principal balance to increase;
(4) a provision that increases the interest rate after default. This provision does not apply to interest rate changes in a variable rate loan otherwise consistent with the provisions of the loan documents, so long as the change in the interest rate is not triggered by the event of default or the acceleration of the indebtedness;
(5) terms under which more than two periodic payments required pursuant to the loan are consolidated and paid in advance from the loan proceeds provided to the borrower; or
(6) charges to a borrower for fees to modify, renew, extend, or amend a high-cost home loan or to defer a payment due pursuant to the terms of a high-cost home loan.
Section 37-23-40. The lender of a high-cost home loan may not:
(1) make a high-cost home loan without first receiving certification from a counselor approved by the State Housing Finance and Development Authority that the borrower has received counseling on the advisability of the loan transaction and the appropriate loan for the borrower;
(2) make a high-cost home loan unless the lender reasonably believes at the time the loan is consummated that one or more of the obligors, when considered individually or collectively, is able to make the scheduled payments to repay the obligation based upon a consideration of their current and expected income, current obligations, employment status, and other financial resources other than the borrower's equity in the dwelling that secures repayment of the loan. An obligor is presumed to be able to make the scheduled payments to repay the obligation if, at the time the loan is consummated, the obligor's total monthly debts, including amounts owed pursuant to the loan, do not exceed fifty percent of the obligor's monthly gross income as verified by the credit application, the obligor's financial statement, a credit report, financial information provided to the lender by or on behalf of the obligor, or another authoritative means. A presumption of inability to make the scheduled payments to repay the obligation does not arise solely from the fact that, at the time the loan is consummated, the obligor's total monthly debts, including amounts owed under the loan, exceed fifty percent of the obligor's monthly gross income;
(3) directly or indirectly finance:
(a) prepayment fees or penalties payable by the borrower in a refinancing transaction if the lender or an affiliate of the lender is the noteholder of the note being refinanced;
(b) points and fees; or
(c) other charges payable to third parties;
(4) charge a borrower points and fees in connection with a high-cost home loan if the proceeds of the high-cost home loan are used to refinance an existing high-cost home loan held by the same lender as noteholder; or
(5) pay a contractor pursuant to a home-improvement contract from the proceeds of a high-cost home loan other than:
(a) by an instrument payable to the borrower or jointly to the borrower and the contractor; or
(b) at the election of the borrower, through a third-party escrow agent in accordance with terms established in a written agreement signed by the borrower, the lender, and the contractor before the disbursement.
Section 37-23-50. (A) Except as provided in Section 37-23-60, the making of a high-cost home loan that violates Section 37-23-30 or 37-23-40 is a violation of the provisions of this article and renders the loan unenforceable in whole or in part at the election of the borrower. The borrower may recover twice the illegal charges paid by him at the closing.
(B) The provisions of this article apply to a person who in bad faith attempts to avoid the application of this article by:
(1) structuring a loan transaction as an open-end credit plan for the purpose and with the intent of evading the provisions of this article if the loan would be a high-cost home loan if it were structured as a closed-end loan;
(2) dividing a loan transaction into separate parts for the purpose and with the intent of evading the provisions of this article; or
(3) other subterfuge.
(C) The Administrator of the Department of Consumer Affairs, the Attorney General, the Commissioner of Banking, or any party to a high-cost home loan may enforce the provisions of this article. The penalties and remedies provided in this article are in addition to and cumulative of penalties and remedies available pursuant to other provisions of law.
Section 37-23-60. A lender of a high-cost home loan who acts in good faith but fails to comply with this article does not violate this article if the lender establishes that either:
(1) within thirty days of the loan closing and before the institution of an action pursuant to this article, the lender notifies the borrower of the compliance failure, makes appropriate restitution, and makes necessary adjustments to the loan, at the choice of the borrower, either to:
(a) make the high-cost home loan satisfy the requirements of Section 37-23-30 or 37-23-40; or
(b) change the terms of the loan in a manner beneficial to the borrower so that the loan is no longer considered a high-cost home loan subject to the provisions of this article;
(2) the compliance failure was not intentional and resulted from a bona fide error, notwithstanding the maintenance of procedures reasonably adapted to avoid those errors, and within ninety days after the discovery of the compliance failure and before the institution of an action pursuant to this article or the receipt of written notice of the compliance failure, the lender notifies the borrower of the compliance failure, makes appropriate restitution and makes necessary adjustments to the loan, at the choice of the borrower, either to:
(a) make the high-cost home loan satisfy the requirements of Sections 37-23-30 and 37-23-40; or
(b) change the terms of the loan in a manner beneficial to the borrower so that the loan is no longer considered a high-cost home loan subject to the provisions of this article. Examples of a bona fide error include clerical, calculation, computer malfunction and programming, and printing errors. An error of legal judgment with respect to a person's obligations pursuant to this article is not a bona fide error.
Section 37-23-70. (A) It is unlawful for a lender in a consumer home loan to finance, directly or indirectly, credit life, disability, or unemployment insurance, or other life or health insurance premiums; except that insurance premiums calculated and paid on a monthly basis are not considered to be financed by the lender.
(B) A lender may not engage knowingly or intentionally in the unfair act or practice of 'flipping' a consumer home loan. This provision applies regardless of whether the interest rate, points, fees, and charges paid or payable by the borrower in connection with the refinancing exceed those thresholds specified in Section 37-23-20(10).
(C) 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 consumer home loan that refinances all or a portion of the existing loan or debt.
(D) The making of a consumer home loan that violates subsection (A), (B), or (C) is a violation of the provisions of this article and renders the loan unenforceable in whole or in part at the election of the borrower.
(E) In a suit instituted by a borrower who alleges that the defendant violated this article, the presiding judge, in the judge's discretion, may allow reasonable attorney's fees to the attorney representing the prevailing party. The attorney's fees must be taxed as a part of the court costs and payable by the losing party, upon a finding by the presiding judge that:
(1) the party charged with the violation engaged wilfully in the act or practice, and there was unwarranted refusal by the party fully to resolve the matter that constitutes the basis of the suit; or
(2) the party instituting the action knew, or should have known, that the action was frivolous and malicious.
(F) This article establishes specific consumer protections in consumer home loans in addition to other consumer protections that may be otherwise available by law.
Section 37-23-80. The debtor may prepay in full at any time without penalty 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 in good faith to be advanced does not exceed one hundred fifty thousand dollars."
SECTION 2. A. 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 without penalty 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 in good faith to be advanced does not exceed one hundred fifty thousand dollars."
B. Section 37-1-109(6) of the 1976 Code is amended to read:
"(6) The dollar amounts in the following sections of this title are subject to change in accordance with this section: 37-2-104(1)(e), 37-2-106(1)(b), 37-2-203(1), 37-2-407(1), 37-2-705(1)(a) and (b), 37-3-104(1)(d), 37-3-203(1), 37-3-510, 37-3-511, 37-3-514, 37-5-103(2), (3), and (4), 37-10-103, and 37-23-80."
SECTION 3. A. Chapter 2, Title 37 of the 1976 Code is amended by adding:
"Section 37-2-309. (A) An estimate of the disclosures required by Section 37-2-301 is required in connection with a credit sale of a purchaser-occupied manufactured home not less than three days before the consummation of the transaction as defined in 12 C.F.R. Section 226.2(a)(13). The estimated disclosure must be accompanied by the itemization of the amount financed.
(B) If the seller turns down the applicant for the credit sale before making the disclosures, the disclosures as provided in subsection (A) are not required.
(C)(1) If the seller determines that a material term of the credit sale must change, then the seller shall redisclose the estimated disclosures to conform to the changed terms and the transaction must not be consummated until three days after the redisclosure.
(2) A material term of the credit sale includes:
(a) the number of payments of the transaction;
(b) a feature of the transaction causing it to be an alternative mortgage transaction as defined in 12 U.S. Code Section 3802(1) when the transaction as previously disclosed was not an alternative mortgage transaction;
(c) a term or fee in the transaction or combination of terms or fees causing the annual percentage rate to vary more than one quarter of one percent of the annual percentage rate previously disclosed; or
(d) any insurance premiums, prepaid finance charges, third-party fees, or preparation charges that vary from the previously disclosed insurance premiums, prepaid finance charges, third-party fees, or preparation charges by more than one hundred dollars in the aggregate."
B. Chapter 3, Title 37 of the 1976 Code is amended by adding:
"Section 37-3-308. (A) An estimate of the disclosures required by Section 37-3-301 is required in connection with a loan for the purchase, refinance, or consolidation of a loan secured by a borrower-occupied manufactured home not less than three days before the consummation of the transaction as defined in 12 C.F.R. Section 226.2(a)(13). The estimated disclosure must be accompanied by the itemization of the amount financed.
(B) If the lender turns down the applicant for the credit sale before making the disclosures, the disclosures as provided in subsection (A) are not required.
(C)(1) If the lender determines that a material term of the loan sale must change, then the lender shall redisclose the estimated disclosures to conform to the changed terms and the transaction must not be consummated until three days after the redisclosure.
(2) A material term of the credit sale includes:
(a) the number of payments of the transaction;
(b) a feature of the transaction causing it to be an alternative mortgage transaction as defined in 12 U.S. Code Section 3802(1) when the transaction as previously disclosed was not an alternative mortgage transaction;
(c) a term or fee in the transaction or combination of terms or fees causing the annual percentage rate to vary more than one quarter of one percent of the annual percentage rate previously disclosed; or
(d) any insurance premiums, prepaid finance charges, third-party fees, or preparation charges that vary from the previously disclosed insurance premiums, prepaid finance charges, third-party fees, or preparation charges by more than one hundred dollars in the aggregate."
C. Section 37-5-203(1) and (2) of the 1976 Code is amended to read:
"(1) Except as otherwise provided in this section, a creditor who, in violation of the provisions of the Federal Truth in Lending Act or Section 37-2-309 or 37-3-308, fails to disclose information to a person entitled to the information under pursuant to this title is liable to that person in an amount equal to the sum of:
(a) twice the amount of the finance charge in connection with the transaction, but the liability pursuant to this paragraph shall item must be not less than one two hundred dollars or more than one two thousand dollars; and
(b) in the case of a successful action to enforce the liability under paragraph pursuant to item (a), the costs of the action together with reasonable attorney's fees as determined by the court.
(2) A creditor has no liability under pursuant to this section if, within sixty days after discovering an error, and prior to before the institution of an action under pursuant to this section or the receipt of written notice of the error, the creditor notifies the person concerned of the error and makes whatever necessary adjustments in the appropriate account are necessary to assure that the person will is not be required to pay a finance charge in excess of the amount of percentage rate actually disclosed. This item does not apply to the failure or refusal accurately to disclose or redisclose."
D. This section takes effect upon approval by the Governor and applies to a covered sale or loan transaction entered into after that date.
SECTION 4. A. Section 37-5-108(4) of the 1976 Code is amended to read:
"(4)(a) In applying subsection (1), consideration must be given to each of the following applicable factors, among others, such as, applicable but without limitation:
(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) (i) 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) (ii) 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)(iii) 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 unconscionable, considered as a whole, unconscionable, when including the sale of insurance where from which the consumer could receive receives no potential benefit as referenced in Section 37-4-106(1)(a);
(e) (iv) the fact that the seller, lessor, or lender knowingly 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) (v) 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 except, that when a purchase money consumer credit transaction is refinanced or consolidated, the security lawfully collateralizing the prior previous consumer credit transaction can continue continues 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: a (i) work of art;, (ii) electronic entertainment equipment (except one television and one radio);, (iii) items acquired as antiques and which are over one hundred years of age;, and (iv) jewelry, (except wedding rings).
In construing subsection (f) subitem (v), the courts shall must 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).
(b) In applying subsection (1), consideration may be given to the extension of credit to a consumer if, considering the consumer's current and expected income, current obligations, and employment status, the creditor knows or should know that the consumer is unable to make the scheduled payment on the obligation when due. Rental renewals necessary to acquire ownership in a consumer rental-purchase agreement are not obligations contemplated in this item (b)."
B. 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 as provided follows on a loan:
(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 except that a supervised lender may impose a finance charge at a rate less than provided in Section 34-29-140, and provided further except that the maximum charge shall may 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 a loan, regardless of the dollar amount, made by Supervised Financial Organizations, any a rate filed and posted pursuant to Section 37-3-305; or
(c) on loans of any amount, eighteen percent per a year on the unpaid balances of principal;
(d) of any amount with scheduled loan payments of fewer than one hundred twenty days a maximum charge not exceeding the maximum charges imposed in Section 34-29-140 as disclosed as an annual percentage rate, except that a supervised lender may impose a finance charge at a rate less than provided in Section 34-29-140, and except that the maximum charge may not exceed the rate posted and filed pursuant to Section 37-3-305; or
(e) of any amount and for any terms, an amount of interest after maturity not exceeding thirty-six percent a year on the net payoff balance as of the date of maturity, whether as scheduled, accelerated, or otherwise, and notwithstanding other provisions of this subsection to the contrary."
C. This section takes effect upon approval by the Governor, and applies to a covered sale or loan transaction entered into after that date.
SECTION 5. If any section, subsection, paragraph, subparagraph, sentence, clause, phrase, or word of this act is for any reason held to be unconstitutional or invalid, such holding shall not affect the constitutionality or validity of the remaining portions of this act, the General Assembly hereby declaring that it would have passed this chapter, and each and every section, subsection, paragraph, subparagraph, sentence, clause, phrase, and word thereof, irrespective of the fact that any one or more other sections, subsections, paragraphs, subparagraphs, sentences, clauses, phrases, or words hereof may be declared to be unconstitutional, invalid, or otherwise ineffective.
SECTION 6. Unless otherwise noted herein, this act takes effect upon approval by the Governor.
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