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					                                   South Carolina General Assembly
                                       115th Session, 2003-2004

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

12/4/2002
 1
 2
 3
 4
 5
 6
 7
 8
 9                      A BILL
10
11   TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA.
12   1976, BY ADDING CHAPTER 23 TO TITLE 37, RELATING
13   TO CONSUMER PROTECTION SO AS TO ENACT THE
14   SOUTH CAROLINA HIGH-COST AND CONSUMER HOME
15   LOANS ACT; TO DEFINE THE SUBJECT LOANS; TO
16   PROHIBIT PROVISIONS IN A HIGH-COST HOME LOAN
17   AGREEMENT FOR ACCELERATION, BALLOON PAYMENT,
18   NEGATIVE AMORTIZATION, INTEREST INCREASE,
19   ADVANCE PAYMENTS FROM LOAN PROCEEDS, AND
20   ADDITIONAL FEES IN CERTAIN CIRCUMSTANCES; TO
21   REQUIRE A HIGH-COST HOME LOAN LENDER TO
22   ENSURE THAT THE BORROWER RECEIVES LOAN
23   COUNSELING AND IS REASONABLY ABLE TO MEET HIS
24   LOAN OBLIGATIONS; TO PROHIBIT THE FINANCING OF
25   CERTAIN FEES IN CONNECTION WITH MAKING A
26   HIGH-COST HOME LOAN AND THE CHARGING OF
27   POINTS AND FEES IN CONNECTION WITH THE
28   REFINANCING OF AN EXISTING HIGH-COST HOME
29   LOAN; TO REGULATE THE PAYMENT OF A HOME
30   IMPROVEMENT CONTRACTOR FROM THE PROCEEDS OF
31   A HIGH-COST HOME LOAN; TO PROVIDE THAT A
32   VIOLATION OF THE HIGH-COST HOME LOAN
33   PROHIBITIONS OR RESTRICTIONS RENDERS THE LOAN
34   UNENFORCEABLE; TO PROVIDE FOR ENFORCEMENT BY
35   THE ADMINISTRATOR OF THE DEPARTMENT OF
36   CONSUMER      AFFAIRS,   ATTORNEY       GENERAL,
37   COMMISSIONER OF BANKING, OR A PARTY TO THE
38   LOAN; TO PROVIDE THAT THE REMEDIES AND
39   PENALTIES FOR VIOLATIONS OF THE HIGH-COST HOME
40   LOAN RESTRICTIONS AND PROHIBITIONS ARE
41   CUMULATIVE; TO PROVIDE FOR ESTABLISHMENT OF
42   GOOD FAITH BY A HIGH-COST HOME LOAN LENDER; TO

     [17]                   1
 1   PROVIDE CERTAIN RESTRICTIONS AND PROHIBITIONS
 2   IN THE MAKING OF A CONSUMER HOME LOAN,
 3   INCLUDING RESTRICTIONS ON THE CHARGING OF
 4   POINTS AND FEES AND THE PROHIBITION OF “FLIPPING”
 5   A LOAN, FINANCING CERTAIN INSURANCE PREMIUMS,
 6   AND ENCOURAGING DEFAULT OF A PREVIOUS LOAN;
 7   TO PROVIDE THAT A VIOLATION OF THE CONSUMER
 8   HOME LOAN RESTRICTIONS OR PROHIBITIONS RENDERS
 9   THE LOAN UNENFORCEABLE; TO PROVIDE FOR
10   ENFORCEMENT BY THE ADMINISTRATOR OF THE
11   DEPARTMENT OF CONSUMER AFFAIRS, ATTORNEY
12   GENERAL, COMMISSIONER OF BANKING, OR A PARTY
13   TO THE CONSUMER HOME LOAN; TO PROVIDE FOR
14   PENALTIES AND REMEDIES, INCLUDING ATTORNEY‟S
15   FEES, AND TO MAKE THEM CUMULATIVE OF AND IN
16   ADDITION TO OTHER REMEDIES AND PENALTIES
17   PROVIDED AT LAW; TO PROVIDE FOR REPAYMENT
18   WITHOUT PENALTY OF CERTAIN LOANS; TO AMEND
19   SECTION 37-10-103, RELATING TO PREPAYMENT
20   WITHOUT PENALTY OF CERTAIN LOANS, SO AS TO
21   INCREASE THE LOAN LIMIT FROM ONE HUNDRED
22   THOUSAND DOLLARS TO ONE HUNDRED FIFTY
23   THOUSAND DOLLARS; TO AMEND SECTION 37-1-109,
24   RELATING TO THE CHANGE OF DOLLAR AMOUNTS IN
25   THE CONSUMER PROTECTION CODE, SO AS TO ADD
26   THAT LIMIT OF ONE HUNDRED FIFTY THOUSAND
27   DOLLARS AS AN AMOUNT SUBJECT TO CHANGE
28   ACCORDING TO CERTAIN INDICES; BY ADDING
29   SECTIONS 37-2-309 AND 37-3-308 SO AS TO REQUIRE
30   CERTAIN DISCLOSURES IN CONNECTION WITH THE
31   CREDIT    SALE    OF   A     PURCHASER-OCCUPIED
32   MANUFACTURED HOME OR A LOAN FOR THE
33   PURCHASE, REFINANCING, OR CONSOLIDATION OF A
34   LOAN    SECURED    BY   A     BORROWER-OCCUPIED
35   MANUFACTURED HOME; TO AMEND SECTION 37-5-203,
36   RELATING TO CIVIL PENALTIES FOR VIOLATION OF
37   DISCLOSURE PROVISIONS, SO AS TO REFERENCE THE
38   DISCLOSURES REQUIRED IN CONNECTION WITH A
39   CREDIT SALE OF OR LOAN SECURED BY A
40   MANUFACTURED HOME AND TO INCREASE THE
41   PENALTY AMOUNT; TO AMEND SECTION 37-5-108, AS
42   AMENDED, RELATING TO UNCONSCIONABILITY IN
43   CONSUMER CREDIT TRANSACTIONS, SO AS TO PROVIDE

     [17]                    2
 1   THAT IF, CONSIDERING CERTAIN FACTORS, THE
 2   CONSUMER IS UNABLE TO MAKE SCHEDULED
 3   PAYMENTS ON THE OBLIGATION WHEN DUE OR IS
 4   PERMITTED TO ENTER INTO A TRANSACTION FROM
 5   WHICH HE DERIVES NO SUBSTANTIAL BENEFIT, THE
 6   COURT     MAY     FIND    THE     TRANSACTION
 7   UNCONSCIONABLE; AND TO AMEND SECTION 37-3-201,
 8   AS AMENDED, RELATING TO LOAN FINANCE CHARGES
 9   ON CONSUMER LOANS, SO AS TO PROVIDE THAT
10   CERTAIN FINANCE CHARGE LIMITS APPLY TO A LOAN
11   BY A SUPERVISED LENDER WITH SCHEDULED LOAN
12   PAYMENTS OF FEWER THAN ONE HUNDRED TWENTY
13   DAYS AND TO PROVIDE FOR AN ABSOLUTE LIMIT OF
14   THIRTY-SIX PERCENT ON THE PAYOFF BALANCE AT
15   MATURITY.
16
17   Be it enacted by the General Assembly of the State of South
18   Carolina:
19
20   SECTION 1. Title 37 of the 1976 Code is amended by adding:
21
22                              “CHAPTER 23
23
24                 High-Cost and Consumer Home Loans
25
26                                Article 1
27
28                           General Provisions
29
30     Section 37-23-10. This chapter may be cited as the „South
31   Carolina High-Cost and Consumer Home Loans Act‟.
32
33      Section 37-23-20. For purposes of this chapter:
34       (1) „Affiliate‟ means a company that controls, is controlled by,
35   or is under common control with another company, as described in
36   the Bank Holding Company Act of 1956 (12 U.S.C. Section 1841
37   et seq.), as amended.
38       (2) „Annual percentage rate‟ means the annual percentage rate
39   for the loan calculated according to the provisions of the federal
40   Truth-in-Lending Act (15 U.S.C. Section 1601, et seq.), and the
41   regulations promulgated under it by the Federal Reserve Board,
42   both as amended.


     [17]                             3
 1       (3) „Bona fide loan discount points‟ means loan discount points
 2   knowingly paid by the borrower for the purpose of reducing, and
 3   which in fact result in a bona fide reduction of, the interest rate or
 4   time-price differential applicable to the loan, so long as the amount
 5   of the interest rate reduction purchased by the discount points is
 6   reasonably consistent with established industry norms and
 7   practices for secondary mortgage market transactions.
 8       (4) „Consumer home loan‟ means a loan in which:
 9         (a) the borrower is a natural person;
10         (b) the debt is incurred by the borrower primarily for
11   personal, family, or household purposes; and
12         (c) the loan is secured by a mortgage on real estate upon
13   which is located or is to be located a structure designed principally
14   for occupancy of from one to four families and that is or is to be
15   occupied by the borrower as the borrower‟s principal dwelling.
16       (5) „Flipping‟ a consumer home loan means the making of a
17   consumer home loan that refinances an existing consumer home
18   loan of the borrower when the new loan does not have a
19   reasonable, tangible net benefit to the borrower, considering all the
20   circumstances, including the terms of both the new and refinanced
21   loans, the cost of the new loan, and the borrower‟s circumstances.
22       (6) „High-cost home loan‟ means a loan, other than an
23   open-end credit plan or a reverse mortgage transaction, in which
24   the:
25         (a) principal amount of the loan does not exceed the lesser
26   of:
27             (i) the conforming loan size limit for a single-family
28   dwelling as established from time to time by the Federal National
29   Mortgage Association; or
30            (ii) three hundred thousand dollars;
31         (b) borrower is a natural person;
32         (c) debt is incurred by the borrower primarily for personal,
33   family, or household purposes;
34         (d) loan is secured by either:
35             (i) a security interest in a residential manufactured home,
36   as defined in Section 37-1-301(24) which is to be occupied by the
37   borrower as the borrower‟s principal dwelling; or
38            (ii) a mortgage on real estate upon which there is located
39   or there is to be located a structure designed principally for
40   occupancy of from one to four families and which is or is to be
41   occupied by the borrower as the borrower‟s principal dwelling; and
42         (e) terms of the loan exceed one or more of the thresholds as
43   defined in item (10) of this section.

     [17]                              4
 1       (7) „Lender‟ includes, but is not limited to:
 2         (a) a mortgage broker or a mortgage banker originating a
 3   loan in a table-funded loan transaction in which the broker or
 4   banker is identified as the original payee of the note; and
 5         (b) the assignee of the note or mortgage or other loan
 6   documents representing the obligation of the loan agreement.
 7       (8) „Obligor‟ means each borrower, co-borrower, cosigner, or
 8   guarantor obligated to repay a loan.
 9      (9) „Points and fees‟ means:
10         (a) items required to be disclosed pursuant to Sections
11   226.4(a) and 226.4(b) of Title 12 of the Code of Federal
12   Regulations, as amended, except interest or the time-price
13   differential;
14         (b) charges for items listed in Section 226.4(c)(7) of Title 12
15   of the Code of Federal Regulations, as amended from time to time,
16   but only if the lender receives direct or indirect compensation in
17   connection with the charge or the charge is paid to an affiliate of
18   the lender; otherwise, the charges are not included within the
19   meaning of the phrase „points and fees‟;
20         (c) compensation paid directly by the borrower to a
21   mortgage broker not otherwise included in subitem (a) or (b) of
22   this item;
23         (d) the maximum prepayment fees and penalties that may be
24   charged or collected pursuant to the terms of the loan documents;
25   and
26         (e) „points and fees‟ does not include:
27             (i) taxes, filing fees, recording, and other charges and fees
28   paid or to be paid to public officials for determining the existence
29   of or for perfecting, releasing, or satisfying a security interest; and
30            (ii) fees paid to a person other than a lender or an affiliate
31   of the lender or to the mortgage broker or an affiliate of the
32   mortgage broker for the following: fees for tax payment services,
33   fees for flood certification, fees for pest infestation and flood
34   determinations, appraisal fees, fees for inspections performed
35   before closing, credit reports, surveys, attorneys‟ fees if the
36   borrower has the right to select the attorney from an approved list
37   or otherwise, notary fees, escrow charges not otherwise included
38   pursuant to subitem (a) of this item, title insurance premiums, and
39   fire insurance and flood insurance premiums, so long as the
40   conditions in Section 226.4(d)(2) of Title 12 of the Code of
41   Federal Regulations are met.
42      (10) „Thresholds‟ means:


     [17]                               5
 1         (a) without regard to whether the loan transaction is a
 2   „residential mortgage transaction‟ as the term „residential mortgage
 3   transaction‟ is defined in Section 226.2(a)(24) of Title 12 of the
 4   Code of Federal Regulations, as amended, the annual percentage
 5   rate of the loan at the time the loan is consummated is such a rate
 6   that the loan is considered to be a „mortgage‟ pursuant to Section
 7   152 of the Home Ownership and Equity Protection Act of 1994
 8   (Pub. Law 103-25, [15 U.S.C. Section 1602(aa)]), as amended, and
 9   regulations adopted pursuant to it by the Federal Reserve Board,
10   including Section 226.32 of Title 12 of the Code of Federal
11   Regulations, as amended;
12         (b) the total points and fees payable by the borrower at or
13   before the loan closing exceed five percent of the total loan amount
14   if the total loan amount is twenty thousand dollars or more, or the
15   lesser of eight percent of the total loan amount or one thousand
16   dollars if the total loan amount is less than twenty thousand
17   dollars, except that the following discount points and prepayment
18   fees and penalties are excluded from the calculation of the total
19   points and fees payable by the borrower:
20              (i) up to and including two bona fide loan discount points
21   payable by the borrower in connection with the loan transaction,
22   but only if the interest rate from which the loan‟s interest rate is
23   discounted does not exceed by more than one percentage point the
24   required net yield for a ninety-day standard mandatory delivery
25   commitment for a reasonably comparable loan from either the
26   Federal National Mortgage Association or the Federal Home Loan
27   Mortgage Corporation, whichever is greater;
28             (ii) up to and including one bona fide loan discount point
29   payable by the borrower in connection with the loan transaction,
30   but only if the interest rate from which the loan‟s interest rate is
31   discounted does not exceed by more than two percentage points
32   the required net yield for a ninety-day standard mandatory delivery
33   commitment for a reasonably comparable loan from either the
34   Federal National Mortgage Association or the Federal Home Loan
35   Mortgage Corporation, whichever is greater;
36            (iii) prepayment fees and penalties charged or collected
37   pursuant to the terms of the loan documents, not exceeding one
38   percent of the amount prepaid, provided the loan documents do not
39   permit the lender to charge or collect prepayment fees or penalties
40   more than thirty months after the loan closing; or
41         (c) the loan documents permit the lender to charge or collect
42   prepayment fees or penalties more than thirty months after the loan


     [17]                              6
 1   closing or that exceed, in the aggregate, more than two percent of
 2   the amount prepaid.
 3      (11) „Total loan amount‟ means the same as the term „total loan
 4   amount‟ means in Section 226.32 of Title 12 of the Code of
 5   Federal Regulations, and must be calculated in accordance with the
 6   Federal Reserve Board‟s Official Staff Commentary to that
 7   section.
 8
 9                                Article 3
10
11                        High-Cost Home Loans
12
13      Section 37-23-30. A high-cost home loan agreement may not
14   contain:
15      (1) a call provision that permits the lender, in its sole
16   discretion, to accelerate the indebtedness. This item does not
17   apply when repayment of the loan is accelerated by default, or
18   pursuant to a due-on-sale provision or some other provision of the
19   loan documents unrelated to the payment schedule;
20      (2) a balloon payment provision that contains a scheduled
21   payment more than twice as large as the average of earlier
22   scheduled payments. This provision does not apply when the
23   payment schedule is adjusted to the seasonal or irregular income of
24   the borrower;
25      (3) a negative amortization provision with a periodic payment
26   schedule that causes the principal balance to increase;
27      (4) a provision that increases the interest rate after default.
28   This provision does not apply to interest rate changes in a variable
29   rate loan otherwise consistent with the provisions of the loan
30   documents, so long as the change in the interest rate is not
31   triggered by the event of default or the acceleration of the
32   indebtedness;
33      (5) terms under which more than two periodic payments
34   required pursuant to the loan are consolidated and paid in advance
35   from the loan proceeds provided to the borrower; or
36      (6) charges to a borrower for fees to modify, renew, extend, or
37   amend a high-cost home loan or to defer a payment due pursuant
38   to the terms of a high-cost home loan.
39
40     Section 37-23-40. The lender of a high-cost home loan may
41   not:
42     (1) make a high-cost home loan without first receiving
43   certification from a counselor approved by the State Housing

     [17]                             7
 1   Finance and Development Authority that the borrower has
 2   received counseling on the advisability of the loan transaction and
 3   the appropriate loan for the borrower;
 4      (2) make a high-cost home loan unless the lender reasonably
 5   believes at the time the loan is consummated that one or more of
 6   the obligors, when considered individually or collectively, is able
 7   to make the scheduled payments to repay the obligation based
 8   upon a consideration of their current and expected income, current
 9   obligations, employment status, and other financial resources other
10   than the borrower‟s equity in the dwelling that secures repayment
11   of the loan. An obligor is presumed to be able to make the
12   scheduled payments to repay the obligation if, at the time the loan
13   is consummated, the obligor‟s total monthly debts, including
14   amounts owed pursuant to the loan, do not exceed fifty percent of
15   the obligor‟s monthly gross income as verified by the credit
16   application, the obligor‟s financial statement, a credit report,
17   financial information provided to the lender by or on behalf of the
18   obligor, or another authoritative means. A presumption of inability
19   to make the scheduled payments to repay the obligation does not
20   arise solely from the fact that, at the time the loan is consummated,
21   the obligor‟s total monthly debts, including amounts owed under
22   the loan, exceed fifty percent of the obligor‟s monthly gross
23   income;
24      (3) directly or indirectly finance:
25         (a) prepayment fees or penalties payable by the borrower in
26   a refinancing transaction if the lender or an affiliate of the lender is
27   the noteholder of the note being refinanced;
28         (b) points and fees; or
29         (c) other charges payable to third parties;
30      (4) charge a borrower points and fees in connection with a
31   high-cost home loan if the proceeds of the high-cost home loan are
32   used to refinance an existing high-cost home loan held by the same
33   lender as noteholder; or
34      (5) pay a contractor pursuant to a home-improvement contract
35   from the proceeds of a high-cost home loan other than:
36         (a) by an instrument payable to the borrower or jointly to the
37   borrower and the contractor; or
38         (b) at the election of the borrower, through a third-party
39   escrow agent in accordance with terms established in a written
40   agreement signed by the borrower, the lender, and the contractor
41   before the disbursement.
42


     [17]                               8
 1      Section 37-23-50. (A) Except as provided in Section 37-23-60,
 2   the making of a high-cost home loan that violates Section 37-23-30
 3   or 37-23-40 is a violation of the provisions of this article and
 4   renders the loan unenforceable in whole or in part at the election of
 5   the borrower. The borrower may recover twice the illegal charges
 6   paid by him at the closing.
 7      (B) The provisions of this article apply to a person who in bad
 8   faith attempts to avoid the application of this article by:
 9         (1) structuring a loan transaction as an open-end credit plan
10   for the purpose and with the intent of evading the provisions of this
11   article if the loan would be a high-cost home loan if it were
12   structured as a closed-end loan;
13         (2) dividing a loan transaction into separate parts for the
14   purpose and with the intent of evading the provisions of this
15   article; or
16         (3) other subterfuge.
17      (C) The Administrator of the Department of Consumer Affairs,
18   the Attorney General, the Commissioner of Banking, or any party
19   to a high-cost home loan may enforce the provisions of this article.
20   The penalties and remedies provided in this article are in addition
21   to and cumulative of penalties and remedies available pursuant to
22   other provisions of law.
23
24      Section 37-23-60. A lender of a high-cost home loan who acts
25   in good faith but fails to comply with this article does not violate
26   this article if the lender establishes that either:
27      (1) within thirty days of the loan closing and before the
28   institution of an action pursuant to this article, the lender notifies
29   the borrower of the compliance failure, makes appropriate
30   restitution, and makes necessary adjustments to the loan, at the
31   choice of the borrower, either to:
32         (a) make the high-cost home loan satisfy the requirements of
33   Section 37-23-30 or 37-23-40; or
34         (b) change the terms of the loan in a manner beneficial to the
35   borrower so that the loan is no longer considered a high-cost home
36   loan subject to the provisions of this article;
37      (2) the compliance failure was not intentional and resulted
38   from a bona fide error, notwithstanding the maintenance of
39   procedures reasonably adapted to avoid those errors, and within
40   ninety days after the discovery of the compliance failure and
41   before the institution of an action pursuant to this article or the
42   receipt of written notice of the compliance failure, the lender
43   notifies the borrower of the compliance failure, makes appropriate

     [17]                              9
 1   restitution and makes necessary adjustments to the loan, at the
 2   choice of the borrower, either to:
 3         (a) make the high-cost home loan satisfy the requirements of
 4   Sections 37-23-30 and 37-23-40; or
 5         (b) change the terms of the loan in a manner beneficial to the
 6   borrower so that the loan is no longer considered a high-cost home
 7   loan subject to the provisions of this article. Examples of a bona
 8   fide error include clerical, calculation, computer malfunction and
 9   programming, and printing errors. An error of legal judgment with
10   respect to a person‟s obligations pursuant to this article is not a
11   bona fide error.
12
13                                 Article 5
14
15                         Consumer Home Loans
16
17      Section 37-23-70. (A) It is unlawful for a lender in a consumer
18   home loan to finance, directly or indirectly, credit life, disability,
19   or unemployment insurance, or other life or health insurance
20   premiums; except that insurance premiums calculated and paid on
21   a monthly basis are not considered to be financed by the lender.
22      (B) A lender may not engage knowingly or intentionally in the
23   unfair act or practice of „flipping‟ a consumer home loan. This
24   provision applies regardless of whether the interest rate, points,
25   fees, and charges paid or payable by the borrower in connection
26   with the refinancing exceed those thresholds specified in Section
27   37-23-20(10).
28      (C) A lender may not recommend or encourage default on an
29   existing loan or other debt before and in connection with the
30   closing or planned closing of a consumer home loan that
31   refinances all or a portion of the existing loan or debt.
32      (D) The making of a consumer home loan that violates
33   subsection (A), (B), or (C) is a violation of the provisions of this
34   article and renders the loan unenforceable in whole or in part at the
35   election of the borrower.
36      (E) In a suit instituted by a borrower who alleges that the
37   defendant violated this article, the presiding judge, in the judge‟s
38   discretion, may allow reasonable attorney‟s fees to the attorney
39   representing the prevailing party. The attorney‟s fees must be
40   taxed as a part of the court costs and payable by the losing party,
41   upon a finding by the presiding judge that:



     [17]                              10
 1        (1) the party charged with the violation engaged wilfully in
 2   the act or practice, and there was unwarranted refusal by the party
 3   fully to resolve the matter that constitutes the basis of the suit; or
 4        (2) the party instituting the action knew, or should have
 5   known, that the action was frivolous and malicious.
 6      (F) This article establishes specific consumer protections in
 7   consumer home loans in addition to other consumer protections
 8   that may be otherwise available by law.
 9
10     Section 37-23-80. The debtor may prepay in full at any time
11   without penalty the debt represented by a personal, family, or
12   household purpose loan agreement that is secured in whole or in
13   part by a first or junior lien on real estate if the aggregate of all
14   sums advanced or contemplated by the parties in good faith to be
15   advanced does not exceed one hundred fifty thousand dollars.”
16
17   SECTION 2. A.Section 37-10-103 of the 1976 Code is amended
18   to read:
19
20      “Section 37-10-103. With respect to a loan agreement which is
21   secured in whole or in part by a first or junior lien on real estate
22   under which the aggregate of all sums advanced or contemplated
23   by the parties in good faith to be advanced will not exceed one
24   hundred thousand dollars.
25      (1) the debtor has the right to prepay the debt in full at any time
26   without penalty;
27      (2) The rate of the loan finance charge is a fixed, nonvariable
28   rate. This subsection does not apply:
29        (a) If the borrower otherwise agrees; and either
30        (b) The loan is primarily for a business or agricultural
31   purpose or is used for the construction of any improvements on the
32   real estate which provides the security for the loan; or
33        (c) The creditor makes the loan in accordance with any
34   regulation governing alternative mortgage loans promulgated by
35   the State Board of Financial Institutions or a federal regulatory
36   agency. The debtor may prepay in full at any time without penalty
37   the debt represented by a personal, family, or household purpose
38   loan agreement that is secured in whole or in part by a first or
39   junior lien on real estate if the aggregate of all sums advanced or
40   contemplated by the parties in good faith to be advanced does not
41   exceed one hundred fifty thousand dollars.”
42
43     B.   Section 37-1-109(6) of the 1976 Code is amended to read:

     [17]                              11
 1
 2     “(6) The dollar amounts in the following sections of this title are
 3   subject to change in accordance with this section: 37-2-104(1)(e),
 4   37-2-106(1)(b), 37-2-203(1), 37-2-407(1), 37-2-705(1)(a) and (b),
 5   37-3-104(1)(d), 37-3-203(1), 37-3-510, 37-3-511, 37-3-514,
 6   37-5-103(2), (3), and (4), 37-10-103, and 37-23-80.”
 7
 8   SECTION 3. A. Chapter 2, Title 37 of the 1976 Code is
 9   amended by adding:
10
11      “Section 37-2-309. (A) An estimate of the disclosures required
12   by Section 37-2-301 is required in connection with a credit sale of
13   a purchaser-occupied manufactured home not less than three days
14   before the consummation of the transaction as defined in 12 C.F.R.
15   Section 226.2(a)(13).        The estimated disclosure must be
16   accompanied by the itemization of the amount financed.
17      (B) If the seller turns down the applicant for the credit sale
18   before making the disclosures, the disclosures as provided in
19   subsection (A) are not required.
20      (C)(1) If the seller determines that a material term of the credit
21   sale must change, then the seller shall redisclose the estimated
22   disclosures to conform to the changed terms and the transaction
23   must not be consummated until three days after the redisclosure.
24        (2) A material term of the credit sale includes:
25           (a) the number of payments of the transaction;
26           (b) a feature of the transaction causing it to be an
27   alternative mortgage transaction as defined in 12 U.S. Code
28   Section 3802(1) when the transaction as previously disclosed was
29   not an alternative mortgage transaction;
30           (c) a term or fee in the transaction or combination of
31   terms or fees causing the annual percentage rate to vary more than
32   one quarter of one percent of the annual percentage rate previously
33   disclosed; or
34           (d) any insurance premiums, prepaid finance charges,
35   third-party fees, or preparation charges that vary from the
36   previously disclosed insurance premiums, prepaid finance charges,
37   third-party fees, or preparation charges by more than one hundred
38   dollars in the aggregate.”
39
40   B.     Chapter 3, Title 37 of the 1976 Code is amended by adding:
41
42     “Section 37-3-308. (A) An estimate of the disclosures required
43   by Section 37-3-301 is required in connection with a loan for the

     [17]                             12
 1   purchase, refinance, or consolidation of a loan secured by a
 2   borrower-occupied manufactured home not less than three days
 3   before the consummation of the transaction as defined in 12 C.F.R.
 4   Section 226.2(a)(13).       The estimated disclosure must be
 5   accompanied by the itemization of the amount financed.
 6      (B) If the lender turns down the applicant for the credit sale
 7   before making the disclosures, the disclosures as provided in
 8   subsection (A) are not required.
 9      (C)(1) If the lender determines that a material term of the loan
10   sale must change, then the lender shall redisclose the estimated
11   disclosures to conform to the changed terms and the transaction
12   must not be consummated until three days after the redisclosure.
13        (2) A material term of the credit sale includes:
14           (a) the number of payments of the transaction;
15           (b) a feature of the transaction causing it to be an
16   alternative mortgage transaction as defined in 12 U.S. Code
17   Section 3802(1) when the transaction as previously disclosed was
18   not an alternative mortgage transaction;
19           (c) a term or fee in the transaction or combination of
20   terms or fees causing the annual percentage rate to vary more than
21   one quarter of one percent of the annual percentage rate previously
22   disclosed; or
23           (d) any insurance premiums, prepaid finance charges,
24   third-party fees, or preparation charges that vary from the
25   previously disclosed insurance premiums, prepaid finance charges,
26   third-party fees, or preparation charges by more than one hundred
27   dollars in the aggregate.”
28
29   C. Section 37-5-203(1) and (2) of the 1976 Code is amended to
30   read:
31
32      “(1) Except as otherwise provided in this section, a creditor
33   who, in violation of the provisions of the Federal Truth in Lending
34   Act or Section 37-2-309 or 37-3-308, fails to disclose information
35   to a person entitled to the information under pursuant to this title is
36   liable to that person in an amount equal to the sum of:
37        (a) twice the amount of the finance charge in connection
38   with the transaction, but the liability pursuant to this paragraph
39   shall item must be not less than one two hundred dollars or more
40   than one two thousand dollars; and
41        (b) in the case of a successful action to enforce the liability
42   under paragraph pursuant to item (a), the costs of the action


     [17]                              13
 1   together with reasonable attorney‟s fees as determined by the
 2   court.
 3      (2) A creditor has no liability under pursuant to this section if,
 4   within sixty days after discovering an error, and prior to before the
 5   institution of an action under pursuant to this section or the receipt
 6   of written notice of the error, the creditor notifies the person
 7   concerned of the error and makes whatever necessary adjustments
 8   in the appropriate account are necessary to assure that the person
 9   will is not be required to pay a finance charge in excess of the
10   amount of percentage rate actually disclosed. This item does not
11   apply to the failure or refusal accurately to disclose or redisclose.”
12
13   D. This section takes effect upon approval by the Governor and
14   applies to a covered sale or loan transaction entered into after that
15   date.
16
17   SECTION 4. A. Section 37-5-108(4) of the 1976 Code is
18   amended to read:
19
20      “(4)(a) In applying subsection (1), consideration must be given
21   to each of the following applicable factors, among others, such as,
22   applicable but without limitation:
23        (a) belief by the seller, lessor, or lender at the time a
24   transaction is entered into that there is no reasonable probability of
25   payment in full of the obligation by the consumer or debtor;
26   provided, however, that the rental renewals necessary to acquire
27   ownership in a consumer rental-purchase agreement shall not be
28   construed to be the obligation contemplated in this code section;
29           (b) (i) in the case of a consumer credit sale, consumer
30   lease, or consumer rental-purchase agreement, knowledge by the
31   seller or lessor at the time of the sale or lease of the inability of the
32   consumer to receive substantial benefits from the property or
33   services sold or leased;
34           (c) (ii) in the case of a consumer credit sale, consumer
35   lease, consumer rental-purchase agreement, or consumer loan,
36   gross disparity between the price of the property or services sold,
37   leased, or loaned and the value of the property, services, or loan
38   measured by the price at which similar property, services, or loans
39   are readily obtainable in consumer credit transactions by like
40   consumers;
41           (d)(iii) the fact that the creditor contracted for or received
42   separate charges for insurance with respect to a consumer credit
43   sale, consumer loan, or consumer rental-purchase agreement with

     [17]                               14
 1   the effect of making the sale or loan unconscionable, considered as
 2   a whole, unconscionable, when including the sale of insurance
 3   where from which the consumer could receive receives no
 4   potential benefit as referenced in Section 37-4-106(1)(a);
 5           (e) (iv) the fact that the seller, lessor, or lender knowingly
 6   has knowingly taken advantage of the inability of the consumer or
 7   debtor reasonably to protect his interests by reason of physical or
 8   mental infirmities, ignorance, illiteracy, inability to understand the
 9   language of the agreement, or similar factors;
10           (f) (v) taking a nonpurchase money, nonpossessory
11   security interest in household goods defined as the following:
12   clothing, furniture, appliances, one radio and one television, linens,
13   china, crockery, kitchenware, and personal effects (including
14   wedding rings), of the consumer and his or her dependents;
15   provided except, that when a purchase money consumer credit
16   transaction is refinanced or consolidated, the security lawfully
17   collateralizing the prior previous consumer credit transaction can
18   continue continues to secure the new consumer credit transaction,
19   even if the new consumer credit transaction is for a larger amount
20   or is in other respects a nonpurchase money consumer credit
21   transaction; and provided further, that a nonpurchase money,
22   nonpossessory security interest may be taken in the following: a (i)
23   work of art;, (ii) electronic entertainment equipment (except one
24   television and one radio);, (iii) items acquired as antiques and
25   which are over one hundred years of age;, and (iv) jewelry, (except
26   wedding rings).
27      In construing subsection (f) subitem (v), the courts shall must be
28   guided by the interpretations and rulings of the federal courts and
29   the Federal Trade Commission to the Credit Trade Regulation Rule
30   (16 C.F.R. PART 444).
31      (b) In applying subsection (1), consideration may be given to
32   the extension of credit to a consumer if, considering the
33   consumer‟s current and expected income, current obligations, and
34   employment status, the creditor knows or should know that the
35   consumer is unable to make the scheduled payment on the
36   obligation when due. Rental renewals necessary to acquire
37   ownership in a consumer rental-purchase agreement are not
38   obligations contemplated in this item (b).”
39
40   B.     Section 37-3-201(2) of the 1976 Code is amended to read:
41



     [17]                              15
 1      “(2) With respect to a consumer loan, including a loan pursuant
 2   to open-end credit, a supervised lender may contract for and
 3   receive a loan finance charge as provided follows on a loan:
 4         (a) on loans with a cash advance not exceeding six hundred
 5   dollars, a maximum charge not exceeding the maximum charges
 6   imposed in Section 34-29-140 as disclosed as an annual percentage
 7   rate, provided except that a supervised lender may impose a
 8   finance charge at a rate less than provided in Section 34-29-140,
 9   and provided further except that the maximum charge shall may
10   not exceed the rate posted and filed pursuant to Section 37-3-305;
11         (b) on loans with a cash advance exceeding six hundred
12   dollars, and on all loans a loan, regardless of the dollar amount,
13   made by Supervised Financial Organizations, any a rate filed and
14   posted pursuant to Section 37-3-305; or
15         (c) on loans of any amount, eighteen percent per a year on
16   the unpaid balances of principal;
17         (d) of any amount with scheduled loan payments of fewer
18   than one hundred twenty days a maximum charge not exceeding
19   the maximum charges imposed in Section 34-29-140 as disclosed
20   as an annual percentage rate, except that a supervised lender may
21   impose a finance charge at a rate less than provided in Section
22   34-29-140, and except that the maximum charge may not exceed
23   the rate posted and filed pursuant to Section 37-3-305; or
24         (e) of any amount and for any terms, an amount of interest
25   after maturity not exceeding thirty-six percent a year on the net
26   payoff balance as of the date of maturity, whether as scheduled,
27   accelerated, or otherwise, and notwithstanding other provisions of
28   this subsection to the contrary.”
29
30   C. This section takes effect upon approval by the Governor, and
31   applies to a covered sale or loan transaction entered into after that
32   date.
33
34   SECTION 5. If any section, subsection, paragraph, subparagraph,
35   sentence, clause, phrase, or word of this act is for any reason held
36   to be unconstitutional or invalid, such holding shall not affect the
37   constitutionality or validity of the remaining portions of this act,
38   the General Assembly hereby declaring that it would have passed
39   this chapter, and each and every section, subsection, paragraph,
40   subparagraph, sentence, clause, phrase, and word thereof,
41   irrespective of the fact that any one or more other sections,
42   subsections, paragraphs, subparagraphs, sentences, clauses,


     [17]                             16
1   phrases, or words hereof may be declared to be unconstitutional,
2   invalid, or otherwise ineffective.
3
4   SECTION 6. Unless otherwise noted herein, this act takes effect
5   upon approval by the Governor.
6                             ----XX----
7




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