Title 37 - Consumer Protection Code CHAPTER 23 High-Cost and Consumer Home Loans ARTICLE 1 General Provisions SECTION 37-23-10. Short title. This chapter may be cited as the "South Carolina High-Cost and Consumer Home Loans Act". HISTORY: 2003 Act No. 42, Section 1, eff January 1, 2004, and applying to loans for which the loan applications were taken on or after that date. SECTION 37-23-20. Definitions. ARTICLE 3 High-Cost Home Loans SECTION 37-23-30. High-cost home loan agreements. 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; (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; or (7) contain as a part of the loan agreement a choice of law provision identifying a state other than South Carolina, unless otherwise allowed under federal law. HISTORY: 2003 Act No. 42, Section 1, eff January 1, 2004, and applying to loans for which the loan applications were taken on or after that date. SECTION 37-23-40. Lender limitations. SECTION 37-23-45. Disclosure; form. (A) At the time the borrower receives the good faith estimate under the Real Estate Settlement and Procedures Act (RESPA) and before the scheduled closing of a high-cost home loan, the broker or mortgage broker of a loan must disclose in writing the amount being earned on the loan. The Department of Consumer Affairs shall provide a disclosure form to include the following: (1) the dollar amount of the yield spread premium and the percentage of the yield spread premium in relation to the loan amount. For purposes of this item, "yield spread premium" is the amount paid to the broker by the lender based on the difference between the interest rate at which the broker originates the loan and the par, or market rate offered by a lender; (2) an itemization of dollar amounts for points, fees, and commissions with a combined total given. A percentage of the combined total should be specified in relation to the loan amount; (3) a dollar amount total of items 37-23-45(A)(1) and (2) and a percentage of the total specified in relation to the total amount of the loan; and (4) for a loan that is an ARM as defined in Section 37-23-20(17), a listing of the schedule when the loan may be reset, for each and every reset, and a listing of the monthly payment that is owed for each change that is allowed by the terms of the contract. If the consumer escrows the insurance and taxes with each monthly payment, it must be reflected in the payment listed. (B) The form must include a signature line for the borrower to acknowledge that he has received the disclosures, the disclosures have been explained to him, he understands them, and he voluntarily enters into the loan transaction. HISTORY: 2003 Act No. 42, Section 1, eff January 1, 2004, and applying to loans for which the loan applications were taken on or after that date; 2009 Act No. 67, Section 4.G, eff January 1, 2010.SECTION 37-23-50. Borrower's right in action for violations; penalties; statute of limitations; enforcement; costs; application of article. (A) If a lender, or party charged with a violation, when making a high-cost home loan violates the provisions of this article, the borrower has a right in action, other than a class action, to recover from the lender or party charged with the violation actual damages and also a penalty in an amount determined by the court of not less than one thousand five hundred dollars and not more than seven thousand five hundred dollars for each loan transaction. No borrower may bring a class action for a violation of this article. No borrower may bring an action for a violation of this article more than six years after the violation occurred and after the original scheduled maturity date of the debt. This section does not bar a borrower from asserting a violation of this article in an action to collect a debt which was brought more than six years from the date of the occurrence of the violation and after the original scheduled maturity date of the debt as a matter of defense by recoupment or set-off in such action; (B)(1) If the court finds as a matter of law that the agreement or transaction violates the provisions of this article at the time it was made, the court may, in an action other than a class action: (a) refuse to enforce the agreement, or a term, or part of the agreement or transaction that the court determines to have been unlawful at the time it was made; (b) enforce the remainder of the agreement without the unlawful term or part, or limit the application of the unlawful term or part to avoid an unlawful result; (c) rewrite or modify the agreement to eliminate an unlawful term, part, or result and enforce the new agreement; or (d) award either one of the following: (i) not more than the total amount of the loan finance charge and allow repayment of the unpaid balance of the loan without any finance charge; or (ii) not more than double the amount of excess loan finance charge or other charges or fees actually received by the creditor or paid by the debtor to a third party. (2) An action pursuant to this subsection may not be brought after the original scheduled maturity date of the debt. (C) In an action in which it is found that a lender or party charged with a violation has violated this chapter, the court shall award to the debtor the costs of the action and to his attorneys their reasonable fees. In determining attorney's fees, the amount of the recovery on behalf of the debtor is not controlling. (D) This article establishes specific consumer protections in consumer home loans in addition to other consumer protections that may be otherwise available by law. (E) 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. (F) The Administrator of the Department of Consumer Affairs, the Attorney General, the Commissioner of Banking, the Director of the Consumer Finance Division 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. HISTORY: 2003 Act No. 42, Section 1, eff January 1, 2004, and applying to loans for which the loan applications were taken on or after that date.SECTION 37-23-60. Bona fide error; restitution. ARTICLE 5 Consumer Home Loans SECTION 37-23-70. Prohibited acts; complaints; penalties; statute of limitations; enforcement; costs. (A) 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(15). (B) It is unlawful, on or after January 1, 2005, for a lender in a consumer home loan to finance, directly or indirectly, credit life, disability, debt cancellation, 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. (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) At the time of application for a mortgage loan, the mortgage broker, originator, or employee shall provide the borrower with a document specifying the agency designated to receive complaints or inquiries about the origination and making of the loan, with the telephone number and address of the agency. The consumer shall sign a copy of the document acknowledging receipt of this disclosure and the copy must be maintained in the files of the mortgage broker or originator. (E) Unless otherwise allowed under federal law, a consumer home loan agreement may not contain a choice of law provision identifying a state other than South Carolina. (F) The making of a consumer home loan that violates this section is a violation of the provisions of this article and the borrower has a right in action, other than a class action, to recover from the lender or party charged with the violation actual damages and also a penalty in an amount determined by the court of not less than one thousand five hundred dollars and not more than seven thousand five hundred dollars for each transaction. No borrower may bring a class action for a violation of this article. No borrower may bring an action for a violation of this article more than six years after the violation occurred and after the original scheduled maturity date of the debt. This subsection does not bar a borrower from asserting a violation of this article in an action to collect a debt which was brought more than six years from the date of the occurrence of the violation and after the original scheduled maturity date of the debt as a matter of defense by recoupment or set-off in such action. (G)(1) If the court finds as a matter of law that the agreement or transaction violates the provisions of this article at the time it was made, the court may, in an action other than a class action: (a) refuse to enforce the agreement, or a term, or part of the agreement or transaction that the court determines to have been unlawful at the time it was made; (b) enforce the remainder of the agreement without the unlawful term or part, or limit the application of the unlawful term or part to avoid an unlawful result; (c) rewrite or modify the agreement to eliminate an unlawful term, part, or result and enforce the new agreement; or (d) award either one of the following: (i) not more than the total amount of the loan finance charge and allow repayment of the unpaid balance of the loan without any finance charge; or (ii) not more than double the amount of excess loan finance charge or other charges or fees actually received by the lender or paid by the borrower to a third party. (2) An action pursuant to this subsection may not be brought after the original scheduled maturity date of the debt. (H) In an action in which it is found that a lender has violated this chapter, the court shall award to the borrower the costs of the action and to his attorneys their reasonable fees. In determining attorney's fees, the amount of the recovery on behalf of the borrower is not controlling. (I) This article establishes specific consumer protections in consumer home loans in addition to other consumer protections that may be otherwise available by law. (J) The Administrator of the Department of Consumer Affairs, the Attorney General, the Commissioner of Banking, the Director of the Consumer Finance Division, 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. (K) Points and fees charged on consumer home loans and subject to this article are considered earned immediately and not subject to Section 37-3-201 and the rebate provisions of Sections 37-3-209 and 37-3-210; provided, that this section does not limit the borrower's right to prepay under Section 37-3-209. HISTORY: 2003 Act No. 42, Section 1, eff January 1, 2004, and applying to loans for which the loan applications were taken on or after that date. SECTION 37-23-75. Disclosure; form. (A) At the time the borrower receives the loan estimate under the Real Estate Settlement and Procedures Act (RESPA), the Truth In Lending Act (TILA), and regulations adopted pursuant to both acts including, but not limited to, the TILA-RESPA Integrated Disclosure Rule, and before the scheduled closing of a consumer home loan, the broker or mortgage broker of a loan must disclose in writing the amount being earned on the loan. The Department of Consumer Affairs shall provide a disclosure form to include the following: (1) the dollar amount of the yield spread premium and the percentage of the yield spread premium in relation to the loan amount. For purposes of this item, "yield spread premium" is the amount paid to the broker by the lender based on the difference between the interest rate at which the broker originates the loan and the par, or market rate offered by a lender; (2) an itemization of dollar amounts for points, fees, and commissions with a combined total given. A percentage of the combined total should be specified in relation to the loan amount; (3) a dollar amount total of items (1) and (2) and a percentage of the total specified in relation to the total amount of the loan; and (4) for a loan that is an ARM as defined in Section 37-23-20(17), a listing of the schedule when the loan may be reset, for each and every reset, and a listing of the monthly payment that is owed for each change that is allowed by the terms of the contract. If the consumer escrows the insurance and taxes with each monthly payment, it must be reflected in the payment listed. (B) The form must include a signature line for the borrower to acknowledge that he has received the disclosures, the disclosures have been explained to him, he understands them, and he voluntarily enters into the loan transaction. HISTORY: 2003 Act No. 42, Section 1, eff January 1, 2004, and applying to loans for which the loan applications were taken on or after that date; 2009 Act No. 67, Section 4.H, eff January 1, 2010; 2017 Act No. 93 (S.366), Section 9, eff September 16, 2017. Effect of Amendment 2017 Act No. 93, Section 9, in (A), substituted "loan estimate" for "good faith estimate" and inserted ", the Truth In Lending Act (TILA), and regulations adopted pursuant to both acts including, but not limited to, the TILA-RESPA Integrated Disclosure Rule"; and in (A)(2), deleted "37-23-75(A)" preceding "(1) and (2)".SECTION 37-23-80. Prepayment. 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. HISTORY: 2003 Act No. 42, Section 1, eff January 1, 2004, and applying to loans for which the loan applications were taken on or after that date.SECTION 37-23-85. Compliance failure. A lender of a consumer 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 forty-five 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 to make the consumer home loan satisfy the requirements of Section 37-23-70, 37-23-75, or 37-23-80; or (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 to make the consumer home loan satisfy the requirements of Sections 37-23-70, 37-23-75, and 37-23-80. 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. HISTORY: 2003 Act No. 42, Section 1, eff January 1, 2004, and applying to loans for which the loan applications were taken on or after that date. |