Chapter 7 of the Consumer Protection Code (Title 37)
Former R120/S607

INTRODUCTION

The legislation will be added as Chapter 7 of the Consumer Protection Code. When the Code was originally enacted, Chapter 7 was reserved fro “Consumer Credit Counseling”.

LICENSING AND COVERAGE

The legislation requires all credit counseling organizations and credit counselors to be licensed in order to do business in South Carolina. One is considered doing business in South Carolina if they have a location in South Carolina or if the provider solicits South Carolina consumers. The legislation reaches credit counselors, debt management and debt settlement plans, and credit repair plans. The legislation exempts certain professionals and businesses when acting in the regular course of their prospective businesses. Those exempt include attorneys, certified public accountants, banks and other depository institutions, title insurers and abstract companies while doing escrow business, judicial officers and others acting pursuant to court orders, non-profit religious institutions, counselors certified by the South Carolina Housing Authority to the extent they are engaged in high cost consumer loan counseling, mortgage brokers, and consumer reporting agencies and subsidiaries.

APPLICATION AND LICENSING FEES

An applicant must apply on a form prescribed by the Department, which will include the information set forth in the Chapter. Information that is required for credit counseling organizations includes financial statements to show financial responsibility, a description of the consumer education program, a copy of the standard debt management plan, a surety bond, a criminal background check, and a list of all credit counselors employed by the organization. The organization must also meet a character and fitness standard. The application must be accompanied by a $100 fee per location servicing South Carolina, an investigation fee of $50, and the cost for the criminal background check.
The application for a credit counselor also requires a criminal background check and that the counselor meet a character and fitness standard. The application must be accompanied by a $40 fee and the cost for the criminal background check.

FINANCIAL RESPONSIBILITY

The credit counseling organization must make an initial showing of financial stability and financial responsibility and must maintain such showing. The continued showing is by way of a surety bond and an annual report of the credit counseling activities within the state in the previous year, including financial information. In addition, the organization must maintain a trust account for consumers’ funds to be used for the benefit of the consumers paying the funds.

CONTINUING EDUCATION

The owners of all organizations providing consumer credit counseling and credit counselors must obtain 12 hours of continuing education every 2 years. The Department will offer continuing education courses. All other courses must be approved by a continuing education panel. The panel will consist of three members appointed by the Administrator and will include 2 consumer credit counselors and 1 representative of the Department.

FINANCIAL EDUCATION PROGRAM

Providers of consumer credit counseling must provide consumer’s with a financial education program to improve financial literacy. Counselors must also perform a thorough budget analysis for each consumer to determine whether the individual would benefit form participation in the debt management plan.

CONSENT OF CREDITORS AND CONTRACT REQUIREMENTS

Consumer credit counselors must use written contracts clearly disclosing the terms of the agreement, including a reasonable estimate of all payments and fees due fro the consumer. The disclosures must also include a schedule of payments, the amount and due date for each payment, and the terms applying to a late payment or default. The counselor must also provide a full and detailed description of the services to be provided. The counselor must attempt to obtain the consent of all creditors and record the creditors response and identify the creditors who will not participate in the plan. All debt management plans are subject to cancellation upon the request of the consumer with a 10 day notice.

FEES TO CONSUMERS

The Chapter prohibits licensees from charging a fee except as established by the Department by regulation.

PROHIBITIONS

Licensees are also prohibited from engaging in a number of activities. These include, among other practices: making false, deceptive, or misleading representations; obtaining a waiver of the consumer’s rights; charging to cancel a debt management plan; requiring the purchase of additional goods or services; collecting fees or payments greater than allowed before they are earned; accepting referral fees; operating any other business from a licensed location without authorization; making loans; purchasing debt or obligation of a consumer; and compensating an employee on the basis of a formula depending on the number of consumers the employee signs to a debt management plan.

PENALTIES

Violators of this Chapter are subject to criminal, civil, and administrative penalties. The imposition of administrative penalties would be governed by the requirements of the Administrative Procedures Act.