Haris Ashley
In South Carolina, there are specific requirements that must be met by creditors in relation to borrowers' preferences for legal counsel and insurance agents. These requirements, outlined by the South Carolina Consumer Finance Division, are intended to protect the rights of borrowers and ensure their preferences are respected during loan transactions. The South Carolina Consumer Protection Code defines a creditor and sets out the borrower preference requirements they must adhere to. This includes ascertaining and complying with the borrower's choice of legal counsel and insurance agent before a loan closing. Lenders should be aware of these requirements to ensure their practices are in line with the division's expectations and to avoid potential penalties for non-compliance.
| Characteristics | Values |
|---|---|
| Enforcing Body | South Carolina Board of Financial Institutions, Consumer Finance Division |
| Applies To | Creditors in designated loan transactions other than consumer loan transactions |
| Requirements | Creditors must ascertain and comply with the borrower's preference for legal counsel and insurance agent before a loan closing |
| Compliance Methods | (1) Include preference information on or with the credit application; (2) Provide written notice to the borrower of the preference information within three business days after the application is received or prepared |
| Penalties | Debtors can recover actual and punitive damages, attorneys' fees and costs; Creditors can be liable for actual and punitive damages ranging from $100 to $7,500 |
| Forms | Cx3848, available on the South Carolina Department of Consumer Affairs website |
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What You'll Learn
Borrower's preference requirements
In South Carolina, the Consumer Protection Code outlines the borrower preference requirements that creditors must adhere to. These requirements are designed to ensure that lenders do not improperly influence borrowers' choices regarding legal counsel and insurance agents.
Borrower Preference Requirements
Before loan closing, a creditor must:
- Ascertain the borrower's preference for legal counsel that will represent them in matters relating to the transaction's closing.
- With limited exceptions, comply with the borrower's preference for an insurance agent to provide the required hazard and flood property insurance for the mortgage.
Creditors can meet these requirements by:
- Including preference information on or with the credit application using a form similar to the one provided by the administrator/division.
- Providing written notice to the borrower within three business days of receiving or preparing the application.
- Accepting an email from the borrower indicating their preference for an attorney/insurance agent, provided it meets certain requirements, such as a clear indication of the borrower's wish and the specific professional identified.
Penalties for Non-Compliance
Violating these requirements can result in findings in state examinations and legal action from debtors. The South Carolina Consumer Protection Code allows debtors to recover actual damages per loan and punitive damages ranging from $1,500 to $7,500, in addition to attorneys' fees and costs. Creditors who fail to adhere to preference and disclosure requirements when requiring debtors to purchase insurance or pay attorneys' fees may be separately liable for actual and punitive damages ranging from $100 to $1,000.
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Compliance and penalties
Compliance with the South Carolina Insurance Preference Disclosure requires a creditor to ascertain and comply with the borrower's preference for legal counsel and insurance agents before a loan closing. This applies to loan transactions secured in whole or in part by a lien on real estate for personal, family, or household purposes.
To be compliant, a creditor must either include the preference information on or with the credit application, using a form similar to the one provided by the South Carolina Department of Consumer Affairs, or provide written notice to the borrower within three business days of receiving or preparing the application. The form must include the requested selection information and the consumer's dated signature.
If a creditor fails to adhere to these preference and disclosure requirements, they can be found liable for actual damages and punitive damages ranging from $100 to $7,500 per loan, in addition to attorneys' fees and costs. These actions for violations are limited to within three years of the violation.
Furthermore, creditors are required to provide documented proof of the borrower's preference for legal and insurance service providers if the selection information is missing from the form during a state examination.
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Creditor requirements
In South Carolina, there are several requirements that creditors must adhere to regarding insurance preference disclosure. These requirements are outlined in the South Carolina Consumer Protection Code and are enforced by state regulators.
Firstly, creditors are required to ascertain and comply with the borrower's preference for legal counsel and insurance agents before loan closing. This includes the type of legal counsel employed to represent the debtor in all matters related to the transaction and the insurance agent who will provide the required hazard and flood property insurance in connection with the mortgage. Creditors must provide borrowers with the opportunity to select their preferred attorney and insurance agent.
Secondly, creditors must provide written notice to the borrower of their preference information within three business days of receiving or preparing the application. This can be done by including the preference information on or with the credit application or by delivering the notice separately. The South Carolina Department of Consumer Affairs provides a preference notice form on their website, and using this form is considered compliant with the requirement.
Thirdly, creditors may require the attorney or agent to provide reasonable security through mortgage title insurance from an acceptable company. If title insurance becomes a condition of the loan during negotiations, it must remain a condition regardless of which attorney closes the loan.
Creditors are also responsible for any legal fees incurred in connection with the transaction, except for those related to the examination and certification of the title, document preparation, and closing. Additionally, creditors may contract and receive additional charges, such as credit report fees, assumption fees, and certain other charges authorized by the relevant sections of the South Carolina Code of Laws.
If a creditor violates these requirements, debtors have the right to take civil action and recover actual damages, as well as punitive damages ranging from $1,500 to $7,500 per loan, plus attorneys' fees and costs. These actions must be brought within three years of the violation occurring.
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Consumer Protection Code definitions
The South Carolina Consumer Protection Code provides definitions for various terms related to consumer credit, consumer protection, and financial transactions.
Firstly, the Code defines a "creditor" as "the person who grants credit in a credit transaction or, except as otherwise provided, as an assignee of a creditor's right to payment." This definition clarifies that the term "creditor" does not impose any obligations on an assignee beyond what is explicitly stated.
In the context of consumer protection, the Code outlines the rights of debtors and borrowers. For example, before loan closing, creditors are required to ascertain and comply with the borrower's preference for legal counsel and, in most cases, the insurance agent who will provide hazard and flood property insurance for the mortgage. This is known as the "borrower preference requirement." The creditor must provide notice of the borrower's right to select their attorney and insurance agent within three days of receiving the application.
The Code also defines "official fees" as fees and charges prescribed by law that are paid to public officials for services related to consumer credit transactions, such as perfecting a security interest. "Official fees" do not include certain premiums payable for insurance in lieu of perfecting a security interest, specifically when it is a purchase money security interest as defined by the Code.
Additionally, the Code defines a "supervised financial organization" as a person or entity authorized to make loans and receive deposits, excluding insurance companies or organizations primarily engaged in the insurance business. This definition is important for regulatory and supervisory purposes.
The South Carolina Consumer Protection Code also references the Federal Consumer Credit Protection Act and its amendments, which is referred to as the "Federal Truth-in-Lending Act" in the Code. This federal legislation provides further definitions and protections related to consumer credit and lending practices.
Overall, the South Carolina Consumer Protection Code provides clear definitions and guidelines to protect consumers and ensure fair and transparent financial transactions. These definitions outline the rights and responsibilities of both creditors and debtors, helping to prevent violations and providing recourse for consumers in the state of South Carolina.
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Application and notice
In the state of South Carolina, there are specific requirements that must be met by creditors in relation to borrower preference disclosures for legal counsel and insurance agents. These requirements are outlined in the South Carolina Consumer Protection Code and are as follows:
Before closing a loan, a creditor is required to determine and comply with the borrower's preferences for legal counsel and insurance agents. The creditor must provide consumers with notice of their right to select an attorney and insurance agent within three days of receiving the application. This can be done by including the preference information on or with the credit application or by providing written notice to the borrower. The written notice must be delivered or mailed within three business days after the application is received or prepared.
The South Carolina Department of Consumer Affairs provides a preference notice form on their website, which, if used, ensures compliance with the relevant section. This form is to be fully completed, signed, and dated by the borrower. Creditors may also choose to use their own form, provided it is substantially similar to the one distributed by the administrator.
It is important to note that findings related to this issue are not uncommon in state examinations. Creditors who fail to adhere to the preference and disclosure requirements may be found liable for actual damages and punitive damages ranging from $100 to $7,500, in addition to attorneys' fees and costs.
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Frequently asked questions
It is a form that outlines a borrower's preference for legal counsel and insurance agent before a loan closing.
The borrower fills out the form to indicate their preference for a closing attorney/agent and insurance agent.
The creditor must provide the form to the borrower within three business days of receiving or preparing the credit application.
Violations can result in legal action, with debtors having the right to recover actual and punitive damages, attorneys' fees, and costs. Creditors may be found liable for damages ranging from $100 to $7,500 per violation.
