Indicates Matter Stricken

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Committee Report

March 28, 2023

H. 3952

Introduced by Reps. G. M. Smith, Bannister, Bradley, Crawford, Herbkersman, W. Newton, Felder, Alexander, Wetmore, Hyde, Sessions, Guffey, Connell, Hager, Atkinson, Moss, Stavrinakis, Yow, Mitchell, Ligon, B. Newton, Williams, T. Moore, Lawson, Robbins, Brewer, Murphy, Wooten, Cromer, Magnuson, Pope, Hixon, Forrest, M. M. Smith, Davis, Ballentine, Erickson, Guest, Ott, Willis, Sandifer and White

 

S. Printed 03/28/23--H.                                                                         [SEC 3/29/2023 5:36 PM]

Read the first time February 14, 2023

 

________

 

The committee on House Labor, Commerce and Industry

To who was referred a Bill (H. 3952) to amend the South Carolina Code of Laws by amending Section 37-1-102, relating to the purposes of the Consumer Protection Code, so as to include the promotion of, etc., respectfully

Report:

That they have duly and carefully considered the same, and recommend that the same do pass with amendment:

 

    Amend the bill, as and if amended, by striking SECTIONS 1, 2, 3, and 4 and inserting:

SECTION X. Section 37-2-307 of the S.C. Code is amended to read:

 

    Section 37-2-307.  (A)(1) Every motor vehicle dealer charging closing fees on a motor vehicle sales contract shall pay a one-time registration fee of ten dollars during each state fiscal year before January thirty-first to the Department of Consumer Affairs. The department shall set the fee annually in an amount not to exceed twenty-five dollars.

       (2) The closing fee must be included in the advertised price of the motor vehicle, disclosed on the sales contract, and displayed in a conspicuous location in the motor vehicle dealership.

    (B) A As used in this section:

       (1)   "Closing fee" is defined as means a fee charged for recovery of a motor vehicle dealer's actual costs for all administrative and financial work needed to transfer and deliver the motor vehicle to the consumer, person, or entity including, but not limited to, compliance with all state, federal, and lender requirements, preparation and retrieval of documents, protection of the private personal information of the consumer, records retention, and storage costs;

       (2)   "Dealer" means a "motor vehicle dealer" as defined in Section 56-15-10; and

       (3)   "Department" means the South Carolina Department of Consumer Affairs.

    (B)(1)  Every dealer charging closing fees in a motor vehicle sale or lease transaction shall pay a filing fee of ten dollars to the department each time the dealer provides notice of a new closing fee amount to the department. The department shall set the filing fee annually in an amount not to exceed twenty-five dollars.

       (2)   The closing fee must be disclosed on the motor vehicle sale or lease contract, displayed in a conspicuous location in the motor vehicle dealership, and clearly and conspicuously disclosed in any advertisement of a specific motor vehicle for sale or lease.

    (C)(1) Prior to charging a closing fee, a motor vehicle dealer shall provide written notice to the department of Consumer Affairs of the maximum amount of a the closing fee the dealer intends to charge on an annual basis.

       (2)   If the maximum amount of the proposed closing fee the dealer intends to charge is not more than two hundred twenty-five dollars per vehicle, the closing fee is deemed approved by the department and the dealer does meet and fulfill all reasonable requirements and criteria in compliance with this section. If the proposed closing fee exceeds two hundred twenty-five dollars, the department may review the amount of the closing fee for reasonableness using the criteria in item (3)(5) if the maximum amount of the closing fee intended to be charged by a dealer in a vehicle transaction exceeds two hundred twenty-five dollars per vehicle. The department shall not conduct a review of the amount of the closing fee for reasonableness when the maximum amount the dealer intends to charge in a vehicle transaction is not more than two hundred twenty-five dollars per vehicle.

       (3)   If the department intends to conduct a formal review of a proposed closing fee, the department shall provide written notice to the motor vehicle dealer of the department's intention to review the proposed closing fee within thirty fifteen days of receiving the complete proposed closing fee notice. If the department determines that a proposed closing fee is not reasonable, the department must issue a written order detailing the department's findings within thirty days of receiving the complete proposed closing fee notice. If the department does not provide a motor vehicle the dealer with written notice of the department's intention to review approval of the proposed closing fee within thirty days of receiving the proposed closing fee notice, the motor vehicle dealer is authorized to charge the proposed closing fee. If the department determines that a proposed closing fee is not reasonable, the department shall issue a written order detailing the department's findings. The department may require the fee to be reduced or require the motor vehicle dealer to submit a new fee for review.

       (4)   The dealer is at all times authorized to submit a new closing fee that is equal to or less than two hundred twenty-five dollars per vehicle which is not subject to review. If the department finds that a proposed closing fee is not reasonable, the dealer may request a hearing in accordance with the Administrative Procedures Act. During the pendency of the department's review period, a motor vehicle dealer or the pendency of any action before the Administrative Law Court, the dealer is authorized to charge a closing fee at an amount not to exceed the amount most recently on file and permitted to be charged by the department. If the department finds that a closing fee is not reasonable, the motor vehicle dealer may request a hearing in accordance with the Administrative Procedures Act.

       (2) If the maximum amount of the closing fee that the dealer intends to charge is not more than two hundred twenty-five dollars per vehicle, the closing fee is deemed approved by the department and the dealer does meet and fulfill all reasonableness requirements and criteria in compliance with the law and this section.

       (3) In determining the reasonableness of a closing fee, the department shall allow the following items to be included in a reasonable closing fee:

           (a) all administrative expenses,

       (5)(a) In determining the reasonableness of a closing fee, the department must accept and allow all of the dealer's actual costs and expenses, including, but not limited to, employee compensation, information processing facilities cost, staff, supplies, and materials, and financial work needed to transfer the motor vehicle to the consumer and to procure the associated with the following closing and deliver activities:

               (i) closing of the motor vehicle sale or lease transaction;

           (b) all costs for administrative expenses, costs, staff, supplies, and materials necessary by including any associated loan or lease, and transferring title of the dealer  motor vehicle to comply the consumer;

               (ii)   delivering the motor vehicle to the consumer;

               (iii)  complying with all state, federal, and lender requirements;

           (c) all costs for administrative costs, staff, and materials needed for the preparation and retrieval of documents;

           (d) all costs for administrative costs, staff, supplies, and materials necessary for the protection of

               (iv)  preparing, storing, and retrieving transaction documents; and

               (v)   protecting the private personal information of the consumer;  and

           (e) all costs for administrative costs, staff, supplies, and materials necessary for records retention and storage costs of such records.

           (b)   Dealer costs must be calculated using generally accepted cost accounting principles for the preceding twelve-month period.

           (c)   In determining the reasonableness of a closing fee, the department may compare a particular dealer's costs only with other similarly situated dealers.

    (D) Whether the vehicle transaction is a credit sale, consumer lease, or cash transaction:

       (1) notwithstanding another provision of law, a motor vehicle dealer who complies with this section and any regulation promulgated under it and who charges a closing fee is not engaging in any action which is arbitrary, in bad faith, unconscionable, an unfair or deceptive practice, or an unfair method of competition for purposes of Sections 56-15-30, 56-15-40, and 39-5-20 with regard to the charging of a closing fee and may lawfully charge a closing fee;

       (2) a motor vehicle dealer may assert any defenses provided to a creditor pursuant to the provisions of this title;  and

       (3) a purchaser injured or damaged by an action of a motor vehicle dealer in violation of this section or any regulation promulgated thereunder, may assert the remedies available pursuant to the provisions of this title.

    (E)(1) The department of Consumer Affairs shall administer and enforce the subject of motor vehicle dealer closing fees including, but notas limited to,by this section. The department shall may make and promulgate such rules and regulations relating to motor vehicle dealer closing fees to administer and enforce this section. The department shall have access to a motor vehicle dealer's books, accounts, and dealer's records, but only to the extent necessary to determine if the dealer is complying with the disclosure provisions of this section subsection (B)(2) and the accuracy of the dealer's cost and expense information in subsection (C)(5), and this financial information must be kept confidential and privileged from disclosure, except as otherwise provided by law.

       (2) If the department determines that a closing fee is not reasonable, the department shall issue a written order detailing the department's findings. The department may require the fee to be reduced or require the motor vehicle dealer to submit a new fee for review. If the department finds that a closing fee is not reasonable, the motor vehicle dealer may request a hearing in accordance with the Administrative Procedures Act In administering and enforcing this section, or for any other review or investigation of dealers, the department must:

           (a)   promote education for consumers and best practices for dealers;

           (b)   mediate complaints between a consumer and a dealer, whenever possible.

       (3)   In administering and enforcing this section, and in any review or investigation of dealers, the department must:

           (a)   have probable cause to believe, based on a consumer complaint or other credible evidence, that the dealer has violated a provision of this title;

           (b)   prior to contacting the dealer's employees or visiting the dealer's business premises, present the dealer with written notice of any cause or complaint which necessitates any department review or investigation and any request for records necessary to conduct the review or investigation;

           (c)   allow the dealer to cure any unintentional violation of this title within sixty days of notice from the department;

           (d)   close its investigation into the complaint and pursue not further administrative action on it once the complaint has been cured.

       (4)   A dealer substantially complies with the requirement of this section if the consumer receives a clear and prominent disclosure of the closing fee in the sale or lease transaction and was not misled by any other failure to comply with other requirements of this section.

       (5)   A dealer may not be held liable in any action for a violation of this title if the dealer shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid the error.

    (F) It is the intent of the General Assembly to authorize a motor vehicle dealer to charge a closing fee in compliance with this section and to protect a motor vehicle dealer from civil liability for charging a closing fee if the fee is charged in compliance with this title and any Department of Consumer Affairs regulation or administrative interpretation. It is further the intent to protect consumers by the disclosure and notice provisions established in this section and with the remedies provided by this title.

Renumber sections to conform.

Amend title to conform.

 

WILLIAM SANDIFER for Committee.

 

statement of estimated fiscal impact

Explanation of Fiscal Impact

 

State Expenditure

This bill amends the South Carolina Consumer Protection Code by including the addition of consumer education and mediation of complaints between consumers and businesses as underlying purposes of the title.  The bill further requires the administrator of DCA to attempt to resolve consumer disputes and other matters in accordance with the underlying purposes before taking investigatory, enforcement, or punitive actions.  Prior to beginning an investigation or taking such action, the administrator must present a person subject to an action by the department written notice of reasons and factors for the action that caused the administrator to have probable cause.  A complaint made by a consumer or entity must be verified to be substantial and legitimate before the administrator or DCA may compel testimony from any persons or require any information which may be relevant to the investigation. 

 

The bill also specifies requirements of the administrator of DCA before the issuance of a cease and desist to a business.  The administrator must present the reasons and factors that led to probable cause or a legitimate complaint to the business, establish whether the matter is a singular incident or is an intentional business practice that violates the law, and must allow the business thirty days to cure the issue after notice, and if not cured within thirty days, attempt mediation.

 

DCA indicates that this bill will require additional staff time spent reviewing and verifying complaints against businesses in the state, as well as performing research into business practices before issuing a cease and desist and performing mediation.  DCA reports that these requirements will be managed by existing staff and equipment within existing appropriations and will have no expenditure impact. 

 

State Revenue

This bill amends the South Carolina Consumer Protection Code by including the addition of consumer education and mediation of complaints between consumers and businesses as underlying purposes of the title.  The bill further requires the administrator of DCA to attempt to resolve consumer disputes and other matters in accordance with the underlying purposes before taking investigatory, enforcement, or punitive actions and provide written notice of reasons and factors prior to such action that caused the administrator to have probable cause. 

 

DCA indicates that this bill may reduce the department's ability to collect fines from businesses and refunds for consumers due to the increased level of verifiable evidence required by the bill.  DCA reports that collection of fines in this manner account for 6.7 percent on average of its annual budget, making up approximately 12 percent of the agency's Other Funds revenue.  DCA does not have sufficient data to estimate the actual impact on fine revenue; therefore, the potential decrease in Other Funds revenue for the agency as a result of the bill is undetermined.

 

 

Frank A. Rainwater, Executive Director

Revenue and Fiscal Affairs Office

 

________

 

 

 

 

 

 

 

 

A bill

 

TO AMEND THE SOUTH CAROLINA CODE OF LAWS BY AMENDING SECTION 37-1-102, RELATING TO THE PURPOSES OF THE CONSUMER PROTECTION CODE, SO AS TO INCLUDE THE PROMOTION OF EDUCATION FOR CONSUMERs, BEST PRACTICES FOR BUSINESSES, AND TO MEDIATE COMPLAINTS; BY AMENDING SECTION 37-6-106, RELATING TO INVESTIGATORY POWERS OF THE ADMINISTRATOR, SO AS TO REQUIRE THE PRESENTATION OF PROBABLE CAUSE BEFORE BEGINNING AN INVESTIGATION; BY AMENDING SECTION 37-6-108, RELATING TO EnFORCEMENT ORDERS OF THE ADMINISTRATOR, SO AS TO REQUIRE CERTAIN INFORMATION BE PROVIDED BEFORE A CEASE AND DESIST IS ISSUED TO A BUSINESS; AND BY AMENDING SECTION 37-2-307, RELATING TO MOTOR VEHICLE SALES CONTRACT CLOSING FEES, SO AS TO REQUIRE THE CLOSING FEE TO BE PROMINENTLY DISPLAYED WITH THE ADVERTISED PRICE.

 

Be it enacted by the General Assembly of the State of South Carolina:

 

SECTION 1.  Section 37-1-102 of the S.C. Code is amended to read:

 

    Section 37-1-102.  (1) This title shall be liberally construed and applied to promote its underlying purposes and policies.

    (2) The underlying purposes and policies of this title are:

       (a) promote education for consumers and best practices for businesses;

       (b) mediate complaints between a consumer and a business when possible;

       (c) to simplify, clarify and modernize the law governing retail installment sales, consumer credit and usury;

       (b)(d) to provide rate ceilings to assure an adequate supply of credit to consumers;

       (c)(e) to further consumer understanding of the terms of credit transactions and to foster competition among suppliers of consumer credit so that consumers may obtain credit at reasonable cost;

       (d)(f) to protect consumer buyers, lessees, and borrowers against unfair practices by some suppliers of consumer credit, having due regard for the interests of legitimate and scrupulous creditors;

       (e)(g) to permit and encourage the development of fair and economically sound consumer credit practices;

       (f)(h) to conform the regulation of consumer credit transactions to the policies of the Federal Consumer Credit Protection Act; and

       (g)(i) to make uniform the law, including administrative rules, among the various jurisdictions.

    (3) The administrator and the Department of Consumer Affairs must attempt to resolve consumer disputes and other matters using the underlying purposes of this title set forth in subsection (2)(a) and (b) before taking investigatory, enforcement, or punitive actions. 

    (4) A reference to a requirement imposed by this title includes reference to a related rule of the administrator adopted pursuant to this title.

 

SECTION 2.  Section 37-6-106 of the S.C. Code is amended to read:

 

    Section 37-6-106.  (1) If the administrator has probable cause to believe that a person has engaged in an act which is subject to action by the administrator, he may make an investigation to determine if the act has been committed, and, to the extent necessary for this purpose, may administer oaths or affirmations, and, upon his own motion or upon request of any party, may subpoena witnesses, compel their attendance, adduce evidence, and require the production of any matter which is relevant to the investigation, including the existence, description, nature, custody, condition, and location of any books, records, documents, electronically stored information, or other tangible things and the identity and location of persons having knowledge of relevant facts, or any other matter reasonably calculated to lead to the discovery of admissible evidence. However, before beginning the investigation and taking any of the actions set forth in this chapter, the administrator must present the person subject to the action, in writing, with the reasons and factors that caused the administrator to have probable cause.

    (2) If the person's records are located outside this State, the person at his option shall either make them available to the administrator at a convenient location within this State or pay the reasonable and necessary expenses for the administrator or his representative to examine them at the place where they are maintained. The administrator may designate representatives, including comparable officials of the State in which the records are located, to inspect them on his behalf.

    (3) Upon failure without lawful excuse to obey a subpoena or to give testimony and upon reasonable notice to all persons affected, the administrator may apply to the Administrative Law Court for an order compelling compliance.

    (4) The administrator shall not make public the name or identity of a person whose acts or conduct he investigates pursuant to this section or the facts disclosed in the investigation, but this subsection does not apply to disclosures in actions or enforcement proceedings pursuant to this title.

    (5) A complaint made by a consumer or entity must be verified to be substantial and legitimate before the administrator or the Department of Consumer Affairs may administer oaths or affirmations, subpoena witnesses, compel their attendance, adduce evidence, and require the production of any information which may be relevant to the investigation, including the existence, description, nature, custody, condition, and location of any books, records, documents, electronically stored information, or other tangible things and the identity and location of persons having knowledge of relevant facts, or any other matter reasonably calculated to lead to the discovery of admissible evidence.

 

SECTION 3.  Section 37-6-108 of the S.C. Code is amended by adding:

 

    (H)(1) Notwithstanding any other provision of this section, before the administrator is allowed to issue a cease and desist to a business, the administrator must:

           (a) present the reasons and factors that caused the administrator to have probable cause or a legitimate complaint to the business;

           (b) establish whether the matter is a singular incident, or is an intentional business practice that violates the law; and

           (c) allow the business thirty days to cure the issue after notice, and if not cured within thirty days, attempt mediation.

       (2) Each year, the Department of Consumer Affairs shall prepare and deliver a report to the General Assembly detailing the disposition of all court cases and legal actions it has engaged in, and the costs of such legal actions, including any reimbursements paid to the subject of the action.

 

SECTION 4.  Section 37-2-307(A)(2) of the S.C. Code is amended to read:

 

    (2) The closing fee must be included in prominently displayed with the advertised price of the motor vehicle, disclosed on the sales contract, and displayed in a conspicuous location in the motor vehicle dealership.

 

SECTION 5.  This act takes effect upon approval by the Governor.

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