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Financial Services Law Insights and Observations

South Carolina Legislature Overrides Governor’s Veto of Bill Amending Mortgage Broker Licensing Requirements, Restricts Payday Lending by Supervised Lenders

State Issues

On June 15, the South Carolina General Assembly overrode the veto of South Carolina Governor Mark Sanford in connection with H 3790, a bill including provisions to amend licensing requirements for mortgage loan originators that are independent contractors and prohibiting payday loans made by non-bank supervised lenders. The bill amends the South Carolina Mortgage Lending Act to require the licensure of an independent contractor who originates loans for and under the supervision of a mortgage broker licensee as a “qualified loan originator.” A qualified loan originator is subject to the requirements of a loan originator and cannot (i) be compensated based upon the terms of the loan originated (except for the amount of the principal balance), (ii) offer loans other than fixed-term, fixed-rate, fully amortizing mortgages, or (iii) handle borrower or other third-party funds in connection with the mortgage loan. The bill also excludes payday loans from the definition of “supervised loans,” defined as non-mortgage consumer loans in excess of 12% interest per year, and prohibits non-bank supervised lenders from making payday loans. The bill, however, does not amend South Carolina’s separate payday lending law. Initial violations of this prohibition are subject to fines while the third violation is subject to license revocation. In vetoing the bill, Governor Sanford objected to licensing independent contractors working under the supervision of a mortgage broker licensee differently than non-affiliated independent contractors and restricting consumer access to payday loans. The law becomes effective immediately.

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