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Consumer Finance State Roundup

BY: Consumer Finance Team
State Capital

The latest edition of the Consumer Finance State Roundup features recently enacted measures of potential interest from Colorado and South Carolina:

  • Colorado: Effective May 17, House Bill 24-1011 (2024 Colo. Sess. Laws 189) adds new Section  38-40-106 to the Colorado Revised Statutes addressing requirements for mortgage servicers with respect to the disbursement of insurance proceeds in connection with mortgaged residential property.

First, the new section sets forth certain actions that mortgage servicers must take regarding disbursement of insurance proceeds to borrowers.  Upon a borrower’s request, a mortgage servicer must promptly disclose to the borrower specific conditions under which it will disburse insurance proceeds to the borrower in the event a residential property subject to a mortgage is damaged or destroyed and an insurance company pays insurance proceeds to satisfy a claim for such damage or destruction.  Next, upon receipt from a borrower of a “repair plan” or a “rebuild plan” (either of which the borrower must develop in consultation with a contractor), a mortgage servicer has 30 days to approve or deny such plan.  A repair plan or rebuild plan must include specific milestones, enumerated in the new section, that require the mortgage servicer to disburse insurance proceeds in certain amounts upon meeting those milestones.

Second, immediately when it begins servicing a borrower’s mortgage and upon the borrower’s request thereafter, a mortgage servicer must disclose to the borrower the interest rate associated with the mortgage and provide the borrower with contact information of a primary point of contact for communication with the mortgage servicer.

Finally, the measure makes conforming amendments to the Non-bank Mortgage Servicers Act by adding new Section 5-21-107.5, and repeals Section 10-4-112 as it pertains to property damage and time of payment provisions.

  • South Carolina:  Effective November 21, Senate Bill 700 enacts the “South Carolina Earned Wage Access Services Act,” (the “Act”), S.C. Code Ann. §§ 39-5-810 et seq. For purposes of the Act, “earned wage access services” means “the business of providing consumer-directed wage access services [“offering or providing earned wage access services directly to consumers”] or employer-integrated wage services.” In addition to administrative provisions (e.g., application, recordkeeping, and reporting requirements), we note the following:

First, the Act requires a “provider” – a business entity that will engage in the business of providing earned wage access services to consumers – to register with the South Carolina Department of Consumer Affairs (“Department”).  However, the Act does not apply entities doing business under South Carolina or federal laws relating to banks, credit unions, savings and loan associations, savings banks, or trust companies.

Second, the Act sets forth compliance obligations for a provider.  Among other requirements, a provider must: (a) develop and implement policies and procedures to respond to questions raised by consumers and address any consumer complaints in an expedient manner; and (b) offer a consumer at least one reasonable option to obtain proceeds at no cost to the consumer, and clearly explain to the consumer how to elect such no-cost option.

Third, the Act prohibits a provider from engaging in certain conducting, such as charging a late fee, interest, or any other penalty or charge for failure to repay outstanding proceeds.

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