GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1995

H	1 

HOUSE BILL 542

Short Title:  Amend Certain Loan Procedures.	(Public)

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Sponsors: Representative Tallent.

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Referred to:  Financial Institutions, if favorable, Finance.

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March 23, 1995

A BILL TO BE ENTITLED
AN ACT TO ALLOW LENDERS TO COLLECT FEES, INTEREST, AND CHARGES FOR CERTAIN LOANS AND EXTENSIONS OF CREDIT IN AMOUNTS AGREED UPON BY THE PARTIES, WITH NO STATUTORY MAXIMUM LIMIT, AND TO AUTHORIZE COMPUTATION OF REBATES BY THE SIMPLE INTEREST METHOD ON CONTRACTS GOVERNED BY THE RETAIL INSTALLMENT SALES ACT.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 24-1.1 reads as rewritten:
"§ 24-1.1.  Contract rates and fees.
(a)	Except as otherwise provided in this Chapter or other applicable law, the parties to a loan, purchase money loan, advance, commitment for a loan or forbearance other than a credit card, open-end, or similar loan may contract in writing for the payment of interest not in excess of:
(1)	Where the principal amount is twenty-five thousand dollars ($25,000) or less, the rate set under subsection (c) of this section; or
(2)	Any rate agreed upon by the parties where the principal amount is more than twenty-five thousand dollars ($25,000).
(b)	As used in this section, interest shall not be deemed in excess of the rates provided where interest is computed monthly on the outstanding principal balance and is collected not more than 31 days in advance of its due date.  Nothing in this section shall be construed to authorize the charging of interest on committed funds prior to the disbursement of said funds.
(c)	On the fifteenth day of each month, the Commissioner of Banks shall announce and publish the maximum rate of interest permitted by subdivision (1) of this section on that date.  Such rate shall be the latest published noncompetitive rate for U.S. Treasury bills with a six-month maturity as of the fifteenth day of the month plus six percent (6%), rounded upward or downward, as the case may be, to the nearest one-half of one percent (1/2 of 1%) or sixteen percent (16%), whichever is greater.  If there is no nearest one-half of one percent (1/2 of 1%), the Commissioner shall round downward to the lower one-half of one percent (1/2 of 1%).  The rate so announced shall be the maximum rate permitted for the term of loans made under this section during the following calendar month when the parties to such loans have agreed that the rate of interest to be charged by the lender and paid by the borrower shall not vary or be adjusted during the term of the loan.  The parties to a loan made under this section may agree to a rate of interest which shall vary or be adjusted during the term of the loan in which case the maximum rate of interest permitted on such loans during a month during the term of the loan shall be the rate announced by the Commissioner in the preceding calendar month.
(d)	Any lender may charge a party to a loan or extension of credit governed by this section a fee as agreed upon by the parties for the modification, renewal, extension, or amendment of any terms of the loan or extension of credit.
(e)	Any lender may charge a party to a loan or extension of credit not secured by real property governed by this section an origination fee as agreed upon by the parties.
(f)	This section shall not be construed to limit fees on loans or extensions of credit in excess of three hundred thousand dollars ($300,000)."
Sec. 2.  G.S. 24-1.2 (7) reads as rewritten:
"(7)	Any lender may charge a party to a loan or extension of credit governed by this section a fee as agreed upon by the parties for the modification, renewal, extension, or amendment of any terms of the loan or extension of credit."
Sec. 3.  G.S. 24-1.2(8) reads as rewritten:
"(8)	Any lender may charge a party to a loan or extension of credit not secured by real property governed by this section an origination fee as agreed upon by the parties. "
Sec. 4.  G.S. 24-1.2A reads as rewritten:
"§ 24-1.2A.  Equity lines of credit.
(a)	Notwithstanding any other provision of this Chapter, the parties to an equity line of credit, as defined in G.S. 45-81, may contract in writing for interest as agreed upon by the parties.  The parties may contract for interest rates which are fixed, adjustable, or variable.
(b)	Fees may be charged on equity lines of credit as agreed upon by the parties.  Any lender may charge a party to a loan or extension of credit governed by this section a fee as agreed upon by the parties for the modification, renewal, extension, or amendment of any terms of the loan or extension of credit."
Sec. 5.  G.S. 24-9 reads as rewritten:
"§ 24-9. Loans to corporations organized for profit not subject to claim or defense of usury.
Notwithstanding any other provision of this Chapter or any other provision of law, any foreign or domestic corporation substantially engaged in commercial, manufacturing or industrial pursuits for pecuniary gain may agree to pay, and any lender may charge and collect from such corporation, interest and fees which such corporation may agree to pay in writing, and as to any such transaction the claim or defense of usury by such corporation and its  successors or anyone else in its behalf is prohibited."
Sec. 6. G.S. 24-11 reads as rewritten:
"§ 24-11. Open-end credit.
								(a)	The term 'open-end credit' means credit extended by a creditor under a plan in which the creditor reasonably contemplates repeated transactions, the creditor may impose a finance charge from time to time on an outstanding unpaid balance, and the amount of credit that may be extended to the debtor during the term of the plan, up to any limit agreed upon by the parties, is generally made available to the extent that any outstanding balance is repaid.  The term 'open-end credit' includes revolving credit card plans, revolving charge accounts, and revolving credit loans made directly by a lender under a check loan, check credit, or other similar plan.
(b)	On the extension of open-end credit, whether secured or unsecured, a lender may charge and collect finance charges, interest, and fees as agreed upon by the parties.  An extension of open-end credit may provide for the terms and conditions agreed upon by the parties.
(c)	No interest or finance charge may be imposed upon an extension of open-end credit, other than a direct loan or cash advance to a debtor, if the account is paid in full within 25 days from the billing date.
(d)	Any person, firm, or corporation may charge discounts and fees agreed upon by the parties on accounts acquired from or through vendors or others providing services under a credit card plan.
(e)	All fees and charges authorized by this section are deemed to be interest and are material to the determination of the rate of interest for purposes of (i) 12 U.S.C. § 85, the National Bank Act, (ii) 12 U.S.C. § 1831(d), the Federal Deposit Insurance Act, (iii) 12 U.S.C. § 1463(g), the Federal Savings and Loan Act, and (iv) 12 U.S.C. § 1785(g), the Federal Credit Union Act, as may be amended."
Sec. 7. G.S. 25A-11 reads as rewritten:
"§ 25A-11.  'Revolving charge account contract' defined.
'Revolving charge account contract' means an agreement or understanding between a seller and a buyer under which consumer credit sales may be made from time to time, under the terms of which a finance charge or service charge is to be computed in relation to the buyer's unpaid balance from time to time, and under which the buyer has the privilege of paying the balance in full or in installments. "
Sec. 8. G.S. 25A-14 reads as rewritten:
"§ 25A-14.  Finance charge rates and service charge for revolving charge account contracts.
			On a consumer credit sale made under a revolving charge account contract a seller may charge and collect finance charges and fees as agreed upon by the parties to the revolving charge account contract."
Sec. 9.  G.S. 25A-17 reads as rewritten:
"§ 25A-17.  Additional charges for insurance.
(a)	As to revolving charge account contracts defined in G.S. 25A-11, in addition to the finance charges permitted in G.S. 25A-14, a seller in a consumer credit sale may contract for and receive additional charges or premiums (i) for insurance written in connection with any consumer credit sale, against loss of or damage to property securing the debt pursuant to G.S. 25A-23, provided a clear, conspicuous and specific statement in writing is furnished by the seller to the buyer setting forth the cost of the insurance if obtained from or through the seller and stating that the buyer may choose the insurer through which the insurance is obtained; (ii) for credit life, credit accident and health, or credit unemployment insurance, written in connection with any consumer credit sale, provided the insurance coverage is not required by the seller and this fact is clearly disclosed to the buyer, and any buyer desiring such insurance coverage gives affirmative indication of such desire after disclosure of the cost of such insurance.
(b)	As to revolving charge account contracts defined in G.S. 25A-11, insurance that is required by a seller and is not an additional charge permitted by subsection (a) of this section, shall be included in the finance charge as computed according to G.S. 25A-14.
(c)	As to consumer credit installment sale contracts defined in G.S. 25A-12, in addition to the finance charges permitted in G.S. 25A-15, a seller in a consumer credit sale may contract for and receive additional charges or premiums (i) for insurance written in connection with any consumer credit sale, for loss of or damage to property or against liability arising out of the ownership or use of property, provided a clear, conspicuous and specific statement in writing is furnished by the seller to the buyer setting forth the cost of the insurance if obtained from or through the seller and stating that the buyer may choose the person through which the insurance is to be obtained; (ii) for credit life, credit accident and health, or credit unemployment insurance, written in connection with any consumer credit sale, provided the insurance coverage is not required by the seller and this fact is clearly and conspicuously disclosed in writing to the buyer; and any buyer desiring such insurance coverage gives specific dated and separately signed affirmative written indication of such desire after receiving written disclosure to him of the cost of such insurance."
Sec. 10.  G.S. 25A-23(d) is repealed.
Sec. 11.  G.S. 25A-32 reads as rewritten:
"§ 25A-32.  Rebates on prepayment.
Notwithstanding any provision in a consumer credit installment sale contract to the contrary, any buyer may satisfy the debt in full at any time before maturity, and in so satisfying such debt, shall receive a rebate, the amount of which shall be computed by the simple interest method or under the 'rule of 78's'.  A rebate determined by the 'rule of 78's' shall be computed as follows:
'The amount of such rebate shall represent as great a proportion of the finance charge (less a prepayment charge as agreed upon by the parties) as the sum of the periodical time balances after the date of prepayment in full bears to the sum of all the periodical time balances under the schedule of payments in the original contract.' No rebate is required if the amount thereof is less than one dollar ($1.00).
A prepayment charge as agreed upon by the parties may be imposed when a rebate is determined by the simple interest method.
If the prepayment is made otherwise than on the due date of an installment, it shall be deemed to have been made on the installment due date nearest in time to the actual date of payment.
If a seller obtains a judgment on a debt arising out of a consumer credit installment sale or the seller repossesses the collateral securing the debt, the seller shall credit the buyer with a rebate as if the payment in full had been made on the date the judgment was obtained or 15 days after the repossession occurred. If the seller obtains a judgment and repossesses the collateral, the seller shall credit the buyer with a rebate as if payment in full had been made on the date of the judgment or 15 days after the repossession, whichever occurs earlier."
Sec. 12.  This act becomes effective July 1, 1995, and applies to loans and extensions of credit made, renewed, extended, or modified on or after that date.