GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1995

S	4 

SENATE BILL 332
Second Edition Engrossed 4/26/95
House Committee Substitute Favorable 6/8/95
House Committee Substitute #2 Favorable 6/14/95

Short Title:  Amend Certain Loan Procedures.	(Public)

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Sponsors:

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Referred to:  

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March 8, 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 is amended by adding two new subsections to read:
"( g)	Notwithstanding subsections (d) and (e) of this section, a State or federally chartered bank, savings bank, and savings and loan association may charge a party to a loan or extension of credit governed by this section a fee for the modification, renewal, extension or amendment of any terms of the loan or extension of credit, such fee not to exceed the greater of: (i) one percent (1%) of the outstanding balance at the time of the modification, renewal, extension, or amendment of terms, or (ii) one hundred dollars ($100.00).
(h)	Notwithstanding subsections (d) and (e) of this section, a State or federally chartered bank, savings bank, and savings and loan association may charge a party to a loan or extension of credit not secured by real property governed by this section an origination fee not to exceed the greater of: (i) one percent (1%) of the principal advanced or committed, or (ii) one hundred dollars ($100.00)."
Sec. 2.  G.S. 24-12 is repealed.
Sec. 3.  G.S. 24-1.2A reads as rewritten:
"§ 24-1.2A.  Equity lines of credit.
	(a)	Except as provided in subsection (c) of this section and 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 at rates which shall not exceed the maximum rates permitted under G.S. 24-1.1(c); provided, however, that the parties may contract for interest rates which shall be adjustable or variable, so long as for adjustable or variable rate contracts the rate in effect for a given period does not exceed the maximum rate permitted under G.S. 24-1.1(c) for the same period.
(b)	Except as provided in subsection (c) of this section, fees may be charged on equity lines of credit which in the aggregate, over the life of the contract based on the maximum limit of the line of credit, do not exceed those permitted under G.S. 24-10.  Any lender may charge a party to a loan or extension of credit governed by this section a fee for the modification, renewal, extension, or amendment of any terms of the loan or extension of credit, such fee not to exceed the greater of one-quarter of one percent (1/4 of 1%) of the balance outstanding at the time of the modification, renewal, extension, or amendment of terms, or fifty dollars ($50.00).
(c)	State and federally chartered banks, savings banks, and savings and loan associations may charge a party to an equity line of credit interest and fees as agreed upon in writing by the parties.  The parties may contract for interest rates which are fixed, adjustable, or variable."
Sec. 4.  G.S. 24-9 reads as rewritten:
"§ 24-9.  Loans to corporations organized for profit not subject to claim or defense or 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. 5.  G.S. 24-11(b) reads as rewritten:
"(b)	On revolving credit loans (including check loans, check credit or other revolving credit plans whereby a lending agency makes direct loans to a borrower), if agreed to in writing by the borrower, such lender may collect interest and service charges by application of a monthly periodic rate computed on the average daily balance outstanding during the billing period, such rate not to exceed one and one-half percent (1 1/2%)."
Sec. 6.  G.S. 24-10.1(a) reads as rewritten:
"(a)	Subject to the limitations contained in subsection (b) of this section, any lender may charge a party to a loan or extension of credit governed by the provisions of G.S. 24-1.1 or G.S. 24-1.1A a late payment charge as agreed upon by the parties in the loan contract."
Sec. 7.  Article 1 of Chapter 24 of the General Statutes is amended by adding a new section to read:
"§ 24-11A.  Open-end credit for certain lenders.
(a)	This section applies to open-end credit extended only by State or federally chartered banks, savings banks, and savings and loan associations.
(b)	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.
(c)	On the extension of open-end credit, whether secured or unsecured, a bank, savings bank, and savings and loan association 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.
(d)	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.
(e)	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.
(f)	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. § 183(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. 8.  G.S. 25A-14(a) reads as rewritten:
"(a)	The finance charge rate for a consumer credit sale made under a revolving charge account contract may not exceed twenty-one percent (21%) per annum.  The annual charge or monthly service charge for a consumer credit sale made under a revolving charge account contract may not exceed the charge set forth for the revolving credit in G.S. 24-11."
Sec. 9.  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 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 of ten percent (10%) of the unpaid balance, not to exceed fifty dollars ($50.00), may be imposed when the debt is satisfied before maturity and a rebate is computed by the simple interest method or under the 'rule of 78's'.
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. 10.  The Commissioner of Banks shall study the impact on the banking industry and the consuming public of the provisions of this act.
Sec. 11.  This act becomes effective July 1, 1995, and applies to loans and extension of credit made, renewed, extended, or modified on or after that date.  Sections 3, 5, and 7 of this act shall expire on July 1, 1999.