GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1999

H	1 

HOUSE BILL 1635*

Short Title:  Revisions to Consumer Lending.	(Public)

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Sponsors: Representatives Wright; Bowie, Brubaker, Church, Creech, Dockham, Earle, Gibson, Hurley, McMahan, Tallent, and Wainwright.

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Referred to:  Financial Institutions, if favorable, Rules, Calendar, and Operations of the House.

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May 18, 2000

A BILL TO BE ENTITLED
AN ACT TO REVISE THE APPLICABLE INTEREST RATES ON LOANS MADE PURSUANT TO THE CONSUMER FINANCE ACT UNDER CERTAIN CIRCUMSTANCES, TO ESTABLISH A LOAN PROCESSING FEE FOR CERTAIN LOANS, TO ALLOW BORROWERS TO CANCEL LOANS UNDER CERTAIN CIRCUMSTANCES, TO ALLOW LENDERS TO CHARGE A LATE PAYMENT PENALTY UNDER CERTAIN CIRCUMSTANCES, TO REQUIRE DISCLOSURE ON SOLICITATION OF LOANS BY FACSIMILE OR NEGOTIABLE CHECKS, AND TO ALLOW LENDERS TO MAINTAIN CERTAIN RECORDS IN THE FORM OF OPTICAL IMAGE DISKS.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 53-176 reads as rewritten:
"§ 53-176.  Optional rates, maturities and amounts.
(a)	In lieu of making loans in the amount and at the charges stated in G.S. 53-173 and for the terms stated in G.S. 53-180, a licensee may at any time elect to make loans in installments not exceeding ten thousand dollars ($10,000) and which shall not be repayable in less than six months or more than 84 months and which shall not be secured by deeds of trust or mortgages on real estate and which are repayable in substantially equal consecutive monthly payments and to charge and collect interest in connection therewith which shall not exceed the following actuarial rates:
(1)	With respect to a loan not exceeding two thousand dollars ($2,000), twenty-eight percent (28%) per annum on the outstanding principal balance.
(2)	With respect to a loan exceeding two thousand dollars ($2,000) but not more than three thousand five hundred dollars ($3,500), twenty-five percent (25%) per annum on the outstanding principal balance.
(3)	With respect to a loan exceeding three thousand five hundred dollars ($3,500) but not more than five thousand dollars ($5,000), twenty-three percent (23%) per annum on the outstanding principal balance.
(4)	With respect to a loan exceeding five thousand dollars ($5,000) but not more than seven thousand five hundred dollars ($7,500), twenty-one percent (21%) per annum on the outstanding principal balance.
(5)	With respect to a loan exceeding seven thousand five hundred dollars ($7,500), eighteen percent (18%) per annum on the outstanding principal balance.   
(b)	In addition to the interest permitted in this section, a licensee may assess at closing a fee for processing the loan equal to five percent (5%) of the cash advance, not to exceed twenty-five dollars ($25.00) for loans not in excess of two thousand dollars ($2,000), and not to exceed fifty dollars ($50.00) for loans in excess of two thousand dollars ($2,000). Except as otherwise provided by this subsection, the processing fee may be assessed only once for each loan. If a loan in excess of two thousand dollars ($2,000) is renewed, extended, or refinanced, in which the borrower receives a new cash advance in an amount equal to at least twenty percent (20%) of the outstanding principal balance of the existing loan, a fee for processing the loan may be assessed not to exceed fifty dollars ($50.00).  For all other renewed extended or refinanced loans, a licensee may assess at closing a fee for processing the loan equal to five percent (5%) of the cash advance, not to exceed twenty-five dollars ($25.00) and the fee may not be assessed more than twice in a 12-month period, the initial processing fee being the first.  It shall be unlawful for any lender to structure a loan for the specific purpose of obtaining a higher fee.  The penalty for such action is forfeiture of the fee.  The Commissioner of Banks may review charges assessed pursuant to this subsection and may adopt appropriate rules in accordance with G.S. 53-185.
(c)	The provisions of G.S. 53-173(b), (c) and (d) and G.S. 53-180(b), (c), (d), (e), (f), (g), (h) and (i) shall apply to loans made pursuant to this section.
(d)	Any licensee under this Article shall have the right to elect to make loans in accordance with this section by the filing of a written statement to that effect with the Commissioner and on date of such notification begin making loans regulated by this section for the following 12 months. Annually after such election a licensee may elect to make loans in accordance with this section unless the licensee notifies in writing the Commissioner of its intention to terminate such election.
(e)	The due date of the first monthly payment shall not be more than 45 days following the disbursement of funds under any such installment loan. A borrower under this section may prepay all or any part of a loan made under this section without penalty. No more than twice in a 12-month period, a borrower may cancel a loan with the same licensee within 15 calendar days after disbursement of the loan proceeds without incurring or paying interest so long as the amount of the loan, minus any fees or charges, is returned to or received by the licensee.
(f)	No individual, partnership, or corporate licensee and no corporation which is the parent, subsidiary or affiliate of a corporate licensee that is making loans under this Article except as authorized in this section, shall be permitted to make loans under the provisions of this section. Any corporate licensee or individual or partnership licensee that elects to make loans in accordance with the provisions of this section shall be bound by that election with respect to all of its offices and locations in this State and all offices and locations in this State of its parent, subsidiary or affiliated corporate licensee, or with respect to all of his or their offices and locations in this State.
(g)	A lender may charge a party to a loan or extension of credit governed by this section a late payment charge not to exceed five percent (5%) of the payment due or ten dollars ($10.00), whichever is greater, for any payment past due for 15 days or more; provided, in no case shall the late charge exceed the outstanding principal balance.  If a late payment charge has been once imposed with respect to a late payment, no late charge shall be imposed with respect to any future payment which would have been timely and sufficient but for the previous default."
Section 2. G.S. 53-181(a) is amended by adding a new subdivision to read:
"(10)	In addition to any disclosures otherwise provided by law, a licensee soliciting loans  using a facsimile or negotiable check shall disclose the following:
‘THIS IS A SOLICITATION FOR A LOAN. READ THE ENCLOSED DISCLOSURES BEFORE SIGNING THIS AGREEMENT.'
This notice shall be printed in not less than 12-point bold type and shall appear conspicuously on the offer."
Section 3.  G.S. 53-182(b) reads as rewritten:
"(b)	Upon payment of any loan in full, a licensee shall cancel and return to the borrower, within a reasonable length of time, originals or copies of any note, assignment, mortgage, deed of trust, or other instrument securing such loan, which no longer secures any indebtedness of the borrower to the licensee."
Section 4.  G.S. 53-184(a) reads as rewritten:
"(a)	Each licensee shall maintain all books and records relating to loans made under this Article required by the Commissioner of Banks to be kept, and the Commissioner, his deputy, or duly authorized examiner or agent or employee is authorized and empowered to examine such records at any reasonable time. Such books and records may be maintained in the form of magnetic tape, magnetic disk, optical disk, or other form of computer, electronic or microfilm media available for examination on the basis of computer printed reproduction, video display or other medium acceptable to the Commissioner of Banks; provided, however, that such books and records so kept must be convertible into clearly legible tangible documents within a reasonable time. Any licensee having more than one licensed office may maintain such books and records at a location other than the licensed office location if such location is approved by the Commissioner; provided that, upon such requirements as may be imposed by the Commissioner of Banks, there shall be available to the borrower at each licensed location or such other location convenient to the borrower, as designated by the licensee, complete loan information; and provided further that such books and records of each licensed office shall be clearly segregated. When a licensee maintains its books and records outside of North Carolina, the licensee shall make them available for examination at the place where they are maintained and shall pay for all reasonable and necessary expenses incurred by the Commissioner in conducting such examination. Where the data processing for any licensee is performed by a person other than the licensee, the licensee shall provide to the Commissioner of Banks a copy of a binding agreement between the licensee and the data processor which allows the Commissioner of Banks, his deputy, or duly authorized examiner or agent or employee to examine that particular data processor's activities pertaining to the licensee to the same extent as if such services were being performed by the licensee on its own premises; and, notwithstanding the provisions of G.S. 53-167 and 53-122, when billed by the Commissioner of Banks, the licensee shall reimburse the Commissioner of Banks for all costs and expenses incurred by the Commissioner in such examination."
Section 5.  This act becomes effective October 1, 2000, and applies to loans made on or after that date.