A BILL TO BE ENTITLED
AN ACT to update the consumer finance act by increasing fees paid by consumer finance licensees and to clarify the prohibition against evasions of the consumer finance act.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 53‑122(a)(2) reads as rewritten:
"(2)	Consumer Finance Licensees. – Each consumer finance licensee shall pay an annual assessment not to exceed  forty‑eight dollars ($48.00) per one hundred thousand dollars ($100,000) or fraction thereof of  average total loan receivables for the year preceding the required payment date, plus a fee of  five hundred dollars ($500.00) per office. The assessment shall be determined on a consumer finance licensee's average total  loan receivables as shown on its report of condition made to the Commissioner of Banks as of December 31 each year, or the date most nearly approximating the same."
SECTION 2.  G.S. 53‑168 reads as rewritten:
"§ 53‑168.  License required; showing of convenience, advantage and financial responsibility; investigation of applicants; hearings; existing businesses; contents of license; transfer; posting.
(a)	Necessity for License; Prerequisites to Issuance. – No person shall engage in or offer to engage in the business regulated by this Article unless and until a license has been issued by the Commissioner of Banks, and the Commissioner shall not issue any such license unless and until the Commissioner finds:
(1)	That authorizing the applicant to engage in such business will promote the convenience and advantage of the community in which the applicant proposes to engage in business; and
(2)	That the financial responsibility, experience, character and general fitness of the applicant are such as to command the confidence of the public and to warrant the belief that the business will be operated lawfully and fairly, within the purposes of this Article; and
(3)	That the applicant has available for the operation of such business at the specified location loanable assets of at least fifty thousand dollars ($50,000).
(b)	Investigation of Applicants. – Upon the receipt of an application, the Commissioner shall investigate the facts. If the Commissioner determines from such preliminary investigation that the applicant does not satisfy the conditions set forth in subsection (a), the Commissioner shall so notify the applicant who shall then be entitled to an informal hearing thereon provided  the applicant so requests in writing within 30 days after the Commissioner has caused the above‑referred to notification to be mailed to the applicant. In the event of a hearing, to be held in the offices of the Commissioner of Banks in Raleigh, the Commissioner shall reconsider the application and, after the hearing, issue a written order granting or denying  the application.  Every applicant for initial licensure under this Article shall pay a nonrefundable filing fee of one thousand dollars ($1,000) with the application.
(c)	Repealed by Session Laws 2001‑519, s. 2.
(d)	Required Assets Available. – Each licensee shall continue at all times to have available for the operation of the business at the specified location loanable assets of at least fifty thousand dollars ($50,000). The requirements and standards of this subsection and subsection (a)(2) of this section shall be maintained throughout the period of the license and failure to maintain such requirements or standards shall be grounds for the revocation of a license under the provisions of G.S. 53‑171 of this Article.
(e)	License, Posting, Continuing. – Each license shall state the address at which the business is to be conducted and shall state fully the name of the licensee, and if the licensee is a copartnership, or association, the names of the members thereof, and if a corporation, the date and place of its incorporation. Transfer or assignment of a license by one person to another by sale or otherwise is  prohibited. Each license shall be kept posted in the licensed place of business. Each license shall remain in full force and effect until surrendered, revoked, or suspended as hereinafter provided."
SECTION 3.  G.S. 53‑278 reads as rewritten:
"§ 53‑278.  Application for license; investigation; application fee.
(a)	An application for licensure under this Article shall be in writing, under oath, and on a form prescribed by the Commissioner. The application shall set forth all of the following:
(1)	The name and address of the applicant.
(2)	If the applicant is a firm or partnership, the name and address of each member of the firm or partnership.
(3)	If the applicant is a corporation, the name and address of each officer, director, registered agent, and principal.
(4)	The addresses of the locations of the business to be licensed.
(5)	Other information concerning the financial responsibility, background experience, and activities of the applicant and its members, officers, directors, and principals as the Commissioner requires.
(b)	The Commissioner may make such investigations as the Commissioner deems necessary to determine if the applicant has complied with all applicable provisions of this Article and State and federal law.
(c)	The application shall be accompanied by payment of a  five hundred dollar ($500.00) application  fee, a five hundred dollar ($500.00) investigation  fee, and a fee for each anticipated location of one hundred dollars ($100.00) each. These fees are not refundable or abatable, but, if the license is granted, payment of the application fee shall satisfy the fee requirement for the first license year or remaining part thereof.
(d)	Licenses shall expire annually and may be renewed upon payment of a license fee of  five hundred dollars ($500.00) plus a  one hundred dollar ($100.00) fee for each  office location certificate issued under a license."
SECTION 4.  G.S. 53‑248 reads as rewritten:
"§ 53‑248.  Registration procedure; informal hearing.
(a)	Initial Registration. An application to become registered as a facilitator shall be in writing, under oath, and in a form prescribed by the Commissioner. The application shall contain all information prescribed by the Commissioner. Each application for registration shall be accompanied by a fee, payable to the Commissioner, of  five hundred dollars ($500.00) for each office where the registrant intends to facilitate refund anticipation loans.
Upon the filing of an application for registration, if the Commissioner finds that the responsibility and general fitness of the applicant are such as to command the confidence of the community and to warrant belief that the business of facilitating refund anticipation loans will be operated within the purposes of this Article, the Commissioner shall register the applicant as a facilitator of refund anticipation loans and shall issue and transmit to the applicant a certificate attesting to the registration. If the Commissioner does not so find, he shall not register the applicant and shall notify the applicant of the reasons for the denial.
Upon receipt of a certificate of registration, the applicant is registered under this Article and may engage in the business of facilitating refund anticipation loans at the offices identified on the application for registration.
(b)	Renewal. Each registration as a facilitator of refund anticipation loans shall expire on December 31 following the date it was issued, unless it is renewed for the succeeding year. Before the registration expires, the registrant may renew the registration by filing with the Commissioner an application for renewal in the form and containing all information prescribed by the Commissioner. Each application for renewal of registration shall be accompanied by a fee of  two hundred dollars ($200.00) for each office where the registrant intends to facilitate refund anticipation loans during the succeeding year.
Upon the filing of an application for renewal of registration under this Article, the Commissioner shall renew the registration unless the Commissioner determines that the fitness of the registrant or the operations of the registrant would not support registration of the registrant under subsection (a). If the Commissioner makes such a determination, he shall so notify the registrant, stating the reasons for the determination.
(c)	Display of Certificate. Each registrant shall prominently display a certificate issued under this Article in each place of business in the State where the registrant facilitates the making of refund anticipation loans.
(d)	Within five days of receipt of the Commissioner's notice, as required by subsections (a) and (b) of this section, the applicant may make written demand of the Commissioner for a hearing. The hearing before the Commissioner shall be an informal hearing and shall be held with reasonable promptness."
SECTION 5.  The General Assembly makes the following findings:
(1)	Consumer loans in North Carolina are regulated by the North Carolina Consumer Finance Act, Article 15 of Chapter 53 of the General Statutes. The North Carolina Consumer Finance Act requires consumer finance lenders to be licensed and authorizes a maximum interest rate of thirty‑six percent (36%) on the first six hundred dollars ($600.00) of the loan.
(2)	Some lenders have attempted to evade the restrictions of the North Carolina Consumer Finance Act by offering cash advances in the form of instant cash rebates or other guises. These cash advance transactions are typically offered in conjunction with the sale of Internet access, telephone time units, catalog certificates, or the use of office equipment, when in fact the sale of the goods or services is a pretext for the making of a loan.
(3)	North Carolina courts have declared some of these transactions are unlawful, but new schemes continue to be devised in order to circumvent the lending laws of North Carolina and to avoid regulation by the Commissioner of Banks.
(4)	It is the intent of the General Assembly that G.S. 53‑166(a) should be construed broadly to prohibit illicit lending schemes and to clarify the devices, subterfuges, and pretenses that are prohibited under G.S. 53‑166(b), as amended by Section 6 of this act.
SECTION 6.  G.S. 53‑166 reads as rewritten:
"§ 53‑166.  Scope of Article; evasions; penalties; loans in violation of Article void.
(a)	Scope. – No person shall engage in the business of lending in amounts of ten thousand dollars ($10,000) or less and contract for, exact, or receive, directly or indirectly, on or in connection with any such loan, any charges whether for interest, compensation, consideration, or expense, or any other purpose whatsoever, which in the aggregate are greater than permitted by Chapter 24 of the General Statutes, except as provided in and authorized by this Article, and without first having obtained a license from the Commissioner. The word "lending" as used in this section, shall include, but shall not be limited to, endorsing or otherwise securing loans or contracts for the repayment of loans.
(b)	Evasions. – The provisions of subsection (a) of this section shall apply to any person who seeks to avoid its application by any device, subterfuge or pretense whatsoever. For purposes of this section, devices, subterfuges, and pretenses include, but are not limited to, any transaction in which a cash rebate or other advance of funds is offered and all of the following apply:
(1)	The cash advance is made contemporaneously with the transaction.
(2)	The amount of the cash advance is required to be repaid at a later date.
(3)	The selling or providing of any item, service, or commodity with the transaction is incidental to, or a pretext for, the advance of funds.
(4)	The transaction requires the consumer to present a check or electronic debit authorization for the purpose of making future repayment.
(c)	Penalties; Commissioner to Provide and Testify as to Facts in His Possession. – Any person not exempt from this Article, or any officer, agent,  employee, or representative thereof, who fails to comply with or who otherwise violates any of the provisions of this Article, or any regulation of the Banking Commission adopted pursuant to this Article, shall be guilty of a Class 1 misdemeanor. Each such violation shall be considered a separate offense. It  is the duty of the Commissioner of Banks to provide the district attorney of the court having jurisdiction of any  offense under this Article with all facts and evidence in  the Commissioner's actual or constructive possession, and to testify as to the facts upon the trial of any person for the offense.
(d)	Additional Penalties. – Any contract of loan, the making or collecting of which violates any provision of this Article, or regulation thereunder, except as a result of accidental or bona fide error of computation  is void and the licensee or any other party in violation shall  not collect,  receive, or retain any principal or charges whatsoever with respect to  the loan. If an affiliate operating in the same office or subsidiary operating in the same office of a licensee makes a loan in violation of  G.S. 53‑180(i), the affiliate or subsidiary may recover only its principal on  the loan."
SECTION 7.  This act becomes effective October 1, 2006.