A BILL TO BE ENTITLED
AN ACT TO MAKE VARIOUS AMENDMENTS TO THE NORTH CAROLINA CONSUMER FINANCE ACT to increase CONSUMER ACCESS AND CREDIT MARKET PARITY.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 53‑165 is amended by adding a new subsection to read:
"(e1)	'Consumer Price Index' shall mean the Consumer Price Index for Urban Wage Earners and Clerical Workers: U.S. City Average, All Items, compiled by the Bureau of Labor Statistics, United States Department of Labor, or, if that index is canceled or superseded, the index chosen by the Bureau of Labor Statistics as most accurately reflecting the changes in the purchasing power of the dollar for consumers, or, if no such index is chosen by the Bureau of Labor Statistics, the index chosen by the Commissioner of Banks as most accurately reflecting the changes in the purchasing power of the dollar for consumers."
SECTION 2.  G.S. 53‑172(a) reads as rewritten:
"§ 53‑172.  Conduct of other business in same office.
(a)	No licensee shall conduct the business of making loans under this Article within any office, suite, room, or place of business in which any other business is solicited or transacted.
Installment paper dealers as defined in G.S. 105‑83, and the collection by a licensee of loans legally made in North Carolina, or another state by another government regulated lender or lending agency and the collection by the licensee of claims of, or payments to, an insurance company licensed in North Carolina and arising in any way from an insurance policy approved by the Commissioner of Insurance, shall not be considered as being any other business within the meaning of this section."
SECTION 3.  G.S. 53‑173 reads as rewritten:
"§ 53‑173.  Personal installment loans maximum charges and fees; limitation on interest after judgment; limitation on interest after maturity of the loan.
		
(a)	Maximum Charges and Fees. – 
(1)	Installment account handling charge. – Every licensee under this section may make personal installment loans in amounts up to two thousand dollars ($2,000), as adjusted periodically in accordance with subdivision (3) of this subsection, and collect an installment account handling charge. The installment account handling charge shall not exceed three dollars ($3.00) per month for each one hundred dollars ($100.00) of the amount financed. The installment account handling charge shall be calculated for the term of the contract and with the total processing fee authorized in G.S. 53‑173(a)(2) added to the amount of the principal. Every payment shall be applied to the combined total of principal and charges until the contract is fully paid. The acceptance or payment of charges on loans made under the provisions of this subsection shall not be deemed to constitute payment, deduction, or receipt thereof in advance nor compounding.
(2)	Processing fee. – In addition to the installment account handling charge authorized by subdivision (1) of this subsection, a licensee making a loan under this section may collect from the borrower a fee for processing the loan equal to ten percent (10%) of the amount financed not to exceed one hundred dollars ($100.00), as adjusted periodically in accordance with subdivision (3) of this subsection, provided that such charges may not be assessed more than once in a 90‑day period. This fee shall be fully earned by the licensee at the time the loan is made and shall not be subject to any refund requirement upon prepayment of the personal installment loan by the borrower except as provided in subsection (i) of this section.
(3)	Adjustment of amounts. –
a.	Each year the Commissioner of Banks shall compute, in accordance with sub‑subdivision b. of this subdivision, and announce to licensees by May 15, the following amounts based on a reference base index equal to the consumer price index for 1982, and the adjusted amounts shall take effect on July 1 of the year of the computations:
1.	The maximum fee under subdivision (2) of this subsection.
2.	The maximum amount financed under subdivision (a)(1) of this section and G.S. 53‑176(a).
3.	The dollar thresholds for the interest rate tiers set forth in G.S. 53‑176(a)(1).
4.	The maximum fee for processing the loan under G.S. 53‑176(b).
b.	The adjustment of amounts required by sub‑subdivision a. of this subdivision shall be computed by following these four steps:
1.	Dividing the reference base index into the consumer price index at the end of the preceding year.
2.	Converting the amount obtained under G.S. 53‑173(a)(3)b.1. to the nearest whole percent.
3.	Rounding the result computed under G.S. 53‑173(a)(3)b.2. to the next lower multiple of 10 percent (10%) unless the result computed under G.S. 53‑173(a)(3)b.2. is a multiple of 10 percent (10%) in which event that result shall be used.
4.	For each amount referred to in G.S. 53‑173(a)(3)a.1. through a.4., multiplying that amount by the result obtained under G.S. 53‑173(a)(3)b.3.
c.	If the consumer price index is revised, the revised index shall be used to compute amounts under this subsection after that revision takes effect. If the revision changes the reference base index, a revised reference base index shall be used. The revised reference base index shall bear the same ratio to the reference base index as the revised consumer price index for the first month in which it is available bears to the consumer price index for the first month in which the revised consumer price index is available.
	
(c)	Interest after Judgment. – If a money judgment is obtained against any borrower on any loan made under the provisions of this section, the loan shall carry interest at the annual percentage rate of the loan contract as computed under the federal Truth in Lending Act, 12 U.S.C. § 1601, et seq.
(d)	Interest after Maturity of Loan. – After the maturity date of any loan contract made under the provisions of this section and until the loan contract is paid in full by cash, new loan, refinancing or otherwise,  the loan shall carry interest at a rate not to exceed the annual percentage rate of the loan contract as computed under the federal Truth in Lending Act, 12 U.S.C. § 1601, et seq.
(e)	Repealed by Session Laws 1989, c. 17, s. 3.
(f)	Repealed by Session Laws 2001‑519, s. 3.
(g)	No Other Charges Permitted. – On any loan made under the provisions of this section, no other charge of any nature whatsoever is permitted except for those authorized by this section and G.S. 53‑175, 53‑177, 53‑180(e), and 53‑189.
(h)	Limitation on Loans to Individual Consumers. – 
(1)	No person licensed under this Article, or an affiliate of such licensee, shall make a loan to a borrower under this section if there exists an outstanding loan made under  this section or G.S. 53‑176 between the licensee and that borrower unless the existing loan is paid in full from the proceeds of the new loan.
(2)	The acquisition by a licensee, or an affiliate of a licensee, of a loan made by another licensee under this section to a borrower who at the time of the acquisition has an outstanding loan made pursuant to this section from the acquiring licensee or an affiliate of the acquiring licensee, is not a violation of this subsection. 
(3)	In the event a loan is made in violation of this subsection, the licensee shall refund to the borrower all charges paid by the borrower with respect to the loan, however, the borrower shall remain obligated to repay to the licensee the amount financed under the loan.
(i)	Partial Refund of Fees. – If a loan made under this section is prepaid in full prior to the term expiration date, including payment in cash or by a new loan, or if, upon default by the borrower, the licensee demands payment in full of the unpaid balance, the licensee shall refund or credit to the borrower that portion of the installment account handling charge permitted in G.S. 53‑173(a)(1) as contracted on the loan but not earned as of the date of loan payoff. The amount of any refund or credit shall be calculated according to the payment schedule originally contracted for, and calculated in accordance with the actuarial method set forth in Regulation Z (12 C.F.R. Part 226) as of the next installment due date following the date of prepayment. In addition, if the loan is prepaid in full, refinanced, or consolidated within the first 90 days, the first fifteen dollars ($15.00) of the loan processing fee  shall be retained by the lender and the remainder of the loan processing fee shall be refunded at a rate of one‑ninetieth of the remainder of the loan processing fee per day, beginning on the day after the date of the prepayment, refinancing, or consolidation and ending on the 90th day after the loan was made.
(j)	Rescission of Contract. – A borrower who has entered into a contract for a loan made pursuant to this section may, within three days of having entered into the contract, rescind the loan contract by returning to the licensee in cash or by a certified bank check the amount financed under the loan, and, upon delivery of those funds to the licensee, the borrower shall have no further liability or obligations under the loan contract. No borrower may exercise this right more than twice in a 12‑month period."
SECTION 4.  G.S. 53‑175 reads as rewritten:
"§ 53‑175.  Fee for returned checks.
A licensee may collect the fee for returned checks to the extent permitted by G.S. 25‑3‑506, or thirty dollars ($30.00), whichever is greater. This section shall apply to any loan made by any licensee under this Article."
SECTION 5.  G.S. 53‑176 reads as rewritten:
"§ 53‑176.  Optional rates, maturities and amounts.
(a)	In addition to making loans in the amount and at the interest stated in G.S. 53‑173 and for the terms stated in G.S. 53‑180, a licensee may make installment loans not exceeding fifteen thousand dollars ($15,000) and which shall not be repayable in less than six months or more than 96 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)	Two and one‑half percent (2.5%) per month on that part of the unpaid principal balance not exceeding five thousand dollars ($5,000), and two percent (2%) per month on that part exceeding five thousand dollars ($5,000) but not exceeding ten thousand dollars ($10,000), and one and one‑half percent (1.5%) per month on the remainder of the unpaid principal balance. Interest shall be contracted for and collected at the single simple interest rate applied to the outstanding balance that would earn the same amount of interest as the above rates for payment according to schedule.
	
(a1)	Interest on loans made pursuant to this section shall not be paid, deducted, or received in advance. Such interest shall not be compounded but shall be (i) computed and paid only as a percentage of the unpaid principal balance or portion thereof and (ii) computed on the basis of the number of days actually elapsed. However, if part or all of the consideration for a loan contract is the unpaid principal balance of a prior loan, then the principal amount payable under the loan contract may include any unpaid interest on the prior loan which has accrued within 90 days before the making of the new loan contract. For the purpose of computing interest, a day shall equal 1/360th of a year. Any payment made on a loan shall be applied first to any accrued interest and then to principal, and any portion or all of the principal balance may be prepaid at any time without penalty.
(b)	In addition to the interest permitted in this section, a licensee may assess at closing a fee for processing the loan as agreed upon by the parties, not to exceed thirty‑five dollars ($35.00) for loans up to one thousand seven hundred fifty dollars ($1,750), as adjusted periodically in accordance with G.S. 53‑173(a)(3), and two percent (2%) of the cash advance for loans above one thousand seven hundred fifty dollars ($1,750), as adjusted periodically in accordance with G.S. 53‑173(a)(3), provided that such charges may not be assessed more than twice in any 12‑month period.
(c)	The provisions of G.S. 53‑173(a)(3), (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.
	
(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. Except as otherwise provided for pursuant to G.S. 75‑20(a), no more than twice in a 12‑month period, a borrower may cancel a loan with the same licensee within three business days after disbursement of the loan proceeds without incurring or paying interest so long as the amount financed, minus any fees or charges, is returned to and received by the licensee within that time.
	"
SECTION 6.  G.S. 53‑177 reads as rewritten:
"§ 53‑177.  Fees.
(a)	Recording Fees. – The licensee may collect from the borrower the amount of any fees necessary to file or record its security interest with any public official or agency of a county or the State as may be required pursuant to Article 9 of Chapter 25 of the General Statutes or G.S. 20‑58 et seq. Upon full disclosure to the borrower on how the fees will be applied, such fees may either (i) be paid by the licensee to such public official or agency of the county or State, or (ii) in lieu of recording or filing, applied by the licensee to purchase nonfiling or nonrecording insurance on the instrument securing the loan. Provided, however, the amount collected by the licensee from the borrower for the purchase of a nonfiling or nonrecording insurance policy shall be the premium amount for such insurance as fixed by the Commissioner of Insurance. Such premium shall be at least one dollar ($1.00) less than the cost of recording or filing a security interest. Provided further, a licensee shall not collect or permit to be collected any notary fee in connection with any loan made under this Article, nor may a licensee collect any fee from the borrower for the cost of releasing a security interest except such fee as actually paid to any public official or agency of the county or State for such purpose.
(b)	Late Fees. – 
(1)	A licensee may charge a late payment charge as agreed upon by the parties in the loan contract for payments received 10 days or more after the due date.
(2)	No licensee may charge a late payment charge:
a.	For loans made pursuant to G.S. 53‑173, greater than fifteen dollars ($15.00).
b.	For loans made pursuant to G.S. 53‑176, in excess of five percent (5%) of the amount of the payment or twenty dollars ($20.00), whichever is greater.
c.	More than once with respect to a single late payment.
(c)	Third‑Party Payment Fees. – The licensee may collect any actual charges paid by the licensee related to payments submitted by the borrower or at the borrower's request through electronic or other means not affiliated with the licensee.
(d)	Deferral Charges. – A licensee may, by agreement with the borrower, collect the charge and defer the due date of all or any part of one or more installments under an existing loan contract as permitted in the provisions of G.S. 25A‑30."
SECTION 7.  G.S. 53‑180 reads as rewritten:
"§ 53‑180.  Limitations and prohibitions on practices and agreements.
(a)	Time and Payment Limitation. – Except as otherwise provided in this Article, no licensee making a loan pursuant to G.S. 53‑173 shall enter into any contract of loan under this Article providing for any scheduled repayment of principal or charges less than four months or more than seven months from the date of making the contract if the cash advance is five hundred dollars ($500.00) or less; or more than 13 months from the date of making the contract if the cash advance is in excess of five hundred dollars ($500.00) but not in excess of one thousand dollars ($1,000); more than 19 months from the date of making the contract if the cash advance is in excess of one thousand dollars ($1,000) but not in excess of one thousand five hundred dollars ($1,500); or more than 25 months if the cash advance is in excess of one thousand five hundred dollars ($1,500). Every loan contract shall provide for repayment in substantially equal, fully amortizing installments, of principal and charges at approximately equal periodic intervals of time. Nothing contained herein shall prevent a loan being considered a new loan because the proceeds of the loan are used to pay an existing loan.
(b)	No Assignment of Earnings. – A licensee may not take an assignment of earnings of the borrower for payment or as security for payment of a loan. An assignment of earnings in violation of this section is unenforceable by the assignee of the earnings and is revocable by the borrower. A sale of unpaid earnings made in consideration of the payment of money to or for the account of the seller of the earnings is deemed to be a loan to the seller by an assignment of earnings.
(c)	Limitation on Default Provisions. – An agreement between a licensee and a borrower pursuant to a loan under this Article with respect to default by the borrower is enforceable only to the extent that (i) the borrower fails to make a payment as required by the agreement, or (ii) the prospect of payment, performance, or realization of collateral is significantly endangered or impaired, the burden of establishing the prospect of a significant endangerment or impairment being on the licensee.
(d)	Prohibitions on Discrimination. – No licensee shall deny any extension of credit or discriminate in the fixing of the amount, duration, application procedures or other terms or conditions of such extension of credit because of the race, color, religion, national origin, sex or marital status of the applicant or any other person connected with the transaction.
(e)	Limitation on Attorney's Fees. – With respect to a loan made pursuant to the provisions of G.S. 53‑173 or G.S. 53‑176, the agreement may provide for the collection of reasonable attorney fees.
(f)	No Real Property as Security. – No licensee shall make any loan within this State which shall in any way be secured by real property.
(g)	Deceptive Acts or Practices. – No licensee shall engage in any unfair method of competition or unfair or deceptive trade practices in the conduct of making loans to borrowers pursuant to this Article or in collecting or attempting to collect any money alleged to be due and owing by a borrower.
(h)	Limitations on Home Loans. – No affiliate operating in the same office or subsidiary operating in the same office of a licensee shall make any home loan as defined in G.S. 24‑1.1A(e) in a principal amount of less than three thousand dollars ($3,000).
(i)	Limitation on Conditions to Making Loans. – A licensee or an affiliate operating in the same office or subsidiary operating in the same office of a licensee shall not make as a condition of any loan the refinancing of a borrower's home loan as defined in G.S. 24‑1.1A(e) which is not currently in default.
(j)	No Solicitation of Deposits. – No licensee may directly or indirectly solicit from any borrower funds to be held on deposit in any bank; provided, however, a borrower may at his option, by way of a military allotment or other such program, designate a depository to receive and disburse funds for a designated purpose.
(k)	Loans made pursuant to this Article solicited using a facsimile or negotiable check shall be subject to the provisions of G.S. 75‑20(a)."
SECTION 8.  G.S. 53‑181 reads as rewritten:
"§ 53‑181.  Statements and information to be furnished to borrowers; power of attorney or confession of judgment prohibited.
(a)	Contents of Statement Furnished to Borrower. – At the time a loan is made, and one time per calendar year free at the written request of the borrower and twenty‑five dollars ($25.00) for each additional request, the licensee shall deliver to the borrower, or if there be two or more borrowers, to one of them a copy of the loan contract, or a written statement, showing in clear and distinct terms:
(1)	The name and address of the licensee and one of the primary obligors on the loan;
(2)	The date of the loan contract;
(3)	Schedule of installments or descriptions thereof;
(4)	The cash advance;
(5)	The face amount of the note evidencing the loan;
(6)	The amount collected or paid for insurance, if any;
(7)	The amount collected or paid for filing or other fees allowed by this Article;
(8)	The collateral or security for the loan;
(9)	If the loan refinances a previous loan, the following relating to the refinanced loan: (i) the principal balance due; (ii) interest charged that is included in the new loan; and (iii) rebates on any credit insurance, listed separately.
(10)	In addition to any disclosures otherwise provided by law, a licensee soliciting loans using a facsimile or negotiable check shall provide the disclosures required by G.S. 75‑20(a).
(b)	Schedule of Charges, etc., to Be Made Available; Copy Filed with Commissioner. – Each licensee doing business in North Carolina shall make readily available to the borrower at each place of business such full and accurate schedule of charges and insurance premiums, including refunds and rebates, on all classes of loans currently being made by such licensee, as the Commissioner shall prescribe, and a copy thereof shall be filed in the office of the Commissioner of Banks.
(c)	Power of Attorney or Confession of Judgment Prohibited. – No licensee shall take any confession of judgment or permit any borrower to execute a power of attorney in favor of any licensee or in favor of any third person to confess judgment or to appear for the borrower in any judicial proceeding and any such confession of judgment or power of attorney to confess judgment shall be absolutely void."
SECTION 9.  G.S. 53‑186 reads as rewritten:
"§ 53‑186.  Commissioner to issue subpoenas, conduct hearings, give publicity to investigations, etc.
(a)	Powers of the Commissioner. – The Commissioner of Banks shall have the power and duty to issue subpoenas including subpoenas duces tecum, and compel attendance of witnesses, administer oaths, conduct hearings and transcribe testimony in making the investigations and conducting the hearings provided for herein or in the other discharge of his duties, and to give such publicity to his investigations and findings as he may deem best for the public interest.
(b)	Timely Response to Borrowers' Complaints and Inquiries. – 
(1)	Timely Commissioner response to borrowers. – The Commissioner shall establish reasonable procedures to provide a timely response to borrowers, in writing where appropriate, to complaints against, or inquiries concerning, a licensee, including all of the following:
a.	Steps that have been taken by the Commissioner in response to the complaint or inquiry of the borrower.
b.	Any responses received by the Commissioner from the licensee.
c.	Any follow‑up actions or planned follow‑up actions by the Commissioner in response to the complaint or inquiry of the borrower.
(2)	Timely response to Commissioner by licensee. – A licensee shall provide a timely response, in writing where appropriate, to the Commissioner concerning a borrower complaint or inquiry, including all of the following:
a.	Steps that have been taken by the licensee to respond to the complaint or inquiry of the borrower.
b.	Responses received by the licensee from the borrower.
c.	Follow‑up actions or planned follow‑up actions by the licensee to respond to the complaint or inquiry of the borrower.
(3)	Provision of information to borrowers. – A licensee shall, in a timely manner, comply with a borrower's written request for information in the control or possession of such licensee concerning the loan transaction,  product, or service that the borrower obtained from such licensee as required by G.S. 53‑181(a), including up to six months of payment history, concerning the account of the borrower. However, nothing in this section shall be construed to require a licensee to make available to the consumer any of the following:
a.	Any confidential commercial information, including an algorithm used to derive credit scores or other risk scores or predictors;
b.	Any information collected by the licensee for the purpose of preventing fraud or money laundering, or detecting or making any report regarding other unlawful or potentially unlawful conduct;
c.	Any information required to be kept confidential by any other provision of law; or
d.	Any nonpublic or confidential information, including confidential supervisory information.
(c)	Commissioner to Develop Pamphlet. – The Office of the Commissioner of Banks shall develop a written pamphlet that explains the rights and responsibilities of consumers who obtain loans from a licensee for distribution in all licensed offices. Such pamphlet shall include the names, mailing or electronic mail addresses, and telephone numbers for the offices in the Office of Commissioner of Banks or the Department of Justice responsible for enforcing the provisions of this Chapter. Such pamphlet shall be given to a borrower at the time a loan is made by a licensee and shall be readily available to all consumers at all times in each licensed office. The Commissioner shall consult with, and seek input from, representatives of consumers, the licensees, and the Attorney General in the development of the pamphlet. Each licensee shall be responsible for reproducing and distributing the pamphlet finally approved and authorized by the Commissioner. The pamphlet developed under this subsection shall be provided to consumers as of January 1, 2012."
SECTION 10.  This act becomes effective October 1, 2011.