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. 53‑166(a) reads as rewritten:
"(a)	Scope. – No person shall engage in the business of lending in amounts of fifteen thousand dollars  ($15,000) 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."
SECTION 2.  G.S. 53‑172(a) reads as rewritten:
"(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, 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 a 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.  Maximum rate of interest and fee; computation of interest; limitation on interest after judgment; limitation on interest after maturity of the loan.
(a)	Maximum Rate of Interest. – Every licensee under this section may make loans in installments not exceeding three thousand dollars ($3,000) in amount, at interest rates not exceeding thirty‑six percent (36%) per annum on the outstanding principal balance of any loan not in excess of one thousand five hundred dollars  ($1,500) and fifteen percent (15%) per annum on any remainder of such 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.
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(g)	Limitations on Loans to Individual Borrowers. – 
(1)	No loan shall be made to a borrower before the 91st day after the origination of an existing loan made under this section, nor with less than fifty percent (50%) of the indebtedness of the existing loan reduced in the current balance, unless the borrower receives the greater of one hundred dollars ($100.00) or twenty percent (20%) in cash in excess of the principal amount of the original loan.
(2)	No licensee shall make a loan under this section to repay an existing loan under this section with the licensee without providing a notice, approved by the Commissioner, explaining the benefits of disciplined consistent repayment of installment credit and the potential of increasing costs when obtaining a new loan before final payment.
(3)	A licensee under this section must accept and credit semimonthly and weekly payments from borrowers made before regularly scheduled payments are due and also provide, at the time the loan is made, an example of the potential savings that could occur as a result of more frequent payments.
(4)	No licensee 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."
SECTION 4.   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 loans in installments 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)	Thirty percent (30%) per annum on that part of the unpaid principal balance not exceeding five thousand dollars ($5,000).
(1a)	Twenty‑four percent (24%) per annum on the unpaid principal balance not exceeding ten thousand dollars ($10,000).
(1b)	Eighteen percent (18%) per annum 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.
	
(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 twenty‑five dollars ($25.00) for loans up to two thousand five hundred dollars ($2,500) and one percent (1%) of the cash advance for loans above two thousand five hundred dollars ($2,500), not to exceed a total fee of forty dollars ($40.00), provided that such charges may not be assessed more than twice in any 12‑month period.
(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.
	
(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.
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SECTION 5.  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 for any payment which remains past due for 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 ten dollars ($10.00).
b.	For loans made pursuant to G.S. 53‑176, greater than fifteen dollars ($15.00).
c.	More than once with respect to a single late payment.
(c)	Deferral Charges. – A licensee may, by agreement with the borrower, collect a deferral 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 6.  G.S. 53‑179 reads as rewritten:
"§ 53‑179.  Multiple‑office loan limitations.
A licensee shall not grant a loan in one office to any borrower who already has a loan in another office operated by the same entity or by an affiliate, parent, subsidiary or under the same ownership, management or control, whether partial or complete. This section shall apply to intrastate and interstate operations. A licensee shall take every reasonable precaution to prevent granting loans in violation of this section. Subject to the limitation contained in G.S. 53‑173(g)(4), loans granted inadvertently resulting in a total liability of three thousand dollars ($3,000) or less, shall be adjusted to the rates applicable under the Article to a single loan of equivalent amount, and when the total liability on such loans is in excess of three thousand dollars ($3,000), interest shall be adjusted to simple interest at eight percent (8%) per annum on the entire obligation."
SECTION 7.(a)  There is created the North Carolina Legislative Study Commission on Improvement in Small-Dollar Lending. The purpose of the Commission is to determine what measures the General Assembly may undertake to appropriately update G.S. 53-173 of the North Carolina Consumer Finance Act.
SECTION 7.(b)  The Commission shall consist of the following 16 members:
(1)	Five members of the House of Representatives appointed by the Speaker of the House of Representatives.
(2)	Five members of the Senate appointed by the President Pro Tempore of the Senate.
(3)	One member of the consumer finance industry, one member of a consumer advocacy organization, and one member representing a State‑chartered bank, each appointed by the Speaker of the House of Representatives.
(4)	One member of the consumer finance industry, one member of a consumer advocacy organization, and one member representing a State-chartered credit union, each appointed by the President Pro Tempore of the Senate. 
SECTION 7.(c)  The Speaker of the House of Representatives shall designate one representative as co-chair and the President Pro Tempore of the Senate shall designate one senator as co-chair. The Commission shall meet upon the call of the co-chairs. Vacancies on the Commission shall be filled by the same appointing authority as made the initial appointment. A quorum of the Commission shall be a majority of its members.
SECTION 7.(d)  The Commission shall study the following issues related to designating appropriate features for a small-dollar loan product and the economic requirements for market sustainability and availability for loans made under G.S. 53-173 of the North Carolina Consumer Finance Act:
(1)	Appropriate features of small dollar installment loans for consumer safety and accountability; that is transparency, fairness, transaction structure, and sustainability for individuals borrowing funds under this section.
(2)	The costs of operations and economic sustainability for the consumer finance industry and its impact on the availability and delivery of small dollar loan products under this section, with specific emphasis on loans under $3,000.
(3)	Appropriate ceiling of the maximum dollar amount to be lent to an individual consumer under this section.
(4)	What, if any, are appropriate restrictions on pricing or transaction fees under this section to encourage safety, responsibility, competition, and availability.
(5)	Any other matters the Commission considers necessary in furtherance of the purpose for which it is established.
SECTION 7.(e)  Members of the Commission shall receive per diem, subsistence, and travel allowances in accordance with G.S. 120‑3.1, 138‑5, or 138‑6, as appropriate. The Commission, while in the discharge of its official duties, may exercise all powers provided for under G.S. 120‑19 and G.S. 120‑19.1 through G.S. 120‑19.4. The Commission may meet in the Legislative Building or the Legislative Office Building.
With approval of the Legislative Services Commission, the Legislative Services Officer shall assign professional staff to assist the Commission in its work. The House of Representatives' and the Senate's Directors of Legislative Assistants shall assign clerical staff to the Commission, and the expenses relating to the clerical employees shall be borne by the Commission. The Commission may contract for professional, clerical, or consultant services as provided by G.S. 120‑32.02. If the Commission hires a consultant, the consultant shall not be a State employee or a person currently under contract with the State to provide services.
All State departments and agencies and local governments and their subdivisions shall furnish the Commission with any information in their possession or available to them.
SECTION 7.(f)  The Commission shall report the results of its study and its recommendations, including any proposed legislative changes, to the 2012 Regular Session of the 2011 General Assembly. The Commission shall terminate on May 1, 2012, or upon the filing of its final report, whichever occurs first.
SECTION 7.(g)  This section becomes effective when it becomes law.
SECTION 8.  G.S. 53‑180 is amended by adding a new subsection to read:
"(l)	Exception for Military Borrowers. – A licensee may not make a loan to a borrower who is a military service member unless the military service member obtains a written authorization signed by the service member's company commander. A licensee must include a clear and concise statement in the loan documentation advising the borrower that military service members must identify themselves as service members and must obtain written authorization from their company commander before entering a loan agreement. The licensee shall retain a copy of the borrower's military ID card and the company commander's written authorization in the borrower's loan file. The borrower must attest (i) that he or she is or is not a military service member, (ii) that if the borrower is a military service member, he or she has obtained a written authorization from the company commander to enter the loan agreement, and (iii) that all information presented to the licensee pertaining to the requirements of this subsection is true and accurate to the best of the borrower's knowledge. For the purpose of this subsection "military service member" includes only a person on active duty."
SECTION 9.  This act becomes effective October 1, 2011.