A BILL TO BE ENTITLED
AN ACT to modify the maximum interest rate allowed and to make various amendments to the north carolina consumer finance act to ensure continued access to credit.
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, payments to, or payments for an insurance company licensed in North Carolina and arising in any way from a nonfiling or nonrecording 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.  Computation of interest; application of payments; limitation on interest after judgment; limitation on interest after maturity of the loan.

(b)	Computation of Interest. – Interest on loans made pursuant to this section shall not be paid, deducted, or received in advance. Such interest shall not be compounded but interest on loans shall (i) be 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; provided, 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 have accrued within 90 days before the making of the new loan contract. For the purpose of computing interest, a day shall equal 1/365th of a year.
(b1)	Application of Payments. – Any payment made on a loan shall be applied first to late charges and other permissible charges under this Article, then to any accrued interest, and then to principal. Any portion or all of the principal balance may be prepaid at any time without penalty.
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SECTION 4.  G.S. 53‑176 reads as rewritten:
"§ 53‑176.  Rates, maturities and amounts.
(a)	A licensee may make loans in installments not exceeding fifteen thousand dollars ($15,000) and which shall not be repayable in less than 12 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).
(2)	Twenty‑four percent (24%) per annum on that part of the unpaid principal balance exceeding five thousand dollars ($5,000) but not exceeding ten thousand dollars ($10,000).
(3)	Eighteen percent (18%) per annum on that part of 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 fee for any payment which remains past due for 10 days or more after the due date.
(2)	No licensee may charge a late payment fee in an amount greater than fifteen dollars ($15.00) nor charge a late payment fee 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 part of one or more installments under an existing loan contract as permitted in the provisions of G.S. 25A‑30.
(d)	Insurance Policy. – If a licensee, in lieu of recording, collects a fee to purchase a nonfiling or nonrecording insurance policy as authorized under subsection (a) of this section, to be valid, any claim arising from such policy shall only be used to compensate the licensee for damages arising from failure to record or file its security interest in accordance with Article 9 of Chapter 25 of the General Statutes. Following payment of such claim, the licensee shall do the following:
(1)	Properly credit the full claim amount posted to the balance of the loan effective the date the proceeds were received.
(2)	Close the loan account and cease collection efforts on any loan that was paid in full by a claim.
(3)	Provide the borrower written notice, unless otherwise prohibited by federal law, that (i) the claim has been partially paid or paid in full and (ii) to the extent the loan is subject to the insurance company's subrogation rights, instructions about direction of future payments.
(4)	Cancel of record or properly credit, as appropriate, any judgments against the borrower arising from the loan and, if the judgment has been paid in part, file a certificate of partial satisfaction.
(5)	Accurately report any account adjustments to any credit bureau used by the licensee."
SECTION 6.  G.S. 53‑180 reads as rewritten:
"§ 53‑180.  Limitations and prohibitions on practices and agreements.
(a)	Time and Payment Limitation. – Every loan contract shall provide for repayment of the amount loaned in substantially equal installments, either of principal or of principal and charges in the aggregate, 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 contract.
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(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 fails to maintain contractually required insurance coverage 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.
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(e)	Limitation on Attorney's Fees. – With respect to a loan made pursuant to the provisions of G.S. 53‑176, the agreement may not provide for payment by the borrower of attorney fees.
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SECTION 7.  Article 15 of Chapter 53 of the General Statutes is amended by adding a new section to read:
"§ 53‑180.1.  Military service members limitation.
(a)	Definition. – For purposes of this section, the term "military service member" means a member of the armed forces who is either (i) on active duty under a call or order that does not specify a period of 30 days or fewer or (ii) on active Guard and Reserve Duty, as that term is defined in 10 U.S.C. § 101(d)(6).
(b)	Verification; Requirements for Granting Loan. – Prior to making a loan under this Article, a licensee will confirm whether the borrower is a military service member and document this in the person's loan file. A licensee may not make a loan to a borrower who is a military service member with a rank of E4 or below unless the following requirements are met:
(1)	The licensee notifies the borrower's company-level commander or the company-level commander's equivalent designee before the loan is consummated. Notification may occur verbally, by electronic means, United States mail, or other equivalent methods of notification. The notification method and date shall be recorded in writing and included in the loan file along with the name of the company-level commander or equivalent designee communicated with and the date of the communication with the company-level commander or equivalent designee.
(2)	The licensee shall deposit in the United States mail a copy of the federal Truth in Lending Act, 15 U.S.C. § 1601, et seq., disclosures and the complete contract for the loan addressed to the borrower's company-level commander or equivalent designee within five business days of the consummation of the loan.
(3)	A military service member who has entered into a loan contract made pursuant to this Article may, within 30 days of entering into the loan contract, rescind the loan contract by returning to the licensee in cash or by certified bank check the amount advanced to or for the benefit of the military service member under the loan contract, and upon delivery of those funds to the licensee, the borrower shall have no further liability or obligations under the loan contract. Nothing in this provision shall be construed to restrict or eliminate any other penalties provided by State or federal law.
(4)	The licensee shall give the military service member a separate disclosure that includes the statements and information required under G.S. 53‑181(a). The licensee shall include the name and address of the North Carolina Commissioner of Banks, the Consumer Protection Division of the North Carolina Department of Justice, and the Consumer Financial Protection Bureau. The licensee may include internal compliance information on the same disclosure.
(5)	Notwithstanding Section 2 of Title 9 of the United States Code, 9 U.S.C. § 2, or any other federal or State law, rule, or regulation, no agreement to arbitrate any dispute involving the extension of consumer credit shall be enforceable against any military service member or dependent of such a member or any person who was a military service member or dependent of that member when the agreement was made.
(6)	A licensee shall take reasonable precaution to prevent making loans in violation of this section. In the event that a licensee does not take reasonable precautions to identify military service members prior to making a loan, such loans granted to military service members shall have the interest rate on the loan adjusted to eight percent (8%) per annum.
(c)	Penalties and remedies. –
(1)	The remedies and rights provided under this section are in addition to and do not preclude any remedy otherwise available under law to the person claiming relief under this section, including any incidental, consequential, or punitive damages.
(2)	Except as provided in subdivision (6) of subsection (b) of this section, any credit agreement, promissory note, or other contract prohibited under this section is null and void.
(3)	Nothing in this section may be construed to limit or otherwise affect the applicability of Section 207 of the Servicemembers Civil Relief Act, 50 U.S.C. App. § 527.
(d)	Additional Restriction. – When a military service member has been deployed to a theater of combat, a licensee shall not contact the military service member by telephone or electronic mail for purposes of collecting on the loan upon receiving sufficient proof of the military service member's deployment. An official copy of the military service member's orders for deployment shall constitute sufficient proof."
SECTION 8.  This act becomes effective July 1, 2013.