A BILL TO BE ENTITLED
AN ACT to modernize the loan origination fee for north carolina banks and to adjust the late payment charge for certain loans.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 24‑1.1 reads as rewritten:
"§ 24‑1.1.  Contract rates and fees.
(a)	Except as otherwise provided in this Chapter or other applicable law, the parties to a loan, purchase money loan, advance, commitment for a loan, or forbearance, other than a credit card, open‑end, or similar loan, may contract in writing for the payment of interest not in excess of the following:
(1)	Where the principal amount is twenty‑five thousand dollars ($25,000) or less, the rate set under subsection (c) of this section.
(2)	Any rate agreed upon by the parties where the principal amount is more than twenty‑five thousand dollars ($25,000).
(b)	As used in this section, interest shall not be deemed in excess of the rates provided where interest is computed monthly on the outstanding principal balance and is collected not more than 31 days in advance of its due date. Nothing in this section authorizes the charging of interest on committed funds prior to the disbursement of the funds.
(c)	On the fifteenth day of each month, the Commissioner of Banks shall announce and publish the maximum rate of interest permitted by subdivision (1) of subsection (a) of this section on that date. The rate shall be the latest published noncompetitive rate for U.S. Treasury bills with a six‑month maturity as of the fifteenth day of the month plus six percent (6%), rounded upward or downward, as the case may be, to the nearest one‑half of one percent (1/2 of 1%) or sixteen percent (16%), whichever is greater. If there is no nearest one‑half of one percent (1/2 of 1%), the Commissioner shall round downward to the lower one‑half of one percent (1/2 of 1%). The rate so announced shall be the maximum rate permitted for the term of loans made under this section during the following calendar month when the parties to the loans have agreed that the rate of interest to be charged by the lender and paid by the borrower shall not vary or be adjusted during the term of the loan. The parties to a loan made under this section may agree to a rate of interest that shall vary or be adjusted during the term of the loan in which case the maximum rate of interest permitted on the loans during a month during the term of the loan shall be the greater of the rate announced by the Commissioner in (i) the preceding calendar month or (ii) the calendar month preceding that in which the rate is varied or adjusted.
(d)	Any bank or savings institution organized under the law of North Carolina or of the United States may charge a party to a loan or extension of credit governed by this section a fee for the modification, renewal, extension, or amendment of any terms of the loan or extension of credit. The fee shall not exceed the greater of one‑quarter of one percent (1/4 of 1%) of the balance outstanding at the time of the modification, renewal, extension, or amendment of terms, or fifty dollars ($50.00).
(e)	Any bank or savings institution organized under the law of North Carolina or of the United States may charge a party to a loan or extension of credit not secured by real property governed by this section an origination fee as follows:
(1)	For a loan or extension of credit with a principal amount of one hundred thousand dollars ($100,000) or greater, the maximum origination fee is one quarter of one percent (1/4 of 1%) of the principal amount. 
(2)	For a loan or extension of credit with a principal amount less than one hundred thousand dollars ($100,000), the origination fee shall not exceed the amounts in the following table:
Principal Amount	Maximum Origination Fee
$0 to $1,499.99	$100.00
$1,500 to $19,999.99	$150.00
$20,000 to $29,999.99	$175.00
$30,000 to $49,999.99	$200.00
$50,000 to $99,999.99	$250.00
(3)	A loan or extension of credit with a principal amount less than five thousand dollars ($5,000) shall not have an annual percentage rate that exceeds thirty‑six percent (36%), inclusive of the charges permitted by this subsection and the interest rate provisions in subsection (c) of this section. For purposes of this subdivision, "annual percentage rate" is calculated using the standards established by the federal Truth In Lending Act (Title 1 of Public Law 90‑321; 82 Stat. 146; 15 U.S.C. § 1601, et seq.) and all regulations and rulings issued pursuant to that Act, as the same may be amended from time to time. This subdivision only applies where the borrower is a natural person and the debt is incurred primarily for personal, family, or household purposes.
(f)	This section does not limit fees on loans or extensions of credit in excess of three hundred thousand dollars ($300,000)."
SECTION 2.  G.S. 24‑10.1 reads as rewritten:
"§ 24‑10.1.  Late fees.
(a)	Subject to the limitations contained in subsection (b) of this section, any lender may charge a party to a loan or extension of credit governed by G.S. 24‑1.1 or G.S. 24‑1.1A a late payment charge as agreed upon by the parties in the loan contract.
(b)	All of the following limitations apply to a late payment charge:
(1)	A late payment charge shall not exceed any of the following:
a.	The amount disclosed with particularity to the borrower pursuant to the Federal Consumer Credit Protection Act if that act applies to the transaction.
b.	For a loan or extension of credit that meets all of the following conditions, the greater of thirty‑five dollars ($35.00) or four percent (4%) of the amount of the payment past due:
1.	The loan or extension of credit is made by a bank or savings institution organized under the law of North Carolina or of the United States.
2.	The loan or extension of credit is not secured by real property.
3.	The loan or extension of credit is governed by G.S. 24‑1.1.
4.	The loan or extension of credit has an original principal balance greater than or equal to one thousand five hundred dollars ($1,500).
c.	For any other type of loan or extension of credit governed by G.S. 24‑1.1 or G.S. 24‑1.1A, four percent (4%) of the amount of the payment past due.
	
(3)	A late payment charge shall not be charged unless one of the following is true:
a.	The payment is 30 days past due or more for a loan on which interest on each installment is paid in advance.
b.	The payment is 15 days past due or more for any other loan.
(4)	A late payment charge shall not be charged more than once with respect to a single late payment. If a late payment charge is deducted from a payment made on the contract and the deduction results in a subsequent default on a subsequent payment, no late payment charge shall be imposed for the default. If a late payment charge has been once imposed with respect to a particular late payment, no late payment charge shall be imposed with respect to any future payment that would have been timely and sufficient but for the previous default. However, when a borrower fails to make an installment payment, and the terms of the loan agreement provide that subsequent payments shall first be applied to the past due balance, and the borrower resumes making installment payments but has not paid all past due installments, then the lender may enforce the contract according to its terms, imposing a separate late payment charge for each installment that becomes due until the default is cured.
(5)	A late payment charge shall not be charged on any loan that by its terms calls for repayment of the entire balance in a single payment and not for installments of interest or principal and interest.
(6)	A late payment charge shall not be charged unless the lender notifies the borrower within 45 days following the date the payment was due that a late payment charge has been imposed for a particular late payment which late payment must be paid unless the borrower can show that the installment was paid in full and on time. No late payment charge shall be collected from any borrower if the borrower informs the lender that non‑payment of an installment is in dispute and presents proof of payment within 45 days of receipt of the lender's notice of the late charge.
(c)	The provisions of this subsection apply only to home loans made by lenders described in G.S. 24‑1.1A(a)(2). Notwithstanding that the note or other loan document sets forth a late payment charge in excess of that permitted in this section, the loan is not unlawful if all of the following are true:
(1)	No late fee in excess of those permitted in this section has been assessed or collected by the lender.
(2)	One of the following is true:
a.	If the loan is executed on or after July 14, 1993, the lender provides written notice to the borrower within 90 days of the date of execution of the loan documents that the late payment charge with respect to the loan shall be four percent (4%) or less.
b.	If the loan was executed prior to July 14, 1993, the lender provides written notice to the borrower within six months of that date that the late payment charge with respect to the loan shall be four percent (4%) or less."
SECTION 3.  This act becomes effective October 1, 2018, and applies to contracts entered into, renewed, or modified on or after that date.