A BILL TO BE ENTITLED
AN ACT to clarify how a creditor may enforce an obligation to pay attorneys' fees in a debt instrument and to remove the default rate for these fees, as recommended by the general statutes commission.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 6‑21.2 reads as rewritten:
"§ 6‑21.2.  Attorneys' fees in debt instruments.

	

	

	

(a)	Definitions. – The following definitions apply in this section:
(1)	Creditor. – A person seeking to collect an amount owed pursuant to a debt instrument, including an assignee or debt buyer as defined in G.S. 58‑70‑15(b)(4).
(2)	Debt instrument. – A note, conditional sale contract, lease agreement, credit agreement, or other evidence of indebtedness. The term does not include a residential rental agreement governed by Article 5 of Chapter 42 of the General Statutes.
(3)	Debtor. – A person from which a creditor is seeking to collect an amount owed pursuant to a debt instrument, including a guarantor or accommodation party.
(4)	Person. – An individual, a firm, a partnership, an association, a corporation, a limited liability company, or any other organization or group acting as a unit.
(b)	Scope. – This section applies to debt instruments governed by the law of this State.
(c)	Attorneys' Fees. – An obligation in a debt instrument to pay attorneys' fees is valid and enforceable if a creditor uses an attorney to collect an amount owed pursuant to the debt instrument after a debtor's default and complies with the requirements of this section. If the debt instrument specifies an amount or percentage, a court shall award that amount or percentage. If the debt instrument does not specify an amount or percentage, a court shall award reasonable attorneys' fees. In no case shall an award of attorneys' fees exceed fifteen percent (15%) of the principal and interest owed at the time the lawsuit commenced or, in the case of a conditional sale contract, fifteen percent (15%) of the time price balance owed at the time the lawsuit commenced.
(d)	Notice. – After the debtor has defaulted, the creditor shall give notice to the debtor if the creditor intends to collect attorneys' fees under this section. The creditor shall include in the notice the total amount owed under the debt instrument at that time, excluding attorneys' fees. If the debtor pays this amount or an amount later determined by a court to be owed under the debt instrument at that time, whichever is lesser, within 14 days after the creditor has given the notice, the obligation to pay attorneys' fees becomes unenforceable. This subsection does not apply, however, to a debtor that has defaulted on a secured indebtedness and has refused to surrender possession of the collateral to the creditor under G.S. 25‑9‑609.
(e)	Assignees and Debt Buyers. – If the creditor is an assignee or debt buyer as defined in G.S. 58‑70‑15(b)(4), the creditor shall provide the materials described in G.S. 58‑70‑150 to the court."
SECTION 2.  G.S. 45‑21.31 reads as rewritten:
"§ 45‑21.31.  Disposition of proceeds of sale; payment of surplus to clerk.
(a)	The proceeds of any sale shall be applied by the person making the sale in the following order:
(1)	Costs and expenses of the sale, including the trustee's commission, if any, a reasonable auctioneer's fee if this expense has been incurred, and reasonable counsel fees for an attorney serving as a trustee if allowed pursuant to subsection (a1) of this section.
(2)	Taxes due and unpaid on the property sold, as provided by G.S. 105‑385, unless the notice of sale provided that the property be sold subject to taxes on it and the property was so sold.
(3)	Special assessments, or any installments thereof, against the property sold that are due and unpaid, as provided by G.S. 105‑385, unless the notice of sale provided that the property be sold subject to special assessments on it and the property was so sold.
(4)	The obligation secured by the mortgage, deed of trust, or conditional sale contract.
(a1)	The clerk of the superior court of the county where the sale was conducted may exercise discretion to allow reasonable counsel fees to an attorney serving as a trustee (in addition to the compensation allowed to the attorney as a trustee) if the attorney, on behalf of the trustee, renders professional services as an attorney that are different from the services normally performed by a trustee and of a type that would reasonably justify the retention of legal counsel by a trustee who is not licensed to practice law. Counsel fees are presumed reasonable if they do not exceed fifteen percent (15%) of the obligation. Nothing in this section, however, precludes the clerk of superior court from deeming a higher fee reasonable.
(b)	Any surplus remaining after the application of the proceeds of the sale as set out in subsection (a) of this section shall be paid to the person entitled to it if the person that made the sale knows that person's identity and location. Otherwise, in the following cases, the surplus shall be paid to the clerk of the superior court of the county where the sale was conducted:
(1)	In all cases when the owner of the property sold is dead and there is no qualified and acting personal representative of the owner's estate.
(2)	In all cases when the person that made the sale is unable to locate the person entitled to it.
(3)	In all cases when the person that made the sale is, for any cause, in doubt as to who is entitled to the surplus money.
(4)	In all cases when adverse claims to it are asserted.
(c)	Payment to the clerk pursuant to subsection (b) of this section discharges the person that made the sale from liability to the extent of the amount so paid.
(d)	The clerk shall execute a receipt for money received under this section.
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SECTION 3.  This act becomes effective October 1, 2024, and applies to debt instruments executed on or after that date.