GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1997

S	1 

SENATE BILL 777

Short Title:  Adjust Interest Rates and Loan Ceilings.   	(Public)

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Sponsors: Senator Lee.

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Referred to:  Commerce.

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April 9, 1997

A BILL TO BE ENTITLED
AN ACT TO ALLOW LICENSEES TO ADJUST CERTAIN INTEREST RATES AND LOAN CEILINGS, TO COLLECT ATTORNEY FEES AND COURT COSTS IN THE CASE OF DEFAULT, AND TO MAINTAIN RECORDS IN THE FORM OF OPTICAL IMAGING.
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 twenty-five thousand dollars ($25,000) 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, 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. 53-176 reads as rewritten:
"§ 53-176.  Optional rates, maturities and amounts.
In lieu of making loans in the amount and at the charges stated in G.S. 53-173 and for the terms stated in G.S. 53-180, a licensee may at any time elect to make loans in installments not exceeding twenty-five thousand dollars ($25,000) and which shall not be repayable in less than six months or more than 84 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. On the part of the unpaid balance not exceeding five thousand dollars ($5,000), interest shall not exceed the actuarial rate of twenty-nine percent (29%) per annum. On the remainder of the unpaid balance, interest shall not exceed the actuarial rate of eighteen percent (18%) per annum. 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.
	In addition to the interest permitted in this section, a licensee may assess at closing a reasonable credit investigation charge as agreed upon by the parties, not to exceed the actual cost of the credit investigation; provided that such charges may not be assessed more than twice in any 12-month period. The Commissioner of Banks may review charges assessed pursuant to this section and may adopt appropriate rules in accordance with G.S. 53-185.
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.
Any licensee under this Article shall have the right to elect to make loans in accordance with this section by the filing of a written statement to that effect with the Commissioner and on date of such notification begin making loans regulated by this section for the following 12 months. Annually after such election a licensee may elect to make loans in accordance with this section unless the licensee notifies in writing the Commissioner of its intention to terminate such election.
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.
No individual, partnership, or corporate licensee and no corporation which is the parent, subsidiary or affiliate of a corporate licensee that is making loans under this Article except as authorized in this section, shall be permitted to make loans under the provisions of this section. Any corporate licensee or individual or partnership licensee that elects to make loans in accordance with the provisions of this section shall be bound by that election with respect to all of its offices and locations in this State and all offices and locations in this State of its parent, subsidiary or affiliated corporate licensee, or with respect to all offices and locations in this State."
Section 3.  G.S. 53-180(e) reads as rewritten:
"(e)	Limitation on Attorney's Fees. – With respect to a loan made pursuant to the provisions of G.S. 53-173, the agreement may not provide for payment by the borrower of attorney fees, except court and collection costs in the case of default by the borrower."
Section 4.  G.S. 53-182(b) reads as rewritten:
"(b)	Upon payment of any loan in full, a licensee shall cancel and return to the borrower, within a reasonable length of time, originals or copies of any note, assignment, mortgage, deed of trust, or other instrument securing the loan, which no longer secures any indebtedness of the borrower to the licensee."
Section 5.  G.S. 53-184(a) reads as rewritten:
"(a)	Each licensee shall maintain all books and records relating to loans made under this Article required by the Commissioner of Banks to be kept, and the Commissioner, the Commissioner's deputy, or duly authorized examiner or agent or employee is authorized and empowered to examine the records at any reasonable time. Books and records may be maintained in the form of magnetic tape, magnetic disk, optical image disk, or other form of computer, electronic or microfilm media available for examination on the basis of computer printed reproduction, video display or other medium acceptable to the Commissioner of Banks; provided, however, that the books and records so kept must be convertible into clearly legible tangible documents within a reasonable time. Any licensee having more than one licensed office may maintain the required books and records at a location other than the licensed office location if the location is approved by the Commissioner; provided that, the Commissioner of Banks may require that there shall be available to the borrower at each licensed location or such other location convenient to the borrower, as designated by the licensee, complete loan information; and provided further that the books and records of each licensed office shall be clearly segregated.  When a licensee maintains its books and records outside of North Carolina, the licensee shall make them available for examination at the place where they are maintained and shall pay for all reasonable and necessary expenses incurred by the Commissioner in conducting such examination. Where the data processing for any licensee is performed by a person other than the licensee, the licensee shall provide to the Commissioner of Banks a copy of a binding agreement between the licensee and the data processor which allows the Commissioner of Banks, the Commissioner's deputy, or duly authorized examiner or agent or employee to examine that particular data processor's activities pertaining to the licensee to the same extent as if such services were being performed by the licensee on its own premises; and, notwithstanding the provisions of G.S. 53-167 and 53-122, when billed by the Commissioner of Banks, the licensee shall reimburse the Commissioner of Banks for all costs and expenses incurred by the Commissioner in the examination."
Section 6.  This act becomes effective October 1, 1997, and applies to contracts entered into on or after that date.