North Carolina Timeline

Policy Name: North Carolina “Mini-Federal Trade Commission” Act

Date: Enacted 1969; last revised 2019

Code Location: Chapter 75 of North Carolina General Statutes: Monopolies, Trust, and Consumer Protection. (N.C. G.S. §75.)

 Summary:

Chapter 75 of the North Carolina General Statutes is another important piece of legislation within North Carolina’s consumer protection regime, and is based on the structure of federal anti-deception law enshrined in the Federal Trade Commission Act. Many of North Carolina’s consumer protection laws, such as the North Carolina Predatory Lending Law, reference this statute in order to identify malpractice or determine punitive measures. In 2010, the legislature added Article 5A to Chapter 75, which outlawed home foreclosure rescue scams in North Carolina.

The statute outlines a three-step process for taking legal action against unfair and deceptive trade practices: (1) determine if the case in question is in or affecting commerce; (2) determine if the practice is unfair or deceptive; (3) and rule on the injury of the claimant. The North Carolina Attorney General may raise a civil claim or criminal charge under this statute against buyers or sellers.

Policy Name: Legislation Regulating Home Loan Rates Secured by First Mortgages

Date: Enacted 1973; last revised 2014

Code Location: Section A of Article 1.1. of Chapter 24 of North Carolina General Statutes: Contract rates on home loans secured by first mortgages or first deeds of trust. (N.C. G.S. §24-1.1A.)

 Summary:

N.C. G.S. §24-1.1.A. provides protections for homeowners by setting limits on interest payments for first-lien mortgages, establishing provisions for amortization schedules and payment deferrals on home loans, and outlining the types of fees lenders may charge. The legislature preserved these provisions under the 1999 North Carolina Predatory Lending Law and added new provisions related to certain mortgage terms and practices.

This section also establishes the “Commissioner’s Rate,” or the maximum allowable interest rate on home loans. The North Carolina Commissioner of Banks announces this interest rate monthly on the basis of the noncompetitive rate for U.S. Treasury bills.

Policy Name: North Carolina Predatory Lending Law

Date: Signed July 22, 1999; effective July 1, 2000

Bill Information: Session Law 1999-332, Senate Bill 1149

Code Location: N.C. G.S. §24-1.1A, §24-1.1E, §24-10.2

 Summary:

The North Carolina Predatory Lending Law amended Chapter 24 of the North Carolina General Statutes – North Carolina’s usury law – to provide comprehensive protections against predatory lending. Upon the bill’s enactment in 1999, North Carolina became the first state to enact predatory lending protections.

The law introduced general protections that apply to all mortgages, defined a new category of “high-cost” home loans, and imposed restrictions upon “high-cost” home loan terms. The law also outlawed prepayment penalties on mortgages, balloon payments for “high-cost” home loans, and lending without the consideration of a borrower’s ability to repay. These standards provided stronger protections than the federal protections in the 1994 Home Ownership and Equity Protection Act.

The law vested enforcement authority to the North Carolina Attorney General and the North Carolina Office of the Commissioner of Banks (NCOCB). As the first state legislative response to predatory lending, and in combination with enforcement actions by the NC Attorney General’s Office and the NCOCB, this law bolstered North Carolina’s regulatory capacity. For further analysis on this legislation, please read our policy memo on the North Carolina Predatory Lending Law.

Policy Name: Consumer Home Loan Protection Provisions of Predatory Lending Act

Date:  Enacted in 1999; last revised in 2007

Code Location: Article 10.2 of Chapter 24 of North Carolina General Statutes: Consumer protections in certain home loans. (N.C. G.S. § 24-10.2)

Summary:

The North Carolina Predatory Lending Law established Article 10.2 of Chapter 24 of the North Carolina General Statutes. This article protects homeowners by prohibiting the predatory practice of loan flipping – the practice of refinancing a loan when that transaction provides no net benefit to the borrower. Predatory lenders rely on loan flipping to generate fees and strip equity from a borrower’s home.

Article 10.2 of Chapter 24 declares loan flipping as “usurious” in violation of Chapter 24 and unlawful as an unfair or deceptive act in violation of Chapter 75.

Policy Name: High Cost Loan Provisions of the Predatory Lending Act

Date: Enacted in 1999; last revised in 2013

Code Location: Section E of Article 1.1 of Chapter 24 of the North Carolina General Statutes: Restrictions and limitations on high-cost home loans. (N.C. G.S.§ 24-1.1E.)

 Summary:

The North Carolina Predatory Lending Law established Section E of Article 1.1 of Chapter 24 of the North Carolina General Statutes. Section E defines “high-cost” loans and sets limitations on these loans, in order to protect homeowners. This section establishes an interest rate threshold as well as a threshold for points, fees, and charges. Under Section E, a loan that crosses either threshold is considered a “high-cost” loan and subject to increased limitations.

The limitations on “high-cost” loans forbade balloon payments, negative amortization, increased interest rates, and other predatory practices. This section also establishes affirmative protections that benefit homeowners, such as mandating home-ownership counseling and the consideration of the borrower’s ability to repay.

Policy Name: North Carolina Mortgage Lending Act

Date: August 29, 2001 (signed); July 1, 2002 (effective)

Bill Information: Session Law 2001-393, Senate Bill 904

Code Information: formerly Section A of Article 19 of Chapter 53 of the North Carolina General Statues: Mortgage Lending Act. (N.C. G.S. § 53-19A)

Summary:

The North Carolina Mortgage Lending Act (MLA) amended Article 19 of Chapter 53 of the North Carolina General Statutes. Enacted a few years after the North Carolina Predatory Lending Law in 1999, the MLA sought to protect North Carolina homeowners from abusive lending practices by strengthening the loan underwriting process.

This law set new licensing standards for mortgage bankers, mortgage brokers, and mortgage loan officers in North Carolina. These requirements included an application that mandated truthful answers to questions about an applicant’s financial condition, relevant qualifications, and criminal history. Additionally, this law required mortgage brokers to make reasonable efforts to secure “reasonably advantageous” loans for the borrower. Lastly, the MLA prohibited several practices within the mortgage industry, including brokering a loan without a license, misrepresenting facts regarding a mortgage, and failing to deliver money in a timely manner.

This law also granted the North Carolina Commissioner of Banks broad enforcement powers, such as the power to impose monetary penalties and suspend or revoke mortgage licenses. In 2009, the Secure and Fair Enforcement (SAFE) Mortgage Licensing Act repealed and replaced the MLA.

Policy Name: Home Loan Spread Provisions of Predatory Lending Act

Date: Enacted in 2007; last revised 2013

Code Location: Section F of Article 1.1 of Chapter 24 of the North Carolina General Statutes: Rate spread home loans. (N.C. G.S.§ 24-1.1F.)

 Summary:

Section F of Article 1.1 of Chapter 24 protects homeowners by defining rate spread home loans as “usurious” in violation of Chapter 24. Section F defines a rate spread home loans as a loan that has an annual percentage rate that exceeds the limits set out in 15 U.S.C. § 1639c(c)(1)(B)(ii). In essence, a rate spread home loan has an annual percentage rate that exceeds the average prime offer rate for a comparable transaction by a certain amount depending on the loan type.

Under Section F, a mortgage broker who brokers a rate spread home loan shall be held jointly liable with the mortgage lender. This section grants the North Carolina Attorney General, the Commissioner of Banks, or any party to a rate spread home loan the power to enforce the provisions of this section. Lastly, Section F also prohibits creditors from offering consumers a residential mortgage loan product that has a prepayment penalty for paying all or part of the principal.

In 2013, the legislature amended Section F to adjust the triggers for a predatory loan classification. This adjustment brought Section F in line with the federal standards set by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.