North Carolina Consumer Finance Bill Passes Out of Committee

A bill to adjust North Carolina’s Consumer Finance Act (H810) passed out of committee on a 15-6 vote yesterday. The vote, which came on last-minute notice on Wednesday evening, will increase the maximum loan amounts for short-term unsecured loans in the state. The bill also gives lenders the right to charge a 5 percent processing fee on all loans.

The bill has been the subject of a lot of press attention. There is a short report from Americans For Prosperity which summarizes some of the views held by the bill’s supporters.Here is a study written by the North Carolina Credit and Personal Finance Council that defends the bill. Al Ripley, an attorney for the NC Justice Center, offers this retort.

A garrison commander from Fort Bragg, Col. Stephen Sicinski, has traveled to Raleigh to campaign against the bill. Sicinski says that some of his troops have been victimized when their families took out these high-cost loans while a father or mother served overseas.

A 2010 research report, authorized by a study bill, describes some of the on-the-ground statistics about consumer finance lending in North Carolina. According to Mark Pearce, the former assistant Commissioner of Banks and now the Director of Consumer Protections at the FDIC, fewer lenders are making more loans. That is interesting, because it matches similar findings of a recent report about California’s payday loan industry.

Jeff Joyner, an employee of the financial data firm FirstPoint Resources, identified some demographic data about consumer finance loan customers. His findings said that 5.92 percent of North Carolinians have used one of these loans. Interestingly, most of these consumers seem to have other sources for credit: 62 percent had a mortgage, 85 percent had a credit card, 70 percent had taken out an automobile loan in the last seven years, and 83 percent had a banking relationship. Those are important numbers. They say two things – for one, these borrowers aren’t that much different than most North Carolinians, and two, they already have access to credit.

North Carolina has a strict rule that outlaws payday loans. These loans are not payday loans, because they do1 not use future paychecks as collateral.

The bill will be read before the full legislature shortly. It may come to a full vote soon.