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Banking industry seeks higher fees on North Carolina loans

June 8, 2018

RALEIGH, N.C. (AP) — North Carolina’s banking industry wants the power to charge higher lending fees because it says locally based banks are at a disadvantage compared with banks chartered in other states issuing similar consumer loans.

But consumer advocates are worried the marked increases advanced through a General Assembly committee this week could unintentionally invite the kind of out-of-state predatory lending they’ve beaten back over the years.

The legislation involves loan origination and late payment fees that supporters say have not changed substantially since the early 1990s. The fees apply to state-chartered banks issuing non-real estate loans of up to $300,000.

Currently, the maximum origination fee is the greater of $50 or 0.25 percent of the loan principal. The legislation would raise the maximum origination fee for the lowest loan amounts — up to $19,999 — to $150. The maximum would rise incrementally, hitting $250 for loans from $50,000 to $99,999. Borrowers of even higher loan amounts would face the same top origination fee as before.

Republican Sen. Joyce Krawiec of Forsyth County, who is shepherding the bill through the chamber, told colleagues the current $50 maximum on many loans isn’t enough for banks to recover the expense of initiating them.

Krawiec and others say that means the banks are losing business to banks chartered in other states or that hold national charters, which can charge fees based on regulations they follow in other states, even if they are issuing the loan in North Carolina. Payment late fees are now equal to 4 percent of the payment amount due. The legislation would change it to the greater of 4 percent or $35 — a move that would affect people making the smallest payments most.

The North Carolina Bankers Association spoke for the legislation, with association attorney Nathan Batts citing general inflation and higher banking costs thanks to increased industry regulation.

“It is not fair for North Carolina banks to be at a disadvantage for doing business in North Carolina,” Ches McDowell, a lobbyist for Winston-Salem-based BB&T Corp., told the committee. Sheffield Financial, a BB&T subsidiary that focuses on consumer loans for all-terrain vehicles, snowmobiles and boats is seeking the changes, Krawiec said.

Al Ripley with the North Carolina Justice Center, which represents low-income citizens, urged caution with the proposal, which he said is wide-reaching and affects all kinds of consumer loans, including those for automobiles. He was particularly worried about how loans of only $500 or $1,000, if issued, could now have $150 fees attached to them.

Payday lending retail outlets have been shut down in North Carolina. But Ripley said the proposal could appeal to out-of-state banks that would purchase a North Carolina-chartered bank to be able to offer these smaller loans because of the enticement of high fees.

The bill is “opening a large playing field that could be potentially let some really harmful lending practices into our state,” Ripley said.

The Senate Commerce Committee recommended Thursday the bill on a voice vote, with some opposition. In response to a senator’s question, Krawiec said she was willing to review fee details. The bill was expected to receive more debate Monday in another committee. The House has yet to hear the proposal.

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