One bill passed by the NC General Assembly became law without the signature of Gov. Roy Cooper. On June 26, SB 577, “Consumer Credit/Default Charge” became law. The bill, sponsored by Sen. Rick Gunn (R-Alamance), is not controversial, so Cooper’s reasons for not signing the bill are unclear.
The long title of the bill declares that it is “an act to modernize North Carolina’s consumer credit installment sale contract default charge in order to level the playing field with out-of-state-businesses.” It changes the allowable default charge for an overdue installment payment under a consumer credit installment sale contract, from no more than 5 percent of the overdue installment or $6, whichever is less, to $15.
On June 8, the House debated the bill, as presented by Rep. John Szoka (R-Cumberland). Szoka said, “This is a small-business-friendly bill. Think of small towns, where you know the man who owns the local appliance store, the local TV store. He’s got his name on it. He’s not part of a chain. It’s only him.”
Szoka then explained that 46 years ago the Retail Installment Sales Act was enacted. The law regulates consumer credit installment sales in North Carolina, including limits on finance charge rates and terms of payment. The law also limits default charges on installments that are past due for 10 days or more to no more than 5 percent of the installment that is past due or $6, whichever is less.
Szoka said that in many cases small businesses offer their own credit, rather than having a large credit company perform that service. He said that whereas credit card companies can charge $37 for a late payment, the small business can only charge a maximum of $6, which often makes it not financially feasible to pursue.
“What this bill simply does is raises that amount to $15,” Szoka said. “It was worked through in the Senate. Consumer advocates are happy with it.” The bill passed by a vote of 46-3 in the Senate on April 26.
Rep. Deb Butler (D-New Hanover) expressed concerns that, while a $15 fee may not seem like a lot of money, the bill may be disproportionately affecting the poor. Rep. Ken Goodman (D-Richmond) said that $6 doesn’t cover the cost of processing late fees and that, “$15 is a very reasonable charge.”
The bill passed 98-18 and was sent to Cooper. Albeit without his signature, it became effective June 26, and it applies to charges imposed on or after that date.
As of this writing, Cooper’s staff has not responded to a request for an explanation as to why he did not sign this bill.