Borrowing in North Carolina: What State Law Allows

Payday lending ended when the law expired

North Carolina once allowed check cashers to make deferred deposit, or payday, loans. That statute, G.S. 53-281, is now marked "Expired," and nothing replaced it. Without it, a small loan has to fit within the state's usury limits or the Consumer Finance Act, and a payday or title loan priced at hundreds of percent fits neither.

The state Attorney General's office describes payday lenders as shut down in North Carolina but still reaching residents online, often through collectors that may be unlicensed or overseas. Under G.S. 53-166, a loan that breaks the Consumer Finance Act is void, and the lender can't collect principal or charges on it.

The rate tiers for licensed finance companies

For loans of $25,000 or less, North Carolina's general rate limit is 16% or the six-month Treasury bill rate plus 6 points, whichever is greater; the Commissioner of Banks publishes the figure monthly. A company that wants to charge more on loans that size must be licensed under the Consumer Finance Act and follow the tiers in G.S. 53-176:

• Loans are capped at $25,000 and must be repaid over 12 to 96 months in substantially equal monthly payments.
• A processing fee of up to $30 is allowed on loans of $3,000 or less; above that, 1% of the amount financed, up to $150. It can't be charged more than twice in 12 months.
• These loans can't be secured by a mortgage or deed of trust on real estate.

A blended rate means a $6,000 loan pays 33% on the first $4,000 of the balance and 24% on the rest, so the overall rate lands in between. Compare that with what a bank or credit union quotes you for a personal loan.

Before you sign with a finance company, ask:

• What is the APR, including the processing fee, and what is the total I'll repay?
• Is any credit insurance or other add-on optional, and what does it cost in dollars?
• Can I pay the loan off early without a penalty?
• What happens, and what does it cost, if a payment is late?

Three years to sue, and wages mostly off-limits

Under G.S. 1-52, most contract claims, including credit card and personal loan debt, must be brought within three years, which is shorter than in many states. If a collector sues after that, the deadline only protects you if you raise it, so respond to the lawsuit rather than ignoring it.

Even with a judgment, a creditor usually can't garnish your paycheck for an ordinary consumer debt. G.S. 1-362 protects your earnings from the 60 days before a collection order when you show they are needed to support your family. Child support, taxes and certain government debts are handled differently. Money in a bank account and other property get separate, more limited exemptions.

Collectors still have to follow federal rules; see debt collectors and your rights.

Who to call about a lender

When you complain, include the lender's name and website, the loan contract or screenshots of the offer, and a record of every payment or bank debit. If an unlicensed lender is still pulling money from your account, ask your bank how to stop the payments while the complaint is reviewed.

Common questions