info@carolinalaw.com
info@carolinalaw.com
In the financial landscape of North Carolina, the operation of unlicensed lenders is a subject of stringent regulation and oversight. The state’s laws are designed to protect consumers from the risks associated with financial transactions that lack the security and guarantees provided by licensed institutions.
In North Carolina, an unlicensed lender is any entity that offers financial services such as taking deposits or making loans without the proper authorization from state regulators or without a charter. This includes both brick-and-mortar establishments and online entities that might attempt to operate outside the purview of state and federal banking laws.
North Carolina General Statutes provide the legal framework that governs banking operations within the state. The North Carolina Office of the Commissioner of Banks (NCCOB) is the primary regulatory body responsible for overseeing banks and ensuring they comply with the necessary laws and regulations. In North Carolina, lenders facilitating loans of $25,000 or less cannot charge more than 16% in interest unless they have a license from the North Carolina Commissioner of Banks (NCCOB).
Car title loans, also known as vehicle-secured cash loans, are a type of short—or long-term loan. The borrower uses their car as collateral to obtain a line of credit. To qualify, the borrower must own the car outright and have no outstanding liens on it. If the borrower misses payments, the lender can repossess the vehicle. According to the Consumer Financial Protection Bureau, these loans carry similar risks to “payday” loans, with 1 in 5 resulting in repossession.
Because of the predatory nature of these loans and the shady lenders who offer them, it’s important for consumers to stay vigilant. Many licensed institutions do not offer this type of loan. Instead, it’s common to see unlicensed lenders such as LoanMart or other fintech companies lending auto title loans at astronomical rates. Like payday loans, these lenders are subject to stringent North Carolina consumer laws protecting citizens from unjust rates.
Usury laws, also known as interest rate laws, are designed to prevent lenders from charging excessively high rates on loans. These laws vary from state to state. In North Carolina, consumer legislation provides specific guidance on lending that differs from that of neighboring states. However, many factors affect the maximum interest rate.
Numerous factors influence the interest rate a lender offers a consumer. These factors include the type of loan — whether a personal loan, mortgage, or payday loan — the financial institution offering the loan, the total amount being borrowed, and, in some cases, a combination of these elements. Lenders may also adjust rates based on the borrower’s creditworthiness or the nature of the loan, making the landscape of lending rates quite complex. However, the bottom line for consumer loans by unlicensed lenders is the same. They are not allowed to exceed 16% on loans under $25,000.
North Carolina’s laws regarding unlicensed lenders are clear. It is essential for consumers to remain vigilant and for financial entities to adhere to the regulations set forth by the state to ensure a secure and trustworthy banking sector. If you suspect a financial institution has violated your rights under North Carolina’s consumer laws, contact us today. Maginnis Howard’s unlicensed bank attorneys are located across the state in Raleigh, Charlotte, and Fayetteville.
