§ 24-9. Loans exempt from rate and fee limitations. - North Carolina Statutes

§ 24‑9.  Loans exemptfrom rate and fee limitations.

(a)        As used in thissection, the following definitions apply:

(1)        "Bank"means a bank, savings and loan association, savings bank, or credit unionchartered under the laws of North Carolina or the United States. However, theterm "bank" does not include any subsidiary or affiliate of a bank,savings and loan association, savings bank, or credit union chartered under thelaws of North Carolina or the United States that is not itself a bank, savingsand loan association, savings bank, or credit union chartered under the laws ofNorth Carolina or the United States.

(2)        "Equity line ofcredit" means a loan, other than an exempt loan, that satisfies all of thefollowing conditions:

a.         The lender is abank.

b.         The loan is arevolving line of credit, open‑end loan, revolving credit plan, orrevolving credit card plan, and the loan is secured by a mortgage or deed oftrust on real property.

c.         At any time within aspecified period not to exceed 30 years the borrower may request and the lenderis obligated to provide credit advances up to the agreed aggregate creditlimit. As used in this sub‑subdivision, "lender is obligated"means that the lender is contractually bound to provide credit advances.However, the equity line of credit and the lender's obligation to make creditadvances shall be subject to the provisions of section 226.5b(f) of Title 12 ofthe Code of Federal Regulations and the official commentaries and rulingsissued pursuant thereto, as the same may be amended from time to time, withoutregard to whether that section of the Code of Federal Regulations wouldotherwise apply to the loan.

d.         Any repayments ofprincipal by the borrower within the specified time will reduce the amount ofadvances counted against the aggregate credit limit.

e.         The initial loanamount is ten thousand dollars ($10,000) or more. On January 1, 2008, and onJanuary 1 every five years thereafter, the minimum initial loan amountsufficient to qualify a loan closed on or after that date as an equity line ofcredit under this section shall be increased by one thousand dollars ($1,000).For example, a loan closed on or after January 1, 2008, but prior to January 1,2013, shall not be considered an equity line of credit unless the initial loanamount is eleven thousand dollars ($11,000) or more, and a loan closed on orafter January 1, 2013, but prior to January 1, 2018, shall not be considered anequity line of credit unless the initial loan amount is twelve thousand dollars($12,000) or more.

      Anequity line of credit shall cease being an equity line of credit subject to theprovisions of this section from and after the date the loan amount is reducedbelow the equity line of credit's initial loan amount unless (i) the loanamount was reduced for one or more of the reasons or pursuant to one or more ofthe methods specified in section 226.5b(f)(2) or section 226.5b(f)(3)(vi) ofTitle 12 of the Code of Federal Regulations and the official commentaries andrulings issued pursuant thereto, as the same may be amended from time to time,without regard to whether that section of the Code of Federal Regulations wouldotherwise apply to the loan, or (ii) the loan amount was reduced at the requestof the borrower because the borrower was engaged in the refinancing of a loansecured by a superior lien on the same real property and the reduction in theloan amount of the equity line of credit is no greater than the differencebetween the loan amount secured by the refinancing mortgage and the outstandingprinciple balance of the loan being refinanced.

(3)        "Exemptloan" means a loan in which:

a.         The loan amount isthree hundred thousand dollars ($300,000) or more; or

b.         The borrower is aperson other than a natural person; or

c.         The loan is obtainedby a natural person primarily for a purpose other than a personal, family, orhousehold purpose. Whether a loan is obtained primarily for a purpose otherthan a personal, family, or household purpose shall be guided by the standardsestablished by the federal Truth In Lending Act (Title 1 of Public Law 90‑321;82 Stat. 146; 15 U.S.C. § 160, et seq.) and all regulations and rulings issuedpursuant to that Act, as the same may be amended from time to time.

(4)        "Loan"means an advance of money or an extension of credit that is made to or onbehalf of a borrower, the principal amount of which the borrower has anobligation to pay the lender. The term includes revolving lines of credit, open‑endloans, revolving credit plans, and revolving credit card plans in addition toclosed‑end loans.

(5)        "Loanamount" means the principal amount of a loan or, in the case of arevolving line of credit, open‑end loan, revolving credit plan, orrevolving credit card plan, the initial maximum credit limit.

(b)        Notwithstanding anyother provision of this Chapter or any other provision of State law, anyborrower in an exempt loan transaction may agree to pay, and any lender,including a bank, may charge and collect from the borrower, interest at anyrate and fees and other charges in any amount that the borrower agrees to pay.A claim or defense of usury is prohibited in an exempt loan transaction.

(c)        The provisions ofG.S. 24‑1.2A, 24‑11, and 24‑11.1 shall not apply to equitylines of credit offered by banks. Except as provided in this subsection andnotwithstanding any other provision of this Chapter or any other provision ofState law, any bank may charge and collect from any borrower interest at anyrate and fees and other charges in any amount that the borrower agrees to payin connection with an equity line of credit. However, an equity line of creditmade by a bank shall be subject to the following, to the extent otherwiseapplicable:

(1)        The provisions ofG.S. 24‑1.1E (relating to restrictions and limitations on high‑costhome loans).

(2)        The provisions ofG.S. 24‑10.2 (relating to consumer protections in certain home loans).

(3)        Notwithstanding thelimitation against prepayment penalties contained in G.S. 45‑81(c), abank may charge and collect prepayment fees or penalties following theborrower's voluntary exercise of a right or option to repay all or any portionof the outstanding balance of a variable interest rate equity line of credit ata fixed interest rate over a specified period of time, subject to the followinglimitations:

a.         Prepayment fees orpenalties may be charged only with respect to the prepayment of that portion ofthe outstanding balance the borrower voluntarily agrees to repay at a fixedinterest rate over a specified time;

b.         No prepayment feesor penalties may be charged for prepayments made more than 30 months after theborrower voluntarily exercises the right or option to repay that portion of theoutstanding balance of the equity line of credit at a fixed interest rate overa specified period of time; and

c.         The prepayment feesor penalties charged with respect to that portion of the outstanding balance tobe repaid at a fixed rate over a specified period of time may not exceed, inthe aggregate, more than two percent (2%) of the amount prepaid.

      Otherwise,no prepayment fees or penalties may be charged or collected by the bank withrespect to an equity line of credit.

(d)        The provisions ofG.S. 24‑11 and G.S. 24‑11.1 shall not apply to revolving creditcard plans offered by banks. Notwithstanding any other provision of thisChapter or any other provision of State law, any bank may charge and collectfrom any borrower interest at any rate, as well as fees and other charges inany amount that the borrower agrees to pay in connection with a revolvingcredit card plan. This subsection (d) shall not apply to a revolving creditcard plan that is secured by a mortgage or deed of trust on real property. (1963, c. 753, s. 1; 1965, c.335; 1969, c. 896; 1979, c. 138, s. 5; 1995, c. 351, s. 13; 2003‑401, s.1.)