Frequently Asked Questions
The following section answers questions and addresses concerns regarding the Consumer Finance Act (CFA). This information is not intended as legal advice. Please use the menu to the left for additional information.
Do you have a complaint about a consumer finance company?
General Information about Consumer Lending in North Carolina
What interest rates can be charged on North Carolina consumer installment loans?
In general, interest rates for consumer installment loans in North Carolina are governed by Chapter 24 of the North Carolina General Statutes (NCGS). The Maximum Rate of Interest can be found under the News and Research section of this website.
Higher-Interest Rate Loans
Direct lenders seeking to charge rates higher than allowed under Chapter 24 on consumer term loans of twenty-five thousand dollars ($25,000) or less, are subject to the CFA located in NCGS Chapter 53, Article 15. Lenders operating under the CFA must be licensed by and are subject to regulation by the NCCOB.
Lenders making consumer finance term loans less than twenty-five thousand dollars ($25,000) and at a rate of sixteen percent (16%) or lower or loans that fall under the Retail Installment Sales Act (RISA) are not regulated by NCCOB. Please contact the North Carolina Department of Justice (NCDOJ) for more information.
The North Carolina Consumer Finance Act
General Questions
What loans are covered by the North Carolina Consumer Finance Act (CFA)?
The CFA covers smaller-dollar loans originated for North Carolina consumers, less than twenty-five thousand dollars ($25,000), which provide direct installment term financing at interest rates higher than what is allowed under Chapter 24. CFA loans are originated for a consumer purpose and are not secured by real estate. The lender funding the loan is traditionally a non-depository finance company.
Do loan documents disclose if the loan is a CFA loan?
Yes, all CFA loans are required to contain the following statement in a conspicuous manner: “This loan is regulated by the provisions of the North Carolina Consumer Finance Act, Article 15 of Chapter 53 of the North Carolina General Statutes.” (NCGS § 53-181(a)(11) and 04 NCAC 03E.0601(5))
Does the Consumer Finance Act apply to servicers of loans originated under the CFA?
Yes. As of October 1, 2023, the CFA also applies to companies servicing CFA loans. Any business that receives scheduled periodic payments from consumers in relation to a CFA loan must be licensed to lawfully collect the payments. Companies engaged in servicing CFA loans should apply for a license. (NCGS § 53-166(a))
Does the CFA apply to all businesses?
No. The following businesses are exempt from licensure (NCGS § 53-191):
- Banks
- Trust companies
- Savings and loans associations
- Cooperative credit unions
- Agricultural credit corporations or associations organized under the laws of North Carolina
- Production credit associations organized under the Farm Credit Act of 1933
- Pawnbrokers lending or advancing money on specific articles of personal property
- Industrial banks
- A business that negotiates loans for real estate as defined in NCGS § 105-41; and
- Installment paper dealers as defined in NCGS § 105-83.
What is the maximum loan amount allowed under the CFA?
The maximum loan amount under the CFA is twenty-five thousand dollars ($25,000).
How many months are allowed in a CFA loan term?
CFA loans must be scheduled to be repaid over a minimum of twelve (12) monthly payments and a maximum of ninety-six (96) monthly payments. (NCGS § 53-176(a))
What is the maximum interest rate allowed on a CFA loan?
The maximum interest rate on a CFA loan is determined by the loan amount.
With respect to a loan with a loan amount at origination not exceeding twelve thousand dollars ($12,000), the interest rate is a blended rate with: thirty three percent (33%) per annum on that part of the unpaid principal balance not exceeding four thousand dollars ($4,000), twenty-four percent (24%) per annum on that part of the unpaid principal balance exceeding four thousand dollars ($4,000) but not exceeding eight thousand dollars ($8,000), and eighteen percent (18%) per annum on that part of the remainder of the unpaid principal balance. CFA loans with a loan amount exceeding twelve thousand dollars ($12,000) carry a maximum interest rate of eighteen percent (18%) per annum. (NCGS § 53 176)
The chart below summarizes the blended interest rates applicable to CFA loans.
Loan Amount Up to $12,000 | Interest Rate |
0-4,000 | 33% |
4,000-8,000 | 24% |
8,000-12,000 | 18% |
Reference: N.C. Gen. Stat. § 53-176(a)
Once a CFA loan reaches maturity or becomes subject to judgment, the interest rate should be lowered to eight percent (8%) per annum. (NCGS § 53-173(d) and 53 173(c))
How is interest on a CFA loan calculated?
Interest shall not be paid, deducted, or received in advance. Interest shall not be compounded but shall be computed and paid only as a percentage of the unpaid portion of the amount financed and computed on the basis of the number of days actually elapsed. (NCGS § 53-173(b))
What is the proper application of payments for a CFA loan?
Payments should be applied first to late charges and other permissible charges, then to any accrued interest, and then to principal. (NCGS § 53-173(b1)
How should transactions be recorded on the transaction history?
Transaction history should include the date and amount of each payment, an allocation between principal, interest, and any fees authorized by statute for each payment, and the remaining loan balance after each payment.
Can a CFA loan be repaid in full at any time?
Yes, any portion of the principal balance may be prepaid at any time without penalty. (NCGS § 53-173(b1)
Can a CFA loan be modified after origination?
Yes. A CFA loan contract may be modified so long as the interest rate after the original maturity date does not exceed eight percent (8%) per annum. The CFA licensee shall document the terms of any agreement to modify an existing CFA loan contract in its loan records and shall provide the borrower a written notice of the changes. (NCGS § 53-180 (l))
What can be modified on a CFA loan?
A modification of a CFA loan may include a reduction of interest rate, a reduction of principal, a reduction in the amount of accrued interest, a suspension of or modification of payment amounts, an extension of the term of the loan, or any combination of these types of account adjustments. However, a modification cannot extend the original maturity date, fail to reduce the interest rate to eight percent (8%) per annum at original maturity, or provide for a balloon payment. (NCGS § 53-180 (l))
Military Lending
Does the CFA have any requirements related to covered military members?
Yes. The CFA contains notification and disclosure requirements to grant loans to covered military service members that are explained in detail in NCGS § 53-180.1.
Allowable Fees
Can a loan processing fee or origination fee be charged to obtain a CFA loan?
Yes. Licensees may charge a fee at closing for processing a CFA loan that is agreed upon by the parties.
The fee should not exceed thirty dollars ($30.00) for loan amounts up to three thousand dollars ($3,000) and one percent (1%) of the amount financed, exclusive of the loan processing fee, for loan amounts more than three thousand dollars ($3,000), not to exceed a total fee of one hundred fifty dollars ($150.00). These charges shall not be assessed more than twice in any 12‑month period. (NCGS 53-176(b))
Can a fee be charged on a late payment?
Yes, if disclosed within the CFA loan agreement, licensees may charge a late fee for a payment that remains past due for ten (10) days or more. The maximum amount of the fee charged is defined by NCGS § 53-177(b)(2) and is currently eighteen dollars ($18), but the amount of the fee is subject to change.
How many late fees can be assessed on a payment?
Only one late fee may be imposed with respect to a particular late payment on a CFA loan. However, a licensee may collect more than one late payment fee from any payment made toward more than one installment payment so long as the number of late payment fees collected does not exceed the number of installment payments that were past due for ten (10) days or more and to which the payment was applied. (NCGS § 53-177).
Can a fee be charged to defer a payment on a CFA loan?
Yes. By agreement with the borrower, a licensee may defer the due date of all or part of one or more installments under an existing CFA loan contract as permitted by NCGS § 25A‑30. A deferral charge of no more than one and one-half percent (1.5%) can be charged for each monthly installment deferred. A licensee may assess a deferral charge for each month of the remaining loan term on each installment owed after the date of deferral.
The deferral shall not alter the original maturity date, even when the final payment is after the maturity date assigned at origination. If more than one loan payment is being deferred, a written agreement should be executed. (NCGS § 53-177(c))
Can a fee be charged to modify or restructure a CFA loan?
Yes, if the modification or restructure includes a deferral of payment, a fee would be permissible.
Can a late fee be charged if a CFA loan payment is deferred?
Yes, in certain circumstances. A licensee may charge a late payment fee on deferred payments that remain past due for 10 days or more after the agreed upon due date. (NCGS § 53-177(c))
Can insufficient funds fees incur interest charges or be added to the principal balance?
No. Interest is computed and paid only as a percentage of the amount financed, which does not include insufficient funds (NSF) fees. (NCGS § 53‑173 (b))
Can a fee be charged to process a disbursement of loan proceeds or loan payment?
Yes, but there are restrictions. A licensee must make available to the borrowers at least one type of transaction for an account payment and at least one type of transaction for disbursement or loan proceeds in which it will not seek to recover the cost of third-party fees associated with the transaction.
A licensee may collect from a borrower an amount not to exceed the actual cost of any fees charged by a non-affiliate third party for the following transactions:
- Disbursement of loan proceeds via ACH
- Disbursement of loan proceeds via prepaid or stored value cards
- Disbursement of loan proceeds via electronic payment to borrower’s account at a financial institution or financial services company
- Online debit card payment
- In-person debit card payment
- Automated clearinghouse (ACH) payment
Disclosure of charges is required at account opening, on the licensee’s website, and displayed publicly at all retail locations. (NCGS § 53-177.1)
Licensing Information
How do I apply for a consumer finance license?
Applications for a new company, branch, or other business activities are submitted online. Find details on the Licensing Application page.
How much does it cost to apply for a consumer finance license?
An application fee of five hundred dollars ($500.00) is assessed to investigate the application. The fee is retained irrespective of whether or not a license is granted. (NCGS § 53-168(b))
Does my business need a consumer finance license?
A license is required if your business originates and/or services CFA loans. Review the Consumer Finance License Decision Guide. (NCGS 53-168(a))
My business is licensed by the NCCOB to originate loans under the CFA, is an additional license necessary to service loans?
No. A Consumer Finance license issued by the NCCOB authorizes a business to originate and service CFA loans. (NCGS 53-166(a))
Do I need a consumer finance license for each company office or branch location?
Yes. Each location where the licensee will perform regulated activity must be approved. (NCGS § 53-170(a)). Each licensee must maintain loanable assets of at least fifty thousand dollars ($50,000) per location for the operation of the business. (NCGS § 53-168(d)).
Applications for a new company, branch, or other business are submitted online. Find details on the Licensing Application page.
Is a consumer finance licensee required to maintain a physical location within North Carolina?
No. A licensee may conduct and carry on the licensee's business at one or more locations approved by the Commissioner. These locations do not have to be physical locations within the State of North Carolina.
If a collection agency is licensed by the North Carolina Department of Insurance, does the collection agency also need a CFA license?
Yes, in certain circumstances. A licensed collection agency collecting payments on active/current loans originated under the CFA needs a CFA license. However, a licensed collection agency attempting to collect on a CFA loan that has been charged off, is no longer accruing interest or fees, and collection of payments is based on a lump sum does not need a CFA license.
Would a law firm collecting payments on behalf of a client need a CFA license?
Yes, in certain circumstances. Collecting payments on an active/current CFA loan requires a CFA license. If the payment being collected is associated with a court-ordered judgment a CFA license is not required. However, all CFA licensees must comply with 04 NCAC 03E .0601(6). Please note that Confessions of Judgment are prohibited under the CFA.
Does a debt buyer, licensed debt collector, or passive debt investor need a CFA license?
Yes, in certain circumstances. Collecting payments on active/current loans originated under the CFA requires a CFA license. Attempting to collect on a CFA loan that has been charged off and is no longer accruing interest or fees does not require a CFA license.
These examples are not all-inclusive. If you have any questions about your company’s activities, please click here to contact the NCCOB with your questions.
Ongoing Requirements for Licensees
Is there an annual renewal requirement for CFA licensees?
Licensees are required to submit an annual report of condition through the NCCOB Online portal by March 31st and pay an annual assessment. (NCGS § 53-184(b))
How is the annual assessment calculated?
Pursuant to NCGS § 53-167, licensees shall pay to the Commissioner an assessment not to exceed eighteen dollars ($18) per one hundred thousand dollars ($100,000) of assets, or fraction thereof, plus a fee of three hundred dollars ($300) per office; provided, however, a consumer finance licensee shall pay a minimum annual assessment of not less than one thousand dollars ($1,000). See sample table below.
| Assessment Per Item | Calculated Assessment | ||
|---|---|---|---|
| Total Assets | $2,675,309 | ||
| # of full $100,000 portions | 26 | $18 | $468 |
| # of partial $100,000 portions | 1 | $18 | $18 |
| # of Offices | 7 | $300 | $2,100 |
| Grand Total Assessment | $2,586 | ||
Consumer Finance Assessment Calculator
When does the NCCOB need to be notified of changes in licensee management, branch location, or branch closure?
If any change occurs in the name and address of the licensee (this includes branch relocations and closures) or of the president, secretary, or agent of a corporation holding a license, or in the membership of any partnership holding a license, should be filed with the Commissioner within 90 days of the change. (NCGS § 53-170(c))
Are companies required to notify the NCCOB of a CFA loan purchase?
Yes. Purchase of a loan made under the CFA shall be reported to the Commissioner within 30 days after the transaction is completed. Report a CFA loan purchase. (NCGS 53‑168 (e))
Is it a requirement to display the CFA license issued by the NCCOB?
Yes. The printed license shall be displayed in the licensed place of business. CFA licensees shall list their license status with their licensee number on their website. Displaying a copy of the printed license on the website is discouraged.
What ongoing monitoring is performed and how often are licensees examined for compliance?
All companies licensed under the CFA are required to submit quarterly data. Compliance examinations for all licensees are performed periodically based upon the risk profile of the institution.
What is the Index of Borrowers (IOB) Report?
The Index of Borrowers (IOB) is a single report that should show all loans to the borrower in chronological order, including the account number, loan amount, and cancellation date. An IOB is required for every CFA borrower, even if the borrower has only one loan. (04 NCAC 3E .0601(4))
What should the licensee provide the borrower once a loan is paid off?
A licensee shall cancel and either return or make available electronically to the borrower, within a reasonable length of time, originals or copies of any note or other instrument securing the loan that no longer secures any indebtedness of the borrower to the licensee. (NCGS 53-182(b))
How long must licensees retain records related to each loan?
All books and records related to each loan shall be retained for a period of two years after the last transaction. (NCGS 53-184(e))
Unsolicited Check Questions
When is the maturity date for a loan that begins with an unsolicited check?
The maturity date cannot be established until the borrower cashes or deposits the unsolicited check. Once the check is negotiated, the licensee should clearly communicate all loan terms to the borrower. These details must be included in the disclosure package or welcome letter provided to the borrower.
Do licensees need to verify an applicant’s military status before sending an unsolicited check?
Yes. Licensees must verify the applicant’s military status before mailing any unsolicited check. They must maintain the required documentation and make it available during examinations. If military status is verified through batch processes, management should indicate this on the Management Questionnaire during examinations. NCGS 53-180.1(b1)
When should the loan number be included in borrower disclosures after an unsolicited check is cashed?
Once an unsolicited check is negotiated, the assigned loan number should be included on all subsequent borrower disclosures, especially documents that require the borrower’s signature.
When should unsolicited check loans be added to the IOB report?
Unsolicited check loans should be added to the IOB report at the time the account is established.
What General Statute language must be included on loan contracts for loans made by a licensee by use of an unsolicited check?
In accordance with NCGS 53-181(a)(10) and 04 NCAC 03E .0601(5), all loan contracts must include the following statement printed in a conspicuous manner, similar to what is displayed below:
"This loan is regulated by the provisions of the North Carolina Consumer Finance Act, located at Chapter 53, Articles 15 of the North Carolina General Statutes."
Does the borrower have the right to cancel a loan made through an unsolicited check?
Yes. The borrower has the right to cancel the loan by refunding the lender the full amount of the check within ten (10) days of the date the check is cashed. The loan is considered refunded once the lender receives the refund within that 10‑day period. (NCGS § 75-20(a)(4))
How to get CFA news alerts or ask a follow-up question
How can our business get updates from the NCCOB on the CFA?
Visit the NCCOB Consumer Finance Bulletin Board. This page includes recent announcements regarding the CFA and training events hosted by the NCCOB. Be sure to subscribe to be alerted by e-mail notification of new messages.
Still have questions?
If you still need assistance, please call our office at (919) 733-3016 or click here to contact the NCCOB with your questions. and we will be happy to assist you.