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Consumer Credit Late Fees Debated in Raleigh

April 27, 2010

RALEIGH, N.C. - Pay late - pay a new fee. A proposal to add a new late fee to consumer finance loans in North Carolina is being debated today at a legislative hearing. Laws on the books since the 1960s prohibit late fees for the loan category, because the high-risk loans already include extra fees and higher interest rates. Finance companies have requested the new fee because they're seeing more late payments than ever, and it's hurting profits.

Al Ripley, director of the Consumer Action Network at the North Carolina Justice Center, says lenders already receive compensation for late payments, just through the way the loans are structured.

"Even when a payment is late, these high fees continue to apply to the outstanding balance of the loan, so the late fee is built into the loan."

Ripley's organization and several other consumer groups are protesting the new fees at today's hearing.

Chris Kukla, director of legislative affairs with the Center for Responsible Lending in Durham says state laws governing such loans allow for profit, and he cites a state study that finds 70 percent of consumer finance companies are turning a profit, even in tough economic times.

"Finance companies already are allowed to charge high interest rates and fees; when combined, the A.P.R. on these loans can reach over 50 percent. Still, they want more."

Support for a change in the law also comes from those who argue that late fees should apply to consumer finance loans, just as they do for any other financial product.

A public hearing on a change in the law is scheduled for 1 p.m. before the Joint Legislative Study Commission on the Modernization of North Carolina Banking Laws and the Consumer Finance Act.

The North Carolina Justice Center, Center for Responsible Lending, AFL-CIO and AARP North Carolina are part of the coalition opposing a change in the law.

Deb Courson, Public News Service - NC