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Watch Your Wallet: High Interest Loans Could Be Coming to NC

North Carolina could soon see more payday lenders popping up if federal legislation is passed that would supersede the state limit on interest rates. (Steve Rhoades/flickr)
North Carolina could soon see more payday lenders popping up if federal legislation is passed that would supersede the state limit on interest rates. (Steve Rhoades/flickr)
November 20, 2017

RALEIGH, N.C. -- North Carolina's long history of prohibiting predatory lending in the state could come to an end with a bill introduced by one of the state's own congressmen.

The "Protecting Consumers' Access to Credit Act,” introduced by Rep. Patrick McHenry, would authorize non-banking entities to partner with a national bank and charge up to triple-digit rates to borrowers. Kelly Tornow, director of North Carolina policy at the Center for Responsible Lending, explained.

"This bill allows lenders to change much higher - 100, 200, 300 percent interest - rate loans, using a rent-a-bank scheme,” Tornow said.

Currently the state has a cap of 30 percent on loans to consumers, which is supported by a variety of citizens groups, including veterans, AARP and other bipartisan organizations. McHenry and other supporters say the legislation is needed to make loans available to those who wouldn't qualify with a traditional lending institution.

North Carolina and Georgia are currently the only southern states to cap payday lending. Neighboring state Tennessee sees rates as high as 460 percent, which Tornow said creates a debt trap for those who opt for a high-interest loan.

"This affects families all across North Carolina. It's not one segment of the population,” she said. "Just because you might not take out a payday loan, your brother who might be struggling to pay his rent that month [might]. "

With 400 percent interest, a $300 loan would accrue about $45 in interest, but if the consumer can't pay it back in the negotiated time, there are often rollover fees.

Stephanie Carson, Public News Service - NC