The NCGA House COVID-19 Economic Working Group met on Tuesday, May 12, 2020.
The Committee staff explained that in recents months NC has seen an increase of debt settlement company activity. With hundreds of thousands of workers losing jobs, they anticipate a surge of debt settlement abuses that can be avoided by updating some laws. The laws regarding debt settlement have not been updated since 2005. The Attorney General’s Office has also identified abusive transactions that this bill draft would help prevent moving forward.
Both the Resident Lenders of NC and the NC Justice Center support modernizing debt settlement to enhance protections for debtors under financial strain caused by COVID-19.
Modernize Debt Settlement Draft
The bill would move the prohibition of debt adjusting and debt settlement from the criminal chapter into the civil chapter on consumer protection and would expand the prohibition to include the following:
- Conduct of affiliates to determine if debt adjusting or debt settlement occured
- Treat any fees pad as consideration, regardless of when paid
- Make debt adjusting and debt settlement under trade practice subject to civil remedies by the Attorney General
- Void any contracts for debt adjusting or debt settlement
The NC Medical Society is following this legislation due to the impact it could have on individuals in this financial situation.