Rep. Howard leads bill to protect debtors in COVID-19 pandemic

Published 4:40 pm Tuesday, May 12, 2020

By Liz Moomey

SALISBURY — The N.C. House Economic Support Working Group, led by a local representative, met Tuesday and discussed a bill that would provide relief to debtors during the COVID-19 pandemic.

The bill, titled Modernize Debt Settlement Prohibition, was sponsored by Reps. Julia Howard, R-77, Jason Saine, R-97, and Michael Wray, D-17. The three are co-chairs of the group.

Greg Roney, a legislative analyst, said the bill changes a current law that states it’s a criminal offense for debt adjusting and debt settlement. Debt adjusting is taking money and promising to pay it to someone else’s creditor. Debt settlement is going between the debtor and creditor to negotiate on behalf of the debtor. Both are misdemeanors under current law.

Roney added the proposed bill will make it clear the attorney general has all authority to stop this activity and it helps the debtor who might want to sue.

Wray said debtors are being preyed upon during pandemic, as people are applying for funding and going through traditional banks and non-traditional banks.

The group was provided four debt settlement claims from North Carolinians, including one from China Grove. Personal identifying information was redacted to protect the privacy of debt settlement victims.

The China Grove resident filed a complaint stating they have paid $12,464 for debt settlements of eight accounts. The person stated they have upheld their end of the agreement and made payments on time, which would “accomplish my debt settlements.” The resident had settlements with three accounts and three summons from three other accounts.

“Now not only do I have credit card debt to settle, I also have judgments that can lead to liens against my property and there will be court costs that I will be responsible to pay,” the China Grove resident wrote. “What started out, to me, as a solution to help consolidate my debt has turned into a scam to take as much money from me as possible with no results in diminishing my debt.”

Howard said legislators found there was certainly a need for this bill.

“I think the certain influx of moneys now (and) people incurring debt is certainly something we need to look at and pass,” she said. “I hope we can do that.”

Rep. Harry Warren, R-76, was in favor of the bill, saying it cleans up a lot of things.

Warren questioned the fee cap section of the proposed bill. It stated organizations that provide services to debtors have to charge no fee or, alternatively, a fee to cover the cost of administering a debt management plan not to exceed $40 for origination or setup of the debt management plan and 10% of the monthly payment disbursed under the debt management plan, not to exceed $40 per month.

Roney said the current law has this language, but it was under definitions. Now it is under a “white hat list,” which gives the organizations a list of items they must have to assist debtors. It also adds a no fee option.

Warren made a motion for the bill to be filed and taken up next week when the General Assembly meets in full.