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Bill > H734


NC H734

NC H734
Modernize Debt Settlement Prohibition


summary

Introduced
04/02/2025
In Committee
04/28/2025
Crossed Over
04/28/2025
Passed
Dead

Introduced Session

2025-2026 Session

Bill Summary

AN ACT TO MODERNIZE AND EXPAND THE PROHIBITION OF DEBT SETTLEMENT BY MAKING DEBT SETTLEMENT AN UNFAIR TRADE PRACTICE, CLARIFYING THE DEFINITION OF DEBT SETTLEMENT, EXPANDING CIVIL REMEDIES AVAILABLE TO DEBTORS, AND LIMITING DEBT SETTLEMENT ACTS THAT ARE AUTHORIZED AND TO MAKE OTHER ADMINISTRATIVE AND TECHNICAL CHANGES.

AI Summary

This bill modernizes and expands North Carolina's legal approach to debt settlement by moving existing debt adjustment regulations from the criminal code to the consumer protection chapter of state law, fundamentally prohibiting debt adjusting and debt settlement practices. The bill provides comprehensive definitions for key terms like "debt adjusting" and "debt settlement", which essentially describe businesses that act as intermediaries between debtors and creditors to modify debt terms for a fee. The legislation makes engaging in debt adjusting or debt settlement a misdemeanor and classifies such activities as unfair trade practices, giving the superior court jurisdiction to enjoin these services. The bill preserves certain exemptions for specific entities like attorneys, creditors, and credit counseling organizations that meet strict criteria, such as providing free initial counseling and limiting administrative fees. Importantly, the bill declares all debt adjusting and debt settlement contracts void as a matter of public policy and allows for civil penalties, potential receivership of funds, and attorney's fees in enforcement actions. The new law will take effect on July 1, 2025, and will apply to offenses committed on or after that date, giving businesses time to adjust to the new regulatory framework.

Committee Categories

Government Affairs, Justice

Sponsors (9)

Last Action

Ref To Com On Rules and Operations of the Senate (on 04/28/2025)

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