August 20, 2003- Governor Mike Easley vetoed House Bill 917, a bill which would have permitted high-cost consumer finance companies to increase the fees they charge on some home mortgages, including an increase in "origination fees" of 300 percent. In his veto message the Governor stated: "During a national recession, many families are struggling to make ends meet. However, the five large national and international conglomerates that make the vast majority of consumer finance loans are thriving. This legislation has no economic benefit to North Carolina or our working families. It would simply increase the cost of loans for North Carolina citizens at a time that they can afford it least."

Alfred Ripley, Consumer Action Network Director and Legal Counsel for Housing and Consumer Affairs with the North Carolina Justice and Community Development Center, praised the Governor's action. "We applaud the Governor's veto of HB 917. With layoffs such as those by Pillowtex, and home foreclosures at record rates, the last thing North Carolina needs is an unnecessary increase in the home mortgage fees charged to vulnerable borrowers by finance companies."

According to Ripley, the existing law offers important protections for consumers who may be tempted to re-finance high cost unsecured consumer loans into high-cost mortgage loans that put the borrower's homes at risk. "If HB 917 had not been vetoed, these lenders would have enjoyed a powerful new incentive to flip borrowers from unsecured consumer loans into higher fee mortgage loans," Ripley said. "The Governor has done consumers a great service," he continued.

Reports from the Commissioner of Bank's office for 2001 and 2002 show that already approximately two-thirds of the consumer finance company loans made each year refinance existing loans. The borrowers of these loans tend to be working families with limited financial experience.

Historically, North Carolina has limited the fees that can be charged on mortgages made in consumer finance offices, but allows a high rate of interest on these loans. There have been limits on the mortgage lending that can be conducted from the same offices that make these consumer loans because of the fear that borrowers will unwittingly jeopardize their homes.

North Carolina law permits consumer finance companies to charge high interest rates on these mortgages, currently 15%.The law limits the lender fees to 1% if the mortgage loans are made out of the same office as the consumer finance personal loans. House Bill 917 would remove these protections and allow for origination fees of 3%, deferral fees of $150 per year, a modification fee of $150 in a twelve month period, and late fees of 4% on the amount past due (this late fee is in addition to additional interest that already accrues on late payments.).