UPDATE: In a victory for consumers and their advocates, Gov. Roy Cooper vetoed House Bill 140 on July 27, sending a profitable proposal pay-to-play benefiting consumer finance companies back to lawmakers. HB140 would allow lenders to tack insurance onto loans in case borrowers cannot repay. Democracy NC had called for Gov. Cooper to take action against this legislation and praised the governor’s Thursday veto.
“Making small loans more expensive by expanding credit insurance can drive borrowers further into debt, especially those who can least afford it,” Cooper said in a statement. “If this bill becomes law, consumers will have higher-cost loans because they will be borrowing the money to pay the credit insurance premiums. Borrowers who need short-term loans should not have to pay more for unnecessary insurance.”
A special session is scheduled for Thursday, August 3 to consider veto overrides.
HB140: Big money in, profitable legislation out
Through last-minute maneuvering by General Assembly leaders, the consumer loan industry won a prize piece of legislation from state legislators who have benefited handsomely from the industry’s campaign donations that total over $500,000 in the past four years.
An amendment to an unrelated bill about dental care will allow consumer lenders to expand the lucrative practice of selling credit insurance on the personal property that borrowers use to secure their loans. Opponents point out that reports from the NC Banking Commission and other agencies show this “credit product insurance” is overpriced and oversold. In North Carolina, less than $9 is paid in claims for every $100 borrowers pay in premiums.*
Rather than justify the amendment on its merits, consumer lenders simply say it “modernizes” the list of items that credit product insurance can cover from the law’s limit to only “household furniture, furnishings and appliances.” In fact, the amendment dramatically expands the list by adding the phrase “and other personal property of the debtor, exclusive of an automobile,” which could include everything from mobile homes to home computers, dirt bikes to boats.