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NC Loan Broker Act Remains an Important Lending Statute and Litigation Tool

By Adam Altman

The North Carolina Loan Broker Act was enacted in 1979 “to protect the public from unscrupulous loan brokering practices.”  Brief of Amicus Curiae Roy Cooper, Attorney General of North Carolina at 4, Printing Services of Greensboro, Inc. v. American Capital Group, Inc. 361 N.C. 347, 643 S.E.2d 586 (2007).

The North Carolina Loan Broker Act (the “Act”), codified in Article 20 of Chapter 66 of the General Statutes, requires that loan brokers provide prospective borrowers with a disclosure statement, obtain a surety bond or establish a trust account, and file certain disclosures with the North Carolina Department of the Secretary of State.  See N.C.G.S. §§ 66-107, 66-108, 66-109.  The Act prohibits loan brokers from collecting an advance fee from prospective borrowers prior to the closing of the loan.  See N.C.G.S. § 66-108(c).  There are several categories of persons and entities that are expressly excluded from the provisions of the Act.  See N.C.G.S. § 66-106(b).  If loan brokers fail to comply with the Act, prospective borrowers may void the loan brokerage contract and sue for damages, recover attorney’s fees, and obtain treble damages.  See N.C.G.S. § 66-111.  The treble damages component is available because the violation of any provision of the Act “shall constitute an unfair trade practice under G.S. 75-1.1.”  N.C.G.S. § 66-111(d).

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