| 12 | 13 | | A BILL TO BE ENTITLED 1 |
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| 13 | 14 | | AN ACT TO CLARIFY HOW A CREDITOR MAY ENFORCE AN OBLIGATION TO PAY 2 |
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| 14 | 15 | | ATTORNEYS' FEES IN A DEBT INSTRUMENT AND TO AMEND THE DEFAULT 3 |
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| 15 | 16 | | RATE FOR THESE FEES. 4 |
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| 16 | 17 | | The General Assembly of North Carolina enacts: 5 |
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| 17 | 18 | | SECTION 1. G.S. 6-21.2 reads as rewritten: 6 |
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| 18 | 19 | | "§ 6-21.2. Attorneys' fees in notes, etc., in addition to interest.debt instruments. 7 |
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| 19 | 20 | | Obligations to pay attorneys' fees upon any note, conditional sale contract or other evidence 8 |
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| 20 | 21 | | of indebtedness, in addition to the legal rate of interest or finance charges specified therein, shall 9 |
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| 21 | 22 | | be valid and enforceable, and collectible as part of such debt, if such note, contract or other 10 |
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| 22 | 23 | | evidence of indebtedness be collected by or through an attorney at law after maturity, subject to 11 |
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| 23 | 24 | | the following provisions: 12 |
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| 24 | 25 | | (1) If such note, conditional sale contract or other evidence of indebtedness 13 |
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| 25 | 26 | | provides for attorneys' fees in some specific percentage of the "outstanding 14 |
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| 26 | 27 | | balance" as herein defined, such provision and obligation shall be valid and 15 |
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| 27 | 28 | | enforceable up to but not in excess of fifteen percent (15%) of said 16 |
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| 28 | 29 | | "outstanding balance" owing on said note, contract or other evidence of 17 |
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| 29 | 30 | | indebtedness. 18 |
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| 30 | 31 | | (2) If such note, conditional sale contract or other evidence of indebtedness 19 |
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| 31 | 32 | | provides for the payment of reasonable attorneys' fees by the debtor, without 20 |
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| 32 | 33 | | specifying any specific percentage, such provision shall be construed to mean 21 |
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| 33 | 34 | | fifteen percent (15%) of the "outstanding balance" owing on said note, 22 |
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| 34 | 35 | | contract or other evidence of indebtedness. 23 |
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| 35 | 36 | | (3) As to notes and other writing(s) evidencing an indebtedness arising out of a 24 |
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| 36 | 37 | | loan of money to the debtor, the "outstanding balance" shall mean the 25 |
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| 37 | 38 | | principal and interest owing at the time suit is instituted to enforce any security 26 |
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| 38 | 39 | | agreement securing payment of the debt and/or to collect said debt. 27 |
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| 39 | 40 | | (4) As to conditional sale contracts and other such security agreements which 28 |
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| 40 | 41 | | evidence both a monetary obligation and a security interest in or a lease of 29 |
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| 41 | 42 | | specific goods, the "outstanding balance" shall mean the "time price balance" 30 |
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| 42 | 43 | | owing as of the time suit is instituted by the secured party to enforce the said 31 |
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| 43 | 44 | | security agreement and/or to collect said debt. 32 |
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| 44 | 45 | | (5) The holder of an unsecured note or other writing(s) evidencing an unsecured 33 |
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| 45 | 46 | | debt, and/or the holder of a note and chattel mortgage or other security 34 |
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| 46 | 47 | | agreement and/or the holder of a conditional sale contract or any other such 35 |
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| 49 | 54 | | interest in or a lease of specific goods, or his attorney at law, shall, after 1 |
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| 50 | 55 | | maturity of the obligation by default or otherwise, notify the maker, debtor, 2 |
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| 51 | 56 | | account debtor, endorser or party sought to be held on said obligation that the 3 |
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| 52 | 57 | | provisions relative to payment of attorneys' fees in addition to the "outstanding 4 |
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| 53 | 58 | | balance" shall be enforced and that such maker, debtor, account debtor, 5 |
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| 54 | 59 | | endorser or party sought to be held on said obligation has five days from the 6 |
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| 55 | 60 | | mailing of such notice to pay the "outstanding balance" without the attorneys' 7 |
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| 56 | 61 | | fees. If such party shall pay the "outstanding balance" in full before the 8 |
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| 57 | 62 | | expiration of such time, then the obligation to pay the attorneys' fees shall be 9 |
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| 58 | 63 | | void, and no court shall enforce such provisions. 10 |
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| 59 | 64 | | (6) If the attorneys' fees are for services rendered to an assignee or a debt buyer, 11 |
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| 60 | 65 | | as defined in G.S. 58-70-15, all of the following materials setting forth a 12 |
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| 61 | 66 | | party's obligation to pay attorneys' fees shall be provided to the court before a 13 |
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| 62 | 67 | | court may enforce those provisions: 14 |
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| 63 | 68 | | a. A copy of the contract or other writing evidencing the original debt, 15 |
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| 64 | 69 | | which must contain a signature of the defendant. If a claim is based on 16 |
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| 65 | 70 | | credit card debt and no such signed writing evidencing the original 17 |
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| 66 | 71 | | debt ever existed, then copies of documents generated when the credit 18 |
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| 67 | 72 | | card was actually used must be attached. 19 |
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| 68 | 73 | | b. A copy of the assignment or other writing establishing that the plaintiff 20 |
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| 69 | 74 | | is the owner of the debt. If the debt has been assigned more than once, 21 |
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| 70 | 75 | | then each assignment or other writing evidencing transfer of 22 |
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| 71 | 76 | | ownership must be attached to establish an unbroken chain of 23 |
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| 72 | 77 | | ownership. Each assignment or other writing evidencing transfer of 24 |
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| 73 | 78 | | ownership must contain the original account number of the debt 25 |
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| 74 | 79 | | purchased and must clearly show the debtor's name associated with 26 |
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| 75 | 80 | | that account number. 27 |
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| 76 | 81 | | Notwithstanding the foregoing, however, if debtor has defaulted or violated 28 |
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| 77 | 82 | | the terms of the security agreement and has refused, on demand, to surrender 29 |
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| 78 | 83 | | possession of the collateral to the secured party as authorized by G.S. 30 |
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| 79 | 84 | | 25-9-609, with the result that said secured party is required to institute an 31 |
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| 80 | 85 | | ancillary claim and delivery proceeding to secure possession of said collateral; 32 |
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| 81 | 86 | | no such written notice shall be required before enforcement of the provisions 33 |
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| 82 | 87 | | relative to payment of attorneys' fees in addition to the outstanding balance. 34 |
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| 83 | 88 | | (a) Definitions. – The following definitions apply in this section: 35 |
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| 84 | 89 | | (1) Creditor. – A person seeking to collect an amount owed pursuant to a debt 36 |
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| 85 | 90 | | instrument, including an assignee or debt buyer as defined in 37 |
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| 86 | 91 | | G.S. 58-70-15(b)(4). 38 |
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| 87 | 92 | | (2) Debt instrument. – A note, conditional sale contract, lease agreement, credit 39 |
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| 88 | 93 | | agreement, or other evidence of indebtedness. The term does not include a 40 |
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| 89 | 94 | | residential rental agreement governed by Article 5 of Chapter 42 of the 41 |
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| 90 | 95 | | General Statutes. 42 |
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| 91 | 96 | | (3) Debtor. – A person from which a creditor is seeking to collect an amount owed 43 |
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| 92 | 97 | | pursuant to a debt instrument, including a guarantor or accommodation party. 44 |
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| 93 | 98 | | (4) Person. – An individual, a firm, a partnership, an association, a corporation, a 45 |
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| 94 | 99 | | limited liability company, or any other organization or group acting as a unit. 46 |
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| 95 | 100 | | (b) Scope. – This section applies to debt instruments governed by the law of this State. 47 |
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| 96 | 101 | | (c) Attorneys' Fees. – An obligation in a debt instrument to pay attorneys' fees is valid 48 |
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| 97 | 102 | | and enforceable if a creditor uses an attorney to collect an amount owed pursuant to the debt 49 |
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| 98 | 103 | | instrument after a debtor's default and complies with the requirements of this section. If the debt 50 |
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| 99 | 104 | | instrument specifies an amount or percentage, a court shall award that amount or percentage. The 51 General Assembly Of North Carolina Session 2025 |
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| 101 | 106 | | award, however, shall not exceed a maximum rate of fifteen percent (15%) of the principal and 1 |
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| 102 | 107 | | interest owed at the time the lawsuit commenced or, in the case of a conditional sale contract, 2 |
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| 103 | 108 | | fifteen percent (15%) of the time price balance owed at the time the lawsuit commenced. If the 3 |
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| 104 | 109 | | debt instrument does not specify an amount or percentage, a court shall award attorneys' fees as 4 |
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| 105 | 110 | | follows: 5 |
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| 106 | 111 | | (1) Unless subdivision (2) of this subsection applies, the court shall award the 6 |
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| 107 | 112 | | maximum rate. 7 |
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| 108 | 113 | | (2) If the amount in controversy computed in accordance with G.S. 7A-243 is 8 |
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| 109 | 114 | | greater than or equal to the amount described in G.S. 7A-45.4(a)(9)c., the 9 |
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| 110 | 115 | | court shall award reasonable attorneys' fees, not to exceed the maximum rate. 10 |
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| 111 | 116 | | (d) Notice. – After the debtor has defaulted, the creditor shall give notice to the debtor if 11 |
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| 112 | 117 | | the creditor intends to collect attorneys' fees under this section. The creditor shall include in the 12 |
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| 113 | 118 | | notice the total amount owed under the debt instrument at that time, excluding attorneys' fees. If 13 |
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| 114 | 119 | | the debtor pays this amount within 14 days after the creditor has given the notice, the obligation 14 |
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| 115 | 120 | | to pay attorneys' fees becomes unenforceable. This subsection does not apply, however, to a 15 |
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| 116 | 121 | | debtor that has defaulted on a secured indebtedness and has refused to surrender possession of 16 |
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| 117 | 122 | | the collateral to the creditor under G.S. 25-9-609. 17 |
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| 118 | 123 | | (e) Assignees and Debt Buyers. – If the creditor is an assignee or debt buyer as defined 18 |
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| 119 | 124 | | in G.S. 58-70-15(b)(4), the creditor shall provide the materials described in G.S. 58-70-150 to 19 |
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| 120 | 125 | | the court." 20 |
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| 121 | 126 | | SECTION 2. G.S. 45-21.31 reads as rewritten: 21 |
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| 122 | 127 | | "§ 45-21.31. Disposition of proceeds of sale; payment of surplus to clerk. 22 |
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| 123 | 128 | | (a) The proceeds of any sale shall be applied by the person making the sale, sale in the 23 |
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| 124 | 129 | | following order, to the payment of -order: 24 |
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| 125 | 130 | | (1) Costs and expenses of the sale, including the trustee's commission, if any, and 25 |
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| 126 | 131 | | a reasonable auctioneer's fee if such this expense has been incurred, and 26 |
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| 127 | 132 | | reasonable counsel fees for an attorney serving as a trustee if allowed pursuant 27 |
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| 128 | 133 | | to subsection (a1) of this section;section. 28 |
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| 129 | 134 | | (2) Taxes due and unpaid on the property sold, as provided by G.S. 105-385, 29 |
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| 130 | 135 | | unless the notice of sale provided that the property be sold subject to taxes 30 |
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| 131 | 136 | | thereon on it and the property was so sold;sold. 31 |
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| 132 | 137 | | (3) Special assessments, or any installments thereof, against the property sold, 32 |
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| 133 | 138 | | which sold that are due and unpaid, as provided by G.S. 105-385, unless the 33 |
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| 134 | 139 | | notice of sale provided that the property be sold subject to special assessments 34 |
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| 135 | 140 | | thereon on it and the property was so sold;sold. 35 |
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| 136 | 141 | | (4) The obligation secured by the mortgage, deed of trust trust, or conditional sale 36 |
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| 137 | 142 | | contract. 37 |
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| 138 | 143 | | (a1) The clerk of the superior court of the county where the sale was had conducted may 38 |
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| 139 | 144 | | exercise discretion to allow reasonable counsel fees to an attorney serving as a trustee (in addition 39 |
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| 140 | 145 | | to the compensation allowed to the attorney as a trustee) where if the attorney, on behalf of the 40 |
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| 141 | 146 | | trustee, renders professional services as an attorney that are different from the services normally 41 |
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| 142 | 147 | | performed by a trustee and of a type which that would reasonably justify the retention of legal 42 |
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| 143 | 148 | | counsel by a trustee who is not licensed to practice law. Counsel fees are presumed reasonable if 43 |
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| 144 | 149 | | in compliance with G.S. 6-21.2(1) and (2). they do not exceed fifteen percent (15%) of the 44 |
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| 145 | 150 | | obligation. Nothing in this section, however, shall preclude precludes the clerk of superior court 45 |
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| 146 | 151 | | from deeming a higher fee reasonable. 46 |
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| 147 | 152 | | (b) Any surplus remaining after the application of the proceeds of the sale as set out in 47 |
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| 148 | 153 | | subsection (a) of this section shall be paid to the person or persons entitled thereto, to it if the 48 |
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| 149 | 154 | | person who that made the sale knows who is entitled thereto. that person's identity and location. 49 |
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| 150 | 155 | | Otherwise, in the following cases, the surplus shall be paid to the clerk of the superior court of 50 |
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| 151 | 156 | | the county where the sale was had -conducted: 51 General Assembly Of North Carolina Session 2025 |
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| 153 | 158 | | (1) In all cases when the owner of the property sold is dead and there is no 1 |
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| 154 | 159 | | qualified and acting personal representative of his estate, andthe owner's 2 |
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| 155 | 160 | | estate. 3 |
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| 156 | 161 | | (2) In all cases when he the person that made the sale is unable to locate the 4 |
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| 157 | 162 | | persons person entitled thereto, andto it. 5 |
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| 158 | 163 | | (3) In all cases when the mortgagee, trustee or vendor person that made the sale 6 |
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| 159 | 164 | | is, for any cause, in doubt as to who is entitled to such the surplus money, 7 |
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| 160 | 165 | | andmoney. 8 |
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| 161 | 166 | | (4) In all cases when adverse claims thereto to it are asserted. 9 |
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| 162 | 167 | | (c) Such payment Payment to the clerk pursuant to subsection (b) of this section 10 |
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| 163 | 168 | | discharges the mortgagee, trustee or vendor person that made the sale from liability to the extent 11 |
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| 164 | 169 | | of the amount so paid. 12 |
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| 165 | 170 | | (d) The clerk shall receive such money from the mortgagee, trustee or vendor and shall 13 |
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| 166 | 171 | | execute a receipt therefor.for money received under this section. 14 |
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| 167 | 172 | | (e) Repealed by Session Laws 2024-33, s. 23, effective July 8, 2024." 15 |
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| 168 | 173 | | SECTION 3. This act becomes effective October 1, 2025, and applies to debt 16 |
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| 169 | 174 | | instruments executed on or after that date. 17 |
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