NORTH CAROLINA GENERAL ASSEMBLY
1963 SESSION

CHAPTER 1118
SENATE BILL 408

AN ACT TO PROVIDE FOR THE REGULATION OF INSURANCE PREMIUM FINANCING, PROVIDING FOR THE LICENSING OF INSURANCE PREMIUM FINANCE COMPANIES, PROVIDING FOR INSURANCE PREMIUM FINANCE CHARGES, RULES, REGULATIONS, ADMINISTRATIVE HEARINGS AND PENALTIES.

The General Assembly of North Carolina do enact:

Section 1.  Chapter 58 of the General Statutes of North Carolina is hereby amended by adding a new Article following Article 3A thereof, to be designated as Article 4 and to read as follows:
"ARTICLE 4
"Insurance Premium Financing
"G.S. 58-55.  Definitions. When used in this Article:
(a)	An insurance premium finance company is hereby defined to be:
(1)	Any person engaged, in whole or in part, in the business of entering into insurance premium finance agreements with insureds; or
(2)	Any person engaged, in whole or in part, in the business of acquiring insurance premium finance agreements from other insurance premium finance companies.
(b)	'Insurance Premium Finance Agreement' means a promissory note or other written agreement by which an insured promises or agrees to pay to, or to the order of, an insurance premium finance company the amount advanced or to be advanced under the agreement to an insurer or to an insurance agent, in payment of premiums on an insurance contract, together with a service charge as authorized and limited by this Article.
"G.S. 58-56.  License Required and Fees.
(a)	No person except an authorized insurer shall engage in the business of an insurance premium finance company without obtaining a license from the Commissioner, as provided in this Article.
(b)	Application for license required under this Article shall be in writing, and in the form prescribed by the Commissioner.
(c)	When an applicant has more than one office, separate applications for license shall be made for each such office.
(d)	At the time of filing an application for a license, the applicant shall pay to the Commissioner the license fee. Upon original application or upon application subsequent to denial of application, or revocation, suspension or surrender of a license, an examination fee may be required.
(e)	The license fee for each license year or part thereof shall be two hundred dollars ($200.00) for each office where the business of an insurance premium finance company is conducted. The examination fee, when required by this Section, shall be one hundred dollars ($100.00) per office, except that, when an applicant files applications for licenses for three (3) or more offices at the same time, the total examination fee for all the applications shall be three hundred dollars ($300.00).
"G.S. 58-56.1.  Exceptions to Requirements for License.
(a)	Any person, firm or corporation doing business under the authority of any law of this State or of the United States relating to banks, trust companies, installment paper dealers, auto finance companies, savings and loan associations, cooperative credit unions, agricultural credit corporations or associations organized under the laws of North Carolina or any person, firm or corporation subject to the provisions of the North Carolina Consumer Finance Act and the North Carolina Motor Vehicle Dealers and Manufacturers Licensing Law, Article 12, Chapter 20, of the General Statutes of North Carolina are exempt from the provisions of this Article.
(b)	An insurance company duly licensed in this State may make an installment payment charge as set forth in the rate filings and approved by the Commissioner and are thereby exempt from the provisions of this Article.
"G.S. 58-56.2.  Application to Commissioner for License.
(a)	Within sixty (60) days after the filing of an application for a license accompanied by payment of the fees for license and examination, the Commissioner shall issue the license or may refuse to issue the license and so advise the applicant. The applicant shall submit with such application any and all information which the Commissioner may require to assist him in determining the financial condition, business integrity, method of operation and protection to the public offered by the person filing such application. Such license to engage in business in accordance with the provisions of this Article at the location specified in the application shall be executed in duplicate by the Commissioner and he shall transmit one copy to the applicant and retain a copy on file.
(b)	If the Commissioner refuses to issue a license, he shall notify the applicant of the denial, return to the applicant the sum paid as a license fee, but retain the examination fee to cover the cost of examining the applicant.
(c)	Each license issued hereunder shall remain in full force and effect until the last day of June unless earlier surrendered, suspended, or revoked pursuant to this Article, and may be renewed for the ensuing license year upon the filing of an application and conforming with G.S. 58-56, but subject to all of the provisions of this Article. If an application for a renewal of a license is filed with the Commissioner before July 1st of any year, the license sought to be renewed shall be continued in full force and effect either until the issuance by the Commissioner of the renewal license applied for or until five (5) days after the Commissioner refuses to issue such renewal license under the provisions of this Article.
(d)	Only one (1) office may be maintained under each license, but more than one (1) license may be issued to the same licensee pursuant to this Article.
(e)	Such license shall state the name and address of the licensee and shall at all times be prominently displayed in the office of the licensee and shall not be transferable or assignable.
(f)	Before any licensee changes any office of his to another location, he shall give written notice thereof to the Commissioner.
"G.S. 58-56.3.  Grounds for Refusal, Suspension, and for Revocation of License.
(a)	The Commissioner may forthwith deny, suspend, revoke, or refuse to renew or continue any license hereunder if he shall find that:
(1)	The licensee has failed to pay the annual license fee or any sum of money lawfully demanded under authority of any Section of this Article or has violated or failed to comply with any demand, ruling, provision or requirement of the Commissioner lawfully made pursuant to or within the authority of this Article.
(2)	Any fact or condition exists which, if it had been known to exist at the time of the original application, would have caused the original license to have been refused.
(b)	The Commissioner may revoke or suspend only the particular license with respect to which grounds for revocation or suspension may occur or exist; or if he shall find that such grounds for revocation or suspension are of general application to all offices, or to more than one (1) office, operated by such licensee, he shall revoke or suspend all of the licenses issued to such licensee or such number of licenses as such grounds apply to, as the case may be.
(1)	Any licensee may surrender any license by delivering to the Commissioner written notice that he thereby surrenders such license, but such surrender shall not affect such licensee's civil or criminal liability for acts committed prior to such surrender.
(2)	No revocation or suspension or surrender of any license shall impair or affect the obligation of any insured under any lawful insurance premium finance agreement previously acquired or held by the licensee.
(3)	Every license issued hereunder shall remain in force and effect until the same shall have been surrendered, revoked, suspended, or expires in accordance with the provisions of this Article; but the Commissioner shall have authority to reinstate suspended licenses or to issue new licenses to a licensee whose license or licenses shall have been revoked, if no fact or condition then exists which clearly would have warranted the Commissioner in refusing originally to issue such license under this Article.
"G.S. 58-57.  Investigations, Hearings, and Penalties.
(a)	For the purpose of conducting investigations and holding hearings on insurance premium finance companies, the Commissioner shall have the same authority as that vested in him by G.S. 58-9.2 and G.S. 58-44.6.
"G.S. 58-57.1.  Licensee's Books and Records.
(a)	The licensee shall keep and use in his business such books, accounts, and records as will enable the Commissioner to determine whether such licensee is complying with the provisions of this Article and with the rules and regulations lawfully made by the Commissioner hereunder. Every licensee shall preserve such books, accounts, and records, including cards used in a card system, if any, for at least three (3) years after making the final entry in respect to any insurance premium finance agreement recorded therein; provided, however, the preservation of photographic reproductions thereof or records in photographic form shall constitute compliance with this requirement. The Commissioner may require of licensees under oath and in the form prescribed by him regular or special reports as he may deem necessary to the proper supervision of licensees under this Article.
(b)	Any person who shall refuse, on demand, to exhibit to the Commissioner of Insurance or to any Deputy, or person acting with or for the Commissioner, the books, accounts or records as above provided, or who shall knowingly or willfully make any false statement in regard to the same shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be fined or imprisoned, or both, at the discretion of the court.
"G.S. 58-57.2. Excessive Insurance Premium Finance Charges; Penalty.
(a)	The knowingly taking, receiving, reserving, charging a greater insurance premium finance charge than that authorized in this Article shall be held and adjudged a forfeiture of the entire insurance premium finance charge which the insurance premium finance agreement carries with it, or which has been agreed to be paid thereon; and if a greater insurance premium finance charge has been paid, the person paying the same or his legal representative may recover from the insurance premium finance company twice the entire amount of the insurance premium finance charge thus paid if action therefore is brought within two (2) years from the time of such payment.
"G.S. 58-57.3.  Rebates and Inducements Prohibited.
(a)	No insurance premium finance company, and no employee of such a company shall pay, allow, or offer to pay or allow in any manner whatsoever to an insurance agent or any employee of an insurance agent, or to any other person, or as an inducement to the financing of an insurance policy with the insurance premium finance company or after any such policy has been financed, any rebate whatsoever, either from the service charge for financing specified in the insurance premium finance agreement or otherwise, or shall give or offer to give any valuable consideration or inducement of any kind directly or indirectly, other than an article of merchandise not exceeding one dollar ($1.00) in value which shall have thereon the advertisement of the insurance premium finance company; but an insurance premium finance company may purchase or otherwise acquire an insurance premium finance agreement provided that it conforms to this Article in all respects, from another insurance premium finance company with recourse against the insurance premium finance company on such terms and conditions as may be mutually agreed upon and such terms and conditions shall be subject to the approval of the Commissioner.
(b)	No filing of the assignment or notice thereof to the insured shall be necessary to the validity of the written assignment of an insurance premium finance agreement as against creditors or subsequent purchasers, pledgees, or encumbrancers of the assignor.
"G.S. 58-58.  Approval of Forms and Service Charge Filings.
(a)	No insurance premium finance agreement form or related form shall be used in this State unless it has been filed with and written approval given by the Commissioner.
(b)	In addition each insurance premium finance company shall file with the Commissioner the service charge rate plan to be used in insurance premium financing including all modifications of service charges to be paid by the insured or others under the insurance premium finance agreement. Such filings shall not be used in this State until written approval has been given by the Commissioner.
"G.S. 58-58.1.  Form and Content of Insurance Premium Finance Agreements.
(a)	An insurance premium finance agreement shall be in writing, dated, signed by the insured, and the printed portion thereof shall be in at least eight point type. It shall contain the entire agreement of the parties with respect to the insurance contract, the premiums for which are advanced or to be advanced under it, and:
(1)	At its top, the words 'INSURANCE PREMIUM FINANCE AGREEMENT' or similar wording in at least ten point bold type; and the insurance premium finance company license number shall also appear, and:
(2)	A notice in at least eight point bold type, reading as follows: 'NOTICE':
1.	Do not sign this agreement before you read it.
2.	You are entitled to a copy of this agreement.
3.	Under the law, you have the right to pay off in advance the full amount due and under certain conditions to obtain a partial refund of the service charge.
(b)	An insurance premium finance agreement shall:
(1)	Contain the name and place of business of the insurance agent negotiating the related insurance contract, the name and residence or the place of business of the insured as specified by him, the name and place of business of the insurance premium finance company to which installments or other payments are to be made, a description of the insurance contract, the premiums for which are advanced or to be advanced under the agreement, and the amount of the premiums for such insurance contracts; and
(2)	Set forth the following items:
a.	The total amount of the premiums;
b.	The amount of the down payment;
c.	The principal balance, which is the difference between items a. and b.
d.	The amount of the service charge;
e.	The balance, which is the sum of items c. and d., payable by the insured, the number of installments required, the amount of each installment expressed in dollars and the due date or period thereof;
(c)	The items need not be stated in the sequence or order set forth above, inapplicable items may be omitted; additional items may be included to explain the computations made in determining the amount to be paid by the insured.
(d)	No insurance premium finance agreement shall be signed by an insured when it contains any blank space to be filled in after it has been signed; however, if the insurance contract, the premiums for which are advanced or to be advanced under the agreement, has not been issued at the time of its signature by the insured and it so provides, the name of the authorized insurer by whom such insurance contract is issued and the policy number and the due date of the first installment may be left blank and later inserted in the original of the agreement after it has been signed by the insured.
"G.S. 58-59.  Limitations on Service Charges.
(a)	An insurance premium finance company shall not directly or indirectly except as otherwise provided by law, impose, take, receive from, reserve, contract for, or charge an insured greater service charges than are permitted by this Article. No insurance premium finance company shall be permitted to charge or finance any membership fees, dues, registration fees, or any other charges except the service charges provided for in this Article for financing insurance premiums on policies of insurance lawfully placed in this State.
(b)	An insurance premium finance company may, in an insurance premium finance agreement, contract for, charge, receive, and collect a service charge for financing the premiums under the agreement computed as provided in subsection (c).
(c)	The service charge provided for in this Section shall be computed on the principal balance of the insurance premium finance agreement from the inception date of the insurance contract, the premiums for which are advanced or to be advanced under the agreement unless otherwise provided under rules and regulations prescribed by the Commissioner, to and including the date when the final installment of the insurance premium finance agreement is payable, at a rate not exceeding ten dollars ($10.00) per one hundred dollars ($100.00) per annum; provided that when the principal balance is one hundred twenty dollars ($120.00) or less, a licensee may charge, in lieu of the charge specified above, rates not exceeding, two dollars ($2.00) for each ten dollars ($10.00) on that part of the principal balance not exceeding forty dollars ($40.00); one dollar ($1.00) for each ten dollars ($10.00) on that part of the principal balance exceeding forty dollars ($40.00) but not exceeding seventy dollars ($70.00); fifty cents (50¢) for each ten dollars ($10.00) on that part of the principal balance exceeding seventy dollars ($70.00) but not exceeding one hundred twenty dollars ($120.00). All service charges are to be rounded off to the nearest dollar and are subject to a minimum charge as follows: Three dollars ($3.00) when the principal balance is less than twenty dollars ($20.00); six dollars ($6.00) when the principal balance is twenty dollars($20.00) or more, but less than one hundred twenty dollars ($120.00); fourteen dollars ($14.00) when the principal balance is one hundred twenty dollars ($120.00) or more.
(d)	The provisions of subsection (c) apply if the premiums under only one (1) insurance contract are advanced or are to be advanced under an insurance premium finance agreement; if premiums under more than one (1) insurance contract are advanced or are to be advanced under an insurance premium finance agreement, the service charge shall be computed from the inception date of such insurance contracts, or from due date of such premiums; however, not more than one minimum service charge shall apply to each insurance premium finance agreement.
(e)	No insurance agent or insurance premium finance company shall induce an insured to become obligated under more than one (1) insurance premium finance agreement for the purpose of or with the effect of obtaining service charges in excess of those authorized by this Article.
"G.S. 58-59.1.  Restrictions on Insurance Premium Finance Agreements.
(a)	No insurance premium finance agreement shall contain any provisions by which:
(1)	In the absence of default of the insured, the insurance premium finance company holding the agreement may, arbitrarily and without reasonable cause, accelerate the maturity of any part or all of the amount owing thereunder;
(2)	A power of attorney is given to confess judgment in this State; or
(3)	The insured relieves the insurance agent or the insurance premium finance company holding the agreement from liability for any legal rights or remedies which the insured may otherwise have against him.
"G.S. 58-59.2.  Delivery of Copy of Insurance Premium Finance Agreement.
(a)	Before the due date of the first installment payable under an insurance premium finance agreement, the insurance premium finance company holding the agreement or the insurance agent shall deliver to the insured, or mail to him at his address as shown in the agreement, a copy of the agreement.
"G.S. 58-59.3.  Notice of Assignment; Payments.
(a)	Unless the insured has notice of actual or intended assignment of the insurance premium finance agreement, payment thereunder by him to the last known holder of the agreement shall be binding upon all subsequent holders or assignees.
"G.S. 58-59.4.  Statement of Account; Receipts.
(a)	At any time after its execution, but not later than one (1) year after the last payment thereunder, an insurance premium finance company holding an insurance premium finance agreement shall, upon written request of the insured, give or mail to him a written statement of the dates and amounts of payment and the total amount, if any, unpaid thereunder.
(b)	After the payment of all sums for which an insured is obligated under an insurance premium finance agreement, and upon his written demand, the insurance premium finance company holding the agreement shall deliver, or mail to the insured at his last known address, such one (1) or more good and sufficient instruments as may be necessary to acknowledge payment in full and to release all interest in or rights to the insurance contracts, the premiums for which were advanced or are to be advanced under the agreement.
"G.S. 58-59.5.  Credit Upon Anticipation of Payments.
(a)	Notwithstanding the provisions of any insurance premium finance agreement to the contrary, any insured may pay it in full at any time before the maturity of the final installment of the balance thereof; and, if he does so and the agreement included an amount for service charge, he shall receive and be entitled to receive for such anticipation a refund credit thereon.
(b)	The amount of any such refund credit shall represent at least as great proportion of the service charge, if any, as the sum of the periodic balances after the month in which prepayment is made bears to the sum of all periodic balances under the schedule of installments in the agreement. Where the amount of the refund credit for anticipation of payment is less than one dollar ($1.00), no refund need be made. Where the earned service charge amounts to less than twelve dollars ($12.00) or where the minimum service charge permitted is less than twelve dollars ($12.00), the refund credit shall be an amount equal to the total service charge less twelve dollars ($12.00) or such minimum service charge. As used in this subsection, the term 'earned service charge' shall mean the total service charge less the refund credit as computed in accordance with the first sentence of this subsection.
"G.S. 58-60.  Cancellation of Insurance Contract Upon Default.
(a)	When an insurance premium finance agreement contains a power of attorney or other authority enabling the insurance premium finance company to cancel any insurance contract or contracts listed in the agreement, the insurance contract or contracts shall not be cancelled unless such cancellation is effectuated in accordance with the following provisions:
(1)	Not less than ten (10) days written notice be furnished the insured or insureds shown on the insurance premium finance agreement of the intent of the insurance premium finance company to cancel his or their insurance contract or contracts unless the defaulted installment payment is received. A notice thereof shall also be mailed to the insurance agent.
(2)	After expiration of such period, the insurance premium finance company shall mail the insurer a request for cancellation, including a copy of the power of attorney, and shall mail a copy of the request for cancellation to the insured at his last known address as shown on the insurance premium finance agreement.
(3)	Upon receipt of a copy of such request for cancellation notice by the insurer or insurers, the insurance contract shall be cancelled with the same force and effect as if the aforesaid request for cancellation had been submitted by the insured himself, without requiring the return of the insurance contract or contracts.
(4)	All statutory, regulatory, and contractual restrictions providing that the insured may not cancel his insurance contract unless he or the insured first satisfies such restrictions by giving a prescribed notice to a governmental agency, the insurance carrier, an individual, or a person designated to receive such notice for said governmental agency, insurance carrier, or individual shall apply where cancellation is effected under the provisions of this Section.
(5)	Whenever an insurance contract is cancelled in accordance with this Section, the insurer shall promptly return whatever gross unearned premiums are due under the contract to the insurance premium finance company effecting the cancellation for the benefit of the insured or insureds. Whenever the return premium is in excess of the amount due the insurance premium finance company by the insured under the agreement, such excess shall be remitted promptly to the order of the insured and agent, subject to the minimum service charge provided for in this Article.
(6)	The provisions of subsection (a) relating to request for cancellation by the insurance premium finance company of an insurance contract and the return by an insurer of unearned premiums to the insurance premium finance company, also, apply to the surrender by the insurance premium finance company of an insurance contract providing life insurance and the payment by the insurer of the cash value of the contract to the insurance premium finance company, except that the insurer may require the surrender of the insurance contract.
"G.S. 58-61.  Violation of Article a Misdemeanor.
(a)	Any person who shall engage in the business referred to in this Article without first receiving a license, or who shall fail to secure a renewal of his license upon the expiration of the license year, or shall engage in the business herein referred to after the license has been suspended or revoked as herein provided, or who shall fail or refuse to furnish the information required of the Commissioner, or who shall fail to observe the rules and regulations made by the Commissioner pursuant to this Article, shall be deemed guilty of a misdemeanor and upon conviction shall pay a fine of not less than one hundred dollars ($100.00) nor more than five hundred dollars ($500.00), or be imprisoned, or both, at the discretion of the court.
"G.S. 58-61.1.  Disposition of Fees.
(a)	All fees collected hereunder shall be credited to the account of the Insurance Commissioner for the specific purpose of providing the personnel, equipment and supplies necessary to enforce this Article, but the Director of the Budget shall have the right to budget the revenues received in accordance with the requirements of the Commissioner for the purposes herein required, and at the end of the fiscal year, if any sum whatever shall remain to the credit of the Commissioner, derived from the sources herein referred to, the same shall revert to the general treasury of the State to be appropriated as other funds."
Sec. 2.  All laws and clauses of laws in conflict with this Act are hereby repealed.
Sec. 3.  This Act shall be in full force and effect from and after October 1, 1963.
In the General Assembly read three times and ratified, this the 24th day of June, 1963.