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North Carolina Gov. Bev Perdue yesterday signed the Consumer Economic Protection Act (CEPA), which lawmakers maintain is designed to protect consumers from unfair debt collectors and help homeowners facing foreclosure.
Gov. Perdue says the law protects North Carolina consumers from unfair debt collection practices by debt buyers, who must now prove that they have the right to enforce the debt and be able to verify the amount owed. The law also prohibits debt buyers from filing or threatening to file a lawsuit when barred by the statute of limitations.
"States threatening to change statutes" has been a concern of debt buyers for a while, according to Lou DiPalma, managing partner at Garnet Capital Advisors, a Harrison, N.Y.-based debt broker. "There is a lot of uncertainty for debt buyers trying to run their business."
Mike Varrichio, president at Global Acceptance Credit Co., an Arlington, Texas-based debt buyer, also is concerned by the potential for new state laws. He worries that the pendulum may swing too far in the direction of over-protection for debtors.
"The one issue debt buyers will be faced with over the coming years is the passage of state laws that continue to be more favorable for the consumer," Varrichio tells Collections & Credit Risk. "We're likely to see a wave of these state laws passed over the next several years that are going to make it more difficult for the industry."
The legislation also authorizes the clerk of court presiding over a foreclosure hearing to ask what steps have been taken to prevent foreclosure and to continue the hearing for up to 60 days to allow homeowners and lenders more time to negotiate a solution, according to Perdue's office.
Furthermore, CEPA standardizes the amount of bond required at 1% of the balance due on the loan to give homeowners a fair opportunity to appeal foreclosure orders. Previously, some homeowners were asked to put up a bond worth the entire value of the loan balance in order to be able to appeal their foreclosure.
