March 31, 1993
Honorable William T. Graham Commissioner of Banks Dobbs Building 430 North Salisbury Street Raleigh, North Carolina
Re: Advisory Opinion of State Agencies Section, Administrative Division for Commissioner of Banks; Consumer Finance Act; Licensee Not Prohibited from Making Loan to Borrower Who Is Indebted to an Affiliate, Parent, or Subsidiary of the Licensee; N.C.G.S. §§ 53-179, 53-180, 53191, and 150B-2
Dear Commissioner Graham: This opinion is in response to the request contained in your letter of March 16, 1993, to Special Deputy Attorney General Henry T. Rosser.
ISSUES
- (1)
- Does G. S. § 53-179 prohibit a licensee under the Consumer Finance Act (Art. 15, G.S. Chap. 53) from making a loan to a borrower who is already indebted to the licensee’s affiliate, parent, or subsidiary which is not subject to the Consumer Finance Act?
- (2)
- Is a Commission policy valid when it prohibits a borrower from being indebted both to a licensee and to an affiliate of the licensee not subject to the Consumer Finance Act, unless the transactions were separated by at least 90 days and were not a a part of the same financing transaction?
- (3)
- Does G.S. § 53-179 prohibit a licensee from soliciting credit card accounts for an affiliated FDIC insured bank when the bank will extend credit to borrowers who are indebted to the licensee?
DISCUSSION
(1) The provisions of G.S. § 53-179 which are pertinent here read as follows:
A licensee shall not grant a loan in one office to any borrower who already has a loan in another office operated by the same entity or by an affiliate, parent, subsidiary or under the same ownership, management or control, whether partial or complete. This section shall apply to intrastate and interstate operations.
The issue is whether the statute prohibits a licensee under the Consumer Finance Act from making a loan to a borrower who has already contained a loan from an entity related to the licensee, such as an affiliate, a subsidiary, or a parent, when the related entity is not subject to the Consumer Finance Act. We have found no decision of an appellate court of this State which construes or applies this statute, and, therefore, we cannot speak with certainty. There are other provisions within the Consumer Finance Act, however, which, we believe, show the legislative intent.
First, G. S. § 53-180 provides as follows:
- (h)
- Limitations on Home Loans. – No affiliate operating in the same office or subsidiary operating in the same office of a licensee shall make any home loan as defined in G.S. 241.1A(e) in a principal amount of less than three thousand dollars ($3,000).
- (i)
- Limitation on Conditions to Making Loans. – A licensee or an affiliate operating in the same office or subsidiary operating in the same office of a licensee shall not make as a condition of any loan the refinancing of a borrower’s home loan as defined in G.S. 24-1.1A(e) which is not currently in default.
As is readily apparent from these provisions, the General Assembly contemplated that affiliates or subsidiaries, not subject to the Consumer Finance Act but operating in the same office as a licensee, would make loans. It also appears from the language of subsection (i) that the General Assembly contemplated that the licensee and entities related to the licensee, but not subject to the Consumer Finance Act, could both make loans to a borrower. Were this not so, there would appear to be little reason to prohibit a requirement for refinancing a home loan, since a licensee may not make real estate loans (G.S. § 53-180(f) and would have little reason to require a refinancing unless the licensee was related to the home loan lender.
Next, an extremely broad spectrum of lenders is specifically exempt from the provisions of the Consumer Finance Act by G.S. § 53-191, which reads:
Nothing in this Article shall be construed to apply to 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, savings and loan associations, cooperative credit unions, agricultural credit corporations or associations…production credit associations…pawnbrokers leading or advancing money on specific articles of personal property, industrial banks, the business of negotiating loans on real estate as defined in G.S. 105-41, nor to installment paper dealers as defined in G.S. 105-83 other than persons, firms and corporations engaged in the business of accepting fees for endorsing or otherwise securing loans or contracts for repayment of loans.
It is an accepted rule of statutory construction that when two statutes address the same subject matter, they must be read in pari materia and reconciled, if possible, to give effect to each. Carolina Truck & Body Co. v. General Motors Corp., 102 N.C.App. 262, 402 S.E.2d 135 (1991). Further, when two statutes deal with common subject matter, one in general and comprehensive terms and the other in a more minute and definite way, they should be read together and harmonized, if possible, to effectuate consistent legislative policy. If there necessarily is any repugnance between them, the statute dealing with the subject matter in a more minute and detailed way will prevail over the more general statute. Batten v. N.C. Dept. of Correction, 326
N.C. 338, 389 S.E. 2d 35 (1990).
Application of these rules of construction to the matter at hand leads us to the view that although
G.S. § 53-179 appears to prohibit all loans by a licensee when the borrower already has a loan with an entity related to the licensee, the more particularized provisions of G.S. §§ 53-180 and 53-191 reveal a legislative intent to permit licensees to make loans to borrowers who already have obtained loans from a related entity. It is our opinion, therefore, that a licensee and a related entity not subject to the Consumer Finance Act by virtue of G.S. § 53-191 may make concurrent loans to a borrower.
(2) You have asked for an opinion as to the validity of a policy of the State Banking Commission which prohibits concurrent loans by a licensee and by a related entity not subject to the Consumer Finance Act, unless the loan transactions are separated by at least 90 days and are not a part of the same loan transaction. It is our opinion that such a policy is not valid, for the reasons expressed above, if it is based on the premise that G.S. § 53-179 prohibits concurrent loans by a licensee and an entity related to the licensee that is not subject to the Consumer Finance Act. If there is some other, valid basis for the policy, we believe that it is currently unenforceable because it has not been promulgated as a rule pursuant to the administrative Procedure Act (APA) (G>S> Chap. 150B). The APA defines a rule, inter alia, as "any agency regulation, standard, or statement of general applicability that implements or interprets an enactment of the General Assembly…or that describes the procedure or practice requirements of an agency…."
G.S. § 150B-2(8a). The limitation on loan activities imposed by the policy in question clearly describes a procedure or practice requirement of the Commission and may be intended as a "regulation…that implements or interprets an enactment of the General Assembly."
(3) You have asked for an opinion whether solicitation by a licensee under the Consumer Finance Act of credit care accounts on behalf of a bank of which the licensee is a subsidiary violates the Consumer Finance Act. For the reasons set out above, we do not believe that such a solicitation violates the Act.
We hope that we have responded fully to your request, but if you have any questions or comments, please contact us.
Ann Reed Senior Deputy Attorney General
Henry T. Rosser Special Deputy Attorney General