NC residents now have new protections from foreclosure and unfair debt collectors

North Carolina Attorney General Cooper backed new law to save homes and communities, stop harassment from debt buyers

North Carolinians who face the loss of their homes through foreclosure or harassment from unfair debt collectors now have new protections under the law, according to NC Attorney General Roy Cooper.

The Consumer Economic Protection Act of 2009 (CEPA), which Cooper worked with state legislators to enact, will ensure that homeowners and their mortgage lenders have the chance to voluntarily resolve foreclosures. The new law, which started October 1, 2009, will also protect consumers from an aggressive new breed of debt collectors called debt buyers.

“Losing a home should be a last resort because foreclosures hurt the whole economy,” Cooper said. “With this new law, homeowners and lenders get more time to rework mortgages so that more families can afford to stay in their homes.”

Court records show that nearly 40,000 North Carolina homes have gone into foreclosure so far in 2009. According to the Center for Responsible Lending, more than 2.2 million North Carolina homeowners will see their property values decline over the next three years because of foreclosures in their neighborhood. Foreclosures hurt lenders as well, costing them an estimated 40 percent of the loan value.

Not all foreclosures can be prevented, but some homeowners are able to work out repayment plans and loan modifications with their mortgage lender or servicer. CEPA requires lenders to explain in detail their efforts to resolve delinquent home loans without resorting to foreclosure. Clerks of Court presiding over a foreclosure hearing now have the authority 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.

To give homeowners a fair opportunity to appeal foreclosure orders, CEPA also standardizes the amount of bond required at one percent of the balance due on the loan. 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.

For free counseling on options to avoid foreclosure, North Carolina homeowners can call a toll-free hotline set up by the NC Commissioner of Banks’ Office. The hotline, 1-866-234-4857, is available from 8:00 AM to 9:00 PM Monday through Friday, and from 8:00 AM to 5:00 PM on Saturdays.

The new law also protects North Carolina consumers from unfair debt collection practices by debt buyers, a new type of debt collector that pursues old debts even when the debts have already been settled or paid.

For example, a debt buyer sued a 65-year-old North Carolina woman, producing billing statements supposedly sent to her at an address in Greensboro. But the consumer, who has lived in the same house for more than 30 years, had never lived in Greensboro.

In another case, a 73-year-old North Carolinian received daily calls from a debt buyer, telling her that she would never be able to buy anything if she didn’t pay them. The account the debt buyer was trying to collect was opened in Ohio, and the woman had never set foot in Ohio. A criminal had stolen her identity years before and been prosecuted and convicted for it, but the debt buyer still filed suit against her over the debt that wasn’t hers.

Under the new law, debt buyers must now prove that they have the right to enforce the debt and be able to verify the amount owed. Debt buyers are also prohibited from filing or threatening to file suit when barred by the statute of limitations.

“Whether you’re a senior on a fixed income or a working family trying to make ends meet, the last thing you need is someone hounding you to pay a debt that you don’t really owe,” Cooper said.

A provision in the original legislation that would have clarified the Attorney General’s Office’s enforcement over investment scams involving securities will be pursued in the next legislative session.

Consumer tips on home loans, debt collectors and many other topics are available from the Attorney General’s Consumer Protection Division at