GSC Attorneys' Fees in Debt Instruments.

GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025
S 1
SENATE BILL 60

Short Title: GSC Attorneys' Fees in Debt Instruments. (Public)
Sponsors: Senator Galey (Primary Sponsor).
Referred to: Rules and Operations of the Senate
February 6, 2025
*S60-v-1*
A BILL TO BE ENTITLED 1
AN ACT TO CLARIFY HO W A CREDITOR MAY ENF ORCE AN OBLIGATION TO PAY 2
ATTORNEYS' FEES IN A DEBT INSTRUMENT AND TO AMEND THE DEFAUL T 3
RATE FOR THESE FEES. 4
The General Assembly of North Carolina enacts: 5
SECTION 1. G.S. 6-21.2 reads as rewritten: 6
"§ 6-21.2. Attorneys' fees in notes, etc., in addition to interest.debt instruments. 7
Obligations to pay attorneys' fees upon any note, conditional sale contract or other evidence 8
of indebtedness, in addition to the legal rate of interest or finance charges specified therein, shall 9
be valid and enforceable, and collectible as part of such debt, if such note, contract or other 10
evidence of indebtedness be collected by or through an attorney at law after maturity, subject to 11
the following provisions: 12
(1) If such note, conditional sale contract or other evidence of indebtedness 13
provides for attorneys' fees in some specific percentage of the "outstanding 14
balance" as herein defined, such provision and obligation shall be valid and 15
enforceable up to but not in excess of fifteen percent (15%) of said 16
"outstanding balance" owing on said note, contract or other evidence of 17
indebtedness. 18
(2) If such note, conditional sale contract or other evidence of indebtedness 19
provides for the payment of reasonable attorn eys' fees by the debtor, without 20
specifying any specific percentage, such provision shall be construed to mean 21
fifteen percent (15%) of the "outstanding balance" owing on said note, 22
contract or other evidence of indebtedness. 23
(3) As to notes and other writ ing(s) evidencing an indebtedness arising out of a 24
loan of money to the debtor, the "outstanding balance" shall mean the 25
principal and interest owing at the time suit is instituted to enforce any security 26
agreement securing payment of the debt and/or to collect said debt. 27
(4) As to conditional sale contracts and other such security agreements which 28
evidence both a monetary obligation and a security interest in or a lease of 29
specific goods, the "outstanding balance" shall mean the "time price balance" 30
owing as of the time suit is instituted by the secured party to enforce the said 31
security agreement and/or to collect said debt. 32
(5) The holder of an unsecured note or other writing(s) evidencing an unsecured 33
debt, and/or the holder of a note and chattel mortgag e or other security 34
agreement and/or the holder of a conditional sale contract or any other such 35
security agreement which evidences both a monetary obligation and a security 36
General Assembly Of North Carolina Session 2025
Page 2 Senate Bill 60-First Edition
interest in or a lease of specific goods, or his attorney at law, shall, after 1
maturity of the obligation by default or otherwise, notify the maker, debtor, 2
account debtor, endorser or party sought to be held on said obligation that the 3
provisions relative to payment of attorneys' fees in addition to the "outstanding 4
balance" shall be e nforced and that such maker, debtor, account debtor , 5
endorser or party sought to be held on said obligation has five days from the 6
mailing of such notice to pay the "outstanding balance" without the attorneys' 7
fees. If such party shall pay the "outstanding balance" in full before the 8
expiration of such time, then the obligation to pay the attorneys' fees shall be 9
void, and no court shall enforce such provisions. 10
(6) If the attorneys' fees are for services rendered to an assignee or a debt buyer, 11
as defined in G.S. 58 -70-15, all of the following materials setting forth a 12
party's obligation to pay attorneys' fees shall be provided to the court before a 13
court may enforce those provisions: 14
a. A copy of the co ntract or other writing evidencing the original debt, 15
which must contain a signature of the defendant. If a claim is based on 16
credit card debt and no such signed writing evidencing the original 17
debt ever existed, then copies of documents generated when the credit 18
card was actually used must be attached. 19
b. A copy of the assignment or other writing establishing that the plaintiff 20
is the owner of the debt. If the debt has been assigned more than once, 21
then each assignment or other wr iting evidencing transfer of 22
ownership must be attached to establish an unbroken chain of 23
ownership. Each assignment or other writing evidencing transfer of 24
ownership must contain the original account number of the debt 25
purchased and must clearly show the debtor's name associated with 26
that account number. 27
Notwithstanding the foregoing , however, if debtor has defaulted or violated 28
the terms of the security agreement and has refused, on demand, to surrender 29
possession of the collateral to the secured party as authorized by G.S. 30
25-9-609, with the result that said secured party is require d to institute an 31
ancillary claim and delivery proceeding to secure possession of said collateral; 32
no such written notice shall be required before enforcement of the provisions 33
relative to payment of attorneys' fees in addition to the outstanding balance. 34
(a) Definitions. – The following definitions apply in this section: 35
(1) Creditor. – A person seeking to collect an amount owed pursuant to a debt 36
instrument, including an assignee or debt buyer as defined in 37
G.S. 58-70-15(b)(4). 38
(2) Debt instrument. – A note, conditional sale contract, lease agreement, credit 39
agreement, or other e vidence of indebtedness. The term does not include a 40
residential rental agreement governed by Article 5 of Chapter 42 of the 41
General Statutes. 42
(3) Debtor. – A person from which a creditor is seeking to collect an amount owed 43
pursuant to a debt instrument, including a guarantor or accommodation party. 44
(4) Person. – An individual, a firm, a partnership, an association, a corporation, a 45
limited liability company, or any other organization or group acting as a unit. 46
(b) Scope. – This section applies to debt instruments governed by the law of this State. 47
(c) Attorneys' Fees. – An obligation in a debt instrument to pay attorneys' fees is valid 48
and enforceable if a creditor uses an attorney to collect an amount owed pursuant to the debt 49
instrument after a debtor's default and complies with the requirements of this section. If the debt 50
instrument specifies an amount or percentage, a court shall award that amount or percentage. The 51
General Assembly Of North Carolina Session 2025
Senate Bill 60-First Edition Page 3
award, however, shall not exceed a maximum rate of fifteen percent (15%) of the principal and 1
interest owed at the time the lawsuit commenced or, i n the case of a conditional sale contract, 2
fifteen percent (15%) of the time price balance owed at the time the lawsuit commenced. If the 3
debt instrument does not specify an amount or percentage, a court shall award attorneys ' fees as 4
follows: 5
(1) Unless subdivision (2) of this subsection applies, the court shall award the 6
maximum rate. 7
(2) If the amount in controversy computed in accordance with G.S. 7A-243 is 8
greater than or equal to the amount described in G.S. 7A-45.4(a)(9)c., the 9
court shall award reasonable attorneys' fees, not to exceed the maximum rate. 10
(d) Notice. – After the debtor has defaulted, the creditor shall give notice to the debtor if 11
the creditor intends to collect attorneys' fees under this section. The creditor shall include in the 12
notice the total amount owed under the debt instrument at that time, excluding attorneys' fees. If 13
the debtor pays this amount within 14 days after the creditor has given the notice, the obligation 14
to pay attorneys ' fees becomes unenforceable. This subsection does not apply , however, to a 15
debtor that has defaulted on a secured indebtedness and has refused to surrender possession of 16
the collateral to the creditor under G.S. 25-9-609. 17
(e) Assignees and Debt Buyers. – If the creditor is an assignee or debt buyer as defined 18
in G.S. 58-70-15(b)(4), the creditor shall provide the materials described in G.S. 58-70-150 to 19
the court." 20
SECTION 2. G.S. 45-21.31 reads as rewritten: 21
"§ 45-21.31. Disposition of proceeds of sale; payment of surplus to clerk. 22
(a) The proceeds of any sale shall be applied by the person making the sale, sale in the 23
following order, to the payment of -order: 24
(1) Costs and expenses of the sale, including the trustee's commission, if any, and 25
a reasonable auctioneer's fee if such this expense has been incurred, and 26
reasonable counsel fees for an attorney serving as a trustee if allowed pursuant 27
to subsection (a1) of this section;section. 28
(2) Taxes due and unpaid on the property sold, as provide d by G.S. 105-385, 29
unless the notice of sale provided that the property be sold subject to taxes 30
thereon on it and the property was so sold;sold. 31
(3) Special assessments, or any installments thereof, against the property sold, 32
which sold that are due and unpaid, as provided by G.S. 105-385, unless the 33
notice of sale provided that the property be sold subject to special assessments 34
thereon on it and the property was so sold;sold. 35
(4) The obligation secured by the mortgage, deed of trust trust, or conditional sale 36
contract. 37
(a1) The clerk of the superior court of the county where the sale was had conducted may 38
exercise discretion to allow reasonable counsel fees to an attorney serving as a trustee (in addition 39
to the compensation allowed to the attorney as a t rustee) where if the attorney, on behalf of the 40
trustee, renders professional services as an attorney that are different from the services normally 41
performed by a trustee and of a type which that would reasonably justify the retention of legal 42
counsel by a trustee who is not licensed to practice law. Counsel fees are presumed reasonable if 43
in compliance with G.S. 6 -21.2(1) and (2). they do not exceed fifteen percent (15%) of the 44
obligation. Nothing in this section, however, shall preclude precludes the clerk of superior court 45
from deeming a higher fee reasonable. 46
(b) Any surplus remaining after the application of the proceeds of the sale as set out in 47
subsection (a) of this section shall be paid to the person or persons entitled thereto, to it if the 48
person who that made the sale knows who is entitled thereto. that person's identity and location. 49
Otherwise, in the following cas es, the surplus shall be paid to the clerk of the superior court of 50
the county where the sale was had -conducted: 51
General Assembly Of North Carolina Session 2025
Page 4 Senate Bill 60-First Edition
(1) In all cases when the owner of the property sold is dead and there is no 1
qualified and acting personal representative of his estate, and the owner's 2
estate. 3
(2) In all cases when he the person that made the sale is unable to locate the 4
persons person entitled thereto, andto it. 5
(3) In all cases when the mortgagee, trustee or vendor person that made the sale 6
is, for any cause, in doubt as to who is entitled to such the surplus money, 7
andmoney. 8
(4) In all cases when adverse claims thereto to it are asserted. 9
(c) Such payment Payment to the clerk pursuant to sub section (b) of this section 10
discharges the mortgagee, trustee or vendor person that made the sale from liability to the extent 11
of the amount so paid. 12
(d) The clerk shall receive such money from the mortgagee, trustee or vendor and shall 13
execute a receipt therefor.for money received under this section. 14
(e) Repealed by Session Laws 2024-33, s. 23, effective July 8, 2024." 15
SECTION 3. This act becomes effective October 1, 2025, and applies to debt 16
instruments executed on or after that date. 17