Which place’s debt rules apply—and who can help?

S_NC, PASS-01 — North Carolina provider market access and consumer fees

Research baseline and actual access date: October 22, 2026, Pacific. Research used ordinary web browsing in this conversation. The findings below address this component only.

North Carolina has a prohibition-and-exceptions framework under Article 56, not a general debt-settlement licensing system. A qualifying credit-counseling/DMP organization has a conditional statutory exception. Its verified consumer-fee ceilings are $40 for setup and, monthly, the lesser of 10% of the payment disbursed under the plan or $40. Neither nonprofit status nor an attorney connection establishes the exception by itself. C001, C007–C013. Article 56+2

A separate issue remains held: a genuinely noncustodial provider receiving compensation only after completed settlement and full performance does not fit neatly into a blanket statement that every settlement fee is prohibited. The current statute retains timing language, but the materials read do not establish a generally available, affirmative market-access pathway for the proposed variations of that model. In particular, federal permission to collect after a first creditor payment does not establish compliance with North Carolina’s completion language. C006, C016–C019.

ID convention: Full source and claim IDs appear in the registers below. Elsewhere, “S001” means S_NC-P1-S001, and “C001” means S_NC-P1-C001.

A. Substantive findings

1. Classification depends on the actual services, money flow, compensation, and debtor

Section 14-423(2) contains three relevant branches:

These branches must be read together. In Orion, the court rejected an argument built only around the advance-fee wording and emphasized the broader definition. That was a trial-level pleading decision involving interconnected entities, not an appellate determination of every possible noncustodial model. C002, C017; S001 §14-423(2); S012 ¶¶9, 12–15. Article 56+1

Principal reduction versus concessions. Reduced interest, waived charges, altered payment schedules, and creditor distributions can matter even when principal is repaid in full. Conversely, calling a principal-reduction program a “DMP” does not establish the exception. Article 56 supplies no express definition requiring every DMP to repay 100% of principal; this investigation therefore does not invent that condition. A hybrid must satisfy the actual organizational and service conditions. C005, C007.

Consumer versus business debt. The statutory debtor is an individual residing in North Carolina, including jointly liable individuals. The definition refers to any debt, without an express personal/family/household limitation. Consequently:

• Business purpose alone does not establish an exclusion for a resident individual’s obligation.
• An entity-only obligation differs from an individual owner’s or guarantor’s obligation.
• An LLC borrower does not establish that a personally liable NC resident falls outside the Act.

These are textual classifications, not a complete commercial-debt or guaranty opinion. C003; S001 §14-423(3).

Remote providers. An out-of-state office does not itself remove the NC-resident connection. The 2016 Orion merits decision involved Texas operations serving North Carolina consumers, including third-party account arrangements. Jurisdictional and choice-of-law disputes remain fact-specific; no universal jurisdiction conclusion is made here. C004; S013 ¶¶19–25, 44–58. 2016_NCBC_100.docx

Education and related fee labels. Standalone budgeting information without creditor-intermediary activity or creditor-fund handling is distinguishable from adjustment. However, “education,” “membership,” “contribution,” “legal services,” or “account administration” does not independently resolve classification. Examine what the provider promises, performs, receives, controls, and charges. The DMP exception expressly addresses contributions and certain ancillary purchases/referrals. C005, C007, C013, C020.

2. Market access: prohibition, conditional exceptions, and unresolved boundaries

Section 14-424 makes engaging, offering, or attempting to engage in covered debt adjusting a Class 2 misdemeanor. Section 14-425 authorizes state enforcement through the Attorney General or district attorney. Article 56 provides no general application through which an ordinary covered settlement business becomes licensed. C001.

Credit counseling and DMP exception

Section 14-426(7) requires an organization providing credit counseling, education, and debt management to satisfy all seven conditions:

The statute says an organization; it does not expressly require nonprofit or federal tax-exempt status. DOJ’s recommendation to use nonprofit counselors is consumer guidance, not a replacement for these conditions. A nonprofit label, accreditation alone, or a fee below the ceiling is insufficient. C007; S001 §14-426(7); S004 §1. ncleg.gov+1

Other statutory exclusions

These are conditional exclusions, not transferable business licenses. An advertised, recurring settlement business cannot simply select the casual-activity exclusion. Article 56 contains no blanket list exempting every bank, credit union, finance company, or nonprofit merely because of institutional status; a particular statutory authority or applicable exclusion must be established. C008–C010. ncleg.gov+1

Attorney substance matters. In the Rufty consent disciplinary order, nominal majority ownership by an NC lawyer did not save an arrangement in which another person directed operations and consultants received 97% of profits. The findings treated the lawyer as working for a debt adjuster. This is a fact-specific disciplinary disposition, not an appellate ownership test or a current status determination about that lawyer. C020; S017 findings ¶¶12–16, conclusions ¶3(c)–(d). ncbar.gov

3. Verified consumer-fee structures and limits

Qualifying DMP organization

The statutory wording and current DOJ guidance agree on the $40/10%/$40 figures. C011–C015; S001 §14-423(3a), §14-426(7); S006 fee paragraph. ncdoj.gov

Attorneys and other exclusions

A genuinely qualifying attorney is subject to professional-fee rules rather than an automatic application of the DMP schedule. Rule 1.5 prohibits illegal or clearly excessive fees, addresses disclosure and contingent agreements, and ordinarily requires return of unearned advance fees. The true-retainer distinction does not make all purported retainers earned on receipt. No general numerical NC debt-settlement percentage ceiling for qualifying lawyers was established in this pass. C021; S016 Rule 1.5(a)–(c), comment [4]. North Carolina State Bar

For the creditor-agent and loan-disbursement exclusions, the relevant zero-cost/zero-adjustment-compensation conditions control. The employee, court-authority, and casual-activity exclusions do not themselves supply a general consumer-fee schedule. Absence of a numerical cap in an exclusion is not permission to charge any amount.

Historical and proposed figures

The 2005 amendments originally had an October 1, 2007 sunset. S.L. 2007-79 removed it effective September 1, 2007. The fee limits did not disappear under that original sunset. C014. ncleg.gov

Two competing proposals must not be treated as current law:

• H734: Proposed broader prohibition/recodification. Official last action: Senate Rules referral, April 28, 2025. Its printed July 1, 2025 date never independently made it effective.
• S491: Proposed licensing regime, including proposed 15%-of-principal/20%-of-difference fee language. Official last action: Senate Rules referral, March 26, 2025. Its printed January 1, 2026 date is not operative authority.

Neither bill supplies a current license, fee ceiling, application, or exemption. C026–C027. North Carolina General Assembly+3

4. When fees may be requested or received

North Carolina analysis

The noncustodial branch refers to receipt before settlement completion or full performance. The separate prohibition also reaches offering or attempting the covered business. It would therefore be wrong to infer that an unlawful advance-fee program is permissible until the first debit occurs. C016.

For a qualifying DMP, the statute recognizes a setup category, but does not establish an unrestricted collection date. Required preliminary counseling is free; eligibility, agreement, service, and independently applicable federal conditions still matter.

The following evidence prevents an overbroad conclusion about post-settlement fees:

Held: whether a particular noncustodial arrangement satisfies NC completion requirements after one debt’s first installment while other debts or promised services remain unfinished. C006, C017–C019. 2015_NCBC_102.docx+2

Federal TSR — common context only

For covered debt-relief telemarketing, 16 CFR §310.4(a)(5)(i)(A)–(C) prohibits requesting or receiving payment until:

1. Debt terms have actually been altered under the required customer-executed agreement.
2. The customer has made at least one payment under that agreement.
3. Individually resolved debts satisfy the proportional-fee or consistent-savings-percentage allocation rule.

Enrollment balances control the allocation calculations. These provisions establish timing/allocation requirements, not a federal percentage ceiling or NC permission. C030–C031, C034. ecfr.gov

The FTC adoption explanation addresses a genuine DMP in which eligible debts are renegotiated together: enrollment plus the first plan payment precedes setup/other fees, with subsequent servicing fees possible. It also distinguishes genuine installment settlements from artificially splitting a creditor-required lump sum. C032; S023 p.48489, nn.431–432. ftc.gov

Coverage must be assessed separately. The debt-relief definition concerns unsecured debts; many inbound responses to advertising/direct mail are covered. Bona fide nonprofit status, qualifying face-to-face transactions, and business-to-business calls require their own analysis. There is no general attorney exemption. C028–C029. ecfr.gov+4

Where the dedicated-account provision applies, all five safeguards matter: insured institution, customer ownership/interest, unaffiliated administrator, no referral compensation exchange, and withdrawal without penalty with the required account refund within seven business days, less properly earned fees. C033; §310.4(a)(5)(ii)(A)–(E).

5. Actual public permission, application, and lookup materials

C022–C025, C036. nccob+2

Necessary funds-handling boundary: receiving consumer money for transmission for compensation can trigger the separate Money Transmitters Act. Its exemption section contains no categorical DMP/nonprofit exception. A bona fide payee-agent exemption has specific agreement, public-representation, payment-receipt, and verification requirements; authorized-delegate and Commissioner-order possibilities also exist. The actual arrangement must be examined. An Article 56 exception alone does not establish the separate result. C023–C024; S018 §§53-208.42–.44. ncleg.gov+2

The full current 04 NCAC 03F rules and a linked agent-of-payee ruling could not be read successfully through the attempted public routes. Consequently, full money-transmission clearance remains partial, while the statutory overlap and current application instructions are established.

6–7. Examples, coverage, and acceptance boundary

Section D supplies the requested calculations, classification holds, cancellation cases, and exact next investigations. This pass establishes neither a named provider’s authorization nor completion of the full North Carolina dossier. State acceptance and A066 acceptance remain open.

B. Source register

Access notation: Every entry below was checked during this run on 2026-10-22 Pacific. “Read” means the identified text/passages were actually retrieved and examined; it does not mean every page of a long document or the entire litigation docket was reviewed. Multiple sections of one legal document retain one source ID.

Sources actually read

Unavailable or not substantively read

Other failed/discovery routes: The guessed DOJ debt-relief/credit-repair URL failed; the actual Getting Out of Debt page was then found and read. Secretary of State business-registration/search routes returned 403 and were not used as authorization evidence. The 2026 UNC attorney-exemption article was used as a discovery lead to S017, not as controlling law. Search snippets, company charts, and legislative-summary snippets were not substituted for the operative sources.

C. Claim register

Confidence labels: High = clear text or an accurately bounded official record. Textual = reasoned application of wording, with factual boundaries. Held = the research does not establish the proposed conclusion. These labels do not certify an individual provider.

D. Worked examples and coverage/gap table

Worked examples

Shared assumptions for DMP examples: The organization satisfies every condition in A.2; any separate funds-transmission requirement is satisfied; the fee serves the permitted administrative purpose; the agreement permits it; and collection timing is lawful under all applicable rules. These are bounded calculations, not findings about an actual provider.

Example 1 — Lower debt and a small monthly disbursement

Plain text

Inputs:
Enrolled debt = $1,200.
Actual monthly payment disbursed to creditors = $150.
Monthly rate ceiling = 10%.
Monthly dollar ceiling = $40.

Base = $150 disbursed, not $1,200 enrolled.
Operation = $150 × 0.10 = $15.
Ceiling comparison = min($15, $40).
Result = $15 maximum monthly administration charge.

Units = US dollars per month.
Rounding = none; exact whole-dollar result.

A $40 monthly charge would exceed this example’s percentage ceiling. A permitted setup charge is a separate category, not another monthly allowance. C011–C013.

Example 2 — Larger payment and multiple creditors

Plain text

Inputs:
Monthly creditor disbursements = $700 total.
Number of creditors = 4.

Percentage calculation = $700 × 0.10 = $70.
Ceiling comparison = min($70, $40).
Result = $40 maximum for the month.

Incorrect multiplication = 4 × $40 = $160.
That multiplication has no basis in the plan-level monthly limit.

Units = US dollars per month.
Rounding = none.

C012–C013.

Example 3 — Previous fee in the same month

Plain text

Inputs:
Actual monthly disbursement = $250.
Administration fee already charged for that month = $20.

Monthly ceiling = min($250 × 0.10, $40) = $25.
Remaining mathematical headroom = $25 − $20 = $5.
Result = no more than $5 additional under this month's ceiling.

Units = US dollars.
Rounding = none.

This does not authorize premature collection or fee splitting. If $35 had already been charged, the arithmetic excess would be $10; a future credit cannot simply be assumed to resolve every legal consequence. C012, C015–C016.

Example 4 — Cancellation with no monthly disbursement

Plain text

Inputs:
Actual disbursement during the relevant month = $0.
Earlier setup payment = $40.

Monthly calculation = min($0 × 0.10, $40) = $0.
Result = $0 monthly administration allowance under this formula.

Separate setup question:
The $40 ceiling alone does not decide whether the earlier setup payment
was earned, refundable, or collected lawfully.

Units = US dollars.
Rounding = none.

The setup-retention question is held pending applicable contract/refund law and performance facts. C012, C015–C016.

Example 5 — Partial settlement: federal arithmetic, NC collection held

Plain text

Inputs:
Total enrolled debt = $20,000.
Enrollment balance of one resolved debt = $5,000.
Total contractual program fee = $4,000.

Proportion = $5,000 ÷ $20,000 = 0.25.
Federal proportional allocation = $4,000 × 0.25 = $1,000.

Assumed event:
Customer has executed the required settlement and made one qualifying payment.

Federal arithmetic result = $1,000 allocation for that debt.
North Carolina result = collection authorization HELD.
Other debts and promised services remain unfinished.

Units = US dollars; ratio is dimensionless.
Rounding = none.

The calculation does not decide the NC completion issue, other statutory branches, or the provider’s exemption. C006, C016–C019, C030–C031.

Example 6 — Savings formula does not create an NC fee permission

Plain text

Inputs:
Debt at enrollment = $5,000.
Amount actually paid to satisfy it = $3,000.
Hypothetical consistent savings-fee rate = 20%.

Savings = $5,000 − $3,000 = $2,000.
Formula amount = $2,000 × 0.20 = $400.

Federal allocation arithmetic = $400.
NC lawful charge established by this calculation = none.
Market-access and state timing questions still require resolution.

Units = US dollars.
Rounding = none.

The 20% is an illustrative contractual input, not a verified NC rate. C027, C031, C034.

Example 7 — Dedicated-account cancellation

Plain text

Inputs:
Customer-owned account balance = $1,250.
Properly earned and independently lawful deductible fee = $150.

Refund = $1,250 − $150 = $1,100.
Timing = within 7 business days of the customer's request,
if §310.4(a)(5)(ii) governs the arrangement.

If no fee was properly earned:
Refund calculation = $1,250 − $0 = $1,250.

Units = US dollars and business days.
Rounding = none.

The $150 assumption must be proved; it cannot be derived from a settlement company’s invoice alone. C033.

Example 8 — Attorney advance-fee refund

Plain text

Assumptions:
A genuinely qualifying NC lawyer.
An ordinary advance toward future fees, not a true retainer.
Advance collection is otherwise lawful, including any federal requirements.

Advance = $1,000.
Lawfully earned fee through termination = $600.
Unearned amount = $1,000 − $600 = $400.

Result = $400 to return under the ordinary advance-fee principle.
Units = US dollars.
Rounding = none.

This does not establish that $600 is reasonable in an actual matter or that an affiliated settlement business qualifies as the lawyer. C009, C020–C021, C029.

Component coverage and exact next investigations

E. Researcher self-check

Actually read: the full Article 56 text; the 2005 and 2007 enactments; actual bill histories and operative proposed provisions; current DOJ and NCCOB guidance; the cited judicial and disciplinary passages; relevant money-transmission statutory sections and application instructions; the public Bar lookup instructions; exact federal fee/account clauses and relevant coverage exceptions; and the cited FTC adoption passages.

Not established: a named provider’s current authority; a complete citator or later-docket review; the precise NC per-debt/full-performance boundary; the underlying Consumer Law Group judgment; full current 04 NCAC 03F rules; the operative agent-of-payee ruling; or blocked money-transmitter lookup/form contents. The source register distinguishes these failures from successful reading.

The statute-publication header reports incorporation through S.L.2026-30, while the session-law catalog extends further. The unincorporated-modification table and targeted later-law searches were therefore checked rather than equating the compilation header with the entire current-law inquiry. Likewise, eCFR’s title-wide update date was not treated as the effective date of the debt-relief fee provision. C035. North Carolina General Assembly+4

This is a researcher self-check, not an independent review. No application, contact, account change, local-file deliverable, or publication was undertaken.

END S_NC PASS-01.