After 1994 amendments to the insurance code, can North Carolina consumer finance companies (consumer loan licensees) sell single-interest or dual-interest automobile physical damage insurance (VSI) along with their loans, without separately applying to the Commissioner of Banks for 'other business authority' under G.S. 53-172(b)?

Plain-English summary

Commissioner of Banks William T. Graham asked the AG to revisit a November 10, 1993 opinion that had told the Commissioner consumer finance licensees could not sell single-interest or dual-interest automobile physical damage insurance ("VSI" in the trade) without first applying for "other business authority" from the Commissioner under G.S. § 53-172(b). The prior opinion had concluded that VSI was not among the credit-insurance products listed in G.S. § 53-189(a), the consumer-finance authorization statute, so VSI fell outside the default product menu and required separate clearance.

Between the two opinions, the General Assembly enacted Senate Bill 1719 as Chapter 720 of the 1993 Session Laws (Reg. Sess. 1994). SB 1719 amended the insurance code, Chapter 58, rather than the Consumer Finance Act in Chapter 53. The amended G.S. § 58-57-100 expressly provided that "[a]utomobile physical damage insurance as described in this section is a form of credit property insurance, as referred to in G.S. § 53-189."

Chief Deputy AG Andrew A. Vanore, Jr., and Assistant AG L. McNeil Chestnut said that the November 1993 opinion was correct as of its date, but that SB 1719 changed the answer. The cross-reference in G.S. § 58-57-100 to G.S. § 53-189 was the bridge: by characterizing VSI as a form of credit property insurance referenced in G.S. § 53-189, the General Assembly brought VSI under the consumer-finance authorization. Licensees did not need separate other-business authority to sell it.

The opinion flagged that an inclusio unius est exclusio alternus argument was still on the table. G.S. § 53-189(a) on its face listed credit life, credit accident-and-health, credit unemployment, and credit property insurance, but did not list VSI by name. A strict reading might still demand other-business authority. The AG rejected that strict reading. The General Assembly had chosen to fix the issue by amending the insurance code rather than the banking code, but the legislative intent was clear: VSI was now to be treated as a credit-property product for purposes of the consumer-finance authorization. The AG cited State v. Fulcher, 294 N.C. 503, 243 S.E.2d 338 (1978), for the general principle that legislative intent controls statutory construction, and concluded that the cross-reference resolved any lingering doubt.

The practical upshot for consumer finance companies operating under Article 15 of Chapter 53 was that they could sell single-interest or dual-interest auto physical damage insurance subject to G.S. § 58-57-100, without separate application to the Commissioner of Banks for other-business authority.

Currency note

This opinion was issued in 1994. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Both the Consumer Finance Act in Chapter 53 and the credit-insurance provisions in Chapter 58 have been amended repeatedly since 1994, and federal regulation of vendor single-interest products has shifted as well. Any current question about whether a NC consumer finance licensee may sell a particular credit-insurance product should be checked against the current versions of G.S. §§ 53-189 and 58-57-100, against any later AG opinions on consumer-finance authorization, and against Office of the Commissioner of Banks interpretive guidance.

Common questions

Q: What is "VSI" or "automobile physical damage insurance" in this context?
A: Single-interest or dual-interest vendor protection coverage that a lender requires (or offers) on the collateral securing an auto loan. Single-interest protects only the lender's interest in the collateral if the borrower lets the borrower's own insurance lapse. Dual-interest protects both lender and borrower. The premiums are typically financed into the loan and the policy is written on the financed vehicle.

Q: What is "other business authority" under G.S. § 53-172(b)?
A: A consumer finance licensee may engage in business beyond the default scope of consumer lending only with prior approval from the Commissioner of Banks. G.S. § 53-172(b) lets the Commissioner grant case-by-case authority for "other business" the licensee proposes to conduct in addition to consumer loans. Without that grant, the licensee is limited to the activities the Consumer Finance Act authorizes by default.

Q: Why did the November 1993 opinion say VSI required other-business authority?
A: G.S. § 53-189(a) named the credit-insurance products consumer finance licensees could sell as part of their loan business: credit life, credit accident-and-health, credit unemployment, and credit property. VSI was not on that list. Under the standard canon that to express one thing is to exclude others, VSI fell outside the default authorization. So selling VSI was "other business" under G.S. § 53-172(b) and needed separate Commissioner approval.

Q: Why did SB 1719 change the answer?
A: SB 1719 added language to G.S. § 58-57-100 saying VSI "is a form of credit property insurance, as referred to in G.S. § 53-189." Once the General Assembly characterized VSI as a kind of credit property insurance, and pointed back to G.S. § 53-189, the AG read this as bringing VSI inside the credit-property authorization that licensees already had. No separate other-business clearance was needed.

Q: Why amend the insurance code instead of the consumer finance code?
A: The opinion admits the AG did not know. Both routes would have produced the same effect on consumer finance authorization. The General Assembly's choice to fix it in Chapter 58 (insurance) rather than Chapter 53 (banking) made the cross-reference necessary. The opinion treats the cross-reference as sufficient to carry legislative intent across the chapter boundary.

Q: Does this mean the strict inclusio unius reading is wrong?
A: Not necessarily as a general matter. The AG acknowledged the argument was still available: someone could insist that because G.S. § 53-189(a) does not name VSI, VSI is excluded. The AG just was "not convinced" the strict reading should win here, because the amended G.S. § 58-57-100 had supplied an explicit cross-reference treating VSI as a form of credit property insurance for G.S. § 53-189 purposes. When the legislature provides its own bridge across two statutes, the canon yields.

Background and statutory framework

NC's Consumer Finance Act, Article 15 of Chapter 53, regulates non-bank consumer lenders. Licensees can make consumer loans within rate caps and can also sell certain credit-insurance products tied to those loans. G.S. § 53-189(a) lists the permitted credit-insurance lines; G.S. § 53-172(b) lets the Commissioner of Banks grant case-by-case approval for additional business activities a licensee proposes.

Chapter 58 (insurance) regulates the insurance industry generally. G.S. § 58-57-100 governs automobile physical damage insurance sold as a credit-related product. The 1994 amendment to G.S. § 58-57-100 made an unusual move: instead of amending the consumer-finance code, the General Assembly used the insurance code to define VSI as a form of a credit-insurance product already authorized for consumer finance licensees.

The 1994 opinion is a useful study in how cross-references can carry legislative intent across statute boundaries, and how an AG can reconcile two opinions issued ten months apart by the same office. The November 1993 opinion was correct as of its date; the August 1994 opinion is correct after SB 1719 took effect. The AG did not need to repudiate the earlier analysis; the statutory landscape changed.

Citations

• G.S. § 53-1-189(a) / § 53-189(a) (Consumer Finance Act; credit-insurance products consumer finance licensees may sell as part of loan business)
• G.S. § 53-172(b) (other-business authority granted by Commissioner of Banks for consumer finance licensees)
• G.S. § 58-57-100 (Insurance code; automobile physical damage insurance as credit-related product; SB 1719 added cross-reference to G.S. § 53-189)
• 1993 Sess. Laws, ch. 720 (Reg. Sess. 1994) (SB 1719)
• State v. Fulcher, 294 N.C. 503, 243 S.E.2d 338 (1978) (legislative intent controls statutory construction)

Source

• Landing page: https://ncdoj.gov/opinions/consumer-finance-company-sales-of-automobile-physical-damage-insurance/

Original opinion text

August 16, 1994

Mr. William T. Graham
Commissioner of Banks
Post Office Box 29512
Raleigh, NC 27626-0512

Re: Advisory Opinion — Consumer Finance Company Sales of Automobile Physical Damage Insurance Pursuant to G.S. §§ 53-1-189(a) and 58-57-100 Without other Business Authority.

Dear Commissioner Graham:

This will respond to your request for an opinion on whether or not consumer loan companies, in view of recent legislative action, may sell single or dual interest automobile physical damage insurance ("VSI") without applying to the Commissioner of Banks for other business authority pursuant to G.S. § 53-172(b). For the reasons set forth below, it is our opinion that consumer finance companies (herein referred to as "consumer finance licensees" or "licensees") may sell such insurance without other business authority.

DISCUSSION OF THE ISSUE

In your request for an opinion, you recited certain provisions of a November 10, 1993 Opinion from this office written by Special Deputy Attorney General Henry T. Rosser and Senior Deputy Attorney General Ann Reed. That Opinion concluded in part that as VSI was not mentioned in G.S. § 53-189(a), the statutory authority for consumer finance licensees to sell various credit insurance products, licensees could not sell VSI without other business authority (which may be granted by the Commissioner pursuant to G.S. § 53-172(b)).

Technically, the November 10, 1993 Opinion was correct and we do not disagree with the conclusions it reached at that time. However, as you know, S.B. 1719, enacted as Chapter 720 of the 1993 Session Laws, Reg. Sess., 1994, although amending the insurance laws, Chapter 58 of the General Statutes, as opposed to the Consumer Finance Act, Article 15 of Chapter 53, expressly provided that "[a]utomobile physical damage insurance as described in this section is a form of credit property insurance, as referred to in G.S. § 53-189."

While one might continue to argue, under the maxum of inclusio unius est exclusio alternus, that where the General Assembly has expressly provided in G.S. § 53-189(a) for the sale of credit life, credit accident and health, credit unemployment and credit property insurance, but did not expressly provide for VSI, that the latter may not be sold without other business authority, we are not convinced that this would now apply. Again, G.S. § 58-57-100, as amended by S.B. 1719, provides that VSI ". . . is a form of credit property insurance as referred to in G.S. § 53-189." We do not know why the General Assembly elected to resolve this issue by amending the insurance laws as opposed to the banking laws. Nevertheless, it is our opinion that the amendment resolves any lingering doubt on this issue.

CONCLUSION

It is a cardinal principle of statutory construction that the intent of the legislature controls the interpretation of a statute. See, NC Index 4th, Statutes § 29 (1994). See also, State v. Fulcher, 294 N.C. 503, 243 S.E.2d 338 (1978). In our opinion, the legislative intent here is clear. It is, therefore, our conclusion that consumer finance licensees, operating under the provisions of Article 15 of Chapter 53 of the North Carolina General Statutes, may sell single or dual interest automobile physical damage insurance, subject to the provisions of G.S. § 58-57-100, without applying to your office for other business authority to do so.

We trust that this addresses your questions to this office. If, however, we may be of further assistance, please do not hesitate to let us know.

Andrew A. Vanore, Jr.
Chief Deputy Attorney General

L. McNeil Chestnut
Assistant Attorney General