HB297 Alabama 2016 Session

Summary

Primary Sponsor

Danny GarrettRepresentative

Republican

Session

Regular Session 2016

Title

Banks and Banking, deferred presentment services further regulated, Secs. 5-18A-3, 5-18A-12, 5-18A-13 am'd.

Summary

HB297 would tighten regulation of deferred presentment services (payday-style loans) in Alabama by requiring licenses for each location, using a statewide/NMLS database, and imposing caps and repayment options to protect borrowers.

What This Bill Does

It allows the State Banking Department to require applicants to license through the Nationwide Multistate Licensing System and Registry, with a separate license for each location where deferred presentment loans are offered. It requires lenders to offer an extended repayment option before civil action and sets timeframes for notice, while capping certain fees and defining when the loan period begins and that there can be no extra charge for loan proceeds. It requires lenders to use a database to ensure borrowers do not have more than $500 outstanding, and it places limits on the number and total amount of loans a borrower can have in a 12-month period; it also requires clear disclosures and sets enforcement rules if licensing isn’t followed.

Who It Affects

• Deferred presentment service providers (licensees) – must obtain a license for each location, use the NMLS/statewide database, follow fee caps and repayment options, and verify borrowers' outstanding debt.
• Consumers who use deferred presentment services – gain protections through debt limits, mandatory disclosures, an extended repayment option, and restrictions on fees and repeat lending.

Key Provisions

• Licensing: State Banking Department may require licenses through the Nationwide Multistate Licensing System; one license is required for each location where deferred presentment loans are offered.
• Location coverage: Every place where a deferred presentment loan is made or where information about terms is provided must be licensed (includes in-person and online interactions).
• NMLS requirements: Applicants may be required to apply via NMLS and undergo standard background checks and related screening.
• Extended repayment option: If the borrower cannot repay after the initial term and one rollover, the lender must offer four equal monthly installments before starting a civil action, with written notice and a 15-day window to respond.
• Fee limits and charges: The maximum fee per deferred presentment transaction is capped (text indicates up to about 17.5% of the amount advanced); a single insufficient funds fee may be charged after presentment, with no other charges allowed beyond permitted fees.
• Debt checks: Lenders must use a statewide or approved third-party database to verify that the borrower does not have more than $500 outstanding in deferred presentment transactions.
• Borrower limits: A lender may not enter into a new deferred presentment transaction with a borrower who has six transactions in the past 12 months or who has had $2,500 in principal in a 12-month period; database verification is required.
• Disclosures and transparency: Written explanations of all fees and terms must be provided before the contract, with disclosures aligned to Truth-in-Lending standards; borrowers receive clear notices about repayment terms.
• Enforcement and scope: Transactions entered without a license are uncollectible; general prohibitions on unfair or deceptive practices apply; location licensing requirements apply to all applicable transactions.
• Effective date: The act becomes law on the first day of the third month after it is enacted.
• Other protections: The period for the deferred presentment transaction begins when funds are received by the customer; there is no additional charge for paying out the loan proceeds.

AI-generated summary using openai/gpt-5-nano on Feb 24, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Banks and Banking