HB526 Alabama 2016 Session

Summary

Primary Sponsor

Rod Scott

Democrat

Session

Regular Session 2016

Title

Loans, regulate motor vehicle title loan, Secs. 5-27-1 to 5-27-28, inclusive, added

Summary

HB526 creates the Alabama Motor Vehicle Title Loan Act to license and regulate title loan lenders, set borrower protections, and outline enforcement.

What This Bill Does

It requires title loan lenders to be licensed by the State Banking Department, post a bond, and pay application and investigation fees. It also outlines renewal, reactivation, and potential license denial, suspension, or revocation. It sets loan terms and borrower protections, including caps on loan amount and interest, a prohibition on extensions, required disclosures and a plain-language pamphlet, and strict rules for repossession and sale of vehicles. It provides enforcement tools and penalties, including fines and possible criminal penalties, and applies to online lending as well; it also protects active-duty military members and their dependents from title loans.

Who It Affects

• Title loan lenders and affiliated businesses operating in Alabama would need to obtain a license, post bonds, and follow new rules.
• Borrowers in Alabama who use motor vehicle title loans would experience caps on loan amounts and interest, required disclosures, and regulated repossession and sale processes.
• Active-duty military members and their dependents would be protected from being offered title loans.

Key Provisions

• Creates the Alabama Motor Vehicle Title Loan Act and requires licensure of title loan lenders by the State Banking Department, with application, bond, and investigation fees.
• Sets licensing standards, including a $50,000 bond per location (up to $500,000 total) and at least $75,000 in unencumbered assets per location; provides renewal, reactivation, and grounds for denial or suspension of licenses.
• Defines key terms and clarifies exemptions (banks/credit unions may be exempt if they elect not to be licensed).
• Regulates loan terms: maximum loan amount is 50% of vehicle value and up to $3,500; interest rate capped at 10% per month (120% APR); no extensions or refinancings; prepayment allowed.
• Requires detailed loan agreements and disclosures, including a plain-language pamphlet and complaint contact information; prohibits certain aggressive terms such as power of attorney or arbitration without full compliance.
• Governs security interests and title handling: lender holds original title, must file a lien within seven days, and release the lien when paid; repossession is regulated with notice and redemption rights; excess sale proceeds go to the borrower.
• Regulates advertising: truthful ads with clear license information and finance charge disclosures; requires conspicuous notices in ads.
• Enforcement: licensed actions can be suspended or revoked; fines up to $1,000 per violation; possible civil actions by the Attorney General and cease-and-desist orders; includes internet lending coverage.
• Military protections: prohibits title loans to active-duty armed forces members or their dependents; requires confirmation from borrowers.
• Recordkeeping and reporting: licensees must maintain records for at least three years, file annual reports, and keep a repossession log; examinations occur at least every two years.
• Local government funding note: intended to require a new local expenditure, but the bill is exempt under Amendment 621 due to specified exceptions.
• Effective date: becomes law on the first day of the third month after passage and governor approval.

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

Subjects

Loans