SB284 Alabama 2017 Session

Summary

Primary Sponsor

Arthur Orr Senator

Republican

Session

Regular Session 2017

Title

Banking, loans and consumer credit transactions, small loans, acquisition charge prohibited on refinances within first six months, deferred presentment transaction, term set at 30 days, total transactions limited, collection activity limited, repayment plan for certain transactions set at three months, interest on loan over $2,000 limited, Secs. 5-18-15, 5-18A-3, 5-18A-12, 5-18A-13, 8-8-5 am'd.

Description

Under existing law, the maximum rate of interest on a small loan is three percent a month on amounts not more than $200 and two percent a month for amounts in excess of $200, and the maximum term of the small loan is limited to 25 months. Under existing law, in lieu of these interest rates, the lender may utilize an alternative rate of charge that consists of an acquisition fee of up to 10 percent of the principal and a monthly installment handling fee.

Under existing law, the maximum term of a small loan on which the alternative rate of charge may be utilized is 12 months.

This bill would provide that the minimum term for a small loan in which the lender is charging the alternative rate is six months. This bill would prohibit the lender from collecting an additional acquisition charge if the loan is refinanced within the first six months.

Under existing law, the term of a deferred presentment transaction is between 10 and 31 days, and the deferred presentment services provider may charge an interest rate of up to 17.5 percent for the term. Under existing law, a borrower may renew a deferred presentment transaction no more than once, and, if, after one renewal, the borrower is unable to repay, the deferred presentment services provider must allow the borrower to repay in four equal monthly installments.

This bill would limit the number of deferred presentment transactions a borrower could enter into in a 12-month period to four transactions and would prohibit a licensee from rolling over a deferred presentment transaction within seven days of a prior transaction. This bill would set the term of all deferred presentment transactions at 30 days. This bill would provide for one automatic three-month extension. This bill would prohibit a licensee from engaging in certain actions in an attempt to collect on a transaction or evading the requirements of the Deferred Presentment Services Act by disguising the transaction as another type of loan product. This bill would provide for licensing through a national database.

Under existing law, a person may pawn the title of his or her automobile.

This bill would specify that no person may enter into a pawn transaction with respect to titled personal property.

Under existing law, on a loan in which the principal amount is $2,000 or more, the parties may agree to any rate of interest so long as it is not unconscionable.

This bill would cap the interest rate on loans of more than $2,000 at a 60 percent annualized rate as defined by federal regulation.

Amendment 621 of the Constitution of Alabama of 1901 prohibits a general law whose purpose or effect would be to require a new or increased expenditure of local funds from becoming effective with regard to a local governmental entity without enactment by a 2/3 vote unless: it comes within one of a number of specified exceptions; it is approved by the affected entity; or the Legislature appropriates funds, or provides a local source of revenue, to the entity for the purpose.

The purpose or effect of this bill would be to require a new or increased expenditure of local funds within the meaning of Amendment 621. However, the bill does not require approval of a local governmental entity or enactment by a 2/3 vote to become effective because it comes within one of the specified exceptions contained in Amendment 621.

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Subjects

Banking Department