SB404 Alabama 2017 Session

Summary

Primary Sponsor

Tom Whatley

Republican

Session

Regular Session 2017

Title

Checks, deferred presentment, regulation by Banking Dept., renewals, repayment plans further authorized, licensees to notify customer of installment loans, Secs. 5-18A-2, 5-18A-3, 5-18A-12, 5-18A-13 am'd.

Summary

SB404 tightens Alabama's deferred presentment (payday loan) rules by tightening licensing, limiting renewals, adding free repayment options with financial education, and restricting frequent borrowing.

What This Bill Does

It requires all deferred presentment businesses to be licensed for every channel (in person, by mail, phone, or online) and voids any transaction done without a license. It removes the simple renewal option and requires a new transaction to wait at least 48 hours after the previous one is paid in full. It creates a free extended repayment plan if the borrower cannot pay at the end of the term or if a payment is returned, allows one such plan per 12 months, requires participation in financial literacy or counseling before taking another deferred presentment loan, and lets the lender charge a late fee on the plan while prohibiting new loans during the plan. It requires lenders offering other installment loans to inform customers after six successful deferred presentment transactions in 12 months, and prohibits using proceeds from other loan acts to repay a deferred presentment loan. It also adds a high-volume Borrower rule: a lender may issue a new deferred presentment loan to a customer with 12+ transactions in the past 12 months only after 14 days have passed since the previous transaction is repaid. The bill sets fee caps and disclosure requirements and enhances recordkeeping and consumer notices.

Who It Affects

• Licensees/deferred presentment providers: must obtain and maintain a license for each location, follow new rules on renewals, repayments, disclosures, cross-product notices, and transaction frequency, and may be subject to late fees in repayment plans.
• Consumers in Alabama using deferred presentment services: gain stronger protections, including free repayment options, mandatory financial education before taking new loans, clearer upfront disclosures, limits on renewal/extension practices, and restrictions on frequent borrowing.

Key Provisions

• Licensing requirement across all channels; any deferred presentment transaction conducted without a license is void.
• No renewal or extension; a new transaction cannot start until at least 48 hours after the previous transaction is paid in full.
• Free extended repayment plan if the borrower cannot pay at maturity or if a payment is returned; available once per 12 months; borrower must participate in financial literacy/education or counseling before entering a new deferred presentment transaction; a late fee may be charged on the repayment plan and no new transaction can occur during the plan.
• If the licensee offers other installment loans, the customer must be informed about these options after six successful deferred presentment transactions in a 12-month period; proceeds from other loan acts may not be used to repay a deferred presentment transaction.
• High-frequency restriction: a borrower with 12+ deferred presentment transactions in the prior 12 months may only enter a new deferred presentment transaction after 14 days following full repayment of the previous one.
• Fee and disclosure requirements: maximum fee is 17.5% of the amount advanced, with a maximum advance of $500; clear upfront disclosure of all fees and costs; written agreement provided to the customer; conspicuous fee schedule displayed.
• Additional rules include: licensees must maintain records, may use a state database to verify outstanding transactions, and must follow restrictions on security/guaranties and ensure cash proceeds are paid to the borrower.

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

Subjects

Banking Department