HB335 Alabama 2022 Session

Summary

Primary Sponsor

Chris BlackshearRepresentative

Republican

Session

Regular Session 2022

Title

Small loans companies, licensees of Banking Dept., additional limited closing fee for loans, Sec. 5-18-15 am'd.

Summary

HB335 updates Alabama's small-loan rules to authorize limited closing fees and new fee structures for loans under $1,500.

What This Bill Does

The bill adds new and modified fees for small loans, including an account maintenance fee up to $3 per month (if monthly payments are at least $30) and optional acquisition and installment charges under a tiered structure, plus a closing fee up to 4% of the loan or $50 that may be financed. It also sets maximum interest rates, a 25-month repayment limit, refunds for early payoff, and specific rules for late charges, default charges, and how charges are calculated and applied. The act requires rebates and charges to be managed so total costs stay aligned with authorized charges and restricts other unlisted charges; it also tightens penalties for excessive charges and regulates how refunds and prepayments are handled.

Who It Affects

• Borrowers/consumers who take small loans: they would face new or higher upfront and ongoing charges (such as account maintenance, acquisition, and potential closing fees), but also receive defined refund and default-charge protections.
• Small-loan licensees and lenders (Banking Dept. licensees): they are authorized to impose the new fees and charges within specified caps, must follow the calculation and refund rules, and face penalties for overcharging.

Key Provisions

• Maximum rates for loans under $1,500: 3% per month on the first $200, and 2% per month on the portion above $200 but less than $1,500.
• Account maintenance fee: up to $3 per month, for loans with scheduled payments at least $30, not accruing interest, and included in the finance charge.
• Alternative rates (m): acquisition charge up to 10% of principal; installment account handling charge by tier (up to $26 per month depending on loan size); term limits and eligibility tied to monthly payment amounts.
• Closing fee: up to the lesser of 4% of the loan amount or $50, may be financed; refunds for prepayment may apply with limits (licensee may keep up to $25 of the closing fee).
• Refunds and prepayments (d): refunds or credits for prepaid portions calculated using standard refund schedules; partial prepayments may adjust future charges.
• Default/extension charges (e): late charges up to $10 or 5% of the delinquent payment, charged once per payment.
• Term and repayment (i): no loan contract may require more than 25 months to repay; payments should be approximately equal; seasonal adjustments allowed.
• Interest after final due date (j): no interest on loans for six months after the final due date; after that, interest may be charged at up to 8% per year.
• Prohibitions and penalties (h, k, l): no unlisted charges; no inducing multiple contracts to raise charges; penalties include refunds and possible misdemeanor fines for deliberate violations.
• Regulatory oversight (f): supervisor may issue rules to ensure rebates and charges are computed and collected properly so total charges are in line with authorized amounts.
• Recording and other fees (g): licensees may collect verified recording fees for security instruments.
• Eligibility and limitations (m): alternative rate structure with detailed monthly charges and a cap on term (minimum 3 months, maximum 18 months) under certain conditions; additional provisions on refunds and exclusions; a closing fee is allowed under this subsection with specific rules.
• Territorial applicability (n): applies to contracts under Act 2017-373 for loans entered after May 25, 2017.
• Overall cap and scope: establishes comprehensive limits and structured charges for small loans, balancing lender compensation with borrower protections.

AI-generated summary using openai/gpt-5-nano on Feb 22, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Small Loans