HB326 By Representatives Todd, Hall, Coleman, Moore (M), Rogers, Jackson, England, Melton, Grimsley, Morrow, Beech, Buskey, Howard, Bracy, Polizos, Drummond, Forte, Warren, Greer, Sessions, Gaston, Pringle, Collins, Nordgren, Rowe, Henry, Treadaway and Harper RFD Financial Services Rd 1 25-FEB-16

SYNOPSIS: Under existing law, title loan lenders are not licensed.

This bill would provide for the licensure and regulation of title loan lenders by the State Banking Department.

This bill would prescribe maximum annual interest rates for title loans.

This bill would prescribe procedures when there is a default of a title loan.

This bill would prohibit the issuance of a title loan to a person under the age of 19 years.

This bill would provide for the enforcement of the act by fines and criminal penalties.

Amendment 621 of the Constitution of Alabama of 1901, now appearing as Section 111.05 of the Official Recompilation of the Constitution of Alabama of 1901, as amended, 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 the amendment. 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 the amendment.

A BILL TO BE ENTITLED AN ACT

Relating to title loans; to provide for the licensure and regulation of title loan lenders by the State Banking Department; to prescribe maximum annual interest rates for title loans; to prescribe procedures when there is a default of a title loan; to prohibit the issuance of a title loan to a person under the age of 19 years; to provide for the enforcement of the act by fines and criminal penalties; and in connection therewith would have as its purpose or effect the requirement of a new or increased expenditure of local funds within the meaning of Amendment 621 of the Constitution of Alabama of 1901, now appearing as Section 111.05 of the Official Recompilation of the Constitution of Alabama of 1901, as amended.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:

Section 1. This act shall be known and may be cited as the Alabama Title Loan Act.

Section 2. (a) The Legislature finds that the making of title loans vitally affects the general economy of this state and the public interest and welfare of its citizens. It is the policy of this state and the purpose of this act to do all of the following:

(1) Ensure a sound system of making title loans through statewide licensing of title loan lenders by the State Banking Department.

(2) Provide for the licensing, examination, and regulation of title lenders by the State Banking Department.

(3) Ensure financial responsibility to the public by setting a reasonable interest rate that correctly reflects the risk incurred by lenders on these secured loans and by requiring consideration of borrowers' ability to repay these loans.

(b) All loans secured by a motor vehicle title shall be regulated under this act. This act shall supersede other state laws affecting title loans to the extent of any conflict.

Section 3. As used in this act, the following words and phrases shall have the following meanings:

(1) BORROWER. The owner of any titled personal property who pledges the property to a title lender pursuant to a title loan agreement.

(2) COMMERCIALLY REASONABLE. The same meaning as Part 6, commencing with Section 7-9A-601, Article 9A, Title 7, Code of Alabama 1975. In addition, nonpublic sales or disposal of personal property between a title loan lender and any business affiliate of a title loan lender or a member of the family of a title loan lender are presumed not to be made in a commercially reasonable manner.

(3) DEPARTMENT. The State Banking Department.

(4) EXECUTIVE OFFICER. The president, chief executive officer, chief financial officer, chief operating officer, executive vice president, senior vice president, secretary, and treasurer.

(5) IDENTIFICATION. A government-issued photo identification.

(6) INTEREST. The cost of obtaining a title loan, including, but not limited to, any profit or advantage of any kind whatsoever that a title loan lender may charge, contract for, collect, receive, or in any way obtain, as a result of a title loan.

(7) LICENSE. A permit issued pursuant to this act to make or service title loans at a single title loan office in accordance with this act.

(8) LICENSEE. A person who is licensed as a title loan lender under this act.

(9) MOTOR VEHICLE. An automobile, motorcycle, mobile home, truck, trailer, semitrailer, truck tractor, and semitrailer combination, or any other vehicle operated on the public highways and streets of this state, used to transport persons or property, and propelled by power other than muscular power, but excluding a vehicle that runs only upon a track and a mobile home that is the primary residence of the owner.

(10) PERSON. One or more individuals, corporations, partnerships, associations, or other legal entities.

(11) PRINCIPAL BALANCE. The balance due and owed exclusive of any interest, service charges, or other loan-related charges.

(12) SECONDHAND DEALER. Any person, corporation, or other business organization or entity that is not an automotive dismantler and parts recycler and that is engaged in the business of purchasing, consigning, or pawning secondhand goods or entering into title loan transactions including, but not limited to, pawnbrokers, jewelers, precious metals dealers, garage sale operators, secondhand stores, and consignment shops.

(13) TITLE LOAN AGREEMENT. A written agreement whereby a title loan lender agrees to make a loan of money to a borrower, and the borrower agrees to deposit the certificate of title to the titled property with the lender as security.

(14) TITLE LOAN LENDER or LENDER. Any person engaged in the business of making, offering, or brokering title loan agreements. The term does not include a bank that is regulated by the State Banking Department, the Comptroller of the Currency of the United States, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, or any other federal or state authority and all affiliates of such bank, any state or federally chartered credit union, and any finance company subject to licensing and regulation by the State Banking Department.

(15) TITLE LOAN OFFICE. The location at which, or premises from which, a title loan lender regularly conducts business under this act or any other location that is held out to the public as a location at which a lender makes or services title loans.

(16) TITLED PERSONAL PROPERTY. A motor vehicle that has as evidence of ownership a state-issued certificate of title, whose certificate of title is given to the lender as security for the title loan.

(17) ULTIMATE EQUITABLE OWNER. A person who, directly or indirectly, owns or controls an ownership interest in a corporation, a foreign corporation, an alien business organization, or any other form of business organization, regardless of whether the person owns or controls the ownership interest through one or more persons or one or more proxies, powers of attorney, nominees, corporations, associations, partnerships, trusts, joint stock companies, or other entities or devices, or any combination thereof.

Section 4. (a) A person may not act as a title loan lender, or own or operate a title loan office unless the person has an active title loan lender license issued by the department under this act. A title loan lender may not own or operate more than one title loan office unless the lender obtains a separate title loan lender license for each title loan office. Acting as a title loan lender includes offering or agreeing to enter a title loan agreement with a borrower, or brokering or acting as an agent for a third party in such a transaction, regardless of whether approval, acceptance, or ratification is necessary to create a legal obligation for the third party. Actions, transactions, and agreements entered into with borrowers in the state include transactions conducted through the Internet, facsimile, telephone, kiosk, or other means.

(b) The department, by rule, shall establish procedures for securing a license in compliance with this act, including, but not limited to, application procedures and forms, applicable fees, bond requirements, and renewal procedures.

(c) The department shall approve an application and issue a license if the department determines that the applicant satisfies the requirements of this act. If the department determines that an application should be approved, the department shall issue a license for a period not to exceed one year.

(d) Each license shall be conspicuously displayed at the title loan office. When a licensee wishes to move a title loan office to another location, the licensee shall provide prior written notice to the department.

(e) A license issued pursuant to this act is not transferable or assignable.

(f) Each licensee shall designate and maintain in this state a registered agent for service of process.

(g) Whenever a person or a group of persons, directly or indirectly or acting by or through one or more persons, proposes to purchase or acquire a 50 percent or more interest in a licensee, the person or group shall submit an initial application for licensure pursuant to this act prior to the purchase or acquisition.

(h) All moneys collected by the department pursuant to this act shall be used by the department to regulate the entities covered by this act.

Section 5. (a) After notice and a hearing, the department may invoke disciplinary action as outlined in subsection (b) whenever the department determines after notice and a hearing, that a person has been guilty of any of the following:

(1) Failure to comply with this act, any rule adopted pursuant to this act, or any written agreement entered into with the department.

(2) Fraud, misrepresentation, deceit, or gross negligence in any title loan transaction, regardless of reliance by or damage to the borrower.

(3) False, deceptive, or misleading advertising by a title loan lender.

(4) Aiding, abetting, or conspiring by a title loan lender with a person to circumvent or violate any of the requirements of this act.

(5) Failure to maintain, preserve, and keep available for examination all books, accounts, or other documents required by this act, by any rule or order adopted pursuant to this act, or by any agreement entered into with the department.

(6) Refusal to provide information upon request of the department, to permit inspection of books and records in an investigation or examination by the department, or to comply with a subpoena issued by the department.

(7) Pleading guilty to or having been convicted or found guilty of, regardless of whether adjudication was withheld, a crime involving breach of trust, fraud, or dishonesty or acting as an ultimate equitable owner of 10 percent or more of a licensee who has pled guilty to or has been convicted or found guilty of, regardless of whether adjudication was withheld, a crime involving breach of trust, fraud, or dishonesty.

(8) Making or having made a material misstatement of fact in an initial or renewal application for a license.

(9) Having been the subject of any decision, finding, injunction, suspension, prohibition, revocation, denial, judgment, or administrative order by any court of competent jurisdiction or administrative law judge, or by any state or federal agency, involving a violation of any state or federal law, rule, or regulation relating to title loans, or has been the subject of any injunction or adverse administrative order by a state or federal agency regulating banking, insurance, finance or small loan companies, real estate, mortgage brokers, or other related or similar industries for acts involving breach of trust, fraud, or dishonesty.

(10) Failing to timely pay any fee, charge, or fine imposed or assessed pursuant to this act or rules adopted pursuant to this act.

(11) Having a license or registration, or the equivalent, to practice any profession or occupation denied, suspended, revoked, or otherwise acted against by a licensing authority in any jurisdiction for breach of trust, fraud, or dishonesty.

(12) Having demonstrated unworthiness, as defined by department rule, to transact the business of a title loan lender.

(b) Upon a finding by the department that a person has committed any of the acts set forth in subsection (a), the department may enter an order taking one or more of the following actions:

(1) Deny an application for licensure under this act.

(2) Revoke or suspend a license previously granted pursuant to this act.

(3) Place a licensee or an applicant for a license on probation for a period of time and subject to the conditions as the department specifies.

(4) Issue a reprimand.

(5) Impose an administrative fine not to exceed five thousand dollars ($5,000) for each separate act or violation.

(c) It is sufficient cause for the department to take any of the actions specified in subsection (b) as to any entity other than a natural person, if the department finds grounds for the action as to any member of the entity, as to any executive officer or director of the entity, or as to any person with power to direct the management or policies of the entity.

(d) Each licensee is subject to the provisions of subsection (b) for the acts of employees and agents of the licensee if the licensee knew or should have known about the acts.

(e) Licensure under this act may be denied or any license issued under this act may be suspended or restricted if an applicant or licensee is charged, in a pending enforcement action or pending criminal prosecution, with any conduct that would authorize denial or revocation under this section.

(f) No revocation, suspension, or surrender of any license shall impart or affect the obligation of any preexisting lawful contract between the licensee and any borrower.

(g) The department may reinstate suspended licenses or issue new licenses to a person whose license or licenses have been revoked if no fact or condition then exists that clearly would have justified the department in originally refusing to issue a license under this act.

Section 6. Any title loan made without benefit of a license is void, in which case the person making the title loan forfeits the right to collect any moneys, including principal and interest charged on the title loan, from the borrower in connection with the agreement. The person making the title loan shall return to the borrower the certificate of title, the titled personal property or the fair market value of the titled personal property, and all principal and interest paid by the borrower. The borrower is entitled to receive reasonable attorneys' fees and costs in any action brought by the borrower to recover from the person making the title loan the certificate of title, the titled personal property, or the principal and interest paid by the borrower.

Section 7. (a) At the time a title loan lender makes a title loan, the lender and the borrower shall execute a title loan agreement, which shall be legibly typed and completed as to all essential provisions prior to execution by the borrower and lender.

(b) The title loan agreement shall include, at a minimum, all of the following:

(1) The name and physical address of the title loan office.

(2) The make, model, and year of the titled personal property.

(3) The vehicle identification number, or other comparable identification number, along with the license plate number, if applicable, of the titled personal property.

(4) The name, residential address, date of birth, physical description, and Social Security number of the borrower.

(5) The date the title loan agreement is executed by the title loan lender and the borrower.

(6) The identification number and the type of identification, including the issuing agency, accepted from the borrower.

(7) The amount of money advanced, designated as the amount financed.

(8) The maturity date of the title loan agreement, which shall be no less than 180 nor more than 365 days after the date the title loan agreement is executed by the title loan lender and the borrower.

(9) The total title loan interest payable over the loan term, designated as the finance charge.

(10) The amount financed plus the finance charge, which shall be paid to reclaim the certificate of title on the maturity date, designated as the "total amount of all payments."

(11) The amount that the borrower must pay in each installment, designated as the installment payments, and the date that each installment payment is due, designated as installment due dates. The installments must be substantially equal amounts due at equal periodic intervals.

(12) The annual percentage rate, computed in accordance with the regulations adopted by the Federal Reserve Board pursuant to the Federal Truth-in-Lending Act.

(13) Any late charge that the title loan lender will charge the borrower, and an explanation of when it will be imposed, designated as the late fee.

(14) The name and address of the department as well as a telephone number to which consumers may address complaints.

(15) The following statement in not less than 14-point bold type immediately above the borrower's signature that shall contain all of the following:

"I understand that there is no penalty for early payments, and that I am entitled to receive a partial refund of the interest paid if my loan is repaid before the maturity date. I am required, at a minimum, to make each payment on the day it is due. If I miss a payment, I may be charged a late fee if one is agreed upon in this contract. If I do not pay the payment plus a late fee within 30 days after the payment's original due date, I will be in default and the lender will repossess my vehicle. I have 15 days after repossession to reclaim my vehicle by paying all money owed, including principal, interest, and other fees. Otherwise, I will lose any right to the vehicle and it will be sold to pay off this debt. I do have a right to the surplus amount from the sale of the vehicle, which is any amount remaining after the principal, interest, and actual costs of sale are paid to the lender. I certify that, to the best of my knowledge, I have a right to enter into this transaction. The vehicle I am using as collateral for this loan is not stolen and no other creditor has a claim to or lien against it. I will not apply for a duplicate certificate of title while the loan agreement is in effect. I have read this document and that, to the best of my knowledge and belief, the facts contained in it are true and correct."

(16) A blank line for the signature of the borrower and the title loan lender or the lender's agent. All owners of the titled personal property shall sign the title loan agreement.

(b) At the time of the transaction, the title loan lender shall deliver to the borrower an exact copy of the executed title loan agreement. The title loan lender shall also provide the borrower with a pamphlet, in a form consistent with regulations adopted by the department, explaining in plain language the rights and responsibilities of the borrower and providing a toll free number of the department for assistance with complaints.

(c) Upon execution of a title loan agreement, the title loan lender may take possession of the certificate of title and retain possession of it until it is redeemed. The borrower shall have the exclusive right to redeem the certificate of title by repaying all amounts legally due under the agreement. When the certificate of title is redeemed, the lender shall immediately return the certificate of title and commence action to release any security interest in the titled personal property. During the term of the agreement or any extension of the agreement, a title loan lender may retain physical possession of the certificate of title only. A title loan lender shall not take additional security or guaranty as a condition to entering into a title loan transaction.

(d) The titled property may not be the subject of more than one title loan at any time or be encumbered at the time of the transaction.

Section 8. (a) Every title loan lender shall maintain, at the title loan office of the lender, the books, accounts, and records of the business conducted under the license issued for the place of business as will enable the department to determine the compliance of the licensee with this act.

(b) The department may authorize the maintenance of books, accounts, and records at a location other than the title loan office of the lender. The department may require books, accounts, and records to be produced and available at a reasonable and convenient location in this state within a reasonable period of time after the request.

(c) The title loan lender shall maintain the original copy of each completed title loan agreement on the title loan office premises, and shall not obliterate, discard, or destroy any of the original copy for a period of at least two years after making the final entry on any loan recorded in the office or after a department examination, whichever is later.

(d) A certificate of title that is delivered to a title loan lender shall be securely stored and maintained at the title loan office unless the certificate of title has been forwarded to the appropriate state agency for the purpose of having a lien recorded or deleted.

(e) The department may prescribe by rule the books, accounts, and records, and the minimum information to be shown in the books, accounts, and records, of licensees so that the records will enable the department to determine compliance with this act.

Section 9. (a) A title loan lender may contract for and receive an interest rate not to exceed 36 percent per annum computed on the first two thousand dollars ($2,000) of the principal amount, 24 percent per annum on that part of the principal amount exceeding two thousand dollars ($2,000) and not exceeding three thousand dollars ($3,000), and 18 percent per annum on that part of the principal amount exceeding three thousand dollars ($3,000). In determining compliance with the statutory maximum interest, the computations must be simple interest and not add-on interest or any other computations. Such charges shall be computed in advance at the agreed rate on scheduled unpaid principal balances of the cash advance on the assumption that all scheduled payments will be made when due. No other interest arrangement, including the provisions of Section 8-8-5, Code of Alabama 1975, shall apply to any title loan agreements under this act. This rate may be imposed only if disclosed in full at the time the contract is created, and cannot be modified. Additional fees may not be imposed on the borrower, except a late charge if it is specified in the title loan agreement and the actual costs expended on repossession and sale as described in this act.

(b) Any interest, charge, or fees contracted for or received, directly or indirectly, by the title loan lender or an agent of the title loan lender in excess of the amount permitted under subsection (a) shall be uncollectible, and the title loan agreement shall be void. If the excess interest resulted from a bona fide error by the title loan lender or an agent of the title loan lender, the title loan agreement shall be voidable and the lender shall refund the excess interest to the borrower within 20 days after discovery by the lender or borrower of the bona fide error, whichever occurs first. If the excess interest resulted from an act by the title loan lender, or an agent of the title loan lender, to circumvent the maximum title loan interest allowed by this act, the title loan agreement is void. The lender shall refund to the borrower any interest paid on the title loan and return to the borrower the certificate of title. The title loan lender forfeits the right of the lender to collect any principal owed by the borrower on the title loan.

(c) The annual percentage rate that may be charged for a title loan may not exceed the annual percentage rate that shall be computed and disclosed as required by the Federal Truth in Lending Act and Regulation Z of the Board of Governors of the Federal Reserve System. The department shall establish by rule the rate for each day in a fraction of a month when the period for which the charge is computed is more or less than one month.

Section 10. (a) A borrower shall have no obligation to redeem the certificate of title or make any payment on a title loan transaction.

(b) A title loan lender may pay all proceeds for a title loan transaction either in cash directly to the borrower or through an electronic funds transfer directly to the borrower or borrower's account. The period of the title loan transaction shall not begin until the funds are received by the borrower. There shall be no additional charge related to the payment of the proceeds of any title loan transaction.

(c) The title loan lender may not impose a penalty for early payment of any amount owed before the installment due date or maturity date. The lender must accept payments of any amount at any time. If the loan is prepaid prior to the maturity of the loan term, the lender shall refund to the consumer a pro rata portion of the finance charge based upon the ratio of time left before maturity to the loan term.

(d) When a scheduled installment payment is in default or delinquent for five or more days, the title loan lender may charge a late fee not to exceed the greater of eighteen dollars ($18) or five percent of the amount of the scheduled payment in default. Each of the late charges permitted under this subsection may be collected only once on any scheduled payment, regardless of the period during which the payment remains in default or is delinquent, and may only be collected on or after the fifth day after the due date. The late fee may be imposed only if the rate or amount was explained in the title loan contract signed by the borrower.

(e) If the borrower does not make the scheduled installment payment and pay any late charge by 30 days after the scheduled installment due date, the title loan lender may take possession of the titled personal property. In taking possession, the title loan lender or his or her agent may proceed without judicial process if this can be done without breach of the peace or, if necessary, may proceed by action to obtain judicial process. At least 15 days before the deadline, the lender shall provide the borrower with notice of the amount of the overdue payment, any late charge, and the deadline to make these payments. The notice must also inform the borrower that the property may be repossessed on this deadline if full payment is not received. This notice must be in writing, personally served or sent by certified or registered mail, return receipt requested.

(f) If, within 15 days after the title loan lender obtains possession of the personal property, the borrower redeems the titled personal property by paying all outstanding principal and applicable interest, late charges, and the actual cost of repossession, the borrower shall be given possession of the titled personal property and the certificate of title without further delay. At the time of repossession or within five days thereafter, the lender must provide the borrower with notice of his or her right of redemption, the deadline to redeem, and any actual costs incurred in repossessing the titled personal property. This notice must be in writing, personally served or sent by certified or registered mail, return receipt requested.

(g) If the borrower fails to redeem the titled personal property and certificate of title during the 15-day period and has received notice of the right to redeem according to subsection (f), then the borrower shall thereby forfeit all right, title, and interest in and to the titled personal property, other than his or her interest in the sale proceeds specified in subsection (h), to the title loan lender who shall thereby acquire an absolute right of title and ownership to the titled personal property. The title loan lender shall then have the sole right and authority to sell or dispose of the titled personal property.

(h) If the property is sold after the 15-day period, the title loan lender shall return to the borrower within 15 days the amount received from the sale less the amount of the unpaid principal balance and interest, any outstanding late charge, and the reasonable and necessary actual costs of the repossession and sale. The cost of repossession shall include reasonable towing charges, storage charges paid to a third party, and repairs made to the property to render it operable. Even if the lender believes that no money is due to the borrower under this subsection, the lender shall provide the borrower with a written statement documenting each of these costs, including the amount and a short description of each individual charge incurred in repossession.

(i) In taking possession and disposing of titled personal property by sale or otherwise, the title loan lender shall at all times proceed in a commercially reasonable manner.

Section 11. (a) Any person presenting identification as the borrower and presenting a copy of the title loan agreement to the title loan lender is presumed to be entitled to reclaim the certificate of title taken by the lender that corresponds to the titled personal property described in the title loan agreement. However, if the title loan lender determines that the person is not the borrower, the title loan lender is not required to allow the redemption of the certificate of title by that person. The person reclaiming the certificate of title shall sign the copy of the title loan agreement of the borrower, and the title loan lender may retain as evidence the receipt of the certificate of title of the person. If the person reclaiming the certificate of title is not the borrower, the person shall show identification to the title loan lender, together with notarized written authorization from the borrower, and the title loan lender shall record the name and address of that person on the title loan agreement retained by the title loan lender. In that case, the person reclaiming the copy of the title loan agreement of the borrower shall be provided a copy of the signed form as evidence of the agreement.

(b) If the copy of the title loan agreement of the borrower is lost, destroyed, or stolen, the borrower shall notify the title loan lender in writing by certified or registered mail, return receipt requested, or in person evidenced by a signed receipt, and receipt of the notice shall invalidate the title loan agreement if the certificate of title has not previously been reclaimed. Before delivering the certificate of title or issuing a new title loan agreement, the title loan lender shall require the borrower to make a written statement of the loss, destruction, or theft of the copy of the title loan agreement of the borrower. The title loan lender shall record on the written statement the type of identification and the identification number accepted from the borrower, the date the statement is given, and the number or date of the title loan agreement lost, destroyed, or stolen. The statement shall be signed by the title loan lender or the title loan office employee who accepts the statement from the borrower. The title loan lender may not impose any type of fee for providing the borrower with a copy of the title loan agreement.

Section 12. (a) A title loan lender, or any agent or employee of a title loan lender, may not do any of the following:

(1) Falsify or fail to make an entry of any material matter in a title loan agreement or any extension of the agreement.

(2) Refuse to allow the department to inspect completed title loan agreements, extensions of the agreements, or any certificates of title held during the ordinary operating hours of the business of the title loan lender or other times acceptable to both parties.

(3) Enter into a title loan agreement with a person under the age of 19 years.

(4) Make any agreement requiring or allowing for the personal liability of a borrower or the waiver of any of the provisions of this act.

(5) Make any loan with a loan term of less than 180 or more than 365 days.

(6) Knowingly enter into a title loan agreement with any person who is under the influence of drugs or alcohol when the condition is visible or apparent, or with any person using a name other than the name of the person or the registered name of the business owned by the person.

(7) Knowingly enter into a title loan agreement in which the titled personal property is encumbered or subject to any lien.

(8) Fail to exercise reasonable care, as defined by department rule, in the safekeeping of certificates of title or of titled personal property repossessed pursuant to this act.

(9) Fail to return a certificate of title or repossessed titled personal property to a borrower, with any and all of the title loan lender's liens on the property properly released, upon payment of the full amount due the title loan lender, unless the property has been seized or impounded by an authorized law enforcement agency, taken into custody by a court, or otherwise disposed of by court order.

(10) Sell or otherwise charge for any type of insurance or other ancillary product such as club memberships in connection with a title loan agreement.

(11) Charge or receive any finance charge, interest, or fee that is not authorized pursuant to this act, or require the borrower to make installment payments that are not substantially equal amounts due at equal periodic intervals.

(12) Act as a title loan lender, including through the Internet or third party broker, without an active license issued under this act.

(13) Refuse to accept partial payments toward satisfying any obligation owed under a title loan agreement or extension of the agreement.

(14) Charge a prepayment penalty or fail to refund the pro rata interest as required under this act for any loan that is prepaid.

(15) Act as a title loan lender under this act within a place of business in which the licensee solicits or engages in business outside the scope of this act if the department determines that the licensee's operation of and conduct pertaining to the other business results in an evasion of this act. Upon making the determination, the department shall order the licensee to cease and desist from the evasion.

(16) Refuse or fail to return to the borrower all personal items contained in the vehicle, not reasonably considered part of the vehicle, at the time of repossession or otherwise deny the borrower use or access to personal property not secured by the loan.

(17) Use or threaten force or violence against any borrower or threaten criminal prosecution or use printed materials that resemble legal process.

(18) Trespass on a borrower's property, other than taking possession without a breach of the peace, or make collection attempts at unreasonable hours of the night.

(19) Directly or indirectly employ any scheme, device, or artifice to defraud or mislead the borrower, another lender, or the department.

(20) Make any title loan without forming a good faith belief that the borrower has the ability to repay the title loan. In forming a good faith belief, the lender shall consider factors adopted by the department by rule. A lender that meets conditions adopted by the department by rule shall be deemed to be in compliance with this section.

(21) Enter into a title loan agreement with any member of the military services of the United States, or such a member's spouse or dependent, unless in compliance with Title 10 U.S.C. §987 or any regulation adopted pursuant thereto.

(b) Title loan companies may not advertise using the words "interest-free loans" or "no finance charges."

Section 13. (a) In addition to any other penalty which may be applicable, any licensee or employee of a licensee who willfully violates any provision of this act, or who willfully makes a false entry in any record specifically required by this act, shall be guilty of a Class A misdemeanor for each violation, and the title loan agreement is rendered void.

(b) In addition to any other penalty which may be applicable, any licensee or employee of a licensee who fails to make a record of a title loan transaction and subsequently sells or disposes of the titled personal property or certificate of title that is the subject of the transaction shall be punished as follows:

(1) For a first offense, the licensee or employee shall be guilty of a Class A misdemeanor.

(2) For a second or subsequent offense, the licensee or employee shall be guilty of a Class C felony.

Section 14. (a) The department may issue and serve subpoenas to compel the attendance of witnesses and the production of documents, papers, books, records, and other evidence before the department in any matter pertaining to this act. The department shall administer oaths and affirmations to any person whose testimony is required. If any person refuses to testify, produce books, records, and documents, or otherwise refuses to obey a subpoena issued under this section, the department may enforce the subpoena in the same manner that subpoenas issued under the Administrative Procedure Act are enforced. Witnesses are entitled to the same fees and mileage as they are entitled to by law for attending as witnesses in the circuit court, unless the examination or investigation is held at the place of business or residence of the witness.

(b) In addition to any other powers conferred upon the department to enforce or administer this act, the department may do any of the following:

(1) Bring an action in any court of competent jurisdiction to enforce or administer this act, any rule or order adopted under this act, or any written agreement entered into with the department. In the action, the department may seek any relief at law or equity, including a temporary or permanent injunction, appointment of a receiver or administrator, or an order of restitution.

(2) Issue and serve upon a person an order requiring the person to cease and desist and take corrective action whenever the department finds that the person is violating, has violated, or is about to violate any provision of this act, any rule or order adopted under this act, or any written agreement entered into with the department.

(3) Whenever the department finds that conduct described in subdivision (2) presents an immediate danger to the public health, safety, or welfare requiring an immediate final order, the department may issue an emergency cease and desist order reciting with particularity the facts underlying the findings. The emergency cease and desist order is effective immediately upon service of a copy of the order on the respondent named in the order and shall remain effective for 90 days. If the department begins nonemergency proceedings under subdivision (2), the emergency cease and desist order remains effective until the conclusion of the proceedings.

Section 15. (a) The department may investigate and examine any licensee or other person the department deems necessary to determine compliance with this act. For this purpose, the department may examine the books, accounts, records, and other documents or matters of any licensee or other person. The department may compel the production of all relevant books, records, and other documents and materials relative to an examination or investigation. Examinations may not be made more often than once during any 12-month period unless the department has reason to believe the licensee is not complying with this act.

(b) The department shall conduct all examinations at a convenient location in this state unless the department determines that it is more effective or cost-efficient to perform an examination at the licensee's out-of-state location. For an examination performed at the licensee's out-of-state location, the licensee shall pay the travel expense and per diem subsistence at the rate provided by law for up to 30 eight-hour days per year for each department examiner who participates in the examination. However, if the examination involves or reveals possible fraudulent conduct by the licensee, the licensee shall pay the travel expenses and per diem subsistence provided by law, without limitation, for each participating examiner.

Section 16. (a) In addition to any other penalties or remedies which may be applicable, a title loan lender who fails to comply with any requirement imposed under this act in any title loan transaction shall also be liable to the borrower in an amount equal to the sum of:

(1) Any actual damage sustained by the borrower as a result of the violation; and

(2) Twice the amount of the finance charge stated in the title loan agreement.

(b) Any person having reason to believe that this act has been violated may file with the department a written complaint setting forth the details of the alleged violation and the department shall investigate the complaint.

(c) Any borrower shall be entitled to pursue a private right of action against a licensee for violation of the provisions set forth in this act. Any borrower who is successful in a claim under this subsection shall be entitled to attorneys' fees.

(d) Any intentional violation of this act constitutes an unfair or deceptive trade practice under the Alabama Deceptive Trade Practices Act, commencing with Section 8-19-1, Code of Alabama 1975.

(e) The remedies provided in this section are not intended to be the exclusive remedies available to a consumer for a violation of this act.

Section 17. If any titled personal property from a title loan transaction is found to be stolen and is returned to the rightful owner by law enforcement authorities and if the licensee who accepted the titled property has complied with all of the duties and responsibilities as specified in this act during the transaction, then the rightful owner of the titled personal property shall be liable to the licensee for the loan agreement amount if the rightful owner fails to prosecute or cooperate in the criminal prosecution related to the title loan agreement. It shall also be the responsibility of the licensee to assist or cooperate in the criminal prosecution related to the title loan transaction. If the identity of a person who obtained a title loan using the stolen goods can be determined, the district attorney may prosecute the person for any applicable violations.

Section 18. Nothing in this act precludes a municipality from adopting ordinances more restrictive, in whole or in part, than the provisions of this act. This act shall not repeal or be construed to repeal any provision of the Uniform Commercial Code, Sections 7-1-101 et seq., Code of Alabama 1975.

Section 19. To administer this act, the department may promulgate and enforce specific rules establishing criteria, guidelines, and procedures to be followed by persons affected by this act.

Section 20. (a) Titled personal property may not be confiscated by local law enforcement without the following actions having been accomplished:

(1) A police report made in a timely manner.

(2) A warrant issued for the person who obtained a title loan using the titled personal property.

(b) Titled personal property may be put on a one-time seven-day hold by the authorized law enforcement authorities. This request for a seven-day hold shall be made in writing by the authorized law enforcement authorities.

(c) Confiscated titled property shall be returned to the title loan lender by the law enforcement authorities as soon as possible when determined that the titled personal property has no rightful owner.

Section 21. (a) Each licensee under this act shall file annually, on or before December 1, a written report with the department containing such information as the department may require concerning his or her business and operations during the preceding calendar year as to each approved office. Reports shall be made under oath and shall be in the form prescribed by the department.

(b) Using the information reported to the department under subsection (a), the department shall make and publish annually an analysis and recapitulation of such reports regarding the utilization of title loans in Alabama.

Section 22. Each title loan lender in operation as of the effective date of this act shall have until January 1, 2017, to apply for a license under this act.

Section 23. Although this bill would have as its purpose or effect the requirement of a new or increased expenditure of local funds, the bill is excluded from further requirements and application under Amendment 621, now appearing as Section 111.05 of the Official Recompilation of the Constitution of Alabama of 1901, as amended, because the bill defines a new crime or amends the definition of an existing crime.

Section 24. This act shall become effective on the first day of the third month following its passage and approval by the Governor, or its otherwise becoming law.

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