HB526 By Representative Scott RFD Financial Services Rd 1 12-APR-16

SYNOPSIS: This bill would create the Alabama Motor Vehicle Title Loan Act.

The bill would: Require licensure by the State Banking Department for a person to act as a title loan lender; provide for the application for licensure; require a bond and a nonrefundable application and investigation fee; provide for inactive licenses, renewal and reactivation of licenses, a fee for the license, and for the denial, suspension, or revocation of licenses.

The bill would specify acts which constitute violations for which certain disciplinary actions may be taken; would provide for the imposition of fines and criminal penalties; and would provide remedies for title loans made or serviced without proper licensure.

The bill would establish requirements for a title loan agreement; would provide for reclaiming a repossessed motor vehicle under certain circumstances; and would provide payment of excess proceeds from a sale or disposal of a motor vehicle.

The bill would provide for title loan interest rates; would prohibit extensions; would provide for return of principal and interest to the borrower under certain circumstances; and provide for a holding period when there is a failure to reclaim loan property.

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.

A BILL TO BE ENTITLED AN ACT

Relating to title loan transactions; creating the Alabama Motor Vehicle Title Loan Act; to require and establish requirements for licensure by the State Banking Department to act as a title loan lender; to specify acts which would constitute violations for which certain disciplinary actions may be taken; to provide for fines and criminal penalties; to provide for the title loan agreement; to provide for title loan interest rates; to prohibit extension of a loan; to provide for return of principal and interest to the borrower under certain circumstances; to provide a holding period when there is a failure to reclaim; to provide for the disposal of pledged property; to provide for a title loan lenders lien; to provide for criminal penalties; to provide for investigations and complaints; 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.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:

Section 1. Chapter 27, commencing with Section 5-27-1, is added to Title 5 of the Code of Alabama 1975, to read as follows:

§5-27-1.

This chapter shall be known as the Alabama Motor Vehicle Title Loan Act.

§5-27-2.

The Legislature finds that there exists among the citizens of this state a demand for motor vehicle title loans and that it is the intent of the Legislature to bring such loans under public supervision, to eliminate practices that facilitate the abuse of borrowers, to establish a system of regulation for the purpose of insuring honest and efficient motor vehicle title loan service and stimulating competitive reductions in charges, to allow lenders who meet the conditions of this chapter a rate of charge sufficiently high to permit a business profit and to provide the administrative machinery necessary for effective enforcement. This chapter shall be liberally construed to effectuate its purpose as a consumer protection statute.

§5-27-3.

As used in this chapter, the following terms shall have the following meanings:

(1) BOND. Any form of financial instrument that provides security equivalent to that provided by a bond.

(2) BUSINESS DAY. A day on which the licensee's office is open for business.

(3) DEPARTMENT. The State Banking Department.

(4) DUPLICATE ORIGINAL. An exact copy of a signed original.

(5) GOOD FUNDS INSTRUMENT. A certified check, cashier's check, money order, or, if the licensee is equipped to handle and willing to accept such payments, payment by use of a credit card.

(6) LICENSEE. A person to whom a license has been issued under this chapter.

(7) LIQUID ASSETS. Cash in depository institutions, money market funds, commercial paper, and Treasury bills.

(8) MOTOR VEHICLE. As defined under Title 32, Chapter 2, and subjected to titling thereunder.

(9) MOTOR VEHICLE TITLE LOAN or TITLE LOAN. A loan secured by a non-purchase money security interest in a motor vehicle.

(10) MOTOR VEHICLE TITLE LOAN AGREEMENT or LOAN AGREEMENT. A written document that sets out the terms and conditions under which a licensee agrees to make a motor vehicle title loan to a borrower and the borrower agrees to give to the licensee a security interest in a motor vehicle owned by the borrower to secure repayment of the motor vehicle title loan and performance of the other obligations under the loan agreement.

(11) PERSON. An individual, group of individuals, partnership, association, corporation, or any other business unit or legal entity.

(12) PRINCIPAL. Any person who, directly or indirectly, owns or controls the following:

a. Ten percent or more of the outstanding stock of a stock corporation.

b. A 10 percent or greater interest in any other type of entity.

(13) SUPERVISOR. The Supervisor, Bureau of Loans, or his or her designee.

§5-27-4.

Unless exempted from the provisions of this chapter pursuant to Section 5-27-5, a person may not engage in any of the following:

(1) In the business of making motor vehicle title loans to residents of Alabama or to any individuals in Alabama, whether or not the person has a location in Alabama, except in accordance with the provisions of this chapter and without having first obtained a license under this chapter from the supervisor.

(2) In the business of arranging or brokering motor vehicle title loans for residents of Alabama, or any individuals in Alabama, whether or not the person has a location in Alabama.

§5-27-5.

(a) The provisions of this chapter shall not apply to any of the following:

(1) A bank or credit union or a person licensed under Chapter 19 that does not elect to become licensed under this chapter, except the exemption as to banks or credit unions shall not apply to subsidiaries of those exempt entities.

(2) To the extensions of credit for the sole purpose of financing the purchase of a motor vehicle or of refinancing a purchase money loan secured by a lien on the motor vehicle.

§5-27-6.

(a) An application for a license under this chapter shall be made in writing, under oath, and on a form provided by the supervisor.

(b) The application shall set forth all of the following:

(1) The name and address of the applicant and:

a. If the applicant is a partnership, firm, or association, the name and address of each partner or member.

b. If the applicant is a corporation or limited liability company, the name and address of each director, member, registered agent, and principal.

c. If the applicant is a business trust, the name and address of each trustee and beneficiary.

(2) The address of the location of the business to be licensed.

(3) Such other information concerning the financial responsibility, background, experience, and activities of the applicant and its members, officers, directors, and principals as the supervisor may require.

(c) The application shall be accompanied by payment of a license fee of five hundred dollars ($500) and an investigation fee of one hundred dollars ($100). The license fees are subject to increase by the supervisor through regulation.

(d) The application fee shall not be refundable in any event. The fee shall not be abated by surrender, suspension, or revocation of the license.

(e) The supervisor may require applicants to apply through the Nationwide Multistate Licensing System. In order to carry out this requirement, the supervisor is authorized to participate in the Nationwide Multistate Licensing System. For this purpose, the supervisor may require the use of the Nationwide Multistate Licensing System for the use of criminal background checks and other information required by the Nationwide Multistate Licensing System.

§5-27-7.

The application for a license shall also be accompanied by a bond filed with the supervisor with corporate surety authorized to execute the bond in the State of Alabama, in the sum of fifty thousand dollars ($50,000) per location, not to exceed a total of five hundred thousand dollars ($500,000). The form of the bond shall be approved by the supervisor. The bond shall be continuously maintained thereafter in full force. The bond shall be conditioned upon the applicant or licensee performing all written agreements with borrowers or prospective borrowers, correctly and accurately accounting for all funds received by licensee in the licensee's licensed business, and conducting the licensed business in conformity with this chapter and all applicable laws. Any person who may be damaged by noncompliance of the licensee with any condition of the bond may proceed on the bond against the principal or surety thereon, or both, to recover damages. The aggregate liability under the bond shall not exceed the penal sum of the bond.

§5-27-8.

The supervisor may make the investigations as he or she deems necessary to determine if the applicant has complied with all applicable provisions of law and rules adopted thereunder.

§5-27-9.

(a) Upon the filing and investigation of an application for a license, and compliance by the applicant with Sections 5-27-6 and 5-27-7, the supervisor shall issue and deliver to the applicant the license applied for to engage in business under this chapter at the location specified in the application if the supervisor finds both of the following:

(1) That the financial responsibility, character, reputation, experience, and general fitness of the applicant and its members, senior officers, directors, trustees, and principals are such as to warrant belief that the business will be operated efficiently and fairly, in the public interest, and in accordance with law.

(2) That the applicant has unencumbered liquid assets per location available for the operation of the business of at least seventy-five thousand dollars ($75,000). A licensee, upon request by the supervisor, shall submit proof that it is complying with this requirement at any time.

(b) If the supervisor fails to make the findings, no license shall be issued and the supervisor shall notify the applicant of the denial and the reasons for the denial.

(c) After receiving the license from the supervisor, a licensee shall give written notice to the supervisor of its commencement of business within 10 days thereafter.

(d) A licensee shall post in or on its licensed location the days and hours during which it is open for business so that the posting is legible from outside the business.

§5-27-10.

(a) Each license shall state the address or addresses at which the business is to be conducted and shall state fully the legal name of the licensee as well as any fictitious name by which the licensee is operating in Alabama. Each license shall be posted prominently in each place of business of the licensee. Licenses shall not be transferable or assignable, by operation of law or otherwise. No licensee shall use any name in Alabama other than the legal name or fictitious name set forth on the license issued by the supervisor.

(b) No licensee shall relocate any place of business without prior approval of the supervisor. Applications for the approval shall be made in writing on a form provided by the supervisor and shall be accompanied by payment of a nonrefundable fee of one hundred dollars ($100). The application shall be approved unless the supervisor finds that the applicant does not have the required liquid assets or has not conducted business under this chapter efficiently, fairly, in the public interest, and in accordance with law. The application shall be deemed approved if notice to the contrary has not been mailed by the supervisor to the applicant within 30 days of the date the application is received by the supervisor. After approval, the applicant shall give written notice to the supervisor within 10 days of the commencement of business at the relocated place of business.

(c) Every licensee, within 10 days, shall notify the supervisor, in writing, of the closing of any business location and of the name, address, and position of each new senior officer, member, partner, or director and provide the other information with respect to any change as the supervisor may reasonably require.

(d) Every license shall remain in force until it has been surrendered, revoked, or suspended. The surrender, revocation, or suspension of a license shall not affect any preexisting legal right or obligation of the licensee.

(e) Within 30 days after a person's license is surrendered or revoked, the former licensee shall provide the supervisor with all of the following:

(1) The name, address, and telephone number of a designated contact person.

(2) The location of the former licensee's motor vehicle title loan records.

(3) Any additional information the supervisor may reasonably require.

§5-27-11.

(a) Except as provided in this section, no person shall acquire, directly or indirectly, 25 percent or more of the voting shares of a corporation or 25 percent or more of the ownership of any other person licensed to conduct business under this chapter unless the person first does all of the following:

(1) Files an application with the supervisor in the form as the supervisor may prescribe from time to time.

(2) Delivers the other information to the supervisor as the supervisor may require concerning the financial responsibility, background, experience, and activities of the applicant, its directors, senior officers, principals, and members and of any proposed new directors, senior officers, principals, or members of the licensee.

(3) Pays a fee of one hundred fifty dollars ($150).

(b) Upon the filing and investigation of an application, the supervisor shall permit the applicant to acquire the interest in the licensee if it finds that the applicant, its members if applicable, its directors, senior officers, trustees, and principals and any proposed new directors, members, senior officers, trustees, and principals have the financial responsibility, character, reputation, experience, and general fitness to warrant belief that the business will be operated efficiently and fairly, in the public interest, and in accordance with law. The supervisor shall grant or deny the application within 60 days from the date a completed application accompanied by the required fee is filed unless the period is extended by the supervisor in writing, reciting the reasons for the extension. If the application is denied, the supervisor shall notify the applicant of the denial and the reasons for the denial.

(c) This section does not apply to any of the following:

(1) The acquisition of an interest in a licensee, directly or indirectly, including an acquisition by merger or consolidation, by or with a person licensed under this chapter.

(2) The acquisition of an interest in a licensee, directly or indirectly, by merger or consolidation by or with a person affiliated through common ownership with the licensee.

(3) The acquisition of an interest in a licensee by bequest, descent, survivorship, or operation of law.

(d) The person acquiring an interest in a licensee in a transaction that is exempt from filing an application by subsection (c) shall send written notice to the supervisor of the acquisition within 30 days of its closing.

§5-27-12.

(a) Every licensee shall maintain in its licensed offices the books, accounts, and records as the supervisor may reasonably require in order to determine whether the licensee is complying with this chapter and rules adopted in furtherance thereof. The books, accounts, and records shall be maintained apart and separate from any other business in which the licensee is involved. The records relating to title loans shall be retained for at least three years after final payment is made on any title loan.

(b) In addition to any other books, accounts, and records as the supervisor may reasonably require, a licensee shall maintain copies of the following records:

(1) The loan application.

(2) The motor vehicle title loan agreement. If the loan has been repaid or satisfied in full, a licensee shall maintain a copy of the motor vehicle title loan agreement with the word "paid" or "cancelled" along with the documentation showing that the licensee released its security interest in the borrower's vehicle.

(3) A record of the fair market value of the motor vehicle securing the loan along with any supporting documentation from a recognized pricing guide.

(4) A copy of the original certificate of title for the motor vehicle in the borrower's name.

(c) A licensee shall maintain a repossession log of all motor vehicles that have been repossessed by or on behalf of the licensee, including motor vehicles that are voluntarily surrendered by borrowers. The log shall include all of the following information:

(1) The borrower's first and last name.

(2) The make, model, year, and vehicle identification number of the motor vehicle.

(3) The date the motor vehicle was repossessed.

(4) The date the motor vehicle was sold.

(5) The name of the purchaser.

(6) The sale price of the motor vehicle.

§5-27-13.

Each licensee under this chapter shall annually, on or before March 25, file a written report with the supervisor containing the information as the supervisor may require concerning his or her business and operations during the preceding calendar year as to each licensed place of business. Reports shall be made under oath and shall be in the form prescribed by the supervisor.

§5-27-14.

Within 15 days following the occurrence of any of the following events, a licensee shall file a written report with the supervisor describing the event and its expected impact upon the business of the licensee:

(1) The filing of bankruptcy, reorganization, or receivership proceedings by or against the licensee.

(2) The institution of administrative or regulatory proceedings against the licensee by any governmental authority.

(3) Any felony indictments of the licensee or any of its members, partners, directors, officers, or principals.

(4) Any felony conviction of the licensee or any of its members, partners, directors, officers, or principals.

(5) Any local, state, or federal governmental authority which instituted revocation, suspension, or other formal administrative, regulatory, or enforcement proceeding against the licensee.

(6) The licensee is denied a license to engage in motor vehicle title lending, title pawn or similar business in another state.

(7) Such other events as the supervisor may prescribe by regulation.

§5-27-15.

The supervisor, or his or her designated officers or employees, may investigate and examine the affairs, business, premises, and records of any person licensed or required to be licensed under this chapter insofar as they pertain to any business for which a license is required by this chapter. Examinations of licensees shall be conducted at least once every two-year period. In the course of the investigations and examinations, the owners, members, officers, directors, partners, trustees, beneficiaries, and employees of the person being investigated or examined, upon demand of the person making the investigation or examination, shall afford full access to all premises, books, records, and information that the person making the investigation or examination deems necessary. For the foregoing purposes, the person making the investigation or examination shall have authority to administer oaths, examine under oath all the aforementioned persons, and compel the production of papers and objects of all kinds. The licensee shall be responsible for the payment of the required examination fee.

§5-27-16.

(a) The supervisor may promulgate reasonable regulation for the implementation, administration, execution, and enforcement of this chapter.

(b) Prior to adoption, amendment, or repeal of any regulation, the supervisor shall give at least 35 days' notice of its intended action by filing notice of intended action with the Legislative Reference Service for publication in the Alabama Administrative Monthly. The date of publication in the Alabama Administrative Monthly shall constitute the date of notice. The notice shall include a statement of either the terms or substance of the intended action or a description of the subject and issues involved, shall specify a notice period ending not less than 35 days nor more than 90 days from the date of the notice, during which period interested persons may present their views thereon, and shall specify the place where, and the manner in which interested persons may present their views thereon.

(c) All interested persons shall have a reasonable opportunity to submit data, views, or arguments, orally or in writing. The supervisor shall consider all written and oral submissions respecting the proposed regulation. Upon adoption of a regulation, the supervisor, if conflicting views are submitted on the proposed regulation and if requested in writing to do so by an interested person prior to adoption, shall issue a concise statement of the principal reasons for and against its adoption, incorporating therein its reasons for overruling any considerations urged against its adoption.

(d) Notwithstanding any other provisions of this chapter to the contrary, if the supervisor finds that action is required by or to comply with a federal statute or regulation which requires adoption of a regulation upon fewer than 35 days' notice and states in writing his or her reasons for that finding, the supervisor may proceed without prior notice or hearing or upon any abbreviated notice and hearing that he or she finds practicable, to adopt an emergency regulation. The regulation shall become effective immediately, unless otherwise stated therein. The regulation may be effective for a period of not longer than 120 days unless within the time the supervisor complies with the procedures set forth in subsections (b) and (c). The adoption of the same or substantially similar regulation following the procedures set forth in subsections (b) and (c) at any time is not limited by the adoption of a regulation following the emergency regulation procedure set forth in this subsection.

(e) A person who has exhausted all administrative remedies available within the department, other than rehearing, and who is aggrieved by the final decision of the supervisor with respect to a regulation, is entitled to judicial review under this chapter. All proceedings for a review shall be instituted by filing of notice of appeal or review and a cost bond with the supervisor to cover the reasonable costs of preparing the transcript of the proceeding under review, unless waived by the supervisor or the court on a showing of substantial hardship. The notice of appeal and cost bond shall be filed within 42 days after the date the supervisor issued the final regulation. The appeal shall be filed pursuant to Title 6. The regulation shall be in effect pending the outcome of any appeal unless the supervisor stays the effective date of regulations.

(f) A licensee acting in reasonable reliance upon any written opinion or regulation promulgated by the supervisor or a decision of an appellate court of this state shall be presumed to have acted in accordance with applicable law, notwithstanding that after the act has occurred, the regulation is amended, rescinded, or determined by judicial or other authority to be incorrect or invalid for any reason or the particular judicial decision is reversed or modified.

§5-27-17.

Each licensee shall comply with the following requirements and prohibitions:

(1) Each motor vehicle title loan shall be evidenced by a written motor vehicle title loan agreement. Each motor vehicle title loan agreement shall:

a. Be signed by the borrower and by a person authorized by the licensee to sign the agreements.

b. Be dated the day it is executed by the borrower.

c. Set forth or contain, at a minimum, all of the following:

1. The loan amount.

2. The interest rate and any fees charged pursuant to the loan, which shall not exceed the maximum rate permitted pursuant to Section 5-27-18.

3. The annual percentage rate, which shall be stated using that term, calculated in accordance with the Federal Reserve Board's Regulation Z.

4. The amounts and scheduled due dates of the monthly installment payments of principal and interest.

5. The borrower's mailing address.

6. The make, model, year, and vehicle identification number of the motor vehicle in which a security interest is being given as security for the loan.

7. That the borrower shall have the right to cancel the loan agreement at any time before the close of business on the next business day following the day the loan agreement is executed by returning the original loan proceeds check to or paying to the licensee, in the form of cash or other good funds instrument, the loan proceeds.

8. The loan's maturity date, which shall not be earlier than 120 days from the date the loan agreement is executed nor later than 12 months from the date the loan agreement is executed.

9. Other information relating to the title loan as the supervisor shall determine, by regulation, is necessary in order to ensure that the borrower is provided adequate notice of the relevant provisions of the title loan.

d. Not cause any person to be obligated to the licensee for a principal amount that exceeds 50 percent of the fair market value of the motor vehicle in which the licensee is taking an interest, in no case to exceed three thousand five hundred dollars ($3,500). The value shall be determined by reference to the loan value for the motor vehicle specified in a recognized pricing guide if the motor vehicle is included in a recognized pricing guide.

e. Contain the following notice in at least 14-point bold type immediately above the borrower's signature:

THE INTEREST RATE ON THIS LOAN IS HIGH. YOU SHOULD CONSIDER WHETHER THERE ARE OTHER LOWER COST LOANS AVAILABLE TO YOU. THIS IS A MOTOR VEHICLE TITLE LOAN AGREEMENT. IT ALLOWS YOU TO RECEIVE LOAN PROCEEDS TO MEET YOUR IMMEDIATE CASH NEEDS. IT IS NOT INTENDED TO MEET YOUR LONG-TERM FINANCIAL NEEDS. WHEN USING THIS LOAN, YOU SHOULD REQUEST THE MINIMUM AMOUNT REQUIRED TO MEET YOUR IMMEDIATE NEEDS AND YOU SHOULD REPAY THE LOAN AS QUICKLY AS POSSIBLE TO REDUCE THE AMOUNT OF INTEREST YOU ARE CHARGED. YOU SHOULD TRY TO REPAY THIS LOAN AS QUICKLY AS POSSIBLE. YOU WILL BE REQUIRED TO PAY THE PRINCIPAL AND INTEREST ON THE LOAN IN MONTHLY SUBSTANTIALLY EQUAL INSTALLMENTS. YOU SHOULD TRY TO PAY EVEN MORE TOWARDS YOUR PRINCIPAL BALANCE EACH MONTH. DOING SO WILL SAVE YOU MONEY. YOU MAY RESCIND THIS LOAN WITHOUT COST OR FURTHER OBLIGATION IF YOU RETURN THE LOAN PROCEEDS, IN CASH OR THE ORIGINAL LOAN CHECK, PRIOR TO THE CLOSE OF BUSINESS ON THE BUSINESS DAY IMMEDIATELY FOLLOWING THE EXECUTION OF THIS AGREEMENT. YOU ARE PLEDGING YOUR MOTOR VEHICLE AS COLLATERAL FOR THIS LOAN. IF YOU FAIL TO REPAY THE LOAN PURSUANT TO THIS AGREEMENT, WE MAY REPOSSESS YOUR MOTOR VEHICLE. UNLESS YOU CONCEAL OR INTENTIONALLY DAMAGE THE MOTOR VEHICLE, OR OTHERWISE IMPAIR OUR SECURITY INTEREST BY PLEDGING THE MOTOR VEHICLE TO A THIRD PARTY OR PLEDGING A MOTOR VEHICLE TO US THAT IS ALREADY SUBJECT TO AN UNDISCLOSED EXISTING LIEN, YOUR LIABILITY FOR DEFAULTING UNDER THIS LOAN IS LIMITED TO THE LOSS OF THE MOTOR VEHICLE. IF YOUR MOTOR VEHICLE IS SOLD DUE TO YOUR DEFAULT, YOU ARE ENTITLED TO ANY SURPLUS OBTAINED AT SUCH SALE BEYOND WHAT IS OWED PURSUANT TO THIS AGREEMENT ALONG WITH ANY REASONABLE COSTS OF RECOVERY AND SALE.

(2) Before entering into a motor vehicle title loan, a licensee shall provide each borrower with a pamphlet, in a form provided by the supervisor, explaining in plain language the rights and responsibilities of the borrower and providing a toll-free number at the State Banking Department for assistance with complaints.

(3) The borrower shall have the right to prepay the title loan prior to maturity by paying the outstanding balance at any time without penalty. A borrower shall also be permitted to make partial payments on a motor vehicle equity loan without charge at any time prior to the date the amounts would otherwise be due to the licensee. The licensee shall give the borrower signed, dated receipts for any cash payment made in person.

(4) A licensee shall give a duplicate original of the loan agreement to the borrower at the time it is executed.

(5) A licensee shall not obtain any agreement from the borrower regarding any of the following:

a. Giving the licensee or any third person power of attorney or authority to confess judgment for the borrower.

b. Authorizing the licensee or any third party to bring suit against the borrower in a court outside the State of Alabama.

c. Waiving or modifying any right the borrower has under this chapter.

d. Requiring the borrower to use arbitration or other alternative dispute resolution mechanisms that do not conform to all applicable laws and rules.

(6) A motor vehicle title loan agreement shall not:

a. Contain a provision by which a person acting on behalf of the licensee is treated as an agent of the borrower in connection with its formation or execution other than for purposes of filing or releasing a lien with the state where the motor vehicle is registered.

b. Contain an acceleration clause under which a licensee may demand immediate payment of any amount owed to it unless the borrower is in default under the terms of the loan agreement.

c. Be sold or otherwise assigned to any other person who is not also a licensee, and if a loan agreement is sold or assigned to another licensee, the buyer or assignee of the loan agreement shall be subject to the same obligations under this chapter that apply to the selling or assigning licensee.

(7) Loan proceeds shall be disbursed:

a. In cash.

b. By the licensee's business check.

c. By debit card provided that the borrower will not be directly charged a fee by the licensee in connection with the withdrawal of the funds.

(8) No fee shall be charged by the licensee or check cashier for cashing a title loan proceeds check.

(9) A licensee shall not obtain or accept from a borrower an authorization to electronically debit the borrower's deposit account including, but not limited to, the use of Automated Clearing House network, electronic funds transfer, electronic check conversions, or re-presented check entries.

(10) A licensee shall not take an interest in any real or personal property other than one motor vehicle owned by the borrower as security for a title loan. For purposes of this subdivision, "motor vehicle" includes any accessories or accessions to a motor vehicle that are affixed thereto.

(11) A licensee shall not do any of the following:

a. Make a motor vehicle title loan if, on the date the loan agreement is signed by the borrower, the motor vehicle is security for another loan or otherwise is encumbered by a lien.

b. Make a loan to an individual who the licensee knows is a borrower under another motor vehicle title loan, whether made by the same or another licensee.

c. Knowingly cause a borrower to be obligated upon more than one motor vehicle title loan at any time. Prior to making a motor vehicle title loan, every licensee shall inquire of every prospective borrower if the individual is obligated on a motor vehicle title loan with any licensee. Each loan agreement shall include the borrower's certification that the borrower is not obligated on another motor vehicle title loan.

(12) A licensee shall do all of the following:

a. Hold a copy of the original certificate of title to the motor vehicle throughout the period that the loan agreement is in effect.

b. Within seven days following the date of the motor vehicle title loan agreement, file to have its security interest in the motor vehicle added to its certificate of title by complying with the requirements of all applicable state law and rules, or in the case of a motor vehicle registered in a state other than Alabama by complying with that state's requirements for perfecting a security interest in a motor vehicle.

(13) A licensee shall not make a title loan to a borrower to enable the borrower to do any of the following:

a. Pay for any other product or service sold at the licensee's business location.

b. Repay any amount owed to the licensee or an affiliate of the licensee in connection with another credit transaction.

(14) A licensee's security interest in a motor vehicle shall be promptly released when the borrower's obligations under the loan agreement are satisfied in full. When releasing the security interest in a motor vehicle, a licensee shall do all of the following:

a. Mark the original loan agreement with the word "paid" or "canceled," return it to the borrower, and retain a copy in its records.

b. Take any action necessary to release a recorded lien on the motor vehicle's certificate of title in accordance with Section 32-8-63 and any rules promulgated thereunder.

(15) A licensee shall conspicuously post in each licensed location all of the following:

a. A schedule of finance charges on a title loan, using as an example a one thousand dollar ($1,000) loan that is repaid over a 12-month period.

b. A notice containing the following statement: "Should you wish to file a complaint against us, you may contact the State Banking Department, Bureau of Loans at [insert contact information]." The supervisor shall furnish licensees with the appropriate contact information.

(16) A licensee or affiliate shall not knowingly make a motor vehicle title loan to a covered member of the armed forces or a dependent of the member. Prior to making a motor vehicle title loan, every licensee or affiliate shall inquire of every prospective borrower if the individual is a covered member of the armed forces or a dependent of a covered member. The prospective borrower shall affirm in writing to the licensee or affiliate if he or she is not a covered member of the armed forces or a dependent of a covered member. For purposes of this section, "covered member of the armed forces" means a person on active duty under a call or order that does not specify a period of 30 days or less or on active guard and reserve duty. For purposes of this section, "dependent of a covered member of the armed forces" means the member's spouse, the member's child as defined by 38 U.S.C. §101 (4), or an individual for whom the member provided more than one-half of the individual's support for 180 days immediately preceding the date the motor vehicle title loan is sought.

(17) In collecting or attempting to collect a motor vehicle title loan, a licensee shall comply with the restrictions and prohibitions applicable to debt collectors contained in the Fair Debt Collection Practices Act (15 U.S.C. §1692 et seq.) regarding harassment or abuse, false, misleading or deceptive statements or representations, and unfair practices in collections.

(18) A licensee shall not do any of the following:

a. Engage in any unfair, misleading, deceptive, or fraudulent acts or practices in the conduct of its business.

b. Engage in any business or activity that directly or indirectly results in an evasion of the provisions of this chapter.

c. Threaten, or cause to be instigated, criminal proceedings against a borrower arising from the borrower's failure to pay any sum due under a loan agreement.

(19) A licensee shall not conduct the business of making motor vehicle title loans under this chapter at any office, suite, room, or place of business where any other business is solicited or conducted except the other business as the supervisor determines should be permitted, and subject to the conditions as the supervisor deems necessary and in the public interest. No other business shall be allowed except as permitted by State Banking Department regulation or upon the filing of a written application with the supervisor, payment of a fee of one hundred dollars ($100), and provision of the information as the supervisor may deem pertinent. Written evidence of the approval from the supervisor of each other business conducted must be maintained at the licensed location. No licensee shall make a motor vehicle title loan to a person if:

a. The person has an outstanding deferred presentment transaction or other loan with the licensee.

b. On the same day the person repaid or satisfied in full a motor vehicle title loan from the licensee.

(20) The supervisor shall not permit the sale of insurance or the enrolling of borrowers under group insurance policies or automobile motor club memberships.

(21) A licensee shall provide a safe place for the keeping of all certificates of title while they are in its possession.

(22) A licensee may require a borrower to provide evidence of property insurance upon a motor vehicle securing a title loan made pursuant to this chapter. A licensee may not require the borrower to obtain the insurance from a particular provider.

(23) If the licensee takes possession of a motor vehicle securing a title loan, the vehicle shall be stored in a secure location.

(24) A licensee shall use a statewide database, selected by the State Banking Department, to ensure that the customer does not have more than one outstanding motor vehicle title loan made by any licensee under this chapter or has any outstanding deferred presentment transaction or other loan with the licensee. A licensee shall also use the database to ensure that a customer does not have a motor vehicle loan that exceeds three thousand five hundred dollars ($3,500).

§5-27-18.

(a) A licensee may charge and collect interest on a motor vehicle title loan at rates not to exceed the following 10 percent per month of the principal amount advanced in the title loan transaction.

(b) The annual rate of interest may not exceed 120 percent and shall be charged only upon principal balances outstanding from time to time. Interest shall not be charged on an add-on basis and shall not be compounded or paid, deducted, or received in advance.

(c) Notwithstanding anything set forth in subsection (a), other provisions of this chapter, or in a motor vehicle title loan agreement, interest shall not accrue on the principal balance of a motor vehicle title loan from and after:

(1) The date that the motor vehicle securing the title loan is repossessed by the licensee making the loan.

(2) Sixty days after the borrower has failed to make a monthly payment on a motor vehicle title loan as required by the loan agreement unless the borrower has not surrendered the motor vehicle and the borrower is concealing the motor vehicle.

(d) In addition to the loan principal and interest permitted under subsection (a), a licensee shall not directly or indirectly charge, contract for, collect, receive, recover, or require a borrower to pay any further or other fee, charge, or amount whatsoever except for:

(1) A licensee's actual cost of perfecting its security interest in a motor vehicle securing the borrower's obligations under a loan agreement as provided in Section 32-8-6.

(2) Reasonable costs of repossession and sale of the motor vehicle in accordance with Section 5-25-19. In no event shall the borrower be liable for fees incurred in connection with the storage of a motor vehicle securing a title loan following the motor vehicle's repossession by the licensee or its agent or the voluntary surrender of possession of the motor vehicle by the borrower to the licensee.

(e) Every title loan shall be a term loan providing for repayment of the principal and interest in substantially equal monthly installments of principal and interest; however, nothing in this chapter shall prohibit a loan agreement from providing for an odd first payment period and an odd first payment greater than other monthly payments because of the odd first payment period.

(f) A title loan agreement may not be extended, renewed, or refinanced.

(g) A licensee may impose a late charge for failure to make timely payment of any amount due under the loan agreement provided that the late charge does not exceed the lesser of eighteen dollars ($18) or five percent of the scheduled payment.

(h) Payments shall be credited by the licensee on the date received.

§5-27-19.

(a) Except as otherwise provided in subsection (g), a licensee taking a security interest in a motor vehicle pursuant to this chapter shall be limited, upon default by the borrower, to seeking repossession of, preparing for sale, and selling the motor vehicle in accordance with applicable law. A licensee shall not collect or charge the costs of repossessing and selling the motor vehicle described in subdivision (2) of subsection (d) of Section 5-27-18, unless:

(1) The licensee, at least 10 days prior to repossessing the motor vehicle securing a title loan, has sent to the borrower, by first class mail, written notice advising the borrower that his or her title loan is in default and stating that the motor vehicle may be repossessed unless the principal and interest owed under the loan agreement are paid.

(2) The borrower does not pay the principal and interest prior to the date the motor vehicle is repossessed by or at the direction of the licensee.

(b) A licensee shall not repossess a motor vehicle securing a title loan prior to the date specified in the notice. Except as otherwise provided in subsection (g), a licensee shall not seek or obtain a personal money judgment against a borrower for any amount owed under a loan agreement or any deficiency resulting after the sale of a motor vehicle.

(c) At least 15 days prior to the sale of a motor vehicle, a licensee shall do all of the following:

(1) Notify the borrower of the date and time after which the motor vehicle is subject to sale.

(2) Provide the borrower with a written accounting of the principal amount due to the licensee, interest accrued through the date the licensee took possession of the motor vehicle, and any reasonable expenses incurred to date by the licensee in taking possession of, preparing for sale, and selling the motor vehicle.

(d) At any time prior to the sale, the licensee shall permit the borrower to redeem the motor vehicle by tendering cash or other good funds instrument for the principal amount due to the licensee, interest accrued through the date the licensee took possession, and any reasonable expenses incurred by the licensee in taking possession of, repairing for sale, and selling the motor vehicle.

(e) Within 30 days of the licensee's receipt of funds from the sale of a motor vehicle, the borrower is entitled to receive all proceeds from the sale of the motor vehicle in excess of the principal amount due to the licensee, interest accrued through the date the licensee took possession, and the reasonable expenses incurred by the licensee in taking possession of, preparing for sale, and selling the motor vehicle.

(f) Except in the case of fraud or a voluntary surrender of the motor vehicle, a licensee shall not take possession of a motor vehicle until the time as a borrower is in default under the loan agreement and the licensee's lien is properly recorded on the certificate of title. Except as otherwise provided in this chapter, the repossession and sale of a motor vehicle shall be subject to the provisions of all applicable laws and rules.

(g) Notwithstanding any provision to the contrary, upon default by a borrower, a licensee may seek a personal money judgment against the borrower for any amounts owed under a loan agreement if the borrower impairs the licensee's security interest by:

(1) Intentionally damaging or destroying the motor vehicle.

(2) Intentionally concealing the motor vehicle.

(3) Giving the licensee a lien in a motor vehicle that is already encumbered by an undisclosed prior lien.

(4) Subsequently giving a security interest in, or selling, a motor vehicle that secures a title loan to a third party, without the licensee's written consent.

§5-27-20.

(a) No person licensed or required to be licensed under this chapter shall use or cause to be published any advertisement that:

(1) Contains any false, misleading, or deceptive statement or representation.

(2) Identifies the person by any name other than the name set forth on the license issued by the supervisor.

(b) Any advertising materials used to promote the price, cost, or interest rate of motor vehicle title loans shall disclose the amount of any minimum monthly payments and a statement of finance charges, expressed as an annual percentage rate, payable using as an example a one thousand dollar ($1,000) loan that is repaid over a 12-month period. In any print media advertisement, including any web page, used to promote motor vehicle title loans, the disclosure shall be conspicuous. If a single advertisement consists of multiple pages, folds, or faces, the disclosure requirement applies only to one page, fold, or face. In a television advertisement used to promote motor vehicle title loans, the visual disclosure legend shall include 20 scan lines in size. In a radio advertisement or advertisement communicated by telephone used to promote motor vehicle title loans, the disclosure statement shall last at least two seconds and the statement shall be spoken so that its contents may be easily understood.

(c) A licensee shall disclose the following information in its advertisements:

(1) The name of the motor vehicle title lender as set forth in the license issued by the supervisor.

(2) A statement that the motor vehicle title lender is licensed by the State Banking Department.

(3) The license number assigned by the supervisor to the motor vehicle title lender.

§5-27-21.

(a) The supervisor may suspend or revoke any license issued under this chapter upon any of the following grounds:

(1) Any ground for denial of a license under this chapter.

(2) Any violation of the provisions of this chapter or regulations adopted by the supervisor pursuant thereto, or a violation of any other law or rule applicable to the conduct of the licensee's business.

(3) A course of conduct consisting of the failure to perform written agreements with borrowers.

(4) Conviction of a felony or misdemeanor involving fraud, misrepresentation, or deceit.

(5) Entry of a judgment against the licensee involving fraud, misrepresentation, or deceit.

(6) Entry of a federal or state administrative order against the licensee for violation of any law or any regulation applicable to the conduct of his or her business.

(7) Refusal to permit an investigation or examination by the supervisor.

(8) Failure to pay any fee or assessment imposed by this chapter.

(9) Failure to comply with any order of the supervisor.

(b) For the purposes of this section, acts of any officer, director, member, partner, trustee, beneficiary, or principal shall be deemed acts of the licensee.

§5-27-22.

If the supervisor determines that any person has violated any provision of this chapter or any regulation adopted by the supervisor pursuant thereto, or violated any other law or rule applicable to the conduct of a licensee's business, the supervisor, upon 21 days' notice in writing, may order the person to cease and desist from the practices and to comply with the provisions of this chapter. The notice shall be sent by certified mail to the principal place of business of the person and shall state the grounds for the contemplated action. Within 14 days of mailing the notice, the person or persons named therein may file with the supervisor a written request for a hearing. If a hearing is requested, the supervisor shall not issue a cease and desist order except based upon findings made at the hearing. The supervisor may enforce compliance with any order issued under this section by imposition and collection of the fines and penalties as may be prescribed by law.

§5-27-23.

The supervisor shall not revoke or suspend the license of any person licensed under this chapter upon any of the grounds set forth in Section 5-27-21 until he or she has given the licensee 21 days' notice in writing of the reasons for the proposed revocation or suspension and an opportunity to introduce evidence and be heard. The notice shall be sent by certified mail to the principal place of business of the licensee and shall state with particularity the grounds for the contemplated action. Within 14 days of mailing the notice, the person or persons named therein may file with the supervisor a written request for a hearing. If a hearing is requested, the supervisor shall not suspend or revoke the license except based upon findings made at the hearing.

§5-27-24.

In addition to the authority conferred under Sections 5-27-21 and 5-27-22, the supervisor may impose a fine or penalty not exceeding one thousand dollars ($1,000) upon any person who he or she determines has violated any of the provisions of this chapter or regulations promulgated by the supervisor pursuant thereto, or violated any other law or rule applicable to the conduct of a licensee's business. For the purposes of this section, each separate violation shall be subject to the fine or penalty herein prescribed and, in the case of a violation of Section 5-27-4, each loan made or arranged shall constitute a separate violation.

§5-27-25.

Any person violating Section 5-27-4, upon conviction, shall be guilty of a Class A misdemeanor. For the purposes of this section, each violation shall constitute a separate offense.

§5-27-26.

If any provision of a motor vehicle title loan agreement violates a requirement of this chapter, the provision shall be unenforceable against the borrower.

§5-27-27.

The provisions of this chapter, including specifically the licensure requirements of Section 5-27-4, shall apply to persons making motor vehicle title loans over the Internet to Alabama residents or any individuals in Alabama, whether or not the person making the loan maintains a physical presence in the State of Alabama.

§5-27-28.

(a) If the supervisor determines that a person is in violation of, or has violated, any provision of this chapter, the supervisor may refer the information to the Attorney General and may request that the Attorney General investigate the violations. In the case of the referral, the Attorney General is authorized to seek to enjoin violations of this chapter. The circuit court having jurisdiction may enjoin the violations notwithstanding the existence of an adequate remedy at law.

(b) Upon the referral of the supervisor, the Attorney General may also seek, and the circuit court may order or decree, damages and the other relief allowed by law, including restitution to the extent available to borrowers under applicable law. Persons entitled to any relief as authorized by this section shall be identified by order of the court within 180 days from the date of the order permanently enjoining the unlawful act or practice.

(c) In any action brought by the Attorney General by virtue of the authority granted in this section, the Attorney General shall be entitled to seek reasonable attorney fees and costs.

Section 2. 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 because the bill defines a new crime or amends the definition of an existing crime.

Section 3. 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.

Loans

Banking Department

Licenses and Licensing

Motor Vehicles

Title Loan Businesses

Criminal Law and Procedure

Code Added