SB67 By Senators Ward, Marsh and Reed RFD Judiciary Rd 1 02-FEB-16

SYNOPSIS: This bill would regulate the providing of money or credit to a consumer pursuant to an agreement under which the consumer is not prohibited from using the money or credit for a purpose other than prosecuting a dispute, and under which repayment of the money or credit is conditioned upon the consumer's recovery of money in a dispute or where recourse against the consumer by the person providing the money or credit is limited exclusively or primarily to the amount recovered by the consumer in a dispute.

This bill would define provider of money or credit as a consumer lawsuit lender.

This bill would provide that each provision of money or credit would be deemed to be a consumer loan and the maximum finance charge on the loan would be as provided in this bill, regardless of the amount of the loan or credit provided.

This bill would require each consumer lawsuit lender to obtain a license under Section 5-19-22 of the Code of Alabama 1975.

This bill would provide that the lender would be subject to Sections 5-19-16, 5-19-19, 5-19-23, 5-19-24, 5-19-25, and 5-19-26, Code of Alabama 1975.

This bill would allow the Superintendent of Banks of the State Banking Department to issue regulations and interpretations under the act.

A BILL TO BE ENTITLED AN ACT

Relating to the extension of money or credit to consumers for a purpose other than the prosecution of a dispute where repayment of the money or credit is conditioned upon the consumer's recovery of money in a dispute or where recourse against the consumer by the person providing the money or credit is limited exclusively or primarily to the amount recovered by the consumer in a dispute; to define the terms amount financed, consumer, consumer lawsuit lender, consumer lawsuit lending, consumer lawsuit lending agreement, dispute, and finance charge; to provide for the maximum finance charge under a consumer lawsuit lending agreement without regard to the amount financed or the manner in which the transaction is structured; to provide that a consumer lawsuit lender is required to be licensed under Section 5-19-22 of the Code of Alabama 1975, to engage in consumer lawsuit lending transactions without regard to the number of extensions of credit the consumer lawsuit lender made or arranged in the preceding calendar year; to provide that a consumer lawsuit lender is subject to the provisions of Sections 5-19-16, 5-19-19, 5-19-23, 5-19-24, 5-19-25, and 5-19-26, Code of Alabama 1975; and to provide that the Superintendent of Banks of the State Banking Department is authorized to issue regulations and interpretations of this act; to provide remedies for violations of this act by a consumer lawsuit lender.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:

Section 1. This act shall be known as the "Alabama Consumer Lawsuit Lending Act."

Section 2. For the purposes of this act, the following terms shall have the meanings ascribed to them by this section:

(1) CONSUMER. Any natural person who is, or who is contemplating being or becoming, a plaintiff or claimant in any dispute.

(2) CONSUMER LAWSUIT LENDER. A person that engages in consumer lawsuit lending.

(3) CONSUMER LAWSUIT LENDING. The act of providing money or credit to a consumer who is a resident of this state, or from a place of business in this state or through an employee in this state, pursuant to an agreement or arrangement with the consumer under which the consumer is not prohibited from using the money or credit for a purpose other than prosecuting a dispute, and repayment of the money or credit is conditioned upon the consumer's recovery of money in a dispute pursuant to a judgment, award, settlement, or otherwise or recourse against the consumer by the person providing the money or credit is limited exclusively or primarily to all or part of the amount recovered by the consumer in a dispute. Each such provision of money or credit to a consumer shall be deemed to be a credit transaction that is a loan, whether the transaction under which the money or credit is provided is structured as a loan to the consumer, an investment, a purchase from or other assignment by the consumer of all or part of the consumer's contingent right to a recovery in a dispute, or otherwise. The principal loan amount of the loan shall be the full amount of money actually provided to and obtained by the consumer.

(4) CONSUMER LAWSUIT LENDING AGREEMENT. A contract or other arrangement that governs and sets out the terms of a consumer lawsuit lending transaction.

(5) DISPUTE. Any civil action, alternative dispute resolution proceeding, or administrative proceeding before any agency or instrumentality of a state or the United States.

(6) FINANCE CHARGE. As defined in Section 5-19-1(1) of the Code of Alabama 1975, provided that any amount paid or payable to the consumer lawsuit lender in a consumer lawsuit lending transaction in excess of the amount of money actually provided to the consumer by the consumer lawsuit lender shall be a finance charge, regardless of the manner in which the amount paid or payable is designated or the consumer lawsuit lending transaction is structured. The finance charge shall not be determined or expressed, in whole or in part, as a percentage or other share of any recovery in a dispute.

Section 3. The finance charge under a consumer lawsuit lending agreement shall not exceed the rate of ten dollars ($10) upon one hundred dollars ($100) of the principal loan amount for one year and at that rate for a greater or lesser sum and for a longer or shorter time. The foregoing limitation shall apply notwithstanding any other provision of law, including, without limitation, Sections 8-8-1 through 8-8-5, Section 8-8-14, and Section 5-20-5 of the Code of Alabama 1975.

Section 4. (a) A consumer lawsuit lending agreement shall be subject to the provisions of Section 5-19-16 of the Code of Alabama 1975.

(b) The provisions of Section 5-19-19 of the Code of Alabama 1975, that apply to a creditor that is a lender of money or a licensee under Section 5-19-22 of the Code of Alabama 1975, shall be applicable to a consumer lawsuit lender in a consumer lawsuit lending transaction.

(c) Before engaging in a consumer lawsuit lending transaction, a person shall obtain a license under Section 5-19-22 of the Code of Alabama 1975, without regard to the number of extensions of credit the person made or arranged during the preceding calendar year, unless the person is exempted from licensing under that section.

(d) Sections 5-19-23 through 5-19-25 of the Code of Alabama 1975, shall be applicable to a consumer lawsuit lender that is licensed under Sections 5-19-22 and 5-19-26 of the Code of Alabama 1975, shall apply to a lender that is licensed or has applied for a license under Section 5-19-22 of the Code of Alabama 1975.

(e) Section 5-19-29 of the Code of Alabama 1975, shall be applicable to a consumer lawsuit lender.

Section 5. The Superintendent of Banks of the State Banking Department is authorized and empowered to promulgate regulations and official interpretations as may be necessary or appropriate for the execution and enforcement of this act. The Superintendent of Banks or, if authorized by the regulations, the superintendent's designee, or both, may also issue written interpretations of this act and the regulations. The procedure for adopting, amending, repealing, or contesting any regulation shall be as set forth in Section 5-19-21(b) of the Code of Alabama 1975.

Section 6. If any provision or provisions of this act shall be held to be invalid, unenforceable, or in conflict with the Constitution of this state or of the United States, the validity, legality, and enforceability of the remaining provisions shall not be affected or impaired thereby.

Section 7. 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; provided, that any consumer lawsuit lender that is first required to be licensed under Section 5-19-22 of the Code of Alabama 1975, upon the effective date of this act shall obtain such license not later than September 30, 2016, and the license fee for such license for the period ending December 31, 2016, shall be a prorated fee of one hundred twenty-five dollars ($125) for each office, branch, or place of business of the licensee.

Consumer

Banks and Banking

Title

Loans

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