| SB 458 |
Arise Concern |
| Section 1 and Section 2(a)(b) - Identifies the
bill as the Deferred Presentment Services Act
and defines a deferred presentment service. |
Legalizes small loans based on personal
checks held for deposit, encouraging cash-strapped customers to write checks without
funds on deposit to cover them.
Grants special privileges to one type of small
loan company over other small lenders in
Alabama. |
| Section 3(b) - Exempts banks, credit unions,
thrifts and other state and federally chartered
financial institutions. |
Banks can directly make payday loans that
exceed the limits of this act as long as no
broker or arranger was used. |
| Section 12(a) - Denotes fee lender is allowed
to charge and number of rollovers a customer
is allowed. |
The fee of 16.5% of the cash advanced yields
an APR of 602% for a ten-day loan and an
APR of 429% for a 14-day loan.
Nothing to stop a customer from paying the
loan out and then immediately renewing the
loan, which is commonly referred to as "touch
and go" lending.
Doesn't stop joint account holders from
having two different loans on the same
account. |
| Section 12(b) - States that after the initial
loan and rollover, the loan is subject to terms
and conditions no less favorable than those
provided for in the small loan act. |
The minimum term for a small loan in
Alabama is one month. (There's a 6% fee
plus 3% a month interest.) With the minimum
term being one month, the entire loan amount
could be due and payable in 30 days.
There is no requirement that the term be
based on the loan principal (for example, one
month per $100 owed).
If a customer takes a ten-day, $100 loan under
these terms, $142 could be due and payable
after 50 days.
Doesn't state if the lender has to return the
check once subject to Small Loan Act terms.
Doesn't prohibit the lender from offering a
new payday loan to a borrower unable to
repay an existing payday/small loan in full on
its due date. |
| Section13(a) - Permits lender to make a
second loan to a borrower who is already in
debt for a loan as long as the first loan is less
than $500 or 50% of the customer's net
income for the term of the loan. |
50% of a person's income in payday loans is
too high.
Doesn't set an initial maximum loan amount.
Doesn't state the maximum number of payday
loans a customer is allowed to have.
No central registry (like Florida) to determine
how much a borrower owes on payday loans. |
| Section 13(c) - Lists loan terms of 10 to 31
days. |
Sets a 10-day minimum term whether or not
the customer has a payday.
The lower the term, the higher the APR. |
Section 13(h) - Licensee allowed all civil
remedies allowed by law to collect checks
returned for insufficient funds/closed account,
including court costs and attorneys fees.
Can use criminal remedies if check returned
due to a closed account. |
Lenders can recover court costs and attorneys'
fees, but a borrower who brings a civil case
against the lender has no explicit right to
collect attorney's fees or costs if victorious.
No ban on arbitration. Since lenders almost
always use arbitration clauses, borrowers can
be shut out of court to defend their rights; but
lenders can pursue all civil and criminal
remedies.
Can pursue criminal charges if the check is
returned from a closed account, even if the
account is open at the time the loan was
activated. |
| Section 13(j) - Prohibits licensee from
engaging in unfair or deceptive acts, practices
or advertising. |
The Alabama Deceptive Trade Practices Law
only applies to goods and services, according
to a federal court. Therefore, this section is
unenforceable. |
| Section 13(n) - Lender may not enter into a
payday loan with a person who has
outstanding payday loans with that provider,
or with a person whose payday loan with that
provider or with any other provider which has
been terminated on the previous business day,
if the total amount exceeds the lesser of 50%
of the person's net income for the loan term
or $500. |
Does not stop touch and go lending.
What happens if the loan was terminated on
the same business day?
Without a central registry, a lender has no
idea whether or not a person has outstanding
payday loans. |
