Members of the Modern Financial Services Association of Alabama:
The Alabama Banking Department is proposing legislation that will amend the Alabama Deferred Presentment Act, the statute that regulates pay day loans in Alabama. The proposed changes are significant and if enacted, would cause licensees to change several business practices.
The most significant proposal would create a uniform database under the jurisdiction of the Supervisor of the Bureau of Loans. Licensees would be required to submit such data as the Supervisor, by rule, requires including the customer's name, social security number, address, driver's license number, amount of the transaction, and date of the transaction. A fee of $1.00 per transaction would be authorized. Further, the Supervisor would be specifically authorized to adopt rules to enforce the use of the database.
Another proposal would do away with the statutory term "roll over" and replace it with a concept restricting continuous transactions. A continuous transaction would be to extend or renew a deferred presentment transaction with the same account for another term clarifying that a transaction will not be continuous if there is at least one day from the time the previous transaction was paid in full with cash or guaranteed funds and a new transaction was executed for the same amount.
A third proposal would adopt "actual presentment" as the standard before a dishonored check charge could be assessed.
Another proposal would allow proceeds to be directed to the customer by means other than by cash.
Each of these proposals carries problems; and, we are concerned that the Department is apparently moving forward with these proposals without more careful consideration. The fact is that the existing law is working well, and complaints are minimal. The current law was carefully written, with industry and consumer input, to balance the needs of Alabama's consumers and payday lenders. The proposed changes threaten to upset a law that is serving well the needs of Alabama's consumers.
Too often there are unintended consequences that flow from changing existing law. A recent study by the Federal Reserve Bank of New York points out that bank bad check charges skyrocketed, and bankruptcies significantly increased, in those states where payday lending has been crippled or outlawed. So, when there is no compelling need to make changes, it seems ill-advised to do so.
We will keep you advised of developments.
Federal law regulates written communications regarding federal tax matters, including email, between our law firm and our clients. Accordingly, matters discussed in this email are not intended to be used, and cannot be used, for the purpose of avoiding any tax penalties that may be subsequently imposed relating to the matters discussed herein. If you would like to rely on written communication to avoid any tax penalties that may be subsequently imposed, you should obtain a formal Opinion letter. If a formal Opinion letter is desired, please contact me to discuss our procedures and the cost of preparing a formal Opinion letter.
NOTICE: This communication is not encrypted and may contain privileged or other confidential information. If you are not the intended recipient or believe you may have received this communication in error, please reply to the sender, indicating that fact, and delete the copy you received. In addition, you should not print, retransmit, disseminate or otherwise use the information. Thank you.