ALABAMA CONSUMER CREDIT ACT “MINI CODE”
(Act 1971-2052; Effective 1971)
- Section 5-19-1 Definitions.
- Section 5-19-1.1 Legislative findings.
- Section 5-19-3 Maximum finance charges; contracting for minimum finance charge;
alternate per month computed finance charge. - Section 5-19-4 Additional charges for default or deferral; prepayment; renewal or
refinancing; and real property transactions. - Section 5-19-5 Acceptance of negotiable instruments as evidence of consumer debt.
- Section 5-19-6 Copies of instruments signed by debtors to be furnished to debtors;
required statement in contracts, etc.; limitation on disclosure requirements; intent,
applicability of limitation. - Section 5-19-7 Right to refinance amount of certain scheduled payments.
- Section 5-19-8 Assignee of seller subject to claims and defenses of buyer.
- Section 5-19-9 Application of payments when buyer indebted to same seller for two or
more consumer credit sales. - Section 5-19-10 Contract provisions for attorney’s fees.
- Section 5-19-12 Buyer’s right to cancel home solicitation sale.
- Section 5-19-13 Repossession or acceptance of surrender of goods priced at one thousand
dollars or less. - Section 5-19-14 Rebates or discounts, etc., as inducement for aiding sale to another
prohibited. - Section 5-19-15 Garnishment.
- Section 5-19-16 Refusal by court to enforce unconscionable agreement.
- Section 5-19-17 Inducing obligation on more than one contract in order to obtain higher
finance charge prohibited; consolidation of existing precomputed consumer credit
transaction contract and subsequent precomputed consumer credit transaction. - Section 5-19-18 Installment payment of debt of one thousand dollars or less.
- Section 5-19-19 Liabilities of creditor making excess finance charge; failure to obtain
license; damages for deliberate violation or reckless disregard; written notice of
violations; oral statements not admissible; fiduciary duty not created. - Section 5-19-20 Insurance.
- Section 5-19-21 Administrator authorized to make rules and regulations; filing notice of
intended action with Legislative Reference Service; transactions entered into after May
20, 1996. - Section 5-19-22 License to engage in business of making consumer loans or taking
assignments of consumer credit contracts – Required; exceptions; application;
investigation of applicant; investigation fee; standards for issuance; hearing on
qualifications of applicant; effect of holding license under Small Loan Act; form; posting;
nontransferable; license fee; penalty for late payment of license fee; disposition of license
fee. - Section 5-19-23 License to engage in business of making consumer loans or taking
assignments of consumer credit contracts – Revocation or suspension.
2 - Section 5-19-24 Examinations and investigations of licensees by administrator.
- Section 5-19-25 Cease and desist orders by administrator; penalties for violation of this
chapter; right to counsel at hearing; judicial review. - Section 5-19-26 Appeals to circuit court from order of administrator; appeals from
decision of circuit court. - Section 5-19-29 Injunctions.
- Section 5-19-30 Penalty for violations.
- Section 5-19-31 Nonapplicability of chapter to certain transactions; certain laws not
repealed or amended; intent of section. - Section 5-19-32 Service contracts.
- Section 5-19-33 Account maintenance fee.
Section 5-19-1
Definitions.
For the purposes of this chapter, the following terms shall have the following meanings
respectively ascribed to them by this section:
(1) FINANCE CHARGE. The sum of all charges, payable directly or indirectly by the person to
whom credit is extended, and imposed directly or indirectly by the creditor as an incident to the
extension of credit. The amount of the finance charge in connection with any credit transaction
(i) shall be determined, and shall include and exclude the fees and charges, as provided by
Section 106 of the Federal Truth-in-Lending Act, 15 U.S.C. Section 1605 and the regulations of
the Federal Reserve Board promulgated pursuant to the Federal Truth-in-Lending Act, 12 C.F.R.
Part 226, and the Official Staff Commentary adopted by the Federal Reserve Board pursuant to
that regulation, and without limiting or affecting the foregoing subparagraph (i), (ii) shall
exclude, without limitation, late charges and other charges resulting from or arising out of late
payment, delinquency, default, or other like occurrence. For the purpose of determining the
permissible finance charge, any discount or point paid by the debtor in connection with a
consumer credit transaction secured by a mortgage on real estate, even though paid at one time,
shall be spread over the stated term of the consumer credit transaction. The administrator from
time to time may promulgate regulations pursuant to Section 5-19-21 further establishing charges
and fees which constitute a finance charge and the manner in which the finance charge is
determined to assure consistency between the meaning of “finance charge” under this chapter
and the meaning and application of “finance charge” under the above-referenced Federal Truthin-Lending Act, regulations and Official Staff Commentary, as the same may be amended from
time to time.
(2) CONSUMER.When used as an adjective with reference to a credit transaction, characterizes
the credit transaction as one in which the party to whom credit is extended is a natural person and
the money, property, or services which are the subject of the transaction are primarily for
personal, family or household purposes.
(3) CREDITOR. A person who regularly extends or arranges for the extension of credit for
which the payment of a finance charge is required, whether in connection with loans, sales of
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property or services, or otherwise. The provisions of this chapter apply to any such creditor
irrespective of the creditor’s status as a natural person or any type of organization. A person is a
creditor only if the person extended or arranged for the extension of credit more than 25 times in
the preceding calendar year or more than five times in the preceding calendar year for credit
transactions secured by a residential structure that contains one to four units.
(4) CREDIT SALE. Any sale with respect to which credit is extended or arranged by a seller
who is a creditor. The term includes any contract in the form of a bailment or lease if the bailee
or lessee contracts to pay as compensation for use a sum substantially equivalent to or in excess
of the aggregate value of the property or services involved and it is agreed that the bailee or
lessee may become for no other or a nominal consideration the owner of the property upon full
compliance with the bailee’s or lessee’s obligations under the contract. A rental-purchase
agreement which is subject to the provisions of Chapter 25 of Title 8 is not a credit sale.
(5) OPEN-END CREDIT PLAN. A plan prescribing the terms of credit transactions which may
be made thereunder from time to time and under the terms of which a finance charge may be
charged from time to time on an outstanding unpaid balance.
(6) ADMINISTRATOR. The Superintendent of Banks of the State Banking Department.
(7) SUPERVISOR OF THE BUREAU OF LOANS. The designated deputy administrator for the
purpose of enforcing this chapter as to licensees.
(8) HOME SOLICITATION SALE. A consumer credit sale of goods or services, other than
motor vehicles, in which the seller or a person acting for the seller engages in a personal
solicitation of the sale at a place other than the seller’s place of business and the buyer’s
agreement or offer to purchase is there given to the seller or a person acting for the seller. The
term does not include a sale made pursuant to a preexisting open-end credit plan, a closed-end
plan providing for a series of sales or a sale made pursuant to prior negotiations between the
parties at the seller’s place of business where goods or services are offered or exhibited for sale.
(9) CREDIT TRANSACTION. A loan or credit sale made by a creditor. For purposes only of
Sections 5-19-1(1) and 5-19-3, “credit transaction” shall include nonconsumer loans and credit
sales as well as consumer loans and consumer credit sales with an original amount financed of
less than two thousand dollars ($2,000). Otherwise, the term “credit transaction” refers only to
consumer loans and consumer credit sales irrespective of whether the term is preceded by the
word “consumer.”
(10) AMOUNT FINANCED. The sum determined by adding the principal loan amount or the
cash price in a credit sale, less any down payment, and any other amounts that are financed by
the creditor.
Section 5-19-1.1
Legislative findings.
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The Legislature finds as fact and determines that:
(1) The Alabama Consumer Credit Act, Title 5, Chapter 19, (commonly referred to as the “MiniCode”), was enacted by the Legislature by Acts 1971, No. 2052, page 3290. All, or a portion, of
the provisions of the Mini-Code apply to substantially all consumer credit transactions in
Alabama involving billions of dollars annually.
(2) The availability of consumer credit and certainty of consumer credit transactions is essential
to Alabama citizens and the economy of Alabama. Disputes have arisen involving the Mini-Code
resulting in significant litigation.
Section 5-19-3
Maximum finance charges; contracting for minimum finance charge; alternate per month
computed finance charge.
(a) Except under open-end credit plans, the maximum finance charge for any credit transaction
where the original amount financed is less than two thousand dollars ($2,000), may equal but
may not exceed the total of the following:
(1) Fifteen dollars ($15) per one hundred dollars ($100) per year for the first seven hundred fifty
dollars ($750) of the original amount financed; and
(2) Ten dollars ($10) per one hundred dollars ($100) per year for that portion of the original
amount financed exceeding seven hundred fifty dollars ($750) and less than two thousand dollars
($2,000).
The maximum finance charge under this subsection shall be determined by computing the
maximum rates authorized by this subsection on the original amount financed for the full term of
the contract without regard to scheduled payments and the maximum finance charge so
determined, or any lesser amount, may be added to the original amount financed. The finance
charge may be calculated and expressed as a simple interest charge or by any method which does
not result in a finance charge yield greater than the yield permitted by this subsection.
(b) A creditor, in connection with any credit sale other than a sale made under an open-end credit
plan, may contract for and receive a minimum finance charge not in excess of the following
amounts:
(1) Four dollars ($4) on any credit sale in which the amount financed is twenty-five dollars ($25)
or less; and
(2) Six dollars ($6) on any credit sale in which the amount financed is more than twenty-five
dollars ($25).
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(c) In an open-end credit plan, if there is an unpaid balance on the date as of which the finance
charge is applied, a creditor may contract for and receive a minimum finance charge in an
amount not exceeding fifty cents ($.50) per month.
(d) Other than under an open-end credit plan, in any credit transaction where the finance charge
is computed on the unpaid balance of the amount financed outstanding from time to time, for the
actual time outstanding:
(1) Each payment shall be applied first to accrued charges and the remainder of the payment
applied to the unpaid balance of the amount financed, except that if the amount of the payment is
insufficient to pay the accumulated charges, unpaid charges continue to accumulate to be paid
from the proceeds of subsequent payments and are not added to the unpaid amount financed.
(2) Except for permissible prepaid finance charges, the finance charge shall not be payable in
advance, or compounded; however, if part or all of the consideration for a new credit transaction
contract is the unpaid amount financed and unpaid accrued charges of a prior credit transaction,
then the amount financed under the new credit transaction contract may include any unpaid
accrued charges. The resulting credit transaction contract shall be deemed a new and separate
credit transaction for all purposes.
(3) Debtors may pay in advance the unpaid balance of the amount financed and all accrued
finance charges without penalty.
(4) For purposes of computing finance charges for a fraction of a month, a day may be
considered one-thirtieth of a month, at the option of the creditor.
(e) The provisions of this section shall not apply to any credit transaction with an original
amount financed that is equal to or greater than two thousand dollars ($2,000). The finance
charge for any credit transaction with an original amount financed or original principal balance
not less than two thousand dollars ($2,000) and for any open-end credit plan with a credit limit
not less than two thousand dollars ($2,000) shall be subject to the provisions of Section 8-8-5, or
Sections 5-20-2, et seq., as applicable. The maximum finance charge for any open-end credit
plan with a credit limit of less than two thousand dollars ($2,000) shall be determined by Section
8-8-14, or Sections 5-20-2, et seq., as applicable.
Section 5-19-4
Additional charges for default or deferral; prepayment; renewal or refinancing; and real
property transactions.
(a) When a scheduled payment in a consumer credit transaction is in default 10 days or more, the
creditor may charge and collect a late charge not exceeding the greater of eighteen dollars ($18)
or five percent of the amount of the scheduled payment in default, not to exceed one hundred
dollars ($100). The late charge may be collected only once on any scheduled payment, regardless
of the period during which the scheduled payment remains in default.
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(b) With respect to the deferral of one or more wholly unpaid scheduled payments in a consumer
credit transaction, in which the finance charge was determined by the precomputed method, the
creditor may collect, by agreement with the debtor either before or after default, an additional
charge for each full month that any wholly unpaid scheduled payments are outstanding after the
due date of each scheduled payment equal to that proportion of the finance charge which the
amount of the deferred monthly scheduled payment bears to the sum of all monthly balances
originally scheduled.
(c) Except as otherwise provided by law, when any debt is paid in full before the final scheduled
payment date, the debtor may do so without penalty, and the creditor shall refund or credit the
debtor with not less than that portion of the finance charge which shall be due the debtor as
follows:
(1)a. In the case of a consumer credit transaction with an original term of more than 61 months
according to any generally accepted actuarial method of computation established or otherwise
approved by the administrator; and
b. In all other consumer credit transactions according to the rule of 78ths or sum of the digits
method, meaning the amount of the refund or credit shall be as great a proportion of the finance
charge originally contracted for as the sum of the periodic time balances of the debt scheduled to
follow the date of prepayment bears to the sum of all the periodic time balances of the debt, both
sums to be determined according to the scheduled payments originally contracted for.
(2) No refund of less than one dollar ($1) need be made.
(3) If the prepayment is made by the debtor other than on a scheduled payment date, the nearest
scheduled payment date shall be used in the computation.
(d) Except as otherwise provided by law, when any debt is renewed or refinanced by any creditor
or creditor’s affiliate within a period of 90 days from the date the debt is made or incurred, the
debtor shall be entitled to a pro rata refund or credit of any unearned portion of the original
finance charge computed as of the date of such refinancing or renewal. When the renewal or
refinancing occurs after 90 days, any refund or credit shall be calculated as provided in
subsection (c) above. On and after January 1, 1997, except as otherwise provided by law, when
any debt is renewed or refinanced by any creditor or creditor’s affiliate within a period of 120
days from the date the debt is made or incurred, the debtor shall be entitled to a pro rata refund or
credit of any unearned portion of the original finance charge computed as of the date of such
refinancing or renewal. When the renewal or refinancing occurs after 120 days, any refund or
credit shall be calculated as provided in subsection (c) above.
(e) When any consumer debt is renewed or refinanced by the creditor or an affiliate of the
creditor, any minimum finance charge for a credit sale shall be reduced to the finance charge
which is otherwise permitted by Section 5-19-3.
(f) A creditor may charge and collect in a transaction secured by real property the following fees
and charges if bona fide and reasonable in amount, and provided that, other than the appraisal
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fees authorized by subdivision (4) and fees and charges authorized by regulations promulgated
by the administrator, the fees are paid to parties unrelated to the creditor:
(1) Fees for title examination, abstract of title, title insurance, property survey, pest inspection,
flood inspection, and similar purposes;
(2) Fees for preparing deeds, mortgages, and reconveyance, settlement, and similar documents;
(3) Notary fees and credit report fees;
(4) Appraisal fees paid to persons licensed under the provisions of the Alabama Real Estate
Appraisers Act, whether or not the appraiser is employed by or otherwise related to the creditor;
and
(5) Fees and charges prescribed by law which are or will be paid to public officials or agencies
for recording or releasing a lien on property which secured the loan, provided, however, that a
releasing fee may only be charged and collected at or after the time the lien is released.
(6) The administrator may by regulation promulgated pursuant to Section 5-19-21 authorize
other fees and charges.
(g) A creditor may, pursuant to a consumer credit transaction contract secured by an interest in
real property, charge and collect points in an amount not to exceed five percent of the original
principal balance in the case of a closed-end consumer credit transaction, or five percent of the
total line of credit in the case of an open-end credit plan. Points may be paid in cash at the time
of the consumer credit transaction, or may be deducted from the proceeds and included in the
original amount financed for the purposes of Section 5-19-3 or financed under the open-end
credit plan. Points shall be in addition to all other charges, are fully earned on the date of the
consumer credit transaction, and may be excluded from the finance charge for the purpose of
computing any finance charge credit or refund.
(h) Subsections (b), (c), (d), and (e) of this section shall not apply to open-end credit plans. The
requirements of a refund or credit of any unearned finance charge under subsections (c) and (d)
of this section apply only if and to the extent the consumer credit transaction includes a
precomputed or prepaid finance charge.
Section 5-19-5
Acceptance of negotiable instruments as evidence of consumer debt.
In a consumer credit sale, the seller may not take as evidence of the obligation of the buyer, a
negotiable instrument other than (1) a check; or (2) a promise or order containing a statement,
required by applicable statutory or administrative law, to the effect that the rights of a holder or
transferee are subject to claims or defenses that the issuer could assert against the original payee.
A holder is not a holder in due course if the holder takes a negotiable instrument with notice that
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it is issued in violation of this section. A holder in due course is not subject to the liabilities
prescribed in this chapter.
Section 5-19-6
Copies of instruments signed by debtors to be furnished to debtors; required statement in
contracts, etc.; limitation on disclosure requirements; intent, applicability of limitation.
(a) Any creditor, when extending credit with respect to a consumer credit transaction, other than
under an open-end credit plan, shall at that time furnish to the debtor a copy of each instrument
executed by the debtor in connection with the consumer credit transaction. The consumer credit
transaction contract or note shall contain the following statement in eight point or larger type
immediately above the space for the borrower’s signature.
“CAUTION — IT IS IMPORTANT THAT YOU THOROUGHLY READ THE CONTRACT
BEFORE YOU SIGN IT.”
(b) No disclosures are required by this chapter to be made by a creditor with respect to any
transaction other than disclosures required by regulations made by the administrator pursuant to
Section 5-19-21 and disclosures required by subsection (a) above and by Sections 5-19-12(a) and
5-19-20(e).
(c) Without limiting the generality of subsection (b), there is no obligation or duty under this
chapter to disclose to a debtor any agreement to assign or otherwise transfer a consumer credit
transaction contract at a discount or that the assignee of, or person who funded, the consumer
credit transaction agreed or may agree to pay the creditor or other person who originated the
consumer credit transaction all or a portion of the prepaid finance charges and other fees and/or a
portion of the finance charge to be paid by the debtor over the term of the transaction and/or
other compensation irrespective of how the compensation is determined or described.
(d) Except as modified hereby, the provisions of subsections (b) and (c) confirm, clarify and are
declaratory of existing law. Except as modified hereby, the provisions of Alabama Act No. 94-
115 remain applicable to consumer credit transactions entered into on, before, and after February
24, 1994.
Section 5-19-7
Right to refinance amount of certain scheduled payments.
With respect to a consumer credit transaction, if any scheduled payment is more than one and
one-half times as large as the average of earlier scheduled payments, the debtor has the right to
refinance the amount of that payment at the time it is due without penalty. The terms of the
refinancing shall be no less favorable than the terms of the original transaction. The provisions of
this section do not apply if the debtor’s payment schedule has been adjusted to conform with the
seasonal or irregular income of the debtor, or if a consumer credit transaction is repayable in a
single principal payment irrespective of the scheduled interest payments.
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Section 5-19-8
Assignee of seller subject to claims and defenses of buyer.
With respect to a consumer credit sale, an assignee of the rights of the seller is subject to all
claims and defenses of the buyer against the seller arising out of the sale, notwithstanding an
agreement to the contrary, but the assignee’s liability under this section may not exceed the
amount owing to the assignee at the time the claim or defense is asserted against the assignee.
Rights of the buyer under this section can only be asserted as a matter of defense to or setoff
against a claim by the assignee.
Section 5-19-9
Application of payments when buyer indebted to same seller for two or more consumer
credit sales.
When the buyer is indebted to a particular seller for two or more consumer credit sales of goods
and the goods which were the subject of two or more sales secure the buyer’s total debt to the
seller, the security shall be discharged by applying the buyer’s payments as they are received by
the seller or the seller’s assignee to the portions of the debt in the order in which they were
incurred. To the extent that debts are paid according to the preceding sentence, security interests
in items of property terminate as the debt originally incurred with respect to each item is paid.
Payments received by the seller upon a revolving charge account are deemed, for the purpose of
determining the amount of the debt secured by the various security interests, to have been
applied first to the payment of finance charges in the order of their entry to the account and then
to the payment of debts in the order in which the entries to the account showing the debts were
made. If the debts consolidated arose from two or more consumer sales made on the same day,
payments received by the seller are deemed, for the purpose of determining the amount of the
debt secured by the various security interests, to have been applied first to the payment of the
smallest debt. This section shall not apply to two or more consumer credit sales made by the
same seller to the same buyer when the debts have been assigned to different and unrelated
persons for value and the assignment was bona fide and not for the purpose of violating this
section.
Section 5-19-10
Contract provisions for attorney’s fees.
A contract for a consumer credit transaction with an original amount financed not exceeding
three hundred dollars ($300) may not provide for payment by the debtor of attorney’s fees
after default by the debtor. A contract for a consumer credit transaction with an original amount
financed exceeding three hundred dollars ($300) may provide for the payment by the
debtor of reasonable attorney’s fees not exceeding 15 percent of the unpaid debt after default and
referral of the contract to an attorney who is not a salaried employee of the creditor. An open-end
credit plan may not provide for attorney’s fees when the unpaid balance does not exceed three
hundred dollars ($300), but may provide for reasonable attorney’s fees after default by the
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debtor when the unpaid balance exceeds three hundred dollars ($300). In a consumer
credit transaction contract where the original amount financed exceeds ten thousand dollars
($10,000) or the credit transaction is secured by real property, the creditor may require the
payment by the debtor of attorney’s fees prior to default by the debtor in connection with the
closing of, amendment to, or modification of the credit transaction, provided that the attorney is
not a salaried employee of the creditor.
Section 5-19-12
Buyer’s right to cancel home solicitation sale.
(a) A buyer has the right to cancel a home solicitation sale until midnight of the third business
day following execution by the buyer of an agreement or offer to purchase, which notice is
effective when delivered or when deposited in the mail properly addressed to the seller, postage
prepaid. The seller must deliver to the buyer and obtain the buyer’s written signature to a written
agreement or offer to purchase designating as the date of the transaction the date on which the
buyer actually signs and containing the following under the conspicuous caption:
“BUYER’S RIGHT TO CANCEL”
“If this agreement was solicited at your residence and you do not want the goods or services, you
may cancel this agreement by delivering or mailing a notice to the seller. The notice must say
that you are cancelling the agreement and must be delivered or mailed before midnight of the
third business day after you sign this agreement. The notice must be delivered or mailed to:
___________________________________.”
(insert name and mailing address of seller)
Alternately, the seller may deliver to the buyer the notice required by the Federal Trade
Commission Trade Regulation Rule concerning Cooling-Off Period for Sales Made at Homes or
at Certain Other Locations, Title 16, Code of Federal Regulations, Part 429, as amended from
time to time, which shall satisfy the notice requirement of this section. Until the seller has
complied with this section the buyer may cancel the home solicitation sale within one year after
the date of the sale by notifying the seller in any manner and by any means of the buyer’s
intention to cancel.
(b) The buyer has a duty to take reasonable care of the goods in the buyer’s possession before
cancellation and for a reasonable time thereafter, during which time the goods are otherwise at
seller’s risk. Within 10 days after a home solicitation sale has been cancelled or an offer to
purchase revoked, the seller must tender to the buyer any payments made or goods traded in by
the buyer, or the amount equal to the trade-in allowance stated in the agreement, and any note or
other evidence of debt. Within a reasonable time thereafter the buyer, upon demand, must tender
at the buyer’s residence to the seller any goods delivered by the seller. If the seller fails to
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demand such possession within 20 days after receipt of the notice, the goods become the
property of the buyer without obligation to pay for them.
(c) The provisions of this section shall not apply if the buyer furnishes the seller with a separate
dated and signed personal statement describing an emergency requiring immediate remedy and
modifying or waiving his right to cancel. The use of printed forms for this purpose is prohibited.
Section 5-19-13
Repossession or acceptance of surrender of goods priced at one thousand dollars or less.
If any seller or assignee of the seller repossesses or voluntarily accepts surrender of goods sold in
which the seller or assignee has a security interest and the original cash price of the goods
repossessed or surrendered was one thousand dollars ($1,000) or less, the buyer is not
personally liable to the seller or assignee for the unpaid balance of the debt arising from the sale
and the seller or assignee is not obligated to sell the collateral.
Section 5-19-14
Rebates or discounts, etc., as inducement for aiding sale to another prohibited.
With respect to a consumer credit sale, the seller may not give or offer to give a rebate or
discount, or otherwise pay or offer to pay value to the buyer, as an inducement for a sale in
consideration of the buyer giving to the seller the names of prospective purchasers, or otherwise
aiding the seller in making a sale to another person, if the earning of the rebate, discount, or other
value is contingent upon the occurrence of an event subsequent to the time the buyer agrees to
buy. If a buyer is induced by a violation of this section to enter into a consumer credit sale, the
agreement is unenforceable by the seller and the buyer, at the buyer’s option, may rescind the
agreement or retain the goods delivered and the benefit of any services performed without any
obligation to pay for them.
Section 5-19-15
Garnishment.
Prior to entry of judgment on a consumer credit transaction, the creditor may not attach unpaid
earnings of the debtor by garnishment. Notwithstanding the garnishment procedure otherwise
applicable after judgment, with respect to a consumer credit transaction, the amount of unpaid
earnings of the debtor subject to garnishment shall not exceed the lesser of:
(1) Twenty-five percent of the debtor’s disposable earnings for that week; or
(2) The amount by which the debtor’s disposable earnings for that week exceed 30 times the
federal minimum hourly wage in effect when payable.
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“Disposable earnings” means that part of the earnings of a debtor remaining after deduction of
amounts required by law to be withheld, and disposable earnings shall not include periodic
payments pursuant to a pension, retirement, or disability program.
Section 5-19-16
Refusal by court to enforce unconscionable agreement.
With respect to a consumer credit transaction, if the court as a matter of law finds the contract or
any provision of the contract to have been unconscionable at the time it was made, the court may
refuse to enforce the contract, or it may enforce the remainder of the contract without the
unconscionable provision, or it may so limit the application of any unconscionable provision as
to avoid any unconscionable result.
Section 5-19-17
Inducing obligation on more than one contract in order to obtain higher finance charge
prohibited; consolidation of existing precomputed consumer credit transaction contract
and subsequent precomputed consumer credit transaction.
(a) No creditor shall induce or permit any person or any husband and wife, jointly or severally, to
become obligated directly or contingently, or both, on more than one consumer credit transaction
at the same time for the purpose of obtaining a higher finance charge than would otherwise be
permitted by Section 5-19-3. This subsection shall not apply to the maintenance of two or more
separate consumer credit transactions where the consumer credit transactions were created on
different dates.
(b) It shall be unlawful for any seller to evade or attempt to evade this section by inducing a
buyer to become obligated to another creditor in which the initial creditor has a pecuniary
interest or with whom the initial creditor has an arrangement for exchange of customers.
(c) Subsection (a) does not obligate a creditor to allow any person to maintain two or more
contracts or accounts. Effective June 19, 1996, an existing precomputed consumer credit
transaction contract and a subsequent precomputed consumer credit transaction document may
be consolidated provided that the consumer cannot be required to consolidate the contracts as a
condition for the extension of credit nor can the creditor be required to extend credit; and
provided further, that if such contracts are consolidated, the annual percentage rate resulting
from the consolidation can be no greater than the annual percentage rate on the prior existing
consumer credit transaction contract nor can the consumer be charged any duplicate fees or
expenses that originated in the existing consumer credit transaction contract, provided, however,
that finance charges and other charges and fees rebated in accordance with applicable law and
those charges as permitted by Section 5-19-4(f) and UCC filing fees or nonfiling insurance
premiums in lieu thereof are excluded from this provision. Nothing herein restricts a creditor
from renewing or refinancing an existing consumer credit transaction contract.
Section 5-19-18
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Installment payment of debt of one thousand dollars or less.
With respect to consumer credit transactions, where the debt is payable in installments, not made
pursuant to an open-end credit plan and in which the original amount financed is one thousand
dollars ($1,000) or less, the debt shall be scheduled to be payable in substantially equal
installments at equal periodic intervals, except to the extent that the schedule of payments is
adjusted to the seasonal or irregular income of the debtor or when the transaction is a single
principal payment obligation irrespective of the scheduled interest payments, and:
(1) Over a period of not more than 36 months and 15 days if the original amount financed is
more than three hundred dollars ($300); or
(2) Over a period of not more than 24 months and 15 days if the original amount financed is
three hundred dollars ($300) or less.
Section 5-19-19
Liabilities of creditor making excess finance charge; failure to obtain license; damages for
deliberate violation or reckless disregard; written notice of violations; oral statements not
admissible; fiduciary duty not created.
(a)(1)(i) Any creditor charging a finance charge in excess of the amount authorized herein,
except as specified in subdivision (2), shall forfeit debtor’s actual economic damages not to
exceed the finance charge, and shall refund to the debtor such amount of the actual economic
damages, which may be done by reducing the amount of the debtor’s obligation. If the debtor is
entitled to a refund and the creditor refuses to refund within a reasonable time, not to exceed 60
days, after written demand, including the filing of a legal action, the debtor shall recover a
penalty of five times the amount of the actual economic damages not to exceed the finance
charge, but in any event not less than one hundred dollars ($100). Provided, however, as to any
legal action pending on May 20, 1996, the debtor shall make a new written demand under this
subsection.
(ii) As to transactions occurring after May 20, 1996, any creditor charging a finance charge in
excess of the amount authorized herein, except as specified in subdivision (2), shall forfeit to the
debtor the amount of the actual economic damages not to exceed the finance charge, which may
be done by reducing the amount of the debtor’s obligation. If the debtor is entitled to a refund and
the creditor refuses to refund within a reasonable time, not to exceed 60 days, after written
demand, including the filing of a legal action, the debtor shall recover twice the actual economic
damages not to exceed the finance charge, but in any event not less than one hundred dollars
($100).
(2) If the creditor has made an excess finance charge in deliberate violation of or in reckless
disregard for this chapter, the creditor shall forfeit the greater of the entire finance charge
imposed or five times the amount of the actual economic damages, but not less than one hundred
dollars ($100). No action under this subsection may be brought more than one year after the due
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date of the last scheduled payment of the agreement pursuant to which the charge was made or,
in the case of an open-end credit plan, one year after the excess charge is made.
(3) Any creditor licensed under this chapter adjudged after May 20, 1996 by a court of
competent jurisdiction in any civil action to be in deliberate violation of or in reckless disregard
for this chapter shall within 10 days of such adjudication forward a copy of the judgment to the
administrator. Within 10 days of such judgment becoming final and nonappealable, the creditor
shall notify the administrator and the administrator shall, within 60 days of such notification,
review the creditor’s license in view of the matters on which the judgment was based and
determine whether to conduct a license revocation hearing pursuant to Section 5-19-23. At any
hearing conducted thereon by the administrator, such judgment shall be prima facie evidence in
support of the revocation of the creditor’s license.
(b) A creditor required to obtain a license who fails to obtain such license may not maintain a
proceeding in any court in this state on a consumer credit transaction for which a license was
required until the creditor obtains the license required by Section 5-19-22. If a court determines
that an unlicensed creditor should have obtained a license, the action may be stayed until the
creditor obtains the required license and satisfies the requirements of the next sentence of this
subsection. The creditor shall pay to the administrator a civil penalty equal to three times the
amount of the investigation fee and the annual license fee for each year or portion thereof, the
creditor, in violation of Section 5-19-22, has engaged in the business of making consumer loans
or taking assignments of consumer credit contracts without first having obtained a license, but in
no event shall a civil penalty exceed one hundred thousand dollars ($100,000). All civil penalties
shall be paid into the special fund set up by the State Treasurer pursuant to Section 5-2A-20 and
used in the supervision and examination of licensees. After obtaining the required license, and
paying the civil penalty prescribed by this subsection, the creditor may bring and maintain
proceedings in the courts of this state on consumer credit transaction contracts, and the
enforceability of the contracts shall not be impaired by the prior failure to obtain a license,
irrespective of whether the consumer credit transaction contracts were made before or after the
license was obtained. No private cause of action exists against a creditor for failing to obtain a
license required by Section 5-19-22.
(c) Except for the specific remedies and obligations provided in subsection (a) with respect to
excess finance charges, or subsection (b) with respect to licensing, in which event the remedy
and obligations set forth in subsection (a) or (b), as applicable, shall apply, any provision of a
consumer credit transaction which violates this chapter shall be unenforceable by the creditor to
the extent, but only to the extent, of the violation, and the other remaining provisions and
agreements shall be enforceable and shall not be void and shall not be affected by the violation.
Except as provided in subsection (a), any creditor who fails to comply with any requirement
imposed under this chapter with respect to any person is liable to the person only for the actual
economic damages sustained by the person as the result of the failure. Except as set forth in
subsection (a), no action may be brought by the debtor under this section based upon a violation
of any provision of this chapter more than two years after the date the violation occurred;
provided, however, this limitation shall not bar a debtor from asserting a violation of this chapter
in an action brought by the creditor, as a matter of defense by recoupment or setoff in such
action, if otherwise allowed by law.
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(d) A creditor or assignee has no liability to the debtor for any violation of this chapter if, prior to
receipt of written notice from the debtor of a violation, the creditor or assignee notifies the debtor
of the violation and makes whatever adjustments in the appropriate account, or payments to the
debtor, as are necessary to assure that the debtor will not be required to pay an amount in excess
of the charges permitted by this chapter.
(e) An oral statement shall not be admissible to contradict the provisions of a credit transaction
document, unless the debtor establishes by clear and convincing evidence that the oral statement
was made and that it constituted a misrepresentation of a material fact relating to the character or
essential terms of the transaction that was made principally to induce the debtor to sign the
document and upon which the debtor reasonably relied in signing the document or entering into
the transaction. This subsection shall not apply to credit transaction documents in effect on May
20, 1996, nor to causes of action that arise therefrom; nor shall this subsection apply to any credit
transaction documents not covered by this chapter.
(f) A consumer credit transaction does not create or give rise to a fiduciary duty on the part of the
creditor.
Section 5-19-20
Insurance.
(a) With respect to any consumer credit transaction, the creditor shall not require any insurance
other than insurance against loss of or damage to any property in which the creditor is given a
security interest and insurance insuring the lien of the creditor on the property which is collateral
for the transaction.
(b) (1) Credit life and disability and involuntary unemployment insurance may be offered and, if
accepted, may be provided by the creditor. The charge to the debtor for the insurance shall not
exceed the premium permitted for the coverages. Insurance with respect to any credit transaction
shall not exceed the approximate amount and term of the credit.
(2) This subdivision (2) applies to all consumer credit transactions entered into on or after June
19, 1996. If the consumer credit transaction is scheduled to be repaid in substantially equal
installments which include a portion of the amount financed, the amount of credit life insurance
at any time shall not exceed the greater of the approximate unpaid balance of the debt, excluding
unearned finance charges, if any, or the approximate unpaid scheduled balance of the debt,
excluding unearned finance charges, if any, plus the amount of one scheduled payment. The
amount of credit life insurance on single payment consumer credit transactions and the amount
of accident and health insurance and involuntary unemployment insurance shall not exceed the
approximate amount of the total of payments. The amount of credit life insurance under an openend credit plan shall not exceed the approximate unpaid balance of the debt from time to time.
The debtor’s estate or a named beneficiary shall be entitled to any excess credit life insurance
benefit.
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(c) If the debtor fails to provide any required property insurance, the creditor may, but is not
required to, purchase insurance insuring its interest only, or with the debtor’s written consent,
insuring both the creditor’s interest and the debtor’s interest, and the premium for the property
insurance together with interest on the premium at the contract rate or other rate agreed to in
writing may be charged by the creditor to the debtor. The premium charged to the debtor for any
insurance shall not exceed the premium approved by the administrator or the rates filed by the
insurer with the Alabama Department of Insurance for the insurance, as applicable. If the
insurance insures only the creditor’s interest in the property, the term of the insurance provided
pursuant to this subsection shall not exceed the approximate remaining term of the credit, and the
amount of insurance shall not exceed the approximate amount of the unpaid balance of the debt
excluding unearned finance charges, if any. The administrator may promulgate regulations
pursuant to Section 5-19-21 to provide further for the term and maximum permissible amount of
insurance which covers the creditor’s interest in the property.
(d) The premium for nonfiling insurance, insuring the lien of the creditor on any property which
is collateral for the consumer credit transaction, may not exceed the cost of filing of a lien on the
property and any document necessary to continue the lien and is nonrefundable. The insurance
may be required in both purchase money and nonpurchase money secured transactions. A
creditor may not charge a debtor the cost of filing the lien and a premium for nonfiling insurance
in a consumer credit transaction.
(e) If a creditor requires any insurance against loss of or damage to any property in which the
creditor is given a security interest, the debtor shall have and be given written notice of the
option of obtaining the insurance through a person of the debtor’s choice. If the debtor does not
exercise the option of providing the insurance through an existing policy or a policy
independently obtained and paid for by the debtor, the creditor may purchase the insurance on
the property and charge the premium for the insurance to the debtor. The premium or premiums
charged for such required insurance shall not exceed the premium approved by the administrator
or the rates filed by the insurer with the Alabama Department of Insurance, as applicable. The
creditor may, for reasonable cause, decline the insurance provided by the debtor.
(f) When property insurance, as permitted herein, is required by the creditor, is not furnished by
the debtor, and is purchased by the creditor, then upon renewal, refinancing, or payment of the
debt before the final maturity date, the creditor shall refund or credit the debtor with that portion
of the premium refunded by the insurance carrier upon the termination of the insurance.
(g) A creditor may not contract for or receive a separate charge for insurance against loss of or
damage to property or against liability for property damage or personal injuries unless the
original amount financed exclusive of the charges for insurance is three hundred dollars ($300)
or more and the value of the property is three hundred dollars ($300) or more.
(h) In no event shall the creditor have any responsibility or liability for the failure to purchase
any insurance permitted by this section unless the creditor has affirmatively undertaken in
writing to purchase the insurance.
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(i) A creditor may offer and finance any other insurance in connection with any consumer credit
transaction upon such terms as are authorized by regulation of the administrator.
Section 5-19-21
Administrator authorized to make rules and regulations; filing notice of intended action
with Legislative Reference Service; transactions entered into after May 20, 1996.
(a) The administrator is authorized and empowered to promulgate rules and regulations and
official interpretations (collectively “regulations”) as may be necessary or appropriate for the
execution and enforcement of this chapter. The administrator or, if authorized by regulation, the
administrator’s designee, or both, may also issue written interpretations of consumer finance
statutes and regulations and this chapter.
(b)(1) Prior to the adoption, amendment, or repeal of any regulation, the administrator 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 or 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.
(2) All interested persons shall have a reasonable opportunity to submit data, views, or
arguments, orally or in writing. The administrator shall consider all written and oral submissions
respecting the proposed regulation. Upon adoption of a regulation, the administrator, 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.
(3) Notwithstanding any other provision of this chapter to the contrary, if the administrator finds
that an immediate danger to the public health, safety, or welfare requires adoption of a regulation
upon fewer than 35 days’ notice or 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 its reasons for that finding, it may proceed without prior notice or hearing or upon any
abbreviated notice and hearing that it 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 such time the
administrator complies with the procedures set forth in subsections (b)(1) and (b)(2). The
adoption of the same or a substantially similar regulation following the procedures set forth in
subsections (b)(1) and (b)(2) at any time is not limited by the adoption of a regulation following
the emergency regulation procedure set forth in this subsection.
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(4) A person who has exhausted all administrative remedies available within the State Banking
Department, other than rehearing, and who is aggrieved by a final decision of the administrator
with respect to a regulation, is entitled to judicial review under this chapter. All proceedings for
review shall be instituted by filing of notice of appeal or review and a cost bond with the
administrator to cover the reasonable costs of preparing the transcript of the proceeding under
review, unless waived by the administrator or the court on a showing of substantial hardship. The
notice of appeal and cost bond must be filed within 42 days after the date the administrator
issued its final regulation. The appeal shall be filed in the Circuit Court of Montgomery County.
The regulation will be in effect pending the outcome of any appeal unless the administrator stays
the effective date of the regulation.
(c) As to transactions entered into after May 20, 1996, a creditor shall have no liability under this
chapter for any act or practice done or omitted in conformity with any (i) regulation of the
administrator, or (ii) any rule, regulation, interpretation, or approval of any applicable Alabama
or federal agency or any opinion of the Attorney General, notwithstanding that after such act or
omission has occurred, the regulation, rule, interpretation, opinion, or approval is amended,
rescinded, or determined by judicial or other authority to be invalid for any reason; provided,
however, that any interpretation or opinion issued after May 20, 1996, shall not have any effect
on any litigation pending on May 20, 1996, nor shall any interpretation or opinion issued after
May 20, 1996, have any effect on litigation if issued subsequent to filing of the litigation. The
enactment of Act 96-576 shall have no effect on interpretations or opinions issued prior to May
20, 1996.
(d) A creditor, acting in conformity with a written interpretation or approval by the administrator
or the administrator’s designee, or by the official in charge of any applicable Alabama agency or
department, or by an official of any federal agency or department, shall be presumed to have
acted in accordance with applicable law, notwithstanding that after such act has occurred, the
interpretation or approval is amended, rescinded, or determined by judicial or other authority to
be incorrect or invalid for any reason.
(e) Interpretations, opinions, and approvals shall protect, to the extent provided in subsections (c)
and (d), as applicable, both the creditor at whose request they were issued and any other creditor
in a materially like circumstance.
Section 5-19-22
License to engage in business of making consumer loans or taking assignments of consumer
credit contracts – Required; exceptions; application; investigation of applicant;
investigation fee; standards for issuance; hearing on qualifications of applicant; effect of
holding license under Small Loan Act; form; posting; nontransferable; license fee; penalty
for late payment of license fee; disposition of license fee.
(a) No creditor shall engage in any one or more of the following activities without first having
obtained a license from the administrator:
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(1) Making consumer loans to Alabama residents, regardless of whether the creditor has a place
of business in Alabama or an employee residing in Alabama.
(2) Making consumer loans originated by an individual required to be licensed as a mortgage
loan originator under the Alabama Secure and Fair Enforcement for Mortgage Licensing Act of
2009.
(3) Taking assignments of consumer credit contracts, either from a place of business in Alabama
or through use of an employee residing in Alabama whose employment includes taking
assignments of consumer credit contracts.
Banks chartered by this state or any other state, banks chartered by the United States, trust
companies, savings or building and loan associations, savings banks and other thrift institutions,
bank holding companies, thrift holding companies, credit unions, and federally constituted
agencies shall be exempt from licensing. A seller, with respect to consumer credit sale
transactions and the financing of charges permitted by this chapter, is not required to be licensed
under this chapter. Any creditor required to be licensed under this chapter shall obtain a license
for each location in Alabama from which these activities are conducted or, if the creditor has no
location in Alabama, for the location where the creditor maintains its records regarding Alabama
loans or Alabama consumer credit contracts; provided, however, insurance companies and their
subsidiaries and affiliates who do not make loans or take assignments of consumer credit
contracts secured by real property may obtain a license for the location where the records are
maintained in lieu of obtaining a license for each location where the activity is conducted.
(b) The license application shall be in writing, under oath, in the form prescribed by the
administrator, and be accompanied by an investigation fee of one hundred dollars ($100).
(c) Upon receipt of the application and investigation fee, the administrator shall investigate the
applicant and determine whether the license should be issued or denied.
(d) No license shall be issued unless the administrator determines that the financial
responsibility, character, and fitness of the applicant, and of the members thereof if the applicant
is a partnership or association, officers and directors thereof if the applicant is a corporation are
such as to warrant belief that the business will be operated honestly and fairly within the purpose
of this chapter and finds that the applicant has assets available for the operation of business under
this chapter of at least twenty-five thousand dollars ($25,000). The State Banking Department
may require the applicant or licensee engaging in extensions of credit secured by real estate to
obtain a surety bond in lieu of the net asset requirement in order to fulfill the requirements of the
Alabama Secure and Fair Enforcement for Mortgage Licensing Act. The amount of the surety
bond will be determined by the department. The surety bond will be in favor of the State of
Alabama for the use, benefit, and indemnity of any person who suffers damage or loss as a result
of the company’s breach of contract or of any obligation arising therefrom or any violation of the
law.
(e) Upon written request, the applicant is entitled to a hearing on the question of his
qualifications for a license if:
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(1) The administrator has notified the applicant in writing that the application has been denied; or
(2) The administrator has not issued a license within 60 days after the application for the license
was filed.
A request for a hearing may not be made more than 15 days after the administrator has mailed by
certified mail a writing to the applicant notifying him that the application has been denied stating
in substance the administrator’s findings supporting denial of the application.
(f) Any person licensed under the Alabama Small Loan Act may engage in business under the
Alabama Small Loan Act, but shall not make loans in excess of one thousand dollars ($1,000)
unless such person is also licensed under this chapter. The payment of the license and
examination fees required by this chapter shall be in lieu of the license and examination fees
required by the Alabama Small Loan Act when the licensee is also licensed under the Alabama
Small Loan Act.
(g) The license shall be in the form prescribed by the administrator, posted conspicuously in the
place of business of the licensee, and shall not be assignable or transferable or removed to
another location without permission of the administrator.
(h) The annual license fee shall be five hundred dollars ($500) for each office, branch, or place
of business of the licensee, which shall be due on January 1 of each year, and shall be for a oneyear period ending December 31, and shall be delinquent on February 1 of each year, and there
shall be a penalty of 10 percent for each month or part thereof that the licensee is delinquent in
the payment of such license fee. All license fees and investigation fees collected shall be
nonrefundable and paid into the special fund provided by Section 5-2A-20 and used in the
supervision and examination of licensees.
(i) With respect to any license applicants that will make Residential Mortgage Loans, as defined
in the Alabama S.A.F.E. Act, the State Banking Department may require applicants to apply
through the Nationwide Mortgage Licensing System and Registry. In order to carry out this
requirement, the supervisor is authorized to participate in the Nationwide Mortgage Licensing
System and Registry. For this purpose, the supervisor may establish by rule or order
requirements as necessary, including, but not limited to, the following:
(1) Background checks for the following purposes:
a. Criminal history through fingerprint or other databases.
b. Civil or administrative records.
c. Credit history.
d. Any other information deemed necessary by the Nationwide Mortgage Licensing System and
Registry.
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(2) The payment of fees to apply for or renew licenses through the Nationwide Mortgage
Licensing System and Registry.
(Acts 1971, No. 2052, p. 3920, §18; Acts 1983, No. 83-747, p. 1244, §1; Acts 1996, No. 96-576, p. 887, §2; Act
2009-625, §1.)
Section 5-19-23
License to engage in business of making consumer loans or taking assignments of consumer
credit contracts – Revocation or suspension.
(a) The administrator may issue to a person licensed under this chapter an order to show cause
why his license should not be revoked or suspended for a period not in excess of six months. The
order shall state the place for a hearing and set a time for the hearing that is not less than 10 days
from the date of the order. At such hearing, the licensee shall be entitled to counsel.
(b) After the hearing, the administrator:
(1) Shall revoke the license if he finds that:
a. The licensee has repeatedly and willfully violated this chapter or any rule or order lawfully
made pursuant to this chapter; or
b. Facts or conditions exist which would clearly have justified the administrator in refusing to
grant a license had such facts or conditions been known to exist at the time the application of the
license was made.
(2) May suspend the license if he finds that the licensee has violated this chapter or any rule or
order lawfully made pursuant to this chapter.
Section 5-19-24
Examinations and investigations of licensees by administrator.
(a) For the purpose of determining compliance with this chapter, the administrator may, at any
reasonable time, cause an examination to be made at the licensee’s place of business of the
records and transactions of such licensee. As cost of examination, the licensee shall pay the
administrator an examination fee as provided by Section 5-2A-24 which shall be collected and
paid into the special fund provided by Section 5-2A-20 and used in the supervision and
examination of licensees. Each licensee shall preserve all relevant records for a period of at least
two years after making the last entry on any transaction, and the administrator shall have free
access thereto at the licensee’s place of business at all reasonable times. If the administrator has
probable cause to believe that a person has engaged in an activity which violates the provisions
of this chapter, the administrator may compel the production of such books and records of the
person as he or she has probable cause to believe are relevant to the alleged violation.
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(b) If the person’s records are located outside this state, the person may either make them
available to the administrator at a convenient location within this state, or pay the reasonable and
necessary expenses for the administrator or a representative of the administrator to examine them
at the place where they are maintained. The administrator may designate representatives,
including comparable officials of the state in which the records are located, to inspect them on
his or her behalf.
(c) Reports of examinations and investigations, all working papers related thereto and the books
and records of licensees, are to be held strictly confidential, and may not be produced,
reproduced, or otherwise made available by the State Banking Department to any persons other
than those within the State Banking Department and the licensee, and their respective counsel.
This subsection does not apply to disclosures in proceedings brought by the administrator
pursuant to this chapter.
(d) A licensee’s books and records may be maintained, produced, and reproduced for
examination by photostatic, photographic, microphotographic, optical imaging, or by any other
generally recognized process for data storage and reproduction.
(e) Nothing contained herein shall prohibit discovery of these materials by and through a
lawfully issued subpoena from a court of competent jurisdiction.
Section 5-19-25
Cease and desist orders by administrator; penalties for violation of this chapter; right to
counsel at hearing; judicial review.
After notice and hearing, the administrator may order a licensee under this chapter or a person
acting on behalf of the licensee to cease and desist from engaging in violations of this chapter. A
creditor who is found by the administrator, after notice and hearing, to have violated this chapter
may be ordered by the administrator to pay a civil penalty in an amount determined by the
administrator of not more than ten thousand dollars ($10,000) in the aggregate for all
violations of a similar nature or, where violations are knowing violations, of not more than fifty
thousand dollars ($50,000), in addition to any other penalties provided by law, including,
but not limited to, license revocation. Violations shall be of a similar nature if the violations
consist of the same or substantially the same course of action or practice irrespective of the
number of times the course of action or practice occurred. All civil penalties collected shall be
paid into the special fund provided by Section 5-2A-20 and used in the supervision and
examination of licensees. At the hearing, the licensee shall be entitled to be represented by
counsel. A licensee aggrieved by an order of the administrator under this section may obtain
judicial review of the order and the administrator may obtain an order of the court for
enforcement of its order in the circuit court. The proceedings shall be governed by the provisions
of Section 5-19-26.
Section 5-19-26
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Appeals to circuit court from order of administrator; appeals from decision of circuit
court.
(a) Any interested party or intervener may appeal an order of the administrator to the Circuit
Court of Montgomery County or to the circuit court of the county in which such party has its
principal place of business in Alabama by filing notice of appeal with the administrator and with
the register or clerk of the circuit court within 30 days from the date of said final order. The
administrator’s findings shall be prima facie correct, but the circuit court may hear such appeal
according to its own rules and procedure, including the taking of additional testimony and
staying the order. In the circuit court, the trial shall be de novo. The court may, if it decides that
the administrator has erred to the prejudice of appellant’s substantial rights in its application of
the law or that the order was based upon findings of fact contrary to the substantial weight of the
evidence, remand the proceeding to the administrator for further action in conformity with the
direction of the court or may enter such order as the court deems appropriate.
(b) Either party may appeal from the circuit court to the Supreme Court within 42 days from the
date of entry of the order of the circuit court.
Section 5-19-29
Injunctions.
(a) The administrator may bring an action to restrain a creditor or a person acting in his behalf
from engaging in any business subject to licensing under subsection (a) of Section 5-19-22
without first obtaining a license therefor as provided in Section 5-19-22 and a licensee or any
person acting in his behalf from engaging in violations of this chapter or engaging in a course of
fraudulent or unconscionable conduct in inducing debtors to enter credit transactions or in the
collection of debts.
(b) With respect to an action brought to enjoin violations of the chapter or fraudulent or
unconscionable conduct, the administrator may apply to the court for appropriate temporary
relief against a defendant, pending final determination of the proceedings. If the court finds, after
a hearing held upon notice to the defendant, that there is reasonable cause to believe that the
defendant is engaging in or is likely to engage in conduct which violates this chapter or which is
fraudulent or unconscionable, it may grant any temporary relief or restraining order it deems
appropriate.
Section 5-19-30
Penalty for violations.
A creditor who willfully makes charges in excess of those permitted by Section 5-19-3 or a
creditor who willfully engages in the business of making loans in violation of subsection (a) of
Section 5-19-22, or both, is guilty of a misdemeanor and, upon conviction, shall be sentenced to
pay a fine not exceeding five hundred dollars ($500) or to imprisonment not exceeding
one year, or both.
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Section 5-19-31
Nonapplicability of chapter to certain transactions; certain laws not repealed or amended;
intent of section.
(a) The provisions of this chapter, except the provisions of subdivision (1) of Section 5-19-1 and
Section 5-19-3, shall not apply (i) to any consumer credit transaction or other transaction
involving an interest in real property or the sale, lease, or mortgage of an interest in real property
where the creditor is exempt from licensing under this chapter, (ii) where the credit transaction is
not a consumer transaction, (iii) where the credit transaction is by a trust institution as defined in
Section 5-12A-1(1), in its capacity as a fiduciary under any plan or agreement qualified under 26
U.S.C. 401(a) or defined by 5 U.S.C. 8437, 26 U.S.C. 403(b), or 26 U.S.C. 457, or a trust exempt
under 26 U.S.C. 501, or (iv) to any municipal pension system created under the laws of the State
of Alabama. The provisions of this chapter shall not apply where the credit transaction is a policy
loan made by a life insurance company licensed by this state or any other state.
(b) This chapter shall not be construed to amend or repeal, without limitation, Sections 5-18-1
through 5-18-24, inclusive, Section 8-8-6, Section 8-8-4, Section 8-8-5, Sections 8-8-1.1, 8-8-14,
8-8-15, or Sections 5-20-2 through 5-20-10, inclusive.
(c) This chapter shall not apply to any lawful, bona fide pawnbroking business.
(d) This chapter shall not apply to any insurance agent or agency licensed in Alabama that elects
to charge a collection fee on unpaid balances for insurance premiums under Section 27-12-17.
An election shall be made by stating such on the premium finance contract.
(Acts 1971, No. 2052, p. 3290, §25; Acts 1989, No. 89-541, p. 1132, §1; Acts 1994, No. 94-118, p. 146, §1; Acts
1996, No. 96-576, p. 887, §2; Act 2002-307, p. 873, §1; Act 2009-625, §1.)
Section 5-19-32
Service contracts.
Any creditor who extends credit with respect to a consumer credit sale, may sell or finance, or
both, a service contract covering tangible goods which are the subject of the consumer credit
sale. Any other person who was not the creditor with regard to the initial sale of the tangible
goods also may sell or finance, or both, a service contract covering the tangible goods. A
“service contract” as used in this section is an agreement, for a separately stated consideration, of
the service contract offeror to correct, repair, or replace, or to pay for the correction, repair,
maintenance, or replacement of tangible goods during the period covered by the service contract,
with or without additional provisions for payment of or indemnity under limited circumstances
for related expenses including, without limitation, for towing, rental, and emergency road
service, whether called a service contract, extended warranty or otherwise. The service contract
offeror need not be the seller or creditor. The service contract may be offered, sold, and financed
at the time of the credit sale or at any time thereafter, including, without limitation, at or about
the time of the expiration of any original warranty or the expiration of the period covered by the
service contract. The service contract may, but is not required to, be renewable from time to time
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as set forth in the service contract. A service contract does not constitute insurance for any
purpose, other than for the purpose of a service contract holder’s claim against a service contract
provider for failure to comply with the provisions of the service contract if so provided by other
law.
Section 5-19-33
Account maintenance fee.
(a) In addition to other lawful charges permitted under various state or federal laws, except under
open-end credit plans, a creditor may, if provided in the contract, charge an account maintenance
fee of not more than three dollars ($3) for each month of the scheduled period of repayment of
the credit transaction. The account maintenance fee shall be determined at the date of the credit
transaction and may be charged in full at that time. The account maintenance fee as so
determined shall not bear interest and shall constitute a part of the finance charge. In the event of
the renewal, refinance, or payment in full of the credit transaction, the debtor shall be entitled to
a refund or credit of any unearned portion of the account maintenance fee under subsection (c) of
Section 5-19-4, as of the date of such renewal, refinancing, or payment in full.
(b) This section shall not repeal, amend, modify, or diminish any right or power to charge and
collect charges, fees, interest, or an interest surcharge existing under any other applicable state or
federal statute, nor repeal, amend, or modify Public Law 96-221, enacted by the United States
Congress and approved March 31, 1980, nor Section 5-2A-24.
(Act 2006-238, §§1, 2.)
