Alabama law defines payday loans as deferred presentment transactions. The lender accepts a personal check from the borrower, and in turn gives the borrower money in advance. State law regulates the terms under which payday loans may be negotiated.The Alabama State Banking Office oversees payday loan companies, which must allow a representative from that office access to its business records.
Payday Loan Terms
The limit for a payday loan in Alabama is $500 and the lender cannot charge more than 17.5 percent interest on the loan. You can extend the loan once, but the lender can’t start a new loan with you until the business day after the loan is paid. If you can’t pay the loan in full by the end of the extension, the payday lender can offer you a repayment plan of four equal payments over a four-month period
The payday lender is required to provide you with a written statement that discloses all charges and fees in language you can easily understand. You’re required to acknowledge your notification and agreement of the fees by signing the contract.
Limitation on Number of Loans
Alabama limits the number of payday loans a consumer may have open. Payday lenders in Alabama must check every new application in a local database that tracks payday loans in the state, A person may only have one loan of up to $500 with any payday lender. For instance, if you have an open loan with Payday Lender A, and apply at Payday Lender B for a second loan, that lender is legally required to reject your application or face penalties.
The Collections Process
The payday lender attempts to cash your check at the end of the loan period. If your checking account has insufficient funds to cover the loan, the lender may charge you a $30 bounced-check fee. It will notify you in writing regarding pending collection measures and your legal rights. You have 15 days to respond; if you don’t, the lender may file a lawsuit against you. The statute of limitations for civil charges is six years from the due date on the loan.
Alabama payday lenders may sue for the amount of the loan, court costs and attorney’s fees. Attorney fees can’t exceed 15 percent of the amount due at the end of the loan period. If your check was returned for insufficient funds, you can’t be criminally prosecuted. However, if the check didn’t clear because you closed the bank accounts, you’re subject to criminal prosecution for negotiating a worthless negotiable instrument, a Class A misdemeanor.
Penalties for Violation
Payday lenders in violation of Alabama’s payday loan laws are subject to criminal prosecution. The first offense is a Class B misdemeanor; the second is a Class B felony. Lenders also face fines up to $1,000 per illegal transaction, and loss of their license.
If you believe that your payday loan company is in violation of Alabama law, you may file a written complaint with the Alabama State Banking Office. The supervisor from that office interviews witnesses, reviews the payday lender’s business records and documentation, and determine whether to pursue civil or criminal charges