MARCH 9, 2018 — A legislative priority for the State Banking Department and Alabama Banking Superintendent Mike Hill advanced out of a House committee this week, while a payday lending bill was the center of attention Thursday afternoon on the Senate floor.
On Wednesday, the House Financial Services Committee substituted and favorably reported House Bill 417, sponsored by Rep. Chris Blackshear (R-Phenix City), a member of the committee. The bill now awaits action by the full House. Based on model language provided by the Conference of State Bank Supervisors, House Bill 417 authorizes the Superintendent of Banks to regulate and examine certain third-party entities that perform specified services for state-chartered banks. Specifically, if a company provides (1) data processing, (2) financial-related, or (3) internet-related services to a state-chartered bank, that company is subject to regulation and examination by the superintendent if the superintendent believes the regulation or examination of the company is necessary to either preserve the safety and soundness of the bank or respond to a real or potential danger to the public welfare. To promote efficiency, the bill also provides that the superintendent can in lieu of conducting his own examination, accept an examination conducted within the prior 24 months by a state or federal regulator. In discussing the bill, some committee members noted a displeasure with the additional level of oversight authority given by the bill to the superintendent. In response, Deputy Superintendent of Banks Trabo Reed remarked that, in his opinion, the examination powers granted by this bill would have only been used three times over his 30-plus years at the State Banking Department (most recently, it would have been used against Equifax). A Senate companion to this bill, sponsored by Sen. Linda Coleman-Madison (D-Birmingham), awaits committee action in the Senate.
One day later, the Senate overwhelmingly approved legislation related to deferred presentment transactions, more commonly known as payday loans. Under current law, the term of a payday loan can be anywhere between 10 and 31 days. In theory, at least, this means that an unpaid payday loan could “roll over” and be re-financed three times in the same month. Each of those transactions, of course, comes with transactional fees and costs, leading some to argue that these loans carry a triple-digit annual percentage rate in Alabama. But if Senate Bill 138, sponsored by Sen. Arthur Orr (R-Decatur), becomes law, the terms of any deferred presentment transaction would be set at 30 days, significantly curtailing the number of times such a loan could be rolled over and re-financed. Payday lending reform has long been a topic of discussion in the Legislature, and proposals have come in multiple forms. But this legislation represents a unified effort of reform proponents; no other viable reform options remain for this session. The bill been referred to the House Financial Services Committee.
As always, Capitol Notes provides readers with a brief summary of legislation that might impact Alabama’s banking industry. Those summaries are as follows:
House Bill 90 by Rep. Kerry Rich (R-Albertville) and Senate Bill 30 by Sen. Clay Scofield (R-Arab) make technical changes to an association-supported law passed in 2015 related to the right of redemption for homesteaded properties. Current law caps the redemption period for these properties at 180 days, while the redemption period for all other types of properties is one year. In exchange for the shorter redemption period, legislators in 2015 required that a property owner be notified via certified mail of his redemption rights. These bills merely stipulate that even if this notice is defective, the redemption period is the same as it is for all other types of properties (i.e., one year). It also states that being able to prove the notice was mailed is a defense to a claim that the notice was never received. House Bill 90 was signed into law by Gov. Ivey on Feb. 22.
House Bill 100 by Rep. Will Ainsworth (R-Guntersville) and Senate Bill 60 by Sen. Clay Scofield (R-Arab) are association-drafted bills aimed at correcting an issue in state law that was discovered last year. With the exception of county commissions, all public depositors are allowed to elect their qualified public depository at any time, meaning a local school board could theoretically deposit its public funds in Bank A on a Monday, only to draw them out and deposit them in Bank B the next day. With county commissions, however, the qualified public depository must be elected the first week of every December and used for the entirety of the subsequent year. These bills simply allow county commissions, like all other public depositors, to elect their depository at any time. Senate Bill 60 was signed into law by Gov. Ivey on Feb. 28.
House Bill 117 by Rep. Paul Beckman (R-Prattville) would specify that a civil action to recover debt on an open-end credit plan, including credit card or similar revolving debt, would be required to be commenced within six years. Proponents of this legislation believe that this bill merely cements current law, though opponents say that, under certain circumstances, the appropriate Statute of Limitations is three years. This bill now awaits action by the full House. However, because an amendment was adopted in committee over the objections of the sponsor and the proponents of the bill, future action on this legislation is unlikely.
House Bill 163 by Rep. Paul Beckman (R-Prattville) and Senate Bill 227 by Sen. Greg Albritton (R-Atmore) is the Uniform Trust Decanting Act (UTDA). Drafted by the Alabama Law Institute, the UTDA allows a trustee to reform an irrevocable trust document within reasonable limits that ensure the trust will achieve the settlor’s original intent. The act prevents decanting when it would defeat a charitable or tax-related purpose of the settlor. Approved in 2015 by the Uniform Law Commission, Alabama would be the sixth state to adopt the UTDA. House Bill 163 awaits action by the full Senate.
House Bill 181 by Rep. Matt Fridy (R-Montevallo) and Senate Bill 152 by Sen. Rodger Smitherman (D-Birmingham) is the Uniform Voidable Transfers Act (UVTA), another Alabama Law Institute/Uniform Law Commission bill. In short, the UVTA, which would replace Alabama’s version of the Uniform Fraudulent Transfers Act, strengthens creditor protections by providing remedies for certain transactions by a debtor that are unfair to the debtor’s creditors. Senate Bill 152 was signed into law by Gov. Ivey on Feb. 28.
House Bill 248 by Rep. Kyle South (R-Fayette) and Senate Bill 201 by Sen. Trip Pittman (R-Montrose) is the Alabama First-time Home Buyer Savings Account Act, which allows first-time home buyers to establish a first-time home buyer savings account to save funds for a down payment and closing costs for the purchase of a home. The holder of one of these special accounts would be provided with an annual state income tax deduction of up to $6,000 (or $12,000 for joint accounts) for up to five years. House Bill 248 awaits action by the full Senate.
House Bill 273 by Rep. Patricia Todd (D-Birmingham) and Senate Bill 242 by Sen. Linda Coleman-Madison (D-Birmingham) doubles the Mortgage Record Tax and allocates the revenues to the Alabama Housing Trust Fund, which has never before received funding from this tax (or from the state), as well as to the state, the counties, and the probate judges, each of which already received a portion of the Mortgage Record Tax. The Senate version of this bill was voted down by the Senate Finance and Taxation General Fund Committee.
House Bill 354 by Rep. Corley Ellis (R-Columbiana) and Senate Bill 261 by Sen. Gerald Dial (R-Lineville) would make significant revisions to the tax lien sale procedures used by counties. For instance, among other things, the bill would authorize tax liens to be sold via auction to the bidder with the lowest interest rate not to exceed 12 percent. The legislation is being pushed by the Association of County Commissions of Alabama. They have agreed to work with our association as well as the Alabama Association of Realtors on some suggested changes. House Bill 354 was approved by the full House this week and now awaits action in the Senate.
House Bill 410 by Rep. Phil Williams (R-Huntsville) and Senate Bill 318 by Sen. Arthur Orr (R-Decatur) is the Data Breach Notification Act. Generally speaking, this legislation requires entities to provide notice to affected persons upon a breach of security that results in the unauthorized acquisition of sensitive personally identifying information. Alabama and South Dakota are the only two states without some sort of data breach notification act. Importantly, thanks to the association’s efforts, the legislation exempts any entities, such as financial institutions, that are subject to and compliant with federal data breach notification regulations and guidance. The House Technology and Research Committee amended and favorably reported Senate Bill 318 this week. It now awaits action by the full House.
House Bill 417 by Rep. Chris Blackshear (R-Phenix City) and Senate Bill 321 by Sen. Linda Coleman-Madison (D-Birmingham) is the Examination of Bank Service Providers Act. Under this bill, a company providing data processing-, “financial-,” or “internet”-related services to a bank can be subject to regulation and examination by the superintendent of banks when deemed necessary to ensure the safe and sound operation of the serviced bank or to respond to a danger or potential danger to the public welfare. In lieu of performing an examination under this bill, the superintendent may accept an examination performed on the service provider within the previous two years by another state or federal regulator. This bill is modeled after legislation drafted by the Conference of State Bank Supervisors and was introduced at the urging of the State Banking Department. House Bill 417 was substituted and amended by the House Financial Services Committee this week. It now awaits action by the full House.
House Bill 426 by Rep. Chris England (D-Tuscaloosa) and Senate Bill 337 by Sen. Rodger Smitherman (D-Birmingham) makes numerous revisions to Alabama’s Uniform Condominium Act. A legislative project spearheaded by the Alabama Law Institute, the Association was involved in crafting language relative to a lien that a condo association might place on the property. Significant questions arose over who had lien priority and what fees and costs, such as attorney’s fees, could be included in the lien. The introduced version of the bill represents significant work done by Association attorneys on behalf of ABA member banks. Senate Bill 337 was favorably reported by the House Judiciary Committee this week. It now awaits action by the full House.
Senate Bill 53 by Sen. Clyde Chambliss (R-Prattville) requires the closing statement used to finalize real estate transactions to delineate, if applicable, the amount of the real estate appraisal fee that went to an appraisal management company. While the association has no position on the fee disclosure provisions of this legislation, it strongly objects to modifying the closing statement. Sen. Chambliss understands our concerns and has agreed to work with us on a solution.
Senate Bill 92 by Sen. Arthur Orr (R-Decatur) revises Alabama law related to unemployment compensation by basing the maximum amount of unemployment benefits on a variable rate. The rate would vary based on the state’s unemployment rate, meaning a recipient would receive benefits for a longer duration during tough economic times and a shorter duration during positive economic times. According to the National Federation of Independent Businesses, Alabama would be the sixth state to pass this bill (or something similar) and the state’s unemployment compensation trust fund would likely realize a savings of over $50 million annually. The bill has passed the Senate and now awaits action by a House committee.
As of the end of the 18th legislative day, representatives and senators have introduced 886 bills – 506 in the House and 380 in the Senate – and 467 resolutions. Of those 1,353 measures, 167 have been signed into law as of this writing.
The 2018 Regular Session can last for no more than 30 legislative days and must end on or before April 23.
The Legislature will reconvene for the 19th legislative day next on March 13.
Questions or comments? Contact Jason Isbell, ABA’s Vice President of Legal and Governmental Affairs, by email at jisbell@alabamabankers.com.
