Alabama Payday Loan Law, Stats and History
Payday loans are considered legal in the state of Alabama.
Alabama imposes a $500 amount limit on payday loans offered in the state. Payday loans can be taken for a period of 10-31 days with the maximum finance charge of 17.50% for every $100 and 456%* APR. One rollover is allowed and a cooling-off period of 1 business day after the 2d consecutive loan should pass before a person can apply for a new loan. There is a $30 NSF fee; criminal actions are generally prohibited.
If you take a closer look at the history of payday loans in Alabama, you will learn that back in the 1990s it was among 19 states involved in legislation procedure concerning small loans. The point was to set a usury cap for interest rates on such loans. However, in 2002 these measures were avoided and nowadays lending companies are able to provide short-term payday loans at very lenient terms.
Alabama Payday Lending Statutes
Payday lenders can provide loans in accordance with
Regulations apply to both online and storefront loan providers. In order to operate in the state, lenders have to comply with the following regulations:
- All lenders must be licensed.
- All lenders must disclose all the loan information (terms, interest, fees, repayment period) before the loan documents are signed.
Payday loans in Alabama are not at the present moment under the regulation of the Small Loan Act. Such conditions were very favorable for many old companies to expand and for a number of new ones to appear. At the present moment, payday lending is absolutely legal in Alabama.
Loan Amount in Alabama
Alabama state law allows payday lending in the amount not exceeding $500.
Rates, Fees and Other Charges in Alabama
- Finance charges and fees should not exceed 17.50% for every $100 of the amount advanced.
- APR equals 456.25% (*According to the Center for Responsible Lending 2019: “Typical APR based on the average rate for a $300 loan advertised by largest payday chains or as determined by the state regulator, where applicable.”).
How Much Would a $100 Payday Loan Cost in Alabama? (Use Calculator)
With a 14 days term:
ARP: 456.25%
Loan cost: $17.50
To return: $117.50
ARP сalculation:
$17.50 / 14 days = 1.25 * 365 days = 456.25%
The Maximum Term for a Payday Loan in Alabama
- “Not less than 10 days and not more than 31 days.” (Code §§ 5-18A-1 et seq.)
- Alabama state law also allows one payday loan at a time at a given location.
Consumer Information
Attention
From July 2020, lenders are not required to check a borrower’s ability to repay a loan.
Be careful, evaluate your financial situation, don’t get into a debt trap.
The rule was changed by the CFPB.
- In case the borrower is unable to repay in due time, one rollover is allowed.
- There is also a cooling-off period presupposing that after the repayment of two continuous loans there should be made a break of one business day. In case of necessity, a repayment plan can be offered to a borrower.
- Alabama also has certain collection restrictions in cases when payday loans were delayed or were not entirely repaid. A maximum fee of $30 for non-sufficient funds (NSF) is established.
- Criminal actions against borrowers in Alabama are generally prohibited, however, in rare cases they can be initiated in case repayment check is returned due to the
closed account.
More information about payday loan laws and regulations in Alabama can be found on the official Alabama State Banking Department website.
This is the major regulatory body in Alabama to turn to in case of an inquiry about small cash loans. Customers can also file a complaint against a lender via the Alabama State Banking Department by completing the complaint form. One should download the Complaint Form, complete it, and mail it to the appropriate address given on the complaint page.
Regulator: Complaints & Information
Alabama State Banking Department
Mailing Address: P.O. Box 4600, Montgomery, AL 36103-4600
Address: 401 Adams Ave #680, Montgomery, AL 36104-4350
Phone: 334-242-3452 or 866-465-2279 (toll free)
Url: http://www.banking.alabama.gov/about.aspx
File a Complaint: http://www.banking.alabama.gov/complaint.aspx
Organizations supporting the restriction on payday loans business in Alabama:
Alabama Arise and the Appleseed Center
Alabama Payday Loans Tracking Database: aldpp.com (1-877-238-2262)
Number of Alabama Consumers Complaints by Topics
According to CFPB Consumer Complaint Database
- Fraud and threat ( 176 )
- Not exiting debt ( 109 )
- Charges from account ( 80 )
- Credit rating ( 34 )
- Not requested loan ( 32 )
- Loan to return ( 27 )
- Lender is not available ( 20 )
- Loan not received ( 13 )
The Quantity of Top Alabama Stores by Cities
Statistics
| Year | No. of Stores | No. of Clients, thousand | No. of Loans, million | Value of Fees, million | Value of Loans, million |
|---|---|---|---|---|---|
| 2013 | 1043 | – | – | – | – |
| 2014 | 999 | – | – | – | – |
| 2015 | 836 | 144.4 | 0.3 | $183.2 | $105.9 |
| 2016 | 711 | 238.8 | 2.0 | $116.4 | $668.1 |
| 2017 | 631 | 214.4 | 1.8 | $107.2 | $651.5 |
| 2018 | 596 | 207.6 | 1.75 | $102.9 | $589.9 |
| 2019 | 572 | 191.9 | 1.65 | $99.7 | $570.9 |
| 2020 | 547 | 138.9 | 1.09 | $67.8 | $392.1 |
| 2021 | 464 | 112.3 | 0.85 | $55.3 | $317.1 |
The History of Payday Loans in Alabama
General history read here.
- 1994 – Alabama Attorney General issued an opinion that payday loans were to be covered by the Alabama Small Loan Act, the Mini-Code, and became the subject to Truth-in-Lending Disclosure
- 1998 – The “Alabama State Banking Department issued 150 cease and desist orders” to lenders violating the interest rate cap. (League of Women Voters of Alabama 2016 report) With no success.
- 2002 – Lenders managed to introduce certain modifications to the Alabama Small Loan Act which resulted in “an alternative rate schedule and increase of the allowable loans to approximately 190% APR (Act1959-374Sect.5-8-15, Alternative rate schedule, subsection(m)).” (League of Women Voters of Alabama 2016 report)
- 2003 – The Legislature passed the Deferred Presentment Act that carried additional exceptions for small loans and set the APR at 456% (effective as of today).
- 2013 – Payday lenders sued the Alabama State Banking Department with the aim to block the creation of a database system that was designed to prevent lenders from over-lending.
- 2015 – HB417 requires businesses need to use a database to check if a customer already has a loan of more than $500.
- June 2, 2016 – The Consumer Financial Protection Bureau (CFPB) proposed a Payday Loan Rule that hasn’t yet fully come into effect (expected in November 2020).
- 2018 – The legislature failed to pass SB 138. (in support of 30 Days to Pay reform that would require lenders to issue loans on a 30-day repayment schedule). Though it passed the Senate, it died in the House Financial Services Committee (as many more legislatures before it).
- In a 2018 survey by PARCA, 84.1% of Alabamians opposed payday lending, with 52.5% supporting a ban and 31.6% favoring restrictions. This represents a substantial increase from the previous year.
- 2019 – Alabama lawmakers are growing impatient with the CFPB rule’s outcome.
The 2019 Legislative Session is to have a look at the payday loan issue once again. And with the majority of Alabamians being in favor of a 36% APR rate cap and 30 Days to Pay reform, chances are that this time the efforts of consumer advocates won’t be wasted. - 2020 – The Senate rejected an attempt to extend the payday loan maturity to 30 days.
[Updated As of March 2024]