With One Week Left, Much Work Remains

MAY 12, 2017 — Over the better part of two days, members of the Alabama House of Representatives were treated this week to a marathon reading – by a computer, no less – of a 539-page bill that redraws a majority of the state’s 140 House districts. Requested by members of the Legislative Black Caucus, the reading was designed to slow down the passage of the new reapportionment map, which caucus members believe unconstitutionally divides the state among racial and geographic lines. The reading took more than 13 hours.

At substantially the same time, the Alabama Senate was abuzz over a bill that would require insurance companies to provide coverage for behavioral therapy for autism. After a lengthy committee meeting on Wednesday, the Finance and Taxation General Fund approved the bill by a vote of 14-2. Yet a fever pitch ensued over rumors that the bill would not be allowed to take its next step procedurally, despite the committee’s decision. Luckily, those rumors subsided the next morning, when Senate leaders announced that the legislation would be the Senate’s primary focus next Wednesday.

Together, the actions of the House and Senate this week setup a final week of the 2017 session that will be brimming with the weightier matters legislators have considered since session began in February, including the state’s budgets for next fiscal year (which begins Oct. 1) and plans to build new and rehabilitate existing prisons.

Hopefully, amidst all of this work, the two remaining bills on the association’s radar will be able to advance to Gov. Kay Ivey’s desk. The first bill, Senate Bill 356, is slated to appear on a Consent Calendar in the House next week. Sponsored by Sen. Clay Scofield (R-Arab) and managed in the House by Rep. Will Ainsworth (R-Guntersville), the bill allows a county commission to select a county depository at any time during the year, rather than only once annually. Because bills listed on a Consent Calendar have been pre-screened by a special committee of House members, led by Rep. James Buskey (D-Mobile), they are subject to very limited debate and cannot be amended; it’s essentially an up-or-down vote. If all goes as planned, Senate Bill 356 will be on Gov. Ivey’s desk by this time next week.

The road for the second bill, House Bill 355, might be a bit tougher. Sponsored by Rep. Merika Coleman (D-Montgomery) and managed in the Senate by Sen. Shay Shelnutt (R-Trussville), the bill would make Alabama the 21st state that allows banks and credit unions to offer prize-linked savings accounts to their customers. While ABA is unaware of opposition from members, the bill will have to be approved by the full Senate followed by the full House, thanks to an amendment added to the bill by a Senate committee. If nothing else, that process will take time, not much of which is left.

If all goes as planned, next week will mark the end of the 2017 Regular Session. If all doesn’t go as plan, the end is still near as the session cannot extend past May 22.

Other bills that might impact the state’s banking industry include the following:

 House Bill 70 by Rep. Bill Poole (R-Tuscaloosa) lowers, with a few notable exceptions, the age of majority in Alabama from 19 years to 18 years. The bill wouldn’t change anything related to the criminal code’s “youthful offender” provisions, and it doesn’t impact the age that one can legally purchase alcohol or tobacco products. But changing the age of majority likely also changes the age at which a person can, for example, enter into a loan agreement with a financial institution. The bill has been passed by the full House and now awaits approval by a Senate committee.

House Bill 138 by Rep. Juandalynn Givan (D-Birmingham) and Senate Bill 110 by Sen. Cam Ward (R-Alabaster) adopt the Revised Uniform Fiduciary Access to Digital Assets Act, a national uniform law that extends the traditional power of a fiduciary to manage tangible property, including management of a person’s digital assets like computer files, web domains, and virtual currency (but not necessarily email, text messages, or social media). These bills were also introduced in 2016, and are a product of the Alabama Law Institute. In the last three years, this legislation, known as UFADAA, has been enacted in 22 states, including Tennessee and Florida. In 2017, it has already been introduced in a total of 17 states, including Alabama. The House bill passed the Senate this week and is now awaiting Governor Ivey’s signature.

House Bill 159 by Rep. Patricia Todd (D-Birmingham) doubles the fee required to record mortgages, deeds of trust, and other instruments of like character. Currently, the recording fee is 15 cents for every $100 of indebtedness, with 1/3 of the revenue retained by the county and 2/3 of the revenue distributed to the State General Fund. Under this bill, the recording fee would be 30 cents for every $100 of indebtedness, with 19 percent retained by the county, 35 percent allocated to the State General Fund, 23 percent to the Alabama Housing Trust Fund, and 23 percent to the Alabama Homebuyers Initiative. This is the second year in a row that this legislation has been introduced. Last year, the association joined the Realtors Association and the Homebuilders Association in opposing the bill. The positions of each of these groups, including ABA, remain unchanged. This week, the House Ways and Means General Fund Committee held a public hearing on the bill to provide proponents with the opportunity to make their case that the fee should be doubled and the funds sent as proposed in the legislation. No vote was taken.

House Bill 314 by Rep. Ken Johnson (R-Moulton) and Senate Bill 249 by Sen. Gerald Dial (R-Lineville) modify the Alabama Small Loan Act. Under current law, lenders licensed under the Alabama Small Loan Act can loan up to $1,000 to a single customer at a maximum monthly interest rate of $20 and for a maximum loan term of 12 months. This bill would allow these same lenders to loan up to $1,500 to a single customer, would set the maximum monthly interest rate at $26, and would set a minimum loan term of 3 months. The bill was favorably reported this week by the Senate Banking and Insurance Committee and now awaits approval by the full Senate.

House Bill 321 by Rep. Bob Fincher (R-Woodland) proposes a constitutional amendment that, if ratified, would cap the maximum interest rate on certain consumer loans, lines of credit, and other financial products at 36 percent per year. The association, along with trade groups representing every other facet of the financial services industry, is opposed to this constitutional amendment. Even though the underlying purpose behind the bill is to limit the interest rate on payday loan transactions, the amendment would apply very broadly. What’s worse, if ratified, the interest rate cap would be enshrined in the constitution, making it nearly impossible to change should future economic conditions make it unfeasible to comply with the amendment. The association will monitor this legislation’s progress, and we have already requested that the Campaign, Constitutions and Elections Committee hold a Public Hearing on the bill should they decide to consider its approval.

House Bill 355 by Rep. Merika Coleman (D-Birmingham) and Senate Bill 279 by Sen. Shay Shelnutt (R-Trussville) allow banks and credit unions in Alabama to establish “Prize Linked Savings Accounts,” or PLSAs. Banks and credit unions that choose to establish PLSAs can create a system that encourages customers to save money in exchange for a chance to receive a reward. PLSAs are now available in nearly half of the states in the country. The House bill is currently in position to be voted on by the full Senate.

House Bill 456 by Rep. Marcel Black (D-Tuscumbia) would clarify that the Statute of Limitations for a civil action related to an open-ended credit account, including credit card debt, would be six years. This bill is in response to a debate between creditor and debtor attorneys over whether the applicable Statute of Limitations period is six years or three years; recent case law supports the six-year assertion. The bill is in position to be voted on by the full House.

Senate Bill 67 by Sen. Linda Coleman-Madison (D-Birmingam) would adopt a process known as “Mandatory Unitary Combined Reporting” for state income tax purposes. Though the legislation generally deals with corporate income taxpayers, banks that pay the Financial Institution Excise Tax should also be concerned by this legislation because it gives the Department of Revenue very broad discretion to combine a financial institution – even one not doing business in Alabama – with one or more Alabama corporate income taxpayers; thus the “unitary” nature of the process. This bill has been introduced in each of the last few regular sessions, and the Alabama Bankers Association joined nearly every other trade association representing business interests in opposing its passage. On Wednesday, April 5, our efforts proved successful, as the bill failed on a 2-12 vote to be favorably reported out of committee.

Senate Bill 91 by Sen. Arthur Orr (R-Decatur), the Alabama Protection and Privacy Act of 2017, would provide for the protection of sensitive personally identifying information and notice to individuals whose personal information has been breached. Alabama is one of very few states without some type of data breach notification law, and this legislation is part of the Attorney General’s Office 2017 legislative package. Because they must comply with similar provisions of federal law, including the Gramm-Leach-Bliley Act, financial institutions are exempt from the requirements of this bill. This bill has already been favorably reported by the Senate Judiciary Committee, and is now in position to be voted on by the full Senate.

Senate Bill 261 by Sen. Tom Whatley (R-Auburn) would provide for the regulation of consumer lawsuit lenders and consumer lawsuit lending agreements. Known as the “Consumer Lawsuit Lending Act,” the bill would require lenders to obtain a license from the State Banking Department and would make consumer lawsuit lending agreements subject to certain provisions of the state’s Mini Code. The bill caps the finance charge of a consumer lawsuit lending agreement at 10 percent annually. The bill now awaits action on the Senate floor.

Senate Bill 284 by Sen. Arthur Orr (R-Decatur) would make numerous substantive changes to the terms, interest rates, and other charges applicable to small loans; to the terms and interest rates applicable to deferred presentment (i.e. “payday”) transactions; to laws related to title pawns; and, importantly, to interest rates applicable to consumer loans. Under current law, if the principal balance of a consumer loan is $2,000 or more, the parties to the loan may agree to any interest rate that is not “unconscionable,” meaning unreasonably excessive. Under this bill, if the principal balance of a consumer loan is $2,000 or more, the annualized interest rate cannot exceed 60 percent (as defined by Reg. Z). The Senate Banking and Insurance Committee approved a substitute version of the bill this week that eliminated the interest rate cap on loans exceeding $2,000. The bill now awaits action on the Senate floor.

Senate Bill 356 by Sen. Clay Scofield (R-Arab) would allow county commissions to select a financial institution as a county depository at any point during the year. Other public depositors currently have this ability, but counties are currently required to make a depository selection the first week of December for the next calendar year. The House is expected to act on the bill next week.

As of this writing, representatives have introduced a total of 603 bills (of which 238 have passed out of the House), and senators have introduced a total of 422 bills (209 of which have passed out of the Senate). Including bills and joint resolutions, a total of 256 measures have been enacted into law since the session began.

The Legislature has met for 26 legislative days. The 2017 regular session can last for no more than 30 legislative days and must conclude on or before May 22.

The House and Senate will convene the 27th legislative day on Tuesday. Legislators have indicated that this will be the final week of the session.

Questions or comments? Email Jason Isbell, ABA’s Vice President of Legal and Governmental Affairs.