Capitol Notes: Week Five

FEBRUARY 9, 2018 — While the legislative workweek was brimming with bills that had already been introduced, much of the association’s efforts during week five of the 2018 Regular Session focused on a bill that will likely be introduced in the near future. Attorney General Steve Marshall (R) has publicly ramped up his efforts to introduce and pass a law requiring companies to notify affected customers whenever sensitive customer information obtained or stored by the company has been misused in a way that could potentially cause substantial harm to the customer.

Alabama and South Dakota are the last two states in the country without some type of data breach notification laws. And in the wake of the recent Equifax breach, pressure is mounting for both states to pass new laws in this area. In fact, South Dakota’s law, Senate Bill 62, passed the state senate on Jan. 30.

Under draft versions of the Alabama Data Breach Notification Act of 2018, an entity that acquires or uses sensitive personally identifying information would be required to implement and maintain reasonable security measures to protect that information against a breach of security. If a breach occurred, the entity would be required to conduct an investigation to determine whether the breach has resulted or might reasonably result in substantial harm to the individual to whom the information relates. If so, the entity will have to promptly notify that individual. And when the number of affected individuals exceeds a certain threshold, the entity would have to also notify the Attorney General as well as all consumer reporting agencies. A violation of these requirements could subject the entity to both criminal and civil penalties.

Importantly, financial institutions have been subject to federal data breach notification provisions since Congress passed the Gramm-Leach-Bliley Act in 1999. That legislation, coupled with regulatory guidance finalized in 2005, places stringent requirements on how banks and other members of the financial services industry store and protect sensitive data as well as notify the public when that data has potentially been misused. Because of federal oversight in this area, nearly every state data breach notification law includes provisions that either exempt banks from the state law altogether or allow compliance with federal requirements to serve as de facto compliance with the state requirements. Obviously, getting this language right is important for all sides. Banks do not want to have dual regulatory and penalty schemes, but the law enforcement community does not want to hamstring legislation that is designed to protect customers from identity theft.

As the draft bill likely enters its final stages before introduction, the association will continue to aggressively monitor the bill’s progress and provide input that properly reflects the financial services industry’s unique regulatory situation in this area of consumer protection.

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. Both bills now await action by the full Senate.

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 passed the House County and Municipal Government Committee on Wednesday. Both bills now await action by the full House.

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. The House Financial Services Committee sent this bill to its Regulations Subcommittee for further study. The subcommittee met on Tuesday but made no final decisions. More than likely, the subcommittee will present a summary of its meeting to the full Financial Services Committee, which will then determine the bill’s fate.

House Bill 183 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. The House bill awaits action by the full House.

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. Both bills have been favorably reported out of committee and now await action by the full House and the full Senate.

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. The House version of the bill passed out of the House this week. It now awaits action by the Senate Banking and Insurance Committee.

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. This legislation has been introduced in each of the past few sessions, but it has never advanced out of 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. The House bill was favorably reported out of committee this week. It now awaits action on the House floor.

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 Senate passed this bill last week. It now awaits action by a House committee.

As of the end of the 10th legislative day, representatives and senators have introduced 699 bills – 400 in the House and 299 in the Senate – and 222 resolutions. Of those 921 measures, 71 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 11th legislative day on Feb. 13.

Questions or comments? Contact Jason Isbell, vice president of legal and governmental affairs, at