APRIL 7, 2017 – After a rare two-week hiatus to celebrate spring break, the Alabama Legislature returned to the state capital on Tuesday for what turned out to be a very eventful week. Major weather events outside the building were somewhat overshadowed by the indoor storms surrounding newly-filed redistricting maps, a Senate floor filibuster on the Education Trust Fund budget, and the Alabama Ethics Commission’s decision to recommend that Gov. Robert Bentley be prosecuted for four violations of the state’s ethics and campaign finance laws. Importantly, amid all of these events, Alabama’s banking industry had a quiet yet incredibly productive week at the State House.
After unanimously passing the House Financial Services committee on February 23, and after unanimously passing the House of Representatives on March 15, House Bill 263 was placed on the agenda for last Wednesday’s Senate Banking and Insurance Committee meeting. Sponsored by Rep. Ken Johnson (R-Moulton), House Bill 263 clarifies a complicated income tax regulation that applies to multi-state financial institutions. Not surprisingly, committee members asked excellent questions about the bill. And even though no public hearing had been called, the committee allowed Jason Isbell of the Alabama Bankers Association to testify in support of the legislation’s passage. After nearly a half-hour of deliberation, the committee favorably reported the bill, un-amended, by a unanimous vote of 11-0.
The association appreciates committee chairman Sen. Slade Blackwell (R-Mountain Brook) for adding the bill to the committee agenda, as well as Sen. Clay Scofield (R-Arab) for managing the bill in committee. ABA is hopeful that the bill reaches the Senate floor, and then the governor’s desk, in the very near future.
During this same meeting, committee members also favorably reported Senate Bill 279. Sponsored by Sen. Shay Shelnutt (R-Trussville), this bill would make Alabama the 21st state to allow banks and credit unions to offer “prize linked savings accounts,” or PLSAs. In a nutshell, if the bill passes, banks and credit unions would have the ability to hold “savings promotion contests” that allow PLSA customers to have a chance to win a prize for saving a certain amount of money over a certain time frame. The association has joined forces with the Alabama Credit Union Association, who is pushing the legislation in both chambers.
But even outside of the Senate Banking and Insurance Committee, important ABA-drafted amendments were added to several bills, including bills dealing with Medicaid liens (Senate Bill 325, sponsored by Sen. Arthur Orr (R-Decatur)), the Uniform Condominium Act (Senate Bill 283, sponsored by Sen. Rodger Smitherman (D-Birmingham)), and Guaranteed Asset Protection (GAP) waives (House Bill 420, sponsored by Rep. Jimmy Martin (R-Clanton)). The relatively uncontroversial addition of these amendments illustrates the support Alabama’s bankers enjoy among legislators.
As the unofficial “second half” of the 2017 session begins, it will be more important than ever for our industry to stay involved in the legislative process because, quite frankly, no one knows what the immediate future holds. But what is crystal clear is that major important issues – Medicaid funding, a potential increase in the gasoline tax, a possible re-drawing of the boundary lines for 140 legislative districts, a potential impeachment of the governor – are still on the table and any one of them could potentially drive the Legislature into a quagmire for the session’s remaining days. It’s important that you use your voice to help our representatives and senators stay focused on important, commonsense changes to Alabama law that will help banks and bank customers across all of Alabama.
On that note, ABA urges you to contact your state senator before close of business on Monday, April 10, and ask them to support House Bill 263. The bill is now in position to be on the Senate floor, and may be up for a vote as soon as the next day, April 11. Need contact information? Contact ABA’s VP of Governmental Affairs, Jason Isbell, at firstname.lastname@example.org.
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. Each bill has passed out of its house of origin and now awaits committee action in the second house.
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.
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 Financial Services Committee favorably reported the House bill out of committee this week.
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. Both bills have been favorably reported out of committee and now await action in their houses of origin.
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 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 was favorably reported out of committee this week and 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 County and Municipal Government Committee held a lengthy public hearing, but not a vote, on this bill a few weeks ago. Earlier this week, the bill was re-referred to the Senate Banking and Insurance Committee. It is unclear if, or when, the committee will consider this bill, but proponents of the bill have indicated their willingness to amend the bill to meet the association’s needs.
As of this writing, a total of 487 bills have been introduced in the House of Representatives and a total of 364 bills have been introduced in the Senate. Including bills and joint resolutions, a total of 130 measures have been enacted into law since the session began.
The Legislature has met for 15 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 for the 16th legislative day on Tuesday.
Questions or comments? Contact Jason Isbell, ABA’s Vice President of Legal and Governmental Affairs.