APRIL 21, 2017 – Yesterday, Gov. Kay Ivey signed House Bill 263 into law, marking the end of a complex project the association began in December 2015. The bill was assigned Act number 2017-165.
With her signature, the governor set in motion a process that will require the Department of Revenue to adopt within the next 120 days an administrative regulation that clarifies what is and is not considered a bank’s “property” in the state. The rule will apply only to multi-state financial institutions, and the definition will be used only to determine the property factor such institutions will use when calculating their state income tax liability. The association looks forward to monitoring this regulation throughout the adoption process.
With two thirds of the session complete, major items left on the Legislature’s to-do list are coming into focus. Neither operating budget, for instance, has been sent to the governor’s desk. The prison reform bill still has a long ways to go before becoming law. And another wrinkle – redrawing all 140 legislative districts – might be the most complex item to be dealt with during the last 10 legislative days.
But next week could change all of that, as the long-awaited Ethics Reform Act is scheduled to be introduced as early as Tuesday. For nearly a year, the attorney general’s office has been working on sensible revisions to clarify and strengthen the statutory Code of Ethics that applies to every public official in the state and, to some extent, those officials’ families. The suggested changes have been kept closely guarded, and few outside of the Legislature or the attorney general’s office have any idea what will be included in the bill. But many predict that Alabama’s new attorney general, Steve Marshall, will push hard for this bill to make it to the governor’s desk in short order, making this his first real legislative test since being appointed to the office in February. Our industry likely interacts with more public officials and their families than any other, so it goes without saying that the association will monitor this legislation very closely.
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 has been favorably reported by the Senate Judiciary Committee and is in position to be voted on by the full Senate.
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 House bill is in position to be debated on the House floor.
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. The House will debate House Bill 355 on Tuesday.
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.
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 will vote on the bill next week.
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. This bill has been favorably reported by the Senate County and Municipal Government Committee and now awaits action on the Senate floor.
As of this writing, a total of 551 bills have been introduced in the House of Representatives, and a total of 393 bills have been introduced in the Senate. Including bills and joint resolutions, a total of 172 measures have been enacted into law since the session began.
The Legislature has met for 19 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 20th legislative day next Tuesday.
Questions or comments? Email Jason Isbell, ABA’s Vice President of Legal and Governmental Affairs.