Title 5 — Banks and Financial Institutions

Chapter 1A General Provisions

§ 5-1A-1 Short Title

Chapters 1A through 13B and Chapter 20 of this title shall be known and may be cited as the “Alabama Banking Code.”

(Acts 1980, No. 80-658, §5-1-1; Acts 1995, No. 95-115, p. 134, §66.)

§ 5-1A-2 Definitions

For the purposes of Chapters 1A through 12A of this title, the following terms shall have the meanings respectively ascribed to them by this section:

(1) BANK. Any banking corporation or trust company organized under the laws of this state under the jurisdiction of the superintendent of banks of this state or organized under the laws of the United States having its principal place of business in this state.

(2) SUPERINTENDENT. The Superintendent of Banks of this state.

(3) RECEIVERSHIP COURT. The circuit court of the county in which is located the principal office of a bank in receivership.

(4) NATIONAL BANK. A national banking association organized pursuant to 12 U.S.C. § 21.

(5) CAPITAL. The sum of the par value of the authorized shares of a bank which have been issued and remain outstanding.

(6) SURPLUS. The aggregate of the amounts transferred to surplus pursuant to Section 5-5A-21 and any amounts subsequently designated as such by action of the board of directors of the bank.

(7) UNDIVIDED PROFITS. The accumulated undistributed net profits of a bank.

(8) BANK HOLDING COMPANY. A bank holding company as defined in 12 U.S.C. § 1841.

(Acts 1980, No. 80-658, §5-1-2.)

§ 5-1A-3 Use of Words “Bank,” “Banker,” “Banking,” Etc., Restricted

The use of the words “bank,” “banker,” “banking,” or words of similar meaning in any foreign language as a designation or name, or as part of a designation or name, under which business is or may be conducted in the State of Alabama, or in its advertising is restricted to banking corporations organized under the laws of Alabama, other states, the United States, or foreign countries. All other persons, firms, partnerships, limited liability companies, corporations, and other entities are prohibited from using the words “bank,” “banker,” or “banking” or words of similar meaning in any foreign language in advertising or as a designation or name or as part of a designation or name under which business may be conducted in this state unless the superintendent determines that the use of the word by the entity is unlikely to mislead or confuse the public or give the impression that such entity is lawfully organized and operating as a bank and authorizes the use of the word. Any violation of this prohibition shall subject the party chargeable therewith to a penalty of five hundred dollars ($500) for each day, with a maximum amount of fifty thousand dollars ($50,000), during which such violation is committed or repeated. Such penalty may be recovered by the superintendent by an action instituted for that purpose, and, in addition to the penalty, such violation may be enjoined and the injunction enforced as in other cases. If the directors, officers, or those persons performing similar functions as corporate directors or officers of any entity shall knowingly and willfully violate or knowingly and willfully permit any of the officers, agents, employees, or those persons performing similar functions of the entity to violate any of the provisions of this section, each and every such director, officer, or other person engaging in such knowing and willful violation or knowing and willful permission shall be liable in his or her personal and individual capacity for all damages which the entity or any other person shall have sustained in consequence of such violation. This section shall not be applicable to entities regularly engaged in business in this state which on and since July 12, 1949, have lawfully and continuously used such words in their trade or firm name.

(Acts 1980, No. 80-658, §5-1-3; Act 2007-224, p. 284, §1.)

§ 5-1A-4 Restrictions on Engaging in Banking Business

No person, firm, corporation or other entity except a bank or if otherwise lawfully authorized a credit union or a savings and loan association may lend money and either receive deposits or pay checks at its principal office or branch in this state.

(Acts 1980, No. 80-658, §5-1-4.)

§ 5-1A-5 Supervisory Provisions Not Applicable to National Banks

The supervisory provisions of Chapters 1A through 12A of this title shall not apply to national banks.

(Acts 1980, No. 80-658, §5-1-5.)

§ 5-1A-6 Inconsistent Provisions in Other Laws Superseded

Insofar as the provisions of Chapters 1A through 13B and Chapter 20 of this title are inconsistent with the provisions of any other law, general or special, the provisions of Chapters 1A through 13B and Chapter 20 of this title shall be controlling.

(Acts 1980, No. 80-658, §5-13-1; Acts 1995, No. 95-115, p. 134, §67.)

§ 5-1A-7 Activities of Savings and Loan Associations and Credit Unions Not Restricted

Chapters 1A through 12A of this title are not intended to limit or restrict activities of savings and loan associations or credit unions now or hereafter lawfully authorized. Specifically, nothing contained herein shall be construed so as to alter, amend or repeal any of the provisions of Sections 5-2A-60 through 5-2A-63, 5-2A-100 through 5-2A-125, 5-16-1 through 5-16-53 and 5-17-1 through 5-17-28 relating to savings and loan associations and credit unions.

(Acts 1980, No. 80-658, §5-13-3.)

§ 5-1A-8 Effect of Repeal of Prior Acts

The repeal of a prior act by Chapters 1A through 12A of this title shall not impair, or otherwise affect, the organization or the continued existence of an existing bank. Nor shall the repeal of a prior act by Chapters 1A through 12A of this title affect any right accrued or established, or any liability or penalty incurred, or the construction of the certificate of incorporation or charter of any bank organized before the enactment of Chapters 1A through 12A of this title, or the determination of the rights and interests of any of its shareholders or creditors, under the provisions of such prior act before the repeal thereof.

(Acts 1980, No. 80-658, §5-13-4.)

§ 5-1A-9 Deposit Creates Debtor-Creditor Relationship; Agreement as to Person or Purpose for Which Deposit Made and Payable

A deposit to a bank or other financial institution permitted by law to take deposits from the general public (“depository institution”) creates the relationship of debtor and creditor between the depositor and the depository institution. All such deposits are general deposits unless there is a written agreement between the depositor and the depository institution which provides therein that the deposit is to be paid only to a particular identified or identifiable person or that the deposit is made and payable only for a specific and particular purpose. This section shall not affect accounts labeled “escrow” or “trust.”

(Acts 1986, No. 86-543, p. 1075.)

§ 5-1A-10 Use of Lender Information or Trade Name in Solicitations

(a) For purposes of this section, the following terms shall have the following meanings:

(1) LENDER. A bank, industrial bank, savings and loan association, savings bank, credit union, finance company, mortgage bank, mortgage broker, loan originator or holder of the loan, or other person who makes loans in this state, and any affiliate thereof, or any third party operating with the consent of the lender. A person shall not be considered a lender based on the person’s former employment with the lender.

(2) PERSON. Any individual, firm, corporation, partnership, organization, association, or other legal entity.

(b) A person other than the lender may not use the trade name or trademark of the lender or a trade name or trademark confusingly similar to that of the lender in a solicitation for the offering of services or products without the consent of the lender unless the solicitation clearly and conspicuously states in bold-face type on the front page of the correspondence containing the solicitation all of the following:

(1) The name, address, and telephone number of the person making the solicitation.

(2) That the person making the solicitation is not affiliated with the lender.

(3) That the solicitation is not authorized or sponsored by the lender.

(4) That the loan information referenced was not provided by the lender.

(c) A person may not use a loan number, loan amount, or other specific loan information that is not publicly available in a solicitation for the purchase of services or products. Notwithstanding the foregoing, the prohibition does not apply to communications by a lender or its affiliates with a current customer of the lender or with a person who was a customer of the lender.

(d)(1) A person other than the lender may not use a loan number, loan amount, or, other than the existence of the loan, any loan specific information that is publicly available in a solicitation for the purchase of services or products unless the communication clearly and conspicuously states in bold-faced type on the front page of the correspondence containing the solicitation all of the following:

a. The name, address, and telephone number of the person making the solicitation.

b. That the person making the solicitation is not affiliated with the lender.

c. That the solicitation is not authorized or sponsored by the lender.

d. That the loan information used was not provided by the lender.

(2) The prohibition in subdivision (1) does not apply to communications by a lender or its affiliates with a current customer of the lender or with a person who was a customer of the lender.

(e) Any reference to an existing lender without the consent of the lender and any reference to a loan number, loan amount, or, other than the existence of the loan, any loan specific information appearing on the outside of an envelope, visible through the envelope window, or on a postcard, in connection with any written communication that includes or contains a solicitation for services or products is prohibited.

(f) It is not a violation of this section for a person to use the trade name of another lender in an advertisement for services or products to compare the services or products offered by the other lender.

(g) A lender or owner of a trade name or trademark may seek an injunction against a person who violates this section to stop the unlawful use of the trade name, trademark, or loan information. The person seeking the injunction shall not be required to prove actual damage as a result of the violation. Irreparable harm to the lender or owner shall be presumed. The lender or owner seeking the injunction may seek to recover actual damages.

(Act 2009-148, p. 301, §§1, 2.)

Chapter 2A State Banking Department

Article 1 General Provisions

§ 5-2A-1 Creation of Department; Duties Generally

There shall be a State Banking Department which shall administer the laws of this state which regulate or otherwise relate to corporations doing or carrying on a banking business in the state, all laws relating to savings and loan associations doing business in this state and all laws relating to persons, firms or corporations engaging in the loan business in this state. The authority of the State Banking Department to perform such functions shall be exclusive.

(Acts 1980, No. 80-658, p. 1259, §5-2-1; Acts 1985, No. 85-457, p. 425, §1.)

§ 5-2A-2 Offices, Venue

The State Banking Department shall locate and maintain its principal office in the City of Montgomery, Alabama, from which place it shall perform its duties and transact its business. Unless otherwise provided in Chapters 1A through 13B and Chapter 20 of this title, all actions in which the superintendent, the Banking Department or its employees, the Banking Board or its members are named or joined shall be brought in the Circuit Court of Montgomery County.

(Acts 1980, No. 80-658, §5-2-2; Acts 1995, No. 95-115, p. 134, §68.)

§ 5-2A-3 Superintendent - Qualifications, Appointment and Term of Office; Filling of Vacancies

The State Banking Department shall be in the charge of the superintendent, who shall be the chief executive officer of the department. The superintendent shall be a person of good character and shall be neither directly nor indirectly interested in, nor borrow money from, a bank chartered under the laws of this state. Debts of the superintendent existing at the time of his or her appointment with banks chartered under the laws of this state may not be extended or renewed. The superintendent shall be appointed by the Governor by and with the consent of the Senate and his or her salary shall be set by the Governor within a salary range established by the Banking Board. The salary of any Assistant Superintendent of Banks shall be set by the Governor within a salary range established by the Banking Board for the position of Assistant Superintendent of Banks. Sections 36-6-5 and 36-6-6 shall not apply to the Superintendent of Banks. The term of office of the superintendent shall expire on the first day of February after the expiration of the term of office of the Governor making the appointment. If for any reason there is a vacancy in the office while the Senate is not in session, the Governor shall appoint a superintendent who shall hold office and exercise the powers conferred by law upon the office until the Senate meets and passes on the appointment. If the appointment is disapproved by the Senate, the appointee shall vacate the office immediately and another appointment shall be made by the Governor in like manner until an appointment is confirmed by the Senate. To be eligible for appointment as superintendent, a person shall have had at least five years’ experience in the 10 years next preceding the appointment either as an officer of an Alabama bank or an examiner or other officer in a federal or state bank supervisory agency, including the Office of the Comptroller of the Currency, the Federal Reserve System, the Federal Deposit Insurance Corporation, and the banking departments of the various states or other equivalent experience for at least five years in the 10 years next preceding the appointment.

(Acts 1980, No. 80-658, p. 1259, §5-2-5; Acts 1993, No. 93-725, p. 1461, §1; Acts 1994, 1st Ex. Sess., No. 94-767, p. 51, §1.)

§ 5-2A-4 Superintendent - Oath and Bond

The superintendent, before entering upon the discharge of his duties, shall take and subscribe to the oath prescribed by the constitution and laws of this state, and shall give bond in the penal sum of $25,000.00. The oath and the bond shall be filed with the Secretary of State.

(Acts 1980, No. 80-658, §5-2-6.)

§ 5-2A-5 Superintendent - Seal of Office; Recordation of Executed Papers

The Secretary of State shall provide the superintendent with an official seal. Every paper executed by him as such superintendent, in pursuance of any authority conferred on him by law and sealed with his official seal, shall be received in evidence and may be recorded in the proper recording office in the state in the same manner and with the same effect as a deed regularly acknowledged or proven.

(Acts 1980, No. 80-658, §5-2-7.)

§ 5-2A-6 Superintendent - Removal; Removal of Member of Banking Board

(a) The superintendent or any member of the Banking Board may be removed from office by a vote of two thirds of the members of the entire banking board for:

(1) Neglect of duty;

(2) Malfeasance;

(3) Misfeasance;

(4) Extortion or corruption in office;

(5) Incompetency;

(6) Intemperance in the use of intoxicating liquors or narcotics to such an extent, in view of the dignity of the office and the importance of its duties, as to render such person unfit for the discharge of his duties; or

(7) Any offense involving moral turpitude while in office, committed under color thereof or connected therewith.

(b) The superintendent may also be removed from office, without cause, upon written order of four appointed members of the Banking Board and the Governor.

(Acts 1980, No. 80-658, §5-2-8.)

§ 5-2A-7 Superintendent - Expansion of Banking Powers; Rules and Regulations

(a) The Legislature finds as fact and determines that the financial industry composed of those banks and savings and loan associations having their principal place of business in Alabama must keep pace with technological and other improvements constantly being made throughout the United States so as to enable Alabama banks and savings and loan associations to render better and more efficient services to the citizens of Alabama. It is necessary and desirable that the superintendent be given additional authority in these fields.

(b) The superintendent is hereby authorized to expand banking powers of Alabama banks or the powers of Alabama savings and loan associations in order to:

(1) Accommodate or take advantage of changing technologies; and

(2) Assure the ability of Alabama banks and Alabama savings and loan associations to be responsive in their respective businesses to the needs and conveniences demanded by consumers and businesses through on-premises as well as off-premises operations; provided, that nothing in this section shall enable the superintendent to authorize banks to engage in activities which are not properly incident to the business of banking nor to enable the superintendent to authorize savings and loan associations to engage in the business of offering financial services which are now prohibited to them.

No bank, nor savings and loan association having its principal place of business outside of Alabama may engage in the banking or savings and loan business in Alabama under the provisions of this section; provided, that the superintendent is authorized to enter into agreements with the appropriate regulatory authorities of other states or of the United States, under the terms of which banks or savings and loan associations of such foreign state or subject to federal regulatory jurisdiction, and banks and savings and loan associations having their principal place of business in Alabama are given and may exercise reciprocal rights.

(c) The superintendent is authorized to issue regulations under subsection (b) and shall give notice in writing of any such proposed regulation to each Alabama bank and Alabama savings and loan association affected thereby, inviting comments, and shall give due consideration to such comments before adopting any final regulation. Any regulation issued under this section relating to banks shall be adopted pursuant to the provision of Section 5-2A-9. Any Alabama bank, Alabama savings and loan association and any foreign corporation or association covered by the provisions of subsection (b) desiring to exercise any such expanded power must secure in advance written permission of the superintendent. The superintendent may prescribe the form or forms for such applications for permits and may impose reasonable conditions in granting such permits.

(d) To the extent permitted by federal law, the provisions hereof may be utilized by national banks and federally chartered savings and loan associations.

(Acts 1980, No. 80-658, p. 1259, §5-2-9; Acts 1985, No. 85-457, p. 425, §2.)

§ 5-2A-8 Superintendent - Promulgation and Interpretation of Regulations

The superintendent may, with the concurrence of a majority of the members of the State Banking Board or as otherwise provided in this title, promulgate such reasonable regulations, consistent with the laws of this state, as may be necessary to carry out the provisions of this title over which the State Banking Department has jurisdiction. The superintendent shall, in addition, issue written interpretations of banking laws and regulations. Any bank or bank holding company and any officer or director thereof relying on any regulation or interpretation shall be fully protected even though the same shall be thereafter ruled invalid for any reason by a court of competent jurisdiction.

(Acts 1980, No. 80-658, p. 1259, §5-2-10; Acts 1985, No. 85-457, p. 425, §3; Acts 1995, No. 95-115, p. 134, §69; Act 2013-352, p. 1261, §1.)

§ 5-2A-9 Superintendent - Procedure for Promulgation of Regulations; Emergency Regulations; Judicial Review

(a) Prior to the adoption, amendment, or repeal of any regulation, the superintendent shall:

(1) Give at least 35 days’ notice of the intended action. The notice shall include a statement of either the terms or substance of the intended action or a description of the subjects and issues involved, and the time when, the place where, and the manner in which interested persons may present their views thereon. The notice shall be mailed to all banks in this state and shall be published in a newspaper of general circulation in Montgomery County. A complete copy of the proposed regulation shall be filed with the Secretary of State; and

(2) Afford all interested persons reasonable opportunity to submit data, views, or arguments, orally or in writing. Opportunity for oral hearing must be granted if requested by 25 persons, by a governmental subdivision or agency, or by an association having not less than 25 members. The superintendent shall consider fully all written and oral submissions respecting the proposed regulation. Upon adoption of a regulation, the superintendent, if requested to do so by an interested person either prior to adoption or within 30 days thereafter, shall issue a concise statement of the principal reasons for and against its adoption, incorporating therein the reasons for overruling the considerations urged against its adoption.

(b) Notwithstanding any other provision of this section to the contrary, if the superintendent finds that an immediate danger to the public welfare requires adoption of a regulation upon fewer than 35 days’ notice and states in writing his reasons for that finding, he may proceed without prior notice or hearing or upon any abbreviated notice and hearing that he finds practicable to adopt an emergency regulation. The regulation shall become effective immediately, unless otherwise stated therein, upon the filing of the regulation and a copy of the written statement of the reasons therefor with the Secretary of State. The regulation may be effective for a period of not longer than 120 days and shall not be renewable. The superintendent and Banking Board shall not adopt the same or a substantially similar emergency regulation within one calendar year from its first adoption unless the superintendent clearly establishes it could not reasonably be foreseen during the initial 120-day period that such emergency would continue or would likely reoccur during the next nine months. The adoption of the same or a substantially similar regulation by normal regulation-making procedures is not precluded.

(c) No regulation hereafter adopted is valid unless adopted in substantial compliance with this section. A proceeding to contest any regulation on the ground of noncompliance with the procedural requirements of this section must be commenced within two years from the effective date of the regulation; provided, however, that a proceeding to contest a regulation based on failure to provide notice as herein required or on an incorrect interpretation of the law may be commenced at any time.

(d) The validity or applicability of any regulation or an interpretation of the Banking Department may be determined in an action for declaratory judgment brought in the Circuit Court of Montgomery County when it is alleged that the adoption, amendment or repeal of any regulation or any interpretation or the application or threatened application of any regulation or any interpretation interferes with or impairs or threatens to interfere with or impair the legal rights and privileges of the bank or any person affected thereby.

(Acts 1980, No. 80-658, §5-2-11.)

§ 5-2A-10 Superintendent - Make Good Any Impairment of Capital

Whenever the superintendent shall have reason to believe that the capital of any bank is impaired, he may in his discretion require such bank to make good the deficit by the date specified by him, which requirement shall be in writing. The superintendent may cause the affairs of any such bank to be examined to ascertain the amount of such impairment and whether the deficiency has been made good as required by law.

(Acts 1980, No. 80-658, §5-2-12.)

§ 5-2A-11 Superintendent - Losses; Bank to Correct Impairment of Capital

Whenever losses are sustained by a bank, such losses shall be charged on the books of the bank as losses so that the books of the bank will show the true condition of the bank. When, by reason of losses or otherwise, the capital of a bank is impaired, and when the bank has been notified by the superintendent, under Section 5-2A-10, the bank must make good its impairment of capital in a manner approved by the superintendent.

(Acts 1980, No. 80-658, §5-2-13.)

§ 5-2A-12 Superintendent - Order to Correct Unsafe and Unsound Matters; Penalties; Procedure

(a) For purposes of this section, a bank holding company is a holding company organized under the laws of Alabama or another state in the United States that directly owns a majority of the voting securities of an Alabama state bank.

(b) The superintendent may order a bank, a bank holding company, the board of directors, any director or directors, and any officer or officers of any bank or bank holding company, individually or collectively (hereafter affected person, whether one or more) to correct any matters in the conduct of the affairs of the bank which in the opinion of the superintendent are unsafe and unsound. The Banking Board, after at least 20 days’ written notice by the superintendent to the bank and any affected person, and a hearing before the Banking Board, may direct the superintendent to issue an order that imposes civil money penalties on the bank or bank holding company and affected person and, if so determined by the Banking Board, that removes any affected person:

(1) Who does not comply with the superintendent’s order to correct unsafe and unsound matters if the Banking Board by written order enters a finding that the bank has thereby suffered or will probably suffer substantial financial loss and that such practice is one involving personal dishonesty on the part of such affected person or one which demonstrates a willful and continuing disregard for the safety and soundness of the bank or bank holding company, the result of which has caused the bank to suffer or which is likely to cause the bank to suffer substantial financial loss; or

(2) Whose conduct:

a. demonstrates personal dishonesty in connection with the business, operations, assets, or liabilities of the bank or bank holding company; or

b. demonstrates a willful and continuing disregard for the safety and soundness of the bank, the result of which has caused or is likely to cause the bank or bank holding company to suffer substantial financial loss.

(c) The amount of civil money penalties imposed shall not exceed one thousand dollars ($1,000) per day with a maximum amount of one hundred thousand dollars ($100,000) in the aggregate for all violations of an order of the superintendent. An order of removal also may prohibit the affected person from participating in the affairs of any Alabama state bank or any holding company that controls an Alabama state bank. In the superintendent’s order to the bank or affected person of the imposition of civil money penalties or removal, the superintendent shall include a specific statement of the facts constituting the alleged unsafe and unsound conduct to be made the basis of the imposition of civil money penalties or removal. At the hearing thereon before the Banking Board, the board of directors of the bank or the affected person shall have the right to appear in person or by counsel. No member of the Banking Board, other than the superintendent, may participate in the hearing if such member is affiliated with the bank or affected person or has previously been involved in a determination to institute the proceedings leading to the hearing. Any order of the superintendent as directed by the Banking Board, imposing civil money penalties or directing removal of an affected person shall within 28 days of the date of entry thereof be appealable to the Circuit Court of Montgomery County, which appeal shall be conducted de novo. Pending expiration of the time for appeal, the order imposing civil money penalties or of removal shall not become effective and neither the superintendent nor the Banking Board shall publicly disclose such order except in connection with the appeal. All proceedings before the Banking Board shall be confidential. Any person violating this section by disclosure of nonpublic information presented at a confidential hearing before the Banking Board, other than the disclosure that may result in connection with an appeal thereof, shall be guilty of a Class A misdemeanor.

(Acts 1980, No. 80-658, §5-2-14; Act 2007-224, p. 284, §1; Act 2010-548, p. 966, §1; Act 2011-589, p. 1306, §1.)

§ 5-2A-13 Superintendent - Annual Report to Governor; Publication and Distribution, Etc

The superintendent shall make from the reports of the department during the year an annual report to the Governor on the activities of the banking department and such other information as the Governor may request and shall keep on file as a public record in the superintendent’s office a copy thereof. The board may print for public distribution such annual report and such other material as it deems suitable for the more effective administration of departmental business.

(Acts 1980, No. 80-658, §5-2-15.)

§ 5-2A-14 Superintendent - Reports of Criminal Violations to Grand Juries

The superintendent may submit to any grand jury any criminal violations of the banking laws known to him or her to have occurred pursuant to applicable law regarding criminal venue and may make himself or herself or his or her staff available to testify in criminal cases if subpoenaed.

(Acts 1980, No. 80-658, §5-2-16; Act 2007-224, p. 284, §1.)

§ 5-2A-15 Appointment, Etc., of Assistants and Employees Generally; Bond of Deputy Superintendent

(a) Subject to the provisions of Section 36-26-1, et seq., the superintendent may appoint or employ one or more deputy superintendents and such assistants, employees and attorneys as may be necessary to the efficient operation of the department. He shall fix their compensation in accordance with Section 36-26-1, et seq. and the pay plan of the State Personnel Department. All such assistants, employees and attorneys shall be subject to the provisions of the merit system. The superintendent shall, with the approval of the Governor, have authority to employ and discharge special counsel as he may deem necessary.

(b) The Deputy Superintendent of Banks shall in the absence of the superintendent exercise any of the powers conferred by law on the superintendent and shall before entering upon the duties of his office execute to the State of Alabama a bond in the amount of $25,000.00 for the faithful performance of his duties.

(Acts 1980, No. 80-658, §5-2-18.)

§ 5-2A-16 Limitation of Liability of Superintendent, Members of Banking Board, or Employees

Neither the superintendent, any member of the Banking Board nor any employee of the Banking Department shall be personally liable for any acts done in good faith while in the performance of his duties as provided by law.

(Acts 1980, No. 80-658, §5-2-19.)

§ 5-2A-17 Bank Examiners - Oath; Duties Generally

Every examiner shall, before entering upon the discharge of his duties, take and file with the superintendent an oath faithfully to discharge his duties as examiner. Each examiner shall act under the direction of the superintendent and shall examine fully into the books, papers and affairs of each bank which he may be directed by the superintendent to examine.

(Acts 1980, No. 80-658, §5-2-20.)

§ 5-2A-18 Bank Examiners - Commission

The superintendent shall furnish to each examiner a commission under the signature of the superintendent and official seal of the State Banking Department, which commission the examiner shall exhibit to the bank, and to any officer or officers proposed to be examined as his authority for making the examination.

(Acts 1980, No. 80-658, §5-2-21.)

§ 5-2A-19 Bond of Examiners and Office Assistants

Before entering upon the duties of their respective offices, all examiners and office assistants shall execute to the State of Alabama a bond to be fixed and approved by the superintendent, for the faithful performance of their duties.

(Acts 1980, No. 80-658, §5-2-22.)

§ 5-2A-20 Assessment of Banks - When Payable; Amount; Disposition of Revenue

Each bank shall on the call of the superintendent pay to the State Banking Department an assessment fee based on the total resources of the bank as may be shown by its last report to the State Banking Department. The rate of such assessment shall be in an amount fixed by the superintendent and approved by the Banking Board and the assessment may be made more frequently than annually. All assessments and other fees or penalties collected pursuant to this title by the State Banking Department shall be paid into a special fund to be set up by the State Treasurer. The special fund shall be used to pay the salaries of the officials and employees and the expenses of the State Banking Department, including the purchase of equipment, vehicles, and supplies necessary for the examination and supervision of banks, and all moneys deposited therein are hereby appropriated for that purpose. The expenses of all examiners of the State Banking Department shall be paid according to regulations promulgated by the superintendent, and the State Banking Department and its several bureaus and divisions are hereby exempt from the provisions of Sections 36-7-20 and 36-7-22. It is provided, however, that nothing in this section shall be construed to mean that all salaries of the officials and employees and expenses of operating and equipping the State Banking Department shall come from the special fund. No other assessment or license of any kind shall be levied against or collected from any bank or banking institution, except the ordinary taxes assessed against property in general, and except as may be specifically provided for in this code.

(Acts 1980, No. 80-658, §5-2-3; Act 2007-224, p. 284, §1.)

§ 5-2A-21 Assessment of Banks - Fees for Failure to Pay Assessment; Proceedings for Collection of Assessment

Each bank failing to make payments of assessments on call made by the superintendent within 30 days after receiving notice from the superintendent of the amount of the assessment, shall pay to the state $100.00 for each day after such 30-day period. Such sum, together with the amount due from the bank, may be collected by civil action from the bank in the name of the state against the bank, and the Attorney General shall represent the superintendent in proper proceedings to enforce the collection of the assessment, together with the amount provided in this section.

(Acts 1980, No. 80-658, §5-2-4.)

§ 5-2A-22 Independent Audits; Minimum Standards; Advisory Committee; Report in Lieu of Audit

The board of directors of each state bank shall at least once in each calendar year have an audit made of its books and affairs, including any accounts held in a fiduciary capacity, by independent auditors approved by the superintendent. These may be separate audits. “Independent auditors” shall include the audit staff of a correspondent bank or the audit staff of a bank holding company, or auditors or accountants who are not employees of the bank. The superintendent shall by regulation establish minimum standards for audits and reports, which shall include such matters as he shall require. To assist in promulgating minimum standards for audits and reports, the superintendent shall appoint an advisory committee of no less than six members. Membership of the committee shall consist of auditors, as qualified in Chapters 1A through 12A of this title, who regularly perform audits in banks chartered under the laws of Alabama. A majority of the committee shall be comprised of individuals who are certified internal auditors, chartered bank auditors, or certified public accountants. The committee shall meet at the call of the superintendent. The advice of this committee shall not be binding on the superintendent and the members shall serve without compensation. A report of the audit shall be signed by the person making it, and such signed copy shall be submitted to the board of directors and retained in the bank. If any bank has a system of internal audit approved by the Superintendent of Banks, no such independent audit shall be required, and in lieu thereof the auditor or comptroller of the bank shall submit to its board of directors an annual summary of the same matters, which shall be retained in the bank. Such report shall also set forth the degree of compliance with the approved audit system.

(Acts 1980, No. 80-658, §5-2-17.)

§ 5-2A-23 Legal Counsel

The Attorney General without additional compensation shall render to the State Banking Department such legal services as the superintendent may request. The district attorney in each county in this state, when requested by the superintendent, shall as a part of his or her official duty and without compensation, represent the superintendent in any civil action that the superintendent may desire to bring, or that may be brought against the superintendent under the provisions of Chapters 1A through 13B and Chapter 20 of this title, in his or her respective circuit or county.

(Acts 1980, No. 80-658, §5-2-23; Acts 1995, No. 95-115, p. 134, §70.)

§ 5-2A-24 Examination of Small Loan Companies; Fees

The Superintendent of Banks may at any reasonable time cause an examination to be made of any small loan company, finance company, and other individual or person holding any license from the State Banking Department at the licensee’s place of business of the records and transactions of such licensee to determine compliance with the laws of Alabama. Each licensee shall pay to the State Banking Department the actual cost of each examination, the amount of which shall be reasonably prescribed under uniform and equitable rules and regulations promulgated by the Superintendent of Banks. All such fees shall be paid into the special fund set up by the State Treasurer pursuant to Section 5-2A-20, and used in the supervision and examination of licensees.

(Acts 1980, No. 80-444.)

Article 2 Banking Board

§ 5-2A-40 Composition of Banking Board; Chairman; Appointment and Terms of Office of Members

There shall be a Banking Board, which shall consist of the superintendent, who shall be ex officio a member and chairman of the board, and six persons who shall be appointed by the Governor, by and with the consent of the Senate. At the time of appointment members shall reside in different congressional districts. Members of the Banking Board shall be appointed for terms of six years each so that the terms of two of the six appointed members will expire on February 1 of each odd-numbered year. Upon the expiration of their terms of office, members of the board shall continue to serve until their successors are appointed and have qualified.

(Acts 1980, No. 80-658, §5-2-40.)

§ 5-2A-41 Meetings of Board - Notice; Executive Session; Confidentiality

(a) A meeting of the Banking Board may be held on call of the superintendent or any three members of the Banking Board. The superintendent shall give to each member of the Banking Board at least three days’ notice of the time and place of any meeting of the Banking Board unless such notice is waived by all the members of the Banking Board.

(b) At any meeting, the Banking Board may go into executive session in order to do any of the following:

(1) Protect the confidentiality of reports or information under Sections 5-3A-3, 5-3A-11, and 5-13B-105 and other provisions of this title.

(2) Review information concerning the condition and affairs of any proposed bank or trust company, any bank or trust company, any subsidiary or affiliate of a bank or trust company, or several banks or trust companies or their subsidiaries, or to review personal or financial information of individuals.

(3) Accomplish any other purpose of the Banking Board that requires it to receive or consider information that is confidential under this title.

(c) Confidential information under this title includes all information set forth in subdivisions (1) and (2) of subsection (b) as well as other information designated as confidential in this title and other information as determined by the superintendent.

(d) The Banking Board shall not go into executive session except upon a majority vote of a quorum, duly recorded in the minutes.

(Acts 1980, No. 80-658, §5-2-41; Act 2007-224, p. 284, §1.)

§ 5-2A-42 Meetings of Board - Place

The Banking Board shall hold its meetings within the state; provided, however, the Banking Board may hold a meeting without the state only if so required by the federal agency regulating banks.

(Acts 1980, No. 80-658, §5-2-42.)

§ 5-2A-43 Quorum

A majority of members of the Banking Board shall constitute a quorum for the transaction of any business.

(Acts 1980, No. 80-658, §5-2-43.)

§ 5-2A-44 Filling of Vacancies; Qualification of Members

If a vacancy shall occur in the appointed membership of the Banking Board, the vacancy shall be filled by appointment of the Governor, and the appointee shall hold office until the Senate meets and passes on the appointment. If the appointment is disapproved by the Senate, another appointment must be made by the Governor, and appointments must be made in like manner until an appointment is confirmed by the Senate. The six appointed members of the Banking Board shall be persons of good character. Four of the six must have had at least five years’ experience in the 10 years next preceding their appointment to the Banking Board either as an officer of a bank, a director of a bank or an examiner or other officer in a federal or state bank supervisory agency, including the Office of the Comptroller of the Currency, the Federal Reserve System, the Federal Deposit Insurance Corporation and the banking departments of the various states or other equivalent experience. Three of the members of the board, during the time they hold office, shall be connected with some state bank doing business as a bank under the laws of the State of Alabama as an officer or director of such bank.

(Acts 1980, No. 80-658, §5-2-44.)

§ 5-2A-45 Compensation of Members

No person appointed as a member of the Banking Board shall receive any compensation for this service; except, that each appointed member of said Banking Board shall receive $50.00 per day and expenses as paid state employees for each day said Banking Board is in session. The compensation of the appointed members of the Banking Board shall be paid as earned by the State Treasurer on warrants drawn by the comptroller, in favor of each of them, which warrants are to be drawn on the certificate of the superintendent, which certificate shall certify that a meeting of said board was held, stating the time of meeting and stating the amount to which each member of the board is entitled.

(Acts 1980, No. 80-658, §5-2-45.)

Article 3 Bureau of Savings and Loan

§ 5-2A-60 Composition

The Bureau of Savings and Loan shall consist of:

(1) A Savings and Loan Board;

(2) A Commissioner of Savings and Loan, who shall be the chief officer of the Bureau of Savings and Loan, who shall be ex officio a member and Chairman of the Savings and Loan Board and who shall be the same person who is appointed Superintendent of Banks; and

(3) Such subordinate divisions and employees as are provided for in this chapter.

(Acts 1939, No. 14, p. 11; Acts 1939, No. 170, p. 294; Code 1940, T. 5, §23; Code 1975, §5-2-60.)

§ 5-2A-61 Created; Commissioner and Deputy Commissioner Generally; Examiners; Disclosure of Information by Officers; Seal of Commissioner

(a) There is hereby created a Savings and Loan Bureau which shall be a bureau of the State Banking Department.

(b) The bureau shall be set up, established and administered by the Savings and Loan Commissioner under the executive direction and control of the State Banking Department, and the commissioner shall be the same person as the Superintendent of Banks. The Deputy Superintendent of Banks shall be the deputy commissioner. The salaries of the commissioner and the deputy commissioner shall be payable out of the treasury, as the salaries of other state officials are paid, and the commissioner and his deputy shall be allowed and paid for necessary travelling expenses while travelling upon official business as provided in Article 2 of Chapter 7 of Title 36.

(c) The deputy commissioner shall serve as secretary at the meetings of the Savings and Loan Board.

(d) The Savings and Loan Commissioner, with the approval of the Governor, shall appoint one or more savings and loan examiners, who shall be bank examiners, and the bank examiners so appointed shall not receive additional compensation for their services as savings and loan examiners. The deputy commissioner and the savings and loan examiners of the savings and loan bureau shall be under the direct control of the commissioner.

(e) The expenses of the Savings and Loan Bureau shall be audited and paid in the same manner as salaries and expenses of the other state departments.

(f) The commissioner and his deputy commissioner shall not be interested in any association, directly or indirectly, either as creditor, investor, director, officer, employee or borrower.

(g) Neither the commissioner nor any officer or employee of the Savings and Loan Bureau shall be personally liable for any acts done in good faith while in the performance of his duties provided by law.

(h) The commissioner, his deputy and the savings and loan examiners shall receive no compensation whatsoever from any association.

(i) The commissioner, his deputy and savings and loan examiners shall not divulge any information acquired by them in the discharge of their duties as prescribed by this title, except insofar as the same may be rendered necessary by law or under order of a court in an action involving the Savings and Loan Bureau or in criminal actions; provided, that the commissioner may furnish information as to the condition of any association to the Federal Home Loan Bank Board, the Federal Savings and Loan Insurance Corporation, the Home Owners’ Loan Corporation, any federal home loan bank or the savings and loan department of other states.

(j) The commissioner shall have a seal of office containing the words “Savings and Loan Commissioner of Alabama” in the form of a circle and the words “Seal” and “State of Alabama” shall be contained within the circle.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §242; Code 1975, §5-2-61.)

§ 5-2A-62 Supervisory Powers of Commissioner Generally; Approvals, Etc., by Commissioner; Permits Required of Savings and Loan Associations

(a) The commissioner shall have general supervision over all associations and corporations which are subject to the provisions of Chapter 16 of this title. He shall enforce the purposes of Chapter 16 of this title by use of the powers therein conferred and by reference to the courts when required.

(b) Every approval by the commissioner given pursuant to the provisions of Chapter 16 of this title and every communication having the effect of an order or instruction to any association shall be in writing, signed by the commissioner under the seal of his office and shall be mailed by registered or certified mail to the association affected thereby, addressed to the president thereof at the home office of the association, and unless the association to which any approval or order is directed is an association having its accounts insured by a federal agency, it shall not be necessary to furnish a copy of such approval or order to any agency nor have any such federal agency concur in any such approval or order.

(c) No savings and loan association shall transact any business, except incident to obtaining corporate existence, until it shall have obtained from the Savings and Loan Commissioner a permit to transact business as a savings and loan association.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §243; Acts 1943, No. 97, p. 99; Acts 1945, No. 122, p. 114; Code 1975, §5-2-62.)

§ 5-2A-63 Savings and Loan Board; Appeals from Orders, Etc., of Commissioner or Board

(a) There is hereby created a Savings and Loan Board, consisting of the Savings and Loan Commissioner, who shall be the ex officio chairman of the board and four persons who shall be appointed by the Governor and who shall be persons with actual practical experience for at least three years in the operation and management of an institution of the savings and loan type. The members of the board shall serve without compensation; except that members shall be paid their travelling expenses in connection with the performance of their duties as members of the board plus $10.00 per diem while engaged in the performance of such duties. Such travelling expenses shall be paid out of the treasury. The board shall have such rights, powers and privileges and shall be subject to such duties as are provided by Chapter 16 of this title. The board shall maintain in the office of the commissioner permanent records of its hearings and decisions. The commissioner shall provide adequate and sufficient quarters and personnel for use by the board in connection with the performance of its business. The Governor shall appoint one member for the term of one year, one for a term of two years, one for a term of three years, and one for a term of four years, and, thereafter, upon the expiration of such terms, members shall be appointed for a term of four years. The Governor shall fill any vacancy by the appointment of a member for the unexpired term of such member.

(b) As provided in Chapter 16 of this title, associations may appeal from certain actions of the commissioner, by filing in writing, with the secretary of the board, within 30 days after the action of the commissioner complained of, a statement of the objections taken to such action. A copy of such statement shall be simultaneously filed with the commissioner. Within 10 days after the date of any such objection, the board shall fix a date for a hearing on such objection. The objecting association and the commissioner shall be notified in writing of the date of such hearing. The date of such hearing shall not be earlier than 15 days nor later than 30 days after the date of such notice, unless the board deems an earlier hearing necessary or advisable. At such hearing, the association shall present by its attorney, a director or directors, officer or officers or other employee the reasons why it deems itself aggrieved by the action of the commissioner. The commissioner shall be heard in defense of his action. The board may permit other persons who may be concerned or affected by its decision to appear before it at any such hearing. After hearing the evidence and determining the facts, the board shall, upon the merits, either approve or disapprove the action of the commissioner.

(c) After such action, should any association be dissatisfied with any findings, ruling, order or judgment of the board, said association may within 30 days after the making and issuance thereof commence a civil action in the Circuit Court of Montgomery County, Alabama, against the board and commissioner as defendants, to vacate and set aside said finding, ruling or order on the ground that same is unjust and unreasonable. The rules of pleading and procedure in such civil action shall be the same as for the trial of civil actions in the circuit courts of this state, and on hearing the judge of said circuit court may set aside, modify or confirm said finding, ruling, order or judgment as the evidence may require. Appeals may be taken from the decision of the circuit court to the supreme court by either party in the same manner as is provided by law in other civil cases, but the board and commissioner may appeal without bond. Pending any such appeal, the findings, rulings, orders and judgments of the board shall be prima facie evidence that they are just and reasonable and that the facts found are true and shall remain in full force and effect. If no civil action is brought within 30 days, said finding, ruling, order or judgment shall become final and binding.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §244; Acts 1943, No. 93, p. 95; Code 1975, §5-2-63.)

Article 4 Bureau of Loans

§ 5-2A-80 Created; Supervisor of Bureau; Inspections; Records, Reports, Etc., Not Open to Public

To administer and enforce the provisions of chapter 18 of this title, there is hereby created in the State Banking Department the Bureau of Loans. The Superintendent of Banks shall, with the approval of the Governor and subject to the provisions of the merit system, appoint a Supervisor of the Bureau of Loans, who shall be the chief of the Bureau of Loans, and such other employees of said bureau as may be necessary. The Supervisor of the Bureau of Loans shall take and file with the Secretary of State the official oath and shall give bond in the penal sum of $10,000.00 for the faithful performance of the duties of his office. The Supervisor of the Bureau of Loans, for the purpose of discovering violations of Chapter 18 of this title, may investigate the loans and business of every person, copartnership and corporation by whom or by which any such loan shall be made, whether such person, copartnership or corporation shall act, or claim to act, as principal, agent or broker or under or without the authority of said chapter. All records, reports and other data submitted by any licensee to the Supervisor of the Bureau of Loans and the reporting of all investigations made under Chapter 18 of this title shall remain in said office and shall not be open to public inspection.

(Acts 1945, No. 159, p. 200, §5; Acts 1951, No. 787, p. 1385; Code 1975, §5-2-80.)

§ 5-2A-81 Revocation and Suspension of Licenses; Injunctive Relief as to Violations of Small Loan Act

(a) Upon 10 days’ written notice to a licensee, stating the contemplated action and grounds therefor, and after giving the licensee a reasonable opportunity to be heard, the bureau shall suspend or revoke any license issued under Chapter 18 of this title if it finds:

If the bureau finds that there exists probable cause for the suspension or revocation of any license and that the enforcement of Chapter 18 of this title requires immediate suspension of such license pending a complete investigation, it may, upon three days’ written notice, and after a hearing, enter an order suspending such license for a period not exceeding 30 days, during which time no loans may be made by the licensee. Upon completion of its investigation, the bureau may reinstate the license or revoke the same or order such further suspension thereof as the circumstances may warrant.

(b) The supervisor may, either before or after the suspension or revocation of any license, apply to any court of competent jurisdiction for an injunction or other order enjoining or prohibiting any person from violating any of the provisions of Chapter 18 of this title or any rules, regulations or orders of the bureau, and upon a proper showing the court shall issue such injunction or order as may be deemed proper.

(Acts 1945, No. 159, p. 200, §5; Acts 1951, No. 787, p. 1385; Code 1975, §5-2-81.)

§ 5-2A-82 Appeals from Acts of Bureau or Supervisor

Any person aggrieved by any order or act of the bureau or the supervisor may, within 30 days from the entry of the order complained of or within 60 days of the act complained of if there is no order, file a complaint or appeal from the order or act against the supervisor in the Circuit Court of Montgomery County or the circuit court of the county of the residence of the party aggrieved or the circuit court of the county wherein the party aggrieved does business and file security with the court for costs. Such complaint may pray for a reversal, rescission or modification of the order or act complained of and for such other relief as may be appropriate. It shall allege the facts relied upon as the basis for such relief. When the complaint has been filed, a summons shall be issued forthwith and shall be served upon the supervisor personally or by registered or certified mail addressed to his office in the State Banking Department. The summons shall be returnable within five days from its date but in all other respects it shall be made as in other civil actions. The allegations of the complaint shall be deemed to be denied without further pleading, and the court, upon application by either party, shall advance the cause and hear the same without delay. Mere technical irregularities in the procedure before the bureau shall be disregarded. Trial thereof shall be de novo, but on such hearing the act or order of the supervisor shall be prima facie correct and the burden shall be on the plaintiff to show that the bureau in issuing the order or in taking the action complained of was not justified. Any party to the proceeding may summon witnesses and compel their attendance as in criminal cases and may introduce evidence in addition to that relied upon by the bureau. A proceeding under this section shall be deemed to be a special proceeding and either party may appeal from a final judgment therein.

(Acts 1945, No. 159, p. 200, §5; Acts 1951, No. 787, p. 1385; Code 1975, §5-2-82.)

§ 5-2A-83 Payment of Salaries and Expenses

The salaries of the supervisor and employees of the Bureau of Loans and all other expenses incident to carrying out the duties of the supervisor and employees shall be paid as the salaries of other state officials and employees are paid, and the other said necessary expenses shall be paid as now provided by law.

(Acts 1945, No. 159, p. 200, §6; Acts 1947, No. 124, p. 36; Acts 1951, No. 787, p. 1385; Code 1975, §5-2-83.)

Article 5 Bureau of Credit Unions

Division 1 General Provisions

§ 5-2A-100 Created; Appointment of Supervisor and Other Employees; Supervisor’s Oath and Bond; Investigations; Records, Reports, Etc., Open to Public

[Repealed]

Repealed by Act 2014-317, §2, effective May 1, 2014.

(Acts 1971, No. 2293, p. 3694, §1; Code 1975, §5-2-100.)

§ 5-2A-101 Qualifications of Supervisor

[Repealed]

Repealed by Act 2014-317, §2, effective May 1, 2014.

(Acts 1971, No. 2293, p. 3694, §2; Code 1975, §5-2-101.)

§ 5-2A-102 Supervision, Inspection and Examinations of Credit Unions

[Repealed]

Repealed by Act 2014-317, §2, effective May 1, 2014.

(Acts 1971, No. 2293, p. 3694, §10; Code 1975, §5-2-102.)

§ 5-2A-103 Payment of Operating Expenses

[Repealed]

Repealed by Act 2014-317, §2, effective May 1, 2014.

(Acts 1971, No. 2293, p. 3694, §11; Code 1975, §5-2-103; Acts 1981, No. 81-852, p. 1529, §1.)

Chapter 3A Examinations of Banks; Reports of Banks

Article 1 Examination of Banks

§ 5-3A-1 Required Times; Items to Be Examined; Applicability to Bank Holding Companies and Affiliates

(a) For purposes of this section, a bank holding company is a holding company organized under the laws of Alabama or another state in the United States that directly owns a majority of the voting securities of an Alabama state bank.

(b) Every bank other than national banks shall be subject to the supervision and inspection of the superintendent and the regulations and supervision thereof. The superintendent shall, by competent examiner appointed by him or her, visit and examine every bank organized under the laws of Alabama at least once in each eighteen-month period. The examination of banks shall be at irregular intervals. On every examination, inquiry shall be made as to the conditions and resources of the bank, the mode of conducting and managing the affairs of the bank, the action of its directors, the investment of the funds of the bank, the safety and prudence of the management of the bank, whether the requirements of its charter and of law have been complied with in the administration of the affairs of the bank, and such other matters as the superintendent may prescribe. In addition, the superintendent may in like manner examine or cause to be examined the affairs of every bank, every bank holding company, and every subsidiary or other affiliate or bank service company as defined pursuant to 12 U.S.C. §§1861-1867 of the bank or bank holding company, except a national bank or a subsidiary or other affiliate of a national bank, whenever, in the judgment of the superintendent, the management and condition of the bank, bank holding company, or the affiliates or bank service companies of either render an examination of the affairs of any of these entities necessary or expedient, or whenever the superintendent has reason to believe that a bank, bank holding company, or an affiliate or bank service company of either is not being operated in compliance with the laws of this state or in accordance with safe and sound banking practices.

(c) The term “affiliate” shall include any corporation, business trust, association, or other entity or organization under any of the following conditions:

(1) When a bank or a bank holding company, directly or indirectly, owns or controls either a majority of the voting shares or more than 50 percent of the number of shares voted for the election of the organization’s directors, trustees, or other persons exercising similar functions at the preceding election, or controls in any manner the election of a majority of the organization’s directors, trustees, or other persons exercising similar functions.

(2) When control of a bank or bank holding company is held, directly or indirectly, through stock ownership or in any other manner, by the shareholders of a bank or bank holding company who own or control either a majority of the shares of the bank or bank holding company or more than 50 percent of the number of shares voted for the election of directors of the bank or bank holding company at the preceding election, or by trustees for the benefit of the shareholders of the bank or bank holding company.

(3) When a majority of the directors of the bank or bank holding company comprise a majority of the directors, trustees, or other persons exercising similar functions of the organization.

(4) When the organization owns or controls, directly or indirectly, either a majority of the shares of capital stock of a bank or bank holding company or more than 50 percent of the number of shares voted for the election of directors of a bank or bank holding company at the preceding election, or controls in any manner the election of a majority of the directors of a bank or bank holding company at the preceding election, or controls in any manner the election of a majority of the directors of a bank or bank holding company, or for the benefit of whose shareholders or members all or substantially all the capital stock of a bank or bank holding company is held by trustees.

(Acts 1980, No. 80-658, §5-3-1; Acts 1997, No. 97-495, p. 885, §1; Act 2011-589, p. 1306, §1; Act 2013-352, p. 1261, §1.)

§ 5-3A-2 Acceptance of Examinations and Reports of Federal Bank Regulatory Agency, Etc

The superintendent is authorized to accept, in his discretion, in lieu of any examination authorized by the laws of this state to be conducted by his department the examination that may have been made of same within a reasonable period by a federal bank regulatory agency, provided a copy of said examination is furnished to said superintendent. Nothing in this section shall be construed to limit the duty of any banks in this state, deposits in which are to any extent insured under the provisions of the Federal Deposit Insurance Act or of any amendment of or substitution for the same, to comply with the provisions of said act, its amendments or substitutions or the requirements of said corporation relative to examinations and reports, nor to limit the powers of the superintendent with reference to examinations and reports under existing law.

(Acts 1980, No. 80-658, §5-3-2.)

§ 5-3A-3 Disclosure of Information Obtained by Superintendent, Bank Examiners, Etc

(a) Neither the superintendent, any member of the Banking Board, nor any bank examiner or other state employee shall disclose the condition and affairs of any bank or bank holding company, or their subsidiaries or other affiliates, ascertained by an examination of such bank, or bank holding company, or affiliates, or report or give information as to persons who are depositors or debtors of a bank, except as authorized or required by law; provided, that this section shall not be construed to prevent bank examiners and other employees from reporting such information to the superintendent or such persons as the superintendent may lawfully designate.

(b) Notwithstanding the provisions of subsection (a), the superintendent, at the superintendent’s discretion, may disclose any information, otherwise protected under this section, to the members of the Banking Board and confer with the members of the Banking Board regarding the same and may disclose such information as is necessary in taking enforcement actions or other supervisory actions pursuant to this title.

(c) The superintendent may furnish to the Federal Reserve, Federal Deposit Insurance Corporation, the Comptroller of the Currency, or to any successor banking supervisory agency of the United States reports of examination and other data as the superintendent deems advisable. The Federal Reserve, Federal Deposit Insurance Corporation, the Comptroller of the Currency, or any successor banking supervisory agency of the United States may use such reports of examination and other information in taking their enforcement and other supervisory actions. Any disclosure by these agencies to third parties must be made with the prior consent of the superintendent and subject to such confidentiality restrictions required by this title or as the superintendent may require.

(d) The superintendent may also furnish copies of his or her reports of examination and any other information to the board of directors of the bank, bank holding company, or affiliate, which was examined and to any bank holding company owning more than 50 percent of the capital stock of such bank.

(e) Any reports or information furnished or disclosed under subsection (a), (b), (c), or (d) shall remain the property of the Banking Department and, except as provided in this section and Section 5-3A-11, may not be disclosed to any person other than the officers, directors, attorneys, and auditors of such bank or bank holding company or affiliate, consultants or advisors to such bank, bank holding company, or affiliate, and, subject to appropriate confidentiality agreements, persons considering the possible acquisition of, merger with, or investment in such bank, bank holding company, or affiliate. No person receiving such reports or information may (1) use such report or information other than in connection with the bank, bank holding company, or affiliate, and its business and affairs, (2) retain that report or information or copies thereof, or (3) except as expressly permitted by law, disclose such report or information to any person not authorized to receive the same under this subsection. For purposes of this title, a bank service company pursuant to 12 U.S.C. §§1861-1867 shall be subject to the same confidentiality requirements as an affiliate or a bank or bank holding company.

(f) Any person violating this section shall be guilty of a Class A misdemeanor.

(Acts 1980, No. 80-658, §5-3-3; Act 2007-224, p. 284, §1; Act 2011-589, p. 1306, §1; Act 2013-352, p. 1261, §1.)

§ 5-3A-4 Expenses of Special Examinations

The expenses incidental to any special examination of banks, bank holding companies, or their affiliates shall be borne by the bank or bank holding company so examined, and such bank or bank holding company shall, on the call of the superintendent, pay into the Treasury of Alabama, earmarked for the use of the Banking Department, within 10 days after said examination, an amount not exceeding the actual expenses of such examination, including per diem, travel expenses and the pro rata portion of the salaries of the state employees engaged in making such examination.

(Acts 1980, No. 80-658, §5-3-4; Act 2011-589, p. 1306, §1.)

§ 5-3A-5 Examination of Agency of Foreign Banks

The superintendent shall have the power to examine or cause to be examined every agency located in this state of any foreign bank for the purpose of ascertaining whether it has violated any law of the state and for such other purposes and to such other matters as the superintendent may prescribe.

(Acts 1980, No. 80-658, §5-3-5.)

§ 5-3A-6 Examination of Witnesses and Production of Documents; Penalties for False Entry or Statement; Proceedings Against Former Employees

(a) For purposes of this section, a bank holding company is a holding company organized under the laws of Alabama or another state in the United States that directly owns a majority of the voting securities of an Alabama state bank.

(b) The superintendent and every examiner acting under the superintendent may administer oaths and may examine under oath any person whose testimony may be required on the examination of any bank or any bank holding company, on the examination of any affiliate of a bank, or on the examination of any agency of any foreign bank and shall have authority and power to compel the appearance and attendance of any such person or the production of any records and documents of any bank, any bank holding company, any affiliate of a bank, or any agency of a foreign bank for the purpose of any examination and attendance or production may be enforced by order of a circuit court. Production of records and documents or testimony, whether or not made under oath, required by the superintendent on the examination of any bank or bank holding company shall not constitute a waiver by the bank, bank holding company, or any director, officer, employee, advisor, consultant, attorney, or accountant of or for the bank or bank holding company of any attorney-client privilege or other privilege to which they may be entitled under law.

(c) Any officer, director, agent, or employee of any bank, any bank holding company, any affiliate of any bank, or any agency of any foreign bank, or any affected person, whether one or more, who (1) makes any false entry or omission with intent to mislead in any book, report, or statement of such bank, bank holding company, affiliate of such bank, or agency of such foreign bank or (2) makes a false statement, whether or not made under oath, to the superintendent, an examiner acting under the superintendent, or to any officer of such bank, bank holding company, affiliate of any bank, or agency of any foreign bank with intent to injure or defraud such bank, bank holding company, affiliate, or agency or with the intent to influence in any way the action of the superintendent or an examiner acting under the superintendent, shall be subject to removal and the imposition of civil money penalties by the superintendent when so directed by the Banking Board as provided in this title. An order of removal may prohibit the affected person from participating in the affairs of any Alabama state bank or any holding company that controls an Alabama state bank. Any action of the superintendent or examiner acting under the superintendent taken in reliance upon such false entry, omission, or statement may be rescinded and withdrawn.

(d) In taking an action to prohibit participation by, remove, or impose civil money penalties upon, any officer, director, or employee of any bank, any bank holding company, any affiliate of any bank, or any agency of any foreign bank under this section, the superintendent and Banking Board shall not be required to establish that the bank, bank holding company, affiliate of the bank, or agency of a foreign bank suffered or probably will suffer financial loss and shall not be required to establish that the superintendent or examiner acting under the superintendent was influenced by such false entry, omission, or statement.

(e) The resignation, termination of employment or participation, or separation of any director, officer, or employee of a bank or bank holding company for any reason whatsoever shall not affect the jurisdiction and authority of the superintendent or the Banking Board to issue any notice or order and proceed under this title against any such person, including, without limitation, Sections 5-2A-12 and 5-3A-6, if such notice or order is served before the end of the six-year period beginning on the last date that such person ceased to be a director, officer, or employee of any bank or bank holding company.

(Acts 1980, No. 80-658, §5-3-6; Act 2007-224, p. 284, §1; Act 2010-548, p. 966, §1; Act 2011-589, p. 1306, §1.)

§ 5-3A-7 False Swearing, Etc., Before Bank Examiners or Superintendent

Any person who willfully or corruptly swears or affirms falsely, when being examined under oath by any bank examiner or the superintendent in regard to any material matter or thing, shall be guilty of perjury.

(Acts 1980, No. 80-658, §5-3-7.)

§ 5-3A-8 Reports of Superintendent and Bank Examiners as to Examinations; Publication of Reports of Examination for Limited Purposes

Each examiner shall report under oath to the superintendent the result of each examination made by him, which report the superintendent shall keep on file in his office for a period of not less than two years from the time of the making of such report. The superintendent shall have the power, and he is hereby authorized, to publish the report of his examination of any bank or any affiliate of a bank which shall not within 120 days after notification of the recommendations or suggestions of the superintendent, based on said examination, have complied with the same to his satisfaction. Ninety days’ notice prior to such publication shall be given to the bank or affiliate of a bank.

(Acts 1980, No. 80-658, §5-3-8.)

§ 5-3A-9 Loans, Gifts, Favors, Etc., to Banking Department Employees from Banks, Employees, Etc., Prohibited

(a) No officer, agent or employee of any bank shall offer or give to an employee of the State Banking Department or his family, and no such employee nor his family shall solicit or receive anything of value directly or indirectly from a bank, including a gift, favor, or service or a promise of future employment. Expenses associated with social occasions afforded such employee shall not be deemed a thing of value within the meaning of this section or prohibited hereby.

(b) No superintendent, assistant superintendent, deputy superintendent or bank examiner of the State Banking Department shall, either directly or indirectly, be pecuniarily interested in nor borrow from a state bank. Debts now existing and any debt which may be owing at the time of employment to state banks may not be extended or renewed.

(c) Nothing herein shall be construed to prohibit the superintendent or a State Banking Department employee from owning a certificate of deposit in a state bank, however, no preferential rate shall be granted.

(Acts 1980, No. 80-658, §5-3-9; Acts 1988, No. 88-553, p. 869.)

§ 5-3A-10 False Reports by Bank Examiners

Any bank examiner who shall make a report under oath as to the result of any examination made by him which is knowingly and willfully false shall be guilty of perjury.

(Acts 1980, No. 80-658, §5-3-10.)

§ 5-3A-11 Reports of Examination; Meetings of Banking Board; Confidentiality

All reports of examination, records reflecting action of a bank or bank holding company, or affiliate of either, taken pursuant thereto, and records and minutes of meetings of the Banking Board relating to a bank or several banks or a bank holding company, or affiliate of either, shall be confidential and shall not be subject to subpoena or inspection except by subpoena from a grand jury served on the superintendent.

(Acts 1980, No. 80-658, §5-3-11; Act 2011-589, p. 1306, §1; Act 2013-352, p. 1261, §1.)

§ 5-3A-12 Semiannual Reports by Banks - Required; Verification

All banks shall make to the superintendent, on the call of the superintendent for such report, not less than two reports during each year, according to the form which may be prescribed by the superintendent. Such report must be verified by the oath or affirmation by the president, cashier or secretary and by at least three directors of the bank to be correct to the best of their knowledge and belief of each.

(Acts 1980, No. 80-658, §5-3-12.)

§ 5-3A-13 Semiannual Report by Banks - Special Reports of Banks

The superintendent may call for a special report from any particular bank whenever, in his judgment, the same is deemed necessary for the protection of the public or for a full and complete knowledge of the condition of the bank by the superintendent. A special report called for shall be made in all particulars as required by Sections 5-3A-14 and 5-3A-15, but the superintendent shall not have the right to require that such report be published in a newspaper.

(Acts 1980, No. 80-658, §5-3-13.)

§ 5-3A-14 Semiannual Report by Banks - Form; Publication; Penalty for Late Report

Each report required by Section 5-3A-12 shall exhibit in detail and under appropriate head the resources and liabilities of each bank at the close of business on any past day specified by the superintendent, not more than five days prior to the issue of the superintendent’s call, which day for report shall be uniform throughout the state and shall be transmitted by the bank to the superintendent within 30 days after the receipt of a request or requisition therefor from him, and the same shall be published once by the bank in a newspaper in the city or town in which the bank is located, at the expense of said bank. If no newspaper is published in the town where the bank is located, publication must be made in a newspaper published in the nearest city. Proof of such publication shall be furnished by the bank to the superintendent in such manner as may be required by him, including the clippings of the report as published in the newspaper.

The superintendent shall prescribe to the bank the form for the published report made by the bank, which form shall contain such items as are deemed necessary by the superintendent to inform the public as to the financial condition of the bank. The superintendent shall see that each bank has published its report in accordance with the form prescribed and shall check such published report, using the newspaper clipping furnished him by the bank, with the sworn report of the bank filed with the superintendent.

If the report is not published by the bank, the superintendent shall, at the expense of the bank, publish the report. Each bank failing to transmit the report to the superintendent within 30 days after the receipt of a request shall pay $100.00 for each day after said 30 days. Said fee may be waived by the superintendent upon a showing of good cause by the party requesting the waiver.

(Acts 1980, No. 80-658, §5-3-14.)

§ 5-3A-15 Semiannual Reports by Banks - Republication

If there are discrepancies in the published report of the bank and the sworn report furnished to the superintendent and if, in the opinion of the superintendent, the discrepancies are due to clerical errors, the superintendent shall notify the bank to republish the report so as to conform with the sworn report filed with the superintendent, and the bank shall make such republication. If, in the opinion of the superintendent, the discrepancies in the published and sworn reports are not due to clerical errors, the superintendent shall forthwith publish a true and correct report as shown by the sworn report filed with the superintendent, stating in such publication that the published report of the bank did not conform to the sworn report on file with the superintendent, and the bank shall pay the costs and expenses of such republication.

(Acts 1980, No. 80-658, §5-3-15.)

§ 5-3A-16 Failure to Pay for Publication of Bank Report by Superintendent

Any bank which fails or refuses to pay the cost and expense of the publication by the superintendent of any report of the bank made in pursuance of the requirements of law shall pay to the state $100.00 plus cost of publication.

(Acts 1980, No. 80-658, §5-3-16.)

§ 5-3A-17 Verification of False Report of Condition of Bank

Any person who knowingly and willfully signs or verifies by oath or affirmation any false report of the condition of a bank to the superintendent, on call of the superintendent for such report, shall be guilty of perjury.

(Acts 1980, No. 80-658, §5-3-17.)

Article 2 Examination of Bank Services Providers Act

§ 5-3A-30 Short Title

This article shall be known and may be cited as the Examination of Bank Service Providers Act.

(Act 2018-500, §2.)

§ 5-3A-31 Legislative Findings

The Legislature finds and declares that the connections between banks and service providers create risks to the financial system, as banks are increasingly reliant on third parties to provide or enable key banking functions and other services. Because of the role service providers have in the safety and soundness of banks and the stability of the financial system, the Legislature finds that it is necessary for banking agencies to have authority to examine service providers. The purpose of this article is to authorize the Superintendent of Banks, through examiners appointed by the superintendent, to examine service providers that provide services to banks, other than national banks, subject to supervision and inspection by the superintendent.

(Act 2018-500, §2.)

§ 5-3A-32 Definitions

For the purposes of this article, the following terms shall have the following meanings:

(1) SERVICE PROVIDER. Any person, company, corporation, or other legal entity that provides a covered service listed in Section 5-3A-33 to a serviced bank.

(2) SERVICED BANK. Every bank, bank holding company, bank service company, or any subsidiary or affiliate of a bank that is subject to the supervision of the superintendent pursuant to Section 5-3A-1, and for which covered services are performed by a service provider.

(Act 2018-500, §2.)

§ 5-3A-33 Regulation and Examination of Certain Service Providers; Covered Services

(a) Whenever a serviced bank causes to be performed for itself, by contract or otherwise, any of the covered services listed in this section, the performance, condition, and affairs of the service provider are subject to regulation and examination to the same extent as if the services were being performed by the serviced bank itself when deemed necessary by the superintendent to ensure the safe and sound operation of a serviced bank or serviced banks or to respond to a danger, or potential danger, to the public welfare.

(b) For the purposes of this section, covered services include all of the following:

(1) Data processing services.

(2) Activities that support financial services including, but not limited to, lending, funds transfer, fiduciary activities, trading activities, and deposit taking.

(3) Internet related services including, but not limited to, web services and electronic bill payments, mobile applications, system and software development and maintenance, and security monitoring.

(c) For the purposes of this section, covered services do not include the following:

(1) Provision to a serviced bank of an interactive computer service or a general audience Internet or communications platform, except to the extent that the service or platform is specially designed or adapted for the business of banking and activities relating to the business of banking.

(2) When performed by attorneys who are not employees of the serviced bank, legal services the provision of which is conditioned by law on the existence and maintenance of a professional license to practice law by the attorney providing the legal services.

(d) In order to promote regulatory efficiency, in the event that a service provider has been examined by another state or federal financial services regulatory agency or by a member of the Federal Financial Institution Examinations Council (FFIEC), or any successor entity, in the immediately preceding 24 months, the superintendent may accept the results of the examination in lieu of conducting his or her own examination. Nothing in this article shall be construed as limiting or otherwise restricting the superintendent from participating in any examination by any other state or federal agency or a member of the FFIEC.

(Act 2018-500, §2.)

§ 5-3A-34 Confidentiality of Examination Reports; Availability of Copies

Examination reports of service providers created or obtained by the superintendent or State Banking Department are confidential subject to Sections 5-3A-3 and 5-3A-11. The superintendent may furnish a copy, or portions thereof, of a report of any examination performed by the superintendent of the performance, condition, and affairs of any service provider and any other information obtained through examination of the service provider to entities as provided in Section 5-3A-3, including the board of directors of the serviced bank, under the same terms and with the same limitations as set forth for other examination reports, data, and information under Section 5-3A-3. Additionally, the superintendent may furnish copies of his or her reports of examination, and any other information obtained through examination of the service provider, to the FFIEC, and to the board of directors of the service provider, under the same terms and with the same limitations as provided in Section 5-3A-3.

(Act 2018-500, §2.)

§ 5-3A-35 Powers of Superintendent

(a) The superintendent may enter into agreements, which shall be deemed sole source, one vendor, and one supplier contracts under the procurement laws of this state and shall be exempt from competitive and other bid requirements, with any bank supervisory agency that has concurrent jurisdiction over a service provider to do either of the following:

(1) Engage the services of the examiners of any bank supervisory agency at a reasonable rate of compensation.

(2) Provide the services of the examiners of the State Banking Department to any bank supervisory agency at a reasonable rate of compensation.

(b) The superintendent may enter into corrective agreements with a service provider or may issue corrective orders to a service provider if the superintendent determines the actions are necessary to ensure the safe and sound operation of a serviced bank or serviced banks or to respond to a danger, or potential danger, to the public welfare.

(c) The superintendent may enter into joint examinations or joint enforcement actions with other bank supervisory agencies having concurrent jurisdiction over a service provider.

(Act 2018-500, §2.)

Chapter 4A Retention of Bank Records

§ 5-4A-1 Certain Records to Be Retained; Disposition of Records After Retention for Prescribed Period; Reproduction of Records and Books

(a) Every bank shall retain its business records for such periods as may be prescribed by regulation adopted pursuant to Section 5-2A-9.

(b) Any bank may dispose of any records which have been retained for the period prescribed by the superintendent.

(c) Any bank may cause any or all books and records at any time in its custody and books and records relating to trusts, estates and other fiduciary accounts, to be reproduced by photostatic, photographic, or microphotographic process, or by any other generally recognized reproduction process, and reproduction so made, whether enlarged or not, shall have the same force and effect as the original thereof and be admitted in evidence equally with the original.

(Acts 1980, No. 80-658, §5-4-1.)

§ 5-4A-2 Applicability of Chapter to State and National Banks, Etc

This chapter shall be applicable to banks and, to the extent that they are not in contravention of any law or regulation of the United States, the provisions of this chapter shall apply and inure to the benefit of national banking associations doing business in this state.

(Acts 1980, No. 80-658, §5-4-2.)

Chapter 5A Organization and Operation of Banks

§ 5-5A-1 Procedure for Incorporation - Application for Permit

(a) The proposed incorporators of a bank shall execute and acknowledge an application for a permit in writing in the form prescribed by the superintendent and shall file the same in the office of the State Banking Department, which application shall be signed by all of the incorporators requesting a certificate authorizing the proposed bank to transact business at the place, time and under the name stated in said application.

(b) At the time of filing said application, the applicant shall pay to the superintendent a filing fee.

(c) The application shall name at a minimum five directors, and a majority of all directors shall be outside directors unless a written waiver is obtained from the superintendent. A director shall be deemed to be an outside director if the director will not serve as an officer, other than the chair, or an employee of the bank.

(d) The application shall name a chair, chief executive officer, a chief financial/operations officer, and a chief lending officer of the bank. The chair must be an outside director. The superintendent may exercise discretion and waive any of the above requirements by written notice.

(e) The superintendent shall designate the newspaper in which notice of intention to organize shall be published as required by Section 5-5A-2.

(Acts 1980, No. 80-658, §5-5-1; Act 2011-589, p. 1306, §1.)

§ 5-5A-2 Procedure for Incorporation - Notice of Intention to Incorporate

Before a bank can become incorporated under the laws of Alabama, a notice of intention to organize such bank shall be published once a week for three successive weeks in the newspaper designated by the superintendent. Such notice shall specify the names of the proposed incorporators, the name of the proposed corporation, the place where it proposes to do business and the amount of capital paid in with which it will commence business, provided however, where the superintendent determines an emergency exists which might cause or has caused closing or liquidating an existing bank, the superintendent may waive such advance publication requirement in order to permit formation of a new bank, and such publication shall occur after the new bank commences business.

(Acts 1980, No. 80-658, §5-5-2.)

§ 5-5A-3 Procedure for Incorporation - Affidavit of Proposed Incorporators; Affidavit of Proposed Stockholders; Submission of Proposed Certificate of Incorporation; Disclosure to Stockholders

After the notice of intention to incorporate has been published, the parties named as proposed incorporators in the published notice of the proposed corporation shall make an affidavit before some officer authorized to administer oaths and in said affidavit shall set forth the fact of publication of the notice as required by Section 5-5A-2, the names of the proposed stockholders, and the names of the proposed executive officers; and attach to the affidavit a copy of the published notice; and each proposed stockholder shall make an affidavit which shall state for himself that he bona fide intends to become a stockholder in the amount subscribed for in the proposed bank. These affidavits shall be filed with the superintendent; and, at the time of filing these affidavits, the proposed incorporators shall submit to the superintendent the proposed certificate of incorporation of the bank. The proposed incorporators must also disclose in writing to each proposed stockholder such data as the superintendent may require.

(Acts 1980, No. 80-658, §5-5-3.)

§ 5-5A-4 Procedure for Incorporation - Investigation as to Fitness of Stockholders and Executive Officers and Necessity for Banks

The superintendent shall ascertain whether the character and general fitness of the persons named as proposed incorporators, proposed stockholders and proposed executive officers in the affidavit and in the proposed certificate of incorporation are such as to command the confidence of the community in which such bank is proposed to be located, and the superintendent shall make this inquiry and determination, regardless of whether or not objections to the incorporation are filed with him. The superintendent shall investigate the convenience and need for a bank in the community where the same is proposed to be located and shall also ascertain if there is sufficient business in said community to support said bank.

(Acts 1980, No. 80-658, §5-5-4.)

§ 5-5A-5 Procedure for Incorporation - Filing of Objections to Incorporation of Proposed Bank; Investigation of Objections

Any bank doing business in the community or any reputable citizen in the community may file with the superintendent an objection to the incorporation of the proposed bank, provided that the superintendent may refuse to accept objections after 15 days from the last date of publication of the notice of intention to incorporate. If such objection is filed, the superintendent shall thoroughly and specifically inquire into and investigate the objections. The superintendent in his investigation may summon witnesses to appear before him, and may administer oaths to such witnesses, and may examine such witnesses under oath. The superintendent may in his discretion disclose in confidence to the proposed incorporators such information which relates to the proposed bank as he deems appropriate and the superintendent and employees of the Banking Department shall be immune from suit in their individual capacity because of such disclosure and information.

(Acts 1980, No. 80-658, §5-5-5.)

§ 5-5A-6 Procedure for Incorporation - Certificate of Superintendent of Banks Authorizing Filing of Certificate of Incorporation

If the superintendent shall be satisfied from his investigation that the character and general fitness of the persons named as stockholders and executive officers are such as to command the confidence of the community in which such bank is proposed to be located and that there is sufficient business to support said bank in said community and that the convenience and needs of said community shall be served, he shall pass upon the sufficiency of the certificate of incorporation; and, if he approves the certificate he shall issue under his hand and official seal a certificate authorizing the proper official or officials to file the certificate of incorporation upon proof of payment of subscription to the capital subscribed for as required by law. The superintendent shall transmit the proposed certificate of incorporation, together with said certificate made by him to the official or officials with which a certificate of incorporation would be filed under the business corporation laws of this state, and the superintendent shall keep on file in his office a duplicate of the certificates made by him.

(Acts 1980, No. 80-658, §5-5-6.)

§ 5-5A-7 Procedure for Incorporation - Filing and Recordation of Certificate of Incorporation

The official or officials designated by the business corporation laws to file certificates of incorporation shall, upon the certificate of incorporation being duly signed by the incorporators and proof being duly made as required by law of the payment of subscription to the capital, file and record the certificate of incorporation and other papers necessary or deemed necessary in the incorporation of the bank, together with the said certificate issued by the superintendent.

(Acts 1980, No. 80-658, §5-5-7.)

§ 5-5A-8 Procedure for Incorporation - Refusal to Permit Incorporation; Appeal from Refusal to Banking Board

If the superintendent is of the opinion from his investigation that the character and general fitness of the persons named as stockholders or executive officers are such as not to command the confidence of the community in which such bank is proposed to be located or that there is not a sufficient business to support said bank in said community or that the convenience or needs of said community shall not be served, he shall issue under his hand and official seal, a refusal to permit the incorporation of the proposed bank and a copy of his refusal shall be filed in the superintendent’s office, and the refusal and the proposed certificate of incorporation shall be returned to the proposed incorporators or their agent. No right of appeal to the Banking Board exists except upon refusal of the superintendent to permit incorporation. Any proposed stockholder or individual may appeal from such refusal of the superintendent by written notice of appeal filed with the superintendent within 28 days of the notice of refusal to the Banking Board. The Banking Board may take evidence and examine witnesses with respect to the propriety and justice vel non of said refusal and may make such findings and orders as may be necessary either to confirm said refusal or to permit the incorporation of such bank. Full power and authority is hereby vested in the State Banking Board to review, revise, and reverse or confirm any ruling or finding or order of the superintendent denying the establishment of state banks and to take evidence and examine witnesses of all parties touching such matters. The Banking Board will notify all parties of its decision.

(Acts 1980, No. 80-658, §5-5-8.)

§ 5-5A-9 Procedure for Incorporation - Judicial Review

Nothing in this chapter shall be construed to prevent the Circuit Court of Montgomery County, as provided by law, from reviewing and reversing either the action of the Banking Board in granting or refusing a charter or permitting the organization of a new bank or the action of the superintendent in granting a charter or permitting the organization of a new bank. Written notice of appeal must be filed with that court within 28 days of the order from which the appeal is taken. Upon proper proceedings, the court, after full hearing of the matters at issue, shall enter an order or judgment reversing or affirming the order appealed. The granting of a charter or permit by the superintendent or granting or refusal to grant a charter or permit by the Banking Board shall be taken as prima facie just and reasonable.

(Acts 1980, No. 80-658, §5-5-9.)

§ 5-5A-10 Permit to Transact Business - Required

No bank shall engage in the banking business until it shall have received from the superintendent a permit to transact a banking business. Any person who shall hereafter transact any business as an officer or agent of any bank hereafter incorporated, before such bank is authorized to transact business as a bank by the permit of the superintendent, shall be guilty of a misdemeanor and upon conviction, shall be fined not less than $1,000.00 nor more than $10,000.00. Each day on which said person transacts such business shall be a separate offense. The superintendent is empowered to seek an injunction from any court of competent jurisdiction enjoining such transaction of business.

(Acts 1980, No. 80-658, §5-5-10.)

§ 5-5A-11 Permit to Transact Business - Examination; Issuance and Recordation of Permit

The superintendent shall, before issuing his permit to any bank to commence business under the application provided for in Section 5-5A-1, examine or cause an examination to be made in order to ascertain whether the requisite capital of such bank has been paid in cash. If the superintendent shall find that the requisite capital has been paid in cash, that the certificate of incorporation has been approved and recorded and that all other requirements for the issuance of the permit have been met, he shall issue his permit authorizing such bank to commence business at the place, time and under the name as stated in the application for the permit and to transact business in this state as a bank, which permit shall be recorded in the office of the superintendent in a book to be kept by him for that purpose, and a certified copy thereof shall be filed and recorded at the expense of the bank in the office of the official or officials with which the certificate of incorporation of the bank has been filed.

(Acts 1980, No. 80-658, §5-5-11.)

§ 5-5A-12 Membership in Federal Deposit Insurance Corporation, Etc

All banks now or hereafter operating under the laws of this state shall be members of the Federal Deposit Insurance Corporation or such other agency as may be created to insure the deposits of such bank.

(Acts 1980, No. 80-658, §5-5-12.)

§ 5-5A-13 Filing Fee; Other Fees

(a) The Banking Board shall from time to time fix the amount of the fee for filing an application for a new bank, and for:

(1) Establishment of a branch of an existing bank;

(2) Conversion of a national bank to a state bank;

(3) A merger of two or more existing banks;

(4) Establishment and operation of any facility authorized under the provisions of Sections 5-2A-7 and 5-2A-8;

(5) Acquisition of a majority of voting stock of a bank;

(6) Any examination necessitated by the foregoing; and

(7) Other actions that require the approval of the superintendent or the Banking Board.

(b) All such fees shall be paid into the special fund set up by the State Treasurer pursuant to Section 5-2A-20.

(Acts 1980, No. 80-658, §5-5-13.)

§ 5-5A-14 Capital - Minimum Amount Required for Incorporation of Bank

(a) No bank hereafter organized under the laws of Alabama shall have total initial capital accounts actually paid in of less than $800,000.00.

(b) The superintendent may require a higher amount of capital accounts and where the bank will have no significance except as a means of acquiring the assets or the voting shares of an existing bank, the superintendent may require a lesser amount of capital accounts.

(Acts 1980, No. 80-658, §5-5-14.)

§ 5-5A-15 Capital - Increase or Decrease

Any bank shall with the consent of the superintendent have power and authority to increase or decrease its authorized capital in the manner provided for a corporation under the business corporation laws of this state.

(Acts 1980, No. 80-658, §5-5-15.)

§ 5-5A-16 Issuance of Capital Notes and Debentures

No bank shall issue capital notes or capital debentures except with the prior written approval of the superintendent under such conditions as he may impose.

(Acts 1980, No. 80-658, §5-5-16.)

§ 5-5A-17 Amendment of Certificate of Incorporation; Approval of Amended Certificate of Incorporation

A bank may amend its certificate of incorporation in the manner provided by the laws governing business corporations. No proposed amendment of a certificate of incorporation of a bank is valid unless approved in writing by the superintendent and may not be recorded unless such written approval accompanies the proposed amendment.

(Acts 1980, No. 80-658, §5-5-17.)

§ 5-5A-18 Powers of Banks Generally

Corporations formed for the purpose of doing business as a bank may:

(1) Discount bills, notes or other evidences of debt;

(2) Receive and pay out deposits, with or without interest, pay checks, and impose charges for any services;

(3) Receive on special deposit money, bullion or foreign coins or bonds or other securities;

(4) Buy and sell foreign and domestic exchanges, gold and silver bullion or foreign coins, bonds, bills of exchange, notes and other negotiable paper;

(5) Lend money on personal security or upon pledges of bonds, stocks or other negotiable securities;

(6) Take and receive security by mortgage, security agreement or otherwise on property, real and personal;

(7) Become trustees for any purpose and be appointed and act as executors, administrators, guardians, receivers, or fiduciaries upon receiving the prior written approval of the superintendent under Section 5-11A-1;

(8) Lease real and personal property upon specific request of a customer, provided such banks must comply with any applicable Alabama laws regulating leasing real property or improvements thereon to others;

(9) Perform computer, management, and travel agency services for others;

(10) Subscribe to the capital stock and become a member of the Federal Reserve System and comply with rules and regulations thereof;

(11) Accept deposits and payments on loans and other obligations as agent for other banks located in this state that are subsidiaries of the same bank holding company. If banks located in this state are affiliates, they may accept deposits and payments on loans and other obligations as agent for each other. Banks acting as agents for other banks under this subsection shall not be deemed branch offices of the banks for which they act. As used in this subsection, banks are “affiliates” if the same person or persons directly or indirectly own or control either a majority of the voting shares or more than 50 percent of the number of shares entitled to elect the directors of both banks; and

(12) Do any business and exercise any powers incident to the business of banks.

(Acts 1980, No. 80-658, §5-5-18; Acts 1990, No. 90-217, p. 253.)

§ 5-5A-18.1 Banks and Trust Companies to Have Power of Federally Chartered or Regulated Financial Institution

In addition to all other rights and powers provided under this title, banks and trust companies chartered by this state and supervised by the superintendent and banks or trust companies chartered by any other state which are doing business or proposing to conduct any bank or trust company activities in this state and each of their subsidiaries, subject to the prior approval of the superintendent, may make any loan or investment , exercise any power, and engage in any activity which they could make , exercise, or engage in if incorporated or operating as a federally chartered or regulated financial institution and they shall be entitled to all rights, privileges, and protections granted or available to federally chartered or regulated financial institutions. In addition to other conditions determined at the superintendent’s discretion, any approval granted under this section to a bank or trust company chartered by another state or to subsidiaries of a bank or trust company chartered by another state may be conditioned upon the existence of reciprocal authority from the other state for Alabama state banks and trust companies or their subsidiaries to exercise the same power or engage in the same activity in the other state. The provisions of this section shall take priority and be given effect over any other general or specific provisions of Alabama law to the contrary. Except in the case of a natural disaster or other emergency, in determining whether to issue an approval of an activity, right, privilege, or protection under this section, the superintendent shall consider the importance of maintaining a competitive dual banking system and whether such an approval is contrary to the public interest. In the event of a natural disaster or other national, regional, state, or local emergency, the superintendent may temporarily waive or suspend requirements for bank and trust company compliance with any other general or specific provisions of this title. At the discretion of the superintendent, an approval issued under this section to any bank, trust company, or subsidiary of a bank or trust company may apply to all banks, trust companies, and their subsidiaries. Approvals granted under this section shall not exempt the applicant or its subsidiary from applicable licensure and regulatory requirements of Articles 1, 2, and 4 of Chapter 27 of Title 34, except where a national bank or its subsidiary would not be subject to the licensure or regulatory requirements of Articles 1, 2, and 4 of Chapter 27 of Title 34. For the purposes of this section, the term federally chartered financial institution means any bank, savings bank, limited purpose bank, savings and loan association, other institution whose deposits are federally insured, or trust company chartered by the Office of the Comptroller of the Currency or the Office of Thrift Supervision, or their successor agencies, and any subsidiary of such institutions.

(Acts 1988, No. 88-554, p. 870; Acts 1995, No. 95-115, p. 134, §71; Act 2007-224, p. 284, §1.)

§ 5-5A-19 Reserves

(a) A bank which is not a member of the Federal Reserve System shall maintain at all times a reserve fund in an amount fixed by resolution of the Banking Board. The amount of the required reserve for each day shall be computed on the basis of average daily deposits covering such biweekly or shorter periods as shall be fixed by resolution of the Banking Board. This reserve shall consist of cash on hand and demand deposits due from other banks.

(b) A bank shall give written notice to the superintendent, in the manner prescribed by the superintendent for such notice, of any deficiency in the amount or form of the reserve fund required by this section within three business days after the close of any scheduled averaging period during which deficiency occurs. Such bank shall pay to the superintendent a fee because of this deficiency which shall be fixed by the Banking Board. All such fees shall be paid into the special fund set up by the State Treasurer pursuant to Section 5-2A-20.

(c) A bank which is a member of the Federal Reserve System shall maintain at all times a reserve fund in accordance with the requirements applicable to a member bank under the laws of the United States.

(Acts 1980, No. 80-658, p. 1259, §5-5-19; Acts 1981, No. 81-687, p. 1158.)

§ 5-5A-20 Branch Banks; Commercial Affiliates

(a) Alabama banks may establish a branch or office for the transaction of the banking business within the State of Alabama upon prior approval of the superintendent. Alabama banks may establish a branch or office for the transaction of a banking business in any state other than Alabama, any territory of the United States, or in any foreign country in accordance with the provisions of federal law, the laws of the other state, territory, or foreign country and upon the prior approval of the superintendent.

(b) All laws or parts of laws, whether general, local, or general laws of local applications, which conflict with this section are hereby repealed to the extent of such conflict.

(c) Neither an Alabama bank nor an out-of-state bank may establish or maintain a branch or office for the transaction of the banking business in Alabama on the premises of a commercial affiliate of the bank. For purposes of this section, commercial affiliate is an affiliate of the bank as set forth in subsection (k) of Section 2 of the Bank Holding Company Act which engages in commerce. An entity engages in commerce when 15 percent or more of its revenue is derived from activities other than those in which a bank holding company, or its subsidiaries, may engage. Premises of the commercial affiliate are any physical locations where the commercial affiliate directly or indirectly maintains ownership or conducts business.

(Acts 1980, No. 80-658, p. 1259, §5-5-20; Acts 1983, 1st Ex. Sess., No. 83-73, p. 76; Acts 1985, No. 85-364, p. 307; Acts 1995, No. 95-115, p. 134, §72; Act 2007-224, p. 284, §1.)

§ 5-5A-21 Surplus; Restriction on Dividends

Every bank shall transfer to surplus each year at least 10 percent of its net earnings until the surplus of such bank shall be equal to at least 20 percent of its capital, and it shall be unlawful for such bank to declare or pay a dividend in excess of 90 percent of the net earnings of such bank until the surplus of such bank shall be equal to at least 20 percent of capital.

Thereafter the prior written approval of the superintendent shall be required if the total of all dividends declared by the bank in any calendar year shall exceed the total of its net earnings of that year combined with its retained net earnings of the preceding two years, less any required transfers to surplus. No dividends, withdrawals or transfers may be made from the bank’s surplus without the prior written approval of the superintendent.

For the purpose of this section the term “net earnings” shall mean the remainder of all earnings from current operations plus actual recoveries on loans and investments and other assets, after deducting from the total thereof all current operating expenses, actual losses, accrued dividends on preferred stock, if any, and all federal, state and local taxes.

(Acts 1980, No. 80-658, §5-5-21.)

§ 5-5A-22 Limits of Indebtedness

(a) No bank shall make a loan to any one person which, when combined with all other loans to such person, would cause total loans to that person to exceed:

(1) Ten percent of the capital accounts of the bank, if such loans are not secured, or

(2) Twenty percent of the capital accounts of the bank, if loans in excess of 10 percent of capital are fully secured.

(b) No loans which would exceed the limitation set forth in subsection (a)(1) shall be made unless duly authorized or approved in advance by the board of directors of the bank, a committee of the board of directors of the bank, or a loan committee, with such authorization or approval recorded in minutes of the meeting at which the authority was given.

(c)(1) As used in this section, the term “capital accounts” shall include capital, surplus, and undivided profits as defined in Section 5-1A-2, together with obligations of the bank subordinated in priority upon liquidation or dissolution to the claims of depositors of the bank. The term shall also include such reserves as may from time to time be permitted to be included by the superintendent.

(2) In calculating total loans to a person under this section the following rules shall govern:

a. In computing the total liabilities of any person to a bank, there shall be included all liabilities to the bank as maker or acceptor of paper discounted with or sold to such bank and the liability of the indorser, drawer, or guarantor who obtains a loan from or discounts paper with or sells paper under his or her guaranty or repurchase agreement to such bank.

b. In computing the total liabilities of any person to a bank, there shall be included all liabilities to the bank of any partnership or any unincorporated association of which such person is a member, any loans made for such person’s benefit or for the benefit of such partnership or unincorporated association, and any loans made to, or for the benefit of, a corporation of which such person owns 35 percent or more of the capital.

c. In computing the total liabilities of any partnership or unincorporated association to a bank, there shall be included all liabilities of its individual members to such bank, loans made for the benefit of such partnership or unincorporated association or any member thereof, and any loan made to, or for the benefit of, any corporation of which any member owns 35 percent or more of the capital.

d. In computing the total liabilities of any corporation to a bank, there shall be included all loans made for the benefit of the corporation, and all loans to, or for the benefit of any partnership or unincorporated association, or any member thereof, who owns 35 percent or more of the capital of such corporation.

e. In computing the total liabilities of any person to a bank, direct or indirect loans to such person’s spouse will be aggregated and treated as loans to such person until the bank can satisfy the superintendent that each spouse has a separate net worth and available assets or cash flow to independently repay and service each individual spouse’s debts, and such net worth, assets, or cash flow of each is not dependent on decisions made or actions taken by the other.

f. In computing total liabilities of any person to a bank, any credit exposure to a person arising from a derivative transaction, repurchase agreement, reverse repurchase agreement, securities lending transaction, or securities borrowing transaction between the bank and the person shall be included. For the purposes of this paragraph the term derivative transaction shall include any transaction that is a contract, agreement, swap, warrant, note, or option that is based, in whole or in part, on the value of, any interest in, or any quantitative measure or the occurrence of any event relating to, one or more commodities, securities, currencies, interest or other rates, indices, or other assets.

(d) There shall be excluded from the limits set forth in subsection (a) the following:

(1) Indebtedness evidenced by commercial paper drawn in good faith against actually existing values and secured by a security interest upon goods in transit with shippers’ order, bills of lading, or comparable instruments attached;

(2) Deposits in a reserve depository or a Federal Reserve Bank;

(3) Loans to the extent secured by:

a. Obligations of, and obligations guaranteed by the United States, the State of Alabama, any political subdivision of the State of Alabama, any public body of the State of Alabama, or a public body of any political subdivision of the State of Alabama if the obligations or guarantees are general obligations thereof;

b. Obligations which the bank would be authorized to acquire without limit as investment securities;

c. Guarantees or commitments or agreements to take over or purchase made by any department, bureau, board, commission, or establishment of the United States or any corporation owned directly or indirectly by the United States; or

d. At least a like amount of cash or deposits held by the lending bank.

(4) Investment securities acquired by the bank;

(5) Such other loans, liabilities, or transactions as shall from time to time be established by regulations of the State Banking Department.

(e) It shall be the duty of the superintendent to order any loans in excess of the amount fixed in this section reduced to the legal limit within 30 days of the superintendent’s issuance of a written report of examination detailing such excess. If such reduction is not made by the bank within 30 days of the superintendent’s order, the superintendent may take appropriate action, including ordering the excess charged to profit and loss if, in his or her opinion, such excess is not well secured, or may by order impose civil money penalties against the bank not to exceed the amount of interest and fees paid or contracted to be paid to the bank on the loan or loans in excess of the amount fixed in this section. If such order of the superintendent is not complied with, the superintendent may proceed as in other cases provided for violation of the orders of the superintendent, and the bank shall have the same rights to a hearing and of appeal as are provided in Section 5-2A-12.

(Acts 1980, No. 80-658, p. 1259, §5-5-22; Act 2007-224, p. 284, §1; Act 2011-589, p. 1306, §1.)

§ 5-5A-23 Investments and Loans with Respect to Housing

(a) Banks, insurance companies and savings and loan associations are authorized:

(1) To make such loans and advances of credit and purchases of obligations representing loans and advances of credit as are eligible for insurance and to obtain such insurance; and

(2) To make such loans secured by real property or leasehold as the Federal Housing Administrator insures or makes a commitment to insure and to obtain such insurance.

(b) It shall be lawful for banks, insurance companies or savings and loan associations to purchase, invest in and dispose of bonds or notes secured by mortgages issued by the Federal Housing Administrator and in securities issued by national mortgage associations.

(c) No law of this state requiring security upon which loans or investments may be made, or prescribing or limiting interest rates upon loans or investments, or prescribing or limiting the period for which loans or investments may be made shall be deemed to apply to loans or investments made pursuant to the foregoing paragraph.

(d) Any bank or trust company purchasing, investing in or otherwise holding in any fiduciary capacity for the benefit of any ward or other beneficiary any mortgage loan insured by the Federal Housing Administrator shall be entitled to receive and retain for its own individual or corporate account any service charge allowed by said administrator on account of the servicing of the insured mortgage loan. Such service charge shall be considered as a reimbursement to such fiduciary for the additional expense of handling for the mortgagor and the Federal Housing Administrator monthly collections on such mortgage loan and payments of taxes, insurance and other charges on the property securing such loan as such administrator and regulations may require.

(e) Wherever, by statute of this state, collateral is required as security for the deposit of public or other funds, or deposits are required to be made with any public official or department, or an investment of capital or surplus or a reserve or other fund is required to be maintained, consisting of designated securities, notes and bonds insured by the Federal Housing Administrator and debentures issued by the Federal Housing Administrator and obligations of national mortgage associations shall be acceptable at face value for such purposes.

(Acts 1980, No. 80-658, §5-5-23.)

§ 5-5A-25 Acceptance of Drafts or Bills of Exchange Arising from Transactions Involving Shipment of Goods - Authority

Any bank in Alabama may accept drafts or bills of exchange drawn upon it, having not more than six months’ sight to run, exclusive of days of grace, which grew out of transactions involving the importation or exportation of goods or which grew out of transactions involving the domestic shipment of goods, if shipping documents conveying or securing title are attached at the time of acceptance or which are secured at the time of acceptance by a warehouse receipt or other such document conveying or securing title covering readily marketable staples. The bank shall keep a careful record of all such acceptances and show the same as a liability on its general books.

(Acts 1980, No. 80-658, §5-5-25.)

§ 5-5A-26 Acceptance of Drafts or Bills of Exchange Arising from Transactions Involving Shipment of Goods - Limitations

No bank shall accept, whether in a foreign or domestic transaction, for any one person, company, firm or corporation, to an amount equal at any time in the aggregate to more than 10 percent of its paid up and unimpaired capital and surplus, unless the bank is secured either by attached documents or by some other actual security growing out of the same transaction as the acceptance, and no bank shall accept such bills to an amount equal at any time in the aggregate to more than one half of its paid up and unimpaired capital stock and surplus. Banks which are members of the Federal Reserve System may accept such bills to an amount not exceeding at any time in the aggregate 100 percent of their paid up and unimpaired capital and surplus, but the aggregate of acceptances growing out of domestic transactions shall in no event exceed 50 percent of such capital and surplus.

(Acts 1980, No. 80-658, §5-5-26.)

§ 5-5A-27 Loans Secured by Own Stock; Purchase of Own Stock; Ownership of Capital Stock of Other Banks

No bank shall make a loan taking its own stock as security therefor or directly or indirectly purchase shares of its own stock, except in pursuance of provisions of law for reducing its capital stock. No bank shall subscribe for or own capital stock in any other bank except in the usual course of business in payment of an indebtedness or in order to prevent a loss on a debt owing to it and the bank must sell said stock within one year from the time the same is acquired unless this time period is extended by the superintendent; provided, however, that nothing in this section shall prohibit the ownership by any bank of any stock in another bank acquired prior to May 28, 1980.

(Acts 1980, No. 80-658, §5-5-27.)

§ 5-5A-28 Pledge of Assets

No bank may pledge assets as security for deposits, except any bank is authorized to pledge acceptable assets as security for deposits of trust funds deposited by its trust department and of public funds, heretofore or hereafter deposited, by the United States or any agency or governmental instrumentality of the United States or by a state or any political subdivision of a state or any agency or other governmental instrumentality of such subdivision, including any county, municipal corporation, county, city, or other public board of education, including any custodian or treasurer of county, city, or other public school funds, any improvement authority heretofore or hereafter incorporated or any public corporation, including each board, authority, or district heretofore or hereafter organized or created in a state pursuant to authorization or determination by any municipality or municipalities or by any county or counties or the governing body of any one or more thereof. For purposes of this section, banks may only pledge assets to secure deposits of Alabama public entities that are defined as covered public entities or covered public officials under Section 41-14A-2. The word “deposits,” as used in this section, means deposits of all kinds, including, without limiting the generality of the foregoing, deposits in savings accounts, deposits in checking accounts, deposits in special trust funds, demand deposits, special deposits, time deposits on which interest is to be paid, and deposits for which a bank has issued its certificates of deposit.

(Acts 1980, No. 80-658, p. 1259, §5-5-28; Acts 1988, No. 88-260, p. 401; Act 2007-224, p. 284, §1.)

§ 5-5A-29 Security Not Required When Deposits Insured

Notwithstanding any provision of law of this state or of any political subdivision of the state or any agency or governmental instrumentality of such subdivision requiring security for deposits in the form of collateral, surety bond or in any other form, security for such deposits shall not be required to the extent said deposits are insured by the Federal Deposit Insurance Corporation or any successor thereto.

(Acts 1980, No. 80-658, §5-5-29.)

§ 5-5A-30 Transactions of Business on Legal Holidays; Use of Automated Teller Machine or Other Instrumentality, Transaction Fees, Disclosure; Limitation on Contractual Fee Restrictions, Intent of Limitation, Applicability

(a) Any bank may lawfully receive deposits or paychecks or sight drafts and transact any other business on any legal holiday, excepting Sunday, in the same manner and way that it is authorized to do on any legal banking day.

(b) Nothing in this section, nor any other law of this state, shall be construed to prohibit a bank the use of an automated teller machine, or other instrumentality as authorized by Section 5-2A-7 and Section 5-2A-8, 24 hours each day of the week including Sunday, and the use of the machine or other instrumentality by any bank is hereby authorized, provided the machine or other instrumentality and the use thereof is first approved by the appropriate bank regulatory authority, if the approval is required. A bank owning or operating a machine or other instrumentality may charge a transaction fee to the person using the machine or other instrumentality. The transaction fee shall be disclosed: (i) on a sign posted on the machine or other instrumentality or at a location in view of a person while viewing the machine or other instrumentality; or (ii) electronically during the course of the transaction in a manner that permits a person to cancel the transaction without incurring the transaction fee.

(c) No contract with a bank organized under the laws of this state or a national bank located in this state permitting the use of any automated teller machine or other instrumentality owned or operated by a bank by customers of any other financial institution shall prohibit, limit, or restrict the right of the bank to charge any fees not prohibited to the bank by law or require a bank to limit or waive its rights under this chapter.

(d) The amendments to subsection (b) made by Acts 1994, No. 94-104 shall be cumulative with, declare, and clarify existing law. The transaction fee shall be in addition to any fees and charges to which a bank and its customer may agree from time to time with regard to the use of any automated teller machine or other instrumentality.

(e) Subsection (c) shall apply to all contracts permitting the use of automated teller machines or other instrumentalities by customers of another financial institution irrespective of whether the contract was entered into before or after February 18, 1994.

(Acts 1980, No. 80-658, p. 1259, §5-5-30; Acts 1994, No. 94-104, p. 114, §1.)

§ 5-5A-31 Liability for Transactions on Legal Holidays

A bank shall be liable for and chargeable with deposits received and other business transacted on a legal holiday the same as if such deposit were received or business transacted on a legal banking day and shall have the same protection for payment of checks or sight drafts and business on a holiday that it would have if such payments were made and such transactions had on a legal banking day.

(Acts 1980, No. 80-658, §5-5-31.)

§ 5-5A-32 Closing of Banks, Etc., Permitted on One Business Day of Each Week

(a) Any bank or any branch or branches thereof may close on any one business day of each week and shall have this right even though there shall fall in such week a holiday as established in Section 1-3-8. If the superintendent should determine that an emergency should exist, he may authorize any bank or any branch or branches thereof to close on one or more business days.

(b) Any such day upon which such bank or any branch or branches thereof may elect to close shall with respect to such institution be deemed a holiday for all purposes and not a business day. All acts omitted or done by such bank or any branch or branches thereof upon any such day shall have the same consequence and effect as if omitted or done upon the next succeeding business day, and any act authorized, required or permitted to be performed at or with respect to any such bank or any branch or branches thereof on the days so fixed may be performed on the next succeeding business day, and no liability or loss of rights of any kind shall result from such delay to any person or to any bank, or any branch or branches thereof.

(Acts 1980, No. 80-658, §5-5-32.)

§ 5-5A-33 Bank to Pay Checks Drawn on It at Par

Any bank shall pay all checks drawn on it and transmitted in a cash letter at par and shall make no charge for the payment of such checks the first time presented to it for payment.

(Acts 1980, No. 80-658, §5-5-33.)

§ 5-5A-35 Agreements Between Principal and Sureties on Bond for Deposit of Money and Assets in Bank, Etc

It shall be lawful for any party of whom a bond, undertaking or other obligation is required to agree with his surety or sureties for the deposit of any or all money and assets for which he and his surety or sureties are or may be held responsible with a bank, or with other depository approved by the court or a judge thereof, if such deposit is otherwise proper, for the safekeeping thereof, and in such manner as to prevent the withdrawal of such money or assets or any part thereof, without the written consent of such surety or sureties, or an order of court or a judge thereof made on such notice to such surety or sureties as such court or judge may direct; provided, however, that such agreement shall not in any manner release from or change the liability of the principal or sureties as established by the terms of the bond.

(Acts 1980, No. 80-658, §5-5-35.)

§ 5-5A-36 Notice Upon Maturity of Certificate of Deposit Issued for More Than 90 Days

In the case of certificates of deposit issued for more than 90 days which are automatically renewable, a bank shall send within a reasonable period, but in no event less than five days before the next maturity, a written notice to the last known address of record.

(Acts 1980, No. 80-658, §5-5-36.)

§ 5-5A-37 Rights of Minors

A minor may make, in her or his own name, a deposit in any bank, and such deposit may be general or special, and shall be paid only to such minor, or upon his or her order, and not to the parents or guardians of such minor, and such payment shall be valid as against the minor child, his or her parents or guardian.

(Acts 1980, No. 80-658, §5-5-37.)

§ 5-5A-38 Disposition of Small Deposits of Deceased Person - to Whom Payable; When Bond Required

Whenever a person shall die leaving deposits in a bank not exceeding $5,000.00 in the aggregate, the bank may in its discretion discharge itself from liability thereafter by paying the deposits to the surviving spouse of the deceased or, if there is none, to the adult children and to the person having the actual custody and control of the minor child or children of the deceased; provided, that such person, if not the legal guardian, shall execute to the probate judge of the county where the principal office of the bank is located a bond in the penal sum of double the amount of the portion of such deposit he receives for the faithful accounting of the money so received, which shall be approved by said probate judge; or, if there is no surviving spouse or child or children, to the person or persons who, under the laws of Alabama, are the next of kin and inherit the personal property of the deceased. The bank shall be fully protected by requiring an affidavit by some reputable citizen as to the facts specified.

(Acts 1980, No. 80-658, §5-5-38.)

§ 5-5A-39 Disposition of Small Deposits of Deceased Person - Time for Payment; When Payment Prohibited

No payment shall be made pursuant to Section 5-5A-38 by the bank before the lapse of 60 days from the date of the death of the deceased, and no payment shall be made by the bank under this section if letters testamentary or of administration have been issued to a personal representative or a proceeding is pending in the court in this state which would have jurisdiction of the administration of the estate. The bank shall be fully protected by requiring an affidavit by some reputable citizen as to the facts specified.

(Acts 1980, No. 80-658, §5-5-39.)

§ 5-5A-40 Disposition of Deposit in Trust for Another Upon Death of Trustee

Whenever any deposit shall be made in any bank by any person in trust for another and no other or further notice of the existence and terms of a legal and valid trust shall have been given in writing to and received by the bank, in the event of the death of the trustee, such deposit or any part thereof, together with any interest thereon, may be paid to the person for whom said deposit was made, whether a minor or adult, and the receipt or acquittance of such person shall fully relieve and release said bank from all liability.

(Acts 1980, No. 80-658, §5-5-40.)

§ 5-5A-41 Payment of Deposits Made in Names of Two Persons Upon Death of One; More Than Two Persons with Provision for Survivorship

(a) Any deposit heretofore or hereafter made in any bank in the names of two or more persons payable to any of such persons, upon the death of either of said persons, may be paid by the bank to the survivors jointly, irrespective of whether or not:

(1) The form of the deposit or deposit contract contains any provision for survivorship;

(2) The funds deposited were the property of only one said person;

(3) There was at the time of making such deposit any intention on the part of the person making such deposit to vest the other with a present interest therein;

(4) Only one of said persons during their joint lives had the right to withdraw such deposit;

(5) There was any delivery of any bank book, account book, savings account book, certificate of deposit or other writing by the person making such deposit to the other of such persons; or

(6) Any other circumstances.

The bank in which such deposit is made may pay such deposit, or any part thereof or interest thereon, to either of said persons, or if one is dead, to the surviving of them, and such payment shall fully release and discharge the bank from all liability for any payment so made.

(b) The provisions of this section shall apply to savings accounts, checking accounts and certificates of deposit and shall also apply to any deposit made in the names of more than two persons where there is an express written provision for survivorship in the deposit contract.

(c) Nothing contained in this section shall be construed to prohibit the person making such deposit from withdrawing or collecting the same during his lifetime; nor shall anything contained in this section prohibit any person or persons making a deposit in the names of more than one person from providing for disposition of such deposit and interest thereon in a manner different from that provided above in this section, provided such different manner of disposition is expressly provided for in writing in the deposit contract.

(Acts 1980, No. 80-658, §5-5-41.)

§ 5-5A-42 Adverse Claims to Deposits

Notice to any bank of an adverse claim to a deposit standing on its books to the credit of any person shall not be effectual to cause said bank to recognize said adverse claimant unless said adverse claimant shall also either procure a restraining order, injunction or other appropriate process against said bank from a court of competent jurisdiction in a civil action therein instituted by such claimant wherein the person to whose credit the deposit stands is made a party and served with summons or shall execute to said bank in form and with sureties acceptable to it, a bond indemnifying said bank from any and all liability, loss, damage, costs and expenses for and on account of the payment or recognition of such adverse claim or the dishonor of or failure to pay the check or failure to comply with other order of the person to whose credit the deposit stands on the books of said bank; provided, that this section shall not apply in any instance where the person to whose credit the deposit stands is a fiduciary for such adverse claimant and the facts constituting such relationship, as well as the facts showing reasonable cause of belief on the part of the said claimant that the said fiduciary is about to misappropriate said deposit, are made to appear by the affidavit of such claimant.

(Acts 1980, No. 80-658, §5-5-42.)

§ 5-5A-43 Disclosure of Customer Financial Records

A bank shall disclose financial records of its customers pursuant to a lawful subpoena, summons, warrant or court order issued by or at the request of any state agency, political subdivision, instrumentality, or officer or employee thereof and served upon the bank. No bank, director, officer, employee or agent thereof shall be held civilly or criminally responsible for disclosure of financial records pursuant to a subpoena, summons, warrant or court order which on its face appears to have been issued upon lawful authority.

(Acts 1980, No. 80-658, §5-5-43.)

§ 5-5A-44 Acquisition of Majority of Voting Shares of a Bank; Procedure

(a) No person, acting directly or indirectly or through or in concert with one or more persons, may acquire control of a state bank or of any corporation or other entity having control of a state bank, unless an application is filed with the superintendent for review of the proposed transaction and for his or her action, if any, as provided in this section.

(b) The application shall be on a form prescribed by the superintendent and shall be made under oath. The application must contain all information that the superintendent by regulation requires to be furnished in an application, as well as any information that the superintendent orders to be included in the particular application being filed and shall be accompanied by the filing fee prescribed by the Banking Board. For the purposes of this section, the Banking Board may reduce or waive any prescribed fees for applications where a change of control application must also be filed with a responsible federal bank supervisory agency, and the superintendent may accept a copy of the application filed with the responsible federal bank supervisory agency. The superintendent is authorized to waive any prescribed application fees for transactions which the superintendent exempts under subsection (g) (3). No acquiring party may acquire control of a bank unless the superintendent has approved the acquiring party’s acquisition plan. All persons with whom the acquiring party acts directly, indirectly, through, or in concert with to acquire control shall be identified in the application and shall provide all information required by the superintendent. The acquiring party shall file its application with the superintendent, and the application shall, except to the extent expressly waived by the superintendent, contain the following information:

(1) The identity, personal history, business background, and experience of each person by whom or on whose behalf the acquisition is to be made, including his or her material business activities and affiliations during the past five years, and a description of any material pending legal or administrative proceedings in which he or she is a party and any criminal indictment or conviction of such person by a state or federal court.

(2) A statement of the assets and liabilities of each person by whom or on whose behalf the acquisition is to be made, as of the end of the fiscal year for each of the five fiscal years immediately preceding the date of the notice, together with related statements of income and source and application of funds for each of the fiscal years then concluded, all prepared in accordance with generally accepted accounting principles consistently applied, and an interim statement of the assets and liabilities for each such person, together with related statements of income and source and application of funds, as of a date not more than 90 days prior to the date of the filing of the notice.

(3) The terms and conditions of the proposed acquisition and the manner in which the acquisition is to be made.

(4) The identity, source, and amount of the funds or other consideration used or to be used in making the acquisition, and if any part of these funds or other consideration has been or is to be borrowed or otherwise obtained for the purpose of making the acquisition, a description of the transaction, the names of the parties, and any arrangements, agreements, or understandings with such persons.

(5) Any plans or proposals which any acquiring party making the acquisition may have to liquidate the bank, to sell its assets or merge it with any company or to make any other major change in its business or corporate structure or management.

(6) The identification of any person employed, retained, or to be compensated by the acquiring party, or by any person on his or her behalf, to make solicitations or recommendations to stockholders for the purpose of assisting in the acquisition, and a brief description of the terms of such employment, retainer, or arrangement for compensation.

(7) Copies of all invitations or tenders or advertisements making a tender offer to stockholders for purchase of their stock to be used in connection with the proposed acquisition.

(8) If any tender offer, request, or invitation for tenders, or other agreement to acquire control is proposed to be made by means of a registration statement under the Federal Securities Act of 1933, as amended, or under circumstances requiring the disclosure of similar information under the Federal Securities Exchange Act of 1934, as amended, or in an application filed with the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, or the Securities Commissioner of Alabama requiring similar disclosure, the superintendent may accept the registration statement or application with any additional information as the superintendent may require in lieu of the requirements of this section.

(9) If, while an application is pending, any material change occurs in the facts stated in the application, the acquiring party within 10 days after the change shall file with the superintendent an amendment to the application describing the change in accordance with rules the superintendent may adopt.

Information obtained by the superintendent under this section is confidential and may not be disclosed by the superintendent or any officer or employee of the State Banking Department, except that the superintendent may in his or her discretion, if the superintendent deems it necessary or proper to the enforcement of the laws of this state or the United States and to the best interest of the public, divulge such information to any department, agency, or instrumentality of the state or federal government.

(c) For purposes of this section, the following terms shall have the following meanings:

(1) ACTING THROUGH OR IN CONCERT. Knowing participation in a joint activity or parallel action towards a common goal of acquiring control of a state bank or any corporation or other entity having control of a state bank whether or not pursuant to an express agreement.

(2) CONTROL. The power, directly or indirectly, to direct the management or policies of a state bank or of any corporation or other entity having that power or ownership of or power to vote (whether through the exercise of proxies or otherwise) the lesser of either of the following:

a. Twenty-five percent or more of any class of the voting securities of a state bank or of any corporation or other entity having control of a state bank.

b. Ten percent or more of any class of the voting securities of a state bank or of any corporation or other entity having control of a state bank if no other person will own, control, or hold the power to vote a majority of that class of voting securities immediately after the transaction.

(3) PERSON. An individual or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, or any other form of entity not specifically listed herein.

(d) The superintendent shall issue an order denying an application if he or she finds that any of the following circumstances exist:

(1) The financial condition of any acquiring person is such as might jeopardize the financial stability of the bank or prejudice the interests of the depositors or stockholders of the bank.

(2) The competence, experience, or integrity of any acquiring person or of any of the proposed management personnel indicates that it would not be in the interest of the depositors or stockholders of the bank, or in the interest of the public to permit such person to control the bank.

(3) Any acquiring person neglects, fails, or refuses to furnish the superintendent all the information required by the superintendent.

(4) The plans or proposals which any acquiring person may have to make any major change in the business or corporate structure or management may be detrimental to the safety and soundness of the state bank or of any corporation or other entity having control of the state bank.

(5) The effect of the proposed acquisition of control may result in a substantial reduction of competition in this state or communities served by the state bank to be acquired.

(6) The proposed acquisition of control may have a significantly adverse effect on the convenience and needs of the community or communities that are served by the state bank.

(e) The superintendent shall approve or deny a change of control under this section within 60 days after receipt of a completed application; provided that if the superintendent requests additional information from the applicant following receipt of a completed application, the time limit for the decision by the superintendent shall be the later of (1) the date set forth above in this subsection; or (2) 30 days after the receipt by the superintendent of the requested additional information. Any agreement entered into by the applicants and the superintendent as a condition that the application will not be denied is enforceable against the applicant and the bank.

(f) From any final order denying the application the applicant may appeal the decision in the manner and through the procedures established in Sections 5-5A-8 and 5-5A-9 for the denial of incorporation of a bank.

(g) This section does not apply to any of the following:

(1) The acquisition of securities in connection with the exercise of a security interest or otherwise by way of foreclosure on default in the payment of a debt previously contracted for in good faith.

(2) Acquisitions or transfers by gift, by will, or intestate succession.

(3) Any transaction which the superintendent by regulation, order, or written interpretation may exempt as not being contemplated by the purposes of this section or the regulation of which is not necessary or appropriate for the protection of the bank.

However, in any change of control transaction exempted from filing an application pursuant to this subsection, the acquiring person shall notify the superintendent within 60 days of obtaining control, shall submit a business plan including management structure within 90 days of obtaining control for approval by the superintendent, and shall obtain the superintendent’s prior approval for any changes to the business plan during the first three years from the date of change of control.

(h) If it appears to the superintendent that any person has committed or is about to commit a violation of this section or any regulation or order of the superintendent adopted under it, the Attorney General on behalf of the superintendent may apply to the Circuit Court of Montgomery County for an order enjoining the violation and for any other equitable relief as the nature of the case may require.

(i) Fees collected under this section shall be paid into the special fund established by the State Treasurer pursuant to Section 5-2A-20.

(j) This section applies to acquisitions subject to this section that occur on or after May 6, 2016.

(Acts 1980, No. 80-658, §5-5-44; Act 2010-548, p. 966, §1; Act 2011-589, p. 1306, §1; Act 2016-278, §§1, 2.)

§ 5-5A-45 Initiation of Run on Banks, Etc

Any person or persons whose business it is, either as individuals, agents or officers of banks, to receive checks, drafts and demands, when the same are not entitled to days of grace, upon any bank, and who receives the same, for collection and retains the same for an unreasonable time, without making known to the drawee bank that such collections and demands are held for collection, in order to accumulate a large amount for the purpose of starting what is commonly called a “run” on such bank, or for the purpose of embarrassing such drawee bank shall be guilty of a misdemeanor.

(Acts 1980, No. 80-658, §5-5-45.)

§ 5-5A-46 False, Etc., Statements, Etc., Affecting Financial Standing of Bank

Any person who shall willfully and maliciously make, circulate or transmit to another or others any false, libelous or slanderous statement, rumor or suggestion written, printed or by word of mouth which is directly or by inference derogatory to the financial condition, or affects the solvency or financial standing of any bank, or who shall counsel, aid, procure or induce another to start, transmit or circulate any such statement or rumor shall be guilty of a misdemeanor.

(Acts 1980, No. 80-658, §5-5-46.)

§ 5-5A-47 Liability of Directors or Officers; Enforcement Powers of Superintendent

If the directors or officers of any bank knowingly and willfully violate or knowingly and willfully permit any of the officers, agents, or employees of the bank to violate any of the provisions of this title, each and every director or officer engaging in such knowing and willful violation or knowing and willful permission shall be liable in his or her personal and individual capacity for all damages which the bank or any other person shall have sustained in consequence of such violation. The superintendent may use enforcement powers granted by Section 5-2A-12 to seek restitution for or on behalf of the bank for damages resulting from such violations. Further, the superintendent shall have standing to intervene in any court action arising out of or relating to such violation in order to protect the interests of the superintendent, the bank, or its shareholders.

(Acts 1980, No. 80-658, §5-5-47; Act 2007-224, p. 284, §1.)

Chapter 6A Directors, Officers, and Employees

Article 1 General Provisions

§ 5-6A-1 Directors of Banks to Own Stock in Bank; Citizenship and Residence of Directors

Not less than 75 percent of the directors of a bank shall, during their whole term of service, be citizens of the United States. Every director of a bank shall be the owner and holder of shares of stock in the bank or parent bank holding company. Every director shall hold such shares in his or her own name, unpledged and unencumbered in any way except statutory lien which might attach in favor of such corporation. No person convicted of a felony or a crime involving moral turpitude shall serve as a director. At least 51 percent of the directors of every bank shall be residents of the state. Any director at any time violating any of the provisions of this section shall be removed from office by the board of directors or by the superintendent when the facts are made known to the superintendent.

(Acts 1980, No. 80-658, §5-6-1; Act 98-244, p. 403, §1.)

§ 5-6A-2 Oath of Directors

Every such director shall, within 30 days after his election, take and subscribe, in duplicate, an oath that he will diligently and honestly perform his duties as such director, not knowingly violate or permit to be violated any provision of the banking law of this state and that he is the owner in good faith of the shares of stock of the bank or company required to qualify him for such office, standing in his own name on its books. A copy of such oath shall be forthwith filed with the Superintendent of Banks. No director shall perform the duties of his office until such oath is made, and in case a director fails to make such oath, his place on the board shall be declared vacant and his successor elected as prescribed by the bylaws of the bank, such successor being required to have the same qualifications and take the same oath as provided by this chapter.

(Acts 1980, No. 80-658, §5-6-2.)

§ 5-6A-3 Meeting of Board of Directors; Bonds of Officers and Employees of Banks

(a) The board of directors of any bank shall hold regular meetings at such time as may be fixed by the bylaws, at least once every two months, and shall at all times be subject to call by the president or by any two members of the board. Notwithstanding contrary provision in the certificate of incorporation or bylaws of a bank, meetings of the board of directors may be called by the superintendent and held at any place he requires.

(b) The board of directors, at their first meeting after election, shall fix and prescribe the amount of bond that shall be required of each officer and employee of the bank, and shall not be less than the amount that may have been fixed or that may be hereafter fixed by the superintendent for officers and employees of banks of the class to which it belongs. They shall require bonds, either individual or in blanket form, from each and every officer and employee handling money, checks, securities or other valuable papers of the bank, such bond to be made by a bonding company authorized to make such bonds in this state to be approved by the board of directors and to be in such form as may be approved by the superintendent. The superintendent or the board of directors of the bank may require an increase of the amount of such bond or other additional bond and securities, when he or they deem it necessary for the better protection of the bank and its depositors. Directors, as such, shall not be required to give bond.

(Acts 1980, No. 80-658, §5-6-3.)

Article 2 Prohibited Acts

§ 5-6A-20 Declaration of Illegal Dividends, Discounts of Notes, Etc

Any director of a bank who knowingly concurs in any vote or act of the directors of such bank by which it is intended to pay a cash dividend except from the undivided profits arising from the business of the bank in violation of Section 5-5A-21, or to make or approve a loan with the stock of the lending bank as security therefor; to divide, withdraw or in any manner pay to the stockholders or any of them any part of the capital of the bank, or to purchase or reduce such capital, except in pursuance of law; or to discount or receive any note or other evidence of debt in payment of any installment of purchase price of capital actually called in and required to be paid, or with intention to provide the means of making such payment; or to receive or discount any note or other evidence of debt with the intent to enable any stockholder to withdraw any part of the money paid in by him on his stock; or to apply any portion of the funds of such corporation except as allowed by law, directly or indirectly, to the purchase of shares of its stock, is guilty of a misdemeanor.

(Acts 1980, No. 80-658, §5-6-20.)

§ 5-6A-21 Concealment of Loans, Purchase or Sale of Security, Etc

Any officer or employee of a bank who intentionally conceals from the directors or a committee of such bank where the directors have delegated authority to a committee to pass on loans and discounts, any discount or loan made for and in behalf of the bank between the regular meetings of its board of directors or committee or the purchase or the sale of any of its securities during the same period is guilty of a misdemeanor.

(Acts 1980, No. 80-658, §5-6-21.)

§ 5-6A-22 Overdrawing Own Account; Receipt of Commissions, Etc., to Procure Loans, Discounts, Etc

Any officer, director, or employee of a bank who willfully and knowingly overdraws his account with such bank and thereby obtains money or funds of any such bank except as the superintendent shall allow by regulation, or asks, receives, consents or agrees to receive any commission, emolument, gratuity, or reward or any promise of any commission, emolument or reward, or any money, property or thing of value or of personal advantage in procuring or endeavoring to procure for any person, firm or corporation any loan from or the purchase or discount of any paper, note, draft, check or bill of exchange by any such bank is guilty of a misdemeanor.

(Acts 1980, No. 80-658, §5-6-22.)

§ 5-6A-23 Receipt or Possession of Bank Property with Intent to Defraud, Etc

Any director, officer or employee of a bank who knowingly receives or possesses himself of any of its property otherwise than in payment for a just demand and with intent to defraud shall be guilty of a felony.

(Acts 1980, No. 80-658, §5-6-23.)

§ 5-6A-24 Making of False Entries, Etc., on Books and Accounts of Bank

Any director, officer or employee of a bank who with intent to defraud makes or concurs in making any false entry, or with intent to defraud omits or concurs in omitting to make any material entry on its books and accounts, shall be guilty of a felony.

(Acts 1980, No. 80-658, §5-6-24.)

§ 5-6A-25 Fraudulent Representation as to Capital, False Reports, Etc., as to Condition of Bank, Etc

Any director, officer, or employee of a bank who knowingly, by newspaper advertisement or otherwise, represents its capital to be in excess of the actual capital accounts or knowingly concurs in making or publishing any materially false written report, exhibit, or statement of its financial condition, making any material statement which is false, or refuses or intentionally neglects to make any report or statement required by Chapters 1A through 13B and Chapter 20 of this title is guilty of a felony.

(Acts 1980, No. 80-658, §5-6-25; Acts 1995, No. 95-115, p. 134, §73.)

§ 5-6A-26 Loans or Extension of Credit to Bank Officers and Employees

An officer or employee of any bank who shall in any way obtain as a borrower any of the funds of such bank without having first complied with the requirements of this section must on conviction be punished as if he had embezzled the amount borrowed.

Any loan obtained by an officer or employee of a bank must be made in accordance with a written loan policy which has been adopted by the board of directors. Such loans or extensions of credit may be made only if (i) the bank would be authorized to make such loans or extensions of credit to borrowers other than officers and employees and (ii) such loans or extensions of credit to officers and employees do not involve more than the normal risk of repayment or present other unfavorable features. All such loans, extensions of credit, or lines of credit to an officer must be reported to the board of directors at its next meeting.

(Acts 1980, No. 80-658, §5-6-26.)

Chapter 7A Bank Merger, Consolidation, or Conversion

Article 1 Consolidation, Merger or Transfer of State Banks

§ 5-7A-1 Banks May Merge or Consolidate; Transfer of Place of Business

Any bank may consolidate or merge with or transfer its assets and liabilities to another bank and any bank may move its office or place of business from one city or town to another city or town within the state.

(Acts 1980, No. 80-658, §5-7-1.)

§ 5-7A-2 Proceedings to Effect Consolidation, Merger or Transfer

Before such consolidation, merger or transfer shall become effective, the following proceedings must be had and done. The board of directors of each bank affected must pass a resolution stating that such consolidation, merger or transfer is desirable and order the officers of the bank to call a meeting of the stockholders to consider the proposition. Upon the passage of such resolution by the directors, the officers shall mail a notice of such meeting to each stockholder at his last known place of residence, postage prepaid, at least 30 days before the date set for the meeting of stockholders, which notice shall specify the date and place of the meeting and the purpose for which the meeting is to be held. A copy of the resolution must also be forwarded to the superintendent for his information, and he shall investigate the advisability of such consolidation, merger or transfer. On the day of the meeting of the stockholders, a resolution may be prepared setting forth the desirability of the consolidation, merger or transfer of the place of business of such bank, which shall set forth the terms, etc., of such consolidation, merger or transfer and such other matters as the stockholders may see proper, not contrary to law. If a majority of the stock is represented at such meeting and vote in the affirmative for such resolution and the superintendent shall approve all of the proceedings and it is his judgment that the same would be for the best interest of the institution or institutions affected, such resolution shall have the force and effect of consolidating or merging such institution with the other institution, provided such action of the other institution is likewise satisfactorily passed by its stockholders. If the proposition to transfer the place of business from one town or city to the other is affirmatively voted for by a majority of all the stock of the institution and the superintendent, after careful investigation, is of the opinion that it is wise to change or transfer the place of business to another town or city, such transfer shall be made.

(Acts 1980, No. 80-658, §5-7-2.)

§ 5-7A-3 Certificate of Proceedings to Be Forwarded to Superintendent of Banks

A certificate of all the proceedings, including a copy of the pertinent portion of the minutes of the meeting of the board of directors at which the resolution under Section 5-7A-2 was passed, the notice which was given to each stockholder and a copy of the minutes of the stockholders’ meeting, shall be made and certified to by the president and cashier of the institution under the seal thereof and acknowledged before a notary public as deeds are required to be acknowledged by a corporation and forwarded to the superintendent for his certificate of approval.

(Acts 1980, No. 80-658, §5-7-3.)

§ 5-7A-4 Issuance of Certificate of Approval by Superintendent

If the superintendent approves the entire proceedings, he shall issue his certificate of approval in writing, in duplicate, one copy being filed in his office and the other forwarded, along with the certificate, to the official or officials where articles of merger or consolidation would be filed under the business corporation laws of this state, for record at the expense of the institution affected.

(Acts 1980, No. 80-658, §5-7-4.)

§ 5-7A-5 Examinations; Written Consent of Superintendent to Consolidation

Before approving proceedings to consolidate one such institution with another, the superintendent shall cause to be made an examination of each such institution to determine whether the interests of the depositors, creditors and stockholders of each are protected and that such consolidation is made for legitimate purposes, and his consent or rejection of such consolidation or transfer shall be based upon such examination and investigation. The expense of such examination shall be paid by such institution. No such consolidation shall be made without the written consent of the superintendent.

(Acts 1980, No. 80-658, §5-7-5.)

§ 5-7A-6 Appeals; Applicability of Article to Branch Banks, Etc

If such consent is refused, an appeal may be taken therefrom to the circuit court of the county where such institution is located. This article shall apply to banks having branches and to any branch office thereof in the same way as it applies to other banks.

(Acts 1980, No. 80-658, §5-7-6.)

Article 2 Conversion of National Banks into State Banks

§ 5-7A-20 Conversion of National Bank, Etc., into State Bank - Procedure

Any bank organized under the laws of the United States may, by the vote of the stockholders owning not less than a majority of the capital stock of such bank with the approval of the superintendent and upon the payment by it to the superintendent of a fee prescribed by the Banking Board under Section 5-5A-13, be converted into a state bank with any name approved by the superintendent.

(Acts 1980, No. 80-658, §5-7-20.)

§ 5-7A-21 Conversion of National Bank, Etc., into State Bank - Execution of Articles of Incorporation and Organization Certificate; Powers of Directors, Etc

In case of such conversion, the articles of incorporation and organization certificates may be executed by a majority of the directors of the bank and the certificate shall declare that the owners of a majority of the capital stock have authorized the directors to make such certificate and to exchange or convert the national bank into a state bank. A majority of the directors, after executing the articles of incorporation and the organization certificate, shall have power to execute all other papers and to do whatever may be required to make its organization perfect and complete as a state bank. The shares of any such bank may continue to be for the same amount each as they were before they were converted, and the directors may continue to be directors of the state bank until others are elected or appointed in accordance with the statutes of Alabama.

(Acts 1980, No. 80-658, §5-7-21.)

§ 5-7A-22 Conversion of National Bank, Etc., into State Bank - Powers and Duties of Bank, Stockholders, Officers, Etc., Upon Issuance of Certificate

(a) When the superintendent has given to such bank a certificate that the provisions of this article have been complied with, such bank and all its stockholders, officers and employees shall have the same powers and privileges and shall be subject to the same duties, liabilities and regulations, in all respects, as shall have been prescribed for banks originally organized as banking corporations under the laws of Alabama.

(b) At the time when such conversion of the national bank into a state bank, under the charter of the latter, becomes effective, all the property of the national bank, including all its rights, title and interest in and to all property of whatsoever kind, whether real, personal or mixed, and things in action, and every right, privilege, interest and asset of any conceivable value or benefit then existing, belonging or appertaining to it or which would inure to it, shall immediately, by act of law and without any conveyance or transfer and without any further act or deed, be vested in and become the property of the state bank, which shall have, hold and enjoy the same in its own right as fully and to the same extent as if the same were possessed, held and enjoyed by the national bank.

(c) Upon such conversion becoming effective, the state bank shall be deemed to be a continuation of the entity and of the identity of the national bank and all the rights, obligations and relations of the national bank to or in respect to any person, estate, creditor, depositor, trustee or beneficiary of any trust and in, or in respect to, any executorship or trusteeship or other trust or fiduciary function shall remain unimpaired. The state bank as of the time of the taking effect of such conversion, shall succeed to all such rights, obligations, relations and trusts and the duties and liabilities connected therewith and shall execute and perform each and every such trust or relation in the same manner as if the state bank had itself assumed the trust or relation, including the obligations and liabilities connected therewith. If the national bank is acting as administrator, co-administrator, executor, co-executor, trustee or co-trustee of or in respect to any estate or trust being administered under the laws of this state, such relation, as well as any other or similar fiduciary relations, and all rights, privileges, duties and obligations connected therewith shall remain unimpaired and shall continue into and in said state bank from and as of the time of the taking effect of such conversion, irrespective of the date when any such relation may have been created or established and irrespective of the date of any trust agreement relating thereto or the date of the death of any testator or decedent whose estate is being so administered. Nothing done in connection with the conversion of a national bank into a state bank shall in respect of any such executorship, trusteeship or similar fiduciary relation, be deemed to be or to effect, under the laws of this state, a renunciation or revocation of any letters of administration or letters testamentary pertaining to such relation, nor a removal or resignation from any such executorship or trusteeship or other fiduciary relationship, nor shall the same be deemed to be of the same effect as if the executor or trustee or other fiduciary had died or otherwise become incompetent to act.

(d) Any reference to the national bank in any contract, will or document shall be considered a reference to the state bank unless expressly provided to the contrary in the contract, will or document.

(Acts 1980, No. 80-658, §5-7-22.)

§ 5-7A-23 Declaration of Incorporation

Before the issuing of such certificate by the superintendent a majority of the directors of such bank shall file in the office of the official or officials with which a certificate of incorporation would be filed under the business corporation laws of this state a declaration of incorporation, which shall show:

(1) The name to be assumed and used by the corporation;

(2) The objects of the corporation, among which shall be the conversion of a national bank with the name and description of the same, into a state bank with all the power and authority that may be exercised by a state bank;

(3) The location of its principal office;

(4) The amount of its total authorized capital and the amount of its paid-in capital;

(5) The name and post-office address of each officer and director;

(6) The time limit, if any, for the duration of the corporation; and

(7) A certificate, acknowledged before a notary public by a majority of the directors of the national bank so converted, that there has been transferred by the national bank, by a vote of the stockholders owning not less than a majority of the capital stock of such national bank, to such state bank into which it is converted, all the property and assets of said national bank.

(Acts 1980, No. 80-658, §5-7-23.)

§ 5-7A-24 Issuance of Stock by State Bank

Such state bank shall have authority to issue to the stockholders of the national bank from which it was converted shares of stock of the same amount and of the same par value as is held by each of said stockholders in such national bank.

(Acts 1980, No. 80-658, §5-7-24.)

Article 3 Conversion of State Banks into or Consolidation with National Banks

§ 5-7A-40 Authorized; Exchange of Stock

Any state bank may, with the consent of the holders of a majority in amount of its stock obtained at a meeting of the shareholders called therefor, be converted or merged into or consolidate with a national bank, in such manner as may, at the time of such conversion, merger or consolidation, be prescribed by the laws of the United States, and the stock of such state bank may be exchanged for stock in such national bank upon such terms as the consenting shareholders may, at the meeting at which the conversion, merger or consolidation is authorized, determine or upon such terms as the holders of a majority of the stock of such state bank may, at any other meeting called for such purpose, determine. All proceedings relating to such a conversion, merger or consolidation shall be conducted in accordance with the requirements of Chapter 2A of Title 10, except that if any provision thereof shall conflict with or be more restrictive than the requirements set forth at 12 U.S.C. §214a then the procedures set forth in such §214a shall govern.

(Acts 1980, No. 80-658, p. 1259, §5-7-40; Acts 1981, No. 81-504, p. 863, §1.)

§ 5-7A-41 Meeting of Stockholders for Purpose of Conversion or Consolidation

All meetings of shareholders, called for any of the purposes provided for in Section 5-7A-40, shall be called by resolution of the board of directors. Notice of such meeting and of the purposes thereof shall be published once a week for four consecutive weeks prior to the date of such meeting in some newspaper with a general circulation in the city, town or village in which the principal place of business of said state bank is located, provided, that newspaper publication may be dispensed with entirely if waived by all the shareholders, and in the case of a merger or consolidation, one publication at least 10 days before the meeting shall be sufficient if publication for four weeks is waived by holders of at least two-thirds of each class of capital stock. The state bank shall send such notice to each shareholder of record by registered mail or by certified mail at least 10 days prior to the meeting, which notice may be waived specifically by any shareholder.

(Acts 1980, No. 80-658, p. 1259, §5-7-41; Acts 1981, No. 81-504, p. 863, §1.)

§ 5-7A-42 Transfer of Property of State Bank to National Bank

At the time when such conversion of or consolidation or merger by the state bank with a national bank, under the charter of the latter, becomes effective, all the property of the state bank including all its rights, title and interest in and to all property of whatsoever kind, whether real, personal or mixed, and things in action, and every right, privilege, interest and asset of any conceivable value or benefit then existing, belonging or appertaining to it or which would inure to it, shall immediately, by act of law and without any conveyance or transfer and without any further act or deed, be vested in and become the property of the national bank, which shall have, hold and enjoy the same in its own right as fully and to the same extent as if the same were possessed, held and enjoyed by the state bank.

(Acts 1980, No. 80-658, p. 1259, §5-7-42; Acts 1981, No. 81-504, p. 863, §1.)

§ 5-7A-43 Continuation of Identity, Obligations, Etc., of State Bank

Upon such conversion, merger or consolidation becoming effective, the national bank shall be deemed to be a continuation of the entity and of the identity of the state bank and all the rights, obligations and relations of the state bank to or in respect to any person, estate, creditor, depositor, trustee or beneficiary of any trust and in, or in respect to, any executorship or trusteeship or other trust or fiduciary function shall remain unimpaired. The national bank, as of the time of the taking effect of such conversion, merger or consolidation shall succeed to all such rights, obligations, relations and trusts and the duties and liabilities connected therewith and shall execute and perform each and every such trust or relation in the same manner as if the national bank had itself assumed the trust or relation, including the obligations and liabilities connected therewith. If the state bank is acting as administrator, co-administrator, executor, co-executor, trustee or co-trustee of or in respect to any estate or trust being administered under the laws of this state, such relation, as well as any other or similar fiduciary relations, and all rights, privileges, duties and obligations connected therewith shall remain unimpaired and shall continue into and in said national bank from and as of the time of the taking effect of such conversion, merger or consolidation, irrespective of the date when any such relation may have been created or established and irrespective of the date of any trust agreement relating thereto or the date of the death of any testator or decedent whose estate is being so administered. Nothing done in connection with the conversion to or merger or consolidation of a state bank with a national bank, shall, in respect to any such executorship, trusteeship or similar fiduciary relation, be deemed to be or to effect, under the laws of this state, a renunciation or revocation of any letters of administration or letters testamentary pertaining to such relation, nor a removal or resignation from any such executorship or trusteeship or other fiduciary relationship, nor shall the same be deemed to be of the same effect as if the executor or trustee or other fiduciary had died or otherwise become incompetent to act.

(Acts 1980, No. 80-658, p. 1259, §5-7-43; Acts 1981, No. 81-504, p. 863, §1.)

§ 5-7A-44 Rights of Dissenting Shareholders

The rights of shareholders of a national bank dissenting from the conversion, merger or consolidation of the bank shall be governed exclusively by the applicable laws of Congress.

A shareholder of a state bank who votes against the conversion, merger or consolidation of that state bank with or to a national bank, or who has given notice in writing to the bank at or prior to such meeting that he dissents from the conversion, merger or consolidation shall be entitled to receive in cash the value of the shares held by him, if and when the conversion, merger or consolidation is consummated, upon written request made to the resulting national bank at any time before 30 days after the date of consummation of such conversion, merger or consolidation, accompanied by the surrender of his stock certificates. The value of such shares shall be determined as of the date on which the shareholders meeting was held authorizing the conversion, merger or consolidation by a committee of three persons, one to be selected by unanimous vote of the dissenting shareholders entitled to receive the value of their shares, one by the directors of the resulting national bank and the third by the two so chosen. The valuation agreed upon by any two of three appraisers thus chosen shall govern; but, if the value so fixed shall not be satisfactory to any dissenting shareholder who has requested payment as provided herein, such shareholder may within five days after being notified of the appraised value of his shares appeal to the superintendent, who shall cause a reappraisal to be made, which shall be final and binding as to the value of the shares of the appellant.

If within 90 days from the date of consummation of the conversion, merger or consolidation, for any reason one or more of the appraisers is not selected as herein provided, or the appraisers fail to determine the value of such shares, the superintendent shall upon written request of any interested party, cause an appraisal to be made, which shall be final and binding on all parties. The expenses of the superintendent in making the reappraisal, or the appraisal as the case may be, shall be paid by the resulting national bank.

The plan of conversion, merger or consolidation, shall provide the manner of disposing of the shares of the resulting national bank not taken by the dissenting shareholders of the state bank.

(Acts 1981, No. 81-504, p. 863, §2.)

§ 5-7A-46 Sections Not to Affect General or Local Law, Etc

Except to the extent necessary to give effect to Section 5-7A-45(b), no general or local law or general law of local application shall be deemed to have been modified or repealed by Sections 5-7A-40 through 5-7A-46, and nothing contained herein shall be deemed in any way to change or repeal the provisions of Section 5-2A-7 or 5-5A-20.

(Acts 1981, No. 81-504, p. 863, §5.)

Article 4 Conversion of Savings Institutions into State Banks

§ 5-7A-60 Purpose

It is the purpose of this article to permit state and federally chartered savings and loan associations and savings banks to convert to state chartered banks with the approval of the Superintendent of Banks for the State of Alabama in accordance with the provisions of this article.

(Acts 1990, No. 90-289, p. 387, §1.)

§ 5-7A-61 Definitions

As used in this article, the following terms shall have the following meanings, respectively, unless the context clearly indicates otherwise:

(1) SAVINGS INSTITUTION. A savings and loan association or savings bank organized under the laws of this state or organized under the laws of the United States and having its principal place of business in this state, whether a “capital stock saving institution” which is authorized to issue capital stock, or a “mutual savings institution,” shares of which are owned by its members.

(2) RESULTING BANK. The state chartered bank that results from conversion of a savings institution to a state chartered bank pursuant to this article.

(3) SUPERINTENDENT. The Superintendent of Banks for the State of Alabama.

(4) STATE CHARTERED BANK. A bank the same as if such bank were incorporated, chartered and permitted to do business, all as provided in Section 5-5A-1 et seq.

(5) PLAN OF CONVERSION. That written document containing all the information and meeting the requirements as set forth in Section 5-7A-62(1).

(6) APPLICATION FOR CONVERSION. That written application, on a form to be prescribed by the superintendent, which is filed with the superintendent requesting approval of a plan of conversion.

(7) DEPARTMENT. The State Banking Department as provided for and created in Section 5-2A-1.

(Acts 1990, No. 90-289, p. 387, §2.)

§ 5-7A-62 Application to Convert Charter; Written Plan of Conversion; Authorizing Resolution; Submission to Superintendent; Fee; Tentative Approval; Vote of Stockholders or Members; Directors; Articles of Incorporation and Bylaws; Statement of Superintendent’s Objections; Amendment; Appeal of Disapproval; Application to Fdic; Final Approval and Permit

Any savings institution may apply to the superintendent for permission to convert its charter in order to do business as a state chartered bank in accordance with the following procedures:

(1) The board of directors shall approve a written plan of conversion, the application for conversion and shall adopt an authorizing resolution, all by a vote of a majority of all the directors. The plan of conversion shall include a statement of:

a. The proposed organization and management structure of the resulting bank if the application were approved, and the proposed name under which it would do business as a bank;

b. The method and time schedule for terminating any activities and disposing of any assets which would not conform to the requirements applicable to state chartered banks;

c. The competitive impact of such change, including any effect on the availability of particular financial services in the market area to be served by the resulting bank;

d. Such financial data as may be required by the superintendent to determine compliance with the reserve and liquidity requirements applicable to the resulting bank;

e. Such other information as the superintendent may require; and

f. If the savings institution is a mutual savings institution, shares of which are owned by its members, then the plan of conversion must provide the method and terms for converting the mutual savings institution to a capital stock savings institution provided that such method and terms must comply with and be in accordance with all state and federal laws, procedures and regulations governing the conversion of mutual savings institutions into capital stock institutions.

(2)a. Following approval by the board of directors, the plan of conversion, together with the certified copy of the authorizing resolution adopted by the board, and the application for conversion shall be submitted to the superintendent for tentative approval before being submitted to the stockholders or members of the savings institution.

b. The application for conversion pursuant to this article shall be accompanied by a fee prescribed by the banking board under Section 5-5A-13, payable to the superintendent.

(3) The superintendent shall tentatively approve the plan if he finds that:

a. The public convenience and advantage would be promoted by the conversion;

b. The resulting bank would have an adequate capital structure with regard to its activities and its deposit liabilities would meet the minimum capital requirements for existing state chartered banks under state and federal law; and would meet other applicable state and federal law requirements relating to the safety and soundness of the resulting bank;

c. The proposed conversion would not cause a substantially adverse effect on the financial condition of any bank already established in the primary service area;

d. The proposed officers and directors have sufficient experience, ability and standing to indicate reasonable promise for successful operation of the resulting bank;

e. The proposed name of the resulting bank would not be so similar to that of another bank or other financial institution as to cause confusion; and

f. The schedule for termination of any nonconforming activities and disposition of any nonconforming assets is reasonably prompt, and the plan for such termination and disposition does not include any unsafe or unsound practice.

(4) In the event the superintendent tentatively approves the plan of conversion, such plan shall be submitted to the stockholders or members at an annual meeting or at any special meeting called to consider such plan of conversion. Upon a favorable vote of a majority of the total number of votes eligible to be cast, the plan of conversion shall be adopted. Copies of the minutes of such meeting, verified by the affidavit of the secretary or an assistant secretary, shall be filed with the superintendent within 10 days after such meeting. Such verified copies of the minutes of such meeting shall be presumptive evidence of the holding of such meeting and of the action taken at such meeting. Provided the plan of conversion is adopted at such meeting, the stockholders or members shall elect the directors who shall be the directors of the resulting bank. Said directors must in all respects, both individually and as a group, meet the statutory and regulatory requirements applicable to directors of state chartered banks. Such directors shall then execute new articles of incorporation or amendments to existing articles and two copies of the new bylaws. The directors shall insert in the articles of incorporation the following: “This bank is incorporated by a plan of conversion from a _______ (state or federal savings and loan association, etc.).” All directors of the resulting bank shall execute and acknowledge the articles of incorporation and the bylaws.

(5)a. In the event the superintendent disapproves the plan of conversion for any reason, he shall state his objections to the plan of conversion in writing.

b. The applicant shall have a period of 28 days from the date of the superintendent’s written objections to: a) amend the plan of conversion and to resubmit same to the superintendent for approval; or b) appeal such determination by the superintendent in accordance with the provisions of Section 5-5A-8 et seq.

c. There shall be no limit on the number of times the plan of conversion may be amended prior to the time the applicant exercises its right of appeal as provided in subdivision (5)b.

d. The superintendent may disapprove the plan of conversion for any number of reasons, including but not limited to, a determination that such plan of conversion does not meet the requirements of any state, federal or other law; that the approval of such plan of conversion would not be in the best interest of the citizens of the State of Alabama or its banking community; that such savings institution is subject to a cease and desist order or other supervisory restriction imposed by any supervisory authority, insurer or guarantor.

(6) Upon the adoption of the plan of conversion by the stockholders or members, the institution shall apply to the Federal Deposit Insurance Corporation for a commitment for insurance guaranteeing the deposits of the resulting bank.

(7) Upon receipt of written notice of commitment for insurance from the Federal Deposit Insurance Corporation, and further provided all other requirements herein have been met, the superintendent shall issue to the savings institution his final approval of the application for conversion and a permit authorizing it to transact business pursuant to applicable law. The plan of conversion shall not take effect until such final approval and permit have been issued by the superintendent.

(Acts 1990, No. 90-289, p. 387, §3.)

§ 5-7A-63 Resulting Bank as Continuation of Savings Institution

Except insofar as the superintendent requires the converting savings institution to terminate certain activities and dispose of certain assets in order to meet the requirements applicable to state chartered banks, upon the conversion of any savings institution into a state chartered bank, the corporate existence of such savings institution shall not terminate, but such resulting bank shall be deemed to be a continuation of the savings institution so converted, and all property of the converted savings institution including its rights, titles and interests in and to all property of whatsoever kind, character or description, whether real, personal or mixed, and things in action and every right, privilege, interest and asset of any conceivable value or benefit, and all obligations, liabilities, charges, liens, encumbrances, judgments, and claims then existing or pertaining to it or which would inure to or against it, shall immediately by operation of law and without the necessity of any conveyance or transfer and without the necessity of any further act or deed remain and be vested in and continue to be the property or obligation of such resulting bank into which the savings institution has converted. Subject to the laws, provisions and regulations applicable to state chartered banks, such resulting bank shall have, hold, enjoy and be obligated the same in its own right as fully and to the same extent as the same was possessed, held, enjoyed and encumbered by the converting savings institution. All pending actions, and other judicial or administrative proceedings to which the converting savings institution is a party shall not be deemed to have abated or to have been discontinued by reason of such conversion, but may be prosecuted to final judgment or order in the same manner as if such conversion had not occurred, and the resulting bank may continue such action in its corporate name as a state chartered bank, and any judgment or order may be entered for or against it in such corporate name.

(Acts 1990, No. 90-289, p. 387, §4.)

§ 5-7A-64 Maintenance and Operation of Offices

Following the conversion of a savings institution to a state chartered bank pursuant to this article, the resulting bank may continue to maintain and operate as banking offices all offices maintained and operated by the savings institution at the time of such conversion.

(Acts 1990, No. 90-289, p. 387, §5.)

§ 5-7A-65 Expansion or Branching Limited

Except as provided in Section 5-7A-64, nothing in this article is to be construed, interpreted or applied to allow any existing state chartered bank, any resulting bank or any state chartered bank resulting from a plan of conversion under this article to expand or branch into any place in any manner or by any method not available to state chartered banks prior to enactment of this article.

(Acts 1990, No. 90-289, p. 387, §6.)

Chapter 8A Liquidation of Banks

Article 1 Solvent Banks

§ 5-8A-1 Liquidation of Solvent Banks

Any solvent bank may dissolve under the provisions of Alabama law relating to voluntary dissolution of a business corporation provided that the superintendent has given his written approval to such dissolution. The superintendent may require the directors to give bond in an amount fixed by him with surety or sureties to be approved by him, payable to the State of Alabama, for the protection of the superintendent and all other persons interested; provided, however, the amount of any such bond required shall not be greater than the total liability of the bank to its depositors and other creditors. Upon receipt of the written approval of the superintendent of the statutory dissolution procedures, it shall be unlawful for said bank to receive any further deposits.

(Acts 1980, No. 80-658, §5-8-1.)

Article 2 Insolvent Banks

§ 5-8A-20 Proceedings of Superintendent Before Banking Board as to Defaults or Misconduct of Bank

Whenever it shall appear to the superintendent that any bank has violated its charter or any law of the state, or is conducting business in any unauthorized manner, or that the bank may suspend payment of its obligations, or if its capital is impaired and not made good under the requirement of the superintendent within the required time, or if any such bank or an affiliate of such bank as defined in Section 5-3A-1 shall refuse to submit its papers, books, and concerns to the inspection of the superintendent or any examiner, or if any officer thereof shall refuse to be examined on oath touching the conducting of any such bank, or if any such bank shall suspend payment of its obligations, or if from any examination the superintendent shall have reason to conclude that such bank is in an unsound or unsafe condition to transact the business for which it was organized, or that it is unsafe for it to continue business, or if any such bank shall neglect or refuse to observe any order of the superintendent directing or requiring the doing or cessation of any particular thing required to be done or not to be done by law, the superintendent may call a meeting of the Banking Board and submit to the board matters of default or misconduct in the affairs of the bank, of which the bank shall have notice and upon which the bank may be heard in person or by counsel, and if the board or a majority of the board so directs, the superintendent shall forthwith take possession of the property and business of such bank and retain such possession until such bank shall resume business or a receiver is appointed, as provided in this chapter. Notwithstanding the provisions of Section 5-2A-43, for purposes of this section, a quorum of the board shall be a majority of those present and entitled to vote.

(Acts 1980, No. 80-658, §5-8-20; Act 2010-548, p. 966, §1.)

§ 5-8A-21 Liquidation of Bank by Superintendent Without Assent of Banking Board

If a majority of the directors of any bank so request in writing and the bank has violated any of the provisions of the banking laws or is insolvent, the superintendent may take charge of and liquidate the affairs of the bank as provided in this chapter under Section 5-8A-20 without calling a meeting of the Banking Board.

(Acts 1980, No. 80-658, §5-8-21.)

§ 5-8A-22 Institution of Civil Action for Vacation of Charter, Liquidation, Etc., of Bank

The circuit court of the county in which the principal place of business of the bank is located, sitting without a jury may upon application of the superintendent vacate the charter of a bank, liquidate a bank, or appoint a receiver if the directors of the bank knowingly violate or knowingly permit any of the officers, agents or employees of the bank to violate any of the provisions of this title. No civil action shall be instituted by any other person to vacate the charter of or liquidate or appoint a receiver for any bank except as authorized in Section 5-8A-24.

(Acts 1980, No. 80-658, §5-8-22.)

§ 5-8A-23 Acquisition of Possession of Property and Business of Bank by Superintendent; Notice to Holders of Bank Assets

The superintendent shall not take possession of the property and business of any bank under the provisions of this chapter unless requested in writing to do so by a majority of the directors of the bank under Section 5-8A-21 or directed to do so by the Banking Board under Section 5-8A-20. On taking possession of the property and business of any such bank, the superintendent shall give notice of such fact to all banks in this state and other parties or corporations known to be holding or in possession of any assets of such bank.

(Acts 1980, No. 80-658, §5-8-23.)

§ 5-8A-24 Appointment of Receiver to Liquidate Bank

The superintendent may under his or her hand and official seal appoint a receiver to liquidate and distribute the assets of any bank taken possession of by the superintendent under the provisions of this chapter, the certificate of appointment to be filed in the office of the superintendent and a certified copy in the office of the probate judge in the county in which the principal office of such bank is located. The receiver may be the Federal Deposit Insurance Corporation or any other agency or corporation created by the United States to act in such capacity or any person selected by the superintendent; provided, however, no examiner shall be appointed receiver of any bank whose books, papers, and affairs the examiner shall have examined within one year next preceding the appointment of such receiver. Any receiver appointed other than the Federal Deposit Insurance Corporation, or any other agency or corporation created by the United States to act in such capacity shall apply for and shall be entitled to an ex parte order confirming his or her appointment as receiver from the receivership court.

(Acts 1980, No. 80-658, §5-8-24; Act 2010-548, p. 966, §1.)

§ 5-8A-25 Passage of Title to Assets, Etc., of Banking Institution to Receiver

Upon the appointment of a receiver to liquidate a bank, the possession of and title to all assets, business and property of such bank of every kind and nature shall pass to and vest in the receiver without the execution of any instruments of conveyance, assignment, transfer or endorsement.

(Acts 1980, No. 80-658, §5-8-25.)

§ 5-8A-26 Use of Bank Examiner’s Reports as Evidence in Liquidation Proceedings, Etc

In the event the superintendent takes charge of the business and affairs of any bank as authorized in this chapter or in the event a proceeding is instituted to forfeit the charter of any bank, the report of the examiner of such bank on file in the office of the superintendent or a copy thereof duly certified by the superintendent under his official seal, is admissible and may be used as evidence in any court, either by the superintendent, the Banking Board, any member or employee thereof, the receiver or the bank.

(Acts 1980, No. 80-658, §5-8-26.)

§ 5-8A-27 Application by Bank for Injunction Against Acquisition of Possession of Business and Property by Receiver or Superintendent

Whenever the superintendent or a receiver has taken charge of the property or business of any bank, such bank may at any time within 10 days after the taking of such possession apply to the receivership court to enjoin further proceedings by the receiver or superintendent; and the court, after citing the receiver and superintendent to show cause why further proceedings should not be enjoined and hearing the allegations and proof of the parties and determining the facts, may, upon the merits, dismiss such application or enjoin the receiver or superintendent from further proceedings and direct him to surrender such business and property to such bank. Any such application for injunction may be heard at any time in the discretion of the receivership court after one day’s notice from the time of service of process on the receiver and superintendent. If application is made to enjoin the proceedings of the receiver, the superintendent may intervene and become a party to such action as a matter of right.

(Acts 1980, No. 80-658, §5-8-27.)

§ 5-8A-28 Creation of Liens Against Bank After Possession by Superintendent

After the superintendent has taken possession of the property and business of a bank as provided in this chapter, no judgment lien, attachment lien, or any voluntary lien, except as provided in this chapter, shall attach to any assets of said bank nor shall the directors, officers, employees or agents of such bank have authority to act on behalf of said bank or to convey, transfer, assign, pledge, mortgage, or encumber any assets thereof.

(Acts 1980, No. 80-658, §5-8-28.)

§ 5-8A-29 Resumption of Business of Bank

After the superintendent has taken possession of a bank, the superintendent may permit such bank to resume business upon such conditions as may be approved by him, including an observance of all the requirements of law and making good of all deficits in the previous observance of law.

(Acts 1980, No. 80-658, §5-8-29.)

§ 5-8A-30 Collection of Claims of Bank, Etc

Upon taking possession of any of the property and business of any bank, the receiver may collect moneys due to such bank and do such other acts as are necessary to conserve its assets and business, and shall proceed to liquidate the affairs thereof as provided in this chapter. The receiver shall collect all debts due and claims belonging to the bank, whether in this state or in any other state, and may proceed in courts of competent jurisdiction to enforce said claims in this state and in other states. “Claims” shall include any right of action against any surety, fidelity or insurance company, auditor or any past or present officer or director of such bank for mismanagement, violations of laws or regulations or other breach of duty. It shall be the duty of the receiver or his duly authorized agent to satisfy on the proper record all mortgages, judgments, security interests, or other liens held or owned by any insolvent bank that have been paid or satisfied.

(Acts 1980, No. 80-658, §5-8-30.)

§ 5-8A-31 Subrogation of Federal Deposit Insurance Corporation

Whenever any bank shall have been closed as provided under the laws of this state, and the Federal Deposit Insurance Corporation shall pay or make available for payment the insured deposit liabilities of such closed institution, the corporation, whether or not it shall have become receiver or liquidator of such closed bank, shall be subrogated to all rights against such closed bank of the owners of such deposits in the same manner and to the same extent as subrogation of the corporation is now or may be hereafter provided for by federal law in the case of the closing of a national bank; provided, that the rights of depositors and other creditors of such closed bank shall be determined in accordance with the applicable provisions of the laws of this state.

(Acts 1980, No. 80-658, §5-8-31.)

§ 5-8A-32 Sale, Etc., of Bad Debts and Property of Bank

The receiver, by making application to the receivership court, may procure an order to sell or compound all bad or doubtful debts and on like order may sell all real and personal property of such bank on such terms as the court shall direct; provided, however, that the receiver shall have the right to ask for a blanket order from the receivership court for the settlement of all debts, claims of any and all nature, and deposits and for the sale of real and personal property wherein no single item exceeds the value of $10,000.00. In all or any of such court proceedings, the bank shall be made a party by proper service of process issued from the court, and the hearing of any such application or petition of the superintendent may be had at any time after the bank has had five days’ notice of the application; provided, however, the court may ex parte approve a purchase and assumption transaction as provided for in 12 U.S.C. §1823(e) or a similar transaction authorized by federal law and provided further if notice of the hearing of said application is waived or the allegation of said application is admitted by the bank, no further proof will be required of the allegations of said application and the order may be forthwith granted by the court.

(Acts 1980, No. 80-658, §5-8-32.)

§ 5-8A-33 Negotiation of Loans, Granting of Security, Etc., on Behalf of Closed Bank

(a) The receiver is authorized to borrow money and pledge the assets of a bank in liquidation for protecting and preserving its assets, for paying secured claims, for aiding in the reorganization or reopening of such bank or for making distribution to depositors and creditors when, in the judgment of the receiver, the borrowing of such funds would be to the interest of the depositors and creditors.

(b) For any loan negotiated under the authority vested by this article, the receiver may execute a note therefor, renew the same from time to time and do all things he considers necessary until the same has been paid. Such note or renewal or any mortgage or contract to be executed for the purpose hereof shall be signed by giving the name of the bank, followed by the words: “In liquidation,” “By ________ (the name of the receiver) receiver.” Any note or other contract executed for the purpose hereof shall be treated as the obligation of the bank and the holder thereof shall have the character of a creditor of the bank for the amount of any deficiency in the security furnished.

(c) To secure any such loan, the receiver may pledge, mortgage, or grant a security interest in, by appropriate contracts or writings, any or all of the assets, real or personal, in his possession belonging to the bank for whose benefit the loan shall be obtained.

(d) Before closing the proposal to procure the loan, pledge, mortgage, or grant of a security interest in assets under subsections (a) and (c), the same shall be presented to the receivership court by petition, giving the court full information concerning desirability of making the loan and granting a security and such other matters as the receiver may desire, and the court may pass upon such petition with or without notice to the former directors or chief executive officer of the bank involved or to other parties in interest.

(Acts 1980, No. 80-658, §5-8-33.)

§ 5-8A-34 Loans from and Sale of Assets to Federal Deposit Insurance Corporation for Bank

With respect to any bank which is now or may hereafter be closed as provided under the laws of this state, the receiver of such bank may borrow from the Federal Deposit Insurance Corporation and furnish any part or all of the assets of said bank to said corporation as security for a loan from same; provided, that where said corporation is acting as such receiver, the order of the receivership court shall be first obtained approving such loan. The receiver, upon the order of the receivership court which may be ex parte, may sell to said corporation any part or all of the assets of such bank. The provisions of this section shall not be construed to limit the power of the receivers to pledge or sell assets in accordance with any existing law.

(Acts 1980, No. 80-658, §5-8-34.)

§ 5-8A-35 Assumption or Rejection of Executory Contracts by Receiver

The receiver shall assume or reject an executory contract, including an unexpired lease of real or personal property, within 60 days after appointment, but the receivership court may for cause shown extend or reduce the time. Any such contract or lease not assumed or rejected within that time shall be deemed to be rejected. The receiver shall file within 60 days of his appointment, a statement under oath showing which, if any, of the contracts of the bank are executory in whole or in part, including unexpired leases of real or personal property, and which, if any, have been rejected by the receiver. Unless a lease of real or personal property expressly otherwise provides, a rejection of the lease or of any covenant therein by the receiver of the lessor does not deprive the lessee of his estate. A general covenant or condition in a lease that it shall not be assigned shall not be construed to prevent the receiver from assuming the same at his election and subsequently assigning the same; but an express covenant that an assignment by operation of law or the liquidation of a specified party thereto, or of either party shall terminate the lease or give the other party an election to terminate the same is enforceable. A receiver who elects to assume a contract or lease of the bank and who subsequently with approval of the receivership court and upon such terms and conditions as the receivership court may fix after hearing upon notice to the other party to the contract or lease, assigns such contract or lease to a third person, is not liable for breaches occurring after the assignment.

(Acts 1980, No. 80-658, §5-8-35.)

§ 5-8A-36 Employment of Counsel, Expert Assistants, Etc., in Liquidation of Bank; Compensation of Assistants, Etc.; Court Approval of Liquidation Expenses

The receiver may employ such counsel and procure such expert assistants and advice as may be necessary in the liquidation and distribution of the assets of such bank and may retain such of the officers or employees of such bank as he may deem necessary. The receiver and such assistants as will have charge of any of the assets of the bank may be required to post such security for the faithful discharge of their duties as the receivership court may deem proper. The compensation of assistants and other employees and all expenses of supervision and liquidation shall be fixed by the receiver subject to the approval of the receivership court on notice to such bank.

(Acts 1980, No. 80-658, §5-8-36.)

§ 5-8A-37 Payment of Compensation

When the compensation for the various parties aiding in the liquidation is fixed and approved, the same shall be paid out of the funds of such bank in the hands of the receiver and shall be a prior charge and lien on the assets of such bank.

(Acts 1980, No. 80-658, §5-8-37.)

§ 5-8A-38 Deposit of Funds Collected by Receiver

The money collected by the receiver shall be, from time to time, deposited in one or more banks in this state.

(Acts 1980, No. 80-658, §5-8-38.)

§ 5-8A-39 Notice for and Filing of Claims Against Bank

The receiver shall cause notice to be given by advertisement in such newspaper as he may direct, once a week for six consecutive weeks, calling all persons who may have claims, but not including deposits or certificates of deposit shown by the books of the bank which shall be a prima facie proven claim against the bank, against such bank to present the same to the receiver and make legal proof thereof at a place and within a time to be specified in the notice, not less than 90 days from the day of the first publication of the notice. The receiver shall mail a similar notice to all persons whose names appear as creditors upon the books of the bank.

(Acts 1980, No. 80-658, §5-8-39.)

§ 5-8A-40 Preferred Claims

In addition to any other laws of this state or of the United States granting priority, any draft or cashier’s check issued and drawn against actual existing value by any bank prior to its failure or closing and given in payment of clearings and any money paid in the usual course of business to any bank in payment of a draft for the bona fide transfer of funds shall be a preferred claim against the assets of the bank, irrespective of whether the fund representing such item or items can be traced and identified as part of such assets or has been intermingled with or converted into other assets of such failed bank.

(Acts 1980, No. 80-658, §5-8-40.)

§ 5-8A-41 Inventory of Assets of Bank; Filing List of Claims

Upon taking possession of the property and assets of such bank, the receiver shall make an inventory of the assets of such bank in duplicate, and upon expiration of time for rejection of claims, make a full and complete list of claims in duplicate, specifying which claims have been rejected by him. A copy of the inventory and a copy of this list of claims shall be filed in the office of the receiver and one copy of each shall be filed in the office of the clerk of the receivership court. Such inventory and list of claims shall be open at all reasonable times to inspection.

(Acts 1980, No. 80-658, §5-8-41.)

§ 5-8A-42 Objections to Claims; Unproven or Unclaimed Deposits

Objections to any claim or deposit not rejected by the receiver may be made by any party interested by filing a copy of such objections with the clerk of the receivership court and with the receiver, who shall present the same to the receivership court before the time of the next application to declare a dividend. The receivership court may make proper provisions for unproven or unclaimed deposits.

(Acts 1980, No. 80-658, §5-8-42.)

§ 5-8A-43 Rejection of Claims

If the receiver doubts the validity of any claims or deposits, he may reject the same and serve notice of such rejection upon the claimant or depositor, either by mail or personally, and an affidavit of service of such notice, which shall be prima facie evidence thereof, shall be filed in the office of the receiver.

(Acts 1980, No. 80-658, §5-8-43.)

§ 5-8A-44 Actions Upon Rejected Claims; Late Claims

Any action upon a claim so rejected must be brought by filing a complaint in the receivership court by the claimant within six months after service of such notice or the same shall be barred. Claims presented and allowed after the expiration of the time fixed in the notice to creditors shall be entitled to share in the distribution only to the extent of the assets in the hands of the receiver at the time such claims are filed, without allowance for previous distribution.

(Acts 1980, No. 80-658, §5-8-44.)

§ 5-8A-45 Payment of Dividends to Creditors

At any time after the expiration of the date fixed for the presentation of claims, the receiver may, out of the funds remaining in his hands after the payment of expenses, declare and pay one or more dividends to creditors, and after the expiration of one year from the first publication of notice to the creditors to present claims, he may declare and pay a final dividend, such dividend to be paid to such persons and in such amounts and upon such notice as may be directed by the receivership court.

(Acts 1980, No. 80-658, §5-8-45.)

§ 5-8A-46 Final Distribution, Termination of Receivership and Dissolution of Bank

Whenever the receiver shall have paid to each and every depositor and creditor of such bank whose claim or claims as such creditor or depositor shall have been duly proven and allowed the full amount of such claims and shall have made proper provision for the unclaimed and unpaid deposits or dividends the receiver shall make application for final settlement including expenses of liquidation, to be approved by the receivership court and shall distribute the balance of any assets remaining ratably to the stockholders. Creditors shall not receive interest after the date of taking of possession by the superintendent. The receiver shall in said final settlement order be directed to file in the office of the judge of probate of the county in which the principal place of business of the bank was located and in the office of Secretary of State a certificate of dissolution and the written approval of the superintendent to such dissolution; and said bank shall thereupon be dissolved. Any unclaimed funds in the hands of the receiver shall be transmitted by him to the State Treasurer to be held as unclaimed property under the provisions of Sections 35-12-20 through 35-12-48.

(Acts 1980, No. 80-658, §5-8-46.)

Chapter 9A Reorganization of Banks

§ 5-9A-1 Cooperation of Superintendent in Reorganization of Bank

Whenever the board of directors or a majority of the stockholders of any bank shall request the superintendent to cooperate in a reorganization of such bank, because of a substantial impairment of the capital of such bank, the superintendent is authorized to do the following:

(1) To make or have made a careful appraisement of the assets of the bank;

(2) If the appraisement shows the capital to be impaired, to charge the stock down to its actual value, if it has any, and if the appraisement shows the stock has no value, to charge off all capital, surplus and undivided profits and thereafter the rights and interests of such stockholders in any of the assets of the bank shall be subordinate to those of the creditors of the bank and the secured depositors to the extent of such security so held by such secured depositor;

(3) If the capital, surplus and undivided profits are not sufficient to take care of all losses, to prorate the remainder of the losses among the various depositors or common creditors;

(4) If found necessary, to set aside such portion of the assets of such bank to be either liquidated or delivered to creditors or depositors who may be disqualified under the law to participate in a reorganization, such portion to be the pro rata share of the assets which such disqualified creditors or depositors would be entitled to receive from the assets of the bank if the same were liquidated;

(5) To prepare a plan for the reorganization of such bank, including provisions for obtaining sufficient funds for capital purposes by the issuance of stock, such stock if necessary to be of different classes; and

(6) To submit such plan of reorganization, when prepared, to the board of directors of such bank which has made request for the cooperation of the superintendent for a reorganization.

(Acts 1980, No. 80-658, §5-9-1.)

§ 5-9A-2 Submission of Reorganization Plan to Court for Confirmation and Approval

After such plan for reorganization has been submitted to the board of directors of the bank so making such request for a reorganization, the directors of such bank by and with the consent of 75 percent in value of the stockholders and 75 percent in value of the common creditors are authorized and empowered to make a report of such plan to the circuit court of the county in which the principal business office of the bank is located, such report to be accompanied by a petition for its confirmation and approval.

(Acts 1980, No. 80-658, §5-9-2.)

§ 5-9A-3 Publication of Reorganization Plan

Upon the filing of such report and petition, the court shall order notice to be given to all parties in interest by publication in some newspaper published in the county where the principal business office of such bank is located once a week for two consecutive weeks, which notice shall set forth substantially the plan of such reorganization and require all parties in interest to appear at a specified time either to consent to or protest against the plan for such reorganization.

(Acts 1980, No. 80-658, §5-9-3.)

§ 5-9A-4 Hearing Upon Plan; Entry of Judgment

At the time of the hearing of the petition, the court shall hear such legal evidence as may be submitted for and against such petition and plan for reorganization, and if the court is of the opinion it is for the best interest of all parties interested in such bank that the bank be reorganized in accordance with the plan set forth and submitted or in accordance with any modification of such plan determined upon by the court, such court shall so adjudge and enter a judgment fixing the rights of the parties in interest and adjudging that said plan or modification thereof be adopted and confirmed and that said bank be reorganized under and in conformity with such plan or modification thereof.

(Acts 1980, No. 80-658, §5-9-4.)

§ 5-9A-5 Appeals

If any stockholder, depositor or creditor shall not be satisfied with such judgment, he may file a notice of appeal to the Supreme Court of Alabama within 42 days from the day of entry of such judgment, provided he shall give security for cost of such appeal and indemnity in an amount to be fixed by the court, conditioned to pay such damages as the stockholders, depositors or creditors may sustain for a wrongful appeal or delay. Any such appeal shall be a preferred case in the Supreme Court and shall be set for hearing at the earliest possible date. If no such appeal is taken, the judgment of the circuit court shall be final, and said bank may lawfully be reorganized in accordance with the plan approved by the court.

(Acts 1980, No. 80-658, §5-9-5.)

§ 5-9A-6 Manner of Reorganization Not Exclusive

The plan for reorganization of a bank or banks as provided in this chapter shall not be exclusive and shall not be construed to prohibit or prevent a reorganization of a bank as now permitted under existing laws.

(Acts 1980, No. 80-658, §5-9-6.)

Chapter 10A Banking Emergencies and Compliance with Federal Laws

§ 5-10A-1 Authorization or Direction of Banks to Postpone Paying Liabilities, Segregate Deposits and Assets, Renew Loans, Etc

The superintendent with the concurrence of not less than two other members of the Banking Board, or any three members of the Banking Board without action by said superintendent, are hereby authorized and empowered, in addition to all other powers now conferred by law upon the superintendent or the Banking Board, or both, whenever in their judgment the circumstances warrant it, to authorize or direct any and all banks:

(1) To postpone for any length of time the payment of any proportion of deposit or other liabilities, demand and savings account liabilities and certificate of deposit liabilities to any individual, firm, corporation or entity as said state officials may deem necessary and expedient, to be determined by them according to any facts and conditions which in their opinion, for emergency or other reasons, require such action in each particular instance;

(2) To receive deposits to be classified by said state officials under rules and regulations as extended or modified under this chapter from time to time, each class of which shall be segregated from any other class, shall be subject only to such restrictions or limitations, if any, as may be imposed by said state officials and may be invested in such character of investments as may be authorized or approved from time to time by said state officials;

(3) To segregate particular assets for or towards the liquidation and discharge of particular deposit or other liabilities, or any specified percentage thereof, of said bank without proceeding with a receivership liquidation, under such rules and regulations with respect thereto as said state officials may deem proper for the protection of interested parties and, in such cases, to continue the operation of the business; and

(4) To make and renew loans from time to time in the ordinary course of banking business out of any assets available therefor.

(Acts 1980, No. 80-658, §5-10-1.)

§ 5-10A-2 Promulgation of Rules and Regulations; Requirements of Reports, Etc., Generally

The superintendent with the concurrence of not less than two members of the Banking Board, or any three members of the Banking Board without action by said superintendent may authorize and empower any bank to act under the provisions of this chapter, and they are empowered to make and adopt such rules and regulations from time to time and to extend, modify, suspend or terminate any part thereof from time to time as they may deem proper for the protection of interested parties and to require such periodical and other reports in detail with respect to operation under such rules and regulations as they may see fit.

(Acts 1980, No. 80-658, §5-10-2.)

§ 5-10A-3 Declaration of Banking Holidays; Promulgation of Emergency Rules or Regulations

Whenever, in the opinion of the superintendent it shall be deemed that an emergency exists, the superintendent with the concurrence of not less than two other members of the Banking Board, or any three members of the Banking Board without action by said superintendent, shall be authorized to declare and put into effect a bank holiday for such period as he or they may deem necessary or to promulgate or approve such emergency rules or regulations with respect to banking business, practices and transactions within the state or within any community or locality therein as shall, in his or their opinion, be deemed necessary. Such rules and regulations shall continue in force for such period as may be fixed by him or them in promulgating the same and until modified, suspended or terminated as provided in this chapter.

(Acts 1980, No. 80-658, §5-10-3.)

§ 5-10A-4 Extension, Etc., of Banking Holiday or Emergency Rules or Regulations

Any such bank holiday or any such rule or regulation may be extended, modified, suspended or terminated by the superintendent with the concurrence of not less than two other members of the Banking Board or by any three members of the Banking Board without action by said superintendent by signing and filing their written direction to that effect with the superintendent who shall thereupon forthwith proclaim and give effect to the same.

(Acts 1980, No. 80-658, §5-10-4.)

§ 5-10A-5 Sections 5-10A-1 through 5-10A-4 Applicable Only in Emergencies; Duration of Emergency Action

The provisions of Sections 5-10A-1 through 5-10A-4 authorize actions to be taken during an emergency. Any action taken pursuant to these sections shall be reported to the Banking Board and shall automatically terminate upon the expiration of 120 days unless such action is approved during that period by a majority of the Banking Board.

(Acts 1980, No. 80-658, §5-10-5.)

§ 5-10A-6 Operation of Banks Under Federal Laws

Any bank may do any and all things necessary or desirable to permit it to operate under the provisions of any act of Congress of the United States now or hereafter enacted.

(Acts 1980, No. 80-658, §5-10-7.)

§ 5-10A-7 Payment of Expenses of Bank Operating Without Receivership Liquidation

Whenever, pursuant to any provision of this chapter, any bank is authorized to do any one or more of the things specified in this chapter without receivership liquidation, its operating expenses, including compensation to officers and employees, shall be payable as a first charge against all of its assets, subject to such proration thereof and such limitations as may be placed thereon from time to time by any rules and regulations made and adopted and extended or modified from time to time as in this chapter provided. Any such rules and regulations may permit any bank to make charges for any banking service performed by it, and it shall be lawful for any bank to charge accordingly for services not in excess of the amount authorized by such rules and regulations.

(Acts 1980, No. 80-658, §5-10-8.)

§ 5-10A-8 Segregation of Assets - Manner of Segregation Generally; Distribution of Segregated Assets Upon Receivership Liquidation of Bank

Whenever pursuant to any provision of state or federal law or of any rule or regulation by any state or federal authority made or adopted pursuant thereto or whenever pursuant to contractual arrangement any bank is under duty or obligation to segregate particular assets for or towards the liquidation or discharge of particular liabilities or specified percentages of particular liabilities, such assets shall be segregated in such manner as to provide for the pro rata application of the proceeds thereof from time to time to the particular liabilities or percentage of particular liabilities for the purpose of which they are segregated without preference or priority of one liability over another and in accordance with the amounts of such particular liabilities as of the date of such segregation. Upon any receivership liquidation of any bank, the particular assets so segregated and any then remaining proceeds of any thereof shall, subject to expenses of liquidation, be distributable pro rata toward the particular liabilities or percentage of particular liabilities on account of which segregated, with proper adjustment for previous payments therefrom.

(Acts 1980, No. 80-658, §5-10-9.)

§ 5-10A-9 Segregation of Assets - Manners of Segregation

Whenever pursuant to any provision of state or federal law or of any rule or regulation by any state or federal authority made or adopted pursuant thereto, or whenever pursuant to contractual arrangement any bank is under duty or obligation to segregate particular items or assets separate and apart from other items or assets, the same may be either segregated specifically and in kind in the possession of the bank but commingled within the class or amount for the purpose of which they are segregated, or converted into a deposit account separate from any general or other deposit account of such bank with a Federal Reserve Bank or branch thereof, created and organized under an act of Congress of the United States approved December 23, 1913, known as the Federal Reserve Act, as amended, or with any governmental agency hereafter created by act of Congress of the United States authorized to receive such deposit accounts but commingled in such account within the class or amount for the purpose of which such deposit is made, or converted into a deposit account separate from any general or other deposit account of such bank with any one or more other banks or with any one or more banks doing business outside of the state and members of the Federal Reserve System or any governmental agency hereafter created by act of Congress of the United States authorized to receive such deposit accounts but commingled in such account within the class or amount for the purpose of which such deposit is made, or either or any one or more of the foregoing. Any such segregation shall be sufficient if made in any one or more of the manners above specified at or as of the close of business on any banking day.

(Acts 1980, No. 80-658, §5-10-10.)

§ 5-10A-10 Segregation of Assets - Commingling of Items in Classes of Deposits

Within any class of deposits in any bank for the purpose of which class particular assets are segregated, the separate items may be mingled and commingled.

(Acts 1980, No. 80-658, §5-10-11.)

§ 5-10A-11 Segregation of Assets - Adjustments; Identification of Segregated Items

Whenever any bank is required to segregate particular assets under any rule or regulation promulgated or extended or modified under this chapter, it shall accomplish such segregation as promptly as reasonably possible and shall at and as of the close of business on each banking day adjust such segregation to the additions thereto and withdrawals therefrom in accordance with rules and regulations promulgated, extended or modified from time to time under this chapter. Transfer orders as of the close of business each banking day shall be sufficient for the purposes of any such segregation or adjustment thereof. Any segregation made in accordance with the provisions of this chapter or in accordance with any rule or regulation promulgated, extended or modified under this chapter shall be sufficient identification of the items included in such segregation for all purposes.

(Acts 1980, No. 80-658, §5-10-12.)

§ 5-10A-12 Discharge of Deposits of Script, Clearinghouse Certificates or Emergency Currency

Any deposit of script, clearinghouse certificates or emergency currency in any form or of any order on any such deposit shall be dischargeable in whole or in part either in kind or in legal tender of the United States of a value no greater than the current exchange value of the script, clearinghouse certificates or emergency currency originally deposited at the time of the payment at the option of the bank accepting such deposit. Any other deposit shall be dischargeable when and as entitled to payment thereof or on account thereof only in legal tender of the United States as fixed by the laws of the United States in force and effect at the time of payment thereof or of payment on account thereof.

(Acts 1980, No. 80-658, §5-10-13.)

§ 5-10A-13 Issuance and Reissuance of Script, Clearinghouse Certificates or Emergency Currency

The superintendent with the concurrence of not less than two other members of the Banking Board, or any three members of the Banking Board without action by said superintendent may from time to time authorize any bank singly or by groups, to issue and reissue from time to time script, certificates, clearinghouse certificates or emergency currency in such form, under such restrictions and conditions, entitled to such lien on specific security therefor or without such lien and entitled to such rights and privileges as said state officials may authorize, approve or direct. The issue and reissue thereof shall be lawful and subject to no civil or criminal penalties or interest charges or taxation or additions of any kind thereto, notwithstanding any contrary provisions of the laws of this state.

(Acts 1980, No. 80-658, §5-10-14.)

§ 5-10A-14 Issuance of Notes or Certificates of Indebtedness as Evidence of Compensation for Services or Labor During Banking Emergency

Where a banking emergency has been proclaimed by the superintendent and until such time as such emergency is declared to have ended by proclamation of the superintendent, it shall be lawful for the state or any political subdivision thereof and for merchants, manufacturers, public utilities and other business establishments in this state, whether conducted by an individual or individuals or under corporate charter, with the approval of the superintendent to issue as evidence of compensation for services or labor notes or certificates of indebtedness to their employees in convenient denominations, payable not more than 90 days after such proclamation shall be made, and none thereof shall be subject to any civil or criminal penalties or interest charges or taxation or additions thereto of any kind notwithstanding any contrary provisions of the laws of this state. The right of the state or any political subdivision thereof to issue notes in anticipation of the collection of taxes under any law now in force and effect shall not be impaired or affected by the provisions of this section.

(Acts 1980, No. 80-658, §5-10-15.)

§ 5-10A-15 Authorization and Approval of Reorganization of Bank Without Receivership Liquidation

The superintendent with the concurrence of not less than two other members of the Banking Board or any three members of the Banking Board without action by said superintendent are hereby further authorized and empowered to approve and authorize any bank to reorganize its business and affairs, without receivership liquidation, to such extent as may be deemed by them proper, and any reorganization so approved and authorized shall be lawful and effective; provided, that in no case shall the paid-in capital stock be permitted thereby to be reduced below the minimum amount now required by law.

(Acts 1980, No. 80-658, §5-10-16.)

§ 5-10A-16 Compliance with Chapter, Federal Laws, Etc., Not to Entail Liability

No bank nor any surety or guarantor of any bank shall suffer any penalty or liability for damages or increase of liability or be in default, nor shall any maker, endorser, guarantor or other party or person be released from liability or obligation or be in default by reason of a bank’s compliance with any action of any state official authorized or ratified by this chapter or compliance with any act of Congress of the United States now or hereafter enacted or with any rule or regulation promulgated by duly constituted officials of the United States.

(Acts 1980, No. 80-658, §5-10-18.)

§ 5-10A-17 Officers Not to Incur Liability or Penalties for Compliance with Orders of Superintendent, Federal Laws, Etc

No public officer or surety on his official bond shall suffer any penalty or liability for damages or increase of liability or be in default by reason of any failure on his part to perform any act or duty where such failure is due to compliance by any bank with any order or requirement of the superintendent or the Banking Board authorized or ratified by this chapter or with any act of Congress of the United States now or hereafter enacted or with any rule or regulation promulgated by duly constituted officials of the United States.

(Acts 1980, No. 80-658, §5-10-19.)

Chapter 11A Regulation of Trust Business of Banks and Trust Companies

Article 1 General Provisions

§ 5-11A-1 Amenability of Trust Companies to Banking Laws; Use of Word “Trust” in Corporate Name Generally; Operation of Trust Departments, Etc., by Banks

All corporations organized and operating as trust companies shall have the word “trust” as a part of their corporate names, shall be amenable to the general banking laws of the state insofar as said laws are applicable to trust companies and not in conflict with the provisions of this chapter and shall be examined by the superintendent as state banks are examined. The word “trust” need not be a part of the corporate name of any corporation now or hereafter organized under the laws of this state to do a banking business and all such banks, although the word “trust” is not a part of their corporate names, shall have the right to operate and conduct a trust department, become trustees for any purpose, be appointed and act as executors, administrators, guardians and receivers and do any business and exercise any powers incident to the business of trust and banking companies doing banking business after the board of directors of the corporation shall have adopted an appropriate resolution and obtained the written approval of the superintendent authorizing the conduct and operation of a trust department, and a copy of such resolution and written approval certified to by the president and cashier of such bank under the corporate seal of such corporation shall have been filed in the office where the certificate of incorporation of the bank has been filed.

(Acts 1980, No. 80-658, §5-11-1.)

§ 5-11A-1.1 Branching of Trust Companies; Branching of Out-of-State Trust Companies; Reciprocity; Cooperative Agreements

All corporations organized under this chapter shall have the right to establish offices in the same manner as a bank may establish branches under this title. At the discretion of the superintendent, out-of-state trust companies and out-of-state banks may also establish offices in this state in the same manner as out-of-state banks may establish branches in this state provided the superintendent determines that reciprocity exists so that an Alabama bank or trust company could establish a similar office under substantially equivalent requirements in the home state of the out-of-state bank or trust company. The superintendent may enter into cooperative, coordinated, and information-sharing agreements with any other bank supervisory agencies with respect to the establishment, acquisition, periodic examination, or other supervision of any office in this state of an out-of-state bank or trust company or any office of an Alabama state-chartered bank or trust company in any host state, and the superintendent may enter into contracts with any bank supervisory agency that has concurrent jurisdiction over the bank or trust company.

(Act 2007-224, p. 284, §2.)

§ 5-11A-2 Written Approval of Superintendent to Conduct Trust Business

No bank shall have the right to operate or conduct a trust department or become a trustee or a fiduciary without having received the prior written approval of the superintendent and otherwise complied with Section 5-11A-1, even though the certificate of incorporation of the bank might contain language covering such authority.

(Acts 1980, No. 80-658, §5-11-2.)

§ 5-11A-3 Capital Stock Requirements for Trust Companies

No trust company hereafter organized under the laws of Alabama shall have total initial capital accounts actually paid in of less than $1,000,000.00.

(Acts 1980, No. 80-658, §5-11-3.)

§ 5-11A-4 Use of Word “Trust” in Designation or Name of Entity

Except in the case of any entity which is organized and operating under the laws of Alabama, other states, or the United States as a trust company or as a combined bank and trust company and which has complied with the requirements of Sections 5-11A-1 and 5-11A-3 or with similar laws of other states or of the United States, no firm, partnership, limited liability company, corporation, or other entity shall use the word “trust” or a word or words of similar meaning in any foreign language as a part of its designation or name or in connection with its business if such use of the word “trust” or word or words of similar meaning in any foreign language is likely to give the impression that the entity is lawfully organized and operating as a bank or trust company or would otherwise mislead or confuse the public regarding the lawful business of the entity. Any violation of this section shall subject the party chargeable therewith to a penalty of five hundred dollars ($500) for each day, with a maximum amount of fifty thousand dollars ($50,000), during which such violation is committed or repeated. Such penalty may be recovered by the superintendent by an action instituted for that purpose, and, in addition to the penalty, such violation may be enjoined and the injunction enforced as in other cases. If the directors, officers, or those persons performing similar functions as corporate directors or officers of any entity knowingly and willfully violate or knowingly and willfully permit any of the officers, agents, employees, or those persons performing similar functions of the entity to violate any of the provisions of this section, each and every such director, officer, or person engaging in such knowing and willful violation or knowing and willful permission shall be liable in his or her personal and individual capacity for all damages which the entity or any other person shall have sustained in consequence of such violation.

(Acts 1980, No. 80-658, §5-11-4; Act 2007-224, p. 284, §1.)

§ 5-11A-5 Deposit of Security for Operation of Trust Business - Amount Required and Form; Charges Against Deposit

Any corporation organized and operating as a trust company or as a bank authorized by law to do a trust business may deposit with the State Treasurer or elsewhere United States bonds, bonds, notes or debentures of any federal agency such as a federal land bank, banks for cooperatives, Farm Home Administration, Federal National Mortgage Association, etc., Alabama bonds, bonds of any city or county in the State of Alabama or mortgages which are first liens on real estate, worth in each case double the face of the mortgage, situated in this state, to an amount not less than $25,000.00, and may increase said deposit from time to time or reduce the same to an amount not less than $25,000.00, or may withdraw the deposit entirely, provided such trust companies or banks have made final settlement and accounted for all assets in their possession and under their control by reason of any appointment under this chapter. Immediately upon the appointment of any bank or trust company to act as guardian, administrator, executor, receiver or trustee or other fiduciary by the judge of any court in this state, under Section 5-11A-9, said judge shall certify such appointment under his seal of office to the State Treasurer, giving the name and amount of assets of the estate or cestui que trusts; and, upon receipt of said certificate, the State Treasurer shall charge against any deposit the liability under said appointment.

(Acts 1980, No. 80-658, §5-11-5.)

§ 5-11A-6 Deposit of Security for a Operation of Trust Business - State Treasurer to Decline Certain Bonds or Securities

The State Treasurer shall decline to receive bonds or other securities of a market value less than par and may, in his discretion, decline to receive any bonds or other securities that he considers unsafe or unsuitable for the purpose.

(Acts 1980, No. 80-658, §5-11-6.)

§ 5-11A-7 Deposit of Security for a Operation of Trust Business - Certificate of Deposit; Purpose

The State Treasurer shall, from time to time, furnish the company making such deposit with a proper certificate showing the fact of the deposit and containing an exact description of the bonds or other securities deposited. Such deposit is to secure the payment of all liabilities of the company making the deposit as a guardian, administrator, executor, receiver, trustee or other fiduciary under appointment of any court of this state where the company has claimed exemption from giving bond by reason of having this deposit, and all such liabilities shall constitute a first claim on said bonds or other securities deposited as against all other liabilities of said company.

(Acts 1980, No. 80-658, §5-11-7.)

§ 5-11A-8 Sale of Bonds or Securities for Satisfaction of Judgment Against Trust Company

When any person, firm or corporation has established by final court proceedings a claim against said company to secure which said bonds or other securities were deposited and said claim is not paid within 30 days by said company, the State Treasurer shall proceed forthwith to sell a sufficient number of said bonds to pay the judgment against said company and pay said judgment by paying the amount to the proper official of the court wherein said judgment exists.

(Acts 1980, No. 80-658, §5-11-8.)

§ 5-11A-9 Exemption of Trust Companies, Etc., Acting as Administrators, Etc., from Bond Requirement

Any trust company or bank which is authorized by law to act as a guardian, administrator, executor, receiver or trustee, except as may be otherwise provided in this code for the administration of the affairs of war veterans, under appointment of any court of this state, and which maintains the deposit provided for in Section 5-11A-5, shall be entitled as a matter of right to exemption from giving bond before receiving authority to act in any of the above capacities, provided its aggregate liabilities, to secure which said bonds or other securities are deposited, do not exceed five times the par value of said securities. When such company desires exemption from giving any such bond, it shall file with the officer who would otherwise require such bonds a sworn statement showing the amount in value of the bonds or other securities on deposit with the State Treasurer, and that the liabilities of the company protected by such deposit do not exceed five times the par value of said bonds or other securities, together with a certificate from the State Treasurer showing the amount of such deposit.

(Acts 1980, No. 80-658, §5-11-9.)

§ 5-11A-10 Withdrawal of Bonds or Securities from Deposit with Trustees

All trust companies organized under the laws of this state which are now required by their charters to keep on deposit with trustees any bonds, stocks or other securities to be held subject to the payment of any judgment which may be rendered against said companies may, upon making a deposit of securities in accordance with the provisions of Section 5-11A-5 withdraw from the custody of said trustees said bonds, stocks or other securities so deposited with said trustees and shall not thereafter be required to maintain any such deposit with trustees, any provisions of the charter of said companies to the contrary notwithstanding.

(Acts 1980, No. 80-658, §5-11-10.)

§ 5-11A-11 Interest on Bonds or Securities Deposited with Treasurer Payable to Trust Companies

The interest falling due from time to time on bonds or other securities on deposit with the State Treasurer in accordance with Section 5-11A-5 shall be payable to the corporation depositing such bonds or other securities, and the Treasurer may send to such corporation a reasonable time before each interest period the coupons or interest note representing the interest to become due at such interest period.

(Acts 1980, No. 80-658, §5-11-11.)

§ 5-11A-12 Trust Company Authorized to Purchase Its Own Securities in Fiduciary Capacity

A trust company or other financial institution with fiduciary powers may, in its fiduciary capacity, purchase bonds or other securities underwritten or otherwise distributed by the financial institution or by a syndicate which includes the financial institution or an affiliate of the financial institution, provided such purchase is otherwise prudent and not prohibited by the instrument governing the fiduciary relationship. The provisions of this section shall apply to purchases of bonds or other securities made at the time of the initial offering thereof or at any time thereafter.

(Acts 1987, No. 87-826, p. 1674; Acts 1989, No. 89-520, p. 1067.)

Article 2 Transfer of Fiduciary Accounts

§ 5-11A-30 Transfer Between Related Institutions

Absent written objection from the Superintendent of the State Banking Department, a bank, trust company or trust department (hereinafter to be known as the “transferor”) may transfer one or more fiduciary accounts administered by such bank, trust company or trust department to another bank, trust company or trust department (hereinafter to be known as the “transferee”); provided, however, that the transferor and transferee banks are related institutions, as that term is hereinafter defined in Section 5-11A-36, and that the transferee bank has trust powers.

(Acts 1989, No. 89-539, p. 1127, §1.)

§ 5-11A-31 Approval of Superintendent

Approval of the superintendent shall be deemed granted in the absence of written objection from the superintendent within 10 days after receipt by the superintendent of written notice from the transferor bank of the proposed transfer.

(Acts 1989, No. 89-539, p. 1127, §2.)

§ 5-11A-32 Notice of Transfer

(a) Within 30 days after the date of the transfer of the fiduciary accounts, the transferor shall send written notice by first class mail to the last known address (as then set forth on the records of the transferor, or if not set forth, as may be determined by the transferor in the exercise of reasonable diligence) of the following persons or entities:

(1) For employee benefit plans, to the plan sponsors.

(2) For individual retirement accounts and retirement accounts for the self-employed, to the account owners.

(3) For agency and escrow accounts, to the principals.

(4) For securities for which a transferor bank serves as trustee, registrar, transfer agent or paying agent, to the issuers.

(5) For revocable trusts under agreement, to the settlors.

(6) For irrevocable trusts under agreement, to any co-fiduciary, to the settlor, to each current income beneficiary who is an adult, and if a current income beneficiary is a minor, to a parent of the minor with whom the minor resides or to the conservator or guardian of the minor. For purposes of this subsection, “current income beneficiary” means a person currently entitled to income from a trust or a person to whom the trustee, in the trustee’s discretion, may currently pay principal or income.

(7) For testamentary trusts, to the persons notified under subsection (6) of this section.

(8) For conservatorships, to any co-fiduciary, to the protected person for whom the conservatorship was created, or if the conservatorship was created for a minor, to a parent of the minor with whom the minor resides or to the guardian of the minor.

(9) For guardianships, to any co-fiduciary, to the minor or legally incapacitated person for whom the guardian was appointed if the ward is at least 14 years of age.

(10) For probate estates, to any co-fiduciary, to the surviving spouse, if any, and to those persons notified pursuant to subsection (7) of this section.

(11) For corporate trust indentures, to the issuer of the securities subject to each indenture; provided, however, that notwithstanding the foregoing, the transferor may, if it deems it appropriate, comply with any notice procedures contained in the trust indenture instrument with respect to succession of trustees.

(12) For fiduciary accounts not listed in above subsections (1) through (11), to such persons as the transferor sent its last report of the status of the account.

(b) For purposes of this article, notice shall be deemed effective when mailed by the transferor. Should the transferor learn after the expiration of 30 days from such transfer that through inadvertence, error, neglect or otherwise, notice was not mailed as herein provided, delayed notice may be given in the manner set forth herein. The recipient of such notice shall then have 30 days to object to the transfer as provided in Section 5-11A-33.

(Acts 1989, No. 89-539, p. 1127, §3.)

§ 5-11A-33 Objection to Transfer; Hearing on Objection; Appointment of Related Institution as Agent

(a) Any person given notice pursuant to Section 5-11A-32 may file a written objection to the fiduciary transfer with the Superintendent of the State Banking Department, stating grounds for objection, within 30 days of receipt of notice of the transfer by the person notified pursuant to Section 5-11A-32. The transferor shall then have 30 days to either:

(1) Abandon the transfer of fiduciary accounts to which objection was given and hold such transfer for nought, or

(2) Apply to the State Banking Department for a hearing on the merits of the objection to transfer. After such hearing, the State Banking Department shall either approve or deny the transfer.

(b) Nothing herein shall preclude the transferor from appointing a related bank, trust company or trust department as its agent for the performance of any and all fiduciary obligations as provided in Section 5-11A-37.

(Acts 1989, No. 89-539, p. 1127, §4.)

§ 5-11A-34 Filing of Affidavit in Office of Judge of Probate; Filing of Notice of Abandonment

(a) Within a reasonable time after the date of a transfer of the fiduciary accounts in accordance with the procedures set forth in Sections 5-11A-32 and 5-11A-33, the transferor shall file an affidavit in the office of the judge of probate of the county in which the main office of the transferor is located; and from time to time, the transferor may file a copy of such affidavit in the office of the judge of probate in such other counties as the transferor may deem appropriate. Such affidavit shall set forth the names and addresses of the transferor and transferee, such identification of the fiduciary accounts transferred as the transferor may deem appropriate, and such other information as the transferor may deem desirable.

(b) In the event that notice of objection to the transfer is received by the transferor after the filing of record of the original affidavit with respect to the transfer; and in the event that pursuant to Section 5-11A-33, such transfer is abandoned, the transferor shall promptly file notice of such abandonment in the office of the appropriate judge of probate.

(Acts 1989, No. 89-539, p. 1127, §5.)

§ 5-11A-35 Substitution of Transferee Bank, Trust Company or Trust Department as Fiduciary; Effect

If a bank, trust company or trust department completes a fiduciary transfer, the bank, trust company or trust department to which such fiduciary accounts have been transferred shall be automatically substituted as the fiduciary of all the accounts so transferred without further action and without any order or decree by any court or public officer; and without such transfer being treated or considered as a resignation by the transferor as a fiduciary; and such transferee bank, trust company or trust department shall have all the rights, duties, responsibilities, obligations and liabilities, financial or otherwise, of such transferor bank with respect to such accounts. A bank, trust company or trust department which completes a fiduciary transfer shall be relieved as fiduciary without an accounting and without any order or decree of any court or public officer, and prospectively shall have no continuing duties, responsibilities, obligations or liabilities, financial or otherwise, with respect to the accounts transferred. Such transfer shall not, however, relieve the transferor bank of liability it may have incurred for action or inaction prior to the transfer, nor shall it impose liability on the transferee for action or inaction of the transferor prior to the transfer. No such transfer shall constitute a relinquishment of trust powers by the transferor bank.

(Acts 1989, No. 89-539, p. 1127, §6.)

§ 5-11A-36 “Related” Defined

A transferor bank, trust company or trust department is “related” to a transferee bank, trust company or trust department if:

(1) Such transferee controls the transferor;

(2) Such transferor controls the transferee;

(3) The same entity controls, directly or indirectly, the transferor and the transferee;

(4) A majority of the directors of the transferor are directors of the transferee; or

(5) A majority of the directors of the transferee are directors of the transferor.

“Control” and “controls” as used herein shall mean the ownership of a majority of the voting shares of another bank, trust company or of the bank operating such trust department.

(Acts 1989, No. 89-539, p. 1127, §7.)

§ 5-11A-37 Appointment of Agent

Regardless of objection to any fiduciary transfer as provided in Section 5-11A-33 and the outcome thereof, and notwithstanding any procedure under this article, any bank may appoint a related bank, trust company or trust department as its agent for the performance of all acts, obligations and responsibilities of the bank with respect to any fiduciary account. In such an event, the appointing bank shall remain fully responsible and liable with respect to all actions of the related bank, trust company or trust department as if performed by the appointing bank itself. No such agency relationship shall:

(1) Be deemed an impermissible delegation of responsibility or duty by the appointing bank;

(2) Constitute a resignation or disqualification of the appointing bank as fiduciary or relinquishment of trust powers by the appointing bank; or

(3) Require the consent of any person, entity, court or other governmental authority.

(Acts 1989, No. 89-539, p. 1127, §8.)

Chapter 12A Administration, Etc., of Common Trust Funds

§ 5-12A-1 Definitions

As used in this chapter, the following terms shall have the following meanings, respectively, unless the context clearly indicates otherwise:

(1) TRUST INSTITUTION. Any state bank, any national bank or any trust company authorized to act in a fiduciary capacity in this state and under the supervision of the Comptroller of the Currency of the United States or the Federal Reserve System, or the Superintendent of Banks of the State of Alabama.

(2) AFFILIATED TRUST INSTITUTION. A trust institution which, together with one or more other trust institutions, are each owned or controlled by a bank holding company which is under the supervision of the Board of Governors of the Federal Reserve System.

(3) OWNED OR CONTROLLED. The ownership by a bank holding company of stock possessions of at least 80 percent of the voting power of all classes of stock and at least 80 percent of each class of the nonvoting stock (other than nonvoting stock which is limited and preferred as to dividends) of the trust institution.

(4) FIDUCIARY. Any trust institution or person acting in the capacity of executor, administrator, administrator with the will annexed, administrator de bonis non, guardian, testamentary trustee, trustee appointed by any court and trustee, agent or custodian under any written agreement, declaration or instrument of trust, either solely or together with others.

(5) COMMON TRUST FUND. A fund established, maintained and administered pursuant to the requirements of this chapter by a trust institution exclusively for the collective investment and reinvestment of moneys contributed thereto by such trust institution in its capacity as a fiduciary or cofiduciary or by an affiliated trust institution in its capacity as a fiduciary or cofiduciary.

(6) ESTATE OR ESTATES. Such term shall include any trust, estate or fund administered by a trust institution in a fiduciary capacity.

(7) PARTICIPATION. The interest of a participating trust in the common trust fund.

(8) PARTICIPANT. Any trust, estate or fund administered by a trust institution in a fiduciary capacity having a “participation.”

(9) SECURITY OR SECURITIES. Such term shall include all types of property in which the trust institution is authorized to invest the assets of the common trust fund.

(Acts 1980, No. 80-658, §5-12-1.)

§ 5-12A-2 Trust Institutions May Establish, Etc., Common Trust Funds

Any trust institution may establish, maintain and administer one or more common trust funds.

(Acts 1980, No. 80-658, §5-12-2.)

§ 5-12A-3 Investments by Trust Institutions

Any trust institution, in its capacity as fiduciary or cofiduciary, whether such fiduciary capacity arose before or was created after July 8, 1943, may invest funds which it lawfully holds for investment in such capacity in interests or participations in one or more common trust funds, if such investment is not prohibited by the instrument, judgment, decree or order creating the fiduciary relationship and if, in the case of cofiduciaries, the trust institution procures the consent of its cofiduciary or cofiduciaries to such investment.

(Acts 1980, No. 80-658, §5-12-3.)

§ 5-12A-4 Common Trust Fund Plan

Each common trust fund shall be established and maintained in accordance with a written plan (referred to herein as the plan) approved by resolution of the board of directors of the trust institution and approved in writing by competent legal counsel. The plan shall provide that the common trust fund shall be administered under the laws of this state and of the United States and in conformity with the rules and regulations promulgated from time to time under authority of such laws and shall contain full and detailed provisions, not inconsistent with the provisions of this chapter, as to the manner in which the common trust fund is to be operated, the investment powers with respect to the common trust fund, the allocation and apportionment of income, profits and losses, the terms and conditions governing the admission or withdrawal of investments or participations in the common trust fund, the auditing and settlement of accounts of the trust institution with respect to the common trust fund, the basis and method of valuing securities in the common trust fund, the basis upon which the common trust fund may be terminated and such other matters as may be necessary to define clearly the rights of participants in the common trust fund. A copy of the plan shall be available at the principal office of the trust institution for inspection during all regular business hours to any person having an interest in a participation in the common trust fund. The plan may or may not provide for the amortization of the premium upon bonds or other obligations, the disposition of discounts and profits and the allocation of the same to principal or income accounts or the apportionment of the same between principal and income accounts, the establishment and maintenance of a reserve out of current interest from mortgage investments against which realized losses on mortgages may be charged and other like matters. The provisions of the plan shall control all participants therein and the rights and benefits of all persons interested in such participations as beneficiaries or otherwise.

(Acts 1980, No. 80-658, §5-12-4.)

§ 5-12A-5 Amendment of Plan

The plan may be amended from time to time by the fiduciary with the approval of the board of directors of the trust institution. Any such amendment shall be filed with the original plan, together with a certified copy of the resolution of the board of directors of the trust institution approving the same.

(Acts 1980, No. 80-658, §5-12-5.)

§ 5-12A-6 Control of Investments by Instrument Under Which Trust Institution Acts

If the instrument under which a trust institution acts as fiduciary, whether such fiduciary capacity arose before or is created after July 8, 1943, shall either expressly or by its silence limit or restrict the investment of moneys of the estate and securities to the class authorized by law as legal investments, the trust institution may, in its capacity as sole fiduciary or with the consent of any person acting with it in a fiduciary capacity, invest and reinvest moneys of the estate in any such common trust fund maintained by the trust institution or by an affiliated trust institution, provided, the securities composing such fund consist solely of securities of the class authorized as legal investments for funds held by a fiduciary. If the instrument under which the trust institution acts as fiduciary, whether such fiduciary capacity arose before or is created after July 8, 1943, shall authorize investments of moneys of the estate in a common trust fund or in investments other than those designated by law as legal investments or shall authorize the trust institution, either alone or in conjunction with any person acting with it in a fiduciary capacity, to exercise its or their discretion with respect to the investment of moneys of the estate, the trust institution may, in its capacity as sole fiduciary or with the consent of any person acting with it in a fiduciary capacity, invest and reinvest moneys of the estate in any such common trust fund maintained by it or by an affiliated trust institution. Any such common trust fund consisting solely of moneys of estates contributed thereto by the trust institution pursuant to authority contained in any such instrument creating the fiduciary capacity to invest moneys of the estates in a common trust fund or in investments other than legal investments or pursuant to such discretionary powers with respect to the investment of moneys creating the fiduciary capacity may be composed of investments other than those of the class designated by law as legal investments for funds held by fiduciaries. In order to determine whether the investment of funds received or held by a trust institution as fiduciary in a participation in a common trust fund is proper, the trust institution may consider the common trust fund as a whole and shall not, for example, be prohibited from making such investment because any particular asset is nonincome-producing.

(Acts 1980, No. 80-658, §5-12-6.)

§ 5-12A-7 Investment of Estate Moneys in Fund; Withdrawals

The trust institution shall invest the moneys of an estate (whether the estate is administered by such trust institution or by an affiliated trust institution) in such common trust fund by adding the same thereto and by apportioning a participation therein to such estate in the proportion that the moneys of the estate added thereto bears to the aggregate value of all the securities of such fund at the time of such investment, including in such securities the moneys of the estate so added. The withdrawal of a participation of such common trust fund shall be on the basis of its proportionate interest in the aggregate value of all the securities of such fund at the time of such withdrawal, as hereinafter provided. The participating interest of any estate in such common trust funds may, from time to time, be withdrawn in whole or in part by the trust institution administering the estate and shall be withdrawn within a period of three months following the written request to do so of any person acting with the trust institution administering the estate in a fiduciary capacity. Funds for the purpose of any withdrawal shall be made promptly available by the trust institution through sale of securities of the common trust fund. Upon such withdrawals, the trust institution may make distribution in cash or ratably in kind or partly in cash and partly in kind; provided, that all such distribution as of any one time shall be made on the same basis.

(Acts 1980, No. 80-658, §5-12-7.)

§ 5-12A-8 Record of Fiduciary Accounts Owning Interest in Fund; Extent of Interest

The trust institution shall designate clearly upon its records the names of the fiduciary accounts which own a participation in the common trust fund and the extent of the interest of such fiduciary accounts therein. No fiduciary account owning or holding an investment or participation in a common trust fund shall be deemed to have individual ownership of any asset in such common trust fund, but should be deemed to have only a proportionate undivided interest in the common trust fund.

(Acts 1980, No. 80-658, §5-12-8.)

§ 5-12A-9 Annual Audit

At least once during each period of 12 months, the trust institution shall cause an audit to be made of the common trust fund by an auditor or auditors responsible only to the board of directors of the trust institution. The report of such audit shall include a list of the investments comprising the common trust fund at the time of the audit, which shall show the valuation placed on each item as of the date of the audit, a statement of purchases, sales and any other investment changes and of all income and disbursements during the period to which the audit relates. The period of the first audit shall commence with the establishment of the common trust fund, and each succeeding audit shall commence at the end of the period covering the preceding audit. The reasonable expense of any such audit may be charged to the common trust fund, and a copy of such audit shall be available at the principal office of the trust institution for inspection during all regular business hours to any person having an interest in a participation in the common trust fund; provided, that the trust institution shall be required to furnish a copy of such audit to any person having a share in the investments of the common trust fund without expense to such person should the interested person request a copy of such audit.

(Acts 1980, No. 80-658, §5-12-9.)

§ 5-12A-10 Quarterly Valuation of Securities in Fund

No less frequently than once during each period of three months, the trust institution administering a common trust fund shall determine the value of the securities in the common trust fund as of the dates set for the valuation thereof. No participation shall be admitted to or withdrawn from the common trust fund, except (i) on the basis of such valuation and (ii) as of such valuation date.

(Acts 1980, No. 80-658, §5-12-10.)

§ 5-12A-11 Management and Control of Fund; Ownership of Assets

The trust institution shall have the exclusive management and control of each common trust fund administered by it and the sole right at any time to sell, convert, exchange, transfer or otherwise change or dispose of the assets comprising the same. The ownership of such assets shall be solely in the trust institution as fiduciary and shall be considered as assets held by it as fiduciary. A trust institution shall not invest any of its own funds in a common trust fund administered by it or by an affiliated trust institution; and, if the trust institution, because of a creditor relationship or any other reason, acquires any interest in a participation in such common trust fund, the participation shall be withdrawn on the first date on which such withdrawal can be effected; however, in no case shall an unsecured advance to a participant until the time of the next withdrawal be deemed to constitute the acquisition of an interest by a trust institution. A trust institution may charge a fee for the management of a common trust fund administered by it; provided, that the fractional part of such fee proportionate to the interest of each participant shall not, when added to any other compensations charged by the trust institution or by an affiliated trust institution to the participant, exceed the total amount of compensations which would have been charged to said participant if no assets of said participant had been invested in participations in the common trust fund.

(Acts 1980, No. 80-658, §5-12-11.)

§ 5-12A-12 Mistakes in Administration of Fund

No mistake made in good faith and in the exercise of due care in connection with the administration of a common trust fund shall be deemed to be a violation of this chapter or of any rules or regulations issued pursuant thereto if promptly after discovery of the mistake the trust institution takes whatever action may be practical in the circumstances to remedy the mistake.

(Acts 1980, No. 80-658, §5-12-12.)

§ 5-12A-13 Administration, Etc., of Common Trust Funds Differing from Funds Permitted by This Chapter

Nothing contained in this chapter shall prohibit a trust institution, when it acts in accordance with specific authority contained in the instrument or instruments under which the trust institution acts, from establishing, maintaining, administering and investing in, without regard to the requirements and limitations of this chapter, one or more common trust funds differing from the common trust funds expressly permitted by this chapter.

(Acts 1980, No. 80-658, §5-12-13.)

§ 5-12A-14 Accountings

Unless ordered by a court of competent jurisdiction, a trust institution administering a common trust fund shall not be required to render a court accounting with regard to such fund, but it may file returns and make accountings in the same manner and for the same purposes as is provided by law for other fiduciaries.

(Acts 1980, No. 80-658, §5-12-14.)

§ 5-12A-15 Taxation

A common trust fund, whether established, maintained, and administered pursuant to the requirements of this chapter or established, maintained, administered, and invested in without regard to the requirements and limitations of this chapter, as provided in Section 5-12A-13, shall not be subject to taxation under any income tax law of the State of Alabama. The computation of gain, loss, basis, taxable income, taxable loss, and other income tax treatment of a common trust fund and its participants, shall be determined in accordance with 26 U.S.C. § 584, as amended from time to time. Every trust institution maintaining a common trust fund shall make a return under oath for each fiscal year stating specifically with respect to the fund the items of gross income and the deductions allowed by law, and shall include in the return the names and addresses of the participants entitled to share in the net income of the fund and the amount of the proportionate share of each participant.

(Acts 1980, No. 80-658, § 5-12-15; Acts 1997, No. 97-194, p. 305, §1.)

Chapter 13B Interstate and International Bank Acquisitions, Mergers and Branching

Article 1 Acquisitions of Banks by Bank Holding Companies

§ 5-13B-1 Short Title

This chapter shall be known and may be cited as the “Alabama Interstate and International Banking Act of 1995.”

(Acts 1995, No. 95-115, p. 134, §1.)

§ 5-13B-2 Definitions

For purposes of this article:

(a) “Acquire” means:

(1) For a company to merge or consolidate with a bank holding company;

(2) For a company to assume direct or indirect ownership or control of:

(I) More than 25 percent of any class of voting shares of a bank holding company or a bank, if the acquiring company was not a bank holding company prior to such acquisition;

(II) More than five percent of any class of voting shares of a bank holding company or a bank, if the acquiring company was a bank holding company prior to such acquisition; or

(III) All or substantially all of the assets of a bank holding company or a bank; or

(3) For a company to take any other action that results in the direct or indirect acquisition of control by such company of a bank holding company or a bank; however, formation of a de novo bank pursuant to Chapter 5A of this title is not an acquisition for purposes of this article.

(b) “Affiliate” has the meaning set forth in Section 2(k) of the Bank Holding Company Act.

(c) “Alabama bank” means a bank that is:

(1) Organized under the laws of Alabama under the jurisdiction of the superintendent; or

(2) Organized under federal law and having its main office in this state.

(d) “Alabama bank holding company” means a bank holding company that:

(1) Had its principal place of business in this state on July 1, 1966, or the date on which it became a bank holding company, whichever is later; and

(2) Is not controlled by a bank holding company other than an Alabama bank holding company.

(e) “Bank” has the meaning set forth in Section 2(c) of the Bank Holding Company Act.

(f) “Bank holding company”:

(1) Has the meaning set forth in Section 2(a) of the Bank Holding Company Act; and

(2) Unless the context requires otherwise, includes an Alabama bank holding company, an out-of-state bank holding company, and a foreign bank holding company.

(g) “Bank Holding Company Act” means the federal Bank Holding Company Act of 1956, as amended, 12 U.S.C. §§1841 et seq.

(h) “Bank supervisory agency” means any of the following:

(1) The Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and any successor to these agencies; and

(2) Any agency of another state with primary responsibility for chartering and supervising banks.

(i) “Branch” has the same meaning as “domestic branch” defined in Section 3 of the Federal Deposit Insurance Act; however, an automated teller machine shall not constitute a branch.

(j) “Company” has the meaning set forth in Section 2(b) of the Bank Holding Company Act, and includes a bank holding company.

(k) “Control” shall be construed consistently with the provisions of Section 2(a) of the Bank Holding Company Act.

(l) “Deposit” has the meaning set forth in 12 U.S.C. §1813 (l).

(m) “Depository institution” means any institution included for any purpose within the definitions of “insured depository institution” as set forth in 12 U.S.C. §1813(c) (2) and (3).

(n) “Foreign bank holding company” means a bank holding company that is organized under the laws of a country other than the United States, including any territory or possession thereof.

(o) “Home state regulator” means, with respect to an out-of-state bank holding company, the bank supervisory agency of the state in which such company maintains its principal place of business.

(p) “Out-of-state bank holding company” means:

(1) A bank holding company that is not an Alabama bank holding company; and

(2) Unless the context requires otherwise, includes a foreign bank holding company.

(q) “Principal place of business” of a bank holding company means the state in which the total deposits of all bank subsidiaries of such company were the greatest on the later of July 1, 1966, or the date on which such company became a bank holding company.

(r) “State” means any state, territory, or other possession of the United States, including the District of Columbia.

(s) “Subsidiary” has the meaning set forth in Section 2(d) of the Bank Holding Company Act.

(t) “Superintendent” means the Superintendent of Banks then in office and, where appropriate, all of his or her successors and predecessors in office.

(Acts 1995, No. 95-115, p. 134, §2; Act 2007-224, p. 284, §1.)

§ 5-13B-3 Scope of Article and Statement of Legislative Intent

This article sets forth the conditions under which a company may acquire an Alabama bank or an Alabama bank holding company or an Alabama bank holding company may acquire an out-of-state bank or bank holding company. This article is intended not to discriminate against out-of-state bank holding companies or against foreign bank holding companies in any manner that would violate Section 3(d) of the Bank Holding Company Act, as amended effective September 29, 1995, by Section 101 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, Public Law No. 103-328.

(Acts 1995, No. 95-115, p. 134, §3; Act 2010-548, p. 966, §1.)

§ 5-13B-4 Permitted Acquisitions

(a) No company may acquire an Alabama bank holding company or an Alabama state bank without the prior approval of the superintendent.

(b) The approval of the superintendent under subsection (a) shall not be required where the acquisition is made:

(1) In a transaction arranged by the superintendent or another bank supervisory agency to prevent the insolvency or closing of the acquired bank; or

(2) In a transaction in which a bank forms its own bank holding company, if the ownership rights of the former bank shareholders are substantially similar to those of the shareholders of the new bank holding company.

(c) No Alabama bank holding company may acquire an out-of-state bank or bank holding company without the prior approval of the superintendent.

(d) In a transaction for which the superintendent’s approval is not required under this section, the parties shall give written notice to the superintendent at least 15 days before the effective date of the acquisition, unless a shorter period of notice is expressly permitted or required under applicable federal law.

(Acts 1995, No. 95-115, p. 134, §4; Act 2010-548, p. 966, §1.)

§ 5-13B-5 Required Application

(a) A company that proposes to make an acquisition under this article shall:

(1) File with the superintendent a copy of the application that such company has filed with the responsible federal bank supervisory agency together with such additional information as the superintendent may prescribe; and

(2) Pay to the superintendent the application fee, if any, prescribed by the superintendent.

(b) To the extent consistent with the effective discharge of the superintendent’s responsibilities, the forms established under this article for application and reporting shall conform to those established by the Board of Governors of the Federal Reserve System under the Bank Holding Company Act.

(c) In connection with an application received under this article, the superintendent shall require that prior notice of the application be published one time in a daily newspaper of general circulation and provide an opportunity for public comment.

(d) If the applicant is an out-of-state bank holding company that is not incorporated under the laws of this state, it shall submit with the application evidence satisfactory to the superintendent that the applicant has complied with or is exempted from the requirements of Sections 10-2B-15.01 et seq.

(Acts 1995, No. 95-115, p. 134, §5; Act 2010-548, p. 966, §1.)

§ 5-13B-6 Standards for Approval

(a) In deciding whether to approve an application for a proposed acquisition under this article, the superintendent shall consider whether the acquisition may:

(1) Be detrimental to the safety and soundness of the Alabama state bank or the Alabama bank holding company ;

(2) Result in a substantial reduction of competition in this state; or

(3) Have a significantly adverse effect on the convenience and needs of the community or communities in this state that are served by the Alabama state bank or the Alabama bank holding company to be acquired.

(b) Except as otherwise expressly provided in this section, the superintendent shall not approve an acquisition under this article if upon consummation of the transaction the applicant, including any depository institution affiliated with the applicant, would control 30 percent or more of the total amount of deposits held by depository institutions in this state.

(c) The superintendent may by regulation, with the concurrence of a majority of the members of the Alabama State Banking Board, adopt a procedure whereby the limitation on control of deposits set forth in subsection (b) may be waived for good cause shown.

(d) The superintendent shall not approve an application for an acquisition under this article unless the Alabama bank to be acquired, or all Alabama bank subsidiaries of the bank holding company to be acquired, have as of the proposed date of acquisition been in existence and in continuous operation for five years or more.

(e) The five-year requirement shall be met if the superintendent determines that either the Alabama bank or the subsidiaries of the Alabama bank holding company to be acquired:

(1) Were organized solely for the purpose of facilitating the acquisition of a bank that has been in existence and continuously operating for more than five years, or

(2) Resulted from the merger or consolidation of two or more banks at least one of which had been in existence and continuously operating for more than five years.

(Acts 1995, No. 95-115, p. 134, §6; Act 2010-548, p. 966, §1.)

§ 5-13B-7 Procedures Relating to Applications

(a) The superintendent shall decide whether to approve an acquisition under this article within 60 days after receipt of a completed application; provided, that if the superintendent requests additional information from the applicant following receipt of a completed application, the time limit for decision by the superintendent shall be the later of:

(1) The date set forth above in this subsection, or

(2) Thirty days after the superintendent’s receipt of the requested additional information.

(b) The superintendent may in his or her discretion hold a public hearing in connection with an application at any time within 20 days after receipt of the completed application if a significant issue of law or fact has been raised with respect to the proposed acquisition.

(c) If the superintendent holds a public hearing in connection with an application, the time limit specified in subsection (a) shall be extended to 30 days after the conclusion of the public hearing.

(d) An application shall be deemed approved if the superintendent takes no action on the application within the time limits specified in this section.

(Acts 1995, No. 95-115, p. 134, §7.)

§ 5-13B-8 Reports; Examinations

(a) To the extent specified by the superintendent by regulation, order, or written request, each bank holding company that directly or indirectly controls an Alabama state bank or an Alabama bank holding company, or the home state regulator of such company, shall submit to the superintendent:

(1) One or more copies of each financial report filed by such company with any bank supervisory agency, except for any report the disclosure of which would be prohibited by applicable federal or state law, within 15 days after the filing thereof with such agency; and

(2) An annual report, not later than April 15 of each year for each bank and branch in the state controlled by the bank holding company containing the following information:

a. The location;

b. The amount of deposits held as of the end of the preceding calendar year; and

c. The amount of loans made during the preceding calendar year to individuals and entities with addresses in this state.

(b) At the request of the superintendent, to the extent permitted by applicable state or federal law, each bank holding company that controls an Alabama state bank or an Alabama bank holding company, or the home state regulator of such bank or company, shall provide to the superintendent copies of the reports of examination of the company or any Alabama state bank or Alabama bank holding company.

(c) The superintendent may examine an Alabama bank holding company whenever the superintendent has reason to believe that the company is not being operated in compliance with the laws of this state or in accordance with safe and sound banking practices.

(Acts 1995, No. 95-115, p. 134, §8.)

§ 5-13B-9 Agency Activities

(a) Any Alabama state bank may, upon compliance with the requirements of this section, agree to receive deposits, renew time deposits, close loans, service loans, receive payments on loans and other obligations and, with the prior approval of the superintendent, perform other services as an agent for any depository institution.

(b) An Alabama state bank that proposes to enter into an agency agreement to perform services other than those specifically designated in subsection (a) shall file with the superintendent at least 30 days before the effective date of the agreement:

(1) A notice of intention to enter into such an agency agreement with a depository institution;

(2) A description of the services other than those specifically designated in subsection (a) proposed to be performed under the agency agreement; and

(3) A copy of the agreement.

(c) If any proposed service is not specifically designated in subsection (a) and has not previously been approved in a regulation issued by the superintendent, the superintendent shall decide whether to approve the offering of such service within 30 days after receipt of the notice required by subsection (b); provided, that if the superintendent requests additional information after reviewing such notice, the time limit for the superintendent’s decision shall be 30 days after receiving such additional information. In deciding whether to approve, by regulation or order, any proposed service that is not specifically designated in subsection (a), the superintendent shall consider whether such service would be consistent with applicable federal and state law and the safety and soundness of the principal and agent depository institutions. The superintendent shall give appropriate notice to the public of each approval, by regulation or order, of any proposed service pursuant to this subsection.

(d) Any proposed service subject to subsection (c) shall be deemed approved if the superintendent takes no action on the notice required by subsection (b) within the time limits specified in subsection (c).

(e) An Alabama state bank may not under any agency agreement:

(1) Conduct any activity as an agent that it would be prohibited from conducting as a principal under applicable state or federal law; or

(2) Have an agent conduct any activity that the bank as principal would be prohibited from conducting under applicable state or federal law.

(f) The superintendent may order an Alabama state bank or any other depository institution subject to the superintendent’s enforcement powers to cease acting as an agent or principal under any agency agreement with a depository institution that the superintendent finds to be inconsistent with safe and sound banking practices.

(g) Notwithstanding any other provision of the law of this state, an Alabama state bank acting as an agent for a depository institution in accordance with this section shall not be considered to be a branch of that depository institution.

(Acts 1995, No. 95-115, p. 134, §9.)

§ 5-13B-10 Penalties

The superintendent may enforce the provisions of this article by any appropriate action in the circuit courts of this state, including an action for civil money penalties or injunctive relief, provided, that the superintendent shall promptly give notice to the home state regulator of any enforcement action initiated against an out-of-state bank holding company and, to the extent practicable, shall consult and cooperate with the home state regulator in pursuing and resolving the enforcement action.

(Acts 1995, No. 95-115, p. 134, §10.)

§ 5-13B-11 Authority to Issue Regulations; Cooperative Agreements; Fees

In order to carry out the purposes of this title, in addition to and cumulative with the authority and powers of the superintendent set forth elsewhere in this title, the superintendent may:

(1) Adopt regulations;

(2) Enter into cooperative, coordinating, or information-sharing agreements with any other bank supervisory agency or any organization affiliated with or representing one or more bank supervisory agencies;

(3) Accept any report of examination or investigation by another bank supervisory agency having concurrent jurisdiction over an Alabama state bank or a bank holding company that controls an Alabama state bank in lieu of conducting the superintendent’s own examination or investigation of such bank holding company or bank;

(4) Enter into contracts with any bank supervisory agency having concurrent jurisdiction over an Alabama state bank or a bank holding company that controls an Alabama state bank to engage the services of the agency’s examiners at a reasonable rate of compensation, or to provide the services of the superintendent’s examiners to the agency at a reasonable rate of compensation; which contract shall be deemed a sole source, one vendor and one supplier contract under the procurement laws of this state and shall be exempt from competitive bidding requirements;

(5) Enter into joint examinations or joint enforcement actions with any other bank supervisory agency having concurrent jurisdiction over any Alabama state bank, or any bank holding company that controls an Alabama state bank; provided, however, that the superintendent may take any such action independently only with respect to any Alabama state bank or bank holding company organized under the laws of Alabama or another state in the United States that directly owns a majority of the voting securities of an Alabama state bank. If the superintendent determines that examination of an out-of-state bank or bank holding company is necessary to carry out his or her responsibilities under this title or to enforce compliance with the laws of this state, the superintendent shall recognize the exclusive authority of the home state regulator over corporate governance and other matters as provided in federal law and the primary responsibility of the home state regulator with respect to safety and soundness matters; and

(6) Assess supervisory and examination fees that shall be payable by Alabama banks in connection with the performance of the duties of the superintendent under this title. Such fees may be shared with other bank supervisory agencies or any organizations affiliated with or representing one or more bank supervisory agencies in accordance with agreements between them and the superintendent.

Acts 1995, No. 95-115, p. 134, §11; Act 2007-224, p. 284, §1; Act 2011-589, §1.)

Article 2 Interstate Bank Mergers and Branching

§ 5-13B-20 Purpose

It is the express intent of this article to permit interstate branching by merger under Section 102 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, Public Law No. 103-328, in accordance with the provisions set forth in this article.

(Acts 1995, No. 95-115, p. 134, §12.)

§ 5-13B-21 Definitions

As used in this article, unless a different meaning is required by the context, the following words and phrases shall have the following meanings:

(a) “Alabama bank” means a bank whose home state is Alabama.

(b) “Alabama state bank” means a bank chartered under the laws of Alabama.

(c) “Bank” has the same meaning as set forth in 12 U.S.C. §1813(h); provided that the term “bank” shall not include any “foreign bank” as defined in 12 U.S.C. §3101(7), except that such term shall include any foreign bank organized under the laws of a territory of the United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands, the deposits of which are insured by the Federal Deposit Insurance Corporation.

(d) “Bank holding company” has the meaning set forth in 12 U.S.C. §1841(a) (1).

(e) “Bank supervisory agency” means:

(1) The Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and any successor to these agencies; and

(2) Any agency of another state with primary responsibility for chartering and supervising banks.

(f) “Branch” has the same meaning as “domestic branch” defined in Section 3 of the Federal Deposit Insurance Act; however, an automated teller machine shall not constitute a branch.

(g) “Control” shall be construed consistently with the provisions of 12 U.S.C. §1841(a) (2).

(h) “Home state” means:

(1) With respect to a national bank, the state in which the main office of the bank is located;

(2) With respect to a state bank, the state by which the bank is chartered;

(3) With respect to a foreign bank, the state determined to be the home state of such foreign bank under 12 U.S.C. §3103(c).

(i) “Home state regulator” means, with respect to an out-of-state state bank, the bank supervisory agency of the state in which such bank is chartered.

(j) “Host state” means a state, other than the home state of a bank, in which the bank maintains, or seeks to establish and maintain, a branch.

(k) “Insured depository institution” has the meaning set forth in 12 U.S.C. §1813(c) (2) and (3).

(l) “Interstate merger transaction” means:

(1) The merger or consolidation of banks with different home states, and the conversion of branches of any bank involved in the merger or consolidation into branches of the resulting bank; or

(2) The purchase of all or substantially all of the assets, including all or substantially all of the branches, of a bank whose home state is different from the home state of the acquiring bank.

(m) “Out-of-state bank” means a bank whose home state is a state other than Alabama.

(n) “Out-of-state state bank” means a bank chartered under the laws of any state other than Alabama.

(o) “Resulting bank” means a bank that has resulted from an interstate merger transaction under this article.

(p) “State” means any state, territory, or other possession of the United States, including the District of Columbia.

(q) “Subsidiary” has the meaning set forth in Section 2(d) of the Bank Holding Company Act.

(r) “Superintendent” means the Superintendent of Banks then in office and, where appropriate, all of his or her successors and predecessors in office.

(Acts 1995, No. 95-115, p. 134, §13.)

§ 5-13B-22 Establishment of Interstate Branches by Acquisition or Merger; Branching

With the prior approval of the superintendent, an Alabama state bank may establish, maintain, and operate one or more branches in a state other than Alabama or a foreign country on a de novo basis, by acquisition of a branch, or pursuant to an interstate merger transaction in which the Alabama state bank is the resulting bank. For an interstate merger transaction and not later than the date on which the required application for the interstate merger transaction is filed with the responsible federal bank supervisory agency, the applicant Alabama state bank shall file an application on a form prescribed by the superintendent and pay the fee prescribed by the superintendent. The applicant shall also comply with the applicable provisions of Alabama law governing mergers of Alabama state banks. If the superintendent finds that (1) the proposed interstate merger transaction will not be detrimental to the safety and soundness of the applicant or the resulting bank, (2) any new officers and directors of the resulting bank are qualified by character, experience, and financial responsibility to direct and manage the resulting bank, and (3) the proposed interstate merger transaction is consistent with the convenience and needs of the communities to be served by the resulting bank in this state and is otherwise in the public interest, the superintendent shall approve the interstate merger transaction and the operation of branches outside of Alabama by the Alabama state bank. Such an interstate merger transaction may be consummated only after the applicant has received the superintendent’s written approval.

(Acts 1995, No. 95-115, p. 134, §14; Act 2007-224, p. 284, §1.)

§ 5-13B-23 Interstate Merger Transactions and Branching; Operation of Branches

(a) One or more Alabama state banks may enter into an interstate merger transaction with one or more out-of-state banks under this article, and an out-of-state bank resulting from such transaction may maintain and operate the branches in Alabama of an Alabama state bank that participated in such transaction, provided that the conditions and filing requirements of this article are met.

(b) Except as otherwise expressly provided in this subsection, an interstate merger transaction, establishment of a de novo branch, or acquisition of a branch shall not be permitted under this article if, upon consummation of such transaction, the out-of-state bank, including all insured depository institutions that would be “affiliates” as defined in 12 U.S.C. §1841(k) of the out-of-state bank, would control 30 percent or more of the total amount of deposits held by all insured depository institutions in this state. The superintendent may by regulation, subject to the approval of the Banking Board, adopt a procedure whereby the foregoing limitation on control of deposits may be waived for good cause shown.

(c) An interstate merger transaction resulting in the acquisition by an out-of-state bank of an Alabama state bank, or all or substantially all of the branches of an Alabama state bank, shall not be permitted under this article unless such Alabama state bank shall have been in continuous operation, on the date of such acquisition, for a period of at least five years. The five-year requirement shall be met if the superintendent determines that the Alabama state bank to be acquired was:

(1) Organized solely for the purpose of facilitating the acquisition of a bank that has been in existence and continuously operating for more than five years, or

(2) Resulted from the merger or consolidation of two or more banks at least one of which had been in existence and continuously operating for more than five years.

(d) An out-of-state bank that has established or acquired a branch in Alabama under this article may establish or acquire additional branches in Alabama to the same extent that any Alabama bank may establish or acquire a branch in Alabama under applicable federal and state law.

(e) An out-of-state bank that does not have a branch in Alabama and that meets the requirements of this article may establish and maintain one or more de novo branches and acquire and maintain one or more branches in this state.

(f) An out-of-state bank desiring to establish and maintain a de novo branch or to acquire a branch in this state shall provide written notice of the proposed transaction to the superintendent not later than the date on which the bank applies to the responsible federal bank supervisory agency for approval to establish or acquire the branch. The filing of such notice shall be accompanied by the filing fee prescribed by the Banking Board. Filing of the notice by the out-of-state bank’s home state regulator shall satisfy this notice requirement provided the out-of-state bank’s home state regulator permits Alabama banks to file applications in a similar manner.

(g) The out-of-state bank shall comply with the applicable requirements of this code, including the requirements of this title.

(h) An out-of-state bank may establish and maintain a de novo branch or may establish and maintain a branch through acquisition of a branch if both of the following occur:

(1) In the case of a de novo branch, the laws of the home state of the out-of-state bank permit Alabama banks to establish and maintain de novo branches in that state under substantially the same terms and conditions as herein set forth.

(2) In the case of a branch established through the acquisition of a branch, the laws of the home state of the out-of-state bank permit Alabama banks to establish and maintain branches in that state through the acquisition of branches under substantially the same terms and conditions as herein set forth.

(Acts 1995, No. 95-115, p. 134, §15; Act 2007-224, p. 284, §1.)

§ 5-13B-24 Notice and Filing Requirements

Any out-of-state bank that will be the resulting bank pursuant to an interstate merger transaction involving an Alabama state bank shall notify the superintendent of the proposed merger not later than the date on which it files an application for an interstate merger transaction with the responsible federal bank supervisory agency, and shall submit a copy of that application to the superintendent and pay the filing fee, if any, required by the superintendent. Any Alabama state bank which is a party to such interstate merger transaction shall comply with Title 5, Chapter 7A, and with other applicable state and federal laws. Any out-of-state bank which shall be the resulting bank in such an interstate merger transaction shall provide satisfactory evidence to the superintendent of compliance with or exemption from Sections 10-2B-15.01 et seq.

(Acts 1995, No. 95-115, p. 134, §16.)

§ 5-13B-25 Powers

(a) An out-of-state state bank which establishes and maintains one or more branches in Alabama under this article may conduct any activities at such branch or branches that are authorized under the laws of this state for Alabama state banks.

(b) An Alabama state bank may conduct any activities at any branch outside Alabama that are permissible for a bank chartered by the host state where the branch is located, except to the extent such activities are expressly prohibited by the laws of this state; provided, however, that the superintendent shall waive any such prohibition unless he or she determines, by order or regulation, that the involvement of out-of-state branches of an Alabama state bank in particular activities would threaten the safety or soundness of the bank.

(Acts 1995, No. 95-115, p. 134, §17.)

§ 5-13B-26 Examinations; Periodic Reports; Cooperative Agreements; Assessment of Fees

(a) To the extent consistent with subsection (c), the superintendent may make such examinations of any branch established and maintained in this state pursuant to this article by an out-of-state state bank as the superintendent may deem necessary to determine whether the branch is being operated in compliance with the laws of this state and in accordance with safe and sound banking practices. The provisions of Chapter 3A, Title 5, shall apply to such examinations.

(b) The superintendent may prescribe requirements for periodic reports regarding any out-of-state bank that operates a branch in Alabama pursuant to this article. The required reports shall be provided by such bank or by the bank supervisory agency having primary responsibility for such bank. Any reporting requirements prescribed by the superintendent under this subsection shall be (1) consistent with the reporting requirements applicable to Alabama state banks and (2) appropriate for the purpose of enabling the superintendent to carry out his or her responsibilities under this article.

(c) The superintendent may enter into cooperative, coordinating and information-sharing agreements with any other bank supervisory agencies or any organization affiliated with or representing one or more bank supervisory agencies with respect to the periodic examination or other supervision of any branch in Alabama of an out-of-state state bank, or any branch of an Alabama state bank in any host state, and the superintendent may accept such parties’ reports of examination and reports of investigation in lieu of conducting his or her own examinations or investigations.

(d) The superintendent may enter into contracts with any bank supervisory agency that has concurrent jurisdiction over an Alabama state bank or an out-of-state state bank operating a branch in this state pursuant to this article to engage the services of such agency’s examiners at a reasonable rate of compensation, or to provide the services of the superintendent’s examiners to such agency at a reasonable rate of compensation. Any such contract shall be deemed a sole source, one vendor and one supplier contract under the procurement laws of the state and shall be exempt from competitive bidding requirements.

(e) The superintendent may enter into joint examinations or joint enforcement actions with other bank supervisory agencies having concurrent jurisdiction over any branch in Alabama of an out-of-state state bank or any branch of an Alabama state bank in any host state; provided, that the superintendent may at any time take such actions independently if the superintendent deems such actions to be necessary or appropriate to carry out his or her responsibilities under this article and to ensure compliance with the laws of this state; but provided further, that, in the case of an out-of-state state bank, the superintendent shall recognize the exclusive authority of the home state regulator over corporate governance matters and the primary responsibility of the home state regulator with respect to safety and soundness matters.

(f) Each out-of-state state bank that maintains one or more branches in this state may be assessed and, if assessed, shall pay supervisory and examination fees in accordance with the laws of this state and regulations of the superintendent. Such fees may be shared with other bank supervisory agencies or any organization affiliated with or representing one or more bank supervisory agencies in accordance with agreements between such parties and the superintendent.

(Acts 1995, No. 95-115, p. 134, §18.)

§ 5-13B-27 Enforcement

If the superintendent determines that a branch maintained by an out-of-state state bank in this state is being operated in violation of any provision of the laws of this state, or that such branch is being operated in an unsafe and unsound manner, the superintendent shall have the authority to take all such enforcement actions as he or she would be empowered to take if the branch were an Alabama state bank; provided that the superintendent shall promptly give notice to the home state regulator of each enforcement action taken against an out-of-state state bank and, to the extent practicable, shall consult and cooperate with the home state regulator in pursuing and resolving the enforcement action.

(Acts 1995, No. 95-115, p. 134, §19.)

§ 5-13B-28 Regulations

The superintendent may promulgate such regulations as he or she determines to be necessary or appropriate in order to implement the provisions of this article.

(Acts 1995, No. 95-115, p. 134, §20.)

§ 5-13B-29 Notice of Subsequent Merger, Etc

Each out-of-state state bank that has established and maintains a branch in this state pursuant to this article, or the home state regulator of such bank, shall give at least 30 days’ prior written notice to the superintendent, or, in the case of an emergency transaction, such shorter notice as is consistent with applicable state or federal law, of any merger, consolidation, or other transaction that would cause a change of control with respect to such out-of-state state bank or any bank holding company that controls such bank, with the result that an application would be required to be filed pursuant to the federal Change in Bank Control Act of 1978, as amended, 12 U.S.C. §1817(j), or the federal Bank Holding Company Act of 1956, as amended, 12 U.S.C. §§1841 et seq., or any successor statutes thereto.

(Acts 1995, No. 95-115, p. 134, §21.)

Article 3 Regulation of Foreign Banks

Division 1 General

§ 5-13B-40 Purpose

(a) This article is intended generally to provide for state regulation of the participation by foreign banks in the financial markets of this state.

(b) Consistent with the federal International Banking Act, the Bank Holding Company Act, the Federal Deposit Insurance Act, and the Interstate Banking and Branching Efficiency Act, this article is intended specifically:

(1) To authorize banking activities and operations, under state licenses issued by the superintendent, of direct branch and agency offices in this state of foreign banks, generally under terms and conditions not less favorable than the terms and conditions under which such activities and operations may be conducted by federal branch or agency offices of foreign banks in the United States, and to set forth a statutory framework for the licensing, regulation and supervision of such state-licensed offices of foreign banks by the superintendent to assure the safe and sound operation of such offices that are licensed under the laws of this state;

(2) To authorize representative offices in this state of foreign banks, and to set forth statutory provisions governing the licensing and supervision of such offices by the superintendent; and

(3) To ensure that the banking laws and regulations of this state otherwise apply to foreign banks, and to Alabama and out-of-state banks and bank holding companies that are owned or controlled by foreign banks, in a manner consistent with the laws and policies of the United States governing the operations in this country of foreign banks.

(Acts 1995, No. 95-115, p. 134, §22.)

§ 5-13B-41 Definitions

For purposes of this article:

(a) The term “bank” means any bank as defined in: Section 2(c) of the Bank Holding Company Act (12 U.S.C. §1841(c)); Section 3(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. §1813(a)(1)), other than a branch of a foreign bank; or, as the context may require, in Chapter 5A, Title 5. The term “bank” as used in this article shall not in any event include a foreign bank or a branch or agency of a foreign bank.

(b) The term “foreign bank” means any company organized under the laws of a foreign country, a territory of the United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands, that engages directly in the business of banking. The term includes foreign commercial banks, foreign merchant banks, and other foreign institutions that engage in banking activities usual in connection with the business of banking in the countries where such foreign institutions are organized or operating.

(c) The term “out-of-state bank” means a bank, the home state of which is a state other than Alabama.

(d) The term “out-of-state foreign bank” means a foreign bank, the home state of which is a state other than Alabama.

(e) The term “Alabama state bank” means a bank organized under the laws of Alabama.

(f) The term “Alabama national bank” means a national banking association having its headquarters within Alabama.

(g) The term “Alabama bank” means an Alabama state bank or an Alabama national bank.

(h) The terms “bank holding company,” “subsidiary,” and “affiliate,” have the same meaning as set forth in Section 2 of the Bank Holding Company Act (12 U.S.C. §1841), the term “control” shall be construed consistently with the provisions of Section 2(a)(2) of the Bank Holding Company Act (12 U.S.C. §1841(a)(2)), and the term “depository institution” means any institution that is included for any purpose within the definitions of “insured depository institution” as set forth in Sections 3(c)(2) and 3(c)(3) of the Federal Deposit Insurance Act (12 U.S.C. §1813(c)(2) and (3)).

(i) The term “out-of-state bank holding company” means a bank holding company, the home state of which is a state other than Alabama.

(j) The term “state” has the same meaning as is set forth in Section 3(a)(3) of the Federal Deposit Insurance Act (12 U.S.C. §1813(a)(3)).

(k) The term “home state” has the same meaning in reference to national banks, state banks, and bank holding companies as is set forth in Section 44(f)(4) of the Federal Deposit Insurance Act (12 U.S.C. §1831u), and the same meaning in reference to foreign banks as is set forth in Section 5(c) of the Federal International Banking Act (12 U.S.C. §3103(c)).

(l) The term “foreign person” means a natural or juridical person who is a citizen or national of one or more countries, including any colonies, dependencies, or possessions of such countries, other than the United States.

(m) The term “branch,” when used in reference to an office of a foreign bank, shall have the same meaning as set forth in Section 1(b)(3) of the Federal International Banking Act (12 U.S.C. §3101(3)), and when used in reference to an office of a bank as defined in this section, shall have the same meaning as “domestic branch” set forth in Section 3(o) of the Federal Deposit Insurance Act (12 U.S.C. §1813(o)).

(n) The term “interstate branch” means a branch of a bank or a branch of a foreign bank, as the context may require, which is, or is to be, established after September 29, 1994, pursuant to the authority contained in the Interstate Banking and Branching Efficiency Act, outside the home state of the bank or foreign bank. In the case of a foreign bank, the term shall not include a limited branch.

(o) The term “limited branch” means a branch of a foreign bank that accepts only such deposits as would be permissible for a corporation organized under Section 25A of the Federal Reserve Act in accordance with the provisions of Section 5(a)(7) of the Federal International Banking Act (12 U.S.C. §3103(a)(7)).

(p) The term “agency,” when used in reference to an office of a foreign bank, shall have the same meaning as is set forth in Section 1(b)(1) of the Federal International Banking Act (12 U.S.C. §3101(1)).

(q) The term “federal branch” means a branch of a foreign bank that is licensed by the Comptroller of the Currency pursuant to the provisions of Section 4 of the federal International Banking Act (12 U.S.C. §3102).

(r) The term “federal agency” means an agency of a foreign bank that is licensed by the Comptroller of the Currency pursuant to the provisions of Section 4 of the Federal International Banking Act (12 U.S.C. §3102).

(s) The term “Alabama state branch,” when used in reference to an office of a foreign bank, shall mean a branch of a foreign bank that is located in this state and licensed pursuant to the provisions of Division 3 of this article.

(t) The term “Alabama state agency,” when used in reference to an office of a foreign bank, shall mean an agency of a foreign bank that is located in this state and licensed pursuant to the provisions of Division 3 of this article.

(u) The term “representative office” shall have the same meaning as is set forth in Section 1(b)(15) of the Federal International Banking Act (12 U.S.C. §3101(15)), and the term “Alabama representative office” shall mean any such office that is located in this state.

(v) The term “United States,” when used in a geographical sense, means the several states, the District of Columbia, Puerto Rico, Guam, American Samoa, the American Virgin Islands, the Trust Territory of the Pacific Islands, and any other territory of the United States; and, when used in a political sense, means the federal government of the United States.

(w) The term “Bank Holding Company Act” means the Federal Bank Holding Company Act of 1956, as amended (12 U.S.C. §§1841 et seq.).

(x) The term “Federal Deposit Insurance Act” means the Federal Deposit Insurance Act, as amended (12 U.S.C. §§1813 et seq.).

(y) The term “federal International Banking Act” means the federal International Banking Act of 1978, as amended (12 U.S.C. §§3101 et seq.).

(z) The term “Interstate Banking and Branching Efficiency Act” means the federal Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, Public Law No. 103-328, 108 Stat. 2338-2381 (September 29, 1994), codified at various sections of Title 12, United States Code.

(aa) The term “superintendent” means the superintendent then in office and, where appropriate, all of his or her successors and predecessors in office.

(bb) The term “bank supervisory agency” means:

(1) The Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and any successor to these agencies;

(2) Any agency of another state with primary responsibility for chartering and supervising banks; and

(3) Any agency of a country, including any colonies, dependencies, possessions, or political subdivisions thereof, other than the United States.

(Acts 1995, No. 95-115, p. 134, §23.)

§ 5-13B-42 General Regulation Authority

The superintendent, with the concurrence of a majority of the members of the State Banking Board, is authorized and empowered to issue such rules, regulations, and orders as the superintendent may deem necessary in order to perform his or her duties and functions under this article and to administer and carry out the provisions and purposes of this article and to prevent evasions thereof.

(Acts 1995, No. 95-115, p. 134, §24.)

Division 2 Domestic Banks Owned or Controlled by Foreign Banks and Other Foreign Persons

§ 5-13B-60 Purpose

This division is generally intended to ensure that the laws and regulations of this state applicable to the ownership and operations of Alabama banks, and interstate branches in this state of out-of-state banks, do not discriminate against such banks that are owned or controlled by foreign banks or other foreign persons in a manner inconsistent with the provisions of Section 3(d) of the Bank Holding Company Act (12 U.S.C. §1842(d)), as amended effective September 29, 1995, by Section 101 of the Interstate Banking and Branching Efficiency Act, or with other laws and policies of the United States.

(Acts 1995, No. 95-115, p. 134, §25.)

§ 5-13B-61 Operations in This State of Banks Owned or Controlled by Foreign Banks and Other Foreign Persons

(a) Except as provided in subsection (b):

(1) The laws and regulations of this state governing the acquisition or ownership of controlling or other interests in Alabama banks or in out-of-state banks seeking to establish and maintain one or more interstate branches in this state shall not generally prohibit ownership of such institutions by, or otherwise discriminate against, foreign banks or other foreign persons, notwithstanding any provision of the laws or regulations of this state to the contrary;

(2) The laws and regulations of this state governing the powers and activities of Alabama banks and of out-of-state banks maintaining one or more interstate branches in this state shall not discriminate among such banks on the basis of their ownership or control by foreign banks or other foreign persons, notwithstanding any provision of the laws or regulations of this state to the contrary.

(b) Notwithstanding the provisions of subsection (a), the superintendent is authorized to apply any standards or requirements of the laws and regulations of this state governing the ownership, control, or operations of Alabama banks, even if applicable specifically or exclusively to foreign banks or other foreign persons, to the extent such standards or requirements are determined by regulation or order of the superintendent to be either:

(1) Substantially equivalent to or consistent with the standards or requirements governing the ownership, control, or operations of Alabama banks by foreign banks or other foreign persons under applicable U.S. federal laws or regulations, or

(2) Otherwise consistent with the laws and policies of the United States, including its international agreements governing financial services.

(Acts 1995, No. 95-115, p. 134, §26.)

§ 5-13B-62 Citizenship and Residency Requirements for Directors of State Banks

Notwithstanding any other provision of the laws and regulations of this state, the citizenship and residency requirements otherwise applicable to members of the board of directors of any Alabama bank may, in the case of an Alabama bank which is a subsidiary or affiliate of a foreign bank, be waived by the superintendent in his or her discretion upon application by the controlling shareholder of the Alabama bank; provided that at least a majority of the directors shall be citizens of the United States and at least 25 percent of the directors shall be residents of this state.

(Acts 1995, No. 95-115, p. 134, §27.)

Division 3 Direct Branch, Agency, and Representative Offices of Foreign Banks

§ 5-13B-80 Purpose

Consistent with the federal International Banking Act, the Bank Holding Company Act, the Federal Deposit Insurance Act, and the Interstate Banking and Branching Efficiency Act, this division is intended:

(1) To authorize banking activities and operations, under state licenses issued by the superintendent, of direct branch and agency offices in this state of foreign banks, generally under terms and conditions not less favorable than the terms and conditions under which such activities and operations may be conducted by federal branch or agency offices of foreign banks in the United States, and to set forth a statutory framework for the licensing, regulation, and supervision of such state-licensed offices of foreign banks by the superintendent to assure the safe and sound operation of such offices that are licensed under the laws of this state; and

(2) To authorize representative offices in this state of foreign banks, and to set forth statutory provisions governing the licensing and supervision of such offices by the superintendent.

(Acts 1995, No. 95-115, p. 134, §28.)

§ 5-13B-81 Branches and Agencies of Foreign Banks - Necessity of Licensure

(a) No foreign bank shall transact business in this state except at an Alabama state branch or Alabama state agency which it is licensed to establish and maintain pursuant to, and at which it conducts such activities as are permitted by, this article.

(b) Subsection (a) shall not be deemed to prohibit:

(1) Any foreign bank which maintains a federal agency or federal branch in this state from transacting at such federal agency or federal branch such business as it may be authorized to transact under applicable federal laws and regulations; or

(2) Any foreign bank which does not maintain an Alabama state branch or Alabama state agency from making in this state loans secured by liens on real property located in this state; or

(3) Any foreign bank which maintains an Alabama branch or agency from transacting business as agent for an affiliated depository or other institution in accordance with provisions of this article; or

(4) Any foreign bank organized under the laws of a territory of the United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands, the deposits of which are insured by the Federal Deposit Insurance Corporation, from establishing and operating an interstate branch in this state in its capacity as a “state bank” as defined in the Federal Deposit Insurance Act, pursuant to the authorities contained in that act and in the laws of this state.

(c) For purposes of subsection (a), no foreign bank shall be deemed to be transacting business in this state merely because a subsidiary or affiliate transacts business in this state.

(Acts 1995, No. 95-115, p. 134, §29.)

§ 5-13B-82 Application to Establish and Maintain a Branch or Agency - Contents

(a) A foreign bank, in order to procure a license under this article to establish and maintain an Alabama state branch or Alabama state agency shall submit an application to the superintendent. Such application shall contain:

(1) The same information as required by the Board of Governors of the Federal Reserve System for an application to establish a branch or agency, as the case may be, in the United States; and

(2) Such additional information as the superintendent may require by regulation or order.

(b) In addition to the information required to be included in an application for a license to establish and maintain an Alabama state branch or Alabama state agency listed in subsection (a), the superintendent may as he or she deems necessary or appropriate require a foreign bank to include as part of such an application an instrument irrevocably appointing the superintendent and his or her successors in office to be such foreign bank’s agent, representative, and attorney to receive service of any lawful process in any proceeding against the foreign bank or any of its successors which arises out of the foreign bank’s activities in this state after such appointment has been filed, with the same force and validity as if served on the foreign bank or its successor, as the case may be. Such appointment shall be in such form and contain such information as the superintendent may require by regulation or order.

(Acts 1995, No. 95-115, p. 134, §30.)

§ 5-13B-83 Application to Establish and Maintain a Branch or Agency - Manner of Filing and Determination

(a) A foreign bank making an application under this article for a license to establish and maintain an Alabama state branch or Alabama state agency shall deliver to the superintendent:

(1) At least two, or more as the superintendent may require by regulation, duplicate originals of the foreign bank’s application; and

(2) At least two, or more as the superintendent may require by regulation, copies of its charter or articles of incorporation and all amendments thereto, duly authenticated by the proper officer of the country of such foreign bank’s organization.

(b) The superintendent shall issue a license to a foreign bank to establish and maintain an Alabama state branch or Alabama state agency if he or she finds that:

(1) The foreign bank is of good character and sound financial standing;

(2) The management of the foreign bank and the proposed management of the Alabama state branch or Alabama state agency are adequate;

(3) The convenience and needs of persons to be served by the proposed Alabama state branch or Alabama state agency will be promoted; and

(4) The foreign bank satisfies such other standards as the superintendent may establish by regulation.

(c) If the superintendent determines to issue a license to a foreign bank to establish and maintain an Alabama state branch or Alabama state agency, he or she shall, when all fees have been paid as required under this article:

(1) Endorse on each document filed as part of the application the word “Filed,” and the date of the filing thereof and return to the foreign bank a copy of each document so endorsed;

(2) File in his or her office one of such duplicate originals of the application and copies of the charter or articles of incorporation and amendments thereto; and

(3) Issue a license to establish and maintain an Alabama state branch or Alabama state agency to such foreign bank.

(d) Each license issued to a foreign bank to establish and maintain an Alabama state branch or Alabama state agency shall state fully the name of the foreign bank to which such license is issued and all such other information as the superintendent may require by regulation or order.

(e) The superintendent may, by regulation or order, prescribe abbreviated application procedures and standards applicable to applications by foreign banks that have already established an initial Alabama state branch or agency, subsequently to establish additional intrastate Alabama state branches or agencies, as the case may be.

(Acts 1995, No. 95-115, p. 134, §31.)

§ 5-13B-84 Application Fee

Upon applying to the superintendent under this article for a license to establish and maintain an Alabama state branch or Alabama state agency, a foreign bank shall pay to the superintendent an application fee in such amount and in such manner as the superintendent shall require by regulation.

(Acts 1995, No. 95-115, p. 134, §32.)

§ 5-13B-85 No Concurrent Maintenance of Federal Branches or Agencies

(a) No foreign bank which is licensed under this article to establish and maintain an Alabama state branch or Alabama state agency shall concurrently maintain a federal branch or federal agency in this state.

(b) No foreign bank which maintains a federal branch or federal agency in this state shall concurrently be licensed under this article to maintain an Alabama state branch or Alabama state agency.

(Acts 1995, No. 95-115, p. 134, §33.)

§ 5-13B-86 Powers of Branch and Agency

(a) Except as otherwise specifically provided in this division or in regulations or orders adopted by the superintendent, and notwithstanding any other law or regulation of this state to the contrary, operations of a foreign bank at an Alabama state branch or Alabama state agency shall be conducted with the same rights, privileges, and powers as an Alabama state bank at the same location, including, but not limited to, the eligibility to exercise fiduciary or trust powers, and shall be subject to all the same duties, restrictions, penalties, liabilities, conditions, and limitations that would apply under the laws of this state to an Alabama state bank doing business at the same location.

(b) Among other exceptions to the provisions of subsection (a) that may be required or authorized by the superintendent pursuant to the provisions of this division:

(1) An Alabama state branch that was not grandfathered as an “insured branch” within the meaning of Section 6(c)(2) of the Federal International Banking Act (12 U.S.C. §3104(c)(2)) may not accept, from citizens or residents of the United States, deposits, other than credit balances that are incidental to or arise out of its exercise of other lawful banking powers, of less than one hundred thousand dollars ($100,000), except to the extent that such deposits are determined by the Federal Deposit Insurance Corporation not to constitute “domestic retail deposit activities requiring deposit insurance protection” within the meaning of Section 6 of the Federal International Banking Act (12 U.S.C. §3104);

(2) An Alabama state agency may not accept any deposits from citizens or residents of the United States, other than credit balances that are incidental to or arise out of its exercise of other lawful banking powers, but it may accept deposits from persons who are neither citizens nor residents of the United States;

(3) An Alabama state branch or Alabama state agency shall not be required to maintain federal or state deposit insurance under any law, regulation, or order of this state that requires Alabama state banks and other depository institutions to maintain such deposit insurance, and the superintendent may, by regulation or order, exclude or exempt uninsured Alabama state branches and/or Alabama agencies from, or otherwise modify the applicability to uninsured Alabama state branches and/or Alabama agencies of, any law or regulation of this state that is generally applicable to insured Alabama state banks, or that would otherwise be applicable to an insured Alabama state bank doing business at the same location, as the superintendent may deem necessary or desirable, taking into account applicable limitations on the retail deposit-taking powers and privileges of Alabama state branches and Alabama agencies;

(4) Any limitation or restriction based on the capital stock and surplus of an Alabama state bank shall be deemed to refer, as applied to an Alabama state branch or Alabama state agency, to the dollar equivalent of the capital stock and surplus of the foreign bank, and if the foreign bank has more than one Alabama state branch or Alabama state agency in this state, the business transacted by all such Alabama state branches and Alabama state agencies shall be aggregated in determining compliance with the limitation; and

(5) The superintendent is expressly authorized to adopt such additional or modify the applicability of any existing standards, conditions, or requirements, by regulation or order, as he or she may deem necessary to ensure the safety and soundness and the protection of creditors of the operations of branches and agencies of foreign banks in this state.

(Acts 1995, No. 95-115, p. 134, §34.)

§ 5-13B-87 Fiduciary Activities

(a) No foreign bank which is licensed to establish and maintain an Alabama state branch or Alabama state agency shall engage in fiduciary activities at such office unless such foreign bank shall have first obtained a certificate of authority from the superintendent to engage in fiduciary activities at such office.

(b) An application to obtain a certificate of authority to engage in fiduciary activities shall be in such form and contain such information, and be accompanied by such reasonable fee, as the superintendent may require by regulation. The superintendent shall issue a certificate of authority to engage in fiduciary activities to a foreign bank making an application under this section if he or she finds that such foreign bank will exercise fiduciary powers in accordance with the laws and regulations of this state.

(c) A foreign bank which holds a certificate of authority issued under this section may engage at its Alabama state branch or Alabama state agency in fiduciary activities to the same extent and in the same manner as if such foreign bank were an Alabama state bank.

(d) A foreign bank which holds a certificate of authority issued under this section shall file all such reports, pay all such reasonable fees, and be subject to examination and supervision as the superintendent may determine by regulation.

(e) The superintendent may suspend or revoke a certificate to engage in fiduciary activities issued under this section if he or she finds:

(1) That conditions exist which would authorize the superintendent under this article to revoke or suspend such foreign bank’s license to establish and maintain an Alabama state branch or Alabama state agency; or

(2) Any fact or condition exists which, if it had existed at the time of the foreign bank’s original application to obtain a certificate of authority to engage in fiduciary activities, would have resulted in the superintendent’s refusal to issue such certificate of authority to the foreign bank.

(Acts 1995, No. 95-115, p. 134, §35.)

§ 5-13B-88 Authority to Act as Agent

(a) An Alabama state branch or Alabama state agency of a foreign bank licensed under this article may receive deposits, renew time deposits, close loans, service loans, and receive payments on loans and other obligations as an agent for any depository institution affiliate of such foreign bank, including branch, agency, and other offices of the same foreign bank located in other states, generally in accordance with the same terms, conditions, procedures, and requirements that are applicable under the laws and regulations of this state to such agency activities that may be conducted by Alabama state banks.

(b) Notwithstanding any other provision of the laws or regulations of this state, an Alabama state branch or Alabama state agency of a foreign bank acting in this state as an agent in accordance with the provisions of this section shall not be considered to be a branch of such other depository institution affiliate; provided, however, that no Alabama state branch or Alabama agency shall be authorized by this section to act as agent for a branch or agency of an affiliated foreign bank other than the foreign bank which has been licensed to transact business in this state pursuant to this article.

(c) An Alabama state branch or Alabama state agency of a foreign bank licensed under this article may not:

(1) Conduct any activity as an agent under this section which such office is prohibited from conducting as a principal under any applicable federal or state law, including, but not limited to, the acceptance of impermissible deposits; or

(2) As a principal, have an agent conduct any activity under this section which such office is prohibited from conducting under any applicable federal or state law, including, but not limited to, the acceptance of impermissible deposits.

(d) An agency relationship between an Alabama state branch or Alabama state agency of a foreign bank licensed under this article and a depository institution affiliate of such foreign bank shall in any event be on terms that are consistent with safe and sound banking practices and all applicable regulations and orders of the superintendent.

(Acts 1995, No. 95-115, p. 134, §36.)

§ 5-13B-89 Representative Office of Foreign Banks - Necessity of Licensure

(a) No foreign bank shall establish or maintain an Alabama representative office unless such foreign bank is licensed by the superintendent to maintain such an Alabama representative office.

(b) Nothing in subsection (a) shall be deemed to prohibit a foreign bank which maintains a federal agency or federal branch in this state from establishing or maintaining one or more Alabama representative offices.

(Acts 1995, No. 95-115, p. 134, §37.)

§ 5-13B-90 Representative Office - Application

(a) The application for a license to establish and maintain an Alabama representative office shall be in writing under oath and shall be in such form and contain such information as the superintendent may require by regulation or order. The application shall be accompanied by a reasonable fee as the superintendent may establish by regulation.

(b) The superintendent shall require a foreign bank to include as part of its application to establish and maintain an Alabama representative office an instrument irrevocably appointing the superintendent and his or her successors in office to be such foreign bank’s agent, representative, and attorney to receive service of any lawful process in any proceeding against such foreign bank or any of its successors which arises out of a transaction with its Alabama representative office, with the same force and validity as if served on the foreign bank or its successor, as the case may be. Such appointment shall be in such form and contain such information as the superintendent may require by regulation or order.

(Acts 1995, No. 95-115, p. 134, §38.)

§ 5-13B-91 Representative Office - Factors for Approval of Application

(a) A foreign bank making an application for a license to establish and maintain an Alabama representative office shall deliver to the superintendent two, or more as the superintendent may require by regulation, duplicate originals of the foreign bank’s application.

(b) The superintendent shall issue a license to a foreign bank to establish and maintain an Alabama representative office if he or she finds that:

(1) The foreign bank is of good character and sound financial standing;

(2) The management of the foreign banks and the proposed management of the Alabama representative office are adequate; and

(3) The convenience and needs of persons to be served by the proposed Alabama representative office will be promoted.

(c) If the superintendent determines to issue a license to a foreign bank to establish and maintain an Alabama representative office, he or she shall, when all fees have been paid as required under this article:

(1) Endorse on each duplicate original of the application the word “Filed,” and the date of the filing thereof and return to the foreign bank one such duplicate original so endorsed;

(2) File in his or her office one of such duplicate originals of the application; and

(3) Issue a license to establish and maintain an Alabama representative office to such foreign bank.

(d) Each license issued to a foreign bank to establish and maintain an Alabama representative office shall state fully the name of the foreign bank to which such license is issued, the address or addresses at which such Alabama representative office is to be located and all such other information as the superintendent may require by regulation.

(Acts 1995, No. 95-115, p. 134, §39.)

§ 5-13B-92 Representative Office - Permissible Activities

(a) A foreign bank which is licensed to establish and maintain an Alabama representative office may, subject to such regulations as the superintendent may prescribe, engage in the following activities:

(1) Solicitation for loans and in connection therewith the assembly of credit information, making of property inspections and appraisals, securing of title information, preparation of applications for loans including making recommendations with respect to action thereon, solicitation of investors to purchase loans from the foreign bank, and the search for such investors to contract with the foreign bank for servicing of such loans;

(2) The solicitation of new business;

(3) The conduct of research; and

(4) Back office administrative functions as may be more specifically defined in regulations issued by the superintendent.

Any other activity which the foreign bank seeks to conduct at such office shall be subject to the prior written approval of the superintendent by general regulation or upon application in such form as the superintendent shall require by regulation or order.

(b) Notwithstanding subsection (a), an Alabama representative office may engage in credit approval activities provided that the foreign bank (1) gives 45 days’ prior written notice to the superintendent; and (2) the superintendent does not object within such 45-day period to the conduct of such activities by the Alabama representative office. Written notice under this subsection shall be in such a form and contain such information as the superintendent shall require by regulation or order.

(Acts 1995, No. 95-115, p. 134, §40.)

§ 5-13B-93 Representative Office - Revocation of License

The superintendent, after notice and opportunity for a hearing, may revoke a license to establish and maintain an Alabama representative office if he or she finds:

(1) The foreign bank has violated any provision of this article or any other law, rule, or regulation of this state; or

(2) Any fact or condition exists which, if it had existed at the time of the foreign bank’s original application for such license, would have resulted in the superintendent’s refusal to issue such license to the foreign bank.

(Acts 1995, No. 95-115, p. 134, §41.)

§ 5-13B-94 Posting of License

Each foreign bank which is licensed to establish and maintain an Alabama state branch, Alabama state agency, or Alabama representative office shall post its license in a conspicuous place at such office.

(Acts 1995, No. 95-115, p. 134, §42.)

§ 5-13B-95 Licenses Not Transferable

No license issued by the superintendent in accordance with this article shall be transferable or assignable.

(Acts 1995, No. 95-115, p. 134, §43.)

§ 5-13B-96 Appointment of Superintendent as Agent for Service of Process

(a) A foreign bank which is licensed to establish and maintain an Alabama state branch, Alabama state agency, or Alabama representative office shall file with the superintendent an instrument irrevocably appointing the superintendent and his or her successors in office to be such foreign bank’s agent, representative, and attorney to receive service of any lawful process in any judicial or administrative proceeding against the foreign bank or any of its successors which arises out of the foreign bank’s activities in this state after such appointment has been filed, with the same force and validity as if served directly on the foreign bank or its successor, as the case may be. Such appointment shall be in such form and contain such information as the superintendent may require by regulation or order.

(b) Any foreign bank which establishes an Alabama state branch, Alabama state agency, or Alabama representative office and which has not filed with the superintendent an instrument pursuant to subsection (a) shall be deemed by the establishment of such office to have appointed the superintendent as its agent, representative, and attorney to receive service of any lawful process in any judicial or administrative proceeding against the foreign bank or any of its successors which arises out of the foreign bank’s activities in this state, with the same force and validity as if served directly on the foreign bank or its successor, as the case may be.

(Acts 1995, No. 95-115, p. 134, §44.)

§ 5-13B-97 Service of Process

(a) Service of any lawful process in any judicial or administrative proceeding against the foreign bank or any of its successors which arises out of the foreign bank’s activities in this state shall be made on the superintendent by delivering to and leaving with him or her, or with any official having charge of his or her office, duplicate copies of such process, notice, or demand. If any process, notice, or demand is served on the superintendent, he or she shall immediately cause a copy thereof to be forwarded by registered mail addressed to such foreign bank at its principal office as the same appears in his or her records. Any service so had on the superintendent shall be returnable in not less than 30 days.

(b) Nothing in this article limits or affects the right to serve any process, notice, or demand required or permitted by law to be served upon a foreign corporation in any other manner now or hereafter permitted by law.

(c) The superintendent shall keep a record of all processes, notices, and demands served upon him or her under this section and shall record therein the time of such service and his or her action with reference thereto.

(Acts 1995, No. 95-115, p. 134, §45.)

§ 5-13B-98 Filing of Amendments to Articles of Incorporation

A foreign bank which is licensed to maintain an Alabama state branch or Alabama state agency, whenever its articles of incorporation are amended, shall forthwith file in the office of the superintendent a copy of such amendment duly authenticated by the proper officer of the country of such foreign bank’s organization, but the filing thereof may not of itself enlarge or alter the purpose or purposes for which such foreign bank is authorized to pursue in the transaction of its business in this state, nor authorize such foreign bank to transact business in this state under any name other than the name set forth in its license, nor extend the duration of its corporate existence.

(Acts 1995, No. 95-115, p. 134, §46.)

§ 5-13B-99 Amended License to Establish and Maintain a Branch or Agency

(a) A foreign bank which is licensed to establish and maintain an Alabama state branch or Alabama state agency must secure an amended license if it changes its corporate name, changes the duration of its corporate existence, or desires to pursue in this state other or additional purposes than those set forth in its prior application under this article for a license, by making application therefor to the superintendent.

(b) The requirements with respect to the form and contents of an application under subsection (a), the manner of its execution, the filing of duplicate originals thereof with the superintendent, the issuance of an amended license and the effect thereof shall be the same as in the case of an initial application for a license to establish and maintain an Alabama state branch or Alabama state agency.

(Acts 1995, No. 95-115, p. 134, §47.)

§ 5-13B-100 Change of Control of Foreign Bank

A foreign bank which is licensed to establish and maintain an Alabama state branch, Alabama state agency, or Alabama representative office shall file with the superintendent a notice, in such form and containing such information as the superintendent may prescribe, no later than 14 calendar days after such foreign bank becomes aware of any acquisition of control of such foreign bank or merges with another foreign bank.

(Acts 1995, No. 95-115, p. 134, §48.)

§ 5-13B-101 Relocation of Office; Written Notice Necessary

(a) No foreign bank which is licensed to establish and maintain an Alabama state branch, Alabama state agency, or Alabama representative office shall relocate any such office unless the foreign bank provides prior written notice to the superintendent and the superintendent shall have approved such relocation.

(b) Written notice provided by a foreign bank under this section shall be in such form and contain such information as the superintendent shall require by regulation or order.

(Acts 1995, No. 95-115, p. 134, §49.)

§ 5-13B-102 Examination; Payment of Fees

(a) An Alabama state branch, Alabama state agency, or Alabama representative office shall be subject to examination by the superintendent at such intervals and in such a manner as he or she shall establish by regulation or order.

(b) In conducting an examination pursuant to this section, the superintendent shall:

(1) Have full access to the offices, books, accounts, and records of each office located in this state, as well as all of the books, accounts, and records maintained in this state of any office not located in this state of such foreign bank; and

(2) Have authority to require the attendance of and to examine under oath all persons whose testimony may be required relative to the activities of such office.

(c) A foreign bank which is licensed to establish and maintain an Alabama state branch, Alabama state agency, or Alabama representative office shall be assessed a reasonable fee for the expenses incurred by the superintendent in making an examination of such office. Such fee shall be assessed in an amount and in a manner as the superintendent shall establish by regulation.

(d) A foreign bank which is licensed to establish and maintain an Alabama state branch, Alabama state agency, or Alabama representative office shall be subject to all reasonable fees and expenses in such amounts as the superintendent may require by regulation.

(Acts 1995, No. 95-115, p. 134, §50.)

§ 5-13B-103 Supervision and Enforcement

(a) The superintendent shall have all of the powers granted to him or her by the laws of this state to the extent appropriate to enable him or her to supervise each Alabama state branch, Alabama state agency, or Alabama representative office.

(b) If, after notice and a hearing, the superintendent finds that any person has violated any provision of this article or of any regulation or order issued under this article, he or she may, in addition to any other remedy or action available to the superintendent under the laws of this state, order such person to pay to the superintendent a civil penalty in such a manner and in such an amount as the superintendent shall determine in accordance with the laws of this state and regulations thereunder.

(c) In order to carry out the purposes under this article, the superintendent may:

(1) Enter into cooperative, coordinating, or information-sharing agreements with any other bank supervisory agency or any organization affiliated or representing one or more bank supervisory agencies;

(2) With respect to periodic examination or other supervision of a foreign bank that maintains an Alabama state branch, Alabama state agency, or Alabama representative office, accept reports of examinations performed by, and reports submitted to, other bank supervisory agencies in lieu of conducting examinations, or of receiving reports, as might otherwise be required under this division;

(3) Enter into joint examinations or joint enforcement actions with any other bank supervisory agency having concurrent jurisdiction over any foreign bank, provided, however, that the superintendent may at any time take any such actions independently if the superintendent determines that such actions are necessary or appropriate to carry out his or her responsibilities under this article and to ensure compliance with the laws of this state;

(4) Enter into contracts with any bank supervisory agency having concurrent regulatory or supervisory jurisdiction over a foreign bank maintaining an Alabama state branch, Alabama state agency, or Alabama representative office, to engage the services of such agency’s examiners at a reasonable rate of compensation or provide the services of the superintendent’s examiners at a reasonable rate of compensation, which contract shall be deemed a sole source, one vendor and one supplier contract under the procurement laws of this state and shall be exempt from competitive bidding requirements; and

(5) Assess supervisory and examination fees that shall be payable by foreign banks maintaining an Alabama state branch, Alabama state agency, or Alabama representative office in connection with the superintendent’s performance of his or her duties under this article and in accordance with regulations adopted by the superintendent.

(d) Supervisory or examination fees assessed by the superintendent in accordance with the provisions of this article may be shared with other bank supervisory agencies or any organizations affiliated with or representing one or more bank supervisory agencies in accordance with agreements between the superintendent and such agencies or organizations.

(Acts 1995, No. 95-115, p. 134, §51.)

§ 5-13B-104 Reports

(a) Each foreign bank which is licensed to establish and maintain an Alabama state branch, Alabama state agency, or Alabama representative office shall file with the superintendent such reports as and when the superintendent may require by regulation or order.

(b) Each report filed with the superintendent under this article or under any regulation or order issued under this article shall be in such form and contain such information, shall be signed in such manner, and shall be verified in such manner, as the superintendent may require by regulation or order.

(Acts 1995, No. 95-115, p. 134, §52.)

§ 5-13B-105 Confidentiality of Examination Reports

(a) All reports of examinations and investigations, correspondence, and memoranda concerning or arising out of such examinations and investigations, including any duly authenticated copy or copies thereof in the possession of any foreign bank, shall not be subject to subpoena and shall not be made public unless, in the judgment of the superintendent, the public advantage will be served by the publication thereof, in which event the superintendent may publish or authorize the publication of a copy of any such report or any part thereof in such manner as may be deemed proper.

(b) For the purposes of this section, reports of examinations shall include reports of examinations conducted by any bank supervisory agency which are considered confidential by such agency and which are in possession of the superintendent.

(Acts 1995, No. 95-115, p. 134, §53.)

§ 5-13B-106 Books, Accounts, and Records

Each foreign bank which is licensed to establish and maintain an Alabama state branch, Alabama state agency, or Alabama representative office shall maintain or make available at any such office appropriate books, accounts, and records reflecting (1) all transactions effected by or on behalf of such office and (2) all actions taken in this state by employees of the foreign banking corporation located in this state to effect transactions on behalf of any office of such foreign bank located outside this state.

(Acts 1995, No. 95-115, p. 134, §54.)

§ 5-13B-107 Separate Assets

(a) Each foreign bank which is licensed to establish and maintain an Alabama state branch or Alabama state agency in this state shall keep the assets of its business in this state separate and apart from the assets of its business outside this state.

(b) The creditors of a foreign bank arising out of transactions with, and recorded on the books of, its Alabama state branch or Alabama state agency shall be entitled to absolute preference and priority over creditors of such foreign bank offices located outside of Alabama with respect to the assets of such foreign bank’s offices in this state.

(Acts 1995, No. 95-115, p. 134, §55.)

§ 5-13B-108 Disclosure of Lack of Deposit Insurance

Each foreign bank which is licensed to establish and maintain an Alabama state branch or Alabama state agency shall, in a manner established by the superintendent by regulation or order, give notice that deposits and credit balances in such office are not insured by the Federal Deposit Insurance Corporation.

(Acts 1995, No. 95-115, p. 134, §56.)

§ 5-13B-109 Limitations on Payment of Interest on Deposits

A foreign bank which is licensed to establish and maintain an Alabama state branch or Alabama state agency shall be subject to the same limitations with respect to the payment of interest on deposits as a state bank which is a member of the Federal Reserve System.

(Acts 1995, No. 95-115, p. 134, §57.)

§ 5-13B-110 Pledge of Assets

(a) Each foreign bank which is licensed to establish and maintain an Alabama state branch or Alabama state agency shall keep on deposit, in accordance with such regulations or orders as the superintendent shall promulgate, with such unaffiliated Alabama banks as such foreign bank may designate and the superintendent may approve, interest-bearing stocks and bonds, notes, debentures, or other obligations of the United States or any agency or instrumentality thereof, or guaranteed by the United States, or of this state, or of a city, county, town, village, school district, or instrumentality of this state or guaranteed by this state, or dollar deposits, or obligations of the International Bank for Reconstruction and Development, or obligations issued by the InterAmerican Development Bank, or obligations of the Asian Development Bank, or obligations issued by the African Development Bank, or such other assets as the superintendent shall by regulation or order permit, to an aggregate amount to be determined by the superintendent, based upon principal amount or market value, whichever is lower, in the case of the above-described securities, and subject to such limitations as he or she shall prescribe.

(b) The superintendent may from time to time require that the assets deposited pursuant to this section may be maintained by the foreign bank in such amount, in such form and subject to such conditions as he or she shall deem necessary or desirable for the maintenance of a sound financial condition, the protection of depositors and the public interest, and to maintain public confidence in the business of such Alabama state branch or Alabama state agency. The superintendent may give credit to reserves required to be maintained with a Federal Reserve Bank in or outside this state pursuant to federal law, in accordance with such regulations or procedures as the superintendent may promulgate.

(c) So long as it shall continue business in the ordinary course, such foreign bank shall be permitted to collect interest on the securities deposited under this section and from time to time exchange, examine, and compare such securities.

(Acts 1995, No. 95-115, p. 134, §58.)

§ 5-13B-111 Asset Maintenance

(a) Each foreign bank which is licensed to establish and maintain an Alabama state branch or Alabama state agency shall hold in this state currency, bonds, notes, debentures, drafts, bills of exchange, or other evidences of indebtedness, including loan participation agreements or certificates, or other obligations payable in the United States or in United States funds or, with the prior approval of the superintendent, in funds freely convertible into United States funds, or such other assets as the superintendent shall by regulation or order permit, in an amount which shall bear such relationship as the superintendent shall by regulation or order prescribe to liabilities of such foreign bank payable at or through its Alabama state branch or Alabama state agency, including acceptances, but excluding amounts due and other liabilities to other offices, agencies, or branches of, and wholly owned, except for a nominal number of directors’ shares, subsidiaries of, such foreign bank and such other liabilities as the superintendent shall determine.

(b) The superintendent is specifically authorized, in implementing the provisions of this section, to:

Vary the ratio of assets to liabilities for Alabama branches or Alabama agencies, applicable under this section, of certain foreign banks as may be determined by the superintendent in his or her sole discretion to be necessary or desirable to reflect differences among such Alabama branches or Alabama agencies on account of:

(1) The financial condition of Alabama branch or agency offices of the foreign bank,

(2) The financial condition of branch or agency offices of the same foreign bank located in other states,

(3) General economic conditions prevalent in the home country of the parent foreign bank, or

(4) The financial condition of the parent foreign bank itself, including, but not limited to:

a. The financial condition of its branches and agencies located in other countries,

b. The financial condition of its affiliated bank and nonbank subsidiaries in the United States, and

c. The financial condition of the foreign bank on a worldwide consolidated basis or in its home country.

(c) For the purposes of this section, the superintendent shall value marketable securities at principal amount or market value, whichever is lower, shall have the right to determine the value of any non-marketable bond, note, debenture, draft, bill of exchange, other evidence of indebtedness, including loan participation agreements or certificates, or of any other asset or obligation held or owed to the foreign bank or its Alabama state branch or Alabama state agency in this state, and in determining the amount of assets for the purpose of computing the above ratio of assets to liabilities, shall have the power by regulation or order to exclude in whole or in part any particular asset.

(d) If, by reason of the existence or the potential occurrence of unusual and extraordinary circumstances, the superintendent deems it necessary or desirable for the maintenance of a sound financial condition, the protection of depositors, creditors, and the public interest, and to maintain public confidence in the business of an Alabama state branch or Alabama state agency, he or she may, subject to such terms and conditions as he or she may prescribe, require such foreign bank to deposit the assets required to be held in this state pursuant to this section with such Alabama banks, as the superintendent may designate.

(e) The assets held to satisfy the assets to liabilities relationship, prescribed by the superintendent pursuant to this section, shall include obligations of any person for money borrowed from a foreign bank holding a license to establish and maintain an Alabama state branch or Alabama state agency only to the extent that the total of such obligations of any person are not more than 10 percent of such assets considered for purposes of this section.

(Acts 1995, No. 95-115, p. 134, §59.)

§ 5-13B-112 Voluntary Closure of Branch, Agency, or Representative Office - Application

(a) No foreign bank which is licensed to establish and maintain an Alabama state branch, Alabama state agency, or Alabama representative office shall close such office without filing an application with, and obtaining the prior approval of, the superintendent. An application by a foreign bank under this section shall be in such form and include such information as the superintendent shall establish by regulation or order.

(b) If the superintendent finds, with respect to an application by a foreign bank under this section, that the closing of such office will not be substantially detrimental to the public convenience and advantage, the superintendent shall approve such application. If the superintendent finds otherwise, he or she shall deny the application.

(c) Whenever an application by a foreign bank under this section has been approved and all conditions precedent to such closing have been fulfilled, such foreign bank may close such office and shall promptly thereafter surrender to the superintendent the license which authorized the foreign bank to maintain the office.

(Acts 1995, No. 95-115, p. 134, §60.)

§ 5-13B-113 Suspension or Revocation of License; Factors

If, after notice and a hearing, the superintendent finds any of the following with respect to a foreign bank which is licensed to establish and maintain an Alabama state branch or Alabama state agency, he or she may issue an order suspending or revoking the license of such foreign bank:

(1) That the foreign bank has violated any provision of this article or of any regulation or order issued under this article or any provision of any other applicable law, regulation, or order;

(2) That the foreign bank is transacting activities in this state in an unsafe or unsound manner or, in any case, is transacting activities elsewhere in an unsafe or unsound manner;

(3) That the foreign bank or any one or more of its Alabama state branches or Alabama state agencies is in an unsafe or unsound condition;

(4) That the foreign bank has ceased to operate any of its offices in this state without the prior approval of the superintendent in accordance with this article;

(5) That the foreign bank is insolvent in that it has ceased to pay its debts in the ordinary course of business, it cannot pay its debts as they become due, or its liabilities exceed its assets;

(6) That the foreign bank has suspended payment of its obligations, has made an assignment for the benefit of its creditors, or has admitted in writing its inability to pay its debts as they become due;

(7) That the foreign bank has applied for an adjudication of bankruptcy, reorganization, arrangement, or other relief under any foreign or domestic bankruptcy, reorganization, insolvency, or moratorium law, or that any person has applied for any such relief under such law against the foreign bank and the foreign bank has by any affirmative act approved of or consented to such action or such relief has been granted;

(8) That a receiver, liquidator, or conservator has been appointed for the foreign bank or that any proceeding for such an appointment or any similar proceeding has been initiated in the country of the foreign bank’s organization;

(9) That the existence of the foreign bank or the authority of the foreign bank to transact banking business under the laws of the country of the foreign bank’s organization has been suspended or terminated; and

(10) That any fact or condition exists which, if it had existed at the time when the foreign bank applied for its license to transact business in this state, would have been grounds for denying such application.

(Acts 1995, No. 95-115, p. 134, §61.)

§ 5-13B-114 Immediate Suspension or Revocation

If the superintendent finds that any of the factors set forth in Section 5-13B-113 are true with respect to any foreign bank which is licensed to maintain an Alabama state branch or Alabama state agency and that it is necessary for the protection of the interests of creditors of the foreign bank’s business in this state or, in any case, for the protection of the public interest that the superintendent immediately suspend or revoke the license of the foreign bank, the superintendent may issue, without notice or hearing, an order suspending or revoking the license of the foreign bank for a period of up to 90 days, pending investigation or hearing.

(Acts 1995, No. 95-115, p. 134, §62.)

§ 5-13B-115 Seizure of Foreign Bank’s Property and Business; Liquidation

(a) If the superintendent finds that any of the factors set forth in Section 5-13B-113 are true with respect to any foreign bank which is licensed to establish and maintain an Alabama state branch or Alabama state agency and that it is necessary for the protection of the interests of the creditors of such foreign bank’s business in this state or for the protection of the public interest that he or she take immediate possession of the property and business of the foreign bank, the superintendent may by order forthwith take possession of the property and business of the foreign bank in this state and retain possession until the foreign bank resumes business in this state or is finally liquidated. The foreign bank may, with the consent of the superintendent, resume business in this state upon such conditions as the superintendent may prescribe by regulation or order.

(b) At any time within 10 days after the superintendent has taken possession of the property and business of a foreign bank pursuant to subsection (a), such foreign bank may apply to the circuit court of the county in which the primary office of the foreign bank is located in this state for an order requiring the superintendent to show cause why he or she should not be enjoined from continuing such possession. The court may, upon good cause being shown, direct the superintendent to refrain from further proceedings and to surrender such possession. The judgment of the court having jurisdiction over any proceedings under this subsection may be appealed by the superintendent or by the foreign bank in the manner provided by law for appeals from a judgment of the circuit court. Where the superintendent appeals the judgment of the circuit court, such appeal shall operate as a stay of the judgment and a reinstatement of the superintendent’s possession. The superintendent shall not be required to post any bond.

(c) Whenever the superintendent takes possession of the property and business of a foreign bank pursuant to subsection (a), he or she shall conserve or liquidate the property and business of such foreign bank pursuant to the laws of this state as if the foreign bank were an Alabama state bank, with absolute preference and priority given to the creditors of such foreign bank arising out of transactions with, and recorded on the books of, its Alabama state branch or Alabama state agency over the creditors of such foreign bank’s offices located outside this state.

(d) When the superintendent has completed the liquidation of the property and business of a foreign bank, the superintendent shall transfer any remaining assets to such foreign bank in accordance with such orders as the court may issue. However, in case the foreign bank has an office in another state of the United States which is in liquidation and the assets of such office appear to be insufficient to pay in full the creditors of that office, the court shall order the superintendent to transfer to the liquidator of that office such amount of any such remaining assets as appears to be necessary to cover such insufficiency; if there are two or more such offices and the amount of remaining assets is less than the aggregate amount of insufficiencies with respect to the offices, the court shall order the superintendent to distribute the remaining assets among the liquidators of such offices in such manner as the court finds equitable.

(Acts 1995, No. 95-115, p. 134, §63.)

Division 4 Alabama Branches of Out-of-State Foreign Banks

§ 5-13B-130 Purpose

This division is intended generally to ensure that interstate state branches of out-of-state foreign banks may be established and operated in this state (1) to the extent consistent with the provisions of Section 5 of the Federal International Banking Act and (2) under terms and conditions that are generally comparable to and no less favorable than those applicable to the establishment of interstate federal branches in this state by out- of-state foreign banks.

(Acts 1995, No. 95-115, p. 134, §64.)

§ 5-13B-131 Establishment of Interstate Branches in This State by Out-of-State Foreign Banks

(a) Except as provided in subsection (b), an out-of-state foreign bank may establish an interstate Alabama state branch in the same manner, including by merger or other transactions under Section 44 of the Federal Deposit Insurance Act, and comparable provisions of the laws of this state, with Alabama banks or other institutions, as, and subject generally to the same criteria, standards, conditions, requirements, and procedures applicable to the establishment of interstate branches in this state by, an out-of-state bank having the same home state in the United States, notwithstanding any provision of the laws or regulations of this state to the contrary.

(b) Notwithstanding the provisions of subsection (a), the superintendent:

(1) Shall apply to the establishment of an initial interstate Alabama state branch, and subsequent intrastate Alabama branches, of any out-of-state foreign bank the same criteria, standards, conditions, requirements, and procedures applicable under Division 3 of this article or regulations thereunder to the establishment of an initial Alabama state branch, and of subsequent intrastate Alabama branches, respectively;

(2) May apply any other criterion, standard, condition, requirement, or provision of the laws or regulations of this state that is determined by the superintendent to be substantially equivalent to or consistent with a criterion, standard, condition, requirement, or provision of federal law or regulation generally applicable to the establishment of branches in the United States by foreign banks or specifically applicable to the establishment of a branch in the United States by the applicant foreign bank;

(3) May by regulation or order allow an out-of-state foreign bank:

a. To acquire an individual branch of any “insured bank” within the meaning of Section 3(h) of the Federal Deposit Insurance Act (12 U.S.C. §1813(h)), or of any other depository institution, including another foreign bank, without acquiring the entire bank or other institution; or

b. To acquire or merge with another foreign bank maintaining an Alabama branch or agency and thereafter continue such operations as its own; and

c. To acquire or establish an interstate Alabama branch through any other means not inconsistent with Section 5 of the Federal International Banking Act (12 U.S.C. §3103).

(Acts 1995, No. 95-115, p. 134, §65.)

Chapter 14A Regional Reciprocal Savings Institutions

§ 5-14A-1 Short Title

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1987, No. 87-152, p. 207, §1.)

§ 5-14A-2 Definitions

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1987, No. 87-152, p. 207, §2.)

§ 5-14A-3 Acquisition of Alabama Savings and Loan Holding Company or Alabama Savings Institution by Regional Holding Company or Institution

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1987, No. 87-152, p. 207, §3.)

§ 5-14A-4 Enforcement

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1987, No. 87-152, p. 207, §4.)

§ 5-14A-5 Applicable Law

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1987, No. 87-152, p. 207, §5.)

§ 5-14A-6 Regulatory Supervision in Cooperation with Other Savings Institutions Regulatory Agencies

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1987, No. 87-152, p. 207, §6.)

§ 5-14A-7 Application Fee

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1987, No. 87-152, p. 207, §7.)

§ 5-14A-8 Power to Establish or Acquire Branch Offices and Subsidiaries

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1987, No. 87-152, p. 207, §8.)

Chapter 16 Savings and Loan Associations

§ 5-16-1 Short Title

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616, §1.)

§ 5-16-2 Definitions

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616, §1; Code 1940, T. 5, §211; Acts 1959, No. 590, p. 1477.)

§ 5-16-3 Associations, Etc., Accepting Money for Promotion of Thrift and Financing of Homes Subject to Provisions of Chapter, Etc

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §218.)

§ 5-16-4 Procedure for Incorporation - Petition for Certificate of Incorporation; Subscription by Incorporators, Etc

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §212.)

§ 5-16-5 Procedure for Incorporation - Approval of Petition for Certificate of Incorporation; Certificate of Approval

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §245.)

§ 5-16-6 Procedure for Incorporation - Issuance of Certificate of Incorporation

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §213.)

§ 5-16-7 Bylaws

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §214.)

§ 5-16-8 Organizational Meeting

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §215.)

§ 5-16-9 Corporate Name and Offices - Generally

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §216.)

§ 5-16-10 Corporate Name and Offices - Change of Location of Home Office; Certificate of Approval, Etc

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §246.)

§ 5-16-11 Corporate Name and Offices - Establishment of Branch Offices

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §247.)

§ 5-16-12 Period for Commencement of Business; Forfeiture of Corporate Existence for Nonuse

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §217.)

§ 5-16-13 Rights, Privileges, Etc., of Members; Annual Meeting; Annual Financial Statement; Voting by Members; Assessment of Fines and Penalties Against Members; Transfer of Real Estate Security by Borrowing Member

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §219.)

§ 5-16-14 Directors, Officers and Employees

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §220; Acts 1943, No. 107, p. 107.)

§ 5-16-15 Books, Records and Accounts

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §221.)

§ 5-16-16 Capital and Accounts

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §222.)

§ 5-16-17 Reserve Accounts; Interest Due and Accrued Account

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §223.)

§ 5-16-18 Undivided Profits Account

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §224.)

§ 5-16-19 Dividends

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §225.)

§ 5-16-20 Repurchase of Accounts

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §226.)

§ 5-16-21 Redemption of Accounts

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §227.)

§ 5-16-22 Issuance of Duplicate Membership Certificates

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §228.)

§ 5-16-23 Issuance, Etc., of Certificates of Indebtedness; Receipt of Public Deposits; Payment of Guaranteed Rate of Interest

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §229.)

§ 5-16-24 Powers Generally

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §230.)

§ 5-16-25 Real Estate Loans

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §231.)

§ 5-16-26 Liens on Accounts; Pledges of Accounts as Security for Loans

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §232.)

§ 5-16-27 Adoption, Etc., of Bonus Plans and Payment of Cash Bonuses on Accounts; Bonus Reserve Account

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §233.)

§ 5-16-28 Sales, Transfers, or Exchanges of Assets

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §234.)

§ 5-16-29 Mergers

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §235.)

§ 5-16-30 Conversions

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §236.)

§ 5-16-31 Reorganizations

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §237; Acts 1981, No. 81-392, p. 617.)

§ 5-16-32 Voluntary Liquidation - Procedure Generally

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §238.)

§ 5-16-33 Voluntary Liquidation - Remittance of Unclaimed Dividends and Share Accounts by Receiver, Etc.; Payment of Creditors and Investors by Commissioner

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §239; Acts 1943, No. 96, p. 98.)

§ 5-16-34 Voluntary Liquidation - Certification and Transmittal of Unclaimed Funds to State Treasurer

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §240.)

§ 5-16-35 Voluntary Liquidation - Payment of Creditors or Investors by State Treasurer

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §241.)

§ 5-16-36 Reports, Examinations and Audits

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §248.)

§ 5-16-37 Conservatorship; Involuntary Liquidation

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §249; Acts 1943, No. 98, p. 100.)

§ 5-16-38.1 Assessment Fees

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1980, No. 80-693, §2.)

§ 5-16-39 Foreign Corporations Not to Transact Business in State; Privileges, Etc., of Federal Savings and Loan Associations

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §250.)

§ 5-16-40 Sales of Accounts

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §252.)

§ 5-16-41 Acknowledgment, Etc., of Instruments by Public Officers Employed by Associations, Etc

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §253.)

§ 5-16-42 Operating or Management Contracts

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §254.)

§ 5-16-43 Accounts of Minors, Married Women, Joint Owners and Fiduciaries; Investments in Accounts of Associations

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §255; Acts 1967, No. 289, p. 817.)

§ 5-16-44 Deposit in Names of Two Persons, Payable to Either or Survivor - How Payable; When Construed as Belonging to Survivor

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1967, No. 211, p. 575, §1.)

§ 5-16-45 Deposit in Names of Two Persons, Payable to Either or Survivor - Title to Deposit Upon Death of Either

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1967, No. 211, p. 575, §3.)

§ 5-16-46 Disposition of Account of Deceased Person

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1959, No. 589, p. 1477.)

§ 5-16-47 Disposition of Deposit in Trust for Another Upon Death of Trustee

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1967, No. 211, p. 575, §2.)

§ 5-16-48 Engaging in Mortgage Brokerage Business; Purchase of Loans; Origination, Purchase and Sale of Mortgages

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §256.)

§ 5-16-49 Forms

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1939, No. 459, p. 616; Code 1940, T. 5, §257.)

§ 5-16-50 Deposits with State Treasurer, Etc., of Securities Issued by Associations

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1943, No. 444, p. 407.)

§ 5-16-51 Associations Empowered to Enter into Contracts, Etc., for Insurance of Accounts, Etc

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1945, No. 120, p. 113, §1.)

§ 5-16-52 State Associations May Make Contracts, Loans or Investments Available to Federal Savings and Loan Associations

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1945, No. 120, p. 113, §2.)

§ 5-16-53 Termination of Status as Insured Corporation

[Repealed]

Repealed by Act 2015-70 effective April 21, 2015.

(Acts 1945, No. 119, p. 112.)

Chapter 17 Credit Unions

Article 1 General Provisions

§ 5-17-1 “Credit Union” Defined

A credit union is a cooperative society, incorporated for the twofold purpose of promoting thrift among its members and creating a source of credit for them at legitimate rates of interest, particularly among groups of industrial workers and farmers, fraternal and religious organizations, and in those communities where the citizens of the state are distantly removed from convenient centers of business or easy access to financial agencies now provided for by laws of Alabama.

(Acts 1927, No. 597, p. 696, §1; Code 1940, T. 28, §282; Acts 1975, No. 561, §1; Acts 1977, No. 210, p. 282, §3; Acts 1978, No. 469, p. 492, §5.)

§ 5-17-2 Procedure for Organization and Incorporation

(a) For the purposes of this chapter, both a natural person credit union and a corporate credit union are considered a credit union unless otherwise indicated.

(b) The following may apply to the Administrator of the Alabama Credit Union Administration for permission to organize a credit union:

(1) For a natural person credit union, any seven residents of the state.

(2) For a corporate credit union, any seven or more individuals each representing different natural person credit unions.

(c) A credit union is organized in the following manner: The applicants shall execute in duplicate a certificate of organization by the terms of which they agree to be bound. The certificate shall state: (1) the name and location of the proposed credit union, (2) the names and addresses of the subscribers to the certificate and the number of shares subscribed by each, and (3) the par value of the shares of the credit union. They shall next prepare and adopt bylaws for the general governance of the credit union consistent with the provisions of this chapter and shall execute the same in duplicate. The certificate and bylaws, both executed in duplicate, shall be forwarded to the Administrator of the Alabama Credit Union Administration. Not later than 30 days after receiving the certificate of organization and bylaws and proof of the issuance of a certificate of insurance for member accounts from either the National Credit Union Administration or a private insurance carrier approved in writing by the administrator, the administrator shall determine whether the certificate of organization and bylaws conform with the provisions of this chapter and whether or not the organization of the credit union in question would benefit the members of it and be consistent with the purpose of this chapter. Thereupon the Administrator of the Alabama Credit Union Administration shall notify the applicants of his or her decision. If it is favorable, the administrator shall issue a certificate of approval, attached to the duplicate certificate of organization, and return the same, together with the duplicate bylaws, to the applicants. The applicants shall thereupon file the duplicate of the certificate of organization, with the certificate of approval attached thereto, with the judge of probate of the county within which the credit union is to do business, who shall make a record of the certificate and return it, along with his or her certificate of record attached thereto, to the Administrator of the Alabama Credit Union Administration for permanent record. Within 180 days, the applicants shall become and be a credit union operating with normal business hours to serve its field or fields of membership and be incorporated in accordance with the provisions of this chapter. In order to simplify the organization of credit unions, the Administrator of the Alabama Credit Union Administration shall cause to be prepared an approved form of certificate of organization and a form of bylaws, consistent with this chapter, which may be used by credit union incorporators for their guidance, and on written application of any seven residents of the state, shall supply them without charge a blank certificate of organization and a copy of the form of suggested bylaws.

(Acts 1927, No. 597, p. 696; Code 1940, T. 28, §282; Acts 1975, No. 561, p. 1267, §1; Acts 1977, No. 210, p. 282, §3; Acts 1978, No. 469, p. 492, §6; Acts 1983, No. 83-772, p. 1407, §1; Acts 1985, No. 85-457, p. 425, §5; Act 2016-133, §1.)

§ 5-17-3 Use of Words “Credit Union” in Name or Title

It shall be a misdemeanor for any person, association, copartnership, or corporation, except corporations organized in accordance with the provisions of this chapter, credit unions incorporated under the laws of the United States, the trade associations of credit unions doing business in this state, and other organizations as approved by the administrator, to use the words “credit union” in their name, title, or in advertising. A credit union organized under the provisions of this chapter shall include in its corporate name or title the words “credit union.” Any violation of this prohibition shall subject the party chargeable therewith to a penalty of five hundred dollars ($500) for each day, with a maximum amount of fifty thousand dollars ($50,000), during which the violation is committed or repeated. The penalty may be recovered by the administrator by an action instituted for that purpose, and, in addition to the penalty, the violation may be enjoined and the injunction enforced as in other cases. If the directors, officers, or those persons performing similar functions as corporate directors or officers of any entity shall knowingly and willfully violate or knowingly and willfully permit any of the officers, agents, employees, or those persons performing similar functions of the entity to violate any of the provisions of this section, each director, officer, or other person engaging in the violation shall be liable in his or her personal and individual capacity for all damages which the entity or any other person shall have sustained in consequence of the violation. Provided, however, that a credit union organized in another state may conduct business as a credit union in this state with the prior approval of the Administrator of the Alabama Credit Union Administration provided all of the following criteria are met:

(1) It is organized under laws similar to Alabama credit union laws.

(2) It is financially solvent.

(3) Alabama credit unions are allowed to do business in the other state under conditions similar to these provisions.

(4) It maintains member account insurance comparable to that required for Alabama credit unions.

(5) It agrees to submit to the administrator an annual examination report from its supervising agency.

(6) The interest rate on loans made in Alabama does not exceed that allowed by Alabama law.

(7) It complies with the same consumer protection provisions that are applicable to Alabama credit unions.

(8) It designates and maintains an agent for the service of process in Alabama.

(Acts 1927, No. 597, p. 696; Code 1940, T. 28, §284; Acts 1975, No. 561, p. 1267, §3; Acts 1983, No. 83-772, p. 1407, §1; Acts 1985, No. 85-457, p. 425, §6; Act 2014-317, p. 1122, §1.)

§ 5-17-4 Powers Generally

(a) A credit union shall have all of the following powers:

(1) To receive the savings of its members either as payment on shares or as deposits, including the right to conduct Christmas clubs, vacation clubs, and other thrift organizations within the membership.

(2) To accept deposits of fiduciary funds if a member is the beneficiary, trustee, or personal representative and if the funds are part of the estate of a deceased member.

(3) To make loans to members.

(4) To make loans to other credit unions, including credit union service organizations.

(5) To purchase loans from financial institutions, provided a purchased loan is of the nature and type that the credit union could have originated itself.

(6) To make loans to a cooperative society or other organizations having membership in the credit union.

(7) To deposit funds in state and national banks, savings and loan associations, the accounts which are insured by the Federal Deposit Insurance Corporation, and in other credit unions.

(8) To invest in any investment legal for federally chartered credit unions in the state.

(9) To borrow money from any source not prohibited by applicable law and to give its note therefor; provided that the borrowing, in the aggregate, shall not at any time exceed the lesser of:

a. Fifty percent of its assets.

b. The combination of undivided earnings, regular reserves, equity acquired in a merger, net income or net loss not already included in undivided earnings, and shares and deposits.

(10) To assess each member a recurring or nonrecurring membership fee.

(11) To exercise incidental powers as necessary to enable it to carry on effectively the purposes for which it is chartered and incorporated and other powers as are expressly authorized by the Administrator of the Alabama Credit Union Administration.

(b) In addition to any and all other powers heretofore granted to credit unions, any credit union may engage in any activity in which the credit union could engage were the credit union operating as a federally chartered credit union, including but not by way of limitation because of enumeration, the power to do any act and own, possess, and carry as assets property of that character including stocks, bonds, or other debentures which, at the time, are authorized under federal laws or regulations for transactions by federal credit unions, notwithstanding any restrictions elsewhere contained in the law of this state. No credit union can exercise any power which it claims only by virtue of the power being possessed by a federal credit union if the administrator issues a written order prohibiting a credit union from exercising that power.

(c) Notwithstanding any other provision of this chapter or any other state law, a credit union may offer any product or service that is authorized or permitted to any federal credit union as defined in 12 U.S.C. § 1752.

(d) Notwithstanding any other provision of this chapter or any other state law, the administrator may condition the exercise of any power upon terms and conditions intended to ensure safe and sound operation of a credit union in the administrator’s discretion.

(Acts 1927, No. 597, p. 696; Code 1940, T. 28, §285; Acts 1971, No. 2300, p. 3711; Acts 1975, No. 561, p. 1267, §4; Acts 1977, No. 210, p. 282, §4; Acts 1985, No. 85-457, p. 425, §7; Acts 1995, No. 95-315, p. 667, §1; Act 2016-133, p. 315, §1; Act 2019-130, §1.)

§ 5-17-5 Membership

Credit union membership shall consist of the incorporators and such other persons as may be elected to membership and who subscribe to at least one share and pay the initial installment thereon and the entrance fee. Organizations, incorporated or otherwise, composed for the most part of the same general group as the credit union membership may be members. Credit union organization shall be limited to groups, of both large and small membership, having a common bond of occupation or association or to groups within a well- defined neighborhood, community or rural district.

(Acts 1927, No. 597, p. 696; Code 1940, T. 28, § 286.)

§ 5-17-6 Withdrawal of Members; Expulsion for Cause; Termination of Membership; Readmission

(a) Any member may withdraw from the credit union at any time, but notice of withdrawal may be required. All amounts paid on shares or as deposits of an expelled or withdrawing member, with any dividends or interest accredited thereto to the date thereof shall, as funds become available and after deducting all amounts due from the member to the credit union, be paid to the individual. The credit union may require 60 days’ notice of intention to withdraw shares and 30 days’ notice of intention to withdraw deposits. A credit union may reserve in its bylaws the right to pay out not more than one half of its monthly receipts to withdrawing members and depositors.

(b) The board of directors may expel a member for cause by a majority vote of a quorum of directors, pursuant to a written policy adopted by the board. For the purposes of this section, cause includes a loss to the credit union, a violation of the membership agreement or any policy or procedure adopted by the board, or inappropriate behavior such as physical, sexual, or verbal abuse of credit union members or staff. All members shall be provided written notice of such policies. Any person expelled by the board shall have the right to file a written appeal to the board to reconsider the expulsion.

(c) A credit union may terminate the membership of any member who withdraws his or her shares to less than one par share.

(d) Persons whose membership has been terminated, whether by withdrawal or expulsion, shall have no further rights in the credit union, but are not released from any obligation owed to the credit union.

(e) A member who has been expelled may not be readmitted to membership except upon approval by a majority vote of the board after application and proof that the applicant remains within the credit union’s field of membership, has adequately explained, addressed, or remedied the conditions leading to expulsion, and will abide by the terms and conditions of membership. Not more than one such application for readmission may be made within any 12-month calendar period.

(Acts 1927, No. 597, p. 696; Code 1940, T. 28, §299; Act 2014-317, p. 1122, §1; Act 2016-133, §1.)

§ 5-17-7 Operating Fees; Fee Filed with Certificate of Organization

(a) All state chartered credit unions shall pay an annual operating fee and, if deemed necessary by the administrator, an assessment, the exact amount of which shall be fixed from time to time by the Administrator of the Alabama Credit Union Administration.

(b) Except as hereinafter provided, the annual operating fee set by the administrator shall not exceed the fee calculated by use of the following scale or the administrator may authorize payment of the schedule used by federal credit unions if the administrator determines it to be appropriate:

(1) Credit unions having total assets of less than $500,000 shall pay a fee not in excess of $.12 for each $100 of assets, subject to a minimum of $200.

(2) Credit unions with assets of $500,000 but not in excess of $1,000,000 shall pay a fee of $600 plus $.05 per $100 on assets over $500,000 but not in excess of $1,000,000; credit unions with assets of $1,000,000 but not in excess of $5,000,000 shall pay a fee of $850 plus $.035 per $100 on assets of $1,000,000 but not in excess of $5,000,000; credit unions with assets of $5,000,000 but not in excess of $10,000,000 shall pay a fee of $2,250 plus $.02 per $100 on assets over $5,000,000 but not in excess of $10,000,000; credit unions with assets of $10,000,000 but not in excess of $20,000,000 shall pay a fee of $3,250 plus $.018 per $100 on assets over $10,000,000 but not in excess of $20,000,000; credit unions with assets of $20,000,000 but not in excess of $50,000,000 shall pay a fee of $5,050 plus $.016 per $100 on assets over $20,000,000 but not in excess of $50,000,000; credit unions with assets of $50,000,000 but not in excess of $100,000,000 shall pay a fee of $9,850 plus $.013 per $100 on assets over $50,000,000 but not in excess of $100,000,000; credit unions with assets of $100,000,000 or more shall pay a fee of $16,350 plus $.011 per $100 on all assets over $100,000,000.

(3) The annual operating fee for a corporate credit union shall be set by the administrator and shall not exceed the above scale.

(c) Annually, the administrator may fix an annual operating assessment to ensure that the Alabama Credit Union Administration does not continue to operate in a deficit for any given year. The assessment shall be approved by the Credit Union Board of the Alabama Credit Union Administration. Any credit union failing to pay the assessment within 30 days of the notice of assessment may be charged a fine not to exceed fifty dollars ($50) for each day that the assessment remains unpaid.

(d) The annual operating fee shall be paid on or before the last day of January of each year, based upon the assets of the credit union as of the end of the previous year. Any credit union failing to pay the operating fee may be charged a fine not to exceed fifty dollars ($50) for each day that the fee remains unpaid.

(e) Whenever application is made to the Administrator of the Alabama Credit Union Administration for permission to organize a credit union, the applicant shall at the time of filing the certificate of organization with the Administrator of the Alabama Credit Union Administration pay a fee not to exceed one thousand dollars ($1,000) for the purpose of paying the costs incidental to the determination by the Administrator of the Alabama Credit Union Administration whether such certificate of organization shall be approved. The Administrator of the Alabama Credit Union Administration shall from time to time fix the exact charge to be made, but in no event shall the charge exceed one thousand dollars ($1,000). The provisions of this subsection shall not apply to any existing credit union seeking charter conversion.

(f) All fees collected under this section shall be paid into the special fund set up by the State Treasurer. This special fund shall be used to pay the salaries of the officials and employees and the expenses of the Alabama Credit Union Administration including the purchase of equipment, vehicles, and supplies necessary for the examination and supervision of credit unions and may be spent by the Administrator of the Alabama Credit Union Administration for the uses and purposes specified herein. The travel expenses of examiners of the Alabama Credit Union Administration shall be set and paid in accordance with internal policies of the Alabama Credit Union Administration adopted by the Administrator of the Alabama Credit Union Administration and the Alabama Credit Union Administration and the examiners shall be exempt from the provisions of Sections 36-7-20 and 36-7-22. No taxes, fees, assessments, penalties, or other revenues collected by the Alabama Credit Union Administration shall be used for any purpose other than the expenses of operating the Alabama Credit Union Administration.

(g) All the jurisdiction, authority, powers, and duties now conferred upon and imposed by law upon the Superintendent of Banks and the Supervisor of the Credit Union Bureau in relation to the management, control, regulation, and general supervision of credit unions are hereby transferred to, conferred upon, and imposed upon the Alabama Credit Union Administration and administrator.

(h) All assets primarily used by the Bureau of Credit Unions, including books, records, documents, furniture, equipment, and supplies are hereby transferred to the Alabama Credit Union Administration. All funds in the special fund previously maintained by the State Treasurer for the Bureau of Credit Unions are hereby transferred to the Alabama Credit Union Administration. All taxes, fees, assessments, penalties, or other revenues owed to or collected by the Bureau of Credit Unions are hereby transferred to the Alabama Credit Union Administration. Any employee presently employed by the Superintendent of Banks who is presently primarily involved with the Bureau of Credit Unions shall be employed by the Alabama Credit Union Administration.

(Acts 1957, No. 603, p. 862; Acts 1967, No. 221, p. 589; Acts 1975, No. 561, p. 1267, §6; Acts 1981, No. 81-852, p. 1529, §2; Acts 1985, No. 85-457, p. 425, §8; Act 2014-317, p. 1122, §1; Act 2016-133, p. 315, §1; Act 2022-120, §1.)

§ 5-17-8 Reports to Administrator of Alabama Credit Union Administration; Powers of Administrator

(a) Credit unions shall report to the Administrator of the Alabama Credit Union Administration at least annually on or before January 31 in such manner and form as required by the administrator for that purpose. Additional reports may be required. Credit unions shall be examined at least every 18 months by employees of the administration or by other persons designated by the administrator. For failure to file reports when due, unless excused for cause by the administrator, the credit union shall pay to the State Treasurer five dollars ($5) for each day of its delinquency.

(b) If the administrator determines that the credit union is violating this chapter, or is insolvent, the administrator may suspend operations of the credit union by issuing an order requiring that the credit union cease operations pending a hearing on the revocation of the certificate of approval, or the administrator may set a date for a hearing on the revocation of the certificate of approval without suspending operations of the credit union. If the administrator suspends operations of the credit union, a hearing on the revocation of the certificate of authority shall be held by the administrator if requested within 90 days from the date of the order requiring suspension of operations. If demanded by the credit union, the hearing on revocation of the certificate of authority, whether or not the administrator has suspended operations of the credit union pending the hearing, shall be conducted on the record by the administrator who shall also make findings of fact and a written determination concerning revocation of the certificate of authority. The determination may contain an order requiring that credit union to immediately suspend operations or continue in effect a previous order requiring the suspension of operations. If the determination is that the credit union is violating this chapter, or is insolvent, and that the certificate of authority be revoked, and if, for a period of 15 days after the hearing, any violation continues, the administrator may revoke the certificate and take possession of the business and property of the credit union and maintain possession until the administrator shall permit it to continue business or its affairs are finally liquidated through merger or otherwise.

(c)(1) The administrator may, with the approval of a majority of the Credit Union Board of the Alabama Credit Union Administration, issue a cease and desist order upon finding that the credit union or any officer, director, committee member, or employee has done any one of the following:

a. Committed any violation of a law, rule, or regulation.

b. Engaged or participated in any unsafe or unsound practice in connection with the credit union business.

c. Engaged in any act, omission, or practice which constitutes a breach of fiduciary duty to the credit union.

d. Committed any fraudulent or questionable practice in the conduct of the credit union’s business which endangers the credit union’s reputation or threatens insolvency.

e. Violated any condition imposed in writing by the administrator or any written agreement made with the administrator.

f. Concealed, destroyed, removed, falsified, or perjured any book, record, paper, report, statement, or account related to the business and affairs of the credit union.

(2) Any cease and desist order shall be effective not earlier than 10 calendar days after it is delivered to the credit union. The credit union or any person subject to a cease and desist order shall have 10 calendar days from the receipt of any cease and desist order to appeal to the Credit Union Board of the Alabama Credit Union Administration by serving the administrator with a written notice of appeal within the 10-day period. Upon receipt of a notice of appeal from the credit union, the effect of the cease and desist order will be suspended pending a decision upon appeal; provided that a majority of the Credit Union Board of the Alabama Credit Union Administration may order that a cease and desist order be in force and effect pending the decision on appeal. A hearing of any appeal shall be held before the Credit Union Board of the Alabama Credit Union Administration within 60 calendar days of the notice of appeal and the decision of the Credit Union Board shall be rendered within 30 calendar days after the conclusion of the hearing.

(d) The Administrator of the Alabama Credit Union Administration may suspend from office and prohibit further participation in any manner in the conduct of the affairs of a credit union, any director, officer, committee member, or employee who has done any one of the following:

(1) Committed any violation of a law, rule, or regulation.

(2) Engaged or participated in any unsafe or unsound practice in connection with the credit union business.

(3) Engaged in any act, omission, or practice which constitutes a breach of fiduciary duty to the credit union.

(4) Committed any fraudulent or questionable practice in the conduct of the credit union’s business which endangers the credit union’s reputation or threatens insolvency.

(5) Violated any condition imposed in writing by the administrator or any written agreement made with the administrator.

(6) Concealed, destroyed, removed, falsified, or perjured any book, record, paper, report, statement, or account related to the business and affairs of the credit union.

(7) Unless the administrator directs otherwise, the prohibition against participation in the conduct of the affairs of a credit union shall remain effective until it is rescinded by a vote of the Credit Union Board of the Alabama Credit Union Administration.

(e) A person subject to an order issued under subsection (d) may file an appeal in writing delivered to the administrator not more than 10 calendar days after the issuance of the order. Not later than 60 calendar days after the filing of an appeal, the Credit Union Board of the Alabama Credit Union Administration shall hold a hearing and not later than 30 calendar days after the conclusion of the hearing, the Credit Union Board shall issue a decision. The hearing shall be confidential.

(f) The Administrator of the Alabama Credit Union Administration, with the approval of a majority of the Credit Union Board of the Alabama Credit Union Administration, ex parte without notice, may appoint the Alabama Credit Union Administration or the National Credit Union Administration as conservator and immediately take possession and control of the business and assets of any state-chartered credit union in any case in which any one of the following occurs:

(1) The Alabama Credit Union Administration determines that the action is necessary to conserve the assets of any state-chartered credit union or the interests of the members of the credit union.

(2) A credit union, by resolution of its board of directors, consents to the action by the Alabama Credit Union Administration.

(3) There is a willful violation of a cease-and-desist order which has become final.

(4) There is concealment of books, papers, records, or assets of the credit union or refusal to submit books, papers, records, or affairs of the credit union for inspection to any examiner or to any lawful agent of the Alabama Credit Union Administration.

(g) Not later than 10 calendar days after the date on which the Alabama Credit Union Administration takes possession and control of the business and assets of a credit union pursuant to subsection (f), officials of the credit union who were terminated by the conservator may apply to the circuit court for the judicial circuit in which the principal office of the credit union is located for an order requiring the administration to show cause why it should not be enjoined from continuing possession and control. Except as provided in this subsection, no court may take any action, except at the request of the Credit Union Board by regulation or order, to restrain or affect the exercise of powers or functions of the board as conservator.

(h) The administrator shall report to the Credit Union Board of the Alabama Credit Union Administration at least semi-annually on the condition of the credit unions in which the administration serves as conservator. Reports shall contain the following:

(1) The most recent income statement and balance sheet of the credit union.

(2) Actions taken since the last report by the administrator in its role as conservator of the credit union.

(3) A detailed report of all expenditures, reimbursements, and other financial considerations paid out of the assets of the credit union to the Alabama Credit Union Administration or its designated agents during conservatorship.

(4) A business plan outlining necessary actions and timetables under which the credit union would remain under conservatorship.

(i) The Alabama Credit Union Administration may maintain possession and control of the business and assets of the credit union and may operate the credit union until the time as the following occurs:

(1) The administrator shall permit the credit union to continue business subject to the terms and conditions as may be imposed by the Alabama Credit Union Administration.

(2) The credit union is liquidated in accordance with the provisions of Section 5-17-21.

(3) The Credit Union Board of the Alabama Credit Union Administration votes by a majority of voting members that the Alabama Credit Union Administration shall relinquish possession and control of the credit union. Such vote shall be held on at least a semi-annual basis while the credit union is held in conservatorship by the Alabama Credit Union Administration.

(j) The Alabama Credit Union Administration may appoint special agents as it considers necessary in order to assist the administration in carrying out its duties as a conservator under this section.

(k) All costs incurred by the administration in exercising its authority under this section and Section 5-17-8.1, including, without limitation, all expenses and legal fees incurred in exercising its authority or defending any action taken pursuant to its exercise of authority, and any appeal by any credit union or by any director, officer, committee member, or employee thereof shall be paid out of the assets of the credit union.

(l) The conservator shall have all powers of the members, the directors, the officers, and the committees of the credit union and shall be authorized to operate the credit union in its own name or to conserve its assets in the manner and extent authorized by the administration.

(m) After taking possession of the property and business of a credit union through conservatorship, the conservator may terminate or adopt any executory contract to which the credit union may be a party. The termination of any contracts shall be made within six months after the conservator has obtained knowledge of the existence of the contract or lease. Any provision in the contract or lease which provides for damages or cancellation fees upon termination shall not be binding on the conservator or credit union. The directors, the conservator, and the credit union are not liable for damages arising from or relating to such executory contracts.

(n) The administrator may appoint a temporary board of directors to any credit union subject to conservatorship.

(o)(1) Notwithstanding any other provision of state law, if the administrator determines that an emergency requiring expeditious action exists with respect to a credit union, that other alternatives are not reasonably available consistent with National Credit Union Administration precedent, and that the public interest, including the interests of the members of the credit union, would best be served by such action, the administrator may do either of the following:

a. Initiate the involuntary merger of a credit union that is insolvent or is in danger of insolvency with any other credit union or may authorize a credit union to purchase any of the assets of, or assume any of the liabilities of, any other credit union that is insolvent or in danger of insolvency.

b. Authorize a financial institution whose deposits or accounts are insured to purchase any of the assets of, or assume any of the liabilities of, a credit union that is insolvent or in danger of insolvency, except that prior to exercising this authority the administrator shall attempt to effect a merger with, or purchase and assumption by, another credit union as provided in paragraph a.

(2) For purposes of the authority contained in this subsection, insured share and deposit accounts of the credit union, upon consummation of the purchase and assumption, may be converted to insured deposits or other comparable accounts in the acquiring institution, and the administrator and the insuring organization shall be relieved of any liability to the credit union’s members with respect to those accounts.

(Acts 1927, No. 597, p. 696; Code 1940, T. 28, §287; Acts 1975, No. 561, p. 1267, §5; Acts 1978, No. 469, p. 492, §7; Acts 1985, No. 85-457, p. 425, §9; Acts 1989, No. 89-632, p. 1241, §1; Acts 1995, No. 95-315, p. 667, §1; Act 2014-317, p. 1122, §1; Act 2016-133, p. 315, §1; Act 2017-190, §1; Act 2019-130, §1.)

§ 5-17-8.1 Investigatory and Enforcement Powers of Administrator, Board, Designee, Etc

(a) The administrator or the administrator’s designee, in consultation with the agency’s legal counsel acting under the administrator, may administer oaths and may examine under oath any person whose testimony may be required on the examination of any credit union, or the examination of any affiliate of a credit union, and shall have authority and power to compel the appearance and attendance of any such person or the production of any records and documents of any credit union or any affiliate of a credit union for the purpose of any examination. Attendance or production may be enforced by order of the Circuit Court, 15th Judicial District. The production of records, documents, or testimony, whether or not made under oath, by a credit union or by any of its directors, officers, employees, advisors, consultants, attorneys, or accountants made for, and at the request of, the administrator upon examination of the credit union, does not constitute a waiver of any attorney-client privilege or other privilege that the credit union or any director, officer, employee, advisor, consultant, attorney, or accountant thereof is entitled to under law in any unrelated matter or proceeding.

(b) Any officer, director, agent, or employee of any credit union, any affiliate of a credit union, or any affected person, whether one or more, who (1) makes any false entry or omission with intent to mislead in any book, report, or statement of the credit union or affiliate of the credit union, or (2) makes a false statement, whether or not made under oath, to the administrator, an examiner or designee acting under the administrator, or to any officer of such credit union or affiliate of any credit union with intent to injure or defraud the administrator, examiner, designee, officer, credit union, or affiliate, or with the intent to influence in any way the action of the administrator or an examiner or designee acting under the administrator, shall be subject to removal and the imposition of civil money penalties by the administrator when so directed by the Credit Union Board as provided in this title. At the discretion of the administrator, an order of removal may prohibit the affected person from participating in the affairs of any state credit union. Any action of the administrator or designee acting under the administrator taken in reliance upon such false entry, omission, or statement may be rescinded and withdrawn at the discretion of the administrator. These remedies are in addition to the penalties set forth in Sections 5-17-29 to 5-17-32, inclusive.

(c) In taking an action to prohibit participation by, remove, or impose civil money penalties upon, any officer, director, or employee of any credit union or any affiliate of a credit union under this section, the administrator and Credit Union Board shall not be required to establish that the credit union or the affiliate of the credit union suffered or probably will suffer financial loss and shall not be required to establish that the administrator, examiner, or designee acting under the administrator was influenced by such false entry, omission, or statement.

(d) The resignation, termination of employment or participation, or separation of any director, officer, or employee of a credit union for any reason whatsoever shall not affect the jurisdiction and authority of the administrator or the Credit Union Board to issue any notice or order and proceed under this title against any such person, if the notice or order is served before the end of the six-year period beginning on the last date that the person ceased to be a director, officer, or employee of the credit union.

(e) If the directors or officers of any credit union unreasonably or willfully violate, or unreasonably or willfully permit any of the officers, agents, or employees of the credit union to violate any of the provisions of this title, each and every director or officer engaging in such knowing and willful violation or knowing and willful permission shall be liable in his or her personal and individual capacity for all damages that the credit union or any other person sustained in consequence of the violation. The administrator may use enforcement powers to seek restitution for or on behalf of the credit union for damages resulting from such violations. Further, the administrator shall have standing to intervene in any court action arising out of or relating to such violation in order to protect the interests of the administrator, examiners, administrator’s designee or designees, the agency, the credit union, or its members.

(Act 2016-133, §2.)

§ 5-17-9 Fiscal Year; Meetings of Members; Amendment of Bylaws

The fiscal year of all credit unions shall end December 31. Special meetings may be held in the manner indicated in the bylaws. At all meetings a member shall have but a single vote whatever his share holdings. The bylaws may be amended as provided in the bylaws. Amendments to the bylaws shall be submitted to the administrator who shall approve or disapprove the amendments within 60 days provided that the administrator shall not disapprove an amendment which corresponds with the form of bylaws which the administrator furnishes for the guidance of the incorporators of a credit union. There shall be no voting by proxy, a member other than a natural person casting a single vote through a delegated agent.

(Acts 1927, No. 597, p. 696; Code 1940, T. 28, §288; Acts 1985, No. 85-457, p. 425, §10.)

§ 5-17-10 Election of Board of Directors, Credit Committee, and Supervisory Committee

At the annual meeting (the organization meeting shall be the first annual meeting), members of the credit union shall elect a board of directors of not less than five members, may elect a credit committee of not less than three members, and shall elect a supervisory committee of not less than three members, all to hold office for such terms respectively as the bylaws provide and until successors qualify. A record of the names and addresses of the members of the board and committees and the officers shall be filed with the Administrator of the Alabama Credit Union Administration not later than 10 calendar days after their election. If, however, the bylaws so provide, the board of directors shall carry out the functions and duties of the credit committee or may appoint a credit committee, in which case the credit union shall not elect a credit committee.

(Acts 1927, No. 597, p. 696; Code 1940, T. 28, §289; Acts 1983, No. 83-772, p. 1407, §1; Acts 1985, No. 85-457, p. 425, §11; Act 2016-133, p. 315, §1; Act 2019-130, §1.)

§ 5-17-11 Election of Officers; Duties of Officers and Directors; Compensation; Liability

(a) At the first meeting and at subsequent times prescribed in the bylaws, the directors shall elect a president. The president must be either a member of the board of directors or an employee of the credit union who is not a member of the board of directors. If the credit union elects a president who is not a member of the board of directors, the board of directors shall elect from their own number a chair and one or more vice chairs of the board of directors. The board of directors, in accordance with the bylaws, may remove any officer who is not a member of the board of directors. At the first meeting and at subsequent annual meetings prescribed in the bylaws, the directors shall elect from their own number, a secretary and treasurer, who may be the same individual. To nominate a candidate by petition, the petition should conform to the requirements as specified in the bylaws. The bylaws will state the number of members required to sign a petition which can be as few as three members or more as stated in the bylaws. For natural person credit unions, the maximum number cannot exceed the lesser of one percent of the membership or 500 members. For corporate credit unions, the maximum number cannot exceed the lesser of five percent of the membership or 25 members. Candidates shall be given a minimum of 35 days from the postmark date to present a petition.

(b) The duties of the officers shall be as determined in the bylaws. It shall be the duty of the directors to have general management of the affairs of the credit union, particularly:

(1) To act on application for membership.

(2) To determine interest rates on loans and on deposits; provided, that such loans shall be at reasonable rates of interest.

(3) To fix the amount of the surety bond which shall be required of all officers and employees handling money.

(4) To declare dividends, and to transmit to the members recommended amendments to the bylaws.

(5) To fill vacancies in the board and in the credit committee in accordance with the bylaws of the credit union.

(6) To determine the maximum individual share holdings and the maximum individual loan which can be made with and without security.

(7) To have charge of investments other than loans to members.

(8) To establish the par value of the share.

(9) In the absence of a credit committee, and upon the written request of a member, review a loan application denied by a loan officer.

(c) No member of the board or any committee shall, as such, be compensated. Notwithstanding the foregoing, for his or her services to the credit union, providing reasonable life, accident, and similar insurance protection shall not be considered compensation. Directors, officers, and committee members may be reimbursed for necessary expenses incidental to the performance of the official business of the credit union. Expenses may include the payment or reimbursement of travel costs for members of the board or any committee and one guest per member of the board or any committee that were reasonable, proper, and incurred on official business of the credit union, in accordance with written policies and procedures of the credit union.

(d) Liability and indemnification of officers, directors, trustees, and members of the governing body of a credit union shall be the same as provided for a nonprofit corporation in Title 10A, the Alabama Business and Nonprofit Entity Code; provided, however, a credit union may not indemnify officers, directors, and members of the governing body of a credit union against actions brought in connection with willful violations of this title.

(Acts 1927, No. 597, p. 696; Code 1940, T. 28, §290; Acts 1977, No. 210, p. 282, §1; Acts 1978, No. 469, p. 492, §8; Acts 1983, No. 83-772, p. 1407, §1; Act 2014-317, p. 1122, §1; Act 2016-133, p. 315, §1; Act 2019-130, §1.)

§ 5-17-12 Powers and Duties of Credit Committee

The credit committee shall have the general supervision of all loans to members. Applications for loans shall be on a form prepared by the credit committee and all applications shall set forth the purpose for which the loan is desired, the security, if any offered, and such other data as may be required. At least a majority of the members of the credit committee shall pass on all loans, and approval must be unanimous; except, that the credit committee may appoint one or more loan officers and delegate to the officer or officers the power to approve loans in accordance with loan policies approved by the board of directors of the credit union.

(Acts 1927, No. 597, p. 696; Code 1940, T. 28, §291; Acts 1971, No. 2294, p. 3698; Acts 1977, No. 210, p. 282, §2; Acts 1983, No. 83-772, p. 1407, §1; Act 2016-133, §1.)

§ 5-17-13 Powers and Duties of Supervisory Committee

(a) The supervisory committee shall make or cause to be made a comprehensive annual audit of the books and affairs of the credit union and shall submit a report of that audit to the board of directors and summary of that report to the members at the next annual meeting of the credit union. It shall make or cause to be made such supplementary audits or examinations as it deems necessary or as are required by the Administrator of the Alabama Credit Union Administration or by the board of directors and submit reports of these supplementary audits to the board of directors.

(b) The supervisory committee shall cause the accounts of the members to be verified with the records of the credit union from time to time and not less frequently than every two years.

(c) The administrator may define the scope of any audit and may set out what procedures must be followed for an audit to qualify as the required annual audit. He or she may prescribe procedures to be followed in the verification of records required not less frequently than every two years.

(d) Whenever the supervisory committee shall fail to make a comprehensive annual audit or shall fail to verify the accounts of members not less frequently than every two years, the administrator by written order may direct the supervisory committee to perform these duties within a reasonable period of time. Upon failure of the committee to perform these duties as directed by the administrator, the administrator may employ, engage, or contract with a firm with requisite expertise to perform them, and the cost of such audit shall be borne by the credit union.

(e) The supervisory committee, by a unanimous vote, may suspend any officer, director or member of any committee and call the members together to act on such suspension within 30 days after such suspension. The members at the meeting shall consider such suspension and vote to either remove such officer, director, or member of the committee permanently or to reinstate the officer, director, or member of the committee. By majority vote the supervisory committee may call a special meeting of the members to consider any matter submitted to it by such committee. The committee shall fill vacancies in its own membership until the next annual meeting.

(Acts 1927, No. 597, p. 696; Code 1940, T. 28, §292; Acts 1975, No. 561, p. 1267, §7; Acts 1985, No. 85-457, p. 425, §12; Act 2016-133, §1.)

§ 5-17-14 Capital; Lien on Shares and Deposits of Members; Entrance Fee

The capital of a credit union shall consist of the payments that have been made to it by the several members thereof on shares. The credit union shall have a lien on the shares and deposits of a member for any sum due to the credit union from said member or for any loan endorsed by him. A credit union may charge an entrance fee as may be fixed by the bylaws; provided, that such entrance fee shall not exceed $1.00.

(Acts 1927, No. 597, p. 696; Code 1940, T. 28, §293; Acts 1971, No. 2300, p. 3711.)

§ 5-17-15 Deposits for Minor or Trust Beneficiaries; Deposits in Names of Two Persons

(a) A minor, in his or her own name, may make a general or special deposit in any credit union. The deposit shall be paid only to the minor, or upon his or her order, and not to the parents or guardians of the minor, and the payment shall be valid as against the minor child and his or her parents or guardian.

(b) Shares may be issued and withdrawn and deposits received and paid out in the name of a minor or in trust in such manner as the bylaws may provide. The name of the beneficiary must be disclosed to the credit union. If no other notice of the existence and terms of such trust has been given in writing to the corporation, such shares or deposits may, upon the death of the trustee, be transferred to or withdrawn by the person who was named by the trustee as the beneficiary or by his or her legal representative, and such transfer or withdrawal shall release the corporation from liability to any other claimant upon such shares or deposit.

(c) Any deposit heretofore or hereafter made in any credit union in the names of two or more persons payable to any such persons, upon the death of either of such persons, may be paid by the credit union to the survivors jointly, irrespective of whether or not any of the following occur:

(1) The form of the deposit or deposit contract contains any provision for survivorship.

(2) The funds deposited were the property of only one person.

(3) There was at the time of making such deposits any intention on the part of the person making such deposit to vest the other with a present interest therein.

(4) Only one of the persons during their joint lives had the right to withdraw such deposits.

(5) There was any delivery of any passbook, certificate of deposit, or other writing by the person making such deposit to the other of such persons.

(6) Any other circumstances.

The credit union in which such deposit is made may pay such deposit, or any part thereof or interest thereon, to either of the persons, or if one is dead, to the surviving of them, and such payment shall fully release and discharge the credit union from all liability for any payment so made.

(d) The provisions of this section shall apply to share accounts, deposit accounts and certificates of deposits and shall also apply to any deposit made in the names of more than two persons where there is an expressed written provision for survivorship in the deposit contract.

(e) Nothing contained in this section shall be construed to prohibit the person making such deposit from withdrawing or collecting the same during his or her lifetime; nor shall anything contained in this section prohibit any person or persons making a deposit in the names of more than one person from providing for disposition of such deposit and interest thereon in a manner different from that provided above in this section, provided such different manner of disposition is expressly provided for in writing in the deposit contract.

(Acts 1927, No. 597, p. 696; Code 1940, T. 28, §294; Acts 1983, No. 83-772, p. 1407, §1; Act 2014-317, p. 1122, §1.)

§ 5-17-16 Disposition of Shares or Deposit Account of Deceased Person

Whenever a person shall die leaving a share or deposit account in a credit union not exceeding ten thousand dollars ($10,000), the credit union having the share or deposit account may discharge itself from liability thereafter by paying the funds in the share or deposit account to the widow or surviving husband of the deceased or, if there is no widow or surviving husband, to the persons having the actual custody or control of the minor child or children of the deceased; provided, that such person, if not the legal guardian, shall execute to the probate judge of the county a bond in the penal sum of double the amount of such deposit for the faithful accounting of the money so received, which shall be approved by the probate judge, or, if there is no minor child or children, to the person or persons who under the laws of Alabama are the heirs and inherit the personal property of the deceased. No such payment is to be made before the lapse of 60 days from the date of the death of the deceased, and no such payment must be made by the credit union under this section if letters testamentary or of administration have been issued to a personal representative or a proceeding is pending to probate a will of the deceased, or if a petition of letters of administration on the estate of the deceased is pending in the court in this state which would have jurisdiction of the administration of the estate. The amount or amounts of the share or deposit account, together with the other personal property of the deceased, shall not exceed the amount of exemption allowed by law, and the credit union shall be fully protected and discharged from further liability by paying such funds to the person or persons set forth above if the credit union obtains an affidavit of some reputable citizen as to such facts.

(Acts 1967, No. 222, p. 591; Acts 1983, No. 83-772, p. 1407, §1; Act 2014-317, p. 1122, §1.)

§ 5-17-17 Loans to Members, Directors, Officers, Etc

Loans are made subject to the conditions contained in the bylaws. A borrower may repay his loan in whole or in part any day the office of the credit union is open for business.

Provided that loans to directors, officers or members of a committee are not prohibited in the bylaws, it shall be the duty of the board of directors to establish a written policy concerning loans to a director, officer or member of a committee. If it is the policy of the credit union to make directors, officers and members of a committee eligible for loans, such loans will be made under the same terms, conditions and rules as similar loans to other members. In no case may the credit committee make a loan to a director, officer or member of a committee under the terms more favorable than the terms of similar loans to other members. The credit committee shall at least monthly submit to the board of directors a listing of all loans made to directors, officers and credit committee members.

Unless it is the policy of the credit union to make loans to directors, officers and members of a committee:

(1) No such person may borrow or guarantee any loan from that credit union in an amount in excess of his shares and deposits in that credit union; and

(2) No loan or endorsement made more than 90 days prior to his election shall prohibit any person from being elected as a director, officer or member of a committee, but a new or additional loan or guaranty in excess of such person’s shares and deposits shall not be made after such person’s election and during his term of office; and

(3) Any person who has, less than 90 days prior to election, borrowed or guaranteed loans from the credit union in excess of his shares and deposits shall, within 15 days after his election, fully pay or secure such loans with shares and deposits, including any shares and deposits held by such person.

(Acts 1927, No. 597, p. 696; Code 1940, T. 28, §295; Acts 1971, No. 2300, p. 3711; Acts 1975, No. 561, p. 1267, §8; Acts 1978, No. 469, p. 492, §9.)

§ 5-17-18 Interest Rates and Finance Charges on Loans; Late Charge

State chartered credit unions may charge such rates of interest and other finance charges as are authorized for other financial institutions pursuant to the Alabama Consumer Credit Act or other applicable law and may charge a late charge in an amount authorized by the Alabama Consumer Credit Act, provided that such late charge may only be assessed on simple interest loans and simple interest open-end credit plans. As used herein, “simple interest” means charging an interest rate on the unpaid balances of the amount outstanding from time to time for the actual time such balance is outstanding.

(Acts 1927, No. 597, p. 696; Code 1940, T. 28, §296; Acts 1989, No. 89-632, p. 1241, §2.)

§ 5-17-19 Insurance and Reserves

(a) Every credit union shall set aside such regular reserves as are required to be set aside by the credit union in order to maintain insurance of member accounts under the provisions of Title II of the Federal Credit Union Act. Additionally, any credit union may be required by the Administrator of the Alabama Credit Union Administration to maintain any special reserves which the administrator finds are necessary under the particular circumstances to protect the interests of the members.

(b) Any credit union hereafter organized under this chapter shall be prohibited by the Administrator of the Alabama Credit Union Administration from beginning the active conduct of business until such time as such credit union has obtained insurance of member accounts either under the provisions of Title II of the Federal Credit Union Act or has obtained approval for private insurance under a private insurance program or carrier.

(c) Any credit union which has had insurance of its accounts under Title II of the Federal Credit Union Act or a private insurance program or carrier withdrawn or cancelled must apply for such insurance within 30 days of such cancellation or withdrawal. If such credit union has not obtained such insurance within 90 days after such cancellation or withdrawal, the credit union shall either dissolve or merge with another credit union which is insured under Title II of the Federal Credit Union Act or a privately insured credit union insured under a private insurance program or carrier.

(d) The Administrator of the Alabama Credit Union Administration shall be vested with authority to extend the period of time within which a credit union must obtain insurance of its accounts under Title II of the Federal Credit Union Act, to permit other acceptable insurance coverage of its accounts to be utilized by a credit union and to designate into what credit union a credit union not having such insurance coverage shall be merged.

(e) The Administrator of the Alabama Credit Union Administration shall make reports of condition and examination reports available to the National Credit Union Administration and, in his or her discretion, the Administrator of the Alabama Credit Union Administration may accept any report or examination made on behalf of the National Credit Union Administration or a private insurance carrier approved in writing by the administrator in lieu of an examination by the administrator.

(Acts 1927, No. 597, p. 696; Code 1940, T. 28, §297; Acts 1971, No. 2294, p. 3698; Acts 1975, No. 561, p. 1267, §9; Acts 1978, No. 469, p. 492, §10; Acts 1985, No. 85-457, p. 425, §13; Act 2014-317, p. 1122, §1; Act 2016-133, §1.)

§ 5-17-20 Dividends

The directors may declare a dividend from net earnings as the bylaws may provide.

(Acts 1927, No. 597, p. 696; Code 1940, T. 28, §298; Acts 1971, No. 2294, p. 3698; Acts 1978, No. 469, p. 492, §11.)

§ 5-17-21 Voluntary Dissolution

(a) Unless otherwise provided in the bylaws of the credit union, the membership of the credit union may elect to dissolve the credit union upon an affirmative vote of two thirds of the members of the credit union who participate in the vote.

(b) The vote to voluntarily dissolve a credit union shall be taken at a meeting held for that purpose. Voting by mail ballot shall be permitted. Notice of the meeting must state that the purpose of the meeting is to vote on the voluntary dissolution of the credit union and must be mailed to the last known address of each member of the credit union at least 30 calendar days prior to the date of the meeting. The notice, at a minimum, shall also contain all of the following information:

(1) A general description of the implications of the dissolution process on the deposit shares of members.

(2) A general description of the implications of the dissolution process on members who have borrowings with the credit union.

(3) A statement that, following dissolution, the credit union shall continue in existence for the purpose of discharging its debts, collecting and distributing its assets, and doing all other acts required in order to wind up its business.

(c) If the membership of a credit union approves the voluntary dissolution of the credit union, upon written notice from the board of directors of the credit union that such action has been approved by the membership and that the requirements of this section have been satisfied, the Administrator of the Alabama Credit Union Administration shall issue in duplicate a certificate to the effect that this section has been complied with. The certificate shall be filed with the probate judge of the county in which the credit union is located, whereupon the credit union is dissolved and shall cease to carry on business except for the purposes of liquidation and the winding up of its business.

(d) A credit union voluntarily dissolved pursuant to this section shall continue in existence for the purpose of discharging its debts, collecting and distributing its assets, and doing all other acts required in order to wind up its business, and may sue and be sued for the purpose of enforcing such debts and obligations until its affairs are fully adjusted and wound up.

(Acts 1927, No. 597, p. 696; Code 1940, T. 28, §300; Acts 1975, No. 561, p. 1267, §10; Acts 1985, No. 85-457, p. 425, §14; Act 2016-133, §1.)

§ 5-17-22 Merger and Conversion Procedures

Any credit union, with the approval of the Administrator of the Alabama Credit Union Administration, may merge with another credit union, under the existing certificate of organization of the other credit union, pursuant to any plan agreed upon by the majority of each board of directors of each credit union joining in the merger. In addition to approval by the administrator and each board of directors, the membership of the merging credit union must also approve the merger plan in the following manner:

(1) At a meeting called for that purpose, notice of which purpose must be contained in the call, two-thirds of those voting may vote to approve the merger plan. Voting must be conducted in accordance with the bylaws of the credit union. The notice must be provided to the members at least 45 calendar days, but no more than 90 calendar days, prior to the date of the meeting.

(2) After agreement by the directors and approval by the members of the merging credit union, the president and secretary of the credit union shall execute a certificate of merger which shall set forth all of the following:

a. The time and place of the meeting of the board of directors at which the plan was agreed upon.

b. The vote in favor of the adoption of the plan.

c. A copy of the resolution or other action by which the plan was agreed upon.

d. The time and place of the meeting of the members at which the plan agreed upon was approved.

e. The vote by which the plan was approved by the members.

(3) Such certificate and a copy of the plan of merger agreed upon shall be forwarded to the administrator, certified by the administrator, and returned to both credit unions within 30 days.

(4) Upon return of the certificate from the administrator, all property, property rights and members’ interest of the deed, endorsement, or other instrument of transfer, and all debts, obligations, and liabilities of the merged credit union shall be deemed to have been assumed by the surviving credit union under whose charter the merger was effected. The rights and privileges of the members of the merged credit union shall remain intact.

(5) A copy of the certificate approved by the Administrator of the Alabama Credit Union Administration shall be filed with the judge of probate of the county in which each credit union’s certificate of organization is recorded.

(6) This section applies to credit unions organized under the laws of the State of Alabama. Federally chartered credit unions may be merged into Alabama organized credit unions, under the same conditions as Alabama credit unions; provided, that the merger plan is approved by the National Credit Union Administration or private insurance program or carrier.

(7) Credit unions organized under the laws of the State of Alabama may be merged into federally chartered credit unions under the same conditions as provided in this section; provided, that the merger plan is approved by the National Credit Union Administration or private insurance program or carrier.

(8) Credit unions organized under the laws of the State of Alabama may merge a state or federally chartered bank or thrift into the credit union under the same conditions as provided in this section, provided that the merger plan is approved, if required, by the appropriate state or federal regulator of the bank or thrift and federal insurer, the Federal Deposit Insurance Corporation.

(9) Credit unions organized under the laws of the State of Alabama may merge into a state or federally chartered bank or thrift under the same conditions as provided in this section, provided that the merger plan is approved by the resultant institution’s chartering regulator and the federal insurer, the Federal Deposit Insurance Corporation.

(10) A federal credit union may be converted to a credit union chartered under the laws of Alabama and a state credit union may be converted to a federal credit union by adhering to the requirements for the conversion of a federal credit union to a state credit union as specified by the Federal Credit Union Act, presently 12 U.S.C. §1771(a)(1).

(11) A credit union chartered under the laws of another state may be converted to an Alabama state-chartered credit union under state law and regulation. Conversion to an Alabama state-chartered credit union shall be effective upon the written approval of the administrator. Notice of conversion shall be filed with the Secretary of State and the judge of probate of the county in which the credit union maintains its principal office.

(Acts 1975, No. 561, p. 1267, §10; Acts 1983, No. 83-772, p. 1407, §1; Acts 1985, No. 85-457, p. 425, §15; Act 2014-317, p. 1122, §1; Act 2016-133, p. 315, §1; Act 2018-470, §1; Act 2019-130, §1.)

§ 5-17-23 Change of Place of Business

A credit union may change its place of business on written notice to the Administrator of the Alabama Credit Union Administration.

(Acts 1927, No. 597, p. 696; Code 1940, T. 28, §301; Acts 1975, No. 561, p. 1267, §11; Acts 1985, No. 85-457, p. 425, §16.)

§ 5-17-24 Taxation

A credit union shall be deemed an institution for savings and, together with all the accumulations therein, shall not be subject to taxation except as to real estate owned, as to the franchise tax required of other corporations and as to the excise tax required of financial institutions. The shares of a credit union shall not be subject to taxation or to a stock transfer tax when issued by the corporations or when transferred from one member to another.

(Acts 1927, No. 597, p. 696; Acts 1939, No. 48, p. 56; Code 1940, T. 28, §302.)

§ 5-17-25 Alabama Credit Union League - Advance Payment of Dues by Member Credit Unions

[Repealed]

Repealed by Act 2014-317, §2, effective May 1, 2014.

(Acts 1963, No. 422, p. 929, §1.)

§ 5-17-26 Alabama Credit Union League - Issuance of Advance Dues Certificates to Member Credit Unions

[Repealed]

Repealed by Act 2014-317, §2, effective May 1, 2014.

(Acts 1963, No. 422, p. 929, §2.)

§ 5-17-27 Alabama Credit Union League - Amortization of Credit Represented by Advance Dues Certificate

[Repealed]

Repealed by Act 2014-317, §2, effective May 1, 2014.

(Acts 1963, No. 422, p. 929, §3.)

§ 5-17-28 Alabama Credit Union League - Redemption and Purchase of Advance Dues Certificate Upon Dissolution, Etc., of Member Credit Union

[Repealed]

Repealed by Act 2014-317, §2, effective May 1, 2014.

(Acts 1963, No. 422, p. 929, §4.)

§ 5-17-29 Penalties - Concealment of Discounts or Loans

Any officer, director, employee, or committee member of a credit union who intentionally conceals from the directors or a committee of such credit union any discount or loan made for and in behalf of the credit union between the regular meetings of its board of directors or credit committee is guilty of a Class C misdemeanor.

(Acts 1989, No. 89-632, p. 1241, §3.)

§ 5-17-30 Penalties - Overdraws; Receipt of Commission, Emolument, Etc., for Procuring Loans

Any officer, director, committee member, or employee of a credit union who willfully and knowingly overdraws his own account with such credit union and thereby obtains money or funds of any such credit union except as specifically permitted by the written loan policy of the board of directors or asks, receives, consents or agrees to receive any commission, emolument, gratuity, or reward or any promise of any commission, emolument or reward, or any money, property or thing of value or of personal advantage in procuring or endeavoring to procure for any person, firm or corporation any loan from or the purchase or discount of any paper, note, draft check or bill of exchange by any such credit union is guilty of a Class C misdemeanor.

(Acts 1989, No. 89-632, p. 1241, §4.)

§ 5-17-31 Penalties - Receipt of Property Other Than in Payment for Just Demand

Any director, officer, committee member, or employee of a credit union who knowingly receives or possesses himself of any of its property otherwise than in payment for a just demand and with intent to defraud shall be guilty of a Class C felony.

(Acts 1989, No. 89-632, p. 1241, §5.)

§ 5-17-32 Penalties - False or Omitted Entries

Any director, officer, committee member or employee of a credit union who with intent to defraud makes or concurs in making any false entry, or with intent to defraud omits or concurs in omitting to make any material entry on its books and accounts, shall be guilty of a Class C felony.

(Acts 1989, No. 89-632, p. 1241, §6.)

Article 2 Alabama Credit Union Administration

§ 5-17-40 Alabama Credit Union Administration Created; Functions; Transfer of Authority Previously Vested in State Banking Department

THIS SECTION WAS AMENDED BY ACT 2018-470 IN THE 2018 REGULAR SESSION, EFFECTIVE JUNE 1, 2018. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.

(a) There shall be an Alabama Credit Union Administration which shall administer the laws of this state which regulate or otherwise relate to credit unions in the state. The authority of the Alabama Credit Union Administration to perform such functions shall be exclusive and all authority regarding credit unions which was previously vested in the State Banking Department is hereby vested in the Alabama Credit Union Administration.

(b) If any of the provisions of this chapter are inconsistent with any other general or special law, this chapter shall control.

(Acts 1985, No. 85-457, p. 425, §17; Act 2018-470, §1.)

§ 5-17-41 Administrator - Appointment; Vacancy; Eligibility

(a) The Alabama Credit Union Administration shall be in the charge of the administrator who shall be the chief executive officer of the administration.

(b) The administrator shall be a person of good character.

(c) The administrator shall be appointed by the Governor by and with the consent of the Senate. The term of office of the administrator shall expire on the first day of February after the expiration of the term of office of the Governor making the appointment, but the administrator may continue to serve until a successor is appointed and has qualified. If for any reason there should be a vacancy in the office while the Senate is not in session, the Governor shall appoint an administrator and such administrator shall hold office and exercise the powers conferred by law until the Senate meets and passes on the appointment, and if the appointment is disapproved by the Senate another appointment shall be made by the Governor in like manner until an appointment is confirmed by the Senate.

(d) To be eligible for appointment as administrator, a person must have had at least five years’ experience in the 10 years next preceding the appointment either as an officer or director of a federal or state credit union or an examiner or other officer in a federal or state credit union supervisory agency or credit union association, or other equivalent experience for at least five years in the 10 years next preceding the appointment.

(e) The Governor shall set the salary of the administrator within a salary range established by the Credit Union Board of the Alabama Credit Union Administration. The salary range shall not exceed the salary range set by the Banking Board for the Superintendent of the State Banking Department.

(Acts 1985, No. 85-457, p. 425, §18; Act 2006-631, p. 1724, §1.)

§ 5-17-42 Administrator - Oath; Bond

The administrator, before entering upon the discharge of his or her duties, shall take and subscribe to the oath prescribed by the constitution and laws of this state, and shall cause the Division of Risk Management of the Department of Finance or its successor agency to cover the administrator by bond. The oath shall be filed with the Secretary of State.

(Acts 1985, No. 85-457, p. 425, §19; Act 2016-133, §1.)

§ 5-17-43 Official Seal; Use of Sealed Papers as Evidence; Recording

The Secretary of State shall provide the administrator with an official seal. Every paper executed by him as such administrator, in pursuance of any authority conferred on him by law and sealed with his official seal, shall be received in evidence and may be recorded in the proper recording office in the state in the same manner and with the same effect as a deed regularly acknowledged or proven.

(Acts 1985, No. 85-457, p. 425, §20.)

§ 5-17-44 Removal from Office of Administrator or Board Member

(a) The administrator or any member of the Credit Union Board may be removed from office by a vote of two thirds of the members of the entire Credit Union Board for:

(1) neglect of duty;

(2) malfeasance;

(3) misfeasance;

(4) extortion or corruption in office;

(5) incompetency;

(6) intemperance in the use of intoxicating liquors or narcotics to such an extent, in view of the dignity of the office and the importance of its duties, as to render such person unfit for the discharge of his duties; or

(7) any offense involving moral turpitude while in office, committed under color thereof or connected therewith.

(b) The administrator may also be removed from office, without cause, upon written order of four appointed members of the Credit Union Board and the Governor.

(Acts 1985, No. 85-457, p. 425, §21.)

§ 5-17-45 Legislative Findings; Powers of Credit Unions; Agreements; Reports

(a) The Legislature finds as fact and determines that the credit unions having their principal place of business in Alabama must keep pace with technological and other improvements constantly being made throughout the United States so as to enable Alabama credit unions to render better and more efficient services to their members. It is necessary and desirable that the administrator be given additional authority in these fields.

(b) The administrator is hereby authorized to expand powers of Alabama credit unions in order to accomplish both of the following:

(1) Accommodate or take advantage of changing technologies.

(2) Assure the ability of Alabama credit unions to be responsive in their business to the needs and conveniences demanded by credit union members through on-premises as well as off-premises operations; provided, that nothing in this section shall enable the administrator to authorize credit unions to engage in activities which are not properly incident to the business of credit unions nor to enable the administrator to authorize credit unions to engage in the business of offering financial services which are now prohibited to them.

No credit union having its principal place of business outside of Alabama may engage in credit union business in Alabama under the provisions of this section; provided that the administrator is authorized to enter into agreements with the appropriate regulatory authorities of other states; provided credit unions having their principal place of business in Alabama are given and may exercise reciprocal rights.

(c) The administrator is authorized to issue regulations under subsection (b) in the same manner as other regulations of the Alabama Credit Union Administration are adopted. Any Alabama credit union covered by the provisions of subsection (b) desiring to exercise any such expanded power must secure in advance written permission of the administrator. The administrator may prescribe the form or forms for such applications for permission and may impose reasonable conditions in granting such permission.

(d) The administrator may enter into supervisory or other agreements, some of which may be confidential in nature, with the Federal Reserve; the U.S. Treasury Department; the National Credit Union Administration; state credit union, banking, and other regulators; approved private insurance carriers; and other state or federal agencies and furnish to them for their use such reports of examination and other information in taking enforcement and other supervisory actions.

(e) Upon request by a state chartered credit union or its designee, any service provider or vendor providing mission critical services to the credit union shall provide any requested reports of examination, audit reports, or other third party reports of the service provider or vendor to the credit union or its designee. The credit union shall make the reports available for review by the administration. Mission critical services shall include those services defined by regulation as mission critical, and those services that involve access by the service provider or vendor to personally identifiable information as defined by the Gramm-Leach-Bliley Act, 15 U.S.C. § 6809.

(Acts 1985, No. 85-457, p. 425, §22; Act 2014-317, p. 1122, §1; Act 2016-133, p. 315, §1; Act 2018-470, §1.)

§ 5-17-46 Policies, Regulations, and Interpretations; Review for Ratification; Procedure for Adopting, Amending or Repealing

(a) The administrator may, with the concurrence of a majority of the members of the Credit Union Board, promulgate such reasonable regulations, consistent with the laws of this state, as may be necessary to carry out the laws over which the Alabama Credit Union Administration has jurisdiction. The administrator shall, in addition, issue written interpretations of credit union laws and regulations. Any credit union and any officer or director thereof relying on any regulation or interpretation shall be fully protected even though the same regulation or interpretation shall be thereafter ruled invalid for any reason by a court of competent jurisdiction.

(b) Any policy or written interpretation or credit union laws and regulations shall be reviewed for ratification by the Credit Union Board within 90 days after written request for an interpretation by any member of the Credit Union Board. The policy or written interpretation of credit union laws and regulations shall be invalidated unless a majority of the members of the Credit Union Board ratify the interpretation or policy.

(c) The procedure for adopting, amending, or repealing regulations and for the review or ratification of any policy or interpretation shall be the procedure specified in Section 5-17-47.

(Acts 1985, No. 85-457, p. 425, §23; Acts 1995, No. 95-315, p. 667, §1; Act 2016-133, §1.)

§ 5-17-47 Procedure for Adopting, Amending, or Repealing Regulations and Interpretations; Contesting Regulations

(a) Prior to the adoption, amendment, or repeal of any regulation or interpretation, the administrator shall:

(1) Give at least 30 days’ notice of the intended action. The notice shall include a statement of either the terms or substance of the intended action or a description of the subjects and issues involved, and the time when, the place where, and the manner in which interested persons may present their views thereon. The notice shall be made publicly available, and all credit unions chartered under the laws of this state shall be given notice of such intended action. A complete copy of the proposed regulation shall be filed with the Secretary of State; and

(2) Afford all interested persons reasonable opportunity to submit data, views, or arguments, orally or in writing. Opportunity for oral hearing must be granted if requested by 25 persons or by a governmental subdivision or agency. The administrator shall consider fully all written and oral submissions respecting the proposed regulation. Upon adoption of a regulation, the administrator, if requested to do so by an interested person either prior to adoption or within 30 days thereafter, shall issue a concise statement of the principal reasons for and against its adoption, incorporating therein the reasons for overruling the considerations urged against its adoption.

(b) Notwithstanding any other provision of this section to the contrary, if the administrator finds that an immediate danger to the public welfare requires adoption of a regulation upon fewer than 30 days’ notice and states in writing his or her reasons for that finding, he or she may proceed without prior notice or hearing or upon any abbreviated notice and hearing that he or she finds practicable to adopt an emergency regulation. The regulation shall become effective immediately, unless otherwise stated therein, upon the filing of the regulation and a copy of the written statement of the reasons therefor with the Secretary of State. The regulation may be effective for a period of not longer than 120 days and shall not be renewable. The administrator and Credit Union Board shall not adopt the same or a substantially similar emergency regulation within one calendar year from its first adoption unless the administrator clearly establishes it could not reasonably be foreseen during the initial 120-day period that such emergency would continue or would likely reoccur during the next nine months. The adoption of the same or a substantially similar regulation by normal regulation-making procedures is not precluded.

(c) No regulation hereafter adopted is valid unless adopted in substantial compliance with this section. A proceeding to contest any regulation on the ground of noncompliance with the procedural requirements of this section must be commenced within 180 calendar days from the effective date of the regulation; provided, however, that a proceeding to contest a regulation based on failure to provide notice as herein required or on an incorrect interpretation of the law may be commenced at any time.

(d) The validity or applicability of any regulation or any interpretation of the Alabama Credit Union Administration may be determined in an action for declaratory judgment brought in the Circuit Court of Montgomery County when it is alleged that the adoption, amendment, or repeal of any regulation or any interpretation or the application or threatened application of any regulation or any interpretation interferes with or impairs or threatens to interfere with or impair the legal rights and privileges of the credit union or person affected thereby.

(Acts 1985, No. 85-457, p. 425, §24; Act 2016-133, §1.)

§ 5-17-48 Annual Report; Public Distribution of Report and Other Material

The administrator shall make from the reports of the department during the year an annual report to the Governor on the activities of the Alabama Credit Union Administration and such other information as the Governor may request and shall keep on file as a public record in the administrator’s office a copy thereof. The administrator may print for public distribution such annual report and such other material as it deems suitable for the more effective administration of business.

(Acts 1985, No. 85-457, p. 425, §25.)

§ 5-17-49 Violations to Be Submitted to Grand Jury

[Repealed]

Repealed by Act 2014-317, §2, effective May 1, 2014.

(Acts 1985, No. 85-457, p. 425, §26.)

§ 5-17-50 Employment and Compensation of Necessary Personnel; Assistant Administrator

(a) Subject to the provisions of Section 36-26-1, et seq., the administrator may appoint or employ such assistants, employees, and attorneys as may be necessary to the efficient operation of the department. The administrator shall fix their compensation in accordance with Section 36-26-1, et seq. and the pay plan of the State Personnel Department. All such assistants, employees, and attorneys shall be subject to the provisions of the Merit System. The administrator, with the approval of the Governor, may employ and discharge special counsel as the administrator may deem necessary.

(b) The administrator may appoint an assistant administrator, with the approval of the Credit Union Board of the Alabama Credit Union Administration. The administrator shall fix the compensation of the assistant administrator in accordance with Section 36-26-1, et seq. The position of assistant administrator of the Alabama Credit Union Administration shall be subject to the State Merit System and shall be eligible for and subject to any differential travel policy established by the State Personnel Department.

(c) The assistant administrator, in the absence of the administrator, shall exercise any of the powers conferred by law on the administrator and, before entering upon the duties of the office, shall execute to the State of Alabama a bond in the amount of twenty-five thousand dollars ($25,000) for the faithful performance of his or her duties.

(Acts 1985, No. 85-457, p. 425, §27; Act 2006-631, p. 1724, §1.)

§ 5-17-51 Immunity from Personal Liability

Neither the administrator, any member of the Credit Union Board nor any special agent or employee of the Alabama Credit Union Administration shall be personally liable for any acts done in good faith while in the performance of his or her duties as provided by law.

(Acts 1985, No. 85-457, p. 425, §28; Act 2016-133, §1.)

§ 5-17-52 Oath and Duties of Examiner

Before entering upon the discharge of his or her duties, every examiner shall take and file with the administrator an oath faithfully to discharge his or her duties as examiner. Each examiner shall act under the direction of the administrator and shall examine fully the books, records, papers, and affairs of each credit union which the examiner may be directed by the administrator to examine.

(Acts 1985, No. 85-457, p. 425, §29; Act 2016-133, §1.)

§ 5-17-53 Furnishing of Commission to Examiner; Exhibit to Credit Union Upon Making Examination

[Repealed]

Repealed by Act 2014-317, §2, effective May 1, 2014.

(Acts 1985, No. 85-457, p. 425, §30.)

§ 5-17-54 Bond of Alabama Credit Union Administration Employees

Before entering upon the duties of their respective offices, the administrator shall cause the Division of Risk Management of the Department of Finance or its successor agency to include each employee of the Alabama Credit Union Administration under a bond to be fixed and approved by the administrator, for the faithful performance of their duties.

(Acts 1985, No. 85-457, p. 425, §31; Act 2016-133, §1.)

§ 5-17-55 Credit Union Board Created; Composition; Appeals

(a) There shall be a Credit Union Board of the Alabama Credit Union Administration which shall consist of the administrator, who shall be an ex officio member and chair of the board, and seven other persons, appointed by the Governor, by and with the consent of the Senate. Four of these persons shall be appointed from a list of nominees submitted by the Credit Union Board of the Alabama Credit Union Administration, in consultation with the League of Southeastern Credit Union or its successor organization, which shall submit not less than three nominees for any vacancy. Should the Governor determine that none of the first three nominees submitted by the Credit Union Board for a vacancy on the Credit Union Board are acceptable, the Governor may reject the three nominees, and the Credit Union Board shall submit an alternative list of three nominees to the Governor from which the Governor shall make the appointment. The remaining three appointments to the Credit Union Board shall be made by the Governor from a list of nominees submitted by credit unions at large. No person is eligible to be nominated or appointed to the Credit Union Board unless at the time of nomination or appointment, the person is an official of a state-chartered credit union and has at least five years’ experience in the 10 years preceding appointment as an official of a credit union. The position of any member of the Credit Union Board shall be declared vacant by the Administrator of the Alabama Credit Union Administration if the member of the Credit Union Board ceases to serve as an official of a credit union chartered under the laws of the State of Alabama. For the purposes of this subsection, an official of a state-chartered credit union includes the president, chief executive officer, or a person elected by the membership to serve as a board member, credit committee member, or supervisory committee member of the state-chartered credit union.

(b) The seven appointees by the Governor, with the consent of the Senate, shall serve for the terms designated by the Governor for each person upon appointment of the persons. Of the seven persons appointed by the Governor, with the consent of the Senate, three persons shall serve terms expiring on February 1 of the first year following passage hereof, two persons shall serve terms expiring on February 1 of the second year following passage hereof and two persons shall serve terms expiring on February 1 of the third year following passage hereof. Successors shall be appointed by the Governor, with the consent of the Senate, for terms of three years each, so that the terms of two or three of the seven appointed members will expire on February 1 of each year. An allowance for correction of terms may be permitted from time to time or as necessary. Upon the expiration of their terms of office, members of the board shall continue to serve until their successors are appointed and have qualified.

(c)(1) If a member of the Credit Union Board of the Alabama Credit Union Administration fails to attend regular meetings of the board for three consecutive meetings or otherwise fails to perform the duties devolving upon him or her as a member of the Credit Union Board of the Alabama Credit Union Administration, is convicted of a felony or any other crime involving moral turpitude, or ceases to be an official of a credit union, the office of the member shall be declared vacant by the administrator. The office of the board member shall be deemed to be vacated on the thirty-first day after mailing of a notice to the board member that his or her position is being vacated unless the board member files an appeal with the Credit Union Board prior to the thirty-first day after mailing of notice. Except that no appeal is authorized if the member’s position is declared vacant by reason of conviction of a felony or a crime involving moral turpitude.

(2) Any person who is notified that his or her position on the board has been declared vacant by the administrator, within 30 days after mailing of the notice that the position has been declared vacant, may appeal to the other members of the Credit Union Board by written notice of appeal received by the administrator within the time period.

(3) Upon a finding of good cause for the failure to attend meetings or otherwise perform duties, or upon a finding that there is a compelling reason for reinstating the member, a majority of board members may reinstate the person to the position. When the member appeals to the Credit Union Board, unless reinstated by the board within 30 calendar days after appeal, the position on the board shall be deemed to be vacant on the thirty-first day after receipt by the administrator of the member’s written notice of the appeal. The administrator shall call a meeting to hear the appeal within 30 calendar days after receipt of the notice of appeal. The board member who has received notice that the position will be declared vacant shall have the right to present at any hearing dealing with the position being declared vacant, but shall not have the right to vote on any issue until he or she is reinstated by the Credit Union Board.

(d) If by reason of death, resignation, removal from office, or otherwise a vacancy occurs on the Credit Union Board, the vacancy shall be filled by appointment of the Governor and the appointee shall hold office until the Senate meets and passes on the appointment. If the appointment is disapproved by the Senate, another appointment shall be made by the Governor, and appointments must be made in like manner until an appointment is confirmed by the Senate. Any person so appointed shall serve the balance of the unexpired term for which the appointment is made. The seven appointed members of the Credit Union Board shall be persons of good character. Five of the seven shall have at least five years’ experience in the 10 years preceding appointment to the Credit Union Board as an official of a credit union organized under the laws of the State of Alabama.

(e) An appeal may be taken to the Credit Union Board from any finding, ruling, order, decision, or the final action of the administrator by any credit union which feels aggrieved thereby. Notice of appeal shall be filed with the administrator within 30 calendar days after the findings, ruling, order, decision, or other action. The notice shall contain a brief statement of the pertinent facts upon which the appeal is grounded. The Credit Union Board shall fix a date, time, and place for hearing the appeal, within 60 calendar days after it is filed, and shall notify the credit union or its attorney of record thereof at least 30 calendar days prior to the date of the hearing. The finding of the Credit Union Board shall be strictly advisory in nature.

(Acts 1985, No. 85-457, p. 425, §32; Acts 1995, No. 95-315, p. 667, §1; Act 2015-168, p. 443, §1; Act 2016-133, p. 315, §1; Act 2019-130, §1.)

§ 5-17-56 Meetings; Executive Sessions; Confidential Information

(a) The administrator shall comply with the Alabama Open Meetings Law, Chapter 25A of Title 36. The Credit Union Board shall meet not less than once every calendar year. Any meeting of the Credit Union Board may be held at any place in the state where it is called to meet by the administrator.

(b) In order to comply with state and federal confidentiality requirements, at any meeting, the Credit Union Board may enter executive session to do any of the following:

(1) Protect the confidentiality of reports or information under Section 5-17-60 and any other provisions of this title.

(2) Review information concerning the condition and affairs of any proposed credit union, any credit union, any subsidiary or affiliate of a credit union, or several credit unions or their subsidiaries, or to review the personal or financial information of individuals or credit union members.

(3) Undertake any purpose for which a governmental body is permitted to go into executive session under the Alabama Open Meetings Act.

(4) Accomplish any other purpose of the Credit Union Board that requires it to receive or consider information that is confidential under this title.

(5) Comply with any other state or federal law requiring confidentiality.

(c) Confidential information under this title includes all information set forth in subsection (b), as well as other information designated as confidential in this title or under state or federal law, and any other information as determined by the administrator.

(Acts 1985, No. 85-457, p. 425, §33; p. 315, Act 2014-317, p. 1122, §1; Act 2018-470, §1.)

§ 5-17-57 Quorum

A majority of the Credit Union Board shall constitute a quorum for the transaction of any business.

(Acts 1985, No. 85-457, p. 425, §34.)

§ 5-17-58 Compensation and Expenses of Board Members

No person appointed as member of said Credit Union Board shall receive any compensation for his services; except, that each appointed member of said Credit Union Board shall receive $25.00 per day for each day said Credit Union Board is in session, but in no event to exceed $100.00 for each member of said board during any one month, plus travel expenses payable pursuant to Article 2 of Chapter 7 of Title 36. The compensation going to the seven appointed members of the Credit Union Board shall be paid as earned by the Treasurer on warrants drawn by the Comptroller, in favor of each of them, which warrants are to be drawn on the certificate of the administrator of credit unions, which certificate shall certify that a meeting of said board was held, stating the time of meeting and stating the amount to which each member of the board is entitled.

(Acts 1985, No. 85-457, p. 425, §35.)

§ 5-17-59 Applicability of Alabama Business Corporation Act

Any Alabama state chartered credit union shall be subject to the provisions of the Alabama Business Corporation Act, specifically to Sections 10-2A-260, 10-2A-261, 10-2A-283, 10-2A-284, 10-2A-25, 10-2A-26, 10-2A-27, 10-2A-28 and 10-2A-29.

(Acts 1985, No. 85-457, p. 425, §36.)

§ 5-17-60 Confidentiality of Conditions and Affairs of Credit Unions; Disclosures

(a) Except as otherwise provided in this title or under state or federal law, the administrator, a member of the Credit Union Board, or an examiner or other state employee may not disclose the condition and affairs of any credit union, its supervisory committee, or subsidiaries or other affiliates, ascertained by an examination of such credit union or affiliates, or report or give out nonpublic personal information of credit union members, except as authorized or required by law; provided that this section shall not be construed to prevent examiners and other employees from reporting such information to the administrator or such persons as the administrator may lawfully designate.

(b) Notwithstanding subsection (a), the administrator, at the administrator’s discretion, may disclose any information otherwise protected under this section to the members of the Credit Union Board and confer with the members of the Credit Union Board regarding the same and may also disclose publicly such information as is and to the extent necessary to the exercise of enforcement authority or the taking of other supervisory actions pursuant to this title.

(c) The administrator may furnish to the National Credit Union Administration, or to any other supervisory agency of the United States, or to a private share insurance carrier presently providing deposit share insurance to the subject credit union, or to other federal or state agencies with which the administrator has entered into an agreement pursuant to subsection (d) of Section 5-17-45, reports of examination and other data as the administrator deems advisable.

(d) No disclosure may be made by any agency or entity furnished with reports of examination or other data pursuant to subsection (c) to any third parties without the prior consent of the administrator. Any disclosure permitted by the administrator shall be subject to such conditions and restrictions as the administrator may require or as otherwise required by this title.

(e) The administrator may also furnish copies of his or her reports of examination and any other information to the board of directors of the credit union, its supervisory committee, subsidiary, or affiliate.

(f) Any reports or information furnished or disclosed under this section shall remain the property of the Alabama Credit Union Administration and, except as provided in this section, may not be disclosed to any person other than the officers, directors, attorneys, and auditors of the credit union, its supervisory committee, subsidiary, affiliate, consultants, or advisors to the credit union or affiliate, and, subject to appropriate confidentiality agreements, persons considering the possible acquisition of, merger with, or investment in the credit union or affiliate. A person receiving such reports or information may not:

(1) Use the report or information other than in connection with the credit union or affiliate, and its business and affairs.

(2) Retain that report or information or copies thereof.

(3) Except as expressly permitted by law, disclose such report or information to any person not authorized to receive the same under this subsection.

(g) All reports of examination, records reflecting action of a credit union, its supervisory committee, subsidiary, or affiliate, taken pursuant thereto, and records and minutes of meetings of the Credit Union Board relating to a credit union or several credit unions, supervisory committee, subsidiary, or affiliate, shall be confidential and shall not be subject to subpoena or inspection except by subpoena from a grand jury served on the administrator.

(Act 2016-133, §2; Act 2018-470, §1.)

Chapter 18 Small Loans

§ 5-18-1 Short Title

This chapter shall be known and may be cited as the Alabama Small Loan Act.

(Acts 1959, No. 374, p. 966, §25.)

§ 5-18-2 Legislative Findings of Fact and Declaration of Intent

(a) The Legislature finds as facts and determines that:

(1) There exists among citizens of this state a widespread demand for small loans. The scope and intensity of this demand have been increased progressively by many social and economic forces;

(2) The expense of making and collecting small loans, which are usually made on comparatively unsubstantial security to wage earners, salaried employees and other persons of relatively low incomes, is necessarily high in relation to the amounts lent;

(3) Such loans cannot be made profitably under the limitations imposed by existing laws relating to interest and usury. These limitations have tended to exclude lawful enterprises from the small loan field. Since the demand for small loans cannot be legislated out of existence, many small borrowers have been left to the mercy of those willing to bear the opprobrium and risk the penalties of usury for a large profit;

(4) Interest charges are often disguised by the use of subterfuges to evade the usury law. These subterfuges are so complicated and technical that the usual borrower of small sums is defenseless even if he is aware of the usurious nature of the transaction and of his legal rights;

(5) As a result, borrowers of small sums are being exploited to the injury of the borrower, his dependents and the general public. Charges are generally exorbitant in relation to those necessary to the conduct of a legitimate small loan business, trickery and fraud are common and oppressive collection practices are prevalent; and

(6) These evils characterize and distinguish loans of $749.00 or less. Legislation to control this class of loans is necessary to protect the public welfare.

(b) It is the intent of the Legislature in enacting this law to bring under public supervision those engaged in the business of making such loans, to eliminate practices that facilitate abuse of borrowers, to establish a system of regulation for the purpose of insuring honest and efficient small loan service and of stimulating competitive reductions in charges, to allow lenders who meet the conditions of this chapter a rate of charge sufficiently high to permit a business profit and to provide the administrative machinery necessary for effective enforcement.

(Acts 1959, No. 374, p. 966, §1; Acts 1979, No. 79-327, p. 490, §1.)

§ 5-18-3 Definitions

The following terms, when used in this chapter, shall have the following meanings, unless the context clearly requires a different meaning. The meaning ascribed to the singular form shall apply also to the plural.

(1) PERSON. Such term shall include individuals, copartnerships, associations, trusts, corporations and any other legal entities.

(2) LICENSE. A license, issued under the authority of this chapter, to make loans in accordance with the provisions of this chapter at a single place of business.

(3) LICENSEE. A person to whom one or more licenses have been issued.

(4) SUPERVISOR. The Supervisor of the Bureau of Loans of the State Banking Department.

(5) BUREAU. The Bureau of Loans of the State Banking Department.

(6) CASH ADVANCE. The amount of cash or its equivalent that the borrower actually receives or is paid at his direction or on his behalf.

(Acts 1959, No. 374, p. 966, §2.)

§ 5-18-4 License - Required; Exemptions; Penalties for Violation of Section

(a) License required. No person shall engage in the business of lending in amounts of less than one thousand five hundred dollars ($1,500) and contract for, exact or receive, directly or indirectly, on or in connection with any such loan, any charges whether for interest, insurance, compensation, consideration, or expense, which in the aggregate are greater than the interest that the lender would be permitted by law to charge for a loan of money if he or she were not a licensee under this chapter, except as provided in and authorized by this chapter and without first having obtained a license from the supervisor. For the purpose of this section, a loan shall be deemed to be in the amount of less than one thousand five hundred dollars ($1,500) if the net amount or value advanced to or on behalf of the borrower, after deducting all payments for interest, expenses, and charges of any nature taken substantially contemporaneously with the making of the loan, is less than one thousand five hundred dollars ($1,500).

(b) Exemptions. This chapter shall not apply to any person doing business under the authority of, and as permitted by, any law of this state or of the United States relating to banks, trust companies, savings or building and loan associations, credit unions as defined by law, nor to any lawful, bona fide pawnbroking business, nor shall this chapter apply to any person making loans to their tenants engaged in agriculture, nor to loans by agricultural suppliers to persons whose principal business is farming, nor shall it apply to agricultural credit corporations or associations organized under an act of the Congress of the United States, nor shall it apply to the business of financing the purchase of motor vehicles, refrigerators, or other personal property, nor shall it apply to loans insured or guaranteed by the United States or any of its agencies.

(c) Evasions. The provisions of subsection (a) of this section shall apply to any person who seeks to evade its application by any device, subterfuge, or pretense whatsoever including, but not thereby limiting the generality of the foregoing: The loan, forbearance, use or sale of credit (as guarantor, surety, endorser, comaker, or otherwise), money, insurance, goods or things in action; the use of collateral or related sales or purchases of goods or services or agreements to sell or purchase, whether real or pretended; and, receiving or charging compensation for goods or services, whether or not sold, delivered, or provided and the real or pretended negotiation, arrangement, or procurement of a loan through any use of activity of a third person, whether real or fictitious.

(d) Penalties. Whoever violates or participates in the violation of any provision of this section shall be guilty of a misdemeanor and, upon conviction thereof, shall be punishable by a fine of not more than five hundred dollars ($500) nor less than one hundred dollars ($100), or by imprisonment for not more than six months, or by both such fine and imprisonment in the discretion of the court. Any contract of loan in the making or collection of which any act shall have been done which violates this section shall be void, and the lender shall have no right to collect, receive, or retain any principal, interest, or charges whatsoever.

(Acts 1959, No. 374, p. 966, §3; Acts 1979, No. 79-327, p. 490, §1; Act 2002-305, p. 863, §1; Act 2017-373, §1.)

§ 5-18-5 License - Application; Fees; Disposition of Fees

Application for a license shall be in writing, under oath and in the form prescribed by the supervisor. The application shall give the approximate location where the business is to be conducted and shall contain such further relevant information as the supervisor may require, including the names and addresses of the partners, officers, directors, or trustees and of such of the principal owners or members as will provide the basis for the investigations and findings contemplated by Section 5-18-6. At the time of making such application, the applicant shall pay to the supervisor the sum of one hundred dollars ($100) as a fee for investigating the application. All licensees under this chapter shall pay an annual license fee of five hundred dollars ($500) for each office, branch, or place of business of the licensee, which shall be due on January 1 of each year and shall be for a one-year period ending December 31 following and shall be delinquent on February 1 of each year, and there shall be a penalty of 10 percent for each month or portion thereof added to such license fee upon delinquency and collected by the bureau. Two hundred dollars ($200) of each such license fee collected shall be paid into the special fund provided by Section 5-2A-20 and used in the supervision and examination of such licensees; provided further, that in fiscal year 1986, two hundred fifty dollars ($250) of each such license fee collected shall be paid into the special fund provided in Section 5-2A-20 and used in the supervision and examination of such licensees; provided further, that in fiscal year 1987, three hundred dollars ($300) of each such license fee collected shall be paid into the special fund provided by Section 5-2A-20 and used in the supervision and examination of such licensees; provided further, that in fiscal year 1988, three hundred fifty dollars ($350) of each such license fee collected shall be paid into the special fund provided in Section 5-2A-20 and used in the supervision and examination of such licensees; and provided further, that in fiscal year 1989 and thereafter, all such license fees collected shall be paid into the special fund provided by Section 5-2A-20 and used in the supervision and examination of such licensees. If any applicant licensed under this chapter for the first time shall commence business after April 1 in any year, the amount of the license fee shall be one half the amount of a full year’s license fee. The amount of the license fee and penalties, if any, shall be paid to the Supervisor of the Bureau of Loans, who shall remit the same to the Treasurer of the State of Alabama as provided by law. The license provided for in this chapter shall be in addition to all other licenses now or hereafter provided for by law and shall be in addition to the tax provided for by Chapter 16 of Title 40; and the amount of the license fee levied by this section shall not be credited upon or deducted from, in whole or in part, the tax levied by said Chapter 16 as to the current state tax year or as to any prior or subsequent state tax year. No refunds for the current or any prior or subsequent state tax year or any portion of the tax levied by said Chapter 16 shall be made on the ground that the license fee levied by this section was not credited upon or deducted from the tax levied by said Chapter 16, and no civil action shall lie to enforce any claim for such refund.

(Acts 1959, No. 374, p. 966, §4; Acts 1983, No. 83-747, p. 1244, §1; Act 2002-305, p. 863, §1; Act 2009-625, p. 1900, §1.)

§ 5-18-6 License - Investigation of Application; Issuance or Denial of License

(a) Investigation of application. - Upon the filing of such application and the payment of such fees, the supervisor shall investigate the facts concerning the application and the requirements provided for in subsection (b) of this section. The supervisor shall grant or deny such application for a license within 90 days from the filing thereof with the required information and fees unless the period is extended by written agreement between the applicant and the supervisor.

(b) Issuance of license. - If the supervisor shall find that the liquid assets, financial responsibility, experience, character and the general fitness of the applicant are such as to warrant the belief that the business will be operated lawfully, honestly, fairly and efficiently, within the purposes of this chapter, and that allowing such applicant to engage in the business would promote the convenience and advantage of the community in which the business of the applicant is to be conducted, he shall thereupon enter an order granting such application and file his findings with the bureau and forthwith issue and deliver a license to the applicant.

(c) Denial of license. - If the supervisor shall not so find, he shall notify the applicant in writing who may request a hearing on the application. The request for a hearing must be within 30 days of the rejection, with the hearing to be held within 30 days of the date of the request. After such hearing or if no hearing is demanded, the supervisor may deny such application by written order accompanied by his findings of fact and shall deliver a copy of such order and findings to the applicant. The investigation fee shall be retained by the supervisor while the license fee shall be returned to the applicant.

(Acts 1959, No. 374, p. 966, §5.)

§ 5-18-7 License - Contents; Posting; Continuing Effect

(a) Contents of license; posting. - Each license shall state the address at which the business is to be conducted and shall state fully the name of the licensee and, if the licensee is a copartnership or association, the names of the members thereof and, if a corporation, the date and place of its incorporation. Each license shall be kept conspicuously posted in the licensed place of business and shall not be transferable or assignable.

(b) Continuing effect of license. - Each license shall remain in full force and effect until surrendered, revoked or suspended as provided in this chapter.

(Acts 1959, No. 374, p. 966, §6.)

§ 5-18-8 License - Place of Business of Licensee

(a) Separate license for each place of business. - Not more than one place of business shall be maintained under the same license, but the supervisor may issue additional licenses to the same licensee upon his compliance with all the provisions of this chapter governing the issuance of the first or original license.

(b) Removal. - No change in the place of business of a licensee to a location outside of the original municipality shall be permitted under the same license. When a licensee wishes to change his place of business within the same municipality, he shall give written notice thereof to the supervisor who shall investigate the facts and, if he shall find the proposed location is reasonably accessible to borrowers under existing loan contracts, shall enter an order permitting the change and shall amend the license accordingly. If the supervisor shall not so find, he shall enter an order denying the licensee such permission in the manner specified in and subject to the provisions of subsection (c) of Section 5-18-6.

(c) Residence of borrower. - Nothing in this chapter shall be construed to restrict the loans of any licensee to residents of the community in which the licensed place of business is situated.

(Acts 1959, No. 374, p. 966, §7.)

§ 5-18-9 License - Revocation, Suspension, Etc.; Investigation of Complaints

(a) Revocation of license. - The supervisor shall, upon 10 days’ written notice to the licensee stating the contemplated action and in general the grounds therefor and upon reasonable opportunity to be heard, revoke any license issued under this chapter if he finds that:

(1) The licensee has failed to pay the annual license fee;

(2) The licensee, either knowingly or without the exercise of due care to prevent the same, has violated any provisions of this chapter or any regulation or order lawfully made pursuant to and within the authority of this chapter;

(3) Any fact or condition exists which, if it had existed or had been known to exist at the time of the original application for such license, clearly would have justified the supervisor in refusing originally to issue such license; except, that the license shall not be revoked because of convenience and advantage; or

(4) The licensee is guilty of using unreasonable collection tactics.

(b) Suspension of license. - If the supervisor finds that probable cause for revocation of any license exists and that enforcement of the chapter requires immediate suspension of such license pending investigation, he may, upon three days’ written notice and a hearing, enter an order suspending such license for a period not exceeding 30 days.

(c) Records and notice. - Whenever the supervisor shall revoke or suspend a license issued pursuant to this chapter, he shall enter an order to that effect and forthwith notify the licensee of the revocation or suspension. Within five days after the entry of such an order he shall file with the bureau his findings and a summary of the evidence supporting them, and he shall forthwith deliver a copy thereof to the licensee.

(d) Surrender of license. - Any licensee may surrender any license by delivering it to the supervisor with written notice of its surrender, but such surrender shall not affect his civil or criminal liability for acts committed prior thereto.

(e) Preexisting contracts. - No revocation, suspension or surrender of any license shall impair or affect the obligation of any preexisting contract between the licensee and any borrower.

(f) Reinstatement of license. - The supervisor may reinstate suspended licenses or issue new licenses to a person whose license or licenses have been revoked if no fact or condition then exists which clearly would have justified the supervisor in refusing originally to issue such license under this chapter.

(g) Complaints of violation investigated. - The supervisor shall, upon sworn complaint of any borrower, investigate or cause to be investigated any alleged violation of this chapter.

(Acts 1959, No. 374, p. 966, §8.)

§ 5-18-10 Examinations of Licensees; Investigations; Enforcement Powers of Supervisor

(a) Annual examinations of licensees. At least once each year and at such other time as may be deemed necessary by the Supervisor of the Bureau of Loans, an examination shall be made of the place of business of each licensee and of the loans, transactions, books, papers, and records of the licensee so far as they pertain to the business licensed under this chapter. As cost of examination, the licensee shall pay to the Bureau of Loans the actual cost of each examination, the amount of which shall be reasonably prescribed under rules and regulations promulgated by the Superintendent of Banks; provided, however, the cost for each day of examination by each examiner shall not exceed eight times the average hourly rate for auditing purposes as charged by three recognized certified public accountancy firms in the City of Montgomery, Alabama. In addition thereto, the licensee shall pay as per diem the amount authorized by law for state employees traveling inside the state in the service of the state. All such fees shall be paid into the special fund set up by the State Treasury pursuant to Section 5-2A-20, and used in the supervision and examination of licensees.

(b) Investigations. For the purpose of discovering violations of this chapter or of securing information lawfully required hereunder, the supervisor or his or her duly authorized representatives may at any time investigate the business and examine the books, accounts, papers, and records used therein of (1) any licensee, (2) any other person engaged in the business described in subsection (a) of Section 5-18-4 or participating in such business as principal, agent, broker, or otherwise and (3) any person who the supervisor has reasonable cause to believe is violating or is about to violate any provisions of this chapter, whether or not the person shall claim to be within the authority or beyond the scope of this chapter. For purposes of this section, any person who shall advertise for, solicit, or hold himself or herself out as willing to make loan transactions in the amount or of the value of less than one thousand five hundred dollars ($1,500) shall be presumed to be engaged in the business described in subsection (a) of Section 5-18-4.

(c) Access to records; witnesses. For the purposes of this section, the supervisor or his or her duly authorized representatives shall have and be given free access to the offices and places of business, files, safes, and vaults of all such persons and may require the attendance of any person and to examine him or her under oath relative to the loans or the business or to the subject matter of any examination, investigation, or hearing.

(d) Cease and desist orders; injunctions; receivers. Whenever the supervisor has reasonable cause to believe that any person is violating or is threatening to or intends to violate any provision of this chapter, he or she may in addition to all actions provided for in this chapter and in addition to all other remedies that he or she may have at law and without prejudice thereto enter an order requiring such person to desist or to refrain from such violation, and an action may be brought on the relation of the Attorney General or the supervisor to enjoin the person from engaging in or continuing the violation or from doing any act or acts in furtherance thereof. In any action, an order or judgment may be entered awarding the preliminary or final injunction as may be deemed proper. In addition to all other means provided by law for the enforcement of a restraining order or injunction, the court in which the action is brought shall have the power and jurisdiction to impound and to appoint a receiver for the property and business of the defendant, including books, papers, documents, and records pertaining thereto or so much thereof as the court may deem reasonably necessary to prevent violations of this chapter through or by means of the use of the property and business. The receiver, when appointed and qualified, shall have such powers and duties as to custody, collection, administration, winding up, and liquidation of the property and business as shall from time to time be conferred upon him by the court.

(e) Confidentiality of examinations and investigations. Reports of examinations and investigations of the supervisor, and the books and records of licensees are to be held strictly confidential, and may not be produced, reproduced, or otherwise made available by the State Banking Department to any persons other than those within the State Banking Department unless pursuant to a lawfully issued subpoena. This subsection does not apply to disclosures in proceedings brought by the supervisor pursuant to this chapter.

(Acts 1959, No. 374, p. 966, §9; Acts 1979, No. 79- 327, p. 490, §1; Acts 1996, No. 96-757, p. 1331, §1; Act 2002-305, p. 863, §1; Act 2017-373, §1.)

§ 5-18-11 Books, Accounts and Records of Licensees; Annual Report

(a) Books and records. -Each licensee shall keep and use in his business such books, accounts and records as will enable the supervisor to determine whether such licensee is complying with the provisions of this chapter and with the orders and regulations lawfully made by the supervisor hereunder. Each licensee shall preserve such books, accounts and records for at least two years after making the final entry on any loan recorded therein.

(b) Annual report.

(1) Each licensee shall annually, on or before May 1, file a report with the supervisor as to each licensed place of business under this chapter, covering the preceding calendar year.

(2) Such report shall be made under oath and shall be in the form prescribed by the supervisor who shall make and publish annually an analysis and recapitulation of such reports.

(Acts 1959, No. 374, p. 966, §10; Acts 1984, No. 84-287, p. 498.)

§ 5-18-12 Promulgation of Rules, Regulations and Orders by Supervisor; Furnishing of Certified Copies of Licenses, Regulations or Orders

(a) Rules, regulations, and orders. - The supervisor shall have authority to make reasonable rules, regulations, and orders for the administration and enforcement of this chapter, in addition hereto and not inconsistent herewith. The regulation or order shall be referenced to the section or sections of the chapter which set forth the legislative standard which it interprets or to which it applies. Every regulation shall be promulgated by an order, and any ruling, demand, requirement or similar administrative act may be promulgated by an order. Every order shall be in writing, shall state its effective date and the date of its promulgation and shall be entered in an indexed permanent book which shall be a public record. A copy of every order promulgating a regulation and of every other order containing a requirement of general application shall be mailed to each licensee at least 10 days before the effective date thereof. The failure of a licensee to receive a copy of the regulations shall not exempt him from the duty of compliance with the valid regulations lawfully issued.

(b) Certified copies of official documents. - On application of any person and payment of the costs thereof, the supervisor shall furnish, under his or her seal and signed by him or her or his or her deputy a certified copy of any license, regulation or order. In any court or proceeding, the copy shall be prima facie evidence of the fact of the issuance of the license, regulation or order.

(c) Standards for judicial review of rules and regulations. - As set forth in Section 5-19-21, the supervisor may promulgate reasonable rules and regulations, consistent with the laws of this state, as may be necessary to carry out the provisions of this chapter, and issue written interpretations of consumer finance laws and regulations. The courts of this state shall apply each regulation that becomes effective and each written interpretation that is issued under this subsection, unless the regulation or interpretation is found to be arbitrary and capricious, outside the supervisor’s statutory authority, or violative of the Constitution of Alabama of 1901. Any licensee whose practices are consistent with any regulation or written interpretation shall not be liable for any violation of this chapter, even though the rule, or interpretation thereof, is ruled invalid for any reason by a court of competent jurisdiction.

(Acts 1959, No. 374, p. 966, §11; Acts 1996, No. 96-757, p. 1331, §1.)

§ 5-18-13 Advertising; Schedule of Charges

(a) Advertising, etc. No licensee or other person subject to this chapter shall advertise, display, distribute, or broadcast or cause to permit to be advertised, displayed, distributed, or broadcast in any manner whatsoever any false, misleading, or deceptive statement or representation with regard to the rates, terms, or conditions for loans in the amount or of the value of less than one thousand five hundred dollars ($1,500). The supervisor may require that charges or rates of charge, if stated by a licensee, be stated fully and clearly in such manner as he or she may deem necessary to prevent misunderstanding thereof by prospective borrowers. The supervisor may permit or require licensees to refer in their advertising to the fact that their business is under state supervision, subject to conditions imposed by him or her to prevent an erroneous impression as to the scope or degree of protections provided by this chapter.

(b) Schedule of charges. Each licensee shall conspicuously display in each licensed place of business a full and accurate schedule of the rates of charge upon all classes of loans currently to be made by him or her.

(Acts 1959, No. 374, p. 966, §12; Acts 1979, No. 79-327, p. 490, §1; Act 2002-305, p. 863, §1; Act 2004-290, p. 407, §1; Act 2017-373, §1.)

§ 5-18-14 Conduct of Other Business in Office of Licensee; Loan Business Confined to Licensed Offices; Acceptance of Liens on Real Estate as Security for Loans

(a) Other business in same office. - No licensee shall conduct the business of making loans under this chapter within any office, suite, room or place of business in which any other business is solicited or engaged in or in association or conjunction with any other business until three days’ written notice of an intention so to do has been given the supervisor. Upon receipt of written notification, the supervisor may investigate the facts and, if he finds that the character of the licensee and the nature of the other business warrant belief that such conduct of business would conceal violation or evasion of this chapter or of regulations lawfully made hereunder, he shall enter an order directing the licensee to discontinue said other business. The order shall be entered in the manner specified in and subject to the provisions of subsection (c) of Section 5-18-6.

(b) Business confined to licensed office. - No licensee shall conduct the business of making loans provided for by this chapter under any name or at any place of business within this state other than that stated in the license. Nothing in this section shall prevent the making of loans by mail nor prohibit accommodations to individual borrowers when necessitated by sickness or other emergency situations.

(c) Liens on real estate. - No licensee shall take a lien upon real estate as security for any loan made under this chapter, except such lien as is created by law through the entry or recording of a judgment.

(Acts 1959, No. 374, p. 966, §13.)

§ 5-18-15 Interest Rates, Charges, and Fees

THIS SECTION WAS AMENDED BY ACT 2022-207 IN THE 2022 REGULAR SESSION, EFFECTIVE APRIL 4, 2022. TO SEE THE AMENDED VERSION, SEE THE VERSION LABELED PENDING.

(a) Maximum rates of interest and charge. Every licensee under this chapter may contract for and receive as interest on any loan of money less than one thousand five hundred dollars ($1,500) an amount at a rate not exceeding three percent a month on that part of the unpaid principal balance not in excess of two hundred dollars ($200), and two percent a month on that part of the unpaid principal balance in excess of two hundred dollars ($200) but less than one thousand five hundred dollars ($1,500).

(b) Account maintenance fee. In addition to the maximum rate of interest and charges pursuant to subsection (a), a licensee may enter into a contract of loan under this chapter in which the borrower agrees to pay an account maintenance fee of not more than three dollars ($3) for each month of the scheduled period of repayment of the loan provided that the scheduled monthly payments are equal to or greater than thirty dollars ($30). Such account maintenance fee shall be determined at the date of the loan, but may not be prepaid. Such fee as so determined shall not bear interest and shall constitute a part of the finance charge.

(c) Method of computing charges.

(1) Interest or charges under this chapter shall not be paid, deducted, discounted, or received in advance or compounded, but the rate of charge authorized by subsections (a) and (b) may be precomputed as provided in subdivision (2) of this subsection.

For the purpose of this section, one month shall be that period of time from any date in a month to a corresponding date in the next month and, if there is not a corresponding date, then to the next day of the next month, and a day shall be considered one thirtieth of a month when computation is made for a fraction of a month.

(2) When the loan contract requires repayment in substantially equal and consecutive monthly installments of principal and charges or interest combined, the charges or interest may be precomputed at the agreed monthly or periodic rate not in excess of that provided for in subsections (a) and (b) on scheduled unpaid principal balances according to the terms of the contract and added to the principal of the loan. Every payment may be applied to the combined total of principal and precomputed charge until the contract is fully paid. The acceptance or payment of charges on loans made under the provisions of this subsection shall not be deemed to constitute payment, deduction, or receipt thereof in advance nor compounding under subdivision (1) above.

(d) Refunds.

(1) When any loan contract is paid in full by cash, a new loan, renewal, or otherwise one month or more before the final installment date, the licensee shall refund or credit the borrower with that portion of the total charges which shall be due the borrower as determined by schedules prepared under the rule of seventy-eighths or sum of the digits principle as follows: The amount of the refund or credit shall be as great a proportion of the total charges originally contracted for as the sum of the periodic time balances of the contract scheduled to follow the date of prepayment bears to the sum of all the periodic time balances of the contract, both sums to be determined according to the payment schedule originally contracted for.

(2) If the loan contract, with charges precomputed under subsections (a) and (b), is not prepaid in full but becomes partially prepaid in an amount equal to three or more installments, the licensee shall reduce the balance due by the amount that would be required to be refunded for prepayment in full on the date of the partial prepayment and compute charges as payments are made thereafter in the manner prescribed in subdivision (1) of subsection (c), or the licensee may with the consent of the borrower reschedule the remaining installments and precompute charges as prescribed in subdivision (2) of subsection (c).

(e) Default or extension charges. If the contract so provides, when a scheduled payment is in default or delinquent for 10 or more days, the licensee may charge and collect an additional late charge not to exceed the greater of ten dollars ($10) or five percent of the amount of the scheduled payment in default. Each of the late charges permitted under this subsection may be collected only once on any scheduled payment, regardless of the period during which the payment remains in default or is delinquent. It is the intent of this subsection that if the payment date of all wholly unpaid installments is deferred or extended one or more full months and the contract so provides, the licensee may charge and collect a deferment or default charge only on the installment which is delinquent at the date the contract is extended or deferred.

(f) Rules and regulations. In addition to the general authority granted to him or her by subsection (a) of Section 5-18-12, the supervisor may make such rules and regulations as he or she may deem necessary or advisable to insure that rebates, default charges, and deferment charges are so computed, paid to or collected from borrowers that the total charges collected by licensees under this section are substantially equivalent to charges authorized to be collected by licensees under this section.

(g) Recording fees. The licensee may collect from the borrower the actual fees paid a public official or agency of the state for filing, recording, or releasing any instrument securing the loan.

(h) Further charges; splitting of contracts. No further or other charges shall be directly or indirectly contracted for or received by any licensee, including insurance premiums of any kind, except those specifically authorized by this chapter or by Chapter 8 of Title 8. No licensee shall divide into separate parts any contract made for the purpose of or with the effect of obtaining charges in excess of those authorized by this section. All balances due to a licensee from any person as a borrower, or as an endorser, guarantor, or surety for any borrower or otherwise, shall be considered a part of any loan being made by a licensee to the person for the purpose of computing charges.

(i) Installment payments; contract period. No licensee shall enter into any contract of loan under this chapter in which the borrower agrees to make any scheduled repayment of the cash advance more than 25 calendar months from the date of making the contract of loan. Every loan contract shall require payment of the cash advance and charges in installments which shall be payable at approximately equal periodic intervals; except, that payment dates may be omitted to accommodate borrowers with seasonal incomes. No installment contracted for shall be substantially larger than any preceding installment.

(j) Interest after due date of final installment. Interest as provided in this section shall not accrue or be recovered or charged on any loan made under this chapter for any longer than six months after the due date of the final installment of principal or interest. After the expiration of the six-month period, interest may be charged at a rate not to exceed eight percent per annum.

(k) Inducing borrower to become obligated under more than one contract. No licensee shall induce or permit any person or any husband and wife, jointly or severally, to become obligated directly or contingently or both under more than one contract of loan at the same time for the purpose of obtaining a higher rate of charge than would otherwise be permitted by this section. It shall be unlawful for any licensee to evade or attempt to evade this section by inducing a customer to borrow from another loan company in which he or she has a pecuniary interest or with whom he or she has an arrangement for exchange of customers.

(l) Liabilities of licensees making excess charges. Any licensee making any charge in excess of the amount authorized herein, except as the result of a deliberate violation of or reckless disregard for this chapter, shall refund to the borrower the total amount of the actual economic damages which at the licensee’s option may be done by payment to the borrower, or by reducing the amount of the borrower’s principal obligation. If the borrower is entitled to a refund and the licensee refuses to refund within 60 days after written demand, including the filing of a legal action, the licensee shall forfeit, in addition to the actual economic damages his or her right to any finance charge. If the licensee has made an excess charge in deliberate violation of or in reckless disregard for this chapter, the licensee and the several members, officers, directors, agents, and employees thereof who shall have participated in a deliberate violation of or reckless disregard for this chapter, shall be guilty of a misdemeanor which, upon conviction, shall be punishable by a fine of not more than five hundred dollars ($500) and not less than one hundred dollars ($100) or by imprisonment of not more than six months, or by both fine and imprisonment in the direction of the court. The remedies provided herein shall be the remedy of the borrower under this chapter as the result of this violation. No action under this section may be brought more than 18 months after the due date of the last scheduled payment of the agreement pursuant to which the charge was made.

(m) Alternative rates of charge.

(1) As an alternative to the interest rates and charges permitted to be charged by a licensee pursuant to subsections (a) and (b) on loans of less than one thousand five hundred dollars ($1,500), a licensee may charge an acquisition charge for making the loan in an amount not in excess of 10 percent of the amount of the principal and an installment account handling charge in an amount no greater than the following:

a. Twelve dollars ($12) per month on any loan of an amount of one hundred dollars ($100) or more, up to and including the amount of three hundred dollars ($300).

b. Fourteen dollars ($14) per month on any loan of an amount in excess of three hundred dollars ($300), but not more than four hundred dollars ($400).

c. Sixteen dollars ($16) per month on any loan of an amount in excess of four hundred dollars ($400), but not more than five hundred dollars ($500).

d. Twenty dollars ($20) per month on any loan of an amount in excess of five hundred dollars ($500), but not more than one thousand dollars ($1,000).

e. Twenty-three dollars ($23) per month on any loan of an amount in excess of one thousand dollars ($1,000), but not more than one thousand two hundred fifty dollars ($1,250).

f. Twenty-six dollars ($26) per month on any loan of an amount in excess of one thousand two hundred fifty dollars ($1,250), but not equal to or exceeding one thousand five hundred dollars ($1,500.)

Provided, however, that the scheduled payments are in amounts equal to or greater than forty dollars ($40) per month, inclusive of the installment account handling charge. The acquisition charge and the installment account handling charge may be calculated for the term of the contract and added to the amount of the principal. The acceptance or payment of charges on loans made under this subsection shall not be deemed to constitute payment, deduction, or receipt thereof in advance nor compounding under this subsection.

(2) The minimum term for repayment of a loan under this subsection is three months and the maximum term of any loan made under this subsection is 18 months.

(3) Upon the prepayment in full of any loan under this subsection, the installment account handling charge is subject to subsection (d), as it relates to refunds. The acquisition charge shall not be subject to refund.

(4) No insurance charge under Section 5-18-17, no interest surcharge under Section 8-8-14, nor any other charge of any nature whatsoever, is permitted for loans made pursuant to the rate structure of this subsection, except for acquisition charges and installment account handling charges as provided under this subsection, default charges under subsection (e), recording fees under subsection (g), bad check charges under Section 8-8-15, and assessed court costs.

(5) The loan charges allowed under this subsection may not be imposed on a loan to a borrower who has more than one loan outstanding with the licensee and upon which loan charges were imposed under this subsection.

(6) No licensee shall file a claim against a decedent borrower’s estate for any unpaid indebtedness for a loan whose charges include an acquisition charge or an installment account handling charge under this subsection.

(n)(1) Act 2017-373 shall apply to loan contracts entered into after May 25, 2017.

(2) Act 2017-373 shall not affect loan contracts entered into prior to May 25, 2017.

(Acts 1959, No. 374, p. 966, §14; Acts 1979, No. 79-327, p. 490, §1; Acts 1996, No. 96-757, p. 1331, §1; Act 2002-305, p. 863, §1; Act 2004-290, p. 407, §1; Act 2017-373, §§1, 2.)

§ 5-18-15.1 Additional Late Payment Charge

Notwithstanding the provisions of subsection (e) of Section 5-18-15, for contracts entered into after June 7, 2007, the additional late charge a licensee licensed under this chapter, the Alabama Small Loan Act, may charge when a scheduled payment is in default or delinquent for 10 or more days, is hereby increased from a charge not to exceed the greater of ten dollars ($10) or five percent of the scheduled payment in default to a charge not to exceed the greater of eighteen dollars ($18) or five percent of the scheduled payment in default.

(Act 2007-281, p. 383, §1.)

§ 5-18-16 Duties of Licensees as to Making and Payment of Loans

(a) Copy of contract or statement; receipts; payment in advance; release of obligation and security. - Every licensee shall:

(1) At the time a loan is made deliver to the borrower or, if there are two or more borrowers, to one of them a copy of the loan contract, executed by the borrower, in the English language showing in clear and distinct terms:

a. The name and address of the lender and one of the primary obligors on the loan.

b. The date of the loan contract.

c. Schedule of installments or description thereof.

d. The cash advance.

e. The face amount of the note evidencing the loan.

f. The amount collected or paid for insurance, if any.

g. The amount collected or paid for filing or other fees allowed by this chapter.

h. The collateral or security for the loan.

(2) Give to the person making any cash payment on account of any loan a receipt at the time the payment is made which receipt need only show the total amount of the cash payment. No receipt shall be required in the case of payments made by the borrower’s check or money order, and the use of a coupon book system shall be deemed in compliance with this section.

(3) Permit the payment to be made in advance in any amount on any contract of loan at any time during a licensee’s regular business hours.

(4) Upon repayment of the loan in full, mark plainly every obligation and security signed by any obligor with the word “Paid” or “Cancelled,” and release any mortgage, restore any pledge, and cancel and return any note and any assignment given to the licensee.

(b) Confessions of judgment; incomplete instruments. -No licensee shall:

(1) Take any confession of judgment or any power of attorney running to himself or herself or to any third person to confess judgment or to appear for the borrower in a judicial proceeding; nor

(2) Take any note or promise to pay that does not disclose the total amount to be repaid, a schedule of payments or a description thereof and the agreed rate or aggregate amount of charge, nor any instrument in which blanks are left to be filled in after execution.

(c) Installments. - Every loan contract shall provide for repayment of principal and charges at approximately equal periodic intervals of time, which shall be so arranged that no installment is substantially greater in amount than any preceding installment.

(d) Confidential relationship or fiduciary duty not created by loan transaction. - Absent other factors, a loan transaction does not create a confidential relationship between the borrower and the licensee nor does it give rise to or create a fiduciary duty on the part of the licensee.

(Acts 1959, No. 374, p. 966, §15; Acts 1996, No. 96-757, p. 1331, §1.)

§ 5-18-17 Insurance in Connection with Credit Transaction

(a) With respect to any insurance written in connection with any credit transaction under this chapter, the creditor shall be subject to the same restrictions, prohibitions, powers, and allowances as any creditor bank, retail establishment, sales finance company, licensee, or any other creditor under Section 5-19-20, and shall be subject to the same rates and regulations promulgated pursuant to that section.

(b) Insurance sold by a licensee or its agents shall be regulated by the Supervisor of the Bureau of Loans. All insurance shall be written by a company authorized to conduct business in the State of Alabama.

(Acts 1959, No. 374, p. 966, §16; Acts 1979, No. 79-327, p. 490, §2; Acts 1996, No. 96-757, p. 1331, §1.)

§ 5-18-18 Charges, Rates, Etc., as to Certain Loans

Licensees may charge to a borrower the rates permitted by this chapter only on principal loan balances less than one thousand dollars ($1,000). No licensee shall induce or permit any person, jointly or severally, to become obligated directly or contingently, or both, on more than one loan made pursuant to this chapter at the same time for the purpose of obtaining a higher finance charge than would otherwise be permitted by Section 5-18-15. If a licensee makes a loan of one thousand dollars ($1,000) or more, the charges authorized by this chapter shall not apply to any part of the loan. The rates on the entire amount of a loan of one thousand dollars ($1,000) or more shall be governed by the applicable provisions of Chapter 8 of Title 8 or Chapter 19 of this title. The supervisor may suspend or revoke the license of any licensee who violates this section in the manner prescribed by Section 5-18-9, and the penalties provided for in subsection (l) of Section 5-18-15 shall apply to any person, firm, or corporation violating this section.

(Acts 1959, No. 374, p. 966, §16 1/2 ; Acts 1979, No. 79-327, p. 490, §1; Act 2002-305, p. 863, §1.)

§ 5-18-19 Collection of Loans Made Outside State

Any loans made outside this state in accordance with the law applicable to such loan in the state in which the loan was made may be collected in this state.

(Acts 1959, No. 374, p. 966, §17.)

§ 5-18-20 Review of Orders, Etc., of Supervisor

In addition to any other remedy he may have, any licensee and any person considering himself aggrieved by any act or order of the supervisor under this chapter may, within 30 days from the entry of the order complained of, or within 60 days of the act complained of if there is no order, petition the Circuit Court of Montgomery County for review of such act or order; provided, that such petition shall be docketed, heard and tried in the same manner as other extraordinary writs issued by the court and a copy of the petition and order setting the same for hearing shall be served on the supervisor, giving him such notice of the time and place of the hearing as may be directed by the court.

(Acts 1959, No. 374, p. 966, §18.)

§ 5-18-21 Enforceability of Provisions and Agreements Which Violate Chapter; Liability of Licensee for Actual Damage

Except where other specific remedies are provided in this chapter for violations, in which event those remedies shall apply, any provision of a loan contract which violates this chapter shall be unenforceable by the licensee to the extent, but only to the extent, of the violation, and the other remaining provisions and agreements shall be enforceable and shall not be void and shall not be affected by the violation. Except as set forth in subsection (l) of Section 5-18-15, any licensee who fails to comply with any requirement imposed under this chapter with respect to any person is liable to the person for the actual damage sustained by the person as the result of the failure.

(Acts 1959, No. 374, p. 966, §19; Acts 1996, No. 96-757, p. 1331, §1.)

§ 5-18-22 Modification, Amendment or Repeal of Chapter

This chapter or any part thereof may be modified, amended or repealed so as to effect a cancellation or alteration of any license or right of a licensee hereunder; provided, that such cancellation or alteration shall not impair or affect the obligation of any preexisting lawful contract between any licensee and any borrower.

(Acts 1959, No. 374, p. 966, §20.)

§ 5-18-23 Maintenance of Listing of Licensees Doing Business in State; Public Access to Reports, Etc

(a) The supervisor shall cause to be kept on file in the Bureau of Loans, open to public inspection during business hours, an alphabetical listing of all licensees doing business in Alabama, and such list shall reveal the true ownership of the licensee companies. If the company is a corporation, the list shall indicate the name of the corporation, the address of the home office and the names and addresses of its officers and directors.

(b) Except as provided in subsection (a) of this section, all applications, reports and other papers and documents submitted by licensees to the supervisor or to the bureau shall be open to public inspection only upon approval of the supervisor, but the supervisor shall not deny any person access to such records when the disclosure thereof to such person is in the public interest.

(Acts 1959, No. 374, p. 966, §22.)

Chapter 18A Deferred Presentment Services Act

§ 5-18A-1 Short Title; Purpose

This chapter shall be known and may be cited as the “Deferred Presentment Services Act.” The purpose of this chapter is to protect consumers who enter into short-term cash advances from abuses that occur in the marketplace. This chapter shall be liberally construed to effectuate its purpose as a consumer protection statute.

(Act 2003-359, p. 992, §1.)

§ 5-18A-2 Definitions

As used in this chapter, the following terms shall have the following meanings:

(1) CHECK. A debit authorization or a check signed by the maker and made payable to a person licensed under this chapter.

(2) CONTINUOUS TRANSACTION. To extend a deferred presentment transaction with the same account without redemption in full with cash or guaranteed funds.

(3) DEFERRED PRESENTMENT SERVICES. A transaction pursuant to a written agreement involving the following combination of activities in exchange for a fee:

a. Accepting a check or authorization to debit a checking account and, in connection with that acceptance, advancing funds to the checking account holder.

b. Holding the check or authorization to debit checking account for a period of time prior to payment or deposit.

(4) DEPARTMENT. The State Banking Department.

(5) LICENSEE. A person licensed to provide deferred presentment services pursuant to this chapter.

(6) PERSON. An individual, group of individuals, partnership, association, corporation, or any other business unit or legal entity.

(7) ROLLOVER. Any deferred presentment transaction where the transaction is not paid in full and the licensee agrees to allow the customer to pay the fee only for a new deferred presentment transaction.

(8) SUPERVISOR. The Supervisor of the Bureau of Loans or his or her designee.

(Act 2003-359, p. 992, §2.)

§ 5-18A-3 License - Required; Applicability

(a) On or after January 1, 2004, no person shall engage in the business of deferred presentment services without having first obtained a license from the supervisor. A separate license shall be required for each location from which the business is conducted.

(b) Trust companies, life insurance companies, and federally constituted agencies shall be exempt from licensing under this chapter. Notwithstanding anything to the contrary in this chapter, this chapter shall not apply to any of the following entities, and each of these entities shall be exempt from this chapter: Banks, credit unions, savings associations, savings banks, and thrift institutions organized pursuant to the laws of this state or any other state or the laws of the United States and any parent of any of the foregoing entities.

(c) This chapter shall have no application to persons who do not engage in deferred presentment services.

(Act 2003-359, p. 992, §3.)

§ 5-18A-4 License - Qualifications

(a) Each applicant for a license shall satisfy all of the following requirements to qualify for a license:

(1) Have a financial statement showing that the applicant has at least twenty thousand dollars ($20,000) in unencumbered cash assets or its equivalent available for each location of the business prepared in accordance with standard accounting practices and procedures.

(2) Have no record on the part of the applicant, any director, officer, or shareholder owning more than 25 percent of the applicant, of any court findings of fraud or any official suspension or removal by any agency or department of the United States or any state from participation in the conduct of any lending, deferred presentment, or related business.

(3) Have no record of a conviction of a felony or an offense involving breach of trust, fraud, or dishonesty in any jurisdiction or a history of acting as a beneficial owner for an individual who has been convicted of a felony or an offense involving breach of trust, fraud, or dishonesty in any jurisdiction.

(b) The requirements set forth in this section shall be continuing in nature.

(Act 2003-359, p. 992, §4.)

§ 5-18A-5 License - Application

Each application for a license shall be in writing and under oath to the supervisor, in a form prescribed by the supervisor, and shall include the legal name, residence, business address, and telephone number of the applicant. If the applicant is a partnership, association, or corporation, the application shall include the name and address of every member, officer, and director.

(Act 2003-359, p. 992, §5.)

§ 5-18A-6 License - Fees; Financial Statement

Each application for a license shall be accompanied by all of the following:

(1) A nonrefundable license fee of five hundred dollars ($500) for each location, office, or branch at which the applicant conducts business. The license fees are subject to increase by the supervisor through regulation.

(2) A nonrefundable application investigation fee of one hundred dollars ($100).

(3) A financial statement meeting the requirements of subdivision (1) of subsection (a) of Section 5-18A-4.

(Act 2003-359, p. 992, §6.)

§ 5-18A-7 License - Issuance; Display; Payment of Fees; Surrender

(a) Upon the filing of an application in the form prescribed by the supervisor, accompanied by the fee and documents required pursuant to Section 5-18A-6, the supervisor shall investigate to ascertain whether the qualifications prescribed by Section 5-18A-4 have been satisfied. If the supervisor finds that the qualifications have been satisfied, and approves the documents, the supervisor shall issue to the applicant a license to engage in deferred presentment services business in Alabama. A request shall be either granted or denied within 90 days of receipt. If permission is denied, the applicant for licensure shall have the right to an administrative hearing within 60 days of the denial, if requested, and the right to appeal pursuant to rules promulgated by the supervisor.

(b) The license shall be kept conspicuously posted in the place of business of the licensee and shall not be assignable or transferable or removed to another location without permission of the supervisor.

(c) The annual license fee required in subdivision (1) of Section 5-18A-6 for each office, branch, or place of business of the licensee shall be due on January 1 of each year and shall be valid for a one-year period ending the following December 31. License fees shall be delinquent on February 1 of each year and there shall be a penalty of 10 percent for each month or portion thereof that the licensee is delinquent in the payment of a license fee. All license fees and investigation fees collected pursuant to this chapter shall be paid into the special fund created pursuant to Section 5-2A-20, and shall be used in the supervision and examination of licensees.

(d) A licensee may voluntarily surrender its license to the supervisor; however, the licensee shall not be entitled to receive a refund of any license fees previously paid. Upon surrender of a license, the licensee shall immediately make available to the supervisor all books, records, and papers required to be created and maintained pursuant to this chapter or rule or regulation promulgated hereunder.

(Act 2003-359, p. 992, §7.)

§ 5-18A-8 License - Change of Control

The prior written approval of the supervisor shall be required for the continued operation of a deferred presentment services business whenever a change in control of a license is proposed. Control in the case of a corporation shall mean direct or indirect ownership, or the right to control 25 percent or more of the voting shares of the corporation, or the ability of a person to elect a majority of the directors or otherwise effect a change in policy. Control in the case of any other entity shall mean the ability to change the principals of the organization, whether active or passive. The supervisor may require any information deemed necessary to determine whether a new application is required.

(Act 2003-359, p. 992, §8.)

§ 5-18A-9 Circumstances Requiring Written Report

Within 15 days of the occurrence of any one of the following events, a licensee shall file a written report with the supervisor describing the event and its expected impact on the activities of the licensee in this state:

(1) The filing for bankruptcy or reorganization by the licensee.

(2) The institution of revocation or suspension proceedings against the licensee by any state or governmental authority and subsequently the outcome of such proceeding.

(3) The denial of a license to engage in the deferred presentment services business by any state or governmental authority.

(4) Any felony indictment of the licensee or any of its directors, officers, or principals.

(5) Any felony conviction of the licensee or any of its directors, officers, or principals.

(6) All other events as the supervisor may determine and identify by regulation.

(Act 2003-359, p. 992, §9.)

§ 5-18A-10 Rules and Regulations; Judicial Review

(a) The supervisor may promulgate reasonable rules and regulations for the implementation, administration, execution, and enforcement of this chapter.

(b) Prior to adoption, amendment, or repeal of any regulation, the supervisor shall give at least 35 days’ notice of its intended action by filing notice of intended action with the Legislative Reference Service for publication in the Alabama Administrative Monthly. The date of publication in the Alabama Administrative Monthly shall constitute the date of notice. The notice shall include a statement of either the terms or substance of the intended action or a description of the subject and issues involved, shall specify a notice period ending not less than 35 days nor more than 90 days from the date of the notice, during which period interested persons may present their views thereon, and shall specify the place where, and the manner in which interested persons may present their views thereon.

(c) All interested persons shall have a reasonable opportunity to submit data, views, or arguments, orally or in writing. The supervisor shall consider all written and oral submissions respecting the proposed regulation. Upon adoption of a regulation, the supervisor, if conflicting views are submitted on the proposed regulation and if requested in writing to do so by an interested person prior to adoption, shall issue a concise statement of the principal reasons for and against its adoption, incorporating therein its reasons for overruling any considerations urged against its adoption.

(d) Notwithstanding any other provisions of this chapter to the contrary, if the supervisor finds that action is required by or to comply with a federal statute or regulation which requires adoption of a regulation upon fewer than 35 days’ notice and states in writing his or her reasons for that finding, the supervisor may proceed without prior notice or hearing or upon any abbreviated notice and hearing that he or she finds practicable, to adopt an emergency regulation. The regulation shall become effective immediately, unless otherwise stated therein. The regulation may be effective for a period of not longer than 120 days unless within such time the supervisor complies with the procedures set forth in subsections (b) and (c). The adoption of the same or substantially similar regulation following the procedures set forth in subsections (b) and (c) at any time is not limited by the adoption of a regulation following the emergency regulation procedure set forth in this subsection.

(e) A person who has exhausted all administrative remedies available within the department, other than rehearing, and who is aggrieved by the final decision of the supervisor with respect to a regulation, is entitled to judicial review under this chapter. All proceedings for a review shall be instituted by filing of notice of appeal or review and a cost bond with the supervisor to cover the reasonable costs of preparing the transcript of the proceeding under review, unless waived by the supervisor or the court on a showing of substantial hardship. The notice of appeal and cost bond shall be filed within 42 days after the date the supervisor issued the final regulation. The appeal shall be filed pursuant to Title 6. The regulation shall be in effect pending the outcome of any appeal unless the supervisor stays the effective date of regulations.

(f) A licensee acting in reasonable reliance upon any written opinion or regulation promulgated by the supervisor or a decision of an appellate court of this state shall be presumed to have acted in accordance with applicable law, notwithstanding that after such act has occurred, the regulation is amended, rescinded, or determined by judicial or other authority to be incorrect or invalid for any reason or the particular judicial decision is reversed or modified.

(Act 2003-359, p. 992, §10.)

§ 5-18A-11 Maintenance of Business Records; Notice of Intent to Conduct Business in Conjunction with Other Business; Examination of Place of Business

(a) Each licensee shall keep and use in its business any books, accounts, and records that the supervisor may require to carry into effect this chapter and the administrative regulations issued hereunder. If a licensee operates any other business licensed by the department, a deferred presentment services business shall be accounted for separately from any other business licensed by the department. Each licensed business shall maintain separate business records.

(b) No licensee shall conduct the business of making deferred presentment transactions under this chapter within any office, suite, room, or place of business in which any other business except check cashing or a business conducted pursuant to Chapter 19A is solicited or engaged in or in association or conjunction with any other business until 15 days’ written notice of an intention to do so has been given the supervisor. Upon receipt of written notification, the supervisor may investigate the facts and, if he or she finds that the character of the licensee and the nature of the other business warrant belief that such conduct of business would conceal violation or evasion of this chapter or of regulations lawfully made hereunder, he or she shall enter an order directing the licensee to discontinue the other business. The order shall be entered in the manner specified in and subject to the provisions of Section 5-18A-7.

(c) For the purpose of determining compliance with this chapter, the supervisor may, at any reasonable time, cause an examination to be made at the licensee’s place of business of the records and transactions of such licensee. As cost of examination, the licensee shall pay to the supervisor an examination fee as provided in Section 5-2A-24, which fee shall be collected and paid into the special fund as provided by Section 5-2A-20, and shall be used in the supervision and examination of licensees. Each licensee shall preserve all relevant records for a period of two years after making the last entry on any transaction, and the supervisor shall have free access thereto at the licensee’s place of business at all reasonable times. If the supervisor has probable cause to believe that a licensee has engaged in an activity which violates the provisions of this chapter, the supervisor may compel the production of such books and records of the person as he or she has probable cause to believe are relevant to the alleged violation. Any action arising out of any investigation or examination shall be in the Circuit Court of Montgomery County or in the county of the principal place of business of the licensee.

(Act 2003-359, p. 992, §11.)

§ 5-18A-12 Transaction Fees; Renewal or Extension; Repayment; Bad Check Charge

(a) Subject to the following subsections, every licensee under this chapter may charge and collect a maximum fee on any deferred presentment transaction not to exceed 17.5 percent of the amount advanced. The maximum amount that may be advanced in any deferred presentment transaction is five hundred dollars ($500).

(b) Each licensee may renew or extend a deferred presentment transaction with the same customer no more than one additional time at this fee for a maximum of two continuous transactions. After two continuous transactions with the customer, the licensee shall not enter into a new deferred presentment transaction with that same customer until the next business day after the transaction amount is repaid in full. After the customer has redeemed the check in full with cash or guaranteed funds, the licensee has the same authority as any other licensee to enter into another agreement for deferred presentment services with the customer on another check.

(c) After the initial loan period and one rollover with the same customer, the full outstanding amount of the loan, including, but not limited to, held check or debt authorization, shall become due. If the customer is unable to repay the outstanding balance in full, the licensee may offer the customer an extended repayment option of four equal monthly installments of the remaining balance. The licensee shall not commence any civil action to collect on a transaction in default until written notice has been sent notifying the customer of his or her rights. If the customer fails to exercise his or her rights within 15 days of the notice, the licensee may commence action to collect on a transaction in default.

(d) If there are insufficient funds to pay a check on the date of presentment, the licensee may charge a fee authorized in Section 8-8-15; however, only one such fee may be collected with respect to any particular transaction. No other fees or charges of any kind may be charged or collected from customers except those authorized herein. No person shall use any device, subterfuge, or pretense whatsoever, including, but not limited to, catalog sales, discount vouchers, Internet instant-rebate programs, phone card clubs, or any agreement, including agreements with affiliated persons, with the intent to obtain greater charges than would otherwise be authorized by this chapter.

(Act 2003-359, p. 992, §12.)

§ 5-18A-13 Duties of Licensee

(a) A licensee may not knowingly enter into a deferred presentment transaction with a customer that has outstanding deferred presentment transactions from any lender at any location that exceeds five hundred dollars ($500) for the term of the loan.

(b) Before a licensee shall present for payment or deposit a check or debit authorization accepted by the licensee, the check shall be endorsed with the actual name under which the licensee is doing business.

(c) Any agreement for a deferred presentment transaction shall be in writing and signed by the checking account holder. The customer in a deferred presentment contract shall have the right to redeem the check or debit authorization from the licensee before the agreed date of deposit upon payment to the licensee of the amount of the contract. A licensee shall not defer presentment of any personal check or debit authorization for less than 10 days nor more than 31 calendar days after the date of the contract.

(d) The licensee shall notify the district attorney for the circuit in which the check was received within five business days after being advised by the payer financial institution that a check or draft has been altered, forged, stolen, obtained through fraudulent or illegal means, negotiated without proper legal authority, or represents the proceeds of illegal activity. If a check or draft is returned to the licensee by the payer financial institution for any of these reasons, the licensee shall not release the check, draft, or money order without the consent of the district attorney or other investigating law enforcement authority.

(e) A licensee shall comply with all provisions of state and federal law regarding cash transactions and cash transaction reporting.

(f) A licensee shall provide each prospective customer, before consummation of the deferred presentment agreement, with a written explanation in clear, understandable language of the fees to be charged by the licensee and the date on which the check or debit authorization may be deposited or presented by the licensee. All fees associated with deferred presentment transactions shall be disclosed as finance charges as required by the Federal Truth-in-Lending Act, 15 U.S.C. §1605, its regulations, 12 C.F.R. Part 226, and Official Staff Commentary as adopted by the Federal Reserve Board. The supervisor may promulgate rules establishing additional requirements in order to assure complete and accurate disclosures. The customer, prior to entering into a deferred presentment transaction, shall receive and acknowledge an accurate and complete notification and disclosure of the itemized and total amounts of all fees and other costs that will or potentially could be imposed as a result of such agreement. This subsection shall not create any inference that a particular method of disclosure was required prior to June 20, 2003. All customers will be notified in clear and conspicuous language that the deferred presentment check or debit authorization after one rollover, will be subject to terms and conditions described in subsection (c) of Section 5-18A-12. The terms and conditions of the transaction shall be provided in the notification.

(g) A licensee shall issue a copy of the written agreement to each person for whom a licensee defers deposit of a check or debit authorization. The written agreement shall include the information described in subsection (f) and the extended repayment program described in subsection (c) of Section 5-18A-12.

(h) If a check is returned to the licensee from a payer financial institution due to insufficient funds or a closed account, the licensee shall have the right to all civil remedies allowed by law, except as provided for in Section 5-18A-12, to collect the check and may recover court costs and a reasonable attorney’s fee. The attorney’s fee may not exceed 15 percent of the face amount of the check or debit authorization. No individual who issues a personal check or authorizes a debit for his or her checking account to a licensee for the purpose of a deferred presentment transaction under this chapter shall be convicted pursuant to Section 13A-9-13.1, if the check or debit authorization is returned due to insufficient funds. Checks or debit authorizations returned to the licensee due to a closed account may be collected pursuant to Section 13A-9-13.1.

(i) No licensee may alter or delete the date on any check accepted by the licensee. No licensee may accept an undated check or debit authorization or a check or debit authorization dated on a date other than the date on which the licensee accepts the check or debit authorization.

(j) No licensee shall engage in unfair or deceptive acts, practices, or advertising in the conduct of the licensed business.

(k) No licensee shall require a customer to provide security for the transaction or require the customer to provide a guaranty from another person.

(l) Each licensee shall pay all proceeds for any deferred presentment transaction in cash and directly to the customer.

(m) Every licensee shall conspicuously and continuously display a schedule of all fees, charges, and penalties for all services provided by the licensee. The schedule of fees shall contain the following statement in all capital letters and in l2-point type or larger immediately above the space for the borrower’s signature: NOTICE: FEES FOR DEFERRED PRESENTMENT TRANSACTIONS MAY BE SIGNIFICANTLY HIGHER THAN FOR OTHER TYPES OF LOANS.

(n) A deferred presentment provider shall not redeem, extend, or otherwise consolidate a deferred deposit agreement with the proceeds of another deferred presentment transaction made by the same or affiliated deferred presentment provider except as expressly provided in Section 5-18A-12.

(o) The licensee shall use a third party private sector database, where available, to ensure that the customer does not have outstanding deferred presentment transactions that exceed five hundred dollars ($500).

(Act 2003-359, p. 992, §13.)

§ 5-18A-14 Denial of Application; Hearing

(a) If the supervisor determines that an applicant is not qualified to receive a license, the supervisor shall notify the applicant in writing that the application has been denied, stating the basis for denial.

(b) If the supervisor denies an application or if the supervisor fails to act on an application within 90 days after the filing of a properly completed application, the applicant may make a written demand to the supervisor for a hearing as provided in subsection (a) of Section 5-18A-7 before the supervisor on the question of whether the license should be granted.

(c) At the hearing, the burden of proving that the applicant is entitled to a license shall be on the applicant. A decision of the supervisor following any hearing on the denial of a license may be subject to review by the circuit court pursuant to Title 6.

(Act 2003-359, p. 992, §14.)

§ 5-18A-15 Suspension or Revocation of License; Hearing

(a) The supervisor may, after notice and hearing, suspend or revoke any license if the supervisor finds that the licensee has knowingly or through lack of due care committed any of the following actions:

(1) Failed to pay the annual license fee imposed by this chapter or an examination fee imposed by the supervisor under the authority of this chapter.

(2) Committed fraud, engaged in a dishonest activity, or made misrepresentations.

(3) Violated a provision of this chapter, an administrative regulation issued pursuant to this chapter, or has violated any other law in the course of its or his or her dealings as a licensee.

(4) Made a false statement in the application for the license or failed to give a true reply to a question in the application.

(5) Demonstrated incompetence or untrustworthiness to act as a licensee.

(6) Entered or caused to be entered or allowed to be entered any false information on any business record of the licensed activity, including, but not limited to, any information in customer agreements and on deferred presentment checks or debit authorizations.

(b) If the reason for revocation or suspension of a license of the licensee at any one location is of general application to all locations operated by a licensee, the supervisor may revoke or suspend all licenses issued to a licensee.

(c) A hearing shall be held on written notice given at least 20 days prior to the date of the hearings.

(Act 2003-359, p. 992, §15.)

§ 5-18A-16 Violations of Chapter

If, after a hearing, the supervisor finds that a person has violated this chapter or any administrative regulation issued pursuant to this chapter, the supervisor may take any one or more of the following enforcement actions:

(1) Order the person to cease and desist violating the chapter or any administrative rules issued pursuant thereto.

(2) Require the refund of any fees collected by such person in violation of this chapter.

(3) Order the person to pay to the supervisor a civil penalty of not more than one thousand dollars ($1,000) for each transaction in violation of this chapter.

(Act 2003-359, p. 992, §16.)

§ 5-18A-17 Consent Orders; Civil or Criminal Penalties; Extraordinary Circumstances

(a) The supervisor may enter into consent orders at any time with any person to resolve any matter arising under this chapter. A consent order shall be signed by the person to whom it is issued, or a duly authorized representative, and shall indicate agreement to the terms contained therein. A consent order need not constitute an admission by any person that any provision of this chapter, or any rule, regulation, or order promulgated or issued pursuant to this chapter has been violated, nor need it constitute a finding by the supervisor that such person has violated any provision of this chapter or any rule, regulation, or order promulgated or issued hereunder.

(b) Notwithstanding the issuance of a consent order, the supervisor may seek civil or criminal penalties or compromise civil penalties concerning matters encompassed by the consent order.

(c) In cases involving extraordinary circumstances requiring immediate action, the supervisor may take any enforcement action authorized by this chapter without providing the opportunity for a prior hearing.

(Act 2003-359, p. 992, §17.)

§ 5-18A-18 Written Complaint; Investigation; Compliance with Subpoena

(a) Any person aggrieved by the conduct of a licensee under this chapter in connection with the regulated activities of the licensee may file a written complaint with the supervisor who may investigate the complaint.

(b) In the course of the investigation of the complaint, the supervisor may do the following:

(1) Subpoena witnesses.

(2) Administer oaths.

(3) Examine any individual under oath.

(4) Compel the production of records, books, papers, contracts, or other documents relevant to the investigation.

(c) If a person fails to comply with a subpoena of the supervisor under this chapter or to testify concerning any matter about which the person may be interrogated under this chapter, the supervisor may petition any court of competent jurisdiction for enforcement.

(d) The license of any licensee under this chapter who fails to comply with a subpoena of the supervisor may be suspended pending compliance with the subpoena.

(Act 2003-359, p. 992, §18.)

§ 5-18A-19 Public Notice of Provisions

Every licensee shall conspicuously post a sign, as designed by the department, notifying the public of the pertinent provisions of this chapter and any consequences related to entering into a deferred presentment transaction pursuant to this chapter.

(Act 2003-359, p. 992, §19.)

§ 5-18A-20 Excessive Charges

Any person who willfully makes charges in excess of those permitted by Section 5-18A-12 or any person who willfully engages in the business of cashing deferred presentment checks in violation of Section 5-18A-3, or both, is guilty of a Class B misdemeanor for the first offense and a Class B felony for the second or subsequent offense.

(Act 2003-359, p. 992, §20.)

§ 5-18A-21 Disposition of Funds

All license fees and administrative penalties collected under this chapter shall be paid into the special fund provided by Section 5-2A-20, and used in the supervision and examination of applicants and licensees.

(Act 2003-359, p. 992, §21.)

§ 5-18A-22 Claims Preceding Effective Date of Chapter

The provisions of this chapter shall not be construed to take away or negatively impact the customers’ claims in pending lawsuits against persons operating deferred presentment services on or before June 20, 2003.

(Act 2003-359, p. 992, §22.)

Chapter 19 Consumer Finance

§ 5-19-1 Definitions

For the purposes of this chapter, the following terms shall have the following meanings respectively ascribed to them by this section:

(1) FINANCE CHARGE. The sum of all charges, payable directly or indirectly by the person to whom credit is extended, and imposed directly or indirectly by the creditor as an incident to the extension of credit. The amount of the finance charge in connection with any credit transaction (i) shall be determined, and shall include and exclude the fees and charges, as provided by Section 106 of the Federal Truth-in-Lending Act, 15 U.S.C. Section 1605 and the regulations of the Federal Reserve Board promulgated pursuant to the Federal Truth-in-Lending Act, 12 C.F.R. Part 226, and the Official Staff Commentary adopted by the Federal Reserve Board pursuant to that regulation, and without limiting or affecting the foregoing subparagraph (i), (ii) shall exclude, without limitation, late charges and other charges resulting from or arising out of late payment, delinquency, default, or other like occurrence. For the purpose of determining the permissible finance charge, any discount or point paid by the debtor in connection with a consumer credit transaction secured by a mortgage on real estate, even though paid at one time, shall be spread over the stated term of the consumer credit transaction. The administrator from time to time may promulgate regulations pursuant to Section 5-19-21 further establishing charges and fees which constitute a finance charge and the manner in which the finance charge is determined to assure consistency between the meaning of “finance charge” under this chapter and the meaning and application of “finance charge” under the above-referenced Federal Truth-in-Lending Act, regulations and Official Staff Commentary, as the same may be amended from time to time.

(2) CONSUMER. When used as an adjective with reference to a credit transaction, characterizes the credit transaction as one in which the party to whom credit is extended is a natural person and the money, property, or services which are the subject of the transaction are primarily for personal, family or household purposes.

(3) CREDITOR. A person who regularly extends or arranges for the extension of credit for which the payment of a finance charge is required, whether in connection with loans, sales of property or services, or otherwise. The provisions of this chapter apply to any such creditor irrespective of the creditor’s status as a natural person or any type of organization. A person is a creditor only if the person extended or arranged for the extension of credit more than 25 times in the preceding calendar year or more than five times in the preceding calendar year for credit transactions secured by a residential structure that contains one to four units.

(4) CREDIT SALE. Any sale with respect to which credit is extended or arranged by a seller who is a creditor. The term includes any contract in the form of a bailment or lease if the bailee or lessee contracts to pay as compensation for use a sum substantially equivalent to or in excess of the aggregate value of the property or services involved and it is agreed that the bailee or lessee may become for no other or a nominal consideration the owner of the property upon full compliance with the bailee’s or lessee’s obligations under the contract. A rental-purchase agreement which is subject to the provisions of Chapter 25 of Title 8 is not a credit sale.

(5) OPEN-END CREDIT PLAN. A plan prescribing the terms of credit transactions which may be made thereunder from time to time and under the terms of which a finance charge may be charged from time to time on an outstanding unpaid balance.

(6) ADMINISTRATOR. The Superintendent of Banks of the State Banking Department.

(7) SUPERVISOR OF THE BUREAU OF LOANS. The designated deputy administrator for the purpose of enforcing this chapter as to licensees.

(8) HOME SOLICITATION SALE. A consumer credit sale of goods or services, other than motor vehicles, in which the seller or a person acting for the seller engages in a personal solicitation of the sale at a place other than the seller’s place of business and the buyer’s agreement or offer to purchase is there given to the seller or a person acting for the seller. The term does not include a sale made pursuant to a preexisting open-end credit plan, a closed-end plan providing for a series of sales or a sale made pursuant to prior negotiations between the parties at the seller’s place of business where goods or services are offered or exhibited for sale.

(9) CREDIT TRANSACTION. A loan or credit sale made by a creditor. For purposes only of Sections 5-19-1(1) and 5-19-3, “credit transaction” shall include nonconsumer loans and credit sales as well as consumer loans and consumer credit sales with an original amount financed of less than two thousand dollars ($2,000). Otherwise, the term “credit transaction” refers only to consumer loans and consumer credit sales irrespective of whether the term is preceded by the word “consumer.”

(10) AMOUNT FINANCED. The sum determined by adding the principal loan amount or the cash price in a credit sale, less any down payment, and any other amounts that are financed by the creditor.

(Acts 1971, No. 2052, p. 3290, §1; Acts 1979, No. 79-428, p. 673, §1; Acts 1986, No. 86-304, p. 451, §1; Acts 1986, No. 86-497, p. 945, §7; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-1.1 Legislative Findings

The Legislature finds as fact and determines that:

(1) The Alabama Consumer Credit Act, Title 5, Chapter 19, (commonly referred to as the “Mini-Code”), was enacted by the Legislature by Acts 1971, No. 2052, page 3290. All, or a portion, of the provisions of the Mini-Code apply to substantially all consumer credit transactions in Alabama involving billions of dollars annually.

(2) The availability of consumer credit and certainty of consumer credit transactions is essential to Alabama citizens and the economy of Alabama. Disputes have arisen involving the Mini-Code resulting in significant litigation.

(Acts 1996, No. 96-576, p. 887, §1.)

§ 5-19-3 Maximum Finance Charges; Contracting for Minimum Finance Charge; Alternate Per Month Computed Finance Charge

(a) Except under open-end credit plans, the maximum finance charge for any credit transaction where the original amount financed is less than two thousand dollars ($2,000), may equal but may not exceed the total of the following:

(1) Fifteen dollars ($15) per one hundred dollars ($100) per year for the first seven hundred fifty dollars ($750) of the original amount financed; and

(2) Ten dollars ($10) per one hundred dollars ($100) per year for that portion of the original amount financed exceeding seven hundred fifty dollars ($750) and less than two thousand dollars ($2,000).

The maximum finance charge under this subsection shall be determined by computing the maximum rates authorized by this subsection on the original amount financed for the full term of the contract without regard to scheduled payments and the maximum finance charge so determined, or any lesser amount, may be added to the original amount financed. The finance charge may be calculated and expressed as a simple interest charge or by any method which does not result in a finance charge yield greater than the yield permitted by this subsection.

(b) A creditor, in connection with any credit sale other than a sale made under an open-end credit plan, may contract for and receive a minimum finance charge not in excess of the following amounts:

(1) Four dollars ($4) on any credit sale in which the amount financed is twenty-five dollars ($25) or less; and

(2) Six dollars ($6) on any credit sale in which the amount financed is more than twenty-five dollars ($25).

(c) In an open-end credit plan, if there is an unpaid balance on the date as of which the finance charge is applied, a creditor may contract for and receive a minimum finance charge in an amount not exceeding fifty cents ($.50) per month.

(d) Other than under an open-end credit plan, in any credit transaction where the finance charge is computed on the unpaid balance of the amount financed outstanding from time to time, for the actual time outstanding:

(1) Each payment shall be applied first to accrued charges and the remainder of the payment applied to the unpaid balance of the amount financed, except that if the amount of the payment is insufficient to pay the accumulated charges, unpaid charges continue to accumulate to be paid from the proceeds of subsequent payments and are not added to the unpaid amount financed.

(2) Except for permissible prepaid finance charges, the finance charge shall not be payable in advance, or compounded; however, if part or all of the consideration for a new credit transaction contract is the unpaid amount financed and unpaid accrued charges of a prior credit transaction, then the amount financed under the new credit transaction contract may include any unpaid accrued charges. The resulting credit transaction contract shall be deemed a new and separate credit transaction for all purposes.

(3) Debtors may pay in advance the unpaid balance of the amount financed and all accrued finance charges without penalty.

(4) For purposes of computing finance charges for a fraction of a month, a day may be considered one-thirtieth of a month, at the option of the creditor.

(e) The provisions of this section shall not apply to any credit transaction with an original amount financed that is equal to or greater than two thousand dollars ($2,000). The finance charge for any credit transaction with an original amount financed or original principal balance not less than two thousand dollars ($2,000) and for any open-end credit plan with a credit limit not less than two thousand dollars ($2,000) shall be subject to the provisions of Section 8-8-5, or Sections 5-20-2, et seq., as applicable. The maximum finance charge for any open-end credit plan with a credit limit of less than two thousand dollars ($2,000) shall be determined by Section 8-8-14, or Sections 5-20-2, et seq., as applicable.

(Acts 1971, No. 2052, p. 3290, §2; Acts 1979, No. 79-328, p. 499, §1; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-4 Additional Charges for Default or Deferral; Prepayment; Renewal or Refinancing; Real Property Transactions

(a) When a scheduled payment in a consumer credit transaction is in default 10 days or more, the creditor may charge and collect a late charge not exceeding the greater of eighteen dollars ($18) or five percent of the amount of the scheduled payment in default, not to exceed one hundred dollars ($100). The late charge may be collected only once on any scheduled payment, regardless of the period during which the scheduled payment remains in default.

(b) With respect to the deferral of one or more wholly unpaid scheduled payments in a consumer credit transaction, in which the finance charge was determined by the precomputed method, the creditor may collect, by agreement with the debtor either before or after default, an additional charge for each full month that any wholly unpaid scheduled payments are outstanding after the due date of each scheduled payment equal to that proportion of the finance charge which the amount of the deferred monthly scheduled payment bears to the sum of all monthly balances originally scheduled.

(c) Except as otherwise provided by law, when any debt is paid in full before the final scheduled payment date, the debtor may do so without penalty, and the creditor shall refund or credit the debtor with not less than that portion of the finance charge which shall be due the debtor as follows:

(1)a. In the case of a consumer credit transaction with an original term of more than 61 months according to any generally accepted actuarial method of computation established or otherwise approved by the administrator; and

b. In all other consumer credit transactions according to the rule of 78ths or sum of the digits method, meaning the amount of the refund or credit shall be as great a proportion of the finance charge originally contracted for as the sum of the periodic time balances of the debt scheduled to follow the date of prepayment bears to the sum of all the periodic time balances of the debt, both sums to be determined according to the scheduled payments originally contracted for.

(2) No refund of less than one dollar ($1) need be made.

(3) If the prepayment is made by the debtor other than on a scheduled payment date, the nearest scheduled payment date shall be used in the computation.

(d) Except as otherwise provided by law, when any debt is renewed or refinanced by any creditor or creditor’s affiliate within a period of 90 days from the date the debt is made or incurred, the debtor shall be entitled to a pro rata refund or credit of any unearned portion of the original finance charge computed as of the date of such refinancing or renewal. When the renewal or refinancing occurs after 90 days, any refund or credit shall be calculated as provided in subsection (c) above. On and after January 1, 1997, except as otherwise provided by law, when any debt is renewed or refinanced by any creditor or creditor’s affiliate within a period of 120 days from the date the debt is made or incurred, the debtor shall be entitled to a pro rata refund or credit of any unearned portion of the original finance charge computed as of the date of such refinancing or renewal. When the renewal or refinancing occurs after 120 days, any refund or credit shall be calculated as provided in subsection (c) above.

(e) When any consumer debt is renewed or refinanced by the creditor or an affiliate of the creditor, any minimum finance charge for a credit sale shall be reduced to the finance charge which is otherwise permitted by Section 5-19-3.

(f) A creditor may charge and collect in a transaction secured by real property the following fees and charges if bona fide and reasonable in amount, and provided that, other than the appraisal fees authorized by subdivision (4) and fees and charges authorized by regulations promulgated by the administrator, the fees are paid to parties unrelated to the creditor:

(1) Fees for title examination, abstract of title, title insurance, property survey, pest inspection, flood inspection, and similar purposes;

(2) Fees for preparing deeds, mortgages, and reconveyance, settlement, and similar documents;

(3) Notary fees and credit report fees;

(4) Appraisal fees paid to persons licensed under the provisions of the Alabama Real Estate Appraisers Act, whether or not the appraiser is employed by or otherwise related to the creditor; and

(5) Fees and charges prescribed by law which are or will be paid to public officials or agencies for recording or releasing a lien on property which secured the loan, provided, however, that a releasing fee may only be charged and collected at or after the time the lien is released.

(6) The administrator may by regulation promulgated pursuant to Section 5-19-21 authorize other fees and charges.

(g) A creditor may, pursuant to a consumer credit transaction contract secured by an interest in real property, charge and collect points in an amount not to exceed five percent of the original principal balance in the case of a closed-end consumer credit transaction, or five percent of the total line of credit in the case of an open-end credit plan. Points may be paid in cash at the time of the consumer credit transaction, or may be deducted from the proceeds and included in the original amount financed for the purposes of Section 5-19-3 or financed under the open-end credit plan. Points shall be in addition to all other charges, are fully earned on the date of the consumer credit transaction, and may be excluded from the finance charge for the purpose of computing any finance charge credit or refund.

(h) Subsections (b), (c), (d), and (e) of this section shall not apply to open-end credit plans. The requirements of a refund or credit of any unearned finance charge under subsections (c) and (d) of this section apply only if and to the extent the consumer credit transaction includes a precomputed or prepaid finance charge.

(Acts 1971, No. 2052, p. 3290, §3; Acts 1975, 4th Ex. Sess., No. 95, p. 2774, §1; Acts 1986, No. 86-304, p. 451, §2; Acts 1988, No. 88-87, p. 112, §1; Acts 1988, 1st Ex. Sess., No. 88-942, p. 562, §1; Acts 1989, No. 89-525, p. 1074, §1; Acts 1996, No. 96-576, p. 887, §2; Acts 1997, No. 97-440, p. 739, §1; Act 2011-529, p. 866, §1.)

§ 5-19-5 Acceptance of Negotiable Instruments as Evidence of Consumer Debt

In a consumer credit sale, the seller may not take as evidence of the obligation of the buyer, a negotiable instrument other than (1) a check; or (2) a promise or order containing a statement, required by applicable statutory or administrative law, to the effect that the rights of a holder or transferee are subject to claims or defenses that the issuer could assert against the original payee. A holder is not a holder in due course if the holder takes a negotiable instrument with notice that it is issued in violation of this section. A holder in due course is not subject to the liabilities prescribed in this chapter.

(Acts 1971, No. 2052, p. 3290, §4; Acts 1995, No. 95-668, p. 1381, §4; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-6 Copies of Instruments Signed by Debtors to Be Furnished to Debtors; Required Statement in Contracts, Etc.; Limitation on Disclosure Requirements; Intent, Applicability of Limitation

(a) Any creditor, when extending credit with respect to a consumer credit transaction, other than under an open-end credit plan, shall at that time furnish to the debtor a copy of each instrument executed by the debtor in connection with the consumer credit transaction. The consumer credit transaction contract or note shall contain the following statement in eight point or larger type immediately above the space for the borrower’s signature.

“CAUTION - IT IS IMPORTANT THAT YOU THOROUGHLY READ THE CONTRACT BEFORE YOU SIGN IT.”

(b) No disclosures are required by this chapter to be made by a creditor with respect to any transaction other than disclosures required by regulations made by the administrator pursuant to Section 5-19-21 and disclosures required by subsection (a) above and by Sections 5-19-12(a) and 5-19-20(e).

(c) Without limiting the generality of subsection (b), there is no obligation or duty under this chapter to disclose to a debtor any agreement to assign or otherwise transfer a consumer credit transaction contract at a discount or that the assignee of, or person who funded, the consumer credit transaction agreed or may agree to pay the creditor or other person who originated the consumer credit transaction all or a portion of the prepaid finance charges and other fees and/or a portion of the finance charge to be paid by the debtor over the term of the transaction and/or other compensation irrespective of how the compensation is determined or described.

(d) Except as modified hereby, the provisions of subsections (b) and (c) confirm, clarify and are declaratory of existing law. Except as modified hereby, the provisions of Alabama Act No. 94-115 remain applicable to consumer credit transactions entered into on, before, and after February 24, 1994.

(Acts 1971, No. 2052, p. 3290, §4; Acts 1994, No. 94-115, p. 124, §2; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-7 Right to Refinance Amount of Certain Scheduled Payments

With respect to a consumer credit transaction, if any scheduled payment is more than one and one-half times as large as the average of earlier scheduled payments, the debtor has the right to refinance the amount of that payment at the time it is due without penalty. The terms of the refinancing shall be no less favorable than the terms of the original transaction. The provisions of this section do not apply if the debtor’s payment schedule has been adjusted to conform with the seasonal or irregular income of the debtor, or if a consumer credit transaction is repayable in a single principal payment irrespective of the scheduled interest payments.

(Acts 1971, No. 2052, p. 3290, §4; Acts 1989, No. 89-879, p. 1771, §1; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-8 Assignee of Seller Subject to Claims and Defenses of Buyer

With respect to a consumer credit sale, an assignee of the rights of the seller is subject to all claims and defenses of the buyer against the seller arising out of the sale, notwithstanding an agreement to the contrary, but the assignee’s liability under this section may not exceed the amount owing to the assignee at the time the claim or defense is asserted against the assignee. Rights of the buyer under this section can only be asserted as a matter of defense to or setoff against a claim by the assignee.

(Acts 1971, No. 2052, p. 3290, §5; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-9 Application of Payments When Buyer Indebted to Same Seller for Two or More Consumer Credit Sales

When the buyer is indebted to a particular seller for two or more consumer credit sales of goods and the goods which were the subject of two or more sales secure the buyer’s total debt to the seller, the security shall be discharged by applying the buyer’s payments as they are received by the seller or the seller’s assignee to the portions of the debt in the order in which they were incurred. To the extent that debts are paid according to the preceding sentence, security interests in items of property terminate as the debt originally incurred with respect to each item is paid. Payments received by the seller upon a revolving charge account are deemed, for the purpose of determining the amount of the debt secured by the various security interests, to have been applied first to the payment of finance charges in the order of their entry to the account and then to the payment of debts in the order in which the entries to the account showing the debts were made. If the debts consolidated arose from two or more consumer sales made on the same day, payments received by the seller are deemed, for the purpose of determining the amount of the debt secured by the various security interests, to have been applied first to the payment of the smallest debt. This section shall not apply to two or more consumer credit sales made by the same seller to the same buyer when the debts have been assigned to different and unrelated persons for value and the assignment was bona fide and not for the purpose of violating this section.

(Acts 1971, No. 2052, p. 3290, §5; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-10 Contract Provisions for Attorney’s Fees

A contract for a consumer credit transaction with an original amount financed not exceeding three hundred dollars ($300) may not provide for payment by the debtor of attorney’s fees after default by the debtor. A contract for a consumer credit transaction with an original amount financed exceeding three hundred dollars ($300) may provide for the payment by the debtor of reasonable attorney’s fees not exceeding 15 percent of the unpaid debt after default and referral of the contract to an attorney who is not a salaried employee of the creditor. An open-end credit plan may not provide for attorney’s fees when the unpaid balance does not exceed three hundred dollars ($300), but may provide for reasonable attorney’s fees after default by the debtor when the unpaid balance exceeds three hundred dollars ($300). In a consumer credit transaction contract where the original amount financed exceeds ten thousand dollars ($10,000) or the credit transaction is secured by real property, the creditor may require the payment by the debtor of attorney’s fees prior to default by the debtor in connection with the closing of, amendment to, or modification of the credit transaction, provided that the attorney is not a salaried employee of the creditor.

(Acts 1971, No. 2052, p. 3290, §6; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-12 Buyer’s Right to Cancel Home Solicitation Sale

(a) A buyer has the right to cancel a home solicitation sale until midnight of the third business day following execution by the buyer of an agreement or offer to purchase, which notice is effective when delivered or when deposited in the mail properly addressed to the seller, postage prepaid. The seller must deliver to the buyer and obtain the buyer’s written signature to a written agreement or offer to purchase designating as the date of the transaction the date on which the buyer actually signs and containing the following under the conspicuous caption:

“BUYER’S RIGHT TO CANCEL”

“If this agreement was solicited at your residence and you do not want the goods or services, you may cancel this agreement by delivering or mailing a notice to the seller. The notice must say that you are cancelling the agreement and must be delivered or mailed before midnight of the third business day after you sign this agreement. The notice must be delivered or mailed to:

_______________________________________________.” (insert name and mailing address of seller)

Alternately, the seller may deliver to the buyer the notice required by the Federal Trade Commission Trade Regulation Rule concerning Cooling-Off Period for Sales Made at Homes or at Certain Other Locations, Title 16, Code of Federal Regulations, Part 429, as amended from time to time, which shall satisfy the notice requirement of this section. Until the seller has complied with this section the buyer may cancel the home solicitation sale within one year after the date of the sale by notifying the seller in any manner and by any means of the buyer’s intention to cancel.

(b) The buyer has a duty to take reasonable care of the goods in the buyer’s possession before cancellation and for a reasonable time thereafter, during which time the goods are otherwise at seller’s risk. Within 10 days after a home solicitation sale has been cancelled or an offer to purchase revoked, the seller must tender to the buyer any payments made or goods traded in by the buyer, or the amount equal to the trade-in allowance stated in the agreement, and any note or other evidence of debt. Within a reasonable time thereafter the buyer, upon demand, must tender at the buyer’s residence to the seller any goods delivered by the seller. If the seller fails to demand such possession within 20 days after receipt of the notice, the goods become the property of the buyer without obligation to pay for them.

(c) The provisions of this section shall not apply if the buyer furnishes the seller with a separate dated and signed personal statement describing an emergency requiring immediate remedy and modifying or waiving his right to cancel. The use of printed forms for this purpose is prohibited.

(Acts 1971, No. 2052, p. 3290, §8; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-13 Repossession or Acceptance of Surrender of Goods Priced at One Thousand Dollars or Less

If any seller or assignee of the seller repossesses or voluntarily accepts surrender of goods sold in which the seller or assignee has a security interest and the original cash price of the goods repossessed or surrendered was one thousand dollars ($$1,000) or less, the buyer is not personally liable to the seller or assignee for the unpaid balance of the debt arising from the sale and the seller or assignee is not obligated to sell the collateral.

(Acts 1971, No. 2052, p. 3290, §9; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-14 Rebates or Discounts, Etc., as Inducement for Aiding Sale to Another Prohibited

With respect to a consumer credit sale, the seller may not give or offer to give a rebate or discount, or otherwise pay or offer to pay value to the buyer, as an inducement for a sale in consideration of the buyer giving to the seller the names of prospective purchasers, or otherwise aiding the seller in making a sale to another person, if the earning of the rebate, discount, or other value is contingent upon the occurrence of an event subsequent to the time the buyer agrees to buy. If a buyer is induced by a violation of this section to enter into a consumer credit sale, the agreement is unenforceable by the seller and the buyer, at the buyer’s option, may rescind the agreement or retain the goods delivered and the benefit of any services performed without any obligation to pay for them.

(Acts 1971, No. 2052, p. 3290, §10; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-15 Garnishment

Prior to entry of judgment on a consumer credit transaction, the creditor may not attach unpaid earnings of the debtor by garnishment. Notwithstanding the garnishment procedure otherwise applicable after judgment, with respect to a consumer credit transaction, the amount of unpaid earnings of the debtor subject to garnishment shall not exceed the lesser of:

(1) Twenty-five percent of the debtor’s disposable earnings for that week; or

(2) The amount by which the debtor’s disposable earnings for that week exceed 30 times the federal minimum hourly wage in effect when payable.

“Disposable earnings” means that part of the earnings of a debtor remaining after deduction of amounts required by law to be withheld, and disposable earnings shall not include periodic payments pursuant to a pension, retirement, or disability program.

(Acts 1971, No. 2052, p. 3290, §11; Acts 1988, No. 88-294, p. 454, §1; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-16 Refusal by Court to Enforce Unconscionable Agreement

With respect to a consumer credit transaction, if the court as a matter of law finds the contract or any provision of the contract to have been unconscionable at the time it was made, the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable provision, or it may so limit the application of any unconscionable provision as to avoid any unconscionable result.

(Acts 1971, No. 2052, p. 3290, §12; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-17 Inducing Obligation on More Than One Contract in Order to Obtain Higher Finance Charge Prohibited; Consolidation of Existing Precomputed Consumer Credit Transaction Contract and Subsequent Precomputed Consumer Credit Transaction

(a) No creditor shall induce or permit any person or any husband and wife, jointly or severally, to become obligated directly or contingently, or both, on more than one consumer credit transaction at the same time for the purpose of obtaining a higher finance charge than would otherwise be permitted by Section 5-19-3. This subsection shall not apply to the maintenance of two or more separate consumer credit transactions where the consumer credit transactions were created on different dates.

(b) It shall be unlawful for any seller to evade or attempt to evade this section by inducing a buyer to become obligated to another creditor in which the initial creditor has a pecuniary interest or with whom the initial creditor has an arrangement for exchange of customers.

(c) Subsection (a) does not obligate a creditor to allow any person to maintain two or more contracts or accounts. Effective June 19, 1996, an existing precomputed consumer credit transaction contract and a subsequent precomputed consumer credit transaction document may be consolidated provided that the consumer cannot be required to consolidate the contracts as a condition for the extension of credit nor can the creditor be required to extend credit; and provided further, that if such contracts are consolidated, the annual percentage rate resulting from the consolidation can be no greater than the annual percentage rate on the prior existing consumer credit transaction contract nor can the consumer be charged any duplicate fees or expenses that originated in the existing consumer credit transaction contract, provided, however, that finance charges and other charges and fees rebated in accordance with applicable law and those charges as permitted by Section 5-19-4(f) and UCC filing fees or nonfiling insurance premiums in lieu thereof are excluded from this provision. Nothing herein restricts a creditor from renewing or refinancing an existing consumer credit transaction contract.

(Acts 1971, No. 2052, p. 3290, §13; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-18 Installment Payment of Debt of One Thousand Dollars or Less

With respect to consumer credit transactions, where the debt is payable in installments, not made pursuant to an open-end credit plan and in which the original amount financed is one thousand dollars ($1,000) or less, the debt shall be scheduled to be payable in substantially equal installments at equal periodic intervals, except to the extent that the schedule of payments is adjusted to the seasonal or irregular income of the debtor or when the transaction is a single principal payment obligation irrespective of the scheduled interest payments, and:

(1) Over a period of not more than 36 months and 15 days if the original amount financed is more than three hundred dollars ($300); or

(2) Over a period of not more than 24 months and 15 days if the original amount financed is three hundred dollars ($300) or less.

(Acts 1971, No. 2052, p. 3290, §14; Acts 1989, No. 89-879, p. 1771, §1; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-19 Liabilities of Creditor Making Excess Finance Charge; Failure to Obtain License; Damages for Deliberate Violation or Reckless Disregard; Written Notice of Violations; Oral Statements Not Admissible; Fiduciary Duty Not Created

(a)(1)(i) Any creditor charging a finance charge in excess of the amount authorized herein, except as specified in subdivision (2), shall forfeit debtor’s actual economic damages not to exceed the finance charge, and shall refund to the debtor such amount of the actual economic damages, which may be done by reducing the amount of the debtor’s obligation. If the debtor is entitled to a refund and the creditor refuses to refund within a reasonable time, not to exceed 60 days, after written demand, including the filing of a legal action, the debtor shall recover a penalty of five times the amount of the actual economic damages not to exceed the finance charge, but in any event not less than one hundred dollars ($100). Provided, however, as to any legal action pending on May 20, 1996, the debtor shall make a new written demand under this subsection.

(ii) As to transactions occurring after May 20, 1996, any creditor charging a finance charge in excess of the amount authorized herein, except as specified in subdivision (2), shall forfeit to the debtor the amount of the actual economic damages not to exceed the finance charge, which may be done by reducing the amount of the debtor’s obligation. If the debtor is entitled to a refund and the creditor refuses to refund within a reasonable time, not to exceed 60 days, after written demand, including the filing of a legal action, the debtor shall recover twice the actual economic damages not to exceed the finance charge, but in any event not less than one hundred dollars ($100).

(2) If the creditor has made an excess finance charge in deliberate violation of or in reckless disregard for this chapter, the creditor shall forfeit the greater of the entire finance charge imposed or five times the amount of the actual economic damages, but not less than one hundred dollars ($100). No action under this subsection may be brought more than one year after the due date of the last scheduled payment of the agreement pursuant to which the charge was made or, in the case of an open-end credit plan, one year after the excess charge is made.

(3) Any creditor licensed under this chapter adjudged after May 20, 1996 by a court of competent jurisdiction in any civil action to be in deliberate violation of or in reckless disregard for this chapter shall within 10 days of such adjudication forward a copy of the judgment to the administrator. Within 10 days of such judgment becoming final and nonappealable, the creditor shall notify the administrator and the administrator shall, within 60 days of such notification, review the creditor’s license in view of the matters on which the judgment was based and determine whether to conduct a license revocation hearing pursuant to Section 5-19-23. At any hearing conducted thereon by the administrator, such judgment shall be prima facie evidence in support of the revocation of the creditor’s license.

(b) A creditor required to obtain a license who fails to obtain such license may not maintain a proceeding in any court in this state on a consumer credit transaction for which a license was required until the creditor obtains the license required by Section 5-19-22. If a court determines that an unlicensed creditor should have obtained a license, the action may be stayed until the creditor obtains the required license and satisfies the requirements of the next sentence of this subsection. The creditor shall pay to the administrator a civil penalty equal to three times the amount of the investigation fee and the annual license fee for each year or portion thereof, the creditor, in violation of Section 5-19-22, has engaged in the business of making consumer loans or taking assignments of consumer credit contracts without first having obtained a license, but in no event shall a civil penalty exceed one hundred thousand dollars ($100,000). All civil penalties shall be paid into the special fund set up by the State Treasurer pursuant to Section 5-2A-20 and used in the supervision and examination of licensees. After obtaining the required license, and paying the civil penalty prescribed by this subsection, the creditor may bring and maintain proceedings in the courts of this state on consumer credit transaction contracts, and the enforceability of the contracts shall not be impaired by the prior failure to obtain a license, irrespective of whether the consumer credit transaction contracts were made before or after the license was obtained. No private cause of action exists against a creditor for failing to obtain a license required by Section 5-19-22.

(c) Except for the specific remedies and obligations provided in subsection (a) with respect to excess finance charges, or subsection (b) with respect to licensing, in which event the remedy and obligations set forth in subsection (a) or (b), as applicable, shall apply, any provision of a consumer credit transaction which violates this chapter shall be unenforceable by the creditor to the extent, but only to the extent, of the violation, and the other remaining provisions and agreements shall be enforceable and shall not be void and shall not be affected by the violation. Except as provided in subsection (a), any creditor who fails to comply with any requirement imposed under this chapter with respect to any person is liable to the person only for the actual economic damages sustained by the person as the result of the failure. Except as set forth in subsection (a), no action may be brought by the debtor under this section based upon a violation of any provision of this chapter more than two years after the date the violation occurred; provided, however, this limitation shall not bar a debtor from asserting a violation of this chapter in an action brought by the creditor, as a matter of defense by recoupment or setoff in such action, if otherwise allowed by law.

(d) A creditor or assignee has no liability to the debtor for any violation of this chapter if, prior to receipt of written notice from the debtor of a violation, the creditor or assignee notifies the debtor of the violation and makes whatever adjustments in the appropriate account, or payments to the debtor, as are necessary to assure that the debtor will not be required to pay an amount in excess of the charges permitted by this chapter.

(e) An oral statement shall not be admissible to contradict the provisions of a credit transaction document, unless the debtor establishes by clear and convincing evidence that the oral statement was made and that it constituted a misrepresentation of a material fact relating to the character or essential terms of the transaction that was made principally to induce the debtor to sign the document and upon which the debtor reasonably relied in signing the document or entering into the transaction. This subsection shall not apply to credit transaction documents in effect on May 20, 1996, nor to causes of action that arise therefrom; nor shall this subsection apply to any credit transaction documents not covered by this chapter.

(f) A consumer credit transaction does not create or give rise to a fiduciary duty on the part of the creditor.

(Acts 1971, No. 2052, p. 3290, §15; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-20 Insurance

(a) With respect to any consumer credit transaction, the creditor shall not require any insurance other than insurance against loss of or damage to any property in which the creditor is given a security interest and insurance insuring the lien of the creditor on the property which is collateral for the transaction.

(b) (1) Credit life and disability and involuntary unemployment insurance may be offered and, if accepted, may be provided by the creditor. The charge to the debtor for the insurance shall not exceed the premium permitted for the coverages. Insurance with respect to any credit transaction shall not exceed the approximate amount and term of the credit.

(2) This subdivision (2) applies to all consumer credit transactions entered into on or after June 19, 1996. If the consumer credit transaction is scheduled to be repaid in substantially equal installments which include a portion of the amount financed, the amount of credit life insurance at any time shall not exceed the greater of the approximate unpaid balance of the debt, excluding unearned finance charges, if any, or the approximate unpaid scheduled balance of the debt, excluding unearned finance charges, if any, plus the amount of one scheduled payment. The amount of credit life insurance on single payment consumer credit transactions and the amount of accident and health insurance and involuntary unemployment insurance shall not exceed the approximate amount of the total of payments. The amount of credit life insurance under an open-end credit plan shall not exceed the approximate unpaid balance of the debt from time to time. The debtor’s estate or a named beneficiary shall be entitled to any excess credit life insurance benefit.

(c) If the debtor fails to provide any required property insurance, the creditor may, but is not required to, purchase insurance insuring its interest only, or with the debtor’s written consent, insuring both the creditor’s interest and the debtor’s interest, and the premium for the property insurance together with interest on the premium at the contract rate or other rate agreed to in writing may be charged by the creditor to the debtor. The premium charged to the debtor for any insurance shall not exceed the premium approved by the administrator or the rates filed by the insurer with the Alabama Department of Insurance for the insurance, as applicable. If the insurance insures only the creditor’s interest in the property, the term of the insurance provided pursuant to this subsection shall not exceed the approximate remaining term of the credit, and the amount of insurance shall not exceed the approximate amount of the unpaid balance of the debt excluding unearned finance charges, if any. The administrator may promulgate regulations pursuant to Section 5-19-21 to provide further for the term and maximum permissible amount of insurance which covers the creditor’s interest in the property.

(d) The premium for nonfiling insurance, insuring the lien of the creditor on any property which is collateral for the consumer credit transaction, may not exceed the cost of filing of a lien on the property and any document necessary to continue the lien and is nonrefundable. The insurance may be required in both purchase money and nonpurchase money secured transactions. A creditor may not charge a debtor the cost of filing the lien and a premium for nonfiling insurance in a consumer credit transaction.

(e) If a creditor requires any insurance against loss of or damage to any property in which the creditor is given a security interest, the debtor shall have and be given written notice of the option of obtaining the insurance through a person of the debtor’s choice. If the debtor does not exercise the option of providing the insurance through an existing policy or a policy independently obtained and paid for by the debtor, the creditor may purchase the insurance on the property and charge the premium for the insurance to the debtor. The premium or premiums charged for such required insurance shall not exceed the premium approved by the administrator or the rates filed by the insurer with the Alabama Department of Insurance, as applicable. The creditor may, for reasonable cause, decline the insurance provided by the debtor.

(f) When property insurance, as permitted herein, is required by the creditor, is not furnished by the debtor, and is purchased by the creditor, then upon renewal, refinancing, or payment of the debt before the final maturity date, the creditor shall refund or credit the debtor with that portion of the premium refunded by the insurance carrier upon the termination of the insurance.

(g) A creditor may not contract for or receive a separate charge for insurance against loss of or damage to property or against liability for property damage or personal injuries unless the original amount financed exclusive of the charges for insurance is three hundred dollars ($300) or more and the value of the property is three hundred dollars ($300) or more.

(h) In no event shall the creditor have any responsibility or liability for the failure to purchase any insurance permitted by this section unless the creditor has affirmatively undertaken in writing to purchase the insurance.

(i) A creditor may offer and finance any other insurance in connection with any consumer credit transaction upon such terms as are authorized by regulation of the administrator.

(Acts 1971, No. 2052, p. 3290, §16; Acts 1986, No. 86-304, p. 451, §3; Acts 1987, No. 87-766, p. 1494; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-21 Administrator Authorized to Make Rules and Regulations; Filing Notice of Intended Action with Legislative Reference Service; Transactions Entered into After May 20, 1996

(a) The administrator is authorized and empowered to promulgate rules and regulations and official interpretations (collectively “regulations”) as may be necessary or appropriate for the execution and enforcement of this chapter. The administrator or, if authorized by regulation, the administrator’s designee, or both, may also issue written interpretations of consumer finance statutes and regulations and this chapter.

(b)(1) Prior to the adoption, amendment, or repeal of any regulation, the administrator shall give at least 35 days’ notice of its intended action by filing notice of intended action with the Legislative Reference Service for publication in the Alabama Administrative Monthly. The date of publication in the Alabama Administrative Monthly shall constitute the date of notice. The notice shall include a statement of either the terms or substance of the intended action or a description of the subject and issues involved, shall specify a notice period ending not less than 35 days or more than 90 days from the date of the notice, during which period interested persons may present their views thereon, and shall specify the place where, and the manner in which interested persons may present their views thereon.

(2) All interested persons shall have a reasonable opportunity to submit data, views, or arguments, orally or in writing. The administrator shall consider all written and oral submissions respecting the proposed regulation. Upon adoption of a regulation, the administrator, if conflicting views are submitted on the proposed regulation and if requested in writing to do so by an interested person prior to adoption, shall issue a concise statement of the principal reasons for and against its adoption, incorporating therein its reasons for overruling any considerations urged against its adoption.

(3) Notwithstanding any other provision of this chapter to the contrary, if the administrator finds that an immediate danger to the public health, safety, or welfare requires adoption of a regulation upon fewer than 35 days’ notice or that action is required by or to comply with a federal statute or regulation which requires adoption of a regulation upon fewer than 35 days’ notice and states in writing its reasons for that finding, it may proceed without prior notice or hearing or upon any abbreviated notice and hearing that it finds practicable, to adopt an emergency regulation. The regulation shall become effective immediately, unless otherwise stated therein. The regulation may be effective for a period of not longer than 120 days unless within such time the administrator complies with the procedures set forth in subsections (b)(1) and (b)(2). The adoption of the same or a substantially similar regulation following the procedures set forth in subsections (b)(1) and (b)(2) at any time is not limited by the adoption of a regulation following the emergency regulation procedure set forth in this subsection.

(4) A person who has exhausted all administrative remedies available within the State Banking Department, other than rehearing, and who is aggrieved by a final decision of the administrator with respect to a regulation, is entitled to judicial review under this chapter. All proceedings for review shall be instituted by filing of notice of appeal or review and a cost bond with the administrator to cover the reasonable costs of preparing the transcript of the proceeding under review, unless waived by the administrator or the court on a showing of substantial hardship. The notice of appeal and cost bond must be filed within 42 days after the date the administrator issued its final regulation. The appeal shall be filed in the Circuit Court of Montgomery County. The regulation will be in effect pending the outcome of any appeal unless the administrator stays the effective date of the regulation.

(c) As to transactions entered into after May 20, 1996, a creditor shall have no liability under this chapter for any act or practice done or omitted in conformity with any (i) regulation of the administrator, or (ii) any rule, regulation, interpretation, or approval of any applicable Alabama or federal agency or any opinion of the Attorney General, notwithstanding that after such act or omission has occurred, the regulation, rule, interpretation, opinion, or approval is amended, rescinded, or determined by judicial or other authority to be invalid for any reason; provided, however, that any interpretation or opinion issued after May 20, 1996, shall not have any effect on any litigation pending on May 20, 1996, nor shall any interpretation or opinion issued after May 20, 1996, have any effect on litigation if issued subsequent to filing of the litigation. The enactment of Act 96-576 shall have no effect on interpretations or opinions issued prior to May 20, 1996.

(d) A creditor, acting in conformity with a written interpretation or approval by the administrator or the administrator’s designee, or by the official in charge of any applicable Alabama agency or department, or by an official of any federal agency or department, shall be presumed to have acted in accordance with applicable law, notwithstanding that after such act has occurred, the interpretation or approval is amended, rescinded, or determined by judicial or other authority to be incorrect or invalid for any reason.

(e) Interpretations, opinions, and approvals shall protect, to the extent provided in subsections (c) and (d), as applicable, both the creditor at whose request they were issued and any other creditor in a materially like circumstance.

(Acts 1971, No. 2052, p. 3290, §17; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-22 License to Engage in Business of Making Consumer Loans or Taking Assignments of Consumer Credit Contracts - Required; Exceptions; Application; Investigation; Standards for Issuance; Hearing; Licensing Under Small Loan Act; Fees; Participation in Nationwide Mortgage Licensing System and Registry

(a) No creditor shall engage in any one or more of the following activities without first having obtained a license from the administrator:

(1) Making consumer loans to Alabama residents, regardless of whether the creditor has a place of business in Alabama or an employee residing in Alabama.

(2) Making consumer loans originated by an individual required to be licensed as a mortgage loan originator under the Alabama Secure and Fair Enforcement for Mortgage Licensing Act of 2009.

(3) Taking assignments of consumer credit contracts, either from a place of business in Alabama or through use of an employee residing in Alabama whose employment includes taking assignments of consumer credit contracts.

Banks chartered by this state or any other state, banks chartered by the United States, trust companies, savings or building and loan associations, savings banks and other thrift institutions, bank holding companies, thrift holding companies, credit unions, and federally constituted agencies shall be exempt from licensing. A seller, with respect to consumer credit sale transactions and the financing of charges permitted by this chapter, is not required to be licensed under this chapter. Any creditor required to be licensed under this chapter shall obtain a license for each location in Alabama from which these activities are conducted or, if the creditor has no location in Alabama, for the location where the creditor maintains its records regarding Alabama loans or Alabama consumer credit contracts; provided, however, insurance companies and their subsidiaries and affiliates who do not make loans or take assignments of consumer credit contracts secured by real property may obtain a license for the location where the records are maintained in lieu of obtaining a license for each location where the activity is conducted.

(b) The license application shall be in writing, under oath, in the form prescribed by the administrator, and be accompanied by an investigation fee of one hundred dollars ($100).

(c) Upon receipt of the application and investigation fee, the administrator shall investigate the applicant and determine whether the license should be issued or denied.

(d) No license shall be issued unless the administrator determines that the financial responsibility, character, and fitness of the applicant, and of the members thereof if the applicant is a partnership or association, officers and directors thereof if the applicant is a corporation are such as to warrant belief that the business will be operated honestly and fairly within the purpose of this chapter and finds that the applicant has assets available for the operation of business under this chapter of at least twenty-five thousand dollars ($25,000). The State Banking Department may require the applicant or licensee engaging in extensions of credit secured by real estate to obtain a surety bond in lieu of the net asset requirement in order to fulfill the requirements of the Alabama Secure and Fair Enforcement for Mortgage Licensing Act. The amount of the surety bond will be determined by the department. The surety bond will be in favor of the State of Alabama for the use, benefit, and indemnity of any person who suffers damage or loss as a result of the company’s breach of contract or of any obligation arising therefrom or any violation of the law.

(e) Upon written request, the applicant is entitled to a hearing on the question of his qualifications for a license if:

(1) The administrator has notified the applicant in writing that the application has been denied; or

(2) The administrator has not issued a license within 60 days after the application for the license was filed.

A request for a hearing may not be made more than 15 days after the administrator has mailed by certified mail a writing to the applicant notifying him that the application has been denied stating in substance the administrator’s findings supporting denial of the application.

(f) Any person licensed under the Alabama Small Loan Act may engage in business under the Alabama Small Loan Act, but shall not make loans in excess of one thousand dollars ($1,000) unless such person is also licensed under this chapter. The payment of the license and examination fees required by this chapter shall be in lieu of the license and examination fees required by the Alabama Small Loan Act when the licensee is also licensed under the Alabama Small Loan Act.

(g) The license shall be in the form prescribed by the administrator, posted conspicuously in the place of business of the licensee, and shall not be assignable or transferable or removed to another location without permission of the administrator.

(h) The annual license fee shall be five hundred dollars ($500) for each office, branch, or place of business of the licensee, which shall be due on January 1 of each year, and shall be for a one-year period ending December 31, and shall be delinquent on February 1 of each year, and there shall be a penalty of 10 percent for each month or part thereof that the licensee is delinquent in the payment of such license fee. All license fees and investigation fees collected shall be nonrefundable and paid into the special fund provided by Section 5-2A-20 and used in the supervision and examination of licensees.

(i) With respect to any license applicants that will make Residential Mortgage Loans, as defined in the Alabama S.A.F.E. Act, the State Banking Department may require applicants to apply through the Nationwide Mortgage Licensing System and Registry. In order to carry out this requirement, the supervisor is authorized to participate in the Nationwide Mortgage Licensing System and Registry. For this purpose, the supervisor may establish by rule or order requirements as necessary, including, but not limited to, the following:

(1) Background checks for the following purposes:

a. Criminal history through fingerprint or other databases.

b. Civil or administrative records.

c. Credit history.

d. Any other information deemed necessary by the Nationwide Mortgage Licensing System and Registry.

(2) The payment of fees to apply for or renew licenses through the Nationwide Mortgage Licensing System and Registry.

(Acts 1971, No. 2052, p. 3920, §18; Acts 1983, No. 83-747, p. 1244, §1; Acts 1996, No. 96-576, p. 887, §2; Act 2009-625, p. 1900, §1.)

§ 5-19-23 License to Engage in Business of Making Consumer Loans or Taking Assignments of Consumer Credit Contracts - Revocation or Suspension

(a) The administrator may issue to a person licensed under this chapter an order to show cause why his license should not be revoked or suspended for a period not in excess of six months. The order shall state the place for a hearing and set a time for the hearing that is not less than 10 days from the date of the order. At such hearing, the licensee shall be entitled to counsel.

(b) After the hearing, the administrator:

(1) Shall revoke the license if he finds that:

a. The licensee has repeatedly and willfully violated this chapter or any rule or order lawfully made pursuant to this chapter; or

b. Facts or conditions exist which would clearly have justified the administrator in refusing to grant a license had such facts or conditions been known to exist at the time the application of the license was made.

(2) May suspend the license if he finds that the licensee has violated this chapter or any rule or order lawfully made pursuant to this chapter.

(Acts 1971, No. 2052, p. 3290, §23.)

§ 5-19-24 Examinations and Investigations of Licensees by Administrator

(a) For the purpose of determining compliance with this chapter, the administrator may, at any reasonable time, cause an examination to be made at the licensee’s place of business of the records and transactions of such licensee. As cost of examination, the licensee shall pay the administrator an examination fee as provided by Section 5-2A-24 which shall be collected and paid into the special fund provided by Section 5-2A-20 and used in the supervision and examination of licensees. Each licensee shall preserve all relevant records for a period of at least two years after making the last entry on any transaction, and the administrator shall have free access thereto at the licensee’s place of business at all reasonable times. If the administrator has probable cause to believe that a person has engaged in an activity which violates the provisions of this chapter, the administrator may compel the production of such books and records of the person as he or she has probable cause to believe are relevant to the alleged violation.

(b) If the person’s records are located outside this state, the person may either make them available to the administrator at a convenient location within this state, or pay the reasonable and necessary expenses for the administrator or a representative of the administrator to examine them at the place where they are maintained. The administrator may designate representatives, including comparable officials of the state in which the records are located, to inspect them on his or her behalf.

(c) Reports of examinations and investigations, all working papers related thereto and the books and records of licensees, are to be held strictly confidential, and may not be produced, reproduced, or otherwise made available by the State Banking Department to any persons other than those within the State Banking Department and the licensee, and their respective counsel. This subsection does not apply to disclosures in proceedings brought by the administrator pursuant to this chapter.

(d) A licensee’s books and records may be maintained, produced, and reproduced for examination by photostatic, photographic, microphotographic, optical imaging, or by any other generally recognized process for data storage and reproduction.

(e) Nothing contained herein shall prohibit discovery of these materials by and through a lawfully issued subpoena from a court of competent jurisdiction.

(Acts 1971, No. 2052, p. 3290, §19; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-25 Cease and Desist Orders by Administrator; Penalties for Violation of This Chapter; Right to Counsel at Hearing; Judicial Review

After notice and hearing, the administrator may order a licensee under this chapter or a person acting on behalf of the licensee to cease and desist from engaging in violations of this chapter. A creditor who is found by the administrator, after notice and hearing, to have violated this chapter may be ordered by the administrator to pay a civil penalty in an amount determined by the administrator of not more than ten thousand dollars ($10,000) in the aggregate for all violations of a similar nature or, where violations are knowing violations, of not more than fifty thousand dollars ($50,000), in addition to any other penalties provided by law, including, but not limited to, license revocation. Violations shall be of a similar nature if the violations consist of the same or substantially the same course of action or practice irrespective of the number of times the course of action or practice occurred. All civil penalties collected shall be paid into the special fund provided by Section 5-2A-20 and used in the supervision and examination of licensees. At the hearing, the licensee shall be entitled to be represented by counsel. A licensee aggrieved by an order of the administrator under this section may obtain judicial review of the order and the administrator may obtain an order of the court for enforcement of its order in the circuit court. The proceedings shall be governed by the provisions of Section 5-19-26.

(Acts 1971, No. 2052, p. 3290, §20; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-26 Appeals to Circuit Court from Order of Administrator; Appeals from Decision of Circuit Court

(a) Any interested party or intervener may appeal an order of the administrator to the Circuit Court of Montgomery County or to the circuit court of the county in which such party has its principal place of business in Alabama by filing notice of appeal with the administrator and with the register or clerk of the circuit court within 30 days from the date of said final order. The administrator’s findings shall be prima facie correct, but the circuit court may hear such appeal according to its own rules and procedure, including the taking of additional testimony and staying the order. In the circuit court, the trial shall be de novo. The court may, if it decides that the Administrator has erred to the prejudice of appellant’s substantial rights in its application of the law or that the order was based upon findings of fact contrary to the substantial weight of the evidence, remand the proceeding to the administrator for further action in conformity with the direction of the court or may enter such order as the court deems appropriate.

(b) Either party may appeal from the circuit court to the Supreme Court within 42 days from the date of entry of the order of the circuit court.

(Acts 1971, No. 2052, p. 3290, §21.)

§ 5-19-29 Injunctions

(a) The administrator may bring an action to restrain a creditor or a person acting in his behalf from engaging in any business subject to licensing under subsection (a) of Section 5-19-22 without first obtaining a license therefor as provided in Section 5-19-22 and a licensee or any person acting in his behalf from engaging in violations of this chapter or engaging in a course of fraudulent or unconscionable conduct in inducing debtors to enter credit transactions or in the collection of debts.

(b) With respect to an action brought to enjoin violations of the chapter or fraudulent or unconscionable conduct, the administrator may apply to the court for appropriate temporary relief against a defendant, pending final determination of the proceedings. If the court finds, after a hearing held upon notice to the defendant, that there is reasonable cause to believe that the defendant is engaging in or is likely to engage in conduct which violates this chapter or which is fraudulent or unconscionable, it may grant any temporary relief or restraining order it deems appropriate.

(Acts 1971, No. 2052, p. 3290, §22.)

§ 5-19-30 Penalty for Violations

A creditor who willfully makes charges in excess of those permitted by Section 5-19-3 or a creditor who willfully engages in the business of making loans in violation of subsection (a) of Section 5-19-22, or both, is guilty of a misdemeanor and, upon conviction, shall be sentenced to pay a fine not exceeding five hundred dollars ($500) or to imprisonment not exceeding one year, or both.

(Acts 1971, No. 2052, p. 3290, §24; Acts 1982, No. 82-521, p. 869, §1; Acts 1996, No. 96-576, p. 887, §2.)

§ 5-19-31 Nonapplicability of Chapter to Certain Transactions; Certain Laws Not Repealed or Amended

(a) The provisions of this chapter, except the provisions of subdivision (1) of Section 5-19-1 and Section 5-19-3, shall not apply (i) to any consumer credit transaction or other transaction involving an interest in real property or the sale, lease, or mortgage of an interest in real property where the creditor is exempt from licensing under this chapter, (ii) where the credit transaction is not a consumer transaction, (iii) where the credit transaction is by a trust institution as defined in Section 5-12A-1(1), in its capacity as a fiduciary under any plan or agreement qualified under 26 U.S.C. 401(a) or defined by 5 U.S.C. 8437, 26 U.S.C. 403(b), or 26 U.S.C. 457, or a trust exempt under 26 U.S.C. 501, or (iv) to any municipal pension system created under the laws of the State of Alabama. The provisions of this chapter shall not apply where the credit transaction is a policy loan made by a life insurance company licensed by this state or any other state.

(b) This chapter shall not be construed to amend or repeal, without limitation, Sections 5-18-1 through 5-18-24, inclusive, Section 8-8-6, Section 8-8-4, Section 8-8-5, Sections 8-8-1.1, 8-8-14, 8-8-15, or Sections 5-20-2 through 5-20-10, inclusive.

(c) This chapter shall not apply to any lawful, bona fide pawnbroking business.

(d) This chapter shall not apply to any insurance agent or agency licensed in Alabama that elects to charge a collection fee on unpaid balances for insurance premiums under Section 27-12-17. An election shall be made by stating such on the premium finance contract.

(Acts 1971, No. 2052, p. 3290, §25; Acts 1989, No. 89-541, p. 1132, §1; Acts 1994, No. 94-118, p. 146, §1; Acts 1996, No. 96-576, p. 887, §2; Act 2002-307, p. 873, §1; Act 2009-625, p. 1900, §1.)

§ 5-19-32 Service Contracts

Any creditor who extends credit with respect to a consumer credit sale, may sell or finance, or both, a service contract covering tangible goods which are the subject of the consumer credit sale. Any other person who was not the creditor with regard to the initial sale of the tangible goods also may sell or finance, or both, a service contract covering the tangible goods. A “service contract” as used in this section is an agreement, for a separately stated consideration, of the service contract offeror to correct, repair, or replace, or to pay for the correction, repair, maintenance, or replacement of tangible goods during the period covered by the service contract, with or without additional provisions for payment of or indemnity under limited circumstances for related expenses including, without limitation, for towing, rental, and emergency road service, whether called a service contract, extended warranty or otherwise. The service contract offeror need not be the seller or creditor. The service contract may be offered, sold, and financed at the time of the credit sale or at any time thereafter, including, without limitation, at or about the time of the expiration of any original warranty or the expiration of the period covered by the service contract. The service contract may, but is not required to, be renewable from time to time as set forth in the service contract. A service contract does not constitute insurance for any purpose, other than for the purpose of a service contract holder’s claim against a service contract provider for failure to comply with the provisions of the service contract if so provided by other law.

(Acts 1996, No. 96-576, p. 887, §3.)

§ 5-19-33 Account Maintenance Fee

(a) In addition to other lawful charges permitted under various state or federal laws, except under open-end credit plans, a creditor may, if provided in the contract, charge an account maintenance fee of not more than three dollars ($3) for each month of the scheduled period of repayment of the credit transaction. The account maintenance fee shall be determined at the date of the credit transaction and may be charged in full at that time. The account maintenance fee as so determined shall not bear interest and shall constitute a part of the finance charge. In the event of the renewal, refinance, or payment in full of the credit transaction, the debtor shall be entitled to a refund or credit of any unearned portion of the account maintenance fee under subsection (c) of Section 5-19-4, as of the date of such renewal, refinancing, or payment in full.

(b) This section shall not repeal, amend, modify, or diminish any right or power to charge and collect charges, fees, interest, or an interest surcharge existing under any other applicable state or federal statute, nor repeal, amend, or modify Public Law 96-221, enacted by the United States Congress and approved March 31, 1980, nor Section 5-2A-24.

(Act 2006-238, §§1, 2.)

Chapter 19A Alabama Pawnshop Act

§ 5-19A-1 Short Title

This chapter shall be known and may be cited as the “Alabama Pawnshop Act.”

(Acts 1992, No. 92-597, p. 1227, §1.)

§ 5-19A-2 Definitions

The following words and phrases shall have the following meanings:

(1) APPROPRIATE LAW ENFORCEMENT AGENCY. The sheriff of each county in which the pawnbroker maintains an office, or the police chief of the municipality in which the pawnbroker maintains an office.

(2) ATTORNEY GENERAL. The Attorney General of the State of Alabama.

(3) PAWN TRANSACTION. Any loan on the security of pledged goods or any purchase of pledged goods on condition that the pledged goods are left with the pawnbroker and may be redeemed or repurchased by the seller for a fixed price within a fixed period of time. A “pawn transaction” does not include the pledge to, or the purchase by, a pawnbroker of real or personal property from a customer followed by the sale or the leasing of that property back to the customer in the same or a related transaction.

(4) PAWNBROKER. Any person engaged in the business of lending money on the security of pledged goods left in pawn, or in the business of purchasing tangible personal property to be left in pawn on the condition that it may be redeemed or repurchased by the seller for a fixed price within a fixed period of time. Notwithstanding the foregoing, the following are exempt from the definition of the term “pawnbroker” and from this chapter: any bank which is regulated by the State Banking Department of Alabama; the Comptroller of the Currency of the United States; the Federal Deposit Insurance Corporation; the Board of Governors of the Federal Reserve System or any other federal or state authority; and all affiliates thereof and any bank or savings and loan association whose deposits or accounts are eligible for insurance by the Bank Insurance Fund or the Savings Association Insurance Fund or other fund administered by the Federal Deposit Insurance Corporation all affiliates thereof, any state or federally chartered credit union, and any finance company subject to licensing and regulation by the State Banking Department pursuant to Sections 5-19-1 to 5-19-19, inclusive.

(5) PERSON. An individual, partnership, corporation, joint venture, trust, association, or any legal entity.

(6) PLEDGED GOODS. Tangible personal property other than choses in action, securities, or printed evidences of indebtedness, which property is purchased by, deposited with, or otherwise actually delivered into the possession of, a pawnbroker in connection with a pawn transaction.

(7) SUPERVISOR. The Supervisor of the Bureau of Loans of the State Banking Department.

(Acts 1992, No. 92-597, p. 1227, §2.)

§ 5-19A-3 Pawnbroker to Enter on Pawn Ticket Record of Information

At the time of making the pawn or purchase transaction, the pawnbroker shall enter on the pawn ticket a record of the following information which shall be typed or written in ink and in the English language:

(1) A clear and accurate description of the property, including model and serial number if indicated on the property.

(2) The name, residence address, and date of birth of the pledgor or seller.

(3) Date of the pawn or purchase transaction.

(4) Type of identification and the identification number accepted from pledgor or seller.

(5) Description of the pledgor including approximate height, sex, and race.

(6) Amount of cash advanced.

(7) The maturity date of the pawn transaction and the amount due.

(8) The monthly rate and pawn charges.

(Acts 1992, No. 92-597, p. 1227, §3.)

§ 5-19A-4 Certain Information to Be Printed on Pawn Tickets

The following information shall be printed on all pawn tickets:

(1) The statement that “Any personal property pledged to a pawnbroker within this state is subject to sale or disposal when there has been no payment made on the account for a period of 30 days past maturity date of the original contract, and no further notice is necessary.”

(2) The statement that “The pledgor of this item attests that it is not stolen, it has no liens or encumbrances against it, and the pledgor has the right to sell or pawn the item.”

(3) The statement that “The item pawned is redeemable only by the bearer of this ticket.”

(4) A blank line for the pledgor’s signature.

(Acts 1992, No. 92-597, p. 1227, §4.)

§ 5-19A-5 Statement Verifying Pledgor Is Rightful Owner of Goods; Pawnbroker to Maintain Record of Transactions; Goods to Be Maintained on Premises for Certain Number of Days Before Resale

(a) The pledgor or seller shall sign a statement verifying that the pledgor or seller is the rightful owner of the goods or is entitled to sell or pledge the goods and shall receive an exact copy of the pawn ticket which shall be signed or initialed by the pawnbroker or any employee of the pawnbroker.

(b) The pawnbroker shall maintain a record of all transactions of pledged or purchased goods on the premises. A pawnbroker shall make available to the appropriate law enforcement agency a record of the transactions. These records shall be a correct copy of the entries made of the pawn or purchase transaction, except as to the amount of cash advanced or paid for the goods and the monthly pawnshop charge.

(c) All goods purchased by the pawnbroker except for automobiles, trucks, and similar vehicles shall be maintained on the premises by the pawnbroker for at least fifteen business days before the goods may be offered for resale. Automobiles, trucks, and similar vehicles shall be maintained on the premises for 21 calendar days.

(Acts 1992, No. 92-597, p. 1227, §5.)

§ 5-19A-6 Redemption or Automatic Forfeiture of Pledged Goods

A pledgor shall have no obligation to redeem pledged goods or make any payment on a pawn transaction. Pledged goods not redeemed within 30 days following the originally fixed maturity date shall be forfeited to the pawnbroker and absolute right, title, and interest in and to the goods shall vest in the pawnbroker.

(Acts 1992, No. 92-597, p. 1227, §6.)

§ 5-19A-7 Pawnshop Charge; Amounts in Excess of Pawnshop Charge

(a) A pawnbroker may contract for and receive a pawnshop charge in lieu of interest or other charges for all services, expenses, costs, and losses of every nature but not to exceed 25 percent of the principal amount, per month, advanced in the pawn transaction.

(b) Any interest, charge, or fees contracted for or received, directly or indirectly, in excess of the amount permitted under subsection (a) shall be uncollectible and the pawn transaction shall be void. The pawnshop charge allowed under subsection (a) shall be deemed earned, due, and owing as of the date of the pawn transaction and a like sum shall be deemed earned, due, and owing on the same day of the succeeding month.

(Acts 1992, No. 92-597, p. 1227, §7.)

§ 5-19A-8 Certain Acts by Pawnbrokers Prohibited

A pawnbroker, any clerk, agent, or employee of a pawnbroker shall not do any of the following:

(1) Fail to make an entry of any material matter in the record book.

(2) Make any false entry therein.

(3) Falsify, obliterate, destroy, or remove from the place of business records, books, or accounts relating to the licensee’s pawn transactions.

(4) Refuse to allow the supervisor, the appropriate law enforcement agency, the Attorney General, or any other duly authorized state or federal law enforcement officer to inspect the pawn records or any pawn goods during the ordinary hours of business or other acceptable time to both parties.

(5) Fail to maintain a record of each pawn transaction for at least four years.

(6) Accept a pledge or purchase property from a person under the age of 19 years.

(7) Make any agreement requiring the personal liability of a pledgor or seller or waiving any of the provisions of this section or providing for a maturity date less than 30 days after the date of the pawn transaction.

(8) Fail to return or replace pledged goods to a pledgor or seller upon payment of the full amount due the pawnbroker unless the pledged goods have been taken into custody by a court or by a law enforcement officer or agency.

(9) Sell, lease, or agree to sell or lease pledged or purchased goods back to the pledgor or back to the seller and the same or related transaction.

(10) Sell or otherwise charge for insurance in connection with a pawn transaction.

(Acts 1992, No. 92-597, p. 1227, §8.)

§ 5-19A-9 Pledgor Presenting Pawn Ticket Entitled to Redeem or Repurchase Goods; Lost or Damaged Pledged Goods in Possession of Pawnbroker; Lost, Destroyed, or Stolen Pawn Ticket

(a) Any person properly identified as pledgor or as authorized representative of the pledgor and presenting a pawn ticket to the pawnbroker shall be entitled to redeem or repurchase the pledged goods described in the ticket. In the event pledged goods are lost or damaged while in the possession of the pawnbroker, it shall be the responsibility of the pawnbroker to replace the lost or damaged goods with like kinds of merchandise and proof of replacement shall be a defense to any prosecution. For the purposes of this subsection, “lost” includes pledged goods that have been destroyed or have disappeared due to willful neglect that results in the pledged goods being unavailable for return to the pledgor.

(b) If the pawn ticket is lost, destroyed, or stolen, the pledgor shall so notify the pawnbroker in writing, and receipt of this notice shall invalidate the pawn ticket, if the pledged goods have not previously been redeemed. Before delivering the pledged goods or issuing a new pawn ticket, the pawnbroker shall require the pledgor to make a written statement of the loss, destruction, or theft of the ticket. The pawnbroker shall record on the written statement the identifying information required by Section 5-19A-3, the date the statement is given, and the number of the pawn ticket lost, destroyed, or stolen. The statement shall be signed by the pawnbroker or the pawnshop employee who accepts the statement from the pledgor. A pawnbroker is entitled to a fee not to exceed five dollars in connection with each lost, destroyed, or stolen pawn ticket and the taking of a properly prepared written statement for the pawn ticket.

(Acts 1992, No. 92-597, p. 1227, §9.)

§ 5-19A-10 Liens for Pawnbrokers; Pledged Goods Not Redeemed on or Before Maturity Date Fixed in Ticket

(a) A pawnbroker shall have a lien on the pledged goods pawned for the money advanced and the pawnshop charge owed, but not for other debts due to the pawnbroker, subject to the rights of other persons who have an ownership interest or prior liens in the pledged goods. The pawnbroker shall retain possession of the pledged goods except as otherwise herein provided until the lien is satisfied.

(b) Pledged goods not redeemed on or before the maturity date if fixed and set out in the pawn ticket issued in connection with any transaction shall be held by the pawnbroker for 30 days following that date and may be redeemed or repurchased by the pledgor or seller within the period by the payment of the originally agreed redemption price, and by the payment of an additional pawnshop charge equal to the original pawnshop charge.

(Acts 1992, No. 92-597, p. 1227, §10.)

§ 5-19A-11 Licensing Generally; Annual Fee; Temporary License; When New License Not Required Upon Change in Ownership

(a) A person may not engage in business as a pawnbroker unless the person has a valid license authorizing engagement in the business. A separate license is required for each place of business. The supervisor may issue more than one license to a person if that person complies with this chapter for each license. A new license or application to transfer an existing license is required upon any change, directly or beneficially, in the ownership of any licensed pawnshop and an application must be made to the supervisor in accordance with this chapter.

(b) When a licensee wishes to move a pawnshop to another location, the licensee shall give 30 days written notice to the supervisor, who shall then amend the license accordingly.

(c) Each license shall remain in full force and effect until relinquished, suspended, revoked, or expired. Every licensee, on or before each December 1st, shall pay the supervisor $100.00 for each license as the annual fee for the succeeding calendar year. If the annual fee remains unpaid 30 days after written notice of delinquency has been given to the licensee by the supervisor, the license shall thereupon expire, but not before December 31st of any year for which the annual fee has been paid. All licensing and investigation fees shall be paid into the special fund established under Section 5-2A-20.

(d) The supervisor may issue a temporary license authorizing the operation of a pawnshop upon receipt of an application to transfer a license from one person to another, or upon the receipt of an application for a license involving principals and owners that are substantially identical to those of an existing licensed pawnshop. The temporary license shall be effective until the permanent license is issued or denied.

(e) A new license or an application to transfer an existing license shall not be required upon any change, directly or beneficially, in the ownership of a licensed pawnshop incorporated under the laws of this state or any other state if the licensee continues to operate as a corporation doing a pawnbroking business under the license. The supervisor may require the licensee to provide information deemed reasonable and appropriate concerning the officers and directors of the corporation and persons owning in excess of 25 percent of the outstanding shares of the corporation.

(Acts 1992, No. 92-597, p. 1227, §11.)

§ 5-19A-12 Eligibility for Pawnshop License; Application Fee

(a) To be eligible for a pawnshop license, an applicant shall:

(1) Operate lawfully and fairly within the purposes of this chapter.

(2) Not have been convicted of a felony within the last 10 years or not be acting as a beneficial owner for someone who has been convicted of a felony within the last 10 years.

(b) The application shall be accompanied by a fee of $50.00 to be paid to the Supervisor if the applicant does not possess an existing license at the time of applying for the pawnshop license. If the application involves a second or additional license to an applicant previously licensed for a separate location or involves substantially identical principals and owners of a licensed pawnshop at a separate location. The application shall be accompanied by a fee of $50.00.

(Acts 1992, No. 92-597, p. 1227, §12.)

§ 5-19A-13 Suspension or Revocation of License; Notice and Hearing; Surrender of License

(a) The supervisor may, after notice and hearing, suspend or revoke any license upon a finding that:

(1) The licensee, either knowingly or without the exercise of due care to prevent the same, has violated this chapter.

(2) A fact or condition exists which, if it had existed or had been known to exist at the time of the original application for a license, would have justified the supervisor in refusing a license.

(3) The licensee has aided, abetted, or conspired with an individual or person to circumvent or violate the requirements of this chapter.

(4) The licensee or a legal or beneficial owner of the license has been convicted of a crime that the supervisor finds directly relates to the duties and responsibilities of the occupation of pawnbroker.

(b) The supervisor may conditionally license or place on probation a person whose license has been suspended or may reprimand a licensee for a violation of this chapter.

(c) The manner of giving notice and conducting a hearing, as required by subsection (a), shall be as required by Sections 41-22-12 and 41-22-13.

(d) Any licensee may surrender a license by delivering it to the supervisor with written notice of its surrender. Notwithstanding the foregoing, this surrender shall not affect the civil or criminal liability of the licensee for acts committed prior to surrendering of the license.

(e) No revocation, suspension, or surrender of a license shall impair or affect the obligation of any pre-existing lawful contract between the licensee and any pledgor. Any pawn transaction made without benefit of license is void.

(f) The supervisor may reinstate suspended licenses or issue new licenses to a person whose license or licenses have been revoked if no fact or condition then exists which would have justified the supervisor in refusing originally to issue a license under this chapter.

(Acts 1992, No. 92-597, p. 1227, §13.)

§ 5-19A-14 Application for New Pawnshop License, Transfer of Existing License, Etc

(a) An application for a new pawnshop license, the transfer of an existing pawnshop license, or the approval of a change in the ownership of a licensed pawnshop shall be under oath and shall state the full name and place of residence of the applicant, the place where the business is to be conducted, and other relevant information required by the supervisor. If the applicant is a partnership, the application shall state the full name and address of each partner. If the applicant is a corporation, the application shall state the full name and address of each officer, shareholder, and director.

(b) Notwithstanding the foregoing, the application need not state the full name and address of each shareholder, if the applicant is owned directly or beneficially by a person which as an issuer has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, or pursuant to Section 15(d) is an issuer of securities which is required to file reports with the Securities and Exchange Commission, if the person files with the supervisor any information, documents, and reports required by that act to be filed with the Securities and Exchange Commission.

(Acts 1992, No. 92-597, p. 1227, §14.)

§ 5-19A-15 No Confiscation of Property Pledged to Pawnbroker If Property May Be Put on Seven-Day Hold; When Property May Be Placed on Hold

(a) No pledged or purchased goods may be confiscated if the property pledged to, or purchased by, a pawnbroker may be put on a seven-day hold by the authorized law enforcement authorities, but the pledged or purchased property may not be placed on hold unless:

(1) A police report is made in a timely manner.

(2) A warrant is sworn out for the person who pledged or sold the goods to the pawnbroker or for alias if the person is unknown.

(3) A warrant or writ is issued for the merchandise to be confiscated along with a request for restitution, pursuant to law.

(b) This section shall not affect the right of any person who has an ownership interest or prior lien in the pledged or purchased goods.

(Acts 1992, No. 92-597, p. 1227, §15.)

§ 5-19A-16 Penalties for Failure to Secure License

Any person who engages in the business of operating a pawnshop without first securing the license prescribed by this chapter shall be guilty of a misdemeanor and, upon conviction thereof, shall be punished by a fine not in excess of $1,000.00 or by confinement in the county jail for not more than one year, or for both.

(Acts 1992, No. 92-597, p. 1227, §16.)

§ 5-19A-17 Penalties for Willful Violation of Chapter or for False Entry in Required Records; Compliance Enforced by Supervisor; Order Requiring Person to Refrain from Violation

(a) In addition to any other penalty which may be applicable, any licensee who willfully violates this chapter or who willfully makes a false entry in any record specifically required by this chapter shall be guilty of a misdemeanor and, upon conviction thereof, shall be punished by a fine not in excess of $1,000.00 per violation or false entry.

(b) Compliance with this chapter shall be enforced by the supervisor who may exercise any authority conferred by law.

(c) When the supervisor has reasonable cause to believe that a person is violating this chapter, the supervisor, in addition to and without prejudice to the authority provided elsewhere in this chapter, may enter an order requiring the person to stop or to refrain from the violation. The supervisor may sue in any circuit court of the state having jurisdiction and venue to enjoin the person from engaging in, continuing the violation, or from doing any act in furtherance of the violation. In an action, the court may enter an order or judgment awarding a preliminary or permanent injunction.

(Acts 1992, No. 92-597, p. 1227, §17.)

§ 5-19A-18 Department of Public Safety to Supply Available Arrest and Conviction Records

The Department of Public Safety on request shall supply to the supervisor any available arrest and conviction records of an individual applying for or holding a license under this chapter.

(Acts 1992, No. 92-597, p. 1227, §18.)

§ 5-19A-19 Ordinances to Be in Compliance with but Not More Restrictive Than Chapter

Any municipality may enact ordinances which are in compliance with but not more restrictive than this chapter. Any existing or future order, ordinances, or regulation which conflicts with this provision shall be null and void.

(Acts 1992, No. 92-597, p. 1227, §20.)

§ 5-19A-20 Pawnbrokers to Be Subject to Licensing and Issuance Fees Under Chapter 12 of Title 40; Chapter Not to Repeal Uniform Commercial Code

Notwithstanding the foregoing, all persons currently doing business as pawnbrokers and those seeking licensure under this chapter, shall be subject to the applicable licensing and issuance fees levied under Chapter 12 of Title 40. This chapter shall not repeal or be construed to repeal any provision of the Uniform Commercial Code, Sections 7-1-101 et seq.

(Acts 1992, No. 92-597, p. 1227, §21.)

Chapter 20 Alabama Credit Card Act

§ 5-20-2 Short Title

This chapter shall be known and may be cited as the “Alabama Credit Card Act.”

(Acts 1988, No. 88-85, p. 104, §1.)

§ 5-20-3 Definitions

Notwithstanding any other provision of law, for the purposes of this chapter, the following terms shall have the meanings prescribed by this section:

(1) ALABAMA BANK. A bank which is organized under the laws of this state or of the United States and which has its principal place of business in this state.

(2) BANK. Any “insured bank” as such term is defined in Section 3(h) of the Federal Deposit Insurance Act, 12 U.S.C. §1813(h).

(3) BANK HOLDING COMPANY. Any company which is a bank holding company under the Bank Holding Company Act of 1956, as amended, 12 U.S.C. §1841(a).

(4) CREDIT CARD. Any type of arrangement or agreement pursuant to which any domestic lender or credit card bank, whether directly or indirectly through any domestic lender acting as its agent, gives a debtor the privilege of using a credit card or other credit confirmation, device or instrument of any type in transactions out of which debt arises:

a. By the domestic lender or credit card bank honoring a draft or other order, whether written, verbal or electronic, for the payment of money and which is created, authorized, issued or accepted by the debtor; or

b. By the domestic lender or credit card bank paying or agreeing to pay the debtor’s obligation.

(5) CREDIT CARD ACCOUNT. An arrangement or agreement between a debtor and a domestic lender or credit card bank, whether directly or indirectly through any domestic lender acting as its agent, which provides for the creation of debt pursuant to a credit card and under which:

a. The domestic lender or credit card bank may permit the debtor to create debt from time to time;

b. The unpaid balance of principal of such debt and the finance and other charges and fees are debited to an account;

c. A finance charge is computed or an interest rate imposed upon the outstanding balances of the debtor’s account from time to time; and

d. The domestic lender or credit card bank renders bills or statements to the debtor at regular intervals, providing that the amount of credit extensions shown in such bills or statements is payable by and due from the debtor on a date specified in such bill or statement or, at the option of the debtor, but subject to the terms and conditions of the credit card account, may be paid by the debtor in installments.

(6) CREDIT CARD BANK. Any Alabama bank which is organized hereunder and whose activities are limited to those permitted under this chapter.

(7) DOMESTIC LENDER. Any Alabama bank, savings and loan association, savings bank or credit union organized or chartered under the laws of this state or the United States which has its principal place of business in this state and which (i) makes loans, and (ii) accepts deposits or share accounts which are insured by an agency of the United States and which are payable on demand or are subject to withdrawal by check or similar means of payment to third parties or others.

(8) FOREIGN LENDER. Any bank other than an Alabama bank, or any savings and loan association, savings bank, or credit union organized or chartered under the laws of any state other than Alabama or of the United States which has its principal place of business outside this state, and which (i) makes loans, and (ii) accepts deposits or share accounts which are insured by an agency of the United States and which are payable on demand, or are subject to withdrawal by check or similar means of payment to third parties or others.

(9) SUPERINTENDENT. The Superintendent of Banks of this state.

(Acts 1988, No. 88-85, p. 104, §1.)

§ 5-20-4 Establishment or Acquisition of a Credit Card Bank

Subject to the provisions of this chapter and to the prior approval of the superintendent, any bank holding company, bank holding company subsidiary, domestic lender or foreign lender may, either singly or jointly with other bank holding companies, bank holding company subsidiaries, domestic lenders or foreign lenders, establish or acquire, and own and control all the voting shares of a single credit card bank located in Alabama when and for so long as the following conditions are satisfied:

(1) If the credit card bank is to be organized under the laws of this state, such bank shall be organized as provided in this chapter and in the manner provided in Chapter 5A of this title;

(2) In connection with the application to organize, or to acquire control of a credit card bank, the applicant or applicants shall pay one filing fee to the Alabama Department of Banking in an amount not less than $15,000 to be set by the superintendent and approved by the Alabama Department of Banking;

(3) The shares of a credit card bank shall be owned only by one or more bank holding companies, bank holding company subsidiaries, domestic lenders or foreign lenders;

(4) Each credit card bank shall have total initial capital accounts actually paid in of not less than $1,750,000, and at all times thereafter shall maintain such minimum capital together with such additional capital accounts such that it shall have total capital not less than that capital generally required of Alabama banks supervised by the superintendent;

(5) The credit card bank may engage only in the business of soliciting, processing, and extending credit pursuant to credit card accounts and conducting such other activities as are incidental thereto and not inconsistent with the provisions of this chapter;

(6) The credit card bank shall not accept demand deposits or deposits that are withdrawable by check or similar means for payment to third parties or others, and shall not accept any savings or time deposits of less than $100,000;

(7) The credit card bank must operate only a single office in this state, and such office’s location and manner of operation shall be limited so as to be not likely to attract customers from the general public in this state to the substantial detriment of banks and depository institutions located in this state; and

(8) A credit card bank, owned singly or jointly by a foreign lender or by a foreign bank holding company or by a subsidiary thereof, shall have, within one year of the date it commences operations, no fewer than 40 employees located in this state devoted to its credit card activities.

An Alabama bank or a domestic lender is not required to establish a credit card bank to issue credit cards and create credit card accounts.

(Acts 1988, No. 88-85, p. 104, §1.)

§ 5-20-5 Charges, Rates, and Fees

Notwithstanding the provisions of any other law, in connection with a credit card account, any domestic lender or any credit card bank may provide in the credit card agreement such charges for cash advances, charges for extensions of credit in excess of pre-established limits, late fees or delinquency charges, premiums on credit life and credit accident and health insurance, annual fees and other charges and fees, and such other terms and conditions as such domestic lender or credit card bank and the debtor may agree from time to time. Further, in addition to and apart from the charges and fees set forth above, in connection with a credit card account, any domestic lender or credit card bank may impose such interest and other finance charges as any such domestic lender or credit card bank and the debtor may from time to time agree notwithstanding any law otherwise prescribing, regulating or limiting such rates of interest, finance charges, fees and other charges. In the event any domestic lender or credit card bank desires to modify in any respect any term of the credit card account, it shall first provide at least 30 days’ prior written notice of such modification to the debtor. In providing such notice, such domestic lender or credit card bank shall advise the debtor in writing that the debtor has the option (i) to surrender the credit card whereupon the debtor shall have the right to continue to pay off the credit card account in the same manner and under the same terms and conditions as then in effect; or (ii) to hold the credit card after the 30-day period has elapsed, or to use the credit card during such period, either of which shall constitute the debtor’s consent to the modification.

(Acts 1988, No. 88-85, p. 104, §1.)

§ 5-20-6 Application for Approval; Filing Fee

Any bank holding company, bank holding company subsidiary, domestic lender or foreign lender proposing to establish or acquire a credit card bank pursuant to this chapter shall file an application with the superintendent for prior approval of such establishment or acquisition. Such application shall contain such information as the superintendent may require, and shall specifically acknowledge each applicant’s agreement to be bound by the conditions set forth in Section 5-20-4. In addition, such application shall designate a resident of this state as each applicant’s registered agent in connection with matters arising out of this chapter and shall be accompanied by the filing fee specified in section 5-20-4.

(Acts 1988, No. 88-85, p. 104, §1.)

§ 5-20-7 Supervision and Enforcement

(a) All credit card banks organized under the laws of this state shall be subject to the supervision, regulation, and examination of the superintendent and the superintendent shall have all enforcement powers with respect thereto as are provided in this title.

(b) In the event any credit card bank does not conduct its business consistent with the provisions of Section 5-20-4, the superintendent may require such credit card bank to cease all unauthorized activities, and may issue cease and desist orders and exercise any other rights or powers provided by this title, including, but not limited to, seeking equitable or legal remedies. In the event such credit card bank fails to abide by any order or written agreement with the superintendent, the superintendent may in addition to all other rights, remedies, and powers it may have under this title:

(1) Impose upon the credit card bank or any of its controlling or investor bank holding companies, bank holding company subsidiaries, domestic lenders or foreign lenders, a penalty of up to $10,000 per day for each day such order is violated; and

(2) Require divestiture of any interest in such credit card bank by any person or entity not qualified to acquire such credit card bank on the date it ceased to operate within the limitations imposed by Section 5-20-5.

(c) The superintendent shall have the power to promulgate rules and regulations implementing the provisions of this chapter in the manner provided by Sections 5-2A-7 and 5-2A-8.

(Acts 1988, No. 88-85, p. 104, §1.)

§ 5-20-8 Applicable Law

(a) A credit card bank shall be subject to all provisions of this title except to the extent any rights, powers, privileges, provisions or limitations of this title are inconsistent with the rights, powers, privileges, provisions or limitations of this chapter.

(b) A credit card bank shall not be considered a “bank” for the purposes of Section 5-5A-20 or Chapter 13A of Title 5.

(c) Notwithstanding anything to the contrary contained in Section 5-5A-27, an Alabama bank may subscribe for and own stock in a credit card bank.

(Acts 1988, No. 88-85, p. 104, §1.)

§ 5-20-9 Severability

If any provision or clause of this chapter, including without limitation Section 5-20-4(8), or any application thereof to any entity or circumstances is held invalid, such invalidity shall not affect the other provisions or applications of the chapter which can be given effect without the invalid provision or application, and to this end the provisions of this chapter are declared to be severable.

(Acts 1988, No. 88-85, p. 104, §1.)

§ 5-20-10 Construction with Other Laws; Repeal of Conflicting Laws

To the extent other laws or parts of laws, whether general, local, or general laws of local application, conflict with this chapter, such other laws or parts of laws are hereby amended or repealed to the extent of such conflict as necessary to permit full effectiveness of the provisions of this chapter; provided, however, nothing contained in this chapter shall be construed to amend or modify the provisions of Chapter 13A of Title 5, as currently amended.

(Acts 1988, No. 88-85, p. 104, §1.)

Chapter 21 George Wallace, Jr., Plan for Linked Deposits of 1988

§ 5-21-1 Short Title

[Repealed]

Repealed by Act 2007-397, p. 790, §2, effective January 1, 2008.

(Acts 1988, No. 88-162, p. 256, §1.)

§ 5-21-2 Legislative Purpose

[Repealed]

Repealed by Act 2007-397, p. 790, §2, effective January 1, 2008.

(Acts 1988, No. 88-162, p. 256, §2; Acts 1991, No. 91-720, p. 1399, §1; Acts 1993, No. 93-351, p. 540, §1; Acts 1995, No. 95-257, p. 430, §1.)

§ 5-21-3 Definitions

[Repealed]

Repealed by Act 2007-397, p. 790, §2, effective January 1, 2008.

(Acts 1988, No. 88-162, p. 256, §3; Acts 1991, No. 91-720, p. 1399, §1; Acts 1993, No. 93-351, p. 540, §1; Acts 1995, No. 95-257, p. 430, §1; Act 99-659, 2nd Sp. Sess., p. 113, §1.)

§ 5-21-4 Creation of Plan; Term and Return Rate of Deposits

[Repealed]

Repealed by Act 2007-397, p. 790, §2, effective January 1, 2008.

(Acts 1988, No. 88-162, p. 256, §4; Acts 1989, No. 89-882, p. 1780, §1; Acts 1991, No. 91-720, p. 1399, §1; Acts 1993, No. 93-351, p. 540, §1; Acts 1995, No. 95-257, p. 430, §1; Act 99-659, 2nd Sp. Sess., p. 113, §1; Act 2003-304, p. 722, §1; Act 2006-416, p. 1032, §1.)

§ 5-21-5 Amounts of Loans; Eligibility

[Repealed]

Repealed by Act 2007-397, p. 790, §2, effective January 1, 2008.

(Acts 1988, No. 88-162, p. 256, §5; Acts 1995, No. 95-257, p. 430, §1; Act 99-659, 2nd Sp. Sess., p. 113, §1.)

§ 5-21-6 Restriction of Fees or Charges

[Repealed]

Repealed by Act 2007-397, p. 790, §2, effective January 1, 2008.

(Acts 1988, No. 88-162, p. 256, §6; Act 99-659, 2nd Sp. Sess., p. 113, §1.)

§ 5-21-7 Interest Rates

[Repealed]

Repealed by Act 2007-397, p. 790, §2, effective January 1, 2008.

(Acts 1988, No. 88-162, p. 256, §7; Acts 1995, No. 95-257, p. 430, §1; Act 99-659, 2nd Sp. Sess., p. 113, §1; Act 2004-486, §1.)

§ 5-21-8 Agreements Between State and Eligible Lending Institutions in Writing; Specific Terms, Conditions, Etc., Included

[Repealed]

Repealed by Act 2007-397, p. 790, §2, effective January 1, 2008.

(Acts 1988, No. 88-162, p. 256, §8.)

§ 5-21-9 Participation in Plan; Application

[Repealed]

Repealed by Act 2007-397, p. 790, §2, effective January 1, 2008.

(Acts 1988, No. 88-162, p. 256, §9; Acts 1993, No. 93-351, p. 540, §1; Acts 1995, No. 95-257, p. 430, §1; Act 99-659, 2nd Sp. Sess., p. 113, §1.)

§ 5-21-10 Annual Report

[Repealed]

Repealed by Act 2007-397, p. 790, §2, effective January 1, 2008.

(Acts 1988, No. 88-162, p. 256, §10.)

§ 5-21-11 Effective Date; Termination Date

[Repealed]

Repealed by Act 2007-397, p. 790, §2, effective January 1, 2008.

(Acts 1988, No. 88-162, p. 256, §13; Acts 1991, No. 91-720, p. 1399, §1; Acts 1995, No. 95-257, p. 430, §1; Act 99-659, 2nd Sp. Sess., p. 113, §1; Act 2003-304, p. 722, §1; Act 2006-416, p. 1032, §1.)

Chapter 22 Reports of Transactions Involving Currency

§ 5-22-1 Purpose

It is the purpose of this chapter to require submission to the State Revenue Department of certain reports and records of transactions involving United States currency where such reports and records have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings.

(Acts 1990, No. 90-469, p. 674, §1.)

§ 5-22-2 Definitions

For the purpose of this chapter, the following terms shall have the meanings ascribed by this section:

(1) CURRENCY. Currency and coin of the United States.

(2) FINANCIAL INSTITUTION. Any national bank or banking association, state bank or banking association, industrial savings bank, trust company, federal savings and loan association, state savings and loan association, federal savings bank, state savings bank, federal credit union, state credit union, Edge Act or agreement corporation, or international bank agency, located in this state, whether organized under the laws of this state, the laws of another state, or the laws of the United States.

(3) PERSON. Any individual, and any corporation, partnership, association or other such business entity.

(Acts 1990, No. 90-469, p. 674, §2.)

§ 5-22-3 Record of Currency Transactions; Report on Written Request; When No Longer Required; Compliance with Federal Law Sufficient; Multiple Transactions; Disclosures

(a) Every financial institution shall keep a record of each of its currency transactions as required by 31 U.S.C. §5313 and regulations pursuant thereto, as the same may be amended from time to time (“federal monetary transaction records and reports requirement”). Upon the written request of the Revenue Commissioner, each financial institution shall file a report as described in this chapter with the State Revenue Department. After such request and during the period of time covered thereby, each report shall be filed no later than 15 banking days after the report of the same transaction is required to be filed pursuant to the federal monetary transaction records and reports requirement. If the information required to be reported to the State Revenue Department pursuant to this chapter becomes otherwise available to the State Revenue Department through access to reports of any federal agency, the Revenue Commissioner shall notify the financial institutions in writing that such financial institutions no longer have any obligation to file any report pursuant to this chapter. Each report may be in the same form as, or may be a copy of, the report required by the federal monetary transaction records and reports requirement. Notwithstanding any provision hereof to the contrary, maintaining the records and filing a copy of reports required by the federal monetary transaction records and reports requirement shall satisfy the recordkeeping and reporting requirements of this chapter.

(b) Multiple transactions conducted by or for any person in any one day shall be treated as a single transaction, if the financial institution actually is aware of them and such transactions are by or on behalf of the same person.

(c) Information obtained by the State Revenue Department may not be disclosed by the Revenue Commissioner or any officer or employee of the State Revenue Department, except that the Revenue Commissioner may in his discretion, if he deems it necessary or proper to the enforcement of the laws of this state or the United States and to the best interest of the public, divulge such information to any department, agency, or instrumentality of the state or federal government.

(Acts 1990, No. 90-469, p. 674, §3.)

§ 5-22-4 Effect of Federal Exemptions

All exemptions from recordkeeping and reporting requirements under the federal monetary transaction records and reports requirement shall be available to financial institutions under this chapter. This chapter shall not require any recordkeeping or reporting of currency transactions other than those required by the federal monetary transaction records and reports requirement.

(Acts 1990, No. 90-469, p. 674, §4.)

§ 5-22-5 When Reports May Be Disclosed

Other than as provided for in Section 5-22-3, the State Revenue Department shall not provide to any person any report filed under Section 5-22-3 or any information contained therein except:

(1) Pursuant to a lawful subpoena or subpoena duces tecum issued by a state attorney, a United States attorney, or a court, in a criminal judicial proceeding;

(2) Pursuant to any such subpoena issued by a state or federal grand jury; or

(3) Pursuant to any such subpoena issued by a state attorney, a United States attorney, or a court, in the course of a civil judicial proceeding instituted by a state attorney or by a United States attorney.

(Acts 1990, No. 90-469, p. 674, §5.)

§ 5-22-6 Criminal Penalties

(a) Except as provided in subsection (b) of this section, a person who willfully violates any provision of Section 5-22-3 shall in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be punished by a fine of not more than $500.00 or by imprisonment for not more than 12 months or both.

(b) A person who willfully violates any provision of Section 5-22-3, when the violation is:

shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be punished by a fine of not more than $500,000.00 or by imprisonment for not more than five years, or both.

(Acts 1990, No. 90-469, p. 674, §6.)

§ 5-22-7 Immunity from Liability

Except as provided in Section 5-22-6, no financial institution, or director, officer, employee or agent thereof, shall be civilly or criminally liable to any person for acts or omissions done in connection with the keeping or maintaining of records and providing of reports or disclosure thereof as required by this chapter and no cause of action shall exist against any financial institution, director, officer, employee or agent thereof for any action taken or not taken pursuant to or in reliance upon the provisions of this chapter.

(Acts 1990, No. 90-469, p. 674, §7.)

§ 5-22-8 Recoupment of Costs Not Authorized

No part of the cost or expense incurred by the State Revenue Department in recording, maintaining, disposing of or otherwise dealing with the information received by the State Revenue Department pursuant to the provisions of this chapter or otherwise incurred by the State Revenue Department in administering the provisions of this chapter shall be imposed upon or recouped from any financial institution by fees or assessments specially levied or assessed to impose or recoup such cost or expense.

(Acts 1990, No. 90-469, p. 674, §8.)

Chapter 23 State Sponsorship of Financial Institution Credit Card

§ 5-23-1 Definitions

The following terms shall have the meanings ascribed to them unless the context clearly indicates otherwise:

(1) TREASURER. The State Treasurer of Alabama.

(2) FINANCIAL INSTITUTION. Any bank, savings and loans association or credit union operating in Alabama which is chartered under federal or state statutes.

(3) FINANCIAL INSTITUTION CREDIT CARD. A credit card that entitles the holder to make open-account purchases up to an approved amount and which is issued through a financial institution.

(4) SPONSORING ENTITY. An entity, including specifically the State of Alabama, which solicits the use of a particular financial institution credit card bearing the entity’s name in exchange for a fee from the credit card issuer.

(5) STATE FEES. All moneys generated from this program that are remitted to the State of Alabama.

(Acts 1990, No. 90-524, p. 764, §1.)

§ 5-23-2 State Participation in Financial Institution Credit Card Program; Contact with Financial Institutions

The State Treasurer is hereby authorized to participate in a financial institution credit card program for the benefit of the state. Within 180 days of April 19, 1990, the Treasurer shall contact as many financial institutions as, in the Treasurer’s discretion is necessary, to determine if:

(1) The financial institution or its holding company or affiliate currently administers a credit card program;

(2) The credit card program provides a fee or commission on retail sales to the sponsoring entity for the issuance and use of the credit card; and

(3) The credit card program would accept the state as a sponsoring entity.

(Acts 1990, No. 90-524, p. 764, §2.)

§ 5-23-3 Negotiation of State’s Fee; Contracts with Financial Institutions; Use of State Seal and Insignia

(a) If the Treasurer determines that the state may be a sponsoring entity for a financial institution credit card, he shall negotiate and contract for the most favorable rate of return for the state’s fee by a credit card issuer. The state may not offer a more favorable rate to any one credit card issuer over another. The rate must be expressed as a percentage of the gross sales from the use of the credit card.

(b) In participating in a credit card program, the State Treasurer may contract with any number of financial institutions in order to establish the state as a sponsoring entity.

(c) There shall be only one official state sponsored credit card at any given time, and it shall be the official state sponsored credit card authorized by this chapter. It is provided further that the card issuer is authorized to use the official state seal and insignia on said official card.

(d) The state shall not contract to assume any liability for lost or stolen credit cards, nor any other legal debt owed to the financial institutions.

(e) The Treasurer is specifically authorized to extend any contract with a financial institution or institutions previously selected for the credit card program.

(Acts 1990, No. 90-524, p. 764, §3.)

§ 5-23-4 Proceeds

The net proceeds of the state fees shall be transmitted to the state Comptroller and distributed as follows:

(1) Seventy-five percent to the Foundation for Local Schools as provided in Chapter 26C of Title 16, to be allocated to the credit of local school systems.

(2) Twenty-five percent to the Penny Trust Fund as established by Amendment 512 of the Constitution of Alabama of 1901, and by Chapter 15A of Title 41.

(Acts 1990, No. 90-524, p. 764, §5; Act 98-319, p. 535, §11.)

§ 5-23-5 Rules and Regulations

The State Treasurer is authorized to adopt such rules and regulations as may be necessary to implement the Alabama state-sponsored credit card program. The rules may include, without limitation, provisions governing the procedures for contacting financial institutions to determine if they would accept the state as a sponsoring entity for a credit card program and for negotiating, and collecting, the rate for the state’s fee. The financial institution which administers the program may name or rename the card.

(Acts 1990, No. 90-524, p. 764, §6; Act 98-319, p. 535, §12.)

§ 5-23-6 Disclosure of Information

It shall be legal and permissible for the financial institution to request and receive from the state Comptroller a listing of all members of the Teachers’ Retirement System, the Employees’ Retirement System, and the Judicial Retirement System, including the names and addresses of the members on discs, tapes, or other appropriate electronic retrieval systems at actual costs. It shall also be legal and permissible for the financial institution to receive the names and addresses of all persons who purchase the “Helping Schools” distinctive car tags, if the purchasers of the tags have not signed forms disallowing the release of their names and addresses as provided by federal regulations. The financial institution may use the information only for informational or promotional purposes, or both, pertaining to the Alabama state-sponsored credit card card programs as provided by this chapter.

(Act 99-592, p. 1354, §4.)

Chapter 24 Uniform Multiple-Person Accounts Act

Article 1 Definitions and General Provisions

§ 5-24-1 Definitions

In this chapter:

(1) ACCOUNT means a contract of deposit between a depositor and a financial institution, and includes a checking account, savings account, time deposit, certificate of deposit, and share account.

(2) AGENT means a person authorized to make account transactions for a party.

(3) BENEFICIARY means a person named as one to whom sums on deposit in an account are payable on request after death of all parties or for whom a party is named as trustee.

(4) DEVISEE means any person designated in a will to receive a testamentary disposition of real or personal property.

(5) FINANCIAL INSTITUTION means an organization authorized to do business under state or federal laws relating to financial institutions, and includes a bank, trust company, savings bank, building and loan association, savings and loan company or association, and credit union.

(6) HEIRS means those persons, including surviving spouse, who are entitled under the statutes of intestate succession to the property of a decedent.

(7) INCLUDES or INCLUDING means includes, but not limited to, or including, but not limited to.

(8) MULTIPLE-PARTY ACCOUNT means an account payable on request to one or more of two or more parties, whether or not a right of survivorship is mentioned.

(9) PARTY means a person who, by the terms of an account, has a present right, subject to request and the terms of the contract of deposit, to payment from the account other than as a beneficiary or agent.

(10) PAYMENT OF SUMS ON DEPOSIT includes withdrawal, payment to a party or third person pursuant to check or other request, and a pledge of sums on deposit by a party, or a set-off, reduction, or other disposition of all or part of an account pursuant to a pledge or a set-off.

(11) PERSON means an individual, a corporation, an organization, or other legal entity.

(12) PERSONAL REPRESENTATIVE includes executor, administrator, successor personal representative, special administrator, and persons who perform substantially the same function under the law governing their status.

(13) POD DESIGNATION means the designation of:

a. A beneficiary in an account payable on request to one party during the party’s lifetime and on the party’s death to one or more beneficiaries, or to one or more parties during their lifetimes and on death of all of them to one or more beneficiaries; or

b. A beneficiary in an account in the name of one or more parties as trustee for one or more beneficiaries if the relationship is established by the terms of the account and there is no subject of the trust other than the sums on deposit in the account, whether or not payment to the beneficiary is mentioned.

(14) RECEIVE as it relates to notice to a financial institution, means receipt in the principal office of the financial institution in which the account is established, but if the terms of the account require notice at a particular place, in the place required.

(15) REQUEST means a request for payment complying with all terms of the account, including special requirements concerning necessary signatures and regulations of the financial institution; but, for purposes of this chapter, if terms of the account condition payment on advance notice, a request for payment is treated as immediately effective to commence the advance notice and a notice of intent to withdraw is treated as a request for payment.

(16) STATE includes any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, and any territory or possession subject to the legislative authority of the United States.

(17) SUCCESSORS means those persons, other than creditors, who are entitled to property of a decedent under the decedent’s will or otherwise.

(18) SUMS ON DEPOSIT means the balance payable on an account, including interest and dividends earned, whether or not included in the current balance, and any deposit life insurance proceeds added to the account by reason of death of a party.

(19) TERMS OF THE ACCOUNT includes the deposit agreement and other terms and conditions, including the form, of the contract of deposit.

(Acts 1997, No. 97-644, p. 1177, §1.)

§ 5-24-2 Scope of Chapter

This chapter does not apply to (1) an account established for a corporation, partnership, joint venture, other organization for a business purpose, an unincorporated association, or charitable or civic organization, (2) an account controlled by one or more persons as an agent or trustee for an organization described in subdivision (1), or (3) a fiduciary or trust account in which the relationship is established other than by the terms of the account.

(Acts 1997, No. 97-644, p. 1177, §1.)

§ 5-24-3 Types of Account; Existing Accounts

(a) An account may be for a single party or multiple parties. A multiple-party account may be with or without a right of survivorship between the parties. Subject to subsection (c) of Section 5-24-12, either a single-party account or a multiple-party account may have a POD designation, an agency designation, or both.

(b) An account established before, on, or after March 1, 1998, whether in the form prescribed in Section 5-24-4 or in any other form, is either a single-party account or a multiple-party account, with or without right of survivorship, and with or without a POD designation or an agency designation, within the meaning of this chapter, and is governed by this chapter.

(Acts 1997, No. 97-644, p. 1177, §1.)

§ 5-24-4 Forms

(a) A contract of deposit may contain provisions in substantially the following form to establish the type of account provided, and the account shall be governed by the provisions of this chapter applicable to an account of that type: UNIFORM SINGLE- OR MULTIPLE-PARTY ACCOUNT FORM

PARTIES [Name One Or More Parties]:____________________________________ OWNERSHIP[Select One]:SINGLE-PARTY ACCOUNT___________MULTIPLE-PARTY ACCOUNT Parties own account during the lifetime of all parties in proportion to net contributions unless there is clear and convincing evidence of a different intent.RIGHTS AT DEATH[Select One]:SINGLE-PARTY ACCOUNT At death of party, ownership passes as part of party’s estate.SINGLE-PARTY ACCOUNT WITH POD (PAY ON DEATH) DESIGNATION [Name One Or More Beneficiaries]:_________ At death of party, ownership passes to POD beneficiaries and is not part of party’s estate.___________MULTIPLE-PARTY ACCOUNT WITH RIGHT OF SURVIVORSHIP At death of party, ownership passes to surviving parties.___________MULTIPLE-PARTY ACCOUNT WITH RIGHT OF SURVIVORSHIP AND POD (PAY ON DEATH ) DESGINATION [Name One Or More Beneficiaries]:__________________At death of last surviving party, ownership passes to POD beneficiaries and is not part of last surviving party’s estate._______MULTIPLE-PARTY ACCOUNT WITHOUT RIGHT OF SURVIVORSHIP At death of party, deceased party’s ownership passes as part of deceased party’s estate.AGENCY DESIGNATION [Optional] Agents may make account transactions for parties but have no ownership or rights at death unless named as POD beneficiaries. [To Add Agency Designation To Account, Name One Or More Agents]:[Select One]:___________AGENCY DESIGNATION SURVIVES DISABILITY OR INCAPACITY OF PARTIES___________AGENCY DESIGNATION TERMINATES ON DISABILITY OR INCAPACITY OF PARTIES

(b) A contract of deposit that does not contain provisions in substantially the form provided in subsection (a) is governed by the provisions of this chapter applicable to the type of account that most nearly conforms to the depositor’s intent as expressed in the contract of deposit.

(Acts 1997, No. 97-644, p. 1177, §1.)

§ 5-24-5 Designation of Agent

(a) By a signed writing, a party may designate one or more persons other than a party as his or her agent on an account. Unless the terms of the agency designation provide otherwise, the agency designation may be revoked or amended only by the party making the designation or by a guardian, conservator, or other fiduciary appointed by a court of the party’s domicile and charged with the management of the account.

(b) Unless the terms of an agency designation provide otherwise, the agent’s authority survives disability, incompetency, and incapacity of the party making the agency designation. The agent may act for a disabled, incompetent, or incapacitated party until the authority of the agent is revoked.

(c) Death of the party making the agency designation terminates the authority of an agent.

(Acts 1997, No. 97-644, p. 1177, §1.)

§ 5-24-6 Applicability of Chapter

The provisions of Article 2 concerning beneficial ownership as between parties or as between parties and beneficiaries apply only to controversies between those persons and their creditors and other successors, and do not apply to the right of those persons to payment as determined by the terms of the account. Article 3 governs the liability and set-off rights of financial institutions that make payments pursuant to it.

(Acts 1997, No. 97-644, p. 1177, §1.)

Article 2 Ownership as Between Parties and Others

§ 5-24-11 Ownership During Lifetime

(a) In this section, “net contribution” of a party means the sum of all deposits to an account made by or for the party, less all payments from the account made to or for the party which have not been paid to or applied to the use of another party and a proportionate share of any charges deducted from the account, plus a proportionate share of any interest or dividends earned, whether or not included in the current balance. The term includes any deposit life insurance proceeds added to the account by reason of death of the party whose net contribution is in question.

(b) During the lifetime of all parties, an account belongs to the parties in proportion to the net contribution of each to the sums on deposit, unless there is clear and convincing evidence of a different intent. As between parties married to each other, in the absence of proof otherwise, the net contribution of each is presumed to be an equal amount.

(c) A beneficiary in an account having a POD designation has no right to sums on deposit during the lifetime of any party.

(d) An agent in an account with an agency designation has no beneficial right to sums on deposit.

(Acts 1997, No. 97-644, p. 1177, §1.)

§ 5-24-12 Rights at Death

(a) Except as otherwise provided in this chapter, on death of a party sums on deposit in a multiple-party account belong to the surviving party or parties. If two or more parties survive and one is the surviving spouse of the decedent, the amount to which the decedent, immediately before death, was beneficially entitled under Section 5-24-11 belongs to the surviving spouse. If two or more parties survive and none is the surviving spouse of the decedent, the amount to which the decedent, immediately before death, was beneficially entitled under Section 5-24-11 belongs to the surviving parties in equal shares, and augments the proportion to which each survivor, immediately before the decedent’s death, was beneficially entitled under Section 5-24-11, and the right of survivorship continues between the surviving parties.

(b) In an account with a POD designation:

(1) On death of one of two or more parties, the rights in sums on deposit are governed by subsection (a).

(2) On death of the sole party or the last survivor of two or more parties, sums on deposit belong to the surviving beneficiary or beneficiaries. If two or more beneficiaries survive, sums on deposit belong to them in equal and undivided shares, and there is no right of survivorship in the event of death of a beneficiary thereafter. If no beneficiary survives, sums on deposit belong to the estate of the last surviving party.

(c) Sums on deposit in a single-party account without a POD designation, or in a multiple-party account that, by the terms of the account, is without right of survivorship, are not affected by death of a party, but the amount to which the decedent, immediately before death, was beneficially entitled under Section 5-24-11 is transferred as part of the decedent’s estate. A POD designation in a multiple-party account without right of survivorship is ineffective. For purposes of this section, designation of an account as a tenancy in common establishes that the account is without right of survivorship.

(d) The ownership right of a surviving party or beneficiary, or of the decedent’s estate, in sums on deposit is subject to requests for payment made by a party before the party’s death, whether paid by the financial institution before or after death, or unpaid. The surviving party or beneficiary, or the decedent’s estate, is liable to the payee of an unpaid request for payment. A proceeding to assert such liability must be commenced within one year after death of the decedent. The liability is limited to a proportionate share of the amount transferred under this section, to the extent necessary to discharge the request for payment.

(Acts 1997, No. 97-644, p. 1177, §1.)

§ 5-24-13 Alteration of Rights

(a) Rights at death under Section 5-24-12 are determined by the type of account at the death of a party. The type of account may be altered by written notice given by a party to the financial institution to change the type of account or to stop or vary payment under the terms of the account. The notice must be signed by a party and received by the financial institution during the party’s lifetime.

(b) A right of survivorship arising from the express terms of the account, Section 5-24-12, or a POD designation, may not be altered by will.

(Acts 1997, No. 97-644, p. 1177, §1.)

§ 5-24-14 Accounts and Transfers Nontestamentary

Except as a consequence of, and to the extent directed by, Section 5-24-15, a transfer resulting from the application of Section 5-24-12 is effective by reason of the terms of the account involved and this chapter and is not testamentary or subject to estate administration.

(Acts 1997, No. 97-644, p. 1177, §1.)

§ 5-24-15 Rights of Creditors and Others

(a) If other assets of the estate are insufficient, a transfer resulting from a right of survivorship or POD designation under this chapter is not effective against the estate of a deceased party to the extent needed to pay claims against the estate and statutory allowances to the surviving spouse and children.

(b) A surviving party or beneficiary who receives payment from an account after death of a party is liable to account to the personal representative of the decedent for a proportionate share of the amount received to which the decedent, immediately before death, was beneficially entitled under Section 5-24-11, to the extent necessary to discharge the claims and allowances described in subsection (a) remaining unpaid after application of the decedent’s estate. A proceeding to assert the liability may not be commenced unless the personal representative has received a written demand by the surviving spouse, a creditor, a child, or a person acting for a child of the decedent. The proceeding must be commenced within one year after death of the decedent.

(c) A surviving party or beneficiary against whom a proceeding to account is brought may join as a party to the proceeding a surviving party or beneficiary of any other account of the decedent.

(d) Sums recovered by the personal representative must be administered as part of the decedent’s estate. This section does not affect the protection from claims of the personal representative or estate of a deceased party provided in Section 5-24-26 for a financial institution that makes payment in accordance with the terms of the account.

(e) In this section:

(1) CHILD includes any individual entitled to take as a child by intestate succession from the parent whose relationship is involved and excludes any person who is only a stepchild, a foster child, a grandchild, or any more remote descendant.

(2) CLAIMS, in respect to the estate of a decedent, includes liabilities of the decedent whether arising in contract, tort, or otherwise, and liabilities of the estate which arise at or after the death of the decedent, including funeral expenses and expenses of administration. The term does not include estate or inheritance taxes, or demands or disputes regarding title of a decedent to specific assets alleged to be included in the estate.

(Acts 1997, No. 97-644, p. 1177, §1.)

Article 3 Protection of Financial Institutions

§ 5-24-21 Authority of Financial Institution

A financial institution may enter into a contract of deposit for a multiple-party account to the same extent it may enter into a contract of deposit for a single-party account, and may provide for a POD designation and an agency designation in either a single-party account or a multiple-party account. A financial institution need not inquire as to the source of a deposit to an account or as to the proposed application of a payment from an account. A financial institution may answer “indebted”, or a similar answer, for the entire amount of an account upon receipt of a garnishment, levy, or similar process involving a party and pay the entire amount in the account pursuant to the process even though the process is issued in the name of fewer than all parties. The parties on the account may assert their claims to ownership of the account in the proceedings out of which the process arose or was issued.

(Acts 1997, No. 97-644, p. 1177, §1.)

§ 5-24-22 Payment on Multiple-Party Account

A financial institution, on request, may pay sums on deposit in a multiple-party account to:

(1) One or more of the parties, whether or not another party is disabled, incapacitated, or deceased when payment is requested and whether or not the party making the request survives another party; or

(2) The personal representative, if any, of a deceased party if proof of death is presented to the financial institution showing that the deceased party was the survivor of all other persons named on the account either as a party or beneficiary, unless the account is without right of survivorship under Section 5-24-12; or

(3) The persons named in Section 5-5A-38, in accordance with the procedures set forth in Sections 5-5A-38 and 5-5A-39.

(Acts 1997, No. 97-644, p. 1177, §1.)

§ 5-24-23 Payment on Pod Designation

A financial institution, on request, may pay sums on deposit in an account with a POD designation to:

(1) One or more of the parties, whether or not another party is disabled, incapacitated, or deceased when the payment is requested and whether or not a party survives another party;

(2) The beneficiary or beneficiaries, if proof of death is presented to the financial institution showing that the beneficiary or beneficiaries survived all persons named as parties; or

(3) The personal representative, if any, if proof of death is presented to the financial institution showing that the deceased party was the survivor of all other persons named on the account either as a party or beneficiary; or

(4) The persons named in Section 5-5A-38, in accordance with the procedures in Sections 5-5A-38 and 5-5A-39.

(Acts 1997, No. 97-644, p. 1177, §1.)

§ 5-24-24 Payment to Designated Agent

A financial institution, on request of an agent under an agency designation for an account, may pay to the agent sums on deposit in the account, whether or not a party is disabled, incompetent, incapacitated, or deceased when the request is made or received, and whether or not the authority of the agent terminates on the death, disability, incompetency, or incapacity of a party.

(Acts 1997, No. 97-644, p. 1177, §1.)

§ 5-24-25 Payment to Minor

If a financial institution is required or permitted to make payment pursuant to this chapter to a minor designated as a beneficiary, payment may be made pursuant to the Uniform Transfers to Minors Act.

(Acts 1997, No. 97-644, p. 1177, §1.)

§ 5-24-26 Discharge

(a) Payment made pursuant to this chapter in accordance with the type of account discharges the financial institution from all claims for amounts so paid, whether or not the payment is consistent with the beneficial ownership of the account as between parties, beneficiaries, or their successors. Payment may be made whether or not a party, beneficiary, or agent is disabled, incapacitated, or deceased when payment is requested, received, or made.

(b) Protection of a financial institution under this section does not affect the rights of parties in disputes between themselves or their successors concerning the beneficial ownership of sums on deposit in accounts or payments made from accounts.

(Acts 1997, No. 97-644, p. 1177, §1.)

§ 5-24-27 Set-Off

Without qualifying any other statutory right to set-off or lien and subject to any contractual provision between a party and a financial institution, if any party is indebted to a financial institution, the financial institution has a right to set-off against the entire amount of the account without regard to the net contribution of the parties to the account.

(Acts 1997, No. 97-644, p. 1177, §1.)

Article 4 Short Title, Construction, Transitional Provisions

§ 5-24-31 Short Title

This chapter may be cited as the Uniform Multiple-Person Accounts Act.

(Acts 1997, No. 97-644, p. 1177, §1.)

§ 5-24-32 Uniformity of Application and Construction

This chapter shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this chapter among states enacting it.

(Acts 1997, No. 97-644, p. 1177, §1.)

§ 5-24-33 Supplementary General Principles of Law Applicable

Unless displaced by the particular provisions of this chapter, the principles of law and equity supplement its provisions.

(Acts 1997, No. 97-644, p. 1177, §1.)

§ 5-24-34 Transitional Provisions

On March 1, 1998:

(1) An act done before March 1, 1998, and any accrued right is not impaired by this chapter. If a right is acquired, extinguished, or barred on the expiration of a prescribed period of time that has commenced to run by the provisions of any statute before March 1, 1998, the provisions shall remain in force with respect to that right.

(2) Any rule of construction or presumption provided in this chapter applies to accounts established before March 1, 1998, unless there is a clear indication of a contrary intent.

(Acts 1997, No. 97-644, p. 1177, §1.)

Chapter 25 Mortgage Brokers Licensing Act

§ 5-25-1 Short Title

This chapter shall be known and cited as the Mortgage Brokers Licensing Act.

(Act 2001-692, p. 1439, §1.)

§ 5-25-2 Definitions

For purposes of this chapter, the following terms shall have the following meanings:

(1) BORROWER. A natural person who submits an application for a loan secured by a first or subordinate mortgage or deed of trust on a single-family to four-family home to be occupied by the borrower as the borrower’s primary residence.

(2) COMMITMENT. A written statement by a lender that sets forth the terms and conditions upon which the lender is willing to make a particular mortgage loan to a particular borrower. A good faith estimate provided under the Federal Real Estate Settlement Procedures Act is not a commitment for the purposes of Act 2009-624.

(3) CONTROL. The direct or indirect possession of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise, and shall include the terms controlling, controlled by, and under common control with.

(4) DEPARTMENT. The State Banking Department of Alabama.

(5) EXECUTIVE OFFICER. The chief executive officer, the president, the principal financial officer, the principal operating officer, each vice president with responsibility involving policy-making functions for a significant aspect of a person’s business, the secretary, the treasurer, or any other person performing similar managerial or supervisory functions with respect to any organization whether incorporated or unincorporated.

(6) FINANCIAL STATEMENT. A financial statement prepared in accordance with standard accounting practices and procedures under the supervision of a certified public accountant.

(7) LICENSE. A license issued by the department under this chapter to act as a mortgage broker.

(8) LICENSEE. A person who is licensed as a mortgage broker under this chapter.

(9) MORTGAGE BROKER. Any person who directly or indirectly solicits, processes, places, or negotiates mortgage loans for a borrower, or offers to solicit, process, place, or negotiate mortgage loans for a borrower.

(10) MORTGAGE LOAN. A loan or agreement to loan money made to a natural person, which loan is secured by a deed to secure debt, security deed, mortgage, security instrument, or other document representing a security interest or lien upon any interest in single-family to four-family residential real estate located in Alabama, regardless of where made, including the renewal or refinancing of any loan. Without limitation, a “mortgage loan” does not include any document which creates a lien or security interest in a fixture which is attached to residential real estate.

(11) NATIONWIDE MORTGAGE LICENSING SYSTEM AND REGISTRY. A mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for the licensing and registration of mortgage loan originators.

(12) PERSON. Any individual, sole proprietorship, corporation, limited liability company, partnership, estate, trust, or any other group of individuals, however organized.

(13) PRINCIPAL. A natural person who, directly or indirectly, owns or controls an ownership interest of 10 percent or more in a corporation or any other form of business organization, regardless of whether the natural person owns or controls the ownership interest through one or more natural persons or one or more proxies, powers of attorney, nominees, or other entities or devices, or any combination thereof.

(14) RESIDENTIAL REAL ESTATE. Any real property located in Alabama upon which is constructed or intended to be constructed a dwelling.

(15) SERVICE A MORTGAGE LOAN. The collection or remittance for another, or the right to collect or remit for another, of payments of principal, interest, trust items such as insurance and taxes, and any other payments pursuant to a mortgage loan.

(16) SUPERVISOR. The Supervisor of the Bureau of Loans of the department.

(Act 2001-692, p. 1439, §2; Act 2009-624, p. 1891, §1.)

§ 5-25-3 Persons Excluded

The following persons are not subject to the provisions of this chapter:

(1) Any depository institution as defined in Section 3 of the Federal Deposit Insurance Act, any subsidiary institution that is owned and controlled by a depository institution, and employees of any of the foregoing. Bank holding companies and subsidiaries of bank holding companies, thrift holding companies and subsidiaries of thrift holding companies, trust companies, savings or building and loan associations, savings banks and other thrift institutions, credit unions, and all other affiliates of each of the above persons if more than 50 percent of the affiliate’s shares or other ownership interests are owned or controlled by such person, and federally or state constituted agencies and employees of any of the foregoing.

(2) Any person licensed under Section 5-19-22.

(3) An attorney licensed to practice law in Alabama who is not principally engaged in negotiating mortgage loans when the attorney renders services in the course of his or her practice as an attorney.

(4) Any person performing any act relating to mortgage loans under order of any court.

(5) A natural person:

a. Who is employed by a licensed mortgage broker or any person exempted from the licensing requirements of this chapter when acting within the scope of employment with the licensee or exempted person; however, mortgage loan originators must be licensed or registered in accordance with the Alabama Secure and Fair Enforcement for Mortgage Licensing Act; or

b. Who solicits mortgage loans exclusively on behalf of a licensed mortgage broker or any person exempted from the licensing requirements of this chapter when the natural person is acting within the scope of the agency of the licensee or exempted person; however, independent contractors that originate, process, or underwrite mortgage loans shall not originate, process, or underwrite mortgage loans unless they are licensed or registered in accordance with the Alabama Secure and Fair Enforcement for Mortgage Licensing Act.

(6) Any licensed real estate salesperson or broker who provides mortgage loan assistance in the course of doing business unless the real estate salesperson or broker is compensated for providing mortgage loan assistance.

(Act 2001-692, p. 1439, §3; Act 2009-624, p. 1891, §1.)

§ 5-25-4 License to Transact Business as a Mortgage Broker

(a) On and after January 1, 2002, no person shall transact business in this state directly or indirectly as a mortgage broker unless he or she is licensed as a mortgage broker by the department, or is a person exempted from the licensing requirements pursuant to Section 5-25-3.

(b) A licensee shall obtain a license for each location where the business of the mortgage broker is transacted.

(c) On or after January 1, 2002, every person who directly or indirectly controls a person who violates subsection (a), including a general partner, executive officer, joint venturer, or director of the person, violates subsection (a) with and to the same extent as the person, unless the person whose violation arises under this subsection sustains the burden of proof that he or she did not know and, in the exercise of reasonable care, could not have known of the existence of the facts by reason of which the original violation is alleged to exist.

(d) A violation of subsection (a), (b), or (c) does not affect the obligation of the borrower under the terms of the mortgage loan, or the enforceability of the mortgage loan documents. No private cause of action exists against a mortgage broker, licensee, or any person who controls a mortgage broker for any violation of subsection (a), (b), or (c). The department shall provide for the distribution or availability of information regarding approved or revoked licenses.

(Act 2001-692, p. 1439, §4.)

§ 5-25-5 Application for License

(a) An application for a license under this chapter shall be made in writing, under oath, and in the form as the department may prescribe.

(b) The application shall include all of the following:

(1) The legal name, business address, and telephone number of the applicant and, if the applicant is a partnership, association, corporation, or other group of individuals, however organized, the legal name, residence, and business address of every principal, together with the resume of the applicant and of every principal of the applicant.

(2) The name under which the applicant will conduct business in the state.

(3) The complete address of the applicant’s initial registered office and any other locations at which the applicant will engage in any business activity covered by this chapter.

(4) Any other data, financial statements, and pertinent information as the department may require with respect to the applicant, its directors, principals, trustees, officers, members, or agents.

(5) Evidence that at least one principal or executive officer has at least two years of experience in the mortgage industry. This experience shall have been within the previous four years from the date of application. Evidence should include the principal’s resume and contact numbers for the company for which the individual worked or is currently working. Each principal or executive officer that originates mortgage loans shall also obtain a mortgage loan originator’s license under the Alabama Secure and Fair Enforcement for Mortgage Licensing Act.

(c) The applications shall be filed together with the following:

(1) A nonrefundable fee of six hundred dollars ($600).

(2) A financial statement of the applicant, prepared within 90 days of the filing of the application and covering the most recent fiscal year preceding the date of application, which demonstrates that the applicant has a bona fide and verifiable tangible net worth capital of twenty-five thousand dollars ($25,000). A consolidated Securities and Exchange Commission Annual Report Form 10-K shall meet the requirements of this chapter for the licensee if it shows a net worth or stockholder’s equity of the licensee in an amount of at least twenty-five thousand dollars ($25,000). The department may require the applicant or licensee to obtain a surety bond in lieu of the net worth requirement in order to fulfill the requirements of the Alabama Secure and Fair Enforcement for Mortgage Licensing Act. The amount of the surety bond will be determined by the department. The surety bond will be in favor of the State of Alabama for the use, benefit, and indemnity of any person who suffers damage or loss as a result of the company’s breach of contract or of any obligation arising therefrom or any violation of the law.

(3) A set of fingerprints from any local law enforcement agency for the following:

a. All persons acting as a sole proprietorship.

b. All partners in a partnership.

c. All principals of a corporation.

(d) The department may require applicants to apply through the Nationwide Mortgage Licensing System and Registry. In order to carry out this requirement, the supervisor is authorized to participate in the Nationwide Mortgage Licensing System and Registry. For this purpose, the supervisor may establish by rule or order requirements as necessary, including, but not limited to, the following:

(1) Background checks that include any of the following:

a. Criminal history through fingerprint or other database.

b. Civil or administrative records.

c. Credit history.

d. Any other information deemed necessary by the Nationwide Mortgage Licensing System and Registry.

(2) The payment of fees to apply for or renew licenses through the Nationwide Mortgage Licensing System and Registry.

(Act 2001-692, p. 1439, §5; Act 2002-526, p. 1374, §1; Act 2009-624, p. 1891, §1.)

§ 5-25-6 Issuance of License

(a) Upon receipt of a completed application for a license together with all items set forth in subsection (c) of Section 5-25-5, the department shall conduct such an investigation as it deems necessary to determine that the applicant and its officers, directors, and principals are of good character and ethical reputation and will operate honestly and fairly within the purposes of this chapter; and that the applicant demonstrates reasonable financial responsibility.

(b) The department may not license any applicant unless it is satisfied that the applicant may be expected to operate its mortgage brokerage activities in compliance with the laws of this state.

(c) The department may not issue a license if it finds that the applicant, or any person who is a director, executive officer, partner, or principal of the applicant, has been convicted of a felony or offense which involves breach of trust, fraud, or dishonesty in any jurisdiction. For the purposes of this chapter, a person shall be deemed to have been convicted if the person has pled guilty to a crime before a domestic, foreign, or military court or federal magistrate, or has been found guilty of a crime by the decision or judgment of a domestic, foreign, or military court or federal magistrate or by the verdict of a jury, irrespective of the pronouncement of sentence or the suspension of a sentence.

(d) The department may deny a license or otherwise restrict a license if it finds that the applicant, or any person who is a director, executive officer, partner, or principal of the applicant, has had a license or registration to conduct mortgage related activity denied, revoked, or suspended in any jurisdiction.

(e) Within 90 days after receipt of a completed application together with all items set forth in subsection (c) of Section 5-25-5, the department shall either grant or deny the request for license.

(Act 2001-692, p. 1439, §6; Act 2009-624, p. 1891, §1.)

§ 5-25-7 Expiration and Renewal

(a) All licenses issued pursuant to this chapter shall expire on December 31 of each year. Application for renewal shall be made annually on or before December 1 of each year to be effective for the following year.

(b) Any licensee making proper application, including all supporting documents and all applicable fees required by this chapter and any regulations promulgated by the department, for a license renewal to operate during the following calendar year, and filing the application December 1, shall be permitted to continue to operate pending final approval or disapproval of the application for the license renewal for the following year if final approval or disapproval is not granted prior to February 1.

(c) Each renewal application shall be accompanied by a five hundred dollar ($500) annual license application fee, which fee will not be refunded or prorated.

(d) Any person holding a license pursuant to this chapter who fails to file a proper application for a license renewal for the following year, including the proper fee accompanying the application, on or before February 1, and who files an application after February 1, may be required to pay, in addition to the license fee, a penalty of 10 percent for each month or part thereof that the licensee is delinquent in the payment of such license fee.

(e) The department may require a licensee to renew a license through the Nationwide Mortgage Licensing System and Registry.

(Act 2001-692, p. 1439, §7; Act 2009-624, p. 1891, §1.)

§ 5-25-8 License Requirements

(a) Each license issued under this chapter shall state the address of the licensee’s principal place of business and the name of the licensee.

(b) A licensee shall post the license in a conspicuous place in each place of business of the licensee.

(c) A license may not be transferred or assigned.

(d) No licensee shall transact business under any name other than that designated in the license.

(e) Each licensee shall notify the department in writing of any change in the address of its principal place of business or of any change in the address of any licensed location 15 days prior to such change, and any change of officers, directors, or principal of the licensee, not later than 30 business days after the change is effective.

(f) Within 15 days of the occurrence of any one of the following events, a licensee shall file a written report with the supervisor describing the event and its expected impact on the activities of the licensee in this state:

(1) The filing for bankruptcy or reorganization by the licensee.

(2) The institution of revocation or suspension proceedings against the licensee by any state or governmental authority.

(3) Any felony indictment of the licensee or any of its directors, executive officers, or principals.

(4) Any felony conviction of the licensee or any of its directors, executive officers, or principals.

(Act 2001-692, p. 1439, §8; Act 2009-624, p. 1891, §1.)

§ 5-25-9 Maintenance and Examination of Records, Etc

(a) Any person required to be licensed under this chapter shall maintain in its offices or such other location as the department shall permit the books, accounts, and records as the department may reasonably require in order to determine whether the person is complying with this chapter and rules and regulations adopted pursuant to this chapter. These books, accounts, and records shall be maintained apart and separate from any other business in which the person is involved.

(b) The department may, by its designated officers and employees, as often as it deems necessary, but at least once every 24 months, investigate and examine the affairs, business, premises, and records of any person required to be licensed under this chapter insofar as they pertain to any business for which a license is required by this chapter.

(c) The department, at its discretion, may:

(1) Cause an examination to be made at the licensee’s place of business of the records and transactions of such licensee.

(2) Require the licensee to make his or her records and transactions available to the supervisor at the office of the supervisor.

(d) As the cost of examination, the licensee shall pay the supervisor an examination fee as provided by Section 5-2A-24, which shall be collected and paid into the special fund provided by Section 5-2A-20, and used in the supervision and examination of licensees. Each licensee shall preserve all relevant records for a period of at least three years after making the last entry on any transaction, and the supervisor shall have free access thereto at the licensee’s place of business at all reasonable times. If the supervisor has probable cause to believe that a person has engaged in an activity which violates this chapter, the supervisor may compel the production of such books and records of the licensee as he or she has probable cause to believe are relevant to the alleged violation.

(e) If the licensee’s records are located outside this state, the licensee may either make them available to the supervisor at a convenient location within this state, or pay the reasonable and necessary expenses for the supervisor or a representative of the supervisor to examine them at the place where they are maintained. The supervisor may designate representatives, including comparable officials of the state in which the records are located, to inspect them on his or her behalf.

(f) Reports of examinations and investigations, all working papers related thereto and the books and records of licensees, are to be held strictly confidential, and may not be produced, reproduced, or otherwise made available by the department to any persons other than those within the department, the licensee, other governmental agencies, and their respective counsel. This subsection does not apply to disclosures in proceedings brought by the supervisor pursuant to this chapter.

(g) A licensee’s books and records may be maintained, produced, and reproduced for examination by photostatic, photographic, microphotographic, optical imaging, or by any other generally recognized process for data storage and reproduction.

(h) Nothing contained herein shall prohibit discovery of these materials by and through a lawfully issued subpoena from a court of competent jurisdiction.

(Act 2001-692, p. 1439, §9; Act 2009-624, p. 1891, §1.)

§ 5-25-10 Annual Report

(a) Each licensee shall annually, on or before May 1, file a written report with the department containing that information the department may require concerning the licensee’s business and operations during the preceding calendar year, including financial statements.

(b) Reports shall be made under oath and shall be in the form prescribed by the department. Any licensee who fails to prepare and file with the department by May 1 the report required by this section shall pay the department a late penalty of one hundred dollars ($100) for each day after May 1. The department may, in its discretion, relieve any licensee from the payment of any penalty, in whole or in part, if good cause is shown. If a licensee fails to pay a penalty from which it has not been relieved, the department may, through the Attorney General, maintain an action at law to recover the penalty.

(Act 2001-692, p. 1439, §10.)

§ 5-25-11 Principal Place of Business; Branch Office

A licensee may transact business from both a principal place of business and one or more branch offices provided each is licensed under this chapter. A principal place of business or branch office shall consist of at least one enclosed room or building of stationary construction in which negotiations of mortgage loan transactions may be conducted and carried on in privacy and in which all of the books, records, and files pertaining to mortgage loan transactions are maintained. Each principal place of business and branch office shall also be in compliance with local zoning ordinances and have posted any occupational licenses required by local government agencies. It is the responsibility of the licensee to meet local zoning ordinances and obtain the required occupational licenses; however, zoning for the principal place of business or the branch office shall not be residential.

(Act 2001-692, p. 1439, §11; Act 2009-624, p. 1891, §1.)

§ 5-25-12 Disclosure by Licensee; Prohibited Activities

(a) Licensees shall:

(1) Prior to the collection of a mortgage broker fee from a borrower, disclose to the borrower in writing the nature of the mortgage broker’s relationship to the borrower and the method by which the mortgage broker will be compensated for services.

(2) Comply with applicable federal and state laws, rules, and regulations.

(b) Licensees shall not:

(1) Intentionally misrepresent or conceal a material fact, term, or condition of the transaction to which he or she is a party, pertinent to an application for a mortgage loan or a borrower.

(2) Fail to use due diligence and make reasonable efforts to procure a mortgage loan on behalf of the borrower.

(3) Fail to disburse funds in accordance with a written commitment to make a mortgage loan.

(4) Delay closing of a mortgage loan for the purpose of increasing interest rate, costs, fees, or other charges payable by the borrower.

(5) Collect any mortgage broker fees before a conditional commitment is obtained from the lender by the mortgage broker.

(Act 2001-692, p. 1439, §12; Act 2009-624, p. 1891, §1.)

§ 5-25-13 Rules and Regulations

(a) The department may promulgate those rules and regulations, not inconsistent with law, necessary for the enforcement of this chapter.

(b) (1) Prior to the adoption, amendment, or repeal of any regulation, the supervisor shall give at least 35 days’ notice of its intended action by filing notice of intended action with the Legislative Reference Service for publication in the Alabama Administrative Monthly. The date of publication in the Alabama Administrative Monthly shall constitute the date of notice. The notice shall include a statement of either the terms or substance of the intended action or a description of the subject and issues involved, shall specify a notice period ending not less than 35 days or more than 90 days from the date of the notice, during which period interested persons may present their views thereon, and shall specify the place where, and the manner in which, interested persons may present their views thereon.

(2) All interested persons shall have a reasonable opportunity to submit data, views, or arguments, orally or in writing. The supervisor shall consider all written and oral submissions respecting the proposed regulation. Upon adoption of a regulation, the supervisor, if conflicting views are submitted on the proposed regulation and if requested in writing to do so by an interested person prior to adoption, shall issue a concise statement of the principal reasons for and against its adoption, incorporating therein its reasons for overruling any considerations urged against its adoption.

(3) Notwithstanding any other provision of this chapter to the contrary, if the supervisor finds that an immediate danger to the public health, safety, or welfare requires adoption of a regulation upon fewer than 35 days’ notice or that action is required by or to comply with a federal statute or regulation which requires adoption of a regulation upon fewer than 35 days’ notice and states in writing its reasons for that finding, it may proceed without prior notice or hearing or upon any abbreviated notice and hearing that it finds practicable, to adopt an emergency regulation. The regulation shall become effective immediately, unless otherwise stated therein. The regulation may be effective for a period of not longer than 120 days unless within such time the supervisor complies with the procedures set forth in subdivision (1) and subdivision (2). The adoption of the same or a substantially similar regulation following the procedures set forth in subdivision (1) and subdivision (2) at any time is not limited by the adoption of a regulation following the emergency regulation procedure set forth in this subdivision.

(4) Any regulation proposed by the department prior to May 31, 2004, that, in the majority judgment of the Speaker of the House, the Governor, and the Lieutenant Governor, unreasonably limits the ability of new licenses, shall not be effective until May 31, 2004.

(5) A person who has exhausted all administrative remedies available within the department, other than rehearing, and who is aggrieved by a final decision of the supervisor with respect to a regulation, is entitled to judicial review under this chapter. All proceedings for review shall be instituted by filing of notice of appeal or review and a cost bond with the supervisor to cover the reasonable costs of preparing the transcript of the proceeding under review, unless waived by the supervisor or the court on a showing of substantial hardship. The notice of appeal and cost bond must be filed within 42 days after the date the supervisor issued its final regulation. The appeal shall be filed in the Circuit Court of Montgomery County. The regulation will be in effect pending the outcome of any appeal unless the supervisor stays the effective date of the regulation.

(c) Interpretations, opinions, and approvals shall protect, to the extent provided in subsection (c), as applicable, both the licensee at whose request they were issued and any other licensee in a materially like circumstance.

(Act 2001-692, p. 1439, §13.)

§ 5-25-14 Denial, Suspension, or Revocation of License

(a) The department may suspend or revoke a license on any ground on which it might refuse to issue an original license, or for a violation of any provision of this chapter or any rule or regulation issued under this chapter or for failure of the licensee to pay, within 30 days after it becomes final and nonappealable, a judgment recovered in any court within this state by a claimant or creditor in an action arising out of the licensee’s business in this state as a mortgage broker. In these actions, the hearing and appeal procedures provided for in those sections shall be the only procedures required under this chapter.

(b) Notice of the department’s intention to enter an order denying an application for a license under this chapter or of an order suspending or revoking a license under this chapter shall be given to the applicant or licensee in writing, sent by registered or certified mail addressed to the principal place of business of the applicant or licensee. Within 20 days of the date of the notice of intention to enter an order of denial, suspension, or revocation under this chapter, the applicant or licensee may request in writing a hearing to contest the order. If a hearing is not requested in writing within 20 days of the date of the notice of intention, the department shall enter a final order regarding the denial or suspension. Any final order of the department denying, suspending, or revoking a license shall state the grounds upon which it is based and shall be effective on the date of issuance. A copy of the final order shall be forwarded promptly by registered or certified mail addressed to the principal place of business of the applicant or licensee.

(c) A decision of the department denying, suspending, or revoking a license shall be conclusive, except that a licensee aggrieved by an order of the department under this section may obtain judicial review of the order and the department may obtain an order of the court for enforcement of its order in the circuit court. The proceedings shall be governed by the provisions of Section 5-25-15.

(d) A revocation, suspension, or surrender of a license shall not impair or affect the obligation of a preexisting contract between the licensee and another person entered into prior to the effective date of the license revocation, suspension, or surrender.

(Act 2001-692, p. 1439, §14.)

§ 5-25-15 Appeal

(a) Any interested party or intervener may appeal an order of the department to the Circuit Court of Montgomery County or to the circuit court of the county in which such party has its principal place of business in Alabama by filing notice of appeal with the department and with the register or clerk of the circuit court within 30 days from the date of said final order. The department’s findings shall be prima facie correct, but the circuit court may hear such appeal according to its own rules and procedures, including the taking of additional testimony and staying the order. In the circuit court, the trial shall be de novo. The court may, if it decides that the department has erred to the prejudice of appellant’s substantial rights in its application of the law or that the order was based upon findings of fact contrary to the substantial weight of the evidence, remand the proceeding to the department for further action in conformity with the direction of the court or may enter such order as the court deems appropriate.

(b) Either party may appeal from the circuit court to the Supreme Court of Alabama within 42 days from the date of entry of the order of the circuit court.

(Act 2001-692, p. 1439, §15.)

§ 5-25-16 Enforcement and Penalties

(a) Whenever it appears to the supervisor that any person required to be licensed or registered under this chapter has violated any law of this state or any order or regulation of the department, the supervisor after notice and hearing may order such person or an affiliate acting on behalf of such person to cease and desist from the unauthorized practices.

(b) Any person required to be licensed under this chapter or an affiliate of such person who is found by the supervisor after notice and hearing to have violated this chapter or the terms of any order issued pursuant to this section may be ordered by the supervisor to pay a civil penalty of not more than three thousand dollars ($3,000) in the aggregate for all violations of a similar nature or, where violations are knowing violations, not more than fifteen thousand dollars ($15,000), in addition to any other penalties provided by law, including, but not limited to, revocation of any licenses issued under this chapter.

(c) Violations shall be of a similar nature if the violations consist of the same or substantially the same course of action or practice irrespective of the number of times the course of action or practice occurred. All civil penalties collected shall be paid into the special fund provided by Section 5-2A-20, and used in the supervision and examination of licensees. At the hearing, the person or affiliate of a person shall be entitled to be represented by counsel. A person or affiliate of a person aggrieved by an order of the supervisor under this section may obtain judicial review of the order and the supervisor may obtain an order of the court for enforcement of its order in the circuit court. The proceedings shall be governed by the provisions of Section 5-19-26.

(Act 2001-692, p. 1439, §16.)

§ 5-25-17 Violations of Chapter

Any person who willfully violates any of the provisions of this chapter shall be guilty of a misdemeanor and shall be punished by imprisonment for not more than one year or by a fine of not more than one thousand dollars ($1,000), or by both fine and imprisonment.

(Act 2001-692, p. 1439, §17.)

§ 5-25-18 Disposition of Funds

All fees and administrative penalties collected shall be paid into the special fund provided by Section 5-2A-20 and used in the supervision and examination of licensees.

(Act 2001-692, p. 1439, §18.)

Chapter 26 Alabama Secure and Fair Enforcement for Mortgage Licensing Act of 2009

§ 5-26-1 Short Title

This chapter may be cited as the Alabama Secure and Fair Enforcement for Mortgage Licensing Act of 2009 or Alabama S.A.F.E. Mortgage Licensing Act of 2009.

(Act 2009-627, p. 1907, §1.)

§ 5-26-2 Legislative Findings

The activities of mortgage loan originators and the origination or offering of financing for residential real property have a direct, valuable, and immediate impact upon Alabama’s consumers, Alabama’s economy, the neighborhoods and communities of Alabama, and the housing and real estate industry. The Legislature finds that accessibility to mortgage credit is vital to the state’s citizens. The Legislature also finds that it is essential for the protection of the citizens of Alabama and the stability of Alabama’s economy that reasonable standards for licensing and regulation of the business practices of mortgage loan originators be imposed. Therefore the Legislature establishes within this chapter:

(a) SYSTEM OF SUPERVISION AND ENFORCEMENT. An effective system of supervision and enforcement of the mortgage lending industry, including:

(i) The authority to issue licenses to conduct business under this chapter, including the authority to write rules or regulations or adopt procedures necessary to the licensing of persons covered under this chapter.

(ii) The authority to deny, suspend, condition, or revoke licenses issued under this chapter.

(iii) The authority to examine, investigate, and conduct enforcement actions as necessary to carry out the intended purposes of this chapter, including the authority to subpoena witnesses and documents, enter orders, including cease and desist orders, order restitution and monetary penalties, and order the removal and ban of individuals from office or employment.

(b) BROAD ADMINISTRATIVE AUTHORITY. That the supervisor shall have the broad administrative authority to administer, interpret, and enforce this chapter, and promulgate rules or regulations implementing this chapter, in order to carry out the intentions of the Legislature.

(Act 2009-627, p. 1907, §2.)

§ 5-26-3 Definitions

For purposes of this chapter, the following definitions shall apply:

(1) DEPOSITORY INSTITUTION. The term “depository institution” has the same meaning as in Section 3 of the Federal Deposit Insurance Act, and includes any credit union.

(2) FEDERAL BANKING AGENCIES. The term “federal banking agencies” means the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the National Credit Union Administration, and the Federal Deposit Insurance Corporation.

(3) IMMEDIATE FAMILY MEMBER. The term “immediate family member” means a spouse, child, sibling, parent, grandparent, or grandchild. This includes stepparents, stepchildren, stepsiblings, and adoptive relationships.

(4) INDIVIDUAL. The term “individual” means a natural person.

(5) LOAN PROCESSOR OR UNDERWRITER.

(a) In General. The term “loan processor or underwriter” means an individual who performs clerical or support duties as an employee at the direction of and subject to the supervision and instruction of a person licensed, or exempt from licensing, under the Alabama Consumer Credit Act or Mortgage Brokers Licensing Act.

(b) Clerical or Support Duties. For purposes of subsection (a), the term “clerical or support duties” may include subsequent to the receipt of an application:

(i) The receipt, collection, distribution, and analysis of information common for the processing or underwriting of a residential mortgage loan; and

(ii) Communicating with a consumer to obtain the information necessary for the processing or underwriting of a loan, to the extent that such communication does not include offering or negotiating loan rates or terms, or counseling consumers about residential mortgage loan rates or terms.

(c) Representations to the Public. An individual engaging solely in loan processor or underwriter activities, shall not represent to the public, through advertising or other means of communicating or providing information including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items, that such individual can or will perform any of the activities of a mortgage loan originator.

(6) LOSS MITIGATION SPECIALIST. The term “loss mitigation specialist” means an individual employed by a lender or servicer who negotiates or renegotiates the terms of an existing loan, or assists in refinancing an existing loan when a borrower is in default, or in reasonably foreseeable likelihood of default.

(7) MORTGAGE LOAN ORIGINATOR.

(a) In General. The term “mortgage loan originator”:

(i) Means an individual who for compensation or gain or in the expectation of compensation or gain:

(A) Takes a residential mortgage loan application; or

(B) Offers or negotiates terms of a residential mortgage loan;

(ii) Does not include an individual engaged solely as a loan processor or underwriter except as otherwise provided in Section 5-26-4(3);

(iii) Does not include a person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with Alabama law, unless the person or entity is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator; and

(iv) Does not include a person or entity solely involved in extensions of credit relating to timeshare plans, as that term is defined in Section 101(53D) of Title 11, United States Code.

(b) Real Estate Brokerage Activity Defined. For purposes of this chapter the term “real estate brokerage activity” means any activity that involves offering or providing real estate brokerage services to the public, including:

(i) Acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property;

(ii) Bringing together parties interested in the sale, purchase, lease, rental, or exchange of real property;

(iii) Negotiating, on behalf of any party, any portion of a contract relating to the sale, purchase, lease, rental, or exchange of real property (other than in connection with providing financing with respect to any such transaction);

(iv) Engaging in any activity for which a person engaged in the activity is required to be registered or licensed as a real estate agent or real estate broker under any applicable law; and

(v) Offering to engage in any activity, or act in any capacity, described in subsections (i), (ii), (iii), or (iv) of this section.

(8) NATIONWIDE MORTGAGE LICENSING SYSTEM AND REGISTRY. The term “Nationwide Mortgage Licensing System and Registry” means a mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for the licensing and registration of licensed mortgage loan originators.

(9) NONTRADITIONAL MORTGAGE PRODUCT. The term “nontraditional mortgage product” means any mortgage product other than a 30-year fixed rate mortgage.

(10) PERSON. The term “person” means a natural person, corporation, company, limited liability company, partnership, or association.

(11) REGISTERED MORTGAGE LOAN ORIGINATOR. The term “registered mortgage loan originator” means any individual who:

(a) Meets the definition of mortgage loan originator and is an employee of:

(i) A depository institution;

(ii) A subsidiary that is:

(A) Owned and controlled by a depository institution; and

(B) Regulated by a Federal banking agency; or

(iii) An institution regulated by the Farm Credit Administration; and

(b) Is registered with, and maintains a unique identifier through, the Nationwide Mortgage Licensing System and Registry, or if prior to the Federal Banking Agencies establishing a registration system, would be subject to registration under the registration system when established by the Federal Banking Agencies and then would maintain a unique identifier.

(12) RESIDENTIAL MORTGAGE LOAN. The term “residential mortgage loan” means any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling (as defined in Section 103(v) of the Truth in Lending Act) or residential real estate upon which is constructed or intended to be constructed a dwelling.

(13) RESIDENTIAL REAL ESTATE. The term “residential real estate” means any real property located in Alabama, upon which is constructed or intended to be constructed a dwelling.

(14) SUPERVISOR. The Supervisor of the Bureau of Loans of the State Banking Department.

(15) UNIQUE IDENTIFIER. The term “unique identifier” means a number or other identifier assigned by protocols established by the Nationwide Mortgage Licensing System and Registry.

(Act 2009-627, p. 1907, §3.)

§ 5-26-4 License and Registration Required

(1) In general. An individual, unless specifically exempted from this chapter under subsection (2), shall not engage in the business of a mortgage loan originator with respect to any dwelling located in this state without first obtaining and maintaining annually a license under this chapter. Each licensed mortgage loan originator must register with and maintain a valid unique identifier issued by the Nationwide Mortgage Licensing System and Registry.

(2) Exemption from this chapter. The following are exempt from and are not subject to this chapter:

(a) Registered mortgage loan originators, loan processors, loss mitigation specialists, and other employees when acting for an entity described in Section 5-26-3(11)(a)(i),(ii), or (iii) are exempt from this chapter.

(b) Any individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member of the individual.

(c) Any individual who offers or negotiates terms of a residential mortgage loan secured by a dwelling that served as the individual’s residence.

(d) A licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney’s representation of the client, unless the attorney is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator.

(e) The provisions of the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 shall apply to the activities of retail sellers of manufactured or modular homes to the extent determined by the United States Department of Housing and Urban Development through written guidelines, rules, regulations, or interpretive letters.

(f) Notwithstanding the licensing requirements of this section, an individual acting exclusively as a loss mitigation specialist engaging in loss mitigation efforts with respect to existing mortgage transactions is not required to meet the education, testing, background, and licensing standards of this chapter until July 1, 2011, unless denied by the United States Department of Housing and Urban Development.

(3) Independent contractor loan processors or underwriters. A loan processor or underwriter who is an independent contractor may not engage in the activities of a loan processor or underwriter unless such independent contractor loan processor or underwriter obtains and maintains a license under subsection (1). Each independent contractor loan processor or underwriter licensed as a mortgage loan originator must have and maintain a valid unique identifier issued by the Nationwide Mortgage Licensing System and Registry.

(4) Authority to establish licensing rules, regulations or interim procedures and accept early applications. For the purposes of implementing an orderly and efficient licensing process the supervisor may establish licensing rules or regulations and interim procedures for licensing and acceptance of applications.

(Act 2009-627, p. 1907, §4.)

§ 5-26-5 State License and Registration Application and Issuance

(1) Application form. Applicants for a license shall apply in a form as prescribed by the supervisor. Each such form shall contain content as set forth by rule, regulation, instruction, or procedure of the supervisor and may be changed or updated as necessary by the supervisor in order to carry out the purposes of this chapter.

(2) License fee. Each application shall be filed with an initial license fee of seventy-five dollars ($75). This license fee shall be in addition to the fees required to apply through the Nationwide Mortgage Licensing System and Registry.

(3) Supervisor may establish relationships or contracts. In order to fulfill the purposes of this chapter, the supervisor is authorized to establish relationships or contracts with the Nationwide Mortgage Licensing System and Registry or other entities designated by the Nationwide Mortgage Licensing System and Registry to collect and maintain records and process transaction fees or other fees related to licensees or other persons subject to this chapter.

(4) Waive or modify requirements. For the purpose of participating in the Nationwide Mortgage Licensing System and Registry, the supervisor is authorized to waive or modify, in whole or in part, by rule, regulation, or order, any or all of the requirements of this chapter and to establish new requirements as reasonably necessary to participate in the Nationwide Mortgage Licensing System and Registry.

(5) Background checks. Notwithstanding any existing state law to the contrary, in connection with an application for licensing as a mortgage loan originator, the applicant, at a minimum, shall furnish to the Nationwide Mortgage Licensing System and Registry information concerning the applicant’s identity, including:

(a) Fingerprints for submission to the Federal Bureau of Investigation, and any governmental agency or entity authorized to receive such information for a state, national, and international criminal history background check; and

(b) Personal history and experience in a form prescribed by the Nationwide Mortgage Licensing System and Registry, including the submission of authorization for the Nationwide Mortgage Licensing System and Registry and the supervisor to obtain:

(i) An independent credit report obtained from a consumer reporting agency described in Section 603(p) of the Fair Credit Reporting Act; and

(ii) Information related to any administrative, civil, or criminal findings by any governmental jurisdiction.

(6) Agent for purposes of requesting and distributing criminal information. For the purposes of this section and in order to reduce the points of contact which the Federal Bureau of Investigation may have to maintain for purposes of subsection (5)(a) and (b)(ii) the supervisor may use the Nationwide Mortgage Licensing System and Registry as a channeling agent for requesting information from and distributing information to the Department of Justice or any governmental agency.

(7) Agent for purposes of requesting and distributing non-criminal information. For the purposes of this section and in order to reduce the points of contact which the supervisor may have to maintain for purposes of subsection (5)(b)(i) and (ii) the supervisor may use the Nationwide Mortgage Licensing System and Registry as a channeling agent for requesting and distributing information to and from any source so directed by the supervisor.

(Act 2009-627, p. 1907, §5.)

§ 5-26-6 Issuance of License

The supervisor shall not issue a mortgage loan originator license unless the Supervisor makes at a minimum the following findings:

(1) NO LICENSE REVOCATION. The applicant has never had a mortgage loan originator license revoked in any governmental jurisdiction, except that a subsequent formal vacation of such revocation shall not be deemed a revocation.

(2) NO FELONY CONVICTION. The applicant has not been convicted of, or pled guilty or nolo contendere to, a felony in a domestic, foreign, or military court:

(a) During the seven-year period preceding the date of the application for licensing and registration; or

(b) At any time preceding such date of application, if such felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering;

(c) Provided that any pardon of a conviction shall not be a conviction for purposes of this subsection.

(3) CHARACTER AND FITNESS. The applicant has demonstrated financial responsibility, character, and general fitness such as to command the confidence of the community and to warrant a determination that the mortgage loan originator will operate honestly, fairly, and efficiently within the purposes of this chapter. The supervisor shall not base a license denial, in whole or in part, on an applicant’s credit score, nor shall the supervisor use a credit report as the sole basis for license denial.

(a) For purposes of this subsection a person has shown that he or she is not financially responsible when he or she has shown a disregard in the management of his or her own financial condition. A determination that an individual has not shown financial responsibility may include, but not be limited to:

(i) Current outstanding judgments, except judgments solely as a result of medical expenses;

(ii) Current outstanding tax liens or other government liens and filings;

(iii) Foreclosures within the past three years;

(iv) A pattern of seriously delinquent accounts within the past three years.

(4) PRE-LICENSING EDUCATION. The applicant has completed the pre-licensing education requirement described in Section 5-26-7.

(5) WRITTEN TEST. The applicant has passed a written test that meets the test requirement described in Section 5-26-8.

(6) NET WORTH, SURETY BOND, OR STATE FUND REQUIREMENT. The applicant has met the surety bond requirement as required pursuant to Section 5-26-14.

(Act 2009-627, p. 1907, §6.)

§ 5-26-7 Pre-licensing Education of Loan Originators

(1) Minimum educational requirements. In order to meet the pre-licensing education requirement referred to in Section 5-26-6(4) a person shall complete at least 20 hours of education approved in accordance with subsection (2), which shall include at least:

(a) Three hours of federal law and regulations;

(b) Three hours of ethics, which shall include instruction on fraud, consumer protection, and fair lending issues; and

(c) Two hours of training related to lending standards for the nontraditional mortgage product marketplace.

(2) Approved educational courses. For purposes of subsection (1), pre-licensing education courses shall be reviewed and approved by the Nationwide Mortgage Licensing System and Registry based upon reasonable standards. Review and approval of a pre-licensing education course shall include review and approval of the course provider.

(3) Approval of employer and affiliate educational courses. Nothing in this section shall preclude any pre-licensing education course, as approved by the Nationwide Mortgage Licensing System and Registry, that is provided by the employer of the applicant or an entity which is affiliated with the applicant by an agency contract, or any subsidiary or affiliate of such employer or entity.

(4) Venue of education. Pre-licensing education may be offered either in a classroom, online, or by any other means approved by the Nationwide Mortgage Licensing System and Registry.

(5) Reciprocity of education. The pre-licensing education requirements approved by the Nationwide Mortgage Licensing System and Registry in subsections (1)(a), (b), and (c) for any state shall be accepted as credit towards completion of pre-licensing education requirements in Alabama.

(Act 2009-627, p. 1907, §7.)

§ 5-26-8 Testing of Loan Originators

(1) In general. In order to meet the written test requirement referred to in Section 5-26-6(5), an individual shall pass, in accordance with the standards established under this subsection, a qualified written test developed by the Nationwide Mortgage Licensing System and Registry and administered by a test provider approved by the Nationwide Mortgage Licensing System and Registry based upon reasonable standards.

(2) Qualified test. A written test shall not be treated as a qualified written test for purposes of subsection (1) unless the test adequately measures the applicant’s knowledge and comprehension in appropriate subject areas, including:

(a) Ethics;

(b) Federal law and regulation pertaining to mortgage origination;

(c) State law and regulation pertaining to mortgage origination;

(d) Federal and state law and regulation, including instruction on fraud, consumer protection, the nontraditional mortgage marketplace, and fair lending issues.

(3) Testing location. Nothing in this section shall prohibit a test provider approved by the Nationwide Mortgage Licensing System and Registry from providing a test at the location of the employer of the applicant or the location of any subsidiary or affiliate of the employer of the applicant, or the location of any entity with which the applicant holds an exclusive arrangement to conduct the business of a mortgage loan originator.

(4) Minimum competence:

(a) PASSING SCORE. An individual shall not be considered to have passed a qualified written test unless the individual achieves a test score of not less than 75 percent correct answers to questions.

(b) INITIAL RETESTS. An individual may retake a test three consecutive times with each consecutive taking occurring at least 30 days after the preceding test.

(c) SUBSEQUENT RETESTS. After failing three consecutive tests, an individual shall wait at least six months before taking the test again.

(d) RETEST AFTER LAPSE OF LICENSE. A licensed mortgage loan originator who fails to maintain a valid license for a period of five years or longer shall retake the test, not taking into account any time during which such individual is a registered mortgage loan originator.

(Act 2009-627, p. 1907, §8.)

§ 5-26-9 Standards for License Renewal

(1) In general. The minimum standards for license renewal for mortgage loan originators shall include the following:

(a) The mortgage loan originator continues to meet the minimum standards for license issuance under Section 5-26-6(1) to (6), inclusive.

(b) The mortgage loan originator has satisfied the annual continuing education requirements described in Section 5-26-10.

(c) The mortgage loan originator has paid all required fees for renewal of the license. The fee related to the renewal of the license shall be seventy-five dollars ($75). This license renewal fee shall be in addition to the fees required to renew through the Nationwide Mortgage Licensing System and Registry.

(2) Failure to satisfy minimum standards of license renewal. The license of a mortgage loan originator failing to satisfy the minimum standards for license renewal shall expire. The supervisor may adopt procedures for the reinstatement of expired licenses consistent with the standards established by the Nationwide Mortgage Licensing System and Registry.

(Act 2009-627, p. 1907, §9.)

§ 5-26-10 Continuing Education for Mortgage Loan Originators

(1) In general. In order to meet the annual continuing education requirements referred to in Section 5-26-9(1)(b), a licensed mortgage loan originator shall complete at least eight hours of education approved in accordance with subsection (2), which shall include at least:

(a) Three hours of federal law and regulations;

(b) Two hours of ethics, which shall include instruction on fraud, consumer protection, and fair lending issues; and

(c) Two hours of training related to lending standards for the nontraditional mortgage product marketplace.

(2) Approved educational courses. For purposes of subsection (1), continuing education courses shall be reviewed and approved by the Nationwide Mortgage Licensing System and Registry based upon reasonable standards. Review and approval of a continuing education course shall include review and approval of the course provider.

(3) Approval of employer and affiliate educational courses. Nothing in this section shall preclude any education course, as approved by the Nationwide Mortgage Licensing System and Registry, that is provided by the employer of the mortgage loan originator or an entity which is affiliated with the mortgage loan originator by an agency contract, or any subsidiary or affiliate of such employer or entity.

(4) Venue of education. Continuing education may be offered either in a classroom, online, or by any other means approved by the Nationwide Mortgage Licensing System and Registry.

(5) Calculation of continuing education credits. A licensed mortgage loan originator:

(a) Except for Section 5-26-9(2) and subsection (9), may only receive credit for a continuing education course in the year in which the course is taken; and

(b) May not take the same approved course in the same or successive years to meet the annual requirements for continuing education.

(6) Instructor credit. A licensed mortgage loan originator who is an approved instructor of an approved continuing education course may receive credit for the licensed mortgage loan originator’s own annual continuing education requirement at the rate of two hours’ credit for every one hour taught.

(7) Reciprocity of education. A person having successfully completed the education requirements approved by the Nationwide Mortgage Licensing System and Registry in subsections (1)(a), (b), and (c) for any state shall be accepted as credit towards completion of continuing education requirements in Alabama.

(8) Lapse in license. A licensed mortgage loan originator who subsequently becomes unlicensed must complete the continuing education requirements for the last year in which the license was held prior to issuance of a new or renewed license.

(9) Make up of continuing education. A person meeting the requirements of Section 5-26-9(1)(a) and (c) may make up any deficiency in continuing education as established by rule or regulation of the supervisor.

(Act 2009-627, p. 1907, §10.)

§ 5-26-11 Authority to Require License

In addition to any other duties imposed upon the supervisor by law, the supervisor shall require mortgage loan originators to be licensed and registered through the Nationwide Mortgage Licensing System and Registry. In order to carry out this requirement the supervisor is authorized to participate in the Nationwide Mortgage Licensing System and Registry. For this purpose, the supervisor may establish by rule/regulation or order requirements as necessary, including but not limited to:

(1) BACKGROUND CHECKS. Background checks for:

(a) Criminal history through fingerprint or other databases;

(b) Civil or administrative records;

(c) Credit history; or

(d) Any other information as deemed necessary by the Nationwide Mortgage Licensing System and Registry.

(2) FEES. The payment of fees to apply for or renew licenses through the Nationwide Mortgage Licensing System and Registry;

(3) SETTING DATES. The setting or resetting as necessary of renewal or reporting dates; and

(4) OTHER. Requirements for amending or surrendering a license or any other such activities as the supervisor deems necessary for participation in the Nationwide Mortgage Licensing System and Registry.

(Act 2009-627, p. 1907, §11.)

§ 5-26-12 Nationwide Mortgage Licensing System and Registry Information Challenge Process

The supervisor shall establish a process whereby mortgage loan originators may challenge information entered into the Nationwide Mortgage Licensing System and Registry.

(Act 2009-627, p. 1907, §12.)

§ 5-26-13 Enforcement Authorities, Violations, and Penalties

(1) In order to ensure the effective supervision and enforcement of this chapter the supervisor may:

(a) Deny, suspend, revoke, condition, or decline to renew a license for a violation of this chapter, rules or regulations issued under this chapter or order or directive entered under this chapter, or for failure to comply with any other state or federal law, including the rules and regulations thereunder, applicable to any business authorized or conducted under this act.

(b) Deny, suspend, revoke, condition, or decline to renew a license if an applicant or licensee fails at any time to meet the requirements of Section 5-26-6 or Section 5-26-9, or withholds information or makes a material misstatement in an application for a license or renewal of a license.

(c) Order restitution against persons subject to this chapter for violations of this chapter.

(d) Impose fines on persons subject to this chapter pursuant to subsections (2), (3), and (4).

(e) Issue orders or directives under this chapter as follows:

(i) Order or direct persons subject to this chapter to cease and desist from conducting business, including immediate temporary orders to cease and desist.

(ii) Order or direct persons subject to this chapter to cease any harmful activities or violations of this chapter, including immediate temporary orders to cease and desist.

(iii) Enter immediate temporary orders to cease business under a license or interim license issued pursuant to the authority granted under Section 5-26-4(5) if the supervisor determines that such license was erroneously granted or the licensee is currently in violation of this chapter;

(iv) Order or direct such other affirmative action as the supervisor deems necessary.

(2) The supervisor may impose a civil penalty on a mortgage loan originator or person subject to this chapter, if the supervisor finds, on the record after notice and opportunity for hearing, that such mortgage loan originator or person subject to this chapter has violated or failed to comply with any requirement of this chapter or any regulation prescribed by the supervisor under this chapter or order issued under authority of this chapter.

(3) The maximum amount of penalty for each act or omission described in subsection (2) shall be twenty-five thousand dollars ($25,000).

(4) Each violation or failure to comply with any directive or order of the supervisor is a separate and distinct violation or failure.

(5) A violation of this chapter or any order, rule, regulation, or procedure does not affect the obligation of a borrower or other person under the terms of a mortgage loan or the enforceability of mortgage loan documents. No private cause of action is created by or exists under this chapter.

(Act 2009-627, p. 1907, §13.)

§ 5-26-14 Surety Bond Required

(1) Coverage, form and regulations. Each mortgage loan originator shall be covered by a surety bond in accordance with this section. In the event that the mortgage loan originator is an employee or exclusive agent of a person subject to the Alabama Consumer Credit Act or Mortgage Brokers Licensing Act, the surety bond of such person subject to the Alabama Consumer Credit Act or Mortgage Brokers Licensing Act can be used in lieu of the mortgage loan originator’s surety bond requirement.

(a) The surety bond shall provide coverage for each mortgage loan originator in an amount as prescribed in subsection (2).

(b) The surety bond shall be in a form as prescribed by the supervisor.

(c) The supervisor may promulgate rules or regulations with respect to the requirements for such surety bonds as are necessary to accomplish the purposes of this chapter.

(2) Penal sum of surety bond. The penal sum of the surety bond shall be maintained in an amount that reflects the dollar amount of loans originated as determined by the supervisor.

(3) Action on bond. When an action is commenced on a licensee’s bond the supervisor may require the filing of a new bond.

(4) New bond. Immediately upon recovery upon any action on the bond the licensee shall file a new bond.

(Act 2009-627, p. 1907, §14.)

§ 5-26-15 Confidentiality

In order to promote more effective regulation and reduce regulatory burden through supervisory information sharing:

(1) PROTECTIONS. Except as otherwise provided in Public Law 110-289, Section 1512, the requirements under any federal law regarding the privacy or confidentiality of any information or material provided to the Nationwide Mortgage Licensing System and Registry, and any privilege arising under federal or state law, including the rules of any federal or state court, with respect to such information or material, shall continue to apply to such information or material after the information or material has been disclosed to the Nationwide Mortgage Licensing System and Registry. Such information and material may be shared with all state and federal regulatory officials with mortgage industry oversight authority without the loss of privilege or the loss of confidentiality protections provided by federal or state law.

(2) AGREEMENTS AND SHARING ARRANGEMENTS. For these purposes, the supervisor is authorized to enter agreements or sharing arrangements with other governmental agencies, the Conference of State Bank Supervisors, the American Association of Residential Mortgage Regulators, or other associations representing governmental agencies as established by rule, regulation, or order of the supervisor.

(3) NONAPPLICABILITY OF CERTAIN REQUIREMENTS. Information or material that is subject to a privilege or confidentiality under subsection (1) shall not be subject to:

(a) Disclosure under any federal or state law governing the disclosure to the public of information held by an officer or an agency of the federal government or the respective state; or

(b) Subpoena or discovery, or admission into evidence, in any private civil action or administrative process, unless with respect to any privilege held by the Nationwide Mortgage Licensing System and Registry with respect to such information or material, the person to whom such information or material pertains waives, in whole or in part, in the discretion of such person, that privilege.

(4) COORDINATION WITH STATE LAW. Existing Alabama law relating to the disclosure of confidential supervisory information or any information or material described in subsection (1) that is inconsistent with subsection (1) shall be superseded by the requirements of this section.

(5) PUBLIC ACCESS TO INFORMATION. This section shall not apply with respect to the information or material relating to the employment history of, and publicly adjudicated disciplinary and enforcement actions against, mortgage loan originators that is included in the Nationwide Mortgage Licensing System and Registry for access by the public.

(Act 2009-627, p. 1907, §15.)

§ 5-26-16 Investigation and Examination Authority

In addition to any authority allowed under this chapter the supervisor shall have the authority to conduct investigations and examinations as follows:

(1) AUTHORITY TO ACCESS INFORMATION. For purposes of initial licensing, license renewal, license suspension, license conditioning, license revocation or termination, or general or specific inquiry or investigation to determine compliance with this chapter, the supervisor shall have the authority to access, receive, and use any books, accounts, records, files, documents, information, or evidence including but not limited to:

(a) Criminal, civil, and administrative history information, including nonconviction data; and

(b) Personal history and experience information including independent credit reports obtained from a consumer reporting agency described in Section 603(p) of the Fair Credit Reporting Act; and

(c) Any other documents, information, or evidence the supervisor deems relevant to the inquiry or investigation regardless of the location, possession, control, or custody of such documents, information, or evidence.

(2) INVESTIGATION, EXAMINATION, AND SUBPOENA AUTHORITY. For the purposes of investigating violations or complaints arising under this chapter, or for the purposes of examination, the supervisor may review, investigate, or examine any licensee, individual, or person subject to this chapter, as often as necessary in order to carry out the purposes of this chapter. The supervisor may direct, subpoena, or order the attendance of and examine under oath all persons whose testimony may be required about the loans or the business or subject matter of any such examination or investigation, and may direct, subpoena, or order such person to produce books, accounts, records, files, and any other documents the supervisor deems relevant to the inquiry.

(3) AVAILABILITY OF BOOKS AND RECORDS. Each licensee, individual, or person subject to this chapter shall make available to the supervisor, upon request, the books and records relating to the operations of such licensee, individual, or person subject to this chapter. The supervisor shall have access to such books and records and interview the officers, principals, mortgage loan originators, employees, independent contractors, agents, and customers of the licensee, individual, or person subject to this chapter concerning their business.

(4) REPORTS AND OTHER INFORMATION AS DIRECTED. Each licensee, individual, or person subject to this chapter shall make or compile reports or prepare other information as directed by the supervisor in order to carry out the purposes of this section including, but not limited to:

(a) Accounting compilations;

(b) Information lists and data concerning loan transactions in a format prescribed by the supervisor; or

(c) Such other information deemed necessary to carry out the purposes of this section.

(5) CONTROL ACCESS TO RECORDS. In making any examination or investigation authorized by this chapter, the supervisor may control access to any documents and records of the licensee or person under examination or investigation. The supervisor may take possession of the documents and records or place a person in exclusive charge of the documents and records in the place where they are usually kept. During the period of control, no individual or person shall remove or attempt to remove any of the documents and records except pursuant to a court order or with the consent of the supervisor. Unless the supervisor has reasonable grounds to believe the documents or records of the licensee have been, or are at risk of being altered or destroyed for purposes of concealing a violation of this chapter, the licensee or owner of the documents and records shall have access to the documents or records as necessary to conduct its ordinary business affairs.

(6) ADDITIONAL AUTHORITY. In order to carry out the purposes of this section, the supervisor may:

(a) Retain attorneys, accountants, or other professionals and specialists as examiners, auditors, or investigators to conduct or assist in the conduct of examinations or investigations;

(b) Enter into agreements or relationships with other government officials or regulatory associations in order to improve efficiencies and reduce regulatory burden by sharing resources, standardized or uniform methods or procedures, and documents, records, information, or evidence obtained under this section;

(c) Use, hire, contract, or employ public or privately available analytical systems, methods, or software to examine or investigate the licensee, individual, or person subject to this chapter;

(d) Accept and rely on examination or investigation reports made by other government officials, within or without this state; or

(e) Accept audit reports made by an independent certified public accountant for the licensee, individual, or person subject to this chapter in the course of that part of the examination covering the same general subject matter as the audit and may incorporate the audit report in the report of the examination, report of investigation, or other writing of the supervisor.

(7) EFFECT OF AUTHORITY. The authority of this section shall remain in effect, whether such a licensee, individual, or person subject to this chapter acts or claims to act under any licensing or registration law of this state, or claims to act without such authority.

(8) WITHHOLD RECORDS. No licensee, individual, or person subject to investigation or examination under this section may knowingly withhold, abstract, remove, mutilate, destroy, or secrete any books, records, computer records, or other information.

(Act 2009-627, p. 1907, §16.)

§ 5-26-17 Prohibited Acts and Practices

It is a violation of this chapter for a person or individual subject to this chapter to:

(1) Obtain property by intentional fraud or intentional misrepresentation;

(2) Solicit or enter into a contract with a borrower that provides in substance that the person or individual subject to this chapter may earn a fee or commission through “best efforts” to obtain a loan even though no loan is actually obtained for the borrower;

(3) Conduct any business covered by this chapter without holding a valid license if required under this chapter;

(4) Fail to make disclosures as required by this chapter;

(5) Fail to comply with this chapter or rules or regulations promulgated under this chapter;

(6) Collect, charge, or attempt to collect or charge any fee prohibited by this chapter; or

(7) Fail to account for monies belonging to a party to a residential mortgage loan transaction, as required by law or regulation.

(Act 2009-627, p. 1907, §17.)

§ 5-26-18 Mortgage Call Reports

Each person employing a mortgage loan originator licensed under this chapter shall submit to the Nationwide Mortgage Licensing System and Registry reports of condition, which shall be in such form and shall contain such information as the Nationwide Mortgage Licensing System and Registry may require.

(Act 2009-627, p. 1907, §18.)

§ 5-26-19 Report to Nationwide Mortgage Licensing System and Registry

Notwithstanding state privacy law, the supervisor is required to report regularly violations of this chapter as well as enforcement actions and other relevant information to the Nationwide Mortgage Licensing System and Registry, subject to the provisions contained in Section 5-26-15.

(Act 2009-627, p. 1907, §19.)

§ 5-26-20 Unique Identifier Shown

The unique identifier of any person originating a residential mortgage loan shall be clearly shown on all residential mortgage loan application forms, solicitations, or advertisements, including business cards or websites, and any other documents as established by rule, regulation, or order of the supervisor.

(Act 2009-627, p. 1907, §20.)

Chapter 27 Savings Promotion Contest

§ 5-27-1 Legislative Findings

The Legislature finds and declares the following:

(1) Federal law allows both depository financial institutions and credit unions to hold savings promotion contests, subject to certain conditions and authorization under state law.

(2) Savings promotion contests in other states and countries have led to an increase in the number and amount of funds in personal savings accounts.

(3) Savings promotion contests encourage people to save money by adding a feature to personal savings accounts that includes a chance to win prizes.

(4) Savings promotion contests are not lotteries because they do not require individuals to pay consideration for a chance to win a prize, and the individual maintains ownership of the money that is deposited into a savings account or other qualifying account.

(5) The prizes are funded through the interest that accrues across the pool of savings accounts participating in the promotion contest.

(6) It is in the best interest of the citizens of Alabama to encourage increases in personal savings accounts.

(Act 2017-406, §1.)

§ 5-27-2 Definitions

When used in this chapter, the following words and phrases shall have the following meanings:

(1) APPROPRIATE STATE OR FEDERAL REGULATORY AGENCY. The state or federal agency that is statutorily responsible for the supervision of all or part of the operations of a participating financial institution.

(2) DEPOSITOR. An individual member or customer of a financial institution who meets all of the following requirements:

a. Maintains a qualifying account at a financial institution participating in a savings promotion contest.

b. Is in good standing at a financial institution authorized to do business in Alabama.

c. Is 18 years of age or older.

(3) ENTRY. A chance or chances obtained by a depositor to win a designated prize or prizes in a savings promotion contest by complying with the terms and conditions of a savings promotion contest.

(4) FINANCIAL INSTITUTION. A bank, savings institution, or credit union authorized to do business in Alabama under federal or state law.

(5) PARTICIPATING FINANCIAL INSTITUTION. A financial institution, as defined above, that is sponsoring a savings promotion contest.

(6) QUALIFYING ACCOUNT. A savings account or other savings product that is offered by a participating financial institution and that meets all of the following requirements:

a. Allows deposits to be made by a depositor.

b. Is evidenced by periodic statements that are delivered to the depositor or are available to the depositor through electronic access.

c. Has an interest rate that is similar to, and not less than, the interest rates of other comparable nonqualifying accounts.

(7) SAVINGS PROMOTION ACCOUNT. A contest or promotion sponsored by a financial institution or a group of financial institutions in which a chance of winning designated prizes is obtained by a depositor when the depositor either:

a. Deposits a specified amount of money or makes a specified number of deposits into the depositor’s qualifying account.

b. Participates in one or more savings products or programs.

(Act 2017-406, §2.)

§ 5-27-3 Savings Promotion Contest Authorized; Conditions

(a) Subject to supervision by the appropriate federal or state regulatory agency, a financial institution may conduct a savings promotion contest in accordance with this chapter for the purposes of encouraging depositors to maintain savings accounts and increase personal savings. The financial institution may join with other financial institutions to participate in a savings promotion or contest.

(b) A savings promotion contest shall be subject to all of the following conditions:

(1) Subject to any limits the financial institution may place on the number of entries that may be placed by the depositor, it is structured such that a depositor may place an entry to win a prize or prizes by doing either of the following:

a. Depositing a minimum specified amount of money or making a specified number of deposits into a qualifying account in accordance with the terms and conditions of the specific savings promotion contest.

b. Participating in one or more savings products or programs according to the terms and conditions of the savings promotion contest.

(2) The participating financial institution complies with all applicable consumer protection laws.

(3) No consideration is required as payment for a chance at winning the prize or prizes. For purposes of this subdivision, a depositor does not pay consideration if, as a requirement of participating in the savings promotion contest, the financial institution requires the depositor to deposit a specified amount of money or make a specified number of deposits into his or her account or participate in one or more savings programs or products involving his or her accounts.

(4) Each entry has an equal chance of being chosen as the winning entry.

(5) Participating depositors are not required to be present at a drawing in order to win a prize.

(6) The participating financial institution maintains books and records necessary to facilitate an audit of the savings promotion contest and, upon written request, provides those records to the appropriate federal or state regulatory authority.

(7) The savings promotion contest is conducted in a manner that protects the safety and soundness of the financial institution and does not mislead depositors.

(8) The financial institution posts online the terms and conditions of the savings promotion contest and lists each location where entries may be submitted.

(9) No fees or charges may be applied to a qualifying account that would not be applied to a substantially similar nonqualifying account.

(Act 2017-406, §3.)

§ 5-27-4 Oversight

Each savings promotion contest is subject to oversight by the federal or state agency responsible for regulating the financial institution, and the regulatory agency may issue cease and desist orders relating to a savings promotion contest offered by a financial institution which it regulates if the regulatory agency concludes, based on substantial evidence, that the financial institution is engaging in unsafe or unsound practices or that the financial institution has violated any law or rule, condition, or agreement of the regulatory agency.

(Act 2017-406, §4.)

§ 5-27-5 Construction; Limitation on Prizes or Awards

A savings promotion contest offered pursuant to this chapter does not constitute gambling or the promotion of gambling or a lottery or raffle pursuant to Section 65 of the Constitution of Alabama of 1901. No prize or award shall exceed twelve thousand five hundred dollars ($12,500).

(Act 2017-406, §5.)

Chapter 28 LIBOR Discontinuance and Labor Replacement Act of 2021

§ 5-28-1 Short Title

This chapter shall be known and may be cited as the LIBOR Discontinuance and Replacement Act of 2021.

(Act 2021-323, §1.)

§ 5-28-2 Definitions

As used in this chapter, the following terms shall have the following meanings:

(1) BENCHMARK. An index of interest rates or dividend rates that is used, in whole or in part, as the basis of, or as a reference for, calculating or determining any valuation, payment, or other measurement under or in respect of a contract, security, or instrument.

(2) BENCHMARK REPLACEMENT. A benchmark, or an interest rate or dividend rate, which may or may not be based in whole or in part on a prior setting of LIBOR, to replace LIBOR or any interest rate or dividend rate based on LIBOR, whether on a temporary, permanent, or indefinite basis, under or in respect of a contract, security, or instrument.

(3) BENCHMARK REPLACEMENT CONFORMING CHANGES. With respect to any type of contract, security, or instrument, any technical, administrative, or operational changes, alterations, or modifications that are associated with and reasonably necessary to the use, adoption, calculation, or implementation of a recommended benchmark replacement and that both:

a. Have been selected or recommended by a relevant recommending body; and

b. If, in the reasonable judgment of the calculating person, the benchmark replacement conforming changes selected or recommended pursuant to paragraph a. do not apply to the contract, security, or instrument or are insufficient to permit administration and calculation of the recommended benchmark replacement, then benchmark replacement conforming changes shall include other changes, alterations, or modifications that, in the reasonable judgment of the calculating person, are necessary to permit administration and calculation of the recommended benchmark replacement under or in respect of the contract, security, or instrument in a manner consistent with market practice for substantially similar contracts, securities, or instruments and, to the extent practicable, the manner in which the contract, security, or instrument was administered immediately prior to the LIBOR replacement date; and would not result in a disposition of the contract, security, or instrument for U.S. federal income tax purposes.

(4) CALCULATING PERSON. With respect to any contract, security, or instrument, any person responsible for calculating or determining any valuation, payment, or other measurement based on a benchmark. This person may be the determining person.

(5) CONTRACT, SECURITY, OR INSTRUMENT. Includes, without limitation, any contract, agreement, mortgage, deed of trust, lease, instrument, other obligation, or security, whether representing debt or equity, and including any interest in a corporation, a partnership, or a limited liability company.

(6) DETERMINING PERSON. With respect to any contract, security, or instrument, in the following order of priority:

a. Any person so specified.

b. Any person with the authority, right, or obligation to do any of the following:

1. Determine the benchmark replacement that will take effect on the LIBOR replacement date.

2. Calculate or determine a valuation, payment, or other measurement based on a benchmark.

3. Notify other persons of the occurrence of a LIBOR discontinuance event, a LIBOR replacement date, or a benchmark replacement.

(7) FALLBACK PROVISIONS. Terms in a contract, security, or instrument that set forth a methodology or procedure for determining a benchmark replacement, including any terms relating to the date on which the benchmark replacement becomes effective, without regard to whether a benchmark replacement can be determined in accordance with the methodology or procedure.

(8) LIBOR. For purposes of the application of this chapter to any particular contract, security, or instrument, U.S. dollar LIBOR, formerly known as the London Interbank Offered Rate, as administered by ICE Benchmark Administration Limited, or any predecessor or successor thereof, or any tenor thereof, as applicable, that is used in making any calculation or determination thereunder.

(9) LIBOR DISCONTINUANCE EVENT. The earliest to occur of any of the following:

a. A public statement or publication of information by, or on behalf of, the administrator of LIBOR announcing that the administrator has ceased or will cease to provide LIBOR, permanently or indefinitely, provided that, at the time of the statement or publication, there is no successor administrator that will continue to provide LIBOR.

b. A public statement or publication of information by the regulatory supervisor for the administrator of LIBOR, the United States Federal Reserve System, an insolvency official with jurisdiction over the administrator for LIBOR, a resolution authority with jurisdiction over the administrator for LIBOR, or a court or an entity with similar insolvency or resolution authority over the administrator for LIBOR, which states that the administrator of LIBOR has ceased, or will cease, to provide LIBOR permanently or indefinitely, provided that, at the time of the statement or publication, there is no successor administrator that will continue to provide LIBOR.

c. A public statement or publication of information by the regulatory supervisor for the administrator of LIBOR announcing that LIBOR is no longer representative. For purposes of this definition, a public statement or publication of information that affects one or more tenors of LIBOR shall not constitute a LIBOR discontinuance event with respect to any contract, security, or instrument that does either of the following:

1. Provides for only one tenor of LIBOR, if the contract, security, or instrument requires interpolation and the tenor can be interpolated from LIBOR tenors that are not so affected.

2. Permits a party to choose from more than one tenor of LIBOR and any of the tenors is not so affected or if the contract, security, or instrument requires interpolation, can be interpolated from LIBOR tenors that are not so affected.

(10)a. LIBOR REPLACEMENT DATE. In the case of a LIBOR discontinuance event described in paragraph (9)a. or (9)b., the later of:

1. The date of the public statement or publication of information referenced therein.

2. The date on which the administrator of LIBOR permanently or indefinitely ceases to provide LIBOR.

b. In the case of a LIBOR discontinuance event described in paragraph (9)c., the date of the public statement or publication of information referenced therein. For purposes of this chapter, a date that affects one or more tenors of LIBOR shall not constitute a LIBOR replacement date with respect to any contract, security, or instrument that does either of the following:

1. Provides for only one tenor of LIBOR, if the contract, security, or instrument requires interpolation and the tenor can be interpolated from LIBOR tenors that are not so affected.

2. Permits a party to choose from more than one tenor of LIBOR and any of the tenors is not so affected, or if the contract, security, or instrument requires interpolation, can be interpolated from LIBOR tenors that are not so affected.

(11) RECOMMENDED BENCHMARK REPLACEMENT. With respect to any particular type of contract, security, or instrument, a benchmark replacement based on SOFR, which shall include any recommended spread adjustment and any benchmark replacement conforming changes, that shall have been selected or recommended by a relevant recommending body with respect to the type of contract, security, or instrument.

(12) RECOMMENDED SPREAD ADJUSTMENT. A spread adjustment, or method for calculating or determining the spread adjustment, that shall have been selected or recommended by a relevant recommending body for a recommended benchmark replacement for a particular type of contract, security, or instrument and for a particular term to account for the effects of the transition or change from LIBOR to a recommended benchmark replacement. This term may be a positive or negative value or zero.

(13) RELEVANT RECOMMENDING BODY. The Federal Reserve Board, the Federal Reserve Bank of New York, or the Alternative Reference Rates Committee, or any successor to any of them.

(14) SOFR. With respect to any day, the secured overnight financing rate published for the day by the Federal Reserve Bank of New York, as the administrator of the benchmark, or a successor administrator, on the Federal Reserve Bank of New York’s website.

(Act 2021-323, §1.)

§ 5-28-3 Recommended Benchmark Replacement for Certain Contracts, Securities, or Instruments; Fallback Provisions

(a) On the LIBOR replacement date, the recommended benchmark replacement, by operation of law, shall be the benchmark replacement for any contract, security, or instrument that uses LIBOR as a benchmark and meets one of the following requirements:

(1) Contains no fallback provisions.

(2) Contains fallback provisions that result in a benchmark replacement, other than a recommended benchmark replacement, that is based in any way on any LIBOR value.

(b) Following the occurrence of a LIBOR discontinuance event, any fallback provisions in a contract, security, or instrument that provide for a benchmark replacement based on or otherwise involving a poll, survey or inquiries for quotes or information concerning interbank lending rates or any interest rate or dividend rate based on LIBOR shall be disregarded as if not included in the contract, security, or instrument and shall be deemed void and without any force or effect.

(c)(1) This subsection shall apply to any contract, security, or instrument that uses LIBOR as a benchmark and contains fallback provisions that permit or require the selection of a benchmark replacement that is either of the following:

a. Based in any way on any LIBOR value.

b. The substantive equivalent of subdivision (a)(1), (a)(2), or (a)(3) of Section 5-28-4.

(2) A determining person shall have the authority under this chapter, but shall not be required, to select on or after the occurrence of a LIBOR discontinuance event the recommended benchmark replacement as the benchmark replacement. The selection of the recommended benchmark replacement shall be all of the following:

a. Irrevocable.

b. Made by the earlier of either the LIBOR replacement date, or the latest date for selecting a benchmark replacement according to the contract, security, or instrument.

c. Used in any determinations of the benchmark under or with respect to the contract, security, or instrument occurring on and after the LIBOR replacement date.

(d) If a recommended benchmark replacement becomes the benchmark replacement for any contract, security, or instrument pursuant to this section, then all benchmark replacement conforming changes that are applicable to the recommended benchmark replacement shall become an integral part of the contract, security, or instrument by operation of law.

(e) This chapter shall not alter or impair any of the following:

(1) Any written agreement by all requisite parties that, retrospectively or prospectively, a contract, security, or instrument shall not be subject to this chapter without necessarily referring specifically to this chapter. For purposes of this subsection, “requisite parties” means all parties required to amend the terms and provisions of a contract, security, or instrument that would otherwise be altered or affected by this chapter.

(2) Any contract, security, or instrument that contains fallback provisions that would result in a benchmark replacement that is not based on LIBOR, including, but not limited to, the prime rate or the federal funds rate, except that the contract, security, or instrument shall be subject to subsection (b).

(3) Any contract, security, or instrument subject to subsection (c) as to which a determining person does not elect to use a recommended benchmark replacement or as to which a determining person elects to use a recommended benchmark replacement prior to the occurrence of a LIBOR discontinuance event, except that the contract, security, or instrument shall be subject to subsection (b).

(4) The application to a recommended benchmark replacement of any cap, floor, modifier, or spread adjustment to which LIBOR had been subject pursuant to the terms of a contract, security, or instrument.

(f) Notwithstanding the uniform commercial code or any other law of this state, this chapter shall apply to all contracts, securities, and instruments, including contracts, with respect to commercial transactions, and shall not be deemed to be displaced by any other law of this state.

(Act 2021-323, §1.)

§ 5-28-4 Construction and Effect of Selection or Use of a Recommended Benchmark Replacement; Liability

(a) The selection or use of a recommended benchmark replacement as a benchmark replacement under or in respect of a contract, security, or instrument by operation of Section 5-28-3 shall constitute all of the following:

(1) A commercially reasonable replacement for and a commercially substantial equivalent to LIBOR.

(2) A reasonable, comparable, or analogous term for LIBOR under or in respect of the contract, security, or instrument.

(3) A replacement that is based on a methodology or information that is similar or comparable to LIBOR.

(4) Substantial performance by any person of any right or obligation relating to or based on LIBOR under or in respect of a contract, security, or instrument.

(b) None of: a LIBOR discontinuance event, a LIBOR replacement date, the selection or use of a recommended benchmark replacement as a benchmark replacement, or the determination, implementation, or performance of benchmark replacement conforming changes, in each case, by operation of Section 5-28-3, shall do any of the following:

(1) Be deemed to impair or affect the right of any person to receive a payment, or affect the amount or timing of the payment, under any contract, security, or instrument.

(2) Have the effect of discharging or excusing performance under any contract, security, or instrument for any reason, claim, or defense, including, but not limited to, any force majeure or other provision in any contract, security or instrument.

(3) Have the effect of giving any person the right to unilaterally terminate or suspend performance under any contract, security, or instrument.

(4) Have the effect of constituting a breach of a contract, security, or instrument.

(5) Have the effect of voiding or nullifying any contract, security, or instrument.

(c) No person shall have any liability for damages to any person or be subject to any claim or request for equitable relief arising out of or related to the selection or use of a recommended benchmark replacement or the determination, implementation, or performance of benchmark replacement conforming changes, in each case, by operation of Section 5-28-3, and the selection or use of the recommended benchmark replacement or the determination, implementation, or performance of benchmark replacement conforming changes shall not give rise to any claim or cause of action by any person in law or in equity.

(d) The selection or use of a recommended benchmark replacement or the determination, implementation, or performance of benchmark replacement conforming changes, by operation of Section 5-28-3, shall be deemed to do both of the following:

(1) Not be an amendment or modification of any contract, security, or instrument.

(2) Not prejudice, impair, or affect any person’s rights, interests, or obligations under or in respect of any contract, security, or instrument.

(e) Except as provided in either subsection (a) or subsection (c) of Section 5-28-3, this chapter shall not be interpreted as creating any negative inference or negative presumption regarding the validity or enforceability of any of the following:

(1) Any benchmark replacement that is not a recommended replacement benchmark.

(2) Any spread adjustment, or method for calculating or determining a spread adjustment, that is not a recommended spread adjustment.

(3) Any changes, alterations, or modifications to or in respect of a contract, security, or instrument that are not benchmark replacement conforming changes.

(Act 2021-323, §1.)

§ 5-28-5 Severability

If any provision of this chapter or application thereof to any person or circumstance is held invalid, the invalidity shall not affect other provisions or applications of this chapter that can be given effect without the invalid provision or application, and to this end the provisions of this chapter shall be severable.

(Act 2021-323, §1.)

Chapter 29 Second Amendment Financial Privacy Act

§ 5-29-1 Short Title

This chapter shall be known and may be cited as the Second Amendment Financial Privacy Act.

(Act 2024-232, §1.)

§ 5-29-2 Definitions

For the purposes of this chapter, the following terms have the following meanings:

(1) AMMUNITION. Any cartridge, shell, or projectile, or a component thereof, designed for use in a firearm.

(2) ASSIGN or ASSIGNMENT. A financial institution’s policy, process, or practice that labels, links, or otherwise associates a firearms code with a merchant or a payment card transaction in a manner that allows the financial institution or any other entity facilitating or processing the payment card transaction to identify whether a merchant is a firearm retailer or whether a transaction involves the sale of a firearm or ammunition.

(3) CUSTOMER. Any person or entity engaged in a payment card transaction facilitated or processed by a financial institution.

(4) FINANCIAL INSTITUTION. A person or entity other than a merchant involved in facilitating or processing a payment card transaction, including any bank, credit union as defined in Section 5-17-1, acquirer, or payment card issuer.

(5) FIREARM. As defined in Section 13A-11-59. The term also includes any component or accessory of a firearm.

(6) FIREARM RETAILER. Any person or entity that is physically located in this state and is engaged in the lawful selling or trading of firearms, antique firearms, or ammunition.

(7) FIREARMS CODE. A merchant category code approved by the international organization for standardization or an equivalent successor organization and specifically assigned to a firearm retailer.

(8) GOVERNMENTAL ENTITY. The state, or any political subdivision thereof, or any agency or instrumentality of the state.

(9) PAYMENT CARD. A credit card, charge card, debit card, or any other card that is issued to an authorized card user and allows the user to purchase goods or services from a merchant.

(10) PAYMENT CARD NETWORK. An entity that provides proprietary services, infrastructure, and software to conduct payment card transaction authorizations, clearances, and settlements, and software that an entity uses in order to accept as a form of payment a brand of payment card or other device that may be used to carry out payment card transactions. The term does not include any financial institution.

(11) PAYMENT CARD TRANSACTION. Any transaction in which a payment card is accepted as payment.

(Act 2024-232, §2.)

§ 5-29-3 Prohibition Against Governmental Entities Creating or Maintaining Registry of Certain Firearms, Etc.; Use of Firearms Codes Prohibited in Certain Circumstances

(a) Except for records kept during the regular course of a criminal investigation or prosecution or as otherwise required by law, a governmental entity or agent or employee of a governmental entity shall not knowingly keep or cause to be kept any list, record, or registry of privately owned firearms or the owners of firearms.

(b) Except as provided in subsections (d) and (e), a payment card network or agent of a payment card network shall not require the use of a firearms code in a way that distinguishes a firearm retailer from other retailers.

(c) Except as provided in subsections (d) and (e), a financial institution or agent of a financial institution shall not decline a payment card transaction involving a firearm retailer based solely on an assignment of a firearms code.

(d) Nothing in this section shall prohibit a payment card network or financial institution from declining or otherwise refusing to process a payment card transaction for any of the following reasons:

(1) To comply with applicable state or federal law.

(2) To comply with a request by a customer.

(3) To comply with fraud, credit, or compliance controls.

(4) For the purpose of merchant category exclusions offered by a financial institution for expenditure control or corporate card control.

(5) To restrict the use or availability of a firearms code in this state.

(e) Nothing in this section shall limit the authority of a financial institution or payment card network to negotiate with responsible parties or otherwise impair a financial institution’s actions related to any of the following:

(1) Dispute processing.

(2) Fraud risk, compliance, credit management, or other controls in the ordinary course of business operations.

(3) Protecting against illegal activities, breach, or cyber risks.

(4) Restricting the use or availability of a firearms code in this state.

(Act 2024-232, §3.)

§ 5-29-4 Violations

(a) The Attorney General shall investigate reasonable allegations that a person or entity, including a governmental entity, has violated this chapter and, upon finding a violation, shall provide written notice to the person or entity believed to have committed the violation. The person or entity shall cease the violation within 60 business days after receiving written notice from the Attorney General pursuant to this section.

(b)(1) If a person or entity does not cease the violation within 60 business days after receiving written notice from the Attorney General pursuant to this section, the Attorney General shall file an action against the person or entity seeking an injunction.

(2) If the court finds that the person or entity violated this chapter and has not ceased the activity constituting the violation, the court shall enjoin the person or entity from continuing the activity and shall award court costs and reasonable attorney fees.

(3) If a person or entity purposefully fails to comply with an injunction issued pursuant to this section after 30 business days of being served with the injunction, the Attorney General, upon petition to the court, shall seek to impose on the person or entity a civil fine in an amount not to exceed one thousand dollars ($1,000) per violation. In assessing the civil fine, the court shall consider factors including, but not limited to, the financial resources of the violator and the harm or risk of harm to the rights under the Second Amendment to the United States Constitution resulting from the violation.

(4) Any order assessing a civil fine pursuant to this section shall be stayed pending appeal of the order.

(c) The Attorney General shall have exclusive authority to enforce this chapter. The remedies set forth in this section are the exclusive remedies for any violation of this chapter.

(d) It shall be a defense to a proceeding initiated pursuant to this section that a firearms code was required to be disclosed or assigned by law.

(Act 2024-232, §4.)