Alabama Modifies Late Fee Restrictions Under Consumer Credit Act

On June 9, Alabama HB 3 went into effect, amending § 5-19-4 of the Alabama Consumer Credit Act (Mini-Code, which does not apply to real estate loans where the creditor is a national bank or federal thrift, except for prepayment penalties), which sets minimum and maximum late charges that may be imposed on consumer credit transactions. Prior to the amendment, § 5-19-4 allowed lenders to charge the greater of $10 or 5% of the amount of the scheduled payment in default, capped at $100, when a payment on a consumer credit transaction - which includes residential mortgage loans - is ten or more days past due. The amendment increases the dollar limitation to $18, while retaining both the alternative 5% of the amount of the scheduled payment provision and the $100 maximum late charge. This amendment brings the Mini Code and Small Loan Act into accord regarding the charging of late fees.