Payday Loans and Cash Advance in Alabama

Legal under the Deferred Presentment Services Act. Below: the law, the limits, what $300 costs here, who regulates it, and how to request a cash advance online in Alabama.

Is a Cash Advance Legal in Alabama?

Payday loans are legal in Alabama under the Alabama Deferred Presentment Services Act, Ala. Code 5-18A-1 and following, which took effect in June 2003 and is enforced by the Alabama State Banking Department. The Act lets a licensed provider accept your check, advance you cash, and hold the check for 10 to 31 days in exchange for a fee of up to 17.5% of the amount advanced. The most you can owe across every payday lender in the state at one time is $500, and since 2015 every transaction is logged in a statewide database so lenders can check that total before they lend. Alabama allows one renewal if the lender offers it, then requires the lender to offer a no-cost extended repayment plan of four equal monthly installments before it can sue you. A 17.5% fee on a two-week loan is roughly a 456% APR, so this is expensive credit by any measure, but the rules on total debt, term length, and repayment plans are stricter than in many neighboring states. The Banking Department also warns that many online lenders serving Alabama are not licensed and that it may be unable to help with problems those loans cause.

The governing law is Alabama Deferred Presentment Services Act (Ala. Code 5-18A-1 et seq.; fee and term limits at 5-18A-12).

Loan Limits and Terms in Alabama

Alabama's cap works on the borrower, not the loan. Before a lender advances money it must query the statewide database, and if your open payday balances with every licensee in the state already total $500 the transaction is refused. The 17.5% fee is charged on the cash advanced, so $500 costs $87.50, and the term must fall between 10 and 31 days. If you cannot repay on the due date the lender may renew once for a second fee, and after that it must, if it wants to sue, first offer you an extended repayment plan of four equal monthly payments with no additional charge. The database fee is a lender expense; a provider that adds it to your bill is violating the Act. No other charges are allowed apart from one $30 returned check fee and court-awarded costs.

What a $300 Loan Costs in Alabama

Ala. Code 5-18A-12 caps the fee at 17.5% of the amount advanced, so on $300 the maximum fee is 300 x 0.175 = $52.50 and you repay $352.50 on the due date. Using a 14-day term, the shortest common payday cycle inside the Act's 10 to 31 day window, APR = 52.50 / 300 x 365 / 14 = 4.5625, or about 456%. Over the full 31-day term the same $52.50 fee works out to about 206% APR. The Banking Department's required notice uses the same 14-day APR column.

Run your own numbers with the cash advance calculator.

Consumer Protections and Who to Call in Alabama

• Every deferred presentment provider must be licensed by the Alabama State Banking Department, and unlicensed lenders face criminal penalties and are not entitled to keep any fees they collected under Ala. Code 5-18A-1 and following.
• The fee is capped at 17.5% of the amount advanced, the term must run between 10 and 31 days, and no other charge is permitted except one returned check fee of up to $30 and costs a court awards.
• Your total outstanding payday debt with all Alabama lenders combined cannot exceed $500, and every lender must check the statewide database before advancing money to confirm you are under that ceiling.
• Before a lender can sue you over a defaulted loan it must offer a free extended repayment plan of four equal monthly installments, and a renewal is limited to one additional term with one additional fee.
• You cannot be arrested or jailed for a deferred presentment check that bounces unless the account was already closed on the day of the loan, and the lender cannot threaten criminal prosecution to collect.
• The lender must give you a copy of the deferred presentment agreement before you sign, must let you read it and ask questions, and must post a notice showing its fee schedule and APR for a 14-day term.
• If a lender goes to court, attorney fees are capped at 15% of the face amount of the check plus court costs, and the federal Military Lending Act caps the total cost for active duty service members and dependents at 36% APR.

Complaints and licence checks go to the Alabama State Banking Department, Bureau of Loans: 334-242-3452, banking.alabama.gov, or file a complaint at the regulator's complaint page. The federal CFPB also takes complaints about any lender.

Online vs Storefront Lenders in Alabama

The Deferred Presentment Services Act applies to any company that advances money to Alabama residents against a check or bank account authorization, whether it operates from a storefront or a website. Online lenders need the same Banking Department license and must use the same statewide database as storefront providers. The Department has published a consumer alert stating that many companies offering short-term consumer loans over the internet are not licensed in Alabama, and that it may have limited ability to help borrowers who use them. It has heard from Alabamians threatened with arrest by unlicensed online collectors, charged undisclosed fees, and hit with repeat bank withdrawals beyond what they owed. Some of those lenders are affiliated with federally recognized tribes and may not be subject to state jurisdiction at all; the Department directs complaints about tribal lenders to the Federal Trade Commission and the Consumer Financial Protection Bureau. Before borrowing online, search the Department's licensee list, or call 334-242-3452 and ask staff to verify the license. A licensed online lender is bound by the $500 cap, the 17.5% fee limit, and the repayment plan rules; an unlicensed one may honor none of them.

Alternatives If a Payday Loan Is Not the Right Fit

If a $500 payday loan is not the right fit, Alabama has a few lower-cost options. Consumer installment lenders licensed by the Banking Department under the Alabama Small Loan Act and the Alabama Consumer Credit Act make larger loans repaid over months rather than weeks, and the Department's licensee search will show whether a lender holds that license. Federal credit unions can offer payday alternative loans of $200 to $2,000 with a 28% APR cap set by the National Credit Union Administration, and several Alabama credit unions run their own small-dollar programs for members. Some employers offer a payroll advance or earned wage access with no interest charge. For a utility shutoff or rent emergency, community action agencies and the state's 211 line can connect you with assistance programs that do not need to be repaid at all. Asking the creditor you are trying to pay for a short extension is often free, and even a credit card cash advance, which is expensive, typically costs far less than 17.5% for two weeks.

Compare the installment loan and payday alternative loan options before you decide.

Cities We Cover in Alabama

• Birmingham, ALLocal cost of living, ordinances and help lines
• Mobile, ALLocal cost of living, ordinances and help lines

Frequently Asked Questions

Nearby States

• TennesseeThe fee cap, a worked example and the regulator to call in Tennessee.
• GeorgiaThe fee cap, a worked example and the regulator to call in Georgia.
• FloridaThe fee cap, a worked example and the regulator to call in Florida.
• MississippiThe fee cap, a worked example and the regulator to call in Mississippi.