Alabama

The relevant statute and regulations are the Consumer Finance Act, Ala. Code §§5-19-1 et seq. (“AL-CFA”) and the Alabama Consumer Credit Act Regulations, Chapter 155-2-2-.01 et seq. (“AL-REGS”).

A. Actions lender may take: AL-CFA §5-19-20(c) - If a borrower fails to provide any required property insurance, the lender may purchase single-interest insurance for itself or dual-interest insurance insuring both the lender's and borrower's interest. The single-interest insurance policy term must not exceed the remaining loan term, and the amount must not exceed the unpaid loan balance (excluding any unearned finance charges).

B. Notices required: AL-CFA §5-19-20(c); AL-REGS §155-2-2-.12(8) - The lender may not purchase dual-interest insurance unless it has obtained the borrower's written consent. The borrower's written consent may be obtained when the loan agreement is signed, or when the insurance is placed.

C. Coverage required: AL-CFA §5-19-20(c) - Lenders may purchase single-interest protecting only its interests, or, with the borrower's written consent, dual-interest insurance insuring both the lender's and borrower's interest.

D. Charges permitted: AL-CFA §§5-19-20(c), 5-19-20(f) - The lender may charge the borrower for the property insurance premium, as long as that premium does not exceed the premium approved by the administrator or the insurance rates the insurer filed with the Department of Insurance. If the loan is renewed, refinanced or prepaid, the creditor must refund or credit the borrower with any premium refunded by the insurer after the insurance is terminated.

E. Finance charge allowed on lender's payment: AL-CFA §5-19-20(c) - The lender may charge interest on the premium at the contract rate or other rate agreed to in writing.

Click here to view relevant Alabama Code and Regulations.