Code of Alabama

Ala. Code § 5-19-4 (2026)

Additional Charges for Default or Deferral; Prepayment; Renewal or Refinancing; Real Property Transactions.

✓ official Alabama Legislature (ALISON) text, current July 2026

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(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.)

Notes of Decisions

Cited in 19 cases, 1980–1998 · leading case: Ex Parte Watley, 708 So. 2d 890 (Ala. 1997).

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Ex Parte Watley, 708 So. 2d 890 (Ala. 1997). · cites it 59× “Subsection (g) was added to § 5-19-4 on March 11, 1988, effective "from and after June 30, 1988," by Act No.”

United Companies Lending v. McGehee, 686 So. 2d 1171 (Ala. 1996). · cites it 17× “Plaintiffs are uneducated, unsophisticated, do not have high school diplomas, and did not realize until late August or September of 1993 that the loan made the basis of the McGehee transaction violated Alabama Code § 5-19-4(g). Defendants misled Plaintiffs and concealed the…”

In Re Crotzer, 147 B.R. 252 (Bankr. N.D. Ala. 1992). · cites it 8× “Code § 5-19-4 2 limits the *254 amount of charges on late payments to five percent of the scheduled payment or 50 cents, whichever is greater.”

Autrey v. United Companies Lending Corp., 872 F. Supp. 925 (S.D. Ala. 1995). · cites it 8× “The Complaint alleges violation of Ala. Code § 5-19-4 (g) (Supp.1994) (Alabama’s “Mini Code”) as well as various Alabama state law causes of action for fraud and wantonness.”

Willis v. Quality Mortg. USA, Inc., 5 F. Supp. 2d 1306 (M.D. Ala. 1998). · cites it 5× “§ 2607 , and imposed an illegal penalty for prepayment, in violation of § 5-19-4 of the 1975 Code of Alabama. The court has jurisdiction pursuant to 12 U.”

Simmons MacH. Co. Inc. v. M. & M Brokerage, Inc., 409 So. 2d 743 (Ala. 1981). · cites it 2× “Credit Alliance states that it was uncertain whether the Code 1975, § 5-19-4(c) ("Mini-Code"), *757 applied to the transaction so that a refund was due.”

Ex Parte Brannon, 683 So. 2d 994 (Ala. 1996). · cites it 5× “The Court of Civil Appeals affirmed, noting that "[t]he traditional common law proposition [which was based on the reasoning that allowing prepayment could cause inconvenience to mortgagees who often extend credit as an investment] is that when there is no contrary statutory…”

Watley v. Transamerica Fin. Servs., Inc., 708 So. 2d 890 (Ala. 1997). · cites it 54× “Subsection (g) was added to § 5-19-4 on March 11, 1988, effective “from and after June 30, 1988,” by Act No.”

Hunter v. Rich's Dep't Stores, 945 F. Supp. 1500 (N.D. Ala. 1995). · cites it 3× “Code § 5-19-4 (1975). 2 . Defendants list among these courts the First Circuit, the federal district court for the Western District of Pennsylvania, the federal district court for Minnesota, the California Court of Appeal, the Colorado Court of Appeals and the appellate division…”

Jackson v. Cit Grp./sales Fin., 630 So. 2d 368 (Ala. 1993). · cites it 4× “I commend the Legislature for its amendment to the "Mini-Code," see Ala.Code 1975, § 5-19-4(c) (amended 1988), so that the financing scheme used by the defendants in this case can no longer legally apply to extensions of consumer credit for terms longer than 61 months.”

United Companies Lending Corp. v. Autrey, 723 So. 2d 617 (Ala. 1998). · cites it 13× “Code 1975, § 5-19-31, from the provisions of Alabama's Mini-Code; and 2) that Ala.Code 1975, § 5-19-4, did not amend § 8-8-5.”

Centennial Assocs., Ltd. v. Clark, 384 So. 2d 616 (Ala. 1980). “It is significant to note that §§ 5-19-4(a), 5-19-6, 5-19-11, and 5-19-15, all specifically use the word "creditor," thus limiting the application of those sections to creditors who regularly extend credit.”

Show all 19 citing cases →

— Ala. Code § 5-19-4(a) — 4 cases

Ex Parte Watley, 708 So. 2d 890 (Ala. 1997). “Subsection (g) was added to § 5-19-4 on March 11, 1988, effective "from and after June 30, 1988," by Act No.”

In Re Crotzer, 147 B.R. 252 (Bankr. N.D. Ala. 1992). “Code § 5-19-4 2 limits the *254 amount of charges on late payments to five percent of the scheduled payment or 50 cents, whichever is greater.”

Watley v. Transamerica Fin. Servs., Inc., 708 So. 2d 890 (Ala. 1997). “Subsection (g) was added to § 5-19-4 on March 11, 1988, effective “from and after June 30, 1988,” by Act No.”

— Ala. Code § 5-19-4(c) — 6 cases

Simmons MacH. Co. Inc. v. M. & M Brokerage, Inc., 409 So. 2d 743 (Ala. 1981). “Credit Alliance states that it was uncertain whether the Code 1975, § 5-19-4(c) ("Mini-Code"), *757 applied to the transaction so that a refund was due.”

Ex Parte Brannon, 683 So. 2d 994 (Ala. 1996). “The Court of Civil Appeals affirmed, noting that "[t]he traditional common law proposition [which was based on the reasoning that allowing prepayment could cause inconvenience to mortgagees who often extend credit as an investment] is that when there is no contrary statutory…”

Willis v. Quality Mortg. USA, Inc., 5 F. Supp. 2d 1306 (M.D. Ala. 1998). “§ 2607 , and imposed an illegal penalty for prepayment, in violation of § 5-19-4 of the 1975 Code of Alabama. The court has jurisdiction pursuant to 12 U.”

Jackson v. Cit Grp./sales Fin., 630 So. 2d 368 (Ala. 1993). “I commend the Legislature for its amendment to the "Mini-Code," see Ala.Code 1975, § 5-19-4(c) (amended 1988), so that the financing scheme used by the defendants in this case can no longer legally apply to extensions of consumer credit for terms longer than 61 months.”

Brannon v. McGowan, 683 So. 2d 991 (Ala. Civ. App. 1995).

— Ala. Code § 5-19-4(c)(1) — 1 case

— Ala. Code § 5-19-4(e) — 1 case

Jackson v. Am. Sav. Mortg. Corp., 924 F.2d 195 (11th Cir. 1991).

— Ala. Code § 5-19-4(f) — 3 cases

Ex Parte Watley, 708 So. 2d 890 (Ala. 1997). “Subsection (g) was added to § 5-19-4 on March 11, 1988, effective "from and after June 30, 1988," by Act No.”

Watley v. Transamerica Fin. Servs., Inc., 708 So. 2d 890 (Ala. 1997). “Subsection (g) was added to § 5-19-4 on March 11, 1988, effective “from and after June 30, 1988,” by Act No.”

Grantham v. First Union Home Equity Bank, 685 So. 2d 748 (Ala. Civ. App. 1996).

— Ala. Code § 5-19-4(g) — 8 cases

Ex Parte Watley, 708 So. 2d 890 (Ala. 1997). “Subsection (g) was added to § 5-19-4 on March 11, 1988, effective "from and after June 30, 1988," by Act No.”

United Companies Lending v. McGehee, 686 So. 2d 1171 (Ala. 1996). “Plaintiffs are uneducated, unsophisticated, do not have high school diplomas, and did not realize until late August or September of 1993 that the loan made the basis of the McGehee transaction violated Alabama Code § 5-19-4(g). Defendants misled Plaintiffs and concealed the…”

Autrey v. United Companies Lending Corp., 872 F. Supp. 925 (S.D. Ala. 1995). “The Complaint alleges violation of Ala. Code § 5-19-4 (g) (Supp.1994) (Alabama’s “Mini Code”) as well as various Alabama state law causes of action for fraud and wantonness.”

Watley v. Transamerica Fin. Servs., Inc., 708 So. 2d 890 (Ala. 1997). “Subsection (g) was added to § 5-19-4 on March 11, 1988, effective “from and after June 30, 1988,” by Act No.”

United Companies Lending Corp. v. Autrey, 723 So. 2d 617 (Ala. 1998). “Code 1975, § 5-19-31, from the provisions of Alabama's Mini-Code; and 2) that Ala.Code 1975, § 5-19-4, did not amend § 8-8-5.”

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