Alabama Payday Loan Laws: Limits, Fees, Rollovers, and Your Rights

How payday lending works in Alabama

A payday loan in Alabama is a short loan secured by your own check or by permission to pull money from your bank account. You write a check for the amount you borrow plus the fee, and the lender agrees to hold it until your next payday. On the due date, you either pay in cash or the lender deposits the check or runs the electronic debit.

The state calls this a deferred presentment transaction, because the lender defers presenting your check to the bank. The business must hold a deferred presentment license from the Bureau of Loans at the State Banking Department for each location. State regulations say no other kind of license lets a company make these loans in Alabama, and that the law should be read broadly as a consumer protection statute.

Payday loans are separate from small installment loans. Those are covered by the Alabama Small Loan Act and the Alabama Consumer Credit Act, which have their own rate rules and a minimum repayment term of at least one month. If you are comparing a payday loan with a small installment loan, our guide to personal loans in Mobile, Alabama walks through how to compare APRs and terms.

Alabama payday loan laws at a glance

The clearest summary of the rules comes from the notice every licensed lender must post in its lobby. The Banking Department's regulations require a sign of at least 20 by 20 inches that lists the fees, the limits, and how to complain. Here are the main points from that required notice and the Department's database FAQ.

The lender must also give you a copy of its written agreement. You have the right to read it, ask questions until you understand it, and walk away before you sign. No other fees are allowed beyond the ones in the table.

The Act also has a short cooling-off rule after you pay off a renewed loan. Summaries of the statute describe it as one business day before you can start a new loan. We could not read the official statute text online, so ask the lender or the Banking Department to confirm the exact waiting period if it matters to you.

What a $500 payday loan really costs

A 17.5 percent fee may not sound huge, but it is charged for a very short time. That is why the annual percentage rate (APR) is so high. The table below uses the maximum fee allowed in Alabama. A lender can charge less, and its posted sign must show its own fee and the APR for a 14-day loan.

The APR changes with the term. The same 17.5 percent fee works out to roughly 639 percent APR on a 10-day loan and about 206 percent on a 31-day loan. These are our calculations from the fee cap, not figures published by the state.

Here is a simple example. Dana borrows $500 on the 1st and owes $587.50 two weeks later. Her paycheck covers rent but not the loan, so she renews and pays another $87.50 fee. After four weeks she has paid $175 in fees and still owes the $500. That is the cycle the renewal limit and the payment plan are meant to stop.

Renewals and the extended payment plan

Your loan is due in full on the maturity date. Once it is paid in full, you may take out another loan if you are still under the $500 limit. If you cannot pay the full amount, the lender may let you renew the loan one time by paying another fee.

If you still cannot pay after that one renewal, the lender may offer an extended payment plan. Under the posted notice, that plan splits what you owe into four equal monthly payments at no additional cost. The notice says this is at the lender's option, so ask about it directly and get the plan in writing. The Banking Department's FAQ notes that a lender must update the database when a loan moves into an extended payment plan.

A few practical tips:

• Ask before the due date. It is easier to arrange a plan before a check bounces and fees start.
• Pay early if you can. The Department's FAQ says borrowers may repay early, for example with a money order.
• Keep every receipt. Note the transaction ID that the lender writes on your agreement.
• Do not take a second payday loan to pay the first. The database is designed to block loans that would push you over $500.

The statewide payday loan database

Alabama runs a real-time database so lenders can see whether a new loan would put you over the $500 limit. The Banking Department adopted rules creating it in 2013, and news reports from the time say tracking began in 2015 after a court challenge. The database is run by a contractor, Veritec, under the Department's supervision.

Before every new loan or renewal, a licensed lender must check the database and record the transaction. The Department's FAQ says the lender pays a per-transaction database fee, which rose to $2.00 on January 1, 2025, and may not pass it on to you beyond what the law allows.

If you are turned down because the database shows a loan you already paid, you can fix it. The Department says to call Veritec first at 1-877-238-2262 (1-877-ADV-BAMA). If that does not solve the problem, file a written complaint with the Banking Department.

Your rights when a lender comes to collect

Missing a payday loan payment is stressful, but Alabama law limits what a lender can do. Under the required lobby notice:

• One bounced check fee. If your check bounces after deposit, the lender may charge one fee of up to $30.
• Court costs only if they sue. If the lender goes to court, you may owe court costs and attorney fees of up to 15 percent of the check amount.
• No arrest for a normal bounced check. You cannot be arrested or jailed for a bounced payday check unless the account was already closed on the day you took the loan.

Debt collectors who buy or collect old payday debts must also follow the federal Fair Debt Collection Practices Act. They cannot threaten arrest, use abusive language, or call at unusual hours. If you are behind on several debts at once, a free session with a nonprofit credit counselor can help you see all your options. Our debt relief programs guide compares counseling, debt management plans, and settlement.

Federal rules that also apply

The Consumer Financial Protection Bureau (CFPB) issued a national payday rule in 2017. Its underwriting part, which would have required lenders to check whether you could afford the loan, was revoked in 2020. The payment part took effect on March 30, 2025, according to the CFPB.

That payment rule is often called "two strikes." After two failed attempts in a row to pull a payment from your bank account, a covered lender may not try again unless you give new, specific permission. The rule also requires notices before certain withdrawals. Reports in 2025 said the CFPB would not prioritize enforcement of these provisions, and the CFPB has listed a proposal to reconsider the rule. Treat its future as uncertain and check the CFPB for updates.

If you are on active duty or a dependent of a service member, the federal Military Lending Act caps the cost of most consumer loans, including payday loans, at a 36 percent military APR. Ask your installation's financial readiness office for free help.

Checking that a lender is licensed

Alabama's limits only protect you if the lender follows them. Unlicensed online lenders may ignore the $500 cap, charge much higher fees, or take repeated payments from your account. Before you borrow:

1. Look for the lobby notice at a storefront. It must show the lender's fee, the APR for a 14-day loan, and the Banking Department's contact details.
2. Search the lender's name on the Banking Department's Bureau of Loans pages, which link to licensee search tools.
3. Be wary of online offers that skip the database check, ask for an upfront fee, or ask for your online banking password.
4. Read the APR in the agreement. If it is far above what the Alabama fee cap would produce, ask why, or walk away.

Lower-cost alternatives to try first

A payday loan is one of the most expensive ways to borrow. Before you sign, it is worth a few phone calls to see whether one of these options can cover the gap.

Payday alternative loans come from federal credit unions under rules set by the National Credit Union Administration (NCUA). According to MyCreditUnion.gov, PALs cannot be rolled over, and a credit union can make no more than three PALs to one borrower in a six-month period. The NCUA added a second version, PAL II, in 2019 with larger amounts and longer terms. Not every credit union offers them, so ask.

For a free budget and debt review, look for a nonprofit agency through the National Foundation for Credit Counseling. If the problem is a single urgent bill, call 211 or see our guide to Alabama assistance programs for state and local help that does not need to be repaid.

Filing a complaint

If you think a payday lender broke Alabama's rules, you can complain to the State Banking Department, Bureau of Loans. Use the Department's complaint form, or call (334) 242-3452 or toll free (866) 465-2279. Keep copies of your agreement, receipts, bank statements, and any messages from the lender.

Helpful details to include:

• The lender's name, store address or website, and license number if shown.
• The loan date, amount, fee, and transaction ID.
• What went wrong, such as an extra fee, a second renewal, or a loan that put you over $500.
• What you would like to happen, such as a refund of an improper fee.

You can also send a complaint to the CFPB about a lender or debt collector. Free civil legal help may be available through Legal Services Alabama if you are sued or threatened with a lawsuit.

Related guides

• Personal loans in Mobile, Alabama
• Alabama hardship program
• Credit reports and scores
• Debt relief programs

Frequently asked questions

This guide is general information, not legal advice. Laws and fees can change, so confirm current rules with the Alabama State Banking Department. National Relief Program is an independent website and is not a lender or a government agency.