In Legal Terms - March/April 2001

Attorney General Asnwers Credit Card Questions

During the 2000 Regular Session of the Alabama Legislature, the ACCA supported legislation to give cities and counties specific authority to accept credit cards for the payment of taxes, licenses, and fees paid to a city or county office. Those bills were passed (Act Nos. 00-314 and 00-154)1 and are now codified as Code of Alabama 1975, § 11-103-1 et seq.

Many counties have already undertaken programs to authorize payment by credit cards and other counties are considering this option. Two recent attorney general's opinions issued on this subject cover several aspects of the new law and may be helpful to those looking at the possibility or working on implementation of a credit card program within the county.2

AG's Opinion No. 2001-121, issued to Probate Judge Adrian Johns on March 22, 2001, addresses the implementation of credit card agreements and policies and procedures under the new law. As noted by the attorney general, the law states that the county commission may authorize the use of credit cards in county offices and enter into contracts with credit card issuers or processors to provide those services. If authorized, credit cards shall be accepted pursuant to rules and regulations promulgated by the county commission, and each office may decide whether or not to accept credit cards. The law allows the office of the probate judge to establish office policies and procedures for acceptance of credit cards in the probate office as permitted within the county pursuant to an agreement executed by the county commission.

However, as aptly noted by the attorney general, all terms of the agreement with the credit card issuer or processor, such as whether the bank will forego interest and whether or not transaction fees will be paid, shall be negotiated and determined, not by the probate judge or other county official, but by the county commission. Additionally, the general policies and procedures to follow within the county shall be established by the county governing body.

The probate judge asked in his opinion request whether he could guarantee payment of any sums due to a credit card issuer or processor personally or in his official capacity under a proposed credit card agreement and whether he or the county commission could indemnify the bank for any loss caused by employees in his office who accepted credit cards for payment.

The Association worked hard on this legislation to ensure that no county officials or employees would assume any responsibility or liability in this regard, and Opinion # 2001-121 addresses this issue very well. The attorney general states that the law precludes personal liability for final collection making a personal guarantee unnecessary, and that there is no legal basis for indemnifying a bank or other entity against loss. The opinion notes that the law specifically provides that no person making payment by credit card can be relieved from liability for the debt paid by credit card except by full payment of the debt. It further notes that the law specifically prohibits modifying this provision by contract. See Code of Alabama 1975, § 11-103-3(b).

In a second opinion to Judge Johns issued on March 29, 2001, (AG's Opinion # 2001-135), the attorney general again discussed the new credit card law in responding to questions related to establishing a web page allowing taxpayers to pay motor vehicle registration fees and taxes on the Internet. In response to an inquiry as to whether or not the probate judge had authority to contract with a private company to provide Internet services to taxpayers, the attorney general cited the new law as authority for entering into such agreements, but again noted that any contract would be between the service provider and the county commission, not the probate judge.

This opinion also addresses whether a contract for Internet services would have to be competitively bid. Code of Alabama 1975, § 11-103-2 specifically provides that the competitive bid law does not apply to agreements entered into under this Act. However, apparently assuming that a contract to create and maintain a web page for payment of motor vehicle registration taxes and fees would most likely be awarded exclusively to one company, the attorney general warns against violating Section 22 of the State Constitution which prohibits governmental entities from granting an exclusive franchise or special privilege. As discussed in the opinion, the Alabama Supreme Court has held that an exclusive contract for services constitutes a franchise or special privilege in violation of the Constitution. However, that Court has also held that compliance with the competitive bid law will generally satisfy the constitutional proscription. See, Kennedy v. City of Prichard, 484 So.2d 432 (Ala. 1978); Franklin Solid Waste Services v. Jones, 354 So.2d 4 (Ala. 1978).3

At first blush, the attorney general's discussion of this issue may seem to contradict the intent of the legislation in exempting credit card agreements with cities and counties from the competitive bid law, but in my opinion, it does not. It appears that, as in past opinions, the attorney general is advising counties to be careful when considering contracts for exclusive services, such as may be contemplated in web page design and maintenance. However, simply entering into an agreement with a credit card processor or issuer does not grant that company exclusive rights to provide those services within the county. Clearly, counties may contract with more than one such service provider, and the new law is specifically designed to provide for that possibility. Nonetheless, even if a county only enters into an agreement with one credit card service provider, it is not an exclusive franchise in violation of the Constitution unless the agreement prohibits the county from contracting with any other provider for the same or similar service or the nature of the service provided would prohibit any other company or entity from providing the same service to the county during the term of the contract.4

Act Nos. 00-314 and 00-154 have already proved very beneficial for counties looking for ways to improve and streamline the collection of taxes, fees, and licenses. However, as with all new laws, there are questions about interpretation and implementation of the new Code provisions. These opinions are likely the first of many to be issued in this new area of statutory law, and we may see case law on these issues in the next few years as well. The ACCA staff will try to keep counties informed as new interpretations are published - and of course, if you have any questions about this or other provisions of Alabama law, you can always give me or other ACCA staff members a call.

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1 There were actually two bills passed with identical language for acceptance of credit cards by counties and cities.

2 These opinions can be obtained through the attorney general’s web site (www.ago.state.al.us) or by calling the ACCA office.

3 In other words, if the contract is awarded through competitive bid, there is no violation of the Constitutional prohibition 4Although not mentioned in these attorney general’s opinions, keep in mind that Code of Alabama 1975, § 11-103-2 limits these contracts to three year terms.