Something’s going on in Tennessee
April 18, 2009 | Tennessee, industry, regulation | Comments (0)But we can’t figure out whether it’s good or bad. From the story:
Under current state law, title loans are 30-day borrowings that roll over automatically into a new loan if the principal is not paid off within 30 days. Those lenders are allowed by state law to charge 2 percent interest and an administrative fee that’s no more than 20 percent of the principal indebtedness for each loan, Brewer said.
“So that’s 22 percent. And if it was a $1,000 loan, then that would be $220 deducted from the loan right at the beginning,” Brewer said. “So a person would then receive $780, and then if they can’t pay back $1,000 within 30 days, the fees and interest would accrue all over again.”
The bill before the state Legislature would nix the ability of title lenders to add the administrative fee onto the loan each time it’s rolled over.
“What this bill would do is it would allow the 2 percent interest per month, it wouldn’t change that,” Brewer said. “It would allow a 20 percent administrative fee on the front end when the loan is made, but then on the automatic renewals it would permit only 2 percent interest – no more administrative fee.
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