In the state of Tennessee payday lending is considered legal.
Tennessee has a $500 payday loan limit. There is a maximum loan term of 31 days. Finance charges should not exceed 15% of the amount of the check. However, actual APR in the state nears 460%*. Criminal actions are prohibited.
The state of Tennessee is considered the place where payday loans first originated. This is also a state that (despite the so-to-say honorable attribute) managed to impose more or less strict regulations into the industry over the years. However, unfortunately, high-cost loans are still a problem, mostly due to the presence of unlicensed online lenders in the state.
Tennessee Payday Lending Statutes
In the state of Tennessee payday lending is legal according to Tenn. Code Ann. 45-17-101 et seq.
Here, payday loans are called deferred presentment services loans.
A company should obtain the license at the Department of Financial Institutions to be able to set up payday loan business in Tennessee. To get the license the company should possess $25,000 in net worth and have records available for a person owning 5% and more of the lending company.
Here, there is a list of payday loan companies with a proper license in Tennessee (as of April, 2019).
Any lending company functioning in Tennessee and violating the laws will be prosecuted and have the license revoked. For violating the state law, the lending company will get a fine of $1,000.
Loan Amount in Tennessee
“No licensee under the Deferred Presentment Services Act or person related to a licensee may have outstanding more than two (2) checks from any one (1) customer at any one (1) time, with the aggregrate face value of all outstanding checks totaling $500.” (Tenn. Code Ann. § 45-17-112(o))
Rates, fees and other charges in Tennessee
“The maximum fee amount on a deferred presentment services transaction, or payday loan, cannot exceed 15% of the face amount of the check, or internet payday loan.” (Tenn. Code Ann. § 45-17-112(b))
However, in reality, APR in Tennessee can reach 460% (*According to the Center for Responsible Lending 2019: “Typical APR based on average rate for a $300 loan advertised by largest payday chains or as determined by state regulator, where applicable.”).
Maximum term for a payday in Tennessee
- The minimum term should not be less than 31 days: “Agreements cannot exceed 31 days in length.” (Tenn. Code Ann. § 45-17-112(d))
- A cooling-off period of 1 business day after 2 continuous loans repaid should pass before another loan is taken.
- Criminal charges are prohibited in the state of Tennessee.
The Department of Financial Institutions regulates the payday lending industry in the state of Tennessee.
The History of Payday Loans in Tennessee
- 1990s – Check Into Cash, allegedly fist payday loan company was founded by Allan Jones in Tennessee. Payday loan industry was born and developed.
- 2006 – The Military Lending Act effectively capped payday loans offered to the military at 36% APR. No lender in Tennessee is now allowed to offer loans to the military in excess of 36% APR.
- 2010 – Tennessee Legislation was one of the 25 states that passed serious legislation in with regard to payday loans. Deferred Presentment Services Act capped finance charges at 15% and a maximum loan amount at $500.
- 2014 – Metro Council of Nashville passed a zoning law that prohibited payday lenders from being located closer than 1/4 of a mile from another payday loan location.
- June 2, 2016 – The Consumer Financial Protection Bureau (CFPB) proposed a Payday Loan Rule that hasn’t yet fully come into effect (the federal rule is expected in November 2020).
- So far, the situation in Tennessee stays the same. Lawmakers have long offered imposing a 36% annual interest rate cap on payday loans; however, this measure is still under consideration.
(As of April 2019)