2023 Tennessee Code › Title 45 - BANKS AND FINANCIAL INSTITUTIONS (§§ 45-1-101 — 45-20-111) › Chapter 5 - INDUSTRIAL LOAN AND THRIFT COMPANIES (§§ 45-5-101 — 45-5-612) › Part 4 - INTEREST AND BORROWERS (§§ 45-5-401 — 45-5-405) › Section 45-5-403 - Limitations on loan charges - Acquisition charges - Term of loan

(a)
No registrant under this chapter has the power to charge loan charges other than, or in amounts greater than, the following:
(1)
(A)
Registrants may charge a service charge in an amount equal to five percent (5%) of the total amount of the loan, which charge may be deducted in advance from the principal of the loan. This service charge shall be in lieu of all other compensation for services, expenses, detriments or commitments directly incident to the loan, except those charges that are otherwise specifically provided in this chapter. This charge is authorized and limited on the basis that it is generally reasonably related to the total costs and expenses that it is designed to cover, and in order to make the amount of the charges more certain and readily ascertainable by the registrants, their borrowers and the commissioner; and to that end, registrants shall not be required to maintain detailed records with respect to the services, expenses, detriments or commitments covered by the charges. This charge shall not, however, be imposed on that portion of a loan used to pay any existing loan or part thereof owing by the same borrower or spouse, or both, to the same registrant or any affiliated lender;
(B)
In the case of open-end credit plans or in the case of loans secured by real property, in lieu of the five-percent service charge provided in subdivision (a)(1)(A), registrants may charge borrowers with the actual, bona fide, reasonable expenses, directly incident to the loan, paid or to be paid by the registrant to third parties, including, but not limited to, expenses for title examination or title insurance, surveys, preparation of necessary documents, credit reports and appraisals;
(2)
In lieu of the five-percent service charge provided in subdivision (a)(1)(A), and for the same purposes, registrants may charge:
(A)
A flat service charge of two dollars ($2.00) on all loans that do not exceed twenty dollars ($20.00), and charge a flat service charge in addition thereto of fifty cents (50¢) per each five-dollar increase on all loans in excess of twenty dollars ($20.00) but that do not exceed one hundred dollars ($100), and to charge a flat service charge of ten dollars ($10.00) on all loans of more than one hundred dollars ($100); provided, that no lender may charge the flat service charge on multiple loans existing at the same time to any one (1) borrower;
(B)
In the event the borrower shall repay the loan in full within three (3) business days following the date of the loan, then all charges of every kind shall be refunded in cash; provided, that in the event a loan on which a flat service charge has been made shall be renewed, rescheduled or refinanced within forty-five (45) days of the date of the making of the loan, the flat service charge in connection with any new moneys advanced shall not exceed one-half (1/2) of the flat service charge that would be applicable thereto; and
(C)
It being the intent of the general assembly that the flat service charges permitted hereunder shall never be imposed on any portion of any loan used to pay any existing loan, or part thereof, owing by the same borrower or spouse or both to the same registrant or any affiliated lender;
(3)
Registrants may also charge the borrower with any fees or taxes paid, or to be paid, any public official for filing, recording or releasing any document relating to the loan. In lieu of charging the borrower with any fees for filing or recording any document relating to the loan, registrants may charge the borrower with any premiums payable for insurance in lieu of filing or recording the document; provided, that the premium shall not exceed the current fee for filing or recording the document. Moreover, the sum shall not be charged more than one (1) time during any twelve-month period;
(4)
Registrants may also charge a handling or delinquent charge of five cents (5¢) for each default in the payment of each one dollar ($1.00), or fraction thereof, or fifteen dollars ($15.00), whichever is greater, at the time any payment on any loan made hereunder becomes past due for a period of five (5) or more days; provided, that the charge shall not be collected more than once for the same default;
(5)
(A)
Registrants may also charge an installment maintenance fee of five dollars ($5.00) per month;
(B)
The fee may be charged for a period not to exceed the original term of the loan; provided, that the loan is made for a period of ninety (90) days or more; and provided further, that the monthly installment payments are at least fifteen dollars ($15.00) per month. No registrant may charge the installment maintenance fee on multiple loans existing at the same time to any one (1) borrower. The installment maintenance fees shall not be deducted in advance. Registrants may, however, include the maximum maintenance fee for the term of the loan in the face amount of the note evidencing that loan; provided, that neither interest, loan charges, delinquent charges nor insurance charges are computed on the amount; and provided further, that any installment maintenance fee due more than one (1) month following payment in full of the note shall be credited to the note;
(6)
Registrants may also require the payment by the borrower of any reasonable and actual attorneys' fees and other costs incurred in the collection or enforcement of any loan contract;
(7)
Registrants may also charge and collect from the borrower, through regular billing procedure or otherwise, a bad check charge as provided in §
47-29-102
for any check, draft, electronic funds transfer, electronic check, card payment, or any other electronic payment, negotiable order of withdrawal or like instrument drawn on a bank or other depository institution given by any person in full or partial repayment of a loan or other extension of credit if the instrument is not paid or dishonored by the institution; provided, that:
(A)
Registrants may redeposit the instrument with the institution or return the dishonored instrument to the borrower or person to whom the credit was extended upon redemption of the instrument; and
(B)
Registrants may collect not more than one (1) bad check charge on any one (1) check or electronic debit authorization;
(8)
In the case of a residential mortgage loan, a registrant may, from the service charge imposed under subdivision (a)(1)(A), pay a mortgage broker, licensed or otherwise exempt from licensing under the Residential Lending Brokerage and Servicing Act, compiled in chapter 13 of this title, a fee for the services actually rendered by the mortgage broker with respect to a specific transaction; provided, however, that the aggregate fee paid to a mortgage broker may not exceed the five percent (5%), which may be imposed under subdivision (a)(1)(A); and
(9)
(A)
Registrants may also impose and collect a convenience fee from any borrower making payment by credit card, debit card, electronic funds transfer, electronic check, or other electronic means in order to offset actual costs incurred by a registrant for accepting and processing payments made by electronic means;
(B)
(i)
Any convenience fee collected by a registrant pursuant to this subdivision (a)(9) may not exceed the actual costs incurred by the registrant; provided, however, a registrant may impose a convenience fee in lieu of the actual cost of the individual payment type that does not exceed the average of the actual cost incurred for the various types of electronic payments for which the registrant imposes a convenience fee;
(ii)
Any registrant charging a convenience fee pursuant to this subdivision (a)(9) shall notify the customer of the amount of the fee prior to completing a transaction, provide an opportunity for the customer to cancel the transaction without incurring a fee, and make available the option to make a payment on a loan by check, cash, or money order directly to the registrant without the imposition of a convenience fee for a card payment or electronic payment;
(iii)
When a borrower elects to make a payment to the registrant by credit card, debit card, electronic funds transfer, electronic check, or other electronic means and a convenience fee is imposed and collected pursuant to this subdivision (a)(9), the payment of the convenience fee shall not be refundable;
(iv)
The convenience fee may be charged in addition to all other interest and fees allowed by law;
(v)
For purposes of this subdivision (a)(9)(B), "actual costs" means actual third party costs incurred for the processing of payments made by electronic means. If a registrant is a subsidiary of an entity that processes payments made by electronic means, then the parent entity shall be considered a third party;
(vi)
A registrant shall not charge a convenience fee on any debit card or prepaid card transaction if the payment card network on which the transaction is initiated or processed prohibits such convenience fee by contract, rule or policy.
(b)
(1)
As an alternative to the loan charges permitted under subsection (a) and interest permitted under §
45-5-301
, a registrant may charge loan charges in amounts no greater than the following:
(A)
On any loan of an amount of one hundred dollars ($100) or more up to and including the amount of three hundred dollars ($300), there shall be allowed an acquisition charge for making the loan not in excess of ten percent (10%) of the amount of the principal. In addition thereto, an installment account handling charge shall be allowed not to exceed twelve dollars ($12.00) per month;
(B)
On any loan of an amount in excess of three hundred dollars ($300) but not more than four hundred dollars ($400), there shall be allowed an acquisition charge for making the loan not in excess of ten percent (10%) of the amount of the principal. In addition thereto, an installment account handling charge shall be allowed not to exceed fourteen dollars ($14.00) per month;
(C)
On any loan of an amount in excess of four hundred dollars ($400) but not more than five hundred dollars ($500), there shall be allowed an acquisition charge for making the loan not in excess of ten percent (10%) of the amount of the principal. In addition thereto, an installment account handling charge shall be allowed not to exceed sixteen dollars ($16.00) per month;
(D)
On any loan of an amount in excess of five hundred dollars ($500) but not more than one thousand dollars ($1,000), there shall be allowed an acquisition charge for making the loan not in excess of ten percent (10%) of the amount of the principal. In addition thereto, an installment account handling charge shall be allowed not to exceed twenty dollars ($20.00) per month;
(E)
On any loan of an amount in excess of one thousand dollars ($1,000) but not more than one thousand two hundred fifty dollars ($1,250), there shall be allowed an acquisition charge for making the loan not in excess of ten percent (10%) of the amount of the principal. In addition, an installment account handling charge shall be allowed. The handling charge shall not exceed twenty-three dollars ($23.00) per month;
(F)
On any loan of an amount in excess of one thousand two hundred fifty dollars ($1,250) but not more than one thousand five hundred dollars ($1,500), there shall be allowed an acquisition charge for making the loan not in excess of ten percent (10%) of the amount of the principal. In addition, an installment account handling charge shall be allowed. The handling charge shall not exceed twenty-six dollars ($26.00) per month;
(G)
On any loan of an amount in excess of one thousand five hundred dollars ($1,500) but not more than one thousand seven hundred fifty dollars ($1,750), there shall be allowed an acquisition charge for making the loan not in excess of ten percent (10%) of the amount of the principal. In addition, an installment account handling charge shall be allowed. The handling charge shall not exceed twenty-nine dollars ($29.00) per month; or
(H)
On any loan of an amount in excess of one thousand seven hundred fifty dollars ($1,750) but not more than two thousand dollars ($2,000), there shall be allowed an acquisition charge for making the loan not in excess of ten percent (10%) of the amount of the principal. In addition, an installment account handling charge shall be allowed. The handling charge shall not exceed thirty-two dollars ($32.00) per month.
(2)
The minimum term of any loan made under this subsection (b) is three (3) months. The maximum term of any loan made under this subsection (b) is twenty-five (25) months.
(3)
On the prepayment of any loan under this subsection (b), the installment account handling charges are subject to §
45-5-402
as it relates to refunds; provided, for the purpose of calculating the rebate due, the term of the loan begins on the date the loan is made.
(4)
On any loan established under this subsection (b), no insurance charge or any other charge of any nature whatsoever is permitted except as provided in this subsection (b) and except for the delinquent charge under subdivision (a)(4), the reasonable attorney fee and costs charge under subdivision (a)(6) and the bad check charge under subdivision (a)(7) and a convenience fee under subdivision (a)(9).
(5)
In a civil action, a finding by the court that a registrant has violated this subsection (b) gives rise to a rebuttable presumption that the violation constitutes unconscionable conduct under §
47-14-117(c)
, and the registrant is subject to the remedies under that section.
(6)
The loan charges allowed under this subsection (b) may not be imposed on a loan to a borrower who has one (1) or more loans outstanding with the same registrant or an affiliated lender and upon which loan charges were imposed under subsection (a).
(7)
(A)
In addition to any other charges permitted for the making of a loan under this part, a registrant may collect a closing fee at the time of the making of the loan for the purpose of preparing and executing the documents for, and verifying compliance with, the federal Truth in Lending Act (
15 U.S.C. § 1601
et seq.), this section, and all other applicable statutes. The closing fee may be for an amount up to four percent (4%) of the amount financed but must not be more than fifty dollars ($50.00). The closing fee may be paid from the proceeds of the amount borrowed or added to the amount financed.
(B)
If a loan, upon which a closing fee has been charged, is prepaid in full by any means within ninety (90) days of the date of the loan, then the registrant must refund or credit the borrower with a pro rata portion of the closing fee. However, the registrant may retain up to twenty-five dollars ($25.00) of the closing fee regardless of when the loan is prepaid.
Amended by 2021 Tenn. Acts, ch. 91, Secs.s 2, s 3, s 4, s 5, s 6 eff. 7/1/2021.
Amended by 2021 Tenn. Acts, ch. 91, s 1, eff. 7/1/2021.
Amended by 2014 Tenn. Acts, ch. 616, Secs.s 2, s 3, s 4 eff. 7/1/2014.
Amended by 2014 Tenn. Acts, ch. 616, s 1, eff. 7/1/2014.
Acts 1979, ch. 204, § 11; T.C.A., § 45-2011; Acts 1983, ch. 164, § 4; 1986, ch. 576, § 2, 3; 1987, ch. 124, § 2; 1988, ch. 621, § 1; 1989, ch. 265, § 1; 1990, ch. 685, § 1; 1996, ch. 607, §§ 1-4; 1998, ch. 576, § 1; 1999, ch. 172, § 3; 2000, ch. 684, § 1; 2001, ch. 165, § 8; 2006, ch. 563, § 1; 2009 , ch. 499, § 7; 2012 , ch. 534, §§ 1-5.