Borrowing in Tennessee: What State Law Allows

Payday loans (deferred presentment)

Payday lenders must be licensed by the Department of Financial Institutions (TDFI) under the Deferred Presentment Services Act, whether they lend from a store or online. You write a check, and the lender agrees to hold it. The law sets these limits:

• Amount: your outstanding checks with one lender and its affiliates can't total more than $500, and it can hold no more than two of them.
• Fee: no more than 15% of the face amount of the check.
• Term: the lender can't hold the check for more than 31 days.
• No renewals: a loan can't be renewed or paid off with a new one from the same lender; a transaction that does so is void.

Because the fee is figured on the face of the check, a $500 check gets you $425 in cash, and the $75 difference is the fee. Over two weeks, that's an APR of about 460%. You can redeem the check early by paying its amount before the agreed date.

Title pledge loans put your car on the line

Under the Title Pledge Act, a lender holds your vehicle's title in exchange for a loan that runs 30 days and can renew automatically for more 30-day periods.

Renewed month after month, 2% interest plus a 20% fee works out to roughly 264% a year. If you default, the lender can repossess the car, hold it for 20 days while you can redeem it, and then sell it. Any money left after the debt and sale costs must be paid to you.

Flex loans and installment lenders

Flexible credit lenders offer open-ended credit lines of up to $4,000. They may charge interest of up to 24% a year plus a "customary fee" of up to 0.7% a day on the average daily balance. Over a year, those add up to nearly 280%, far more than a personal loan from a bank or credit union.

Industrial loan and thrift companies, the state's traditional installment lenders, work under a different schedule. On loans of $100 to $2,000 they can choose to charge an acquisition charge of up to 12.5% of the principal plus a monthly handling charge that tops out at $32. Fees like these push the APR on small loans well above the stated rate, so compare offers with the APR calculator and look at payday loan alternatives before you borrow.

Time limits on lawsuits and paycheck protection

Tennessee gives creditors six years to sue on contracts not covered by a more specific rule, under section 28-3-109. That's the period usually applied to credit card and personal loan debt. Read how old debts and time limits work before you make a payment on an old balance.

After a judgment, Tennessee follows the federal limit: no more than 25% of your weekly disposable earnings, or the amount above 30 times the federal minimum wage, whichever is less. You can protect an extra $2.50 a week for each dependent child under 16 who lives in Tennessee, but only if you tell your employer about each child.

Checking a lender and making a complaint

1. 1 Check the license. Payday, title pledge and flexible credit lenders each need their own TDFI license for every location, filed through NMLS.
2. 2 Get the cost in writing: the amount you receive, the fees in dollars, the APR and the due date.
3. 3 File a complaint with TDFI if a lender rolls over a payday loan, refuses the title-loan surplus or charges more than the law allows. See also debt collectors and your rights.

Common questions