2010 Tennessee Code
Title 45 - Banks And Financial Institutions
Chapter 5 - Industrial Loan and Thrift Companies
Part 4 - Interest and Borrowers
45-5-403 - Limitations on loan charges Acquisition charges Term of loan.

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 four percent (4%) 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 four percent (4%) 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 four percent (4%) 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 ($5.00) 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 (½) 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:

                (i)  Two dollars and fifty cents ($2.50) per month on loans where the total amount of the loan is less than one hundred dollars ($100);

                (ii)  Three dollars and fifty cents ($3.50) per month where the total amount of the loan is one hundred dollars ($100) or more but not more than seven hundred fifty dollars ($750);

                (iii)  Three dollars ($3.00) per month where the total amount of the loan is more than seven hundred fifty dollars ($750) but not more than one thousand two hundred fifty dollars ($1,250); and

                (iv)  Two dollars and fifty cents ($2.50) per month where the total amount of the loan is more than one thousand two hundred fifty dollars ($1,250);

          (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, 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; and

     (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 title 45, chapter 13, 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 four percent (4%), which may be imposed under subdivision (a)(1)(A).

(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 seven and one-half percent (7.5%) 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 seven and one-half percent (7.5%) 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 seven and one-half percent (7.5%) 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 eight hundred dollars ($800), there shall be allowed an acquisition charge for making the loan not in excess of seven and one-half percent (7.5%) of the amount of the principal. In addition thereto, an installment account handling charge shall be allowed not to exceed seventeen dollars ($17.00) per month; or

          (E)  On any loan of an amount in excess of eight hundred dollars ($800) but not more than one thousand dollars ($1,000), there shall be allowed an acquisition charge for making the loan not in excess of seven and one-half percent (7.5%) 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.

     (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 twelve (12) 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) of this section, the reasonable attorney fee and costs charge under subdivision (a)(6) of this section and the bad check charge under subdivision (a)(7) of this section.

     (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).

[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.]