Low-income people and those struggling with financial problems may find payday loans tempting. You can get cash instantly and pay it back when you get your next paycheck. However, payday lenders often charge very high fees for loans, which can put you deeper into financial trouble instead of getting you out of it. As of 2011, Tennessee is one of 25 states that regulates payday lenders in an attempt to curb high interest rates and fees.
License Requirements
Payday lenders must obtain a license through the Tennessee Department of Financial Institutions. This helps protect consumers from unscrupulous lenders by providing governmental oversight of payday lending institutions. To qualify for a license, lenders must have net worth of at least $25,000. They also must submit paperwork listing all owners of the company. Anyone who owns more than 5 percent of the company is considered an owner. Licenses costs $500 and must be renewed on a yearly basis.
Maximum Amounts
In Tennessee, payday lenders may charge a maximum of 15 percent of the loan amount or $30 -- whichever is smaller -- as a fee for taking out the loan. Lenders also may not provide loans of more than $500. Debtors may take out loans from more than one payday lender or take out more than one loan from the same payday lender. As of 2011, debtors may take out up to three loans at a time as long as the total amount they borrow does not exceed the $500 maximum.
Required Notices
The licenses of payday lenders must be posted in conspicuous areas where the customer is likely to see them. In addition to the license, the lender must provide written information to the debtor about his loan and have the debtor sign it to demonstrate his understanding. The written notice must list the fees that the lender is charging the debtor, the amount of the loan and when the debtor must pay back the loan.
Penalties and Fines
If a payday lender does not follow Tennessee laws regarding fees, loan amounts or other regulations, the Department of Financial Institutions can suspend or revoke its license. It is illegal to provide payday loans without a license, and those who do may face criminal charges. The Department of Financial Institutions may also impose a fine of $1,000 for each violation of the payday lending laws.
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