Tennessee House Bill (HB) 421 amends Tennessee Code Annotated, Title 45, Chapter 5 of the Industrial Loan and Thrift Companies Act, which applies to a variety of installment loans including small, short-term unsecured loans to loans secured by real property. The bill provides for an increase in existing loan fees and the addition of a new closing fee.
HB 421 increases the maximum service charge allowed from four percent (4%) to five percent (5%) of the total amount of the loan, which may be deducted in advance from the principal of the loan.
Tennessee Code Annotated, Section 45-5-403(a)(1)(B) provides that for loans secured by real property, in lieu of a five percent (5%) service charge, registrants may charge borrowers “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, or appraisals.”
In addition to other permitted fees, HB 421 creates a new subdivision (Tenn. Code Ann. § 45-5-403(b)(7)(A)) that allows a registrant to collect a closing fee of up to four percent (4%) of the amount financed, not to exceed $50.00. The closing fee may be paid from loan proceeds or added to the amount financed. If a loan with a closing fee is prepaid within 90 days from the date of the loan, the registrant must refund or credit a pro-rata portion of the fee but may retain up to $25.00 regardless of when the loan is prepaid.
HB 421 applies to all loans made by Tennessee Industrial Loan and Thrift (TILT) Company registrants and will be effective on July 1, 2021. If you have any question, please contact DocMagic’s Compliance Department.
