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Views from across Tennessee

Views from across Tennessee

Posted: Saturday, August 16, 2008 10:34 am

The Tennessean, Nashville; Aug. 11 No reputable lender should try to make the case that an interest rate of 264 percent a year is a fair way to do business. The state should restrain such lending and consider such activity as a fundamentally unacceptable practice. But those high rates are being applied in the title-loan business in Tennessee. … Under a title loan in Tennessee, the borrower puts up the title to a vehicle as collateral on a loan. The lender is allowed to charge 2 percent per month but also is allowed to charge an “administrative fee” of 20 percent per month. A one-time administrative fee of 20 percent might sound reasonable. The paperwork involved makes it proper to have a fee for setting up the loan. But after that, besides charging the 2 percent per month on a loan, the lender is allowed to apply that other 20 percent each month. That makes the loan 22 percent per month and an annual rate of 264 percent. That sort of nonsense shouldn’t be allowed, and fortunately some Tennessee legislators want to bring the title-loan businesses in line. Unfortunately, the lawmakers haven’t succeeded yet. The issue was discussed in a recent summer hearing on title lending. Rep. Larry Turner, D-Memphis, and Sen. Roy Herron, D-Dresden, have headed legislation attempting to crack down on such terms. Their idea is to allow the one-time administrative fee but end it there. They also want at least 10 percent to be lowered from the principal of the loan on monthly payments after two renewals have been made. The title lenders defend their industry. They point out that they are providing a service that people want, that customers like the availability of the loans, that few lenders are offering the options of such easy loans and that only 7 percent of the time do title loans actually result in taking the collateral — the automobile. They say that their business is intended only as a short-term solution for people who need cash. … The issue could be discussed and debated at length, but all that really needs to be known is that figure of the 264 percent annual rate. The legislature should bring some sense to title loans and ease the burdens of people who are clearly being taken advantage of. A title-loan bill should pass when the legislature convenes next year. ——— On the Net: http://www.tennessean.com/apps/pecs.dll/article?AID/20080811/OPINIO N01/8081 10344/1008 Published in The Messenger 8.15.08

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