56-37-109 - Loan charges. - Tennessee Statutes

56-37-109. Loan charges.

No licensee under this chapter has the power to charge premium loan charges other than, or in amounts greater than, the following:

     (1)  Licensees may charge, in the case of the pre-computed loan, 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 premium loan; provided, that a licensee who contracts for the payment of interest on the balances from time to time outstanding, commonly referred to as a revolving or open-end account, shall be limited to contracting for a service charge not to exceed fifteen dollars ($15.00) and payable no more frequently than once per calendar year per premium loan account. 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 thereby. 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 licensee or any affiliated lender.

     (2)  (A)  A premium finance agreement may provide for the payment by the insured of a delinquency charge of two dollars ($2.00) to a maximum of five percent (5%) of the delinquent installment on any installment, which is in default for a period of ten (10) days or more; provided, that the charge shall not be collected more than once for the same delinquency.

          (B)  If the default results in the cancellation of any insurance contract listed in the agreement, the agreement may provide for the payment by the insured of a cancellation charge of five dollars ($5.00).

     (3)  A premium finance agreement may provide for payment of collection costs, attorney's fees equal to fifteen percent (15%) of the outstanding indebtedness and any other charges that arose because one (1) party breached the contract.

     (4)  None of the charges referred to in this section shall be considered directly or indirectly in determining whether a violation of the usury laws has occurred under a premium finance agreement.

[Acts 1980, ch. 920, § 9; 1981, ch. 414, § 2; 1983, ch. 431, § 2.]