New Law Allows Tennesseans to Borrow Up to $500 From Payday Lenders, But Fees Increase Too

Tennessee residents who use payday loans to get money quickly now are able to borrow up to $500 from a single lender, but could pay steeper fees under a new law passed this year by the General Assembly. The law, sponsored by Sen. Bill Ketron, raised the maximum a person can borrow, but also authorized payday loan businesses to charge up to $75 in fees. Previously, the limit was $200; and lenders could charge up to $30. The measure set the limit on fees at $15 per $100, but there is no restriction on how long a lender can require borrowers to pay the fee instead of paying off the loan. Vanderbilt University assistant professor Paige Skiba believes that raising the payday loan limit might actually benefit borrowers. "I've done research on this, and it shows that, when people are allowed to borrow larger amounts, it actually helps them to repay the loan rather than renewing it a bunch of times and then eventually defaulting," she explains. Not all state lawmakers agree. "It's the interest rate that worries me," acknowledged Sen. Douglas Henry. "It's excessive."

Associated Press (08/27/11)