Tennessee Bill Raises Borrowing Limits of Payday Loans
Passage of Bill Also Limits Penalty to Borrowers Who Submit a Bad Check
by Kevin Schneider on August 22, 2011
A Tennessee bill passed in May of 2011 has revised the loan limits for borrowers in the state. People looking to obtain quick cash will be able to borrow as much $500 instead of the previous $200. The move comes as many citizens of the state feel an even greater need for a cash advance to cover unforeseen emergency expenses.
Introduced by Republican Senator Bill Ketron of Murfreesboro, the bill also prohibits lenders from charging more than a one-time fee of $30 for receiving a bad check. The passage of the bill was criticized by some Democratic senators for allowing payday lenders to charge interest rates as high as 360 percent. In response, Ketron said, “I know that’s a large amount of interest to pay, but when you do it in small amounts, you almost have to.”
According to an aide of Ketron, Zach Blair, the senator introduced the bill as a means of helping people to manage their loans better.
When asked about her opinion of the loan limit, Tennessee resident and past payday loan borrower Kelley Newell said, “I don’t think the limit matters. Some people are going to borrow what they’ll allow because they think something is going to magically come along, and they won’t get into all that debt.”
When used responsibly, the interest rates on payday loans do not cause any lasting burden. Vanderbilt University assistant law professor Paige Skiba agrees. According to Skiba, “I am not a person who thinks banning payday loans is a good thing. Traditionally, even though they are extremely expensive, 500 percent APR or more, payday loans can actually be a good thing for people when used the right way.”
She went on to say that “I think that raising the limit actually may be a good thing for 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.”
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