Tennessee Senate passes bill capping loan interest rates at 36%

Tennessee's House Bill 775, recently substituted by Senate Bill 694, is set to reshape the landscape for industrial loan and thrift companies in the state. The bill, introduced on April 8, 2025, aims to amend existing regulations regarding loan interest rates, specifically targeting the maximum effective rate for loans of $100 or more.

Under the new provisions, lenders will be allowed to charge an interest rate not exceeding 36% per annum on these loans, a significant adjustment from previous regulations. Additionally, the bill raises the cap on certain fees from 10% to 12.5%, potentially increasing the cost of borrowing for consumers. These changes are designed to provide more flexibility for lenders while still aiming to protect borrowers from excessively high-interest rates.

The bill has sparked notable debates among lawmakers and consumer advocacy groups. Proponents argue that the adjustments will encourage lending and support economic growth, particularly for individuals who may struggle to access traditional banking services. Critics, however, warn that the increased rates could lead to predatory lending practices, disproportionately affecting low-income borrowers.

As the bill moves forward, its implications could be far-reaching. Experts suggest that while it may stimulate lending activity, it also raises concerns about the financial well-being of vulnerable populations. The legislation is set to take effect on July 1, 2025, and will apply to all contracts or agreements entered into after that date.

With the potential to alter the borrowing landscape in Tennessee, House Bill 775 is a pivotal piece of legislation that will require close monitoring as it unfolds. The balance between fostering economic opportunity and protecting consumers remains a critical point of contention as stakeholders prepare for its implementation.