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House passes bill raising caps on industrial-loan interest rates after extended debate
Summary
The Tennessee House approved Senate Bill 6 94 on third reading March 18, increasing statutory caps on rates and certain fees for industrial loan and thrift companies despite robust opposition from members who called the change onerous for low‑income borrowers.
NASHVILLE — The Tennessee House of Representatives voted March 18 to pass Senate Bill 6 94, a measure that raises the statutory cap on permitted effective interest rates for certain industrial loan and thrift companies and increases the maximum acquisition charge those lenders may assess.
Supporters said the change was needed to reflect higher costs of doing business and to allow lenders to serve borrowers with poor credit who otherwise have no access to short‑term loans. Opponents called the measure a step toward predatory lending that would make it more expensive to be poor.
Representative Powers, sponsor of the measure on the floor, said the bill increases the cap "from 30 to 36 percent" and raises the "maximum permitted acquisition charge" from 10 percent to 12.5 percent. He told members such loans are often the only option for people who cannot obtain credit from banks or credit unions and said the change will “open up more opportunities for people with...burns credit to get in because they're previously unable to get a loan.”
Rep. Sparks led the opposition, calling the legislation "a terrible bill" that would raise costs for borrowers and likened supporting it to voting to increase interest burdens on constituents facing layoffs and economic hardship. "Who wants to pay more in interest? Nobody," Sparks said.
Other opponents warned that the effective annual percentage rates on some short‑term products already produce extremely high costs to borrowers. Representative McKenzie cited a prior study that found effective annual percentage rates of hundreds of percent after fees on some short‑term products, saying raising the cap "would take that number to above 500%" for some products if providers increase charges to the new ceiling.
Proponents, including Representatives Vaughn and Hill, said the loans covered by the bill are short‑term, unsecured products aimed at individuals who cannot access conventional lending. Vaughn argued that, without regulated options, many borrowers turn to unregulated or illegal markets or online offers with still-higher rates.
The bill’s sponsor said the increases would not affect existing loans and would take effect on new loans; he also noted the measure was limited to industrial loan and thrift companies and not to other types of payday or title lending discussed by some members.
The House recorded and concluded a roll‑call vote to pass the measure; the transcript of the floor proceeding shows the bill passed on third consideration, though the verbatim roll‑call tally as reported in the transcript is not clearly legible. The House clerk declared the bill passed and placed it on the concurrence table for further processing.
What it means
If enacted, the statutory caps named in the bill would allow the specified lenders to charge higher rates than under current law. Legislative supporters said that change may broaden access to credit for some Tennesseans; critics said it would increase costs for borrowers who can least afford them.
Next steps
Because the House passed the Senate bill on third consideration, the measure will proceed through the normal enrollment and message process between the chambers and then to the governor, subject to any further procedural steps noted in the record.
