There’s a new lending device that’s gaining popularity across the country, and it’s coming to Tennessee soon.
As in, “to be considered by the 2020 Tennessee Legislature” soon.
It’s called an “online installment loan,” and it’s a new form of pay-day lending, but with a few extra bells and whistles that make it look more like a regular bank loan.
And while many people know the downsides of going to a title-lending place for a loan, this new device is being marketed to a broader group of American consumers, says Bloomberg News in an article published today, titled “America’s Middle Class is Addicted to a New Kind of Credit.” Per Bloomberg, these are:
…a form of debt with much longer maturities but often the same sort of crippling, triple-digit interest rates. If the payday loan’s target audience is the nation’s poor, then the installment loan is geared to all those working-class Americans who have seen their wages stagnate and unpaid bills pile up in the years since the Great Recession.
In just a span of five years, online installment loans have gone from being a relatively niche offering to a red-hot industry … and have done so without attracting the kind of public and regulatory backlash that hounded the payday loan.
[The] average online subprime installment loan customer has an annual income of about $52,000. About 80% have been to college and 30% own a home…[m]ore than 10% of the company’s core customer base makes over $100,000 a year.
These instruments generally have a longer repayment period, like 90 days to a year, but they have the same insanely high interest rates (ranging from 20% to 35% to, in some cases, 155%) as other title loans.
Not in Tennessee, right?
These lenders are targeting Tenn. Code Ann. § 47-14-104, and, specifically, that statute’s 10% cap on interest rates. The lenders hope to eliminate that cap entirely.
Creditors Rights 101 