Tennessee Title Loans: 264% Interest and an Uphill Fight at the Capitol

Some call them predatory loans.

Title loans with interest rates so high they’ll make your knees buckle.

We discovered that title loan businesses in Tennessee can charge rates up to 264 percent. If you’re already struggling, this is the kind of loan that can ruin you.

Now, two Tennessee lawmakers are trying to rein those loans back to earth. But it’s an uphill fight in a legislature that has generally expanded the industry’s ability to raise interest and fees.

Here’s more from the latest payday loan investigation.

“I Thought It Would Cost $1,400”

When Cindy Price’s car broke down, it made her sick.

She needed it for work. She didn’t have the money to fix it. She couldn’t afford to lose her job — and her credit wasn’t good enough for a traditional loan.

So she went to TitleMax and took out a $1,200 title loan.

She walked out believing it would cost about $1,400 total to pay it off.

She was wrong.

“I didn’t know that if I didn’t pay the $1,200 loan off in 30 days, I would be charged a renewal fee,” Price said. “They were renewing the loan every month until it was paid off. That’s how they were justifying the $191 they were charging me when I was making my $216 payment. It was just paying off another renewal fee.”

Every month, she made her payment.

Every month, the loan didn’t go down.

Because of renewal fees, she was essentially running in place — sometimes even going backward.

“I was stuck. I signed it. I could not come up with the $1,200 in one paycheck, in one month,” she said.

Her car still worked.

Now she was the one broken down.

“How does this even exist? We’re just going to charge you $191 each month as a renewal fee because you didn’t pay it off in 30 days?”

Lawmakers Push Back

State Senator Mark Pody says stories like Cindy’s are exactly why something needs to change.

“Feel like something has to be done about this,” Pody said.

Pody drafted legislation that would end extra penalties and special fees once the lender has recouped the original loan amount. The idea: allow companies to earn interest and stay in business — but stop the cycle of mounting fees after they’re no longer at risk.

“When you have an individual that says, ‘Okay, I have paid back the loan,’ then I think that company still deserves interest on that money,” Pody said. “They still deserve to be in business and so forth, but all the extra fees and such doesn’t seem to be reasonable.”

Co-sponsor State Representative Mike Sparks agrees.

“It oppresses the middle class. It oppresses working class folks. It oppresses the poor that are already struggling,” Sparks said.

But they both acknowledge: this is an uphill fight.

In a legislature that has historically allowed title loan companies wide latitude, the political reality is hard to ignore.

At one point, Sparks held up a thick directory.

“You’re one of the real reasons why we’re not going to pass this,” he said, flipping through it. “Let me show you something. It’s right here. It’s a book of lobbyists. Sixty-three pages. Five people per page.”

“You Lose Your Car, You Lose Everything”

Cindy Price eventually got lucky. A friend paid off her loan.

But she says she kept making those monthly payments — not because she didn’t understand what was happening, but because the alternative was worse.

“Then you’ve got to worry about transportation to work. You lose your job, you’re late,” she said. “I think a bunch of people could become homeless real quick, real quick with these loans.”

POLL: Should the cap on payday and title loans be lowered?

For many borrowers, the car is the last asset standing between stability and collapse.

Lose the car.

Lose the job.

Lose everything.

What’s Next

The next step in this investigation: follow the money.

How much do payday and title loan operators contribute to Tennessee senators and representatives? And does that money influence what happens — or doesn’t happen — at the Capitol?

That’s where we’re headed next.