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VOL. 125 | NO. 98 | Thursday, May 20, 2010

Tennessee Earns ‘F’ on Consumer Protections Scorecard

By Andy Meek

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A nonprofit consumer law agency gives Tennessee poor marks for laws governing interest charges on certain loan products.

In its just-released Small Dollar Loan Products Scorecard, the National Consumer Law Center gives Tennessee a grade of “F” for the consumer protections it offers debtors who take out any of four loan products.

The scorecard focuses on payday loans, title loans, six-month installment loans, and one-year installment loans. It looks at the rules across all 50 states governing interest charges, which run the gamut from consumer-friendly caps to three-digit annual percentage rates.

Tennessee was among a handful of states given an “F” in the survey for every loan category in which they allow APRs of more than 36 percent. Consumer advocates have called attention to the issue repeatedly in Nashville over the past several years.

When Memphis attorney Webb Brewer addressed a House subcommittee in March to support a group of bills curbing fees levied by title pledge, payday and mortgage lenders, the committee chairman cut him off.

“We get the picture,” House Republican Richard Montgomery of Sevierville told Brewer, who told The Daily News he was surprised at what he called “rude treatment” from the committee.

Brewer said he believes the survey released earlier this month by the National Consumer Law Center, a Massachusetts-based nonprofit group focused on consumer law from a public policy standpoint, proves his point.

“The title lending bill gets bottled up every year in a House subcommittee,” said Brewer, who with his partner, Steve Barlow, operates a Memphis law practice focused on social justice issues.

“That industry lobbies very heavily on this,” Brewer said about the reason he went to Nashville earlier this year. “It seems like every time we have a hearing up there, there’s so many lobbyists in the room, it’s hard to get in there.”

Among the responses industry supporters frequently give critics is debtors who use their services do so by choice, perhaps because traditional outlets such as credit cards or bank loans are closed off to them.

And supporters argue borrowers who use such products aren’t always as unsophisticated as they’re perceived to be.

“All of the customers who use a payday loan have a bank account, but choose to use the service,” said Ryan Harris, communications manager for Tennessee-based payday lender Check Into Cash.

However, the National Consumer Law Center’s survey counters that such nontraditional lenders often “lend without regard to the borrower’s ability to repay; (refinance) a borrower’s loans repeatedly over a short period of time without any economic gain for the borrower; or commit outright fraud or deception.”

Earlier this year, about two dozen bankers and finance professionals gathered at Memphis City Hall to launch Bank on Memphis, a financial literacy campaign targeting 96,000 area households who use nontraditional financial services such as payday loans. One reason for the movement: More than 33,000 Memphis households don’t have a checking or savings account, according to letters Memphis Mayor A C Wharton Jr. sent out to area bankers.

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 86 393 21,159
MORTGAGES 94 424 24,785
FORECLOSURE NOTICES 0 93 8,703
BUILDING PERMITS 173 1,010 43,347
BANKRUPTCIES 52 292 14,194
BUSINESS LICENSES 15 90 6,491
UTILITY CONNECTIONS 28 167 13,678
MARRIAGE LICENSES 12 89 5,158

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