The purpose of this Bulletin is to notify licensed entities, those licensed under the Deferred Presentment Services Act, of a recent change in state law.
Public Chapter No. 5 of the Acts of 2001, amends Tennessee Code Annotated, Section 45-17-112(i) of the Deferred Presentment Services Act to allow deferred presentment services licensees to collect a handling charge not to exceed twenty dollars ($20) and court costs if a check is returned from a payer financial institution due to insufficient funds, stop payment order, or closed account. The Act becomes effective on July 1, 2001. This notice includes a copy of that provision, as well as Sections 47-29-101 and 47-29-102 of the Uniform Commercial Code. Please note, when this amendment was initially proposed, it allowed for the collection of attorney fees. However, the attorney fee provision was deleted from this amendment before it became law. Therefore, licensees may not collect or contract for attorney fees.
This law applies only on transactions that occur after July 1, 2001. Only after the payer financial institution returns the check stamped insufficient funds (NSF), can the licensee collect a handling charge. Likewise, only one such handling charge may be collected with respect to any check, even if the check has been re-deposited and returned more than once. Further more, the deferred presentment services agreement must contain a provision that allows for the collection of a handling charge not to exceed twenty dollars ($20) in case of default. Otherwise, licensees will forfeit their right to collect it. In addition, this section does not apply to a person who has so allowed a check or draft to be dishonored if, within ten (10) days after the holder has given notice that the check or draft has not been paid by the financial institution, the person pays to the holder the full amount of the check or draft.
The Annual Report for 2002 will require licensees to report the total amount of handling charges collected for the fiscal year. Therefore, licensees should keep records in a manner by which they can readily obtain this information.
If you have any questions about this notice, please feel free to call Stephen Henley, Director, at 615-532-6993.