AN ACT to amend Tennessee Code Annotated, Title 56, Chapter 37, relative to premium finance companies.
SB0766 amends Tennessee’s premium finance laws to authorize premium finance companies to charge convenience fees when insureds pay by credit card, debit card, electronic funds transfer, electronic check, or other electronic means. The bill limits those fees to the licensee’s actual third-party processing costs, or an average actual-cost amount across payment types, and defines “actual cost” to include processing costs incurred by a parent entity when the licensee is a subsidiary. It also requires advance notice of the fee, an opportunity to cancel before completing the transaction, and the availability of no-fee payment options such as check, cash, or money order.
The bill further provides that convenience fees collected under this section are nonrefundable, may be charged in addition to other lawful interest and fees, and may not be imposed on debit or prepaid card transactions if prohibited by the applicable card network’s contract, rule, or policy. It also preserves the ability of licensees to charge handling fees for dishonored drafts, checks, electronic debits, or similar payment instruments, while limiting collection to one handling charge per item. The act specifies that these charges are not to be considered in determining whether usury laws have been violated under a premium finance agreement.
The bill’s impact is to update Title 56, Chapter 37 of the Tennessee Code to expressly permit premium finance companies to recover electronic payment processing costs from insureds under regulated conditions. It affects premium finance licensees and their customers by creating a lawful framework for card and electronic-payment surcharges, while also clarifying how dishonored-payment handling charges may be assessed and collected.
The general sentiment reflected in the voting history is strongly favorable, with the bill advancing through committee and floor votes without recorded opposition in the Senate committee and with broad support on the Senate floor. The House committee vote also showed support, though the floor passage vote in the House was more divided, indicating some reservations even as the measure ultimately passed. No committee transcript was provided, so the available record suggests support for the bill’s consumer-notice and cost-recovery structure, alongside some possible concern about added fees for insureds.
The main point of contention is likely the authorization of convenience fees on insurance premium finance payments, especially because those fees are passed on to consumers and may be charged in addition to other lawful charges. Opponents or skeptics may view the bill as increasing the cost of financing insurance premiums, while supporters likely see it as a narrow cost-recovery measure that aligns fees with actual processing expenses and preserves non-electronic payment alternatives.
SB0766 amends Tennessee Code Annotated, Title 56, Chapter 37, governing premium finance companies, to expressly authorize convenience fees for electronic and card-based payments, subject to limits tied to actual processing costs and notice requirements. It also clarifies treatment of handling charges for dishonored payment instruments and states that these charges do not count toward usury determinations under premium finance agreements. The bill directly affects premium finance licensees, insured borrowers, and payment processors by establishing a statutory framework for permissible surcharges and fee collection.
The bill appears to have enjoyed generally favorable treatment in the legislative process. It passed the Senate Commerce and Labor Committee unanimously and cleared Senate floor action with strong support, indicating broad agreement on the need to modernize payment-fee rules for premium finance companies. The House committee vote also supported the measure, though the House floor vote was more divided, suggesting some lawmakers had concerns about the consumer cost implications even as the bill ultimately became law.
The primary controversy centers on whether premium finance companies should be allowed to pass electronic payment processing costs on to insureds through convenience fees. Supporters likely framed the bill as a limited, transparent cost-recovery measure with consumer protections such as advance notice, cancellation rights, and no-fee alternatives. Critics would be expected to focus on the added expense to consumers who use cards or electronic payments, especially because the fees may be charged on top of other interest and lawful charges. A secondary issue is the bill’s treatment of parent-company processing costs as third-party costs, which could be viewed as broadening the fee base beyond direct merchant processing expenses.