Deposit: means a deposit of money, bonds or other things of value, creating a debtor-creditor relationship. See Tennessee Code 45-1-103
Interest: means that part of the net income, retained earnings, or surplus of an association that is payable to or credited to holders of deposit accounts. See Tennessee Code 45-3-104
(1) Associations are authorized, directed, and required to provide for and maintain a department to service the loans and properties securing the loans, including among other things:
(A) Services in reference to investigating the financial standing of applicants for loans;(B) The enforcement of all contractual requirements of borrowers, including insurance, maintenance, repairs, delinquencies, defaults, and continuing security; and(C) Taxes, assessments and other governmental levies;(2)(A) In their contracts with borrowers, the associations are authorized to provide for and collect a service fee, the amount of which shall in no event exceed two and one-half percent (2½%) per annum of the unpaid balance of the loan, to be used in defraying the expense of providing and maintaining the service department, including the portion of the association‘s overhead expense that is fairly incurred by and in connection with the maintenance of the department; provided, that the service fee shall be in addition to legal interest and the actual expenses incurred in making, securing, and closing the loan, and shall not be collected as interest or compensation for the use of the money loaned, but shall be used in defraying the expense of maintaining the department and in servicing the loans, as contemplated herein; and provided further, that the service fee shall not be collected from borrowers who make deposit account loans.(B) The service fee may be made payable in periodic installments running throughout the life of the loan or at the initial closing of the loan. Any service charge collected at the time the loan is closed may be retained regardless of when the loan is paid.(C) The service fee payable in periodic installments may be retained in the following manner:
(i) If the loan is paid within one (1) year from the date same is made, the service fee may be retained or collected for the full year; or(ii) Where the loan is paid after the period of one (1) year, the service fee shall be retained or collected only to the date of payment.(b) It is the duty of the commissioner, at the time of making annual examinations of associations making real estate loans, to determine whether associations making real estate loans, as herein authorized, are charging fees in excess of the amount reasonably required to defray the expense of servicing loans and in maintaining the service department contemplated herein; and, in the event it is found that the provisions herein are being violated, it shall be the duty of the commissioner to take necessary action, under the law, to prevent the associations from continuing the illegal acts.
