The Tennessee Department of Financial Institutions has announced a new maximum effective formula interest rate, directly impacting borrowers and financial institutions across the state. In a statement released yesterday, Commissioner Greg Gonzales set the rate at 11.50% annually.

This rate adjustment is not an isolated decision but is tied to the weekly average prime loan rate, which the Federal Reserve reported at 7.50% on Monday. This formula rate is a ceiling pegged at 4 percent over the prime rate, and it is a critical metric as it influences various credit products, including personal loans, mortgages, and lending practices among banks, credit unions, and other financial actors in Tennessee. Commissioner Gonzales said, "The rate remains in effect until the average prime loan rate as announced by the Federal Reserve Bank changes," as detailed by the Tennessee Department of Financial Institutions press release.

Chapter 464 of the Public Acts of 1983 gives the state the authority to set interest rates. This Tennessee legislative act mandates that the commissioner of Financial Institutions announce the formula rate of interest weekly. This measure aims to provide a transparent benchmark for interest rates within the state, facilitate a clear guide for economic stakeholders, and guard against predatory lending practices.