An Overview of CFSA Payday Lender Best Practices Policies

By: Javi Calderon
An Overview of CFSA Payday Lender Best Practices Policies

The Community Financial Services Association of America, formed in 1999, was established to regulate the growing payday loan industry and promote consumer confidence in payday loan services. CFSA members comprise over half of all payday lenders in the United States today. The CFSA aims to strike a balance between consumer protection, promoting fair legislation and regulation, and reserving the right to offer short-term loans. To promote transparency and fairness, the CFSA has documented a list of best practices policies for their member lenders to adhere to.

Highlights of CFSA Payday Lender Best Practice Policies

The goal of the CFSA is for their customers to be confident that they are being treated fairly when approaching member lenders about cash advance loans. Following is an outline of the policies they have put forth for their members.

1.   Full Disclosure of Practice – Lenders must adhere to disclosure practices for the state in which they reside. The contract between the payday loan lender and consumer must clearly outline the terms of the transaction, including the cost of services in both dollar amount and APR (annual percentage rate). Rates must be clearly explained to the customer before they agree to a transaction.

2.   Comply with State Laws – CFSA member lenders must comply with all state laws regarding payday loans. This includes adhering to maximum fees and rates. If a state has outlawed rollover payday loans the lender will not allow customers to rollover loans. If state laws allow rollovers then the lender will allow no more than 4 rollovers.

3.   Encourage Consumer Responsibility – The CFSA requires their members to inform and educate consumers on the proper use of payday loan services. Marketing materials are required to include a customer notice.

4.   Fair and Legal Collection Practices – Overdue payments must be collected in a fair and legal manner. By law debt collectors are not allowed to make threats of arrest or criminal action, use intimidating tactics or make repetitive, harassing phone calls.

5.   Offer an Extended Payment Plan – Customers who are unable to repay their payday loan within the timetable originally agreed upon must be offered the option to repay the payday advance over a longer period of time. No additional fee will be charged if an extension is necessary. Extended payment plans must be within regulations of state laws.

6.   Internet Lending Practices- CFSA members that offer loans over the internet must be licensed in each state where they offer their service. They must also comply with all laws and regulations of that state when dealing with customers. For example, if a customer from Florida is seeking a loan, even though it is over the internet, the lender must comply specifically with the payday loan laws of the State of Florida. If the customer is in Michigan, the payday loan laws of Michigan would then apply.

By having transparency and ethical practices the CFSA hopes to ensure that their consumer loans help their customers and assist them in solving their financial troubles. If you’re in the market for a consumer loan make sure that the lender is a member of the CFSA so you know you will be protected and getting a fair deal.