Truth in Lending
The alternative financial services and short-term loan businesses are constantly growing industries which offer temporary financial solutions for many circumstances that may arise. As a proud member of CFSA, there are a number of lending guidelines that we strive to follow in addition to the necessary lending regulations and disclosures.
The Truth in Lending Act was created in order to protect consumers in credit transactions. One of the regulations under the act is Regulation Z which provides guidelines for how business must be transacted. Regulation Z protects our customers in a number of ways including requiring full disclosure of credit terms, cost of credit and annual percentage rate.
CFSA Best Practices
The Community Financial Services Association of America (CFSA) was established in 1999 to ensure consumer confidence in, and long-term success of, the payday advance industry. Their mission is to promote legislation and regulation that provides payday advance customers with substantive consumer protections while preserving their access to short-term credit options, and encourage responsible industry practices.
- Full disclosure. A member will comply with the disclosure requirements of the State in which the payday advance office is located and with Federal disclosure requirements including the Federal Truth in Lending Act. A contract between a member and the customer must fully outline the terms of the payday advance transaction. Members are to disclose the cost of the service fee both as a dollar amount and as an annual percentage rate (“APR”).
- Compliance. A member will comply with all applicable laws. A member will not charge a fee or rate for a payday advance that is not authorized by State or Federal law.
- Truthful advertising. A member will not advertise the payday advance service in any false, misleading or deceptive manner.
- Encourage consumer responsibility. A member will implement procedures to inform consumers of the intended use of the payday advance service. These procedures will include notifying consumers that a payday advance is a short-term cash flow tool not designed as a solution for longer term financial problems and informing customers of the availability of credit counseling services.
- Rollovers. A member will comply with State laws on rollovers (the extension of an outstanding advance by payment of only a fee). In States where rollovers are not specifically allowed a member will not under any circumstances allow a customer to do a rollover. In the few States where rollovers are permitted, a member will limit rollovers to four (4) or the State limit, whichever is less.
- Right to rescind. A member will give its customer the right to rescind, at no cost, a payday advance transaction on or before the close of the following business day.
- Appropriate collection practices. A member must collect past due accounts in a professional, fair and lawful manner. A member will not use unlawful threats, intimidation, or harassment to collect accounts. CFSA believes that the collection limitations contained in the Fair Debt Collection Practices Act (FDCPA) should guide a member’s practice in this area.
- No criminal action. A member will not threaten or pursue criminal action against a customer as a result of the customer’s check being returned unpaid or the customer’s account not being paid.
- Enforcement. A member will participate in self-policing of the industry. A member will be expected to report violations of these Best Practices to CFSA, which will investigate the matter and take appropriate action. Each member company agrees to maintain and post its own toll-free consumer hotline number in each of its outlets.
- Support balanced legislation. A member will work with State legislators and regulators to support responsible legislation of the payday advance industry that incorporates these Best Practices.
- Relationships with financial institutions. A member may market and service payday advances made by a federally insured financial institution, provided the financial institution does the following: (1) sets its own credit criteria, (2) approves and funds each advance; (3) complies with applicable State disclosure requirements, where not inconsistent with Federal law; (4) complies with applicable State law as to the number of rollovers; (5) permits the member to purchase no more than a de minimis amount of the advances, or any such other amount which may be consistent with safety and soundness determinations by Federal or State banking regulators; (6) complies with the guidelines and regulations on payday lending issued by the financial institution’s Federal or State regulator; and (7) complies with these Best Practices conflict with this Paragraph, in which case the terms of this Paragraph shall apply.
- Military practices. A member will comply with a separate code of Military Best Practices that addresses the unique circumstances of military customers. These special consumer protections include, among others: a prohibition on the garnishment of military wages or salaries and on contacting the military chain of command to collect payment and the establishment of financial literacy initiatives that will benefit service men and women.