CFSA or the “Community Financial Services Association of America” is a national organization of the United States that helps in the financial empowerment of Americans by providing free information on short-term payday loans and small dollar loans. In its 15th year now, the CFSA promotes laws and regulations to protect consumer rights, and safeguards consumer interest by overseeing and monitoring the performance of payday lending companies throughout the country. The organization is committed to fairness, and encourages responsible payday lending and good industry practices.
The Virginia based CFSA has come out with their “payday lending best practices” document for both the consumers and businesses that offer short-term cash-advance loans. In an effort to bring in clarity in operations, make the industry responsible, and protect consumer rights and interest, this document showcases how all transactions should take place. All member businesses of the CFSA must abide by the “best practices” as mentioned in this document. Another purpose of the document is to encourage self-governance among those who are offering payday loans at this time.
It is good to realize that like all other businesses, there are good companies and bad ones in the payday loan segment too. So if you are thinking of taking a cash advance, then you should always be careful. Choose your company wisely. It is better to be safe than sorry later. Go through the best lending practices document before deciding. This will help you decide what to check before taking that loan.
The Best Practices document is extensive. It includes everything you need to know, compliance, disclosure, enforcement, collection, fees, advertising, roll over’s, legislation, and many others. All CFSA members must comply with these best practices as mentioned in this document. This is a condition of membership. Every year, the businesses must pledge their commitment to these best practices.
Payday lending is a responsible business that cares about their consumers. These are safe loans that help people in an emergency. This is why millions of short-term cash loans are taken every year in the US.
CFSA Member Best Practices
Full Disclosure: It is necessary for all member businesses to comply fully with the state’s disclosure requirement where their office is based. They must also comply with federal disclosure requirements, which include the Federal Truth in Lending Act. Contracts with customers should outline the terms of the payday advance transaction fully. All CFSA members will have to disclose the service fee cost in dollar amount and as the APR or the “Annual Percentage Rate”. All member businesses must make full disclosure of rates, wherever these guidelines are not in conflict with local, state and federal requirements, and these disclosures should be visible clearly to consumers before they decide to enter the transaction.
Compliance:Member businesses need to comply with all laws applicable. The businesses are not allowed to charge a rate or fee for any cash advance which is not authorized by federal or state laws.
Truthful Advertising:CFSA member businesses are not allowed to advertise payday lending services in a deceptive, misleading or false manner. They must promote their services in a responsible way without saying anything that is a lie or is misleading.
Encourage Consumer Responsibility:Member payday loan businesses have to inform consumers about all details of the payday loans and procedures. On all marketing materials that include print, radio, online advertising, television, in-store promotion, and direct mail, they have to put a “Customer Notice” that is easily visible.
Rollovers:Payday lending companies are not allowed to offer a rollover of the loan, which means an extension of the loan term in exchange for a fee, unless of course it has been allowed explicitly by state laws. And even in instances where such a rollover is allowed, the number of times they are allowed is limited to four or the state limit, whichever is less.
Right to Rescind:When dealing with CFSA member businesses, every customer can rescind the payday advance transaction at no cost on or before the next business day closes. The businesses have to make sure that this is allowed.
Appropriate Collection Practices:All payday advance companies are allowed to collect past dues, but this has to be done in a lawful, fair, and professional way. No member company can intimidate, harass or issue unlawful threats to any customer to collect the due amounts. The CFSA believes that all member businesses must abide by the limitations as mentioned in the FDCPA or the Fair Debt Collection Practices Act.
No Criminal Action:No member business is allowed to threaten or carry out any form of criminal action against their customers even if the customer’s check is returned unpaid or the account is not being paid.
Enforcement:It is the responsibility of each member to practice self-policing. All CFSA Best Practices violations are to be reported. The CFSA is going to investigate the issue and take the right action. Businesses must maintain and post their own toll-free consumer hot-line number in all their offices or outlets.
Support Balanced Legislation:Member businesses are all expected to work with state regulators and legislatures for supporting responsible legislation of the payday lending business to incorporate the industry best practices.
Extended Payment Plan:Sometimes, some customers, in spite of their best efforts, may find it very difficult to repay the loan amount on time as agreed upon in the original contract. In these situations, the member companies must provide them the option of repaying the amount due over a longer time. However, this extended time must be offered in compliance with any state law. Where there is no such state law, the extended period contract must comply with the “Guidelines for Extended Payment Plans” as mentioned in the CFSA Best Practices. Members must disclose this Extended Payment Plan adequately to their customers while complying with any state law for such disclosures, or when such a thing is not included in the state law, they must comply with the “Guidelines for Extended Payment Plans” mentioned in CFSA Best Practices.
It needs to be noted here that laws in a few stats don’t allow the implementation of the Extended Payment Plan (EPP) of CFSA. The Community Financial Services Association of America is working with regulators in these states to allow the implementation of the CFSA’s EPP plan so that this can be allowed in the state law in the future.
Internet Lending:These days, many payday loan companies are offering their loan plans over the internet. All member businesses that are doing this must be licensed in each state where their customers are based. The companies are bound to make full disclosure, clearly mention the rate, mention rollover, and comply with other requirements as imposed by the state, unless there is no requirement to be licensed in the state, or there is no requirement to comply with the provisions, or the federal law has preempted the state’s licensing requirements and other laws applicable.
Display of the CFSA Membership Seal – Member businesses of the CFSA must display the CFSA Membership Seal prominently in all outlets so that their customers come to know that the store is affiliated with the association and adheres to all the best practices of the Community Financial Services Association of America.
Finally, all member businesses of the Community Financial Services Association of America must provide a copy of the “Your Guide to Responsible Use of Payday Advances” brochure in both Spanish and English. This will go a long way in informing and educating all payday loan customers.
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