As far as alternatives go and the need for more clarity and transparency in disclosure agreements, the following was a key quote from a representative from Pew Charitable Trusts:

Susan Weinstock, Pew Charitable Trusts: “Unfortunately, the checking accounts in our study did not meet this standard. We found a median of 111 pages of disclosure documents…The banks often used different names for the same fee or service; put the information in different documents, different media, or different locations in a document…Many of these documents are not user-friendly, with much of the text densely printed, difficult to decipher, and highly technical and legalistic.”

We believe that CFSA’s Best Practices should be considered as a blueprint for responsible lending within the payday advance industry, and can be adopted for most short-term financial products. Provisions include: Full disclosure of fees, truthful advertising, right to rescind, appropriate collection practices, including no criminal action, and a requirement to be licensed in each state where the company does business.

In her post, Hillebrand said: “Payday lending operations—including those that operate online and those that target people residing on reservations—continue to be a concern for both communities.”

We wanted to remind our readers that CFSA Best Practices require that all our member companies that offer payday advances through the Internet must be licensed in the state in which the customer resides and that they comply with all applicable state laws. As a condition of membership, members must abide by all CFSA Best Practices and pledge their commitment to them annually.

In a statement on Native American partnerships with payday advance companies, our Board Chair D. Lynn DeVault said this: “CFSA believes that our strict set of Best Practices is a business model that ensures strong consumer protections while preserving access to short-term credit.”

Today, payday advance stores fill an important need for small dollar, short-term credit for banked, working Americans in communities throughout the country. Millions of customers across the country have used payday advances responsibly and appreciate having somewhere to turn when they need quick access to credit. Analysts estimate payday advances are used by 19 million American households.

We strongly encourage consumers who need access to credit to do business with CFSA members who are required to be licensed and regulated. A member that offers payday advances through the Internet must be licensed in the state where the payday advance customer resides.

As an example, in October, 2010, the Washington State Department of Financial Institutions (DFI) warned consumers of the danger of unlicensed payday lenders.

“When a consumer takes a loan from an unlicensed lender, there is very little we can do to protect them, and often little we can do to the company if they don’t adhere to our laws, especially if they are located outside of the United States.”

As a reminder on CFSA Best Practices:

• CFSA members always provide the most transparent application forms and fee descriptions. We strongly support applying these to all other short-term lenders, both bank and nonbank.

• Members are required to disclose the cost of the service fee in both dollar amount and as an APR on loan documents and informational brochures. In addition, members must post fees in large type on posters in all store locations to ensure that customers know, in simple terms, exactly what the fees are before, not after, they enter into a transaction.

We just wanted to remind our critics that recent evidence demonstrates that certain types of restrictions on payday advances, including annual loan limits and cost-prohibitive rate caps, drives consumers to financially risky and more expensive products.

Since 2009, 19 of the 32 states where payday lenders operate have rejected prohibitive rate caps. These states, which provide an important short-term credit option to consumers, have rejected prohibitive rate caps that would force regulated payday advance stores out of business.  On a federal level, Congress has also rejected rate caps on several occasions. Most recently during the debate on the Dodd-Frank­Wall Street Reform and Consumer Protection Act, Congress expressly prohibited federal regulators from establishing a national rate cap on payday advance fees.

Research shows that heavy-handed restrictions on payday loans have caused consumers to bounce more checks, pay more late fees, and experience more credit problems.

Your article described short-term loan customers as those “without access to other credit.” But when facing such a shortfall, consumers say they consider the pros and cons of credit cards, overdraft programs, and cash advances from banks, credit unions, and retail lenders.

They also weigh the costs and consequences associated with missing bill payments or submitting them late.

Consumers thrive in a competitive, regulated financial services environment. The Mississippi Legislature approved meaningful reforms last year, preserving access to a variety of regulated options and implementing consumer safeguards. That was step in the right direction. But we must continue to ensure that consumers are equipped with all of the information they need to compare services and make informed choices.

“One could argue that … financial institutions with strong or successful marketing plans always look out for the best interests of consumers, because those are the products that are going to be the most successful over time, those that are good for consumers,” Fischer said. “If you develop those types of products, price them appropriately, you’re going to do very well.”

We believe that CFSA’s Best Practices should be considered as a blueprint for responsible lending, and can be adopted for most short-term financial products. Provisions include: Full disclosure of fees, truthful advertising, right to rescind, appropriate collection practices, including no criminal action, and a requirement to be licensed in each state where the company does business.

More specifically, CFSA Best Practice #3:

A member will not advertise the payday advance service in any false, misleading, or deceptive manner, and will promote only the responsible use of the payday advance service.

“Although a payday loan customer is typically financially vulnerable, payday lenders are not necessarily targeting their customers inappropriately. Identifying the motivations of lenders and customers is difficult. Payday lenders may create demand for their product by targeting financially vulnerable populations, or they may simply be locating their stores
where markets exist.”

A word to the wise to all consumers of payday loans: Use a CFSA Member! We want to make sure that situations like this don’t happen. Remember, using a CFSA Member means you’re doing business with a legitimate financial institution.

Our first two Best Practices state:

1. 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 agree to disclose the cost of the service fee both as a dollar amount and as an annual percentage rate (“APR”). A member, in compliance with CFSA guidelines where they do not conflict with applicable federal, state or local requirements, will further ensure full disclosure by making rates clearly visible to customers before they enter into the transaction process.
2. 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.

You’ll know when you’re taking out a loan with a CFSA member if you see this seal.

So what happens if you experience a collection scam? CFSA released a statement earlier this year about rogue debt collectors. Here’s a snapshot from what our Board Chair D. Lynn DeVault said:

“It is simply wrong to pursue criminal complaints against consumers who have defaulted on personal debt,” said D. Lynn DeVault, board chair of the CFSA. “Lenders should be working with their customers to figure out a solution. Our members offer borrowers an extended payment plan at no extra cost to the borrower and adhere to CFSA Best Practices which prohibit any criminal recourse.”

CFSA’s Best Practices state, “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.”

If you have consumers that are being called by someone claiming they have defaulted on a loan and will face criminal prosecution, please have them file a complaint with the Federal Trade Commission.

Here’s more information for consumers on what they can do during the call:

• Ask the caller to provide official documentation verifying the debt.
• Don’t provide or confirm any bank account, credit card, social security number, or other personal information over the phone.
• File a complaint with the FTC.