Once again we’re seeing generalizations about payday lenders in one news story that came out earlier this week. Unlike companies that are licensed by the state, such as CFSA members, unlicensed and unregulated lenders, including those located offshore, are not subject to state examination, compliance standards, or the formal complaint process.

There’s no doubt that less access to legitimate, regulated loans will drive consumers to unscrupulous offshore providers that are in effect, beyond the legal reach of U.S. authorities. A proliferation of online pharmacies portends the future of short-term loans if consumers lack state-based, regulated credit options.

A 60 Minutes’ nine-month investigation called “The difficult fight against counterfeit drugs,” which aired March 10, 2011, detailed how counterfeit prescription drugs manufactured outside of the United States were sold through “rogue internet sites, often posing as legitimate pharmacies.” According to the report, “Thirty-six million Americans are estimated to have bought their medicines from these sites, many searching for quality drugs at a better price. Some sites pretend to be from Canada because Canada is known for safe, inexpensive medicines.”

CFSA believes that appropriate state regulations provide strong protections for consumers, while ensuring continued access to choices for short-term credit needs. That same principle should apply in cyberspace. Customers who choose to get a payday advance online should not forfeit any of the protections they would receive from a regulated, store-front lender.

According to this article, payday loans (a viable credit option that’s being used by millions of working Americans in 19 million households) “‘stink up’ the lending landscape”. And what option are they promoting? None other than the credit unions’ alternative. Like we said before:

Last September, the NCUA voted to allow credit union members to raise the annual interest rate for short-term loans to 28 percent. What the NCUA doesn’t discuss is that the fees credit unions tack on to a loan, drive the true cost up to, yes, triple-digits. For example, a two-week (typical payday loan) $400 loan at Kinecta Federal Credit Union costs $42.25, that’s an annual percentage rate (APR) of 275 percent. Or when considering a two-week loan at Mountain America Federal Credit Union, this short-term alternative has an APR at 876 percent.

Like it or not, short-term, unsecured credit is expensive and no one, including banks and credit unions can afford to make loans at the rates of traditional, secured loans. Is the cost worth it to consumers? We think that payday lenders, banks, and credit unions should clearly disclose loan fees and terms and at the end of the day, only the consumer can decide whether the loan is appropriate for their needs.”

Our Board Chair D. Lynn DeVault goes on to say:

“Like it or not, short-term, unsecured credit is expensive and no one, including banks and credit unions can afford to make loans at the rates of traditional, secured loans. Is the cost worth it to consumers? We think that payday lenders, banks, and credit unions should clearly disclose loan fees and terms and at the end of the day, only the consumer can decide whether the loan is appropriate for their needs.”