Native American partnerships with payday lending companies is getting increasing media attention, and for once, news coverage is accurate in stating this is solely a practice of some Internet-based lenders who choose to license themselves under the laws of a sovereign nation, rather than through states.
That distinction is important, but consumers should also know which lenders are not partnering with Native American tribes. They should know which lenders offer a safe, reliable short-term credit product that is regulated at the state and federal level. And those lenders are all CFSA member companies.
CNBC covered the topic recently in its piece “How Some Payday Lenders Charge Over 700% on Loans.”
The loophole involves payday lending firms affiliating with Native American tribes and taking advantage of tribal sovereignty to offer loans online that would otherwise be blocked by many US state laws.
CFSA members have a long history of operating within the state regulatory framework, and follow all state and federal laws. Also, CFSA Best Practices require that all 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.
CFSA has long-advocated through its Best Practices that responsible payday lenders follow state and federal laws. Last year, we put out a statement on the issue where CFSA Board Chair D. Lynn DeVault said: “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.”