Social crusaders want the payday advance industry regulated, even out of business. However, a lot of the industry already regulates itself. Image from Wikimedia Commons.
Many critics of the payday advance industry have opined that the industry needs greater regulatory control. Numerous states have put interest rate caps, effectively price ceilings, in place which make it hard for loan lenders to make a living. How many payday loans a person can borrow has also been limited by statutes. The calls for new laws rarely address how much self-regulation the industry already does.
Case for regulating payday advance loans
There have been numerous campaigns and calls for the payday advance loans industry to be regulated. Some people want cash advances as a product regulated completely out of business. To be fair, there are “bad apples” in the industry. In fact, a debt collector for a payday loan lending outfit in Oklahoma is being sued for violating the Fair Debt Collection Practices Act by impersonating a government official, according to Consumer Affairs. It would seem that there should be strong laws set in place against short term loan lenders so that they cannot abuse people with impunity. However, the payday advance industry has been self-regulating itself for years.
Best Practices
There are trade organizations to which payday loan lenders belong at local, state and national levels. Many of these organizations set a code of ethics for themselves, known as Best Practices. The Best Practices are often similar if not the same across trade organizations. For instance, there is disclosing rates and fees up front to customers. Practices also will limit the number of “roll overs,” or renewal of loans to customers if there is a pattern of repeat borrowing. They also mandate adherence to the law regarding collections, and encourage customers to report lenders not in compliance with Best Practices to both the organization a lender belongs to, and also to authorities.
Look for membership
A potential payday advance loan customer should check out a prospective lender, and see if they are affiliated with any such organization. There should be a seal of membership in a payday loan store or on a website. Look for members of the Online Lenders Alliance, Community Financial Service Association of America or Financial Service Centers of America. You can read more in the Payday Loan Facts and Statistics Report on Personal Money Market.
