Questions and Answers with Eric L. Johnson
Payday lender group pushes voluntary disclosure
Questions and Answers with Eric L. Johnson

Published: December 6, 2007

Q: Describe the disclosure that the Community Financial Services Association of America requires of its members.

A: By Jan. 1, the companies of the CFSA, the national association of payday lenders, will be required to prominently display in their stores payday cash advance fees and annual percentage rates (APRs) for at least five different loan increments on posters at least 18 inches by 22 inches. In addition, all CFSA members will be required to post this same information on their company Web sites. The CFSA has also established a Web site, www.knowyourfee.org, which includes an interactive map of the maximum fees and rate caps in individual states and provides consumers with information about how to use payday advances responsibly.

Q: What percentage of payday lender companies belongs to this industry group?

A: According to the CFSA, it represents approximately 60 percent of all payday advance locations in the United States. I estimate the percentage of CFSA member stores in Oklahoma to be closer to 80 percent, which means these new disclosure requirements affect approximately 325 Oklahoma payday advance stores.

Q: How do you respond to claims that this is just window dressing for companies that prey on the poor?

A: These new required disclosures are much more than window dressing; the disclosures are tangible and substantive disclosures that go beyond what is required by both federal and Oklahoma law. The new disclosure policy should ensure that consumers know, in simple and easy-to-read terms, exactly what the fees are before they enter into a payday advance transaction.

Q: Don't many payday loan customers end up with multiple loans, and eventually in bankruptcy court?

A: In Oklahoma, there are consumer protection regulations that keep this from being a real problem. Oklahoma's Deferred Deposit Lending Act, which regulates payday lenders doing business in Oklahoma, includes some safeguards that limit the number of outstanding payday loans that an individual can have at one time to two. In other states that do not have a restriction on the number of payday loans that can be taken out at one time, yes, it may be possible for a payday loan customer to end up with multiple loans. However, from my experience in the consumer finance industry, multiple payday loan obligations do not factor heavily into decisions to file for bankruptcy protection. For example, poor spending choices, such as spending more than you earn, or a life changing event, such as prolonged illness or loss of a job, are more likely to contribute to an individual's decision to file for bankruptcy protection.

Q: Is this an attempt to stave off even more rigorous regulations on the industry?

A: No. I believe these additional steps are being taken by the payday advance industry to ensure their commitment to responsible lending and to assist their customers with making better, more informed financial choices.

Business Writer Don Mecoy

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