CFSA Modernizes Industry-Leading Best Practices

July 10, 2018 | Access to Credit

The Community Financial Services Association of America (CFSA) today released a modernized set of best business practices to further enhance consumer protections and address the evolving credit needs of small-dollar loan customers. CFSA member companies are licensed and regulated in each state in which they operate, and these mandatory Best Practices ensure they continue to hold themselves to a higher standard of responsible lending and help consumers make informed financial decisions. Additionally, these modernized best practices are intended to cover all small-dollar loans provided by CFSA member companies, including automobile title and installment loans.

 

“We are excited to release our modernized Best Practices, which help ensure CFSA member companies continue to provide their customers with superior service, offer customers the best resources available to make informed financial decisions, and deliver unparalleled transparency,” said CFSA CEO Dennis Shaul. “Small-dollar loans are a vital form of credit for millions of American households, and these Best Practices will further protect consumers as they look to small-dollar loans to fulfill their financial needs.”

 

CFSA’s new set of mandatory Best Practices include 15 lending requirements for member companies – up from the CFSA’s previous 13 Best Practices. The two new provisions of the modernized Best Practices are:

 

• Ability to Repay. A member, before extending credit, shall undertake a reasonable, good-faith effort to determine a customer’s creditworthiness and ability to repay the loan.
• Maintaining Privacy. A member who possesses any personally identifiable information about a consumer agrees to maintain the privacy of such information in accordance with all state and federal privacy laws and regulations.

In addition to the two new requirements, several existing Best Practices have been updated with substantive changes, technical adjustments, or both. Among the changes to the existing Best Practices:

 

• New “Customer Notice” language as part of the “Encourage Consumer Responsibility” Best Practice. Members will continue to inform consumers of the appropriate use of small-dollar loans, which will include a revised “customer notice” on all company marketing and advertising materials.

 

CUSTOMER NOTICE: There are a wide variety of loan products available in the marketplace, so your choice of lending products should match your financial needs. Small-dollar loans used over a long period of time can be expensive.

 

• Broader “Extended Repayment Plan” Best Practice to cover all small-dollar loans. In addition to continuing to provide for a state-sponsored or CFSA “Extended Payment Plan” for payday advance loans, CFSA members are now expected to extend repayment plans to all small-dollar loan customers. Such repayment plans are designed to assist those small-dollar loan customers who are undergoing financial difficulties and are not able to repay loans when due.
• Broader “Licensing/Registration” Best Practice. While implicit in the past, CFSA members are expressly required to be registered with all government agencies (local, state, and federal) and to hold all necessary businesses licenses so that they operate legally in the jurisdictions in which they offer small-dollar loans.

 

“As evidenced by the high customer satisfaction scores enjoyed by CFSA member companies, we enjoy great relationships with the customers we serve and have worked over the past year to strengthen the organization’s Best Practices. We believe that our customers will be pleased with result of this effort. These Best Practices allow us to stay true to our mission of balancing strong consumer protections while providing access to short-term credit for millions of Americans,” added Patrick O’Shaughnessy, Chairman of CFSA’s Executive Board. “We will continue to hold ourselves to the highest standard as we provide hard-working Americans with the financial resources they need to provide for their families and themselves.”

 

CFSA’s Best Practices have been in effect since 2000 and have been periodically updated over the years. While the new set of Best Practices are effective now, member companies will have until the end of the calendar year to be in full compliance. The transition period until January 1, 2019, provides members time to modify software and computers systems, update employee handbooks and operational procedures, and train employees.

 

Customers can find more information about CFSA’s Best Practices by visiting CFSA’s website, as well as inquiring at local storefronts of CFSA member companies.