A national trade association’s new guidelines for faxless payday advance loans offer little that’s new to North Dakota lenders, who already operate under state regulations and self-imposed restraints.
The Community Financial Services Association of America last week announced changes to its best practices for members, along with a $10 million consumer education campaign. The changes came in response to concerns raised by consumer groups about the industry.
There are 81 no fax payday loan lenders licensed and regulated by the North Dakota Department of Financial Insitutions. Nationally, there are about 22,000 payday lenders.
“The business seems to be doing well,” said Timothy Karsky, commissioner of the state Department of Financial Institutions. “They say there’s more payday loan services now than there are actual McDonald’s franchises. It’s a very big industry. It’s over $40 billion. So obviously, there’s a demand for these types of loans.”
Consumer groups have raised concerns about predatory practices and the high cost when translating fees into interest rates. Although states regulate industries within their borders, cash advance loan offers proliferate on the Internet and through e-mail spam.
“We have very few complaints from individuals,” Karsky said of the industry in North Dakota. Nor do the department’s on-site inspections turn up more than minor infractions at the establishments.
“Overall, they are doing a good job, and I think we are doing a good job of regulating the industry,” he said.
A state law passed in 2001 includes many of the provisions of CFSA’s best practices, including restrictions on certain advertising, disclaimers provided to customers and provisions enabling fast cash advance customers to rescind a transaction at no cost before the end of the next business day.
CFSA plans to require members after July to offer an extended payment plan at no additional fee if a customer has difficulty paying when the loan comes due.
Jay Couture, president of the North Dakota Pawnbrokers Association, said North Dakota’s requirement that no faxing payday loans be repaid within 60 days will limit the extension period. Payday loans typically can be renewed for an additional fee, and North Dakota allows only one renewal. State law also limits loans to $500 and fees to 20 percent of the loan amount.
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