Community Financial Services Association of America
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The Community Financial Services Association of America (CFSA) is a
trade association A trade association, also known as an industry trade group, business association, sector association or industry body, is an organization founded and funded by businesses that operate in a specific Industry (economics), industry. An industry tra ...
in the United States representing the
payday lending A payday loan (also called a payday advance, salary loan, payroll loan, small dollar loan, short term, or cash advance loan) is a short-term unsecured loan, often characterized by high interest rates. The term "payday" in payday loan refers to ...
industry.


Controversy

The payday lending industry has been the source of ongoing controversy due to its
lobbying In politics, lobbying, persuasion or interest representation is the act of lawfully attempting to influence the actions, policies, or decisions of government officials, most often legislators or members of regulatory agency, regulatory agencie ...
tactics and business practices that ''
The New York Times ''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid ...
'' chief financial correspondent Floyd Norris bluntly calls "
predatory lending Predatory lending refers to unethical practices conducted by lending organizations during a loan origination process that are unfair, deceptive, or fraudulent. While there are no internationally agreed legal definitions for predatory lending, a 2006 ...
".


”Financial quicksand”

A central criticism of the CFSA member companies has been that
payday loan A payday loan (also called a payday advance, salary loan, payroll loan, small dollar loan, short term, or cash advance loan) is a short-term unsecured loan, often characterized by high interest rates. The term "payday" in payday loan refers to ...
s are "designed to keep borrowers in debt". While payday loans are marketed as “one time” or “emergency loans”, the nonprofit
Center for Responsible Lending The Center for Responsible Lending (CRL) is a nonprofit organization research and policy group based in Durham, North Carolina. Its stated purpose is to educate the public about financial products and to push for policies that curb predatory len ...
has found that "borrowers who receive five or more loans a year account for 90 percent of the lenders’ business", and "lenders…collect 90 percent of their revenue from borrowers who cannot pay off their loans when due, rather than from one-time users dealing with short-term financial emergencies". The U.S. PIRG has documented how payday loans create a “debt cycle” through high cost rollovers, additional fees, and debt collection. Payday lending practices have fueled calls for increased governmental regulation, and several states have taken legislative action to cap interest rates or outlaw payday lending altogether. CFSA states that it is open to working with state regulators and disputes the negative impact of its lending practices.


Payday loans and soldiers

The
United States Senate The United States Senate is the upper chamber of the United States Congress, with the House of Representatives being the lower chamber. Together they compose the national bicameral legislature of the United States. The composition and pow ...
asked the
U.S. Department of Defense The United States Department of Defense (DoD, USDOD or DOD) is an executive branch department of the federal government charged with coordinating and supervising all agencies and functions of the government directly related to national secur ...
to conduct a study on the impact of
predatory lending Predatory lending refers to unethical practices conducted by lending organizations during a loan origination process that are unfair, deceptive, or fraudulent. While there are no internationally agreed legal definitions for predatory lending, a 2006 ...
on U.S. troops as a provision of the 2006 National Defense Authorization Act. When the Department of Defense submitted its report to Congress in August 2006,
payday loan A payday loan (also called a payday advance, salary loan, payroll loan, small dollar loan, short term, or cash advance loan) is a short-term unsecured loan, often characterized by high interest rates. The term "payday" in payday loan refers to ...
companies came under attack. The report found that the prominence of payday lending among U.S. servicemen and women was compromising U.S. military readiness and troop
morale Morale, also known as esprit de corps (), is the capacity of a group's members to maintain belief in an institution or goal, particularly in the face of opposition or hardship. Morale is often referenced by authority figures as a generic value ...
, and that payday lenders were specifically targeting U.S. military personnel. The CFSA disputed these findings, claiming that it only looked into the research of payday lending opponents. As a response to these and other charges, the CFSA initiated a
US$ The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
10 million education and advertising campaign it claimed would help inform borrowers and improve the lending practices of its members. The CFSA hired
Eric Dezenhall Eric B. Dezenhall (born September 9, 1962; pronounced DEHZ-in-hall) is an American crisis management consultant, author, and founder of Washington D.C.-based public relations firm Dezenhall Resources. His aggressive tactics on behalf of his cli ...
, a
public relations Public relations (PR) is the practice of managing and disseminating information from an individual or an organization (such as a business, government agency, or a nonprofit organization) to the public in order to influence their perception. P ...
specialist, to improve its image. In 2007, the DoD created new regulations that placed a maximum limit of 36% on the
annual percentage rate The term annual percentage rate of charge (APR), corresponding sometimes to a nominal APR and sometimes to an effective APR (EAPR), is the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mort ...
s charged to U.S. servicemembers and their families for payday loans, vehicle
title loan A title loan (also known as a car title loan) is a type of secured loan where borrowers can use their vehicle title as collateral. Borrowers who get title loans must allow a lender to place a lien on their car title, and temporarily surrender the ...
s, and tax refund anticipation loans.


Litigation


''CFSA et al. v. CFPB et al.''

In April 2018, CFSA, along with the Consumer Services Alliance of Texas, filed a lawsuit against the CFPB, seeking an order and judgment to hold unlawful, enjoin, and set aside the Bureau’s final small-dollar lending rule. CFSA argued that the Bureau’s rule failed to demonstrate consumer harm from small-dollar loans, ignored unbiased research and data, and relied on flawed information. Additionally, the lawsuit alleges that the rule violates the Administrative Procedure Act (APA) because it exceeds the Bureau’s statutory authority and is arbitrary, capricious, and unsupported by substantial evidence. The court stayed the rule’s compliance date – originally August 19, 2019 – while the lawsuit was ongoing and while the CFPB reconsiders portions of the rule.


''Advance America et al. v. Federal Deposit Insurance Corp. et al.''

In 2014, CFSA and two of its members, Advance America and Check Into Cash, sued the Federal Deposit Insurance Commission (FDIC) and the
Office of the Comptroller of the Currency The Office of the Comptroller of the Currency (OCC) is an independent bureau within the United States Department of the Treasury that was established by the National Currency Act of 1863 and serves to charter, regulate, and supervise all nation ...
(OCC). The plaintiffs alleged that federal regulators from these agencies pressured banks into terminating the accounts of lawful small-dollar lenders under the program known as
Operation Choke Point Operation Choke Point was an initiative of the United States Department of Justice beginning in 2013 which investigated banks in the United States and the business they did with firearm dealers, payday lenders, and other companies believed to be a ...
, which targeted industries disfavored by the Obama administration. The lawsuit subsequently unsealed more than 900 pages of emails and depositions demonstrating that government officials, including senior FDIC officials, targeted legal businesses including small-dollar lenders through Operation Choke Point. The parties reached a settlement on May 22, 2019. As part of the settlement, the FDIC agreed to reiterate its policies to its staff, conduct trainings specifically related to Operation Choke Point and establish a process to allow for banks or customers to submit complaints regarding potential violations of FDIC policies.


See also

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Alternative financial services in the United States Alternative financial services in the United States refers to a particular type of financial service, namely subprime or near-prime lending (that is, lending to people with relatively poor credit) by non-bank financial institutions. This branch of ...
*
Moneytree Moneytree, Inc. is a retail financial services provider headquartered in Tukwila, Washington, with branches in Washington, California, Colorado, Idaho, Nevada, and British Columbia. Moneytree offers payday loans, installment loans, prepaid debi ...
*
Operation Choke Point Operation Choke Point was an initiative of the United States Department of Justice beginning in 2013 which investigated banks in the United States and the business they did with firearm dealers, payday lenders, and other companies believed to be a ...
*
Predatory lending Predatory lending refers to unethical practices conducted by lending organizations during a loan origination process that are unfair, deceptive, or fraudulent. While there are no internationally agreed legal definitions for predatory lending, a 2006 ...


References


External links


CFSA websiteCenter for Responsible Lending
{{DEFAULTSORT:Community Financial Services Association Of America Finance industry associations