Staff editorial: Consumer rights, industry responsibility
Before making any purchase, a consumer has the right to basic information about the product or service. If you're buying food, you should have a chance to see the nutritional value. If you're taking your family to a movie, you should know whether the content is appropriate for kids. And if you're using any financial product, you should have access to clear, easy-to-understand information about the cost of that product or service.
The payday advance industry is taking additional steps to ensure that consumers understand the fees associated with payday advances before they enter into a transaction. For those unfamiliar with the service, payday advances are short-term, small-dollar advances that are typically used by consumers who need assistance covering unexpected or unbudgeted expenses between paychecks. Used responsibly, payday advances help people avoid higher fees associated with bounced checks, late bill payments and other negative outcomes resulting from inadequate cash flow.
Consumers need access to all fee information before they are able to determine whether or not a payday advance is right for them. That is why the member companies of Community Financial Services Association of America (CFSA), the national association of responsible payday lenders, have always met or exceeded state regulations on fee disclosure. It is also why we are voluntarily enhancing our best practices with a new requirement that all stores display large 18" X 22" fee posters, and that all member company Web sites post this fee information for every state in which they do business.
The easy-to-read posters and detailed Web site information will ensure that customers know, in simple terms, exactly what the fees are before they enter into any transaction.
Some industry critics argue that the cost of payday advances is too high and that these advances need to be severely restricted or even banned. While they will rarely say so, the implicit message of this argument is that some consumers are simply not capable of making sound financial decisions and that it is up to others, including the government, to make these decisions for them. Their argument goes against the grain of that basic American value of individual choice.
Consumers have the right to make their own choices about the financial services that are right for them and their families. At the same time, financial service providers have the responsibility to ensure that people are empowered with the information to make informed choices. That is the balance that should be sought by industry, policymakers, community leaders and other stakeholders.
Misinforming or manipulating consumers is unacceptable in any industry. It is up to all of us to work together to ensure that consumers have the tools and information they need to make the best decisions for themselves - and then to trust that people are best able to decide what to eat, what movies to watch and what financial service products to use.