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Bio Statement The Many Payday Loan Acts

There are many payday loan acts that you need to know. Get the information you need to beware of so you too can be protected.

Fair Credit Reporting Act

A bank engaged directly or indirectly in payday lending is responsible for complying with requirements to provide notice to a consumer when it declines an application for credit or takes other adverse action based on certain information. If adverse action is taken based on information received from a consumer reporting agency, the consumer must be notified and provided the name and address of the consumer reporting agency.

It is important to note that information in "bad check lists" or databases that track outstanding payday loans are considered to be consumer reports, and therefore the companies that provide such a tracking service (such as Teletrack) are consumer reporting agencies. If adverse action is taken based on information received from a third party that is not a consumer reporting agency, the adverse action notice must direct the consumer to the bank, and not any third party, for details regarding the character of the information (even where the payday loan applications are received by the bank through a third party such as a payday lender).

Electronic Fund Transfer Act (EFTA)/ Regulation E and Truth in Savings Act (TISA)

Payday lending arrangements that involve the opening of a deposit account or the establishment of "electronic fund transfers" must meet the disclosure and other requirements of both the EFTA and TISA. Examples include providing a device to access funds from a deposit account, or depositing a payday loan directly in a borrower's account and debiting the subsequent payment.

Fair Debt Collection Practices Act (FDCPA)

If a bank engages in payday lending through an arrangement with a third party, and the third party collects defaulted debts on behalf of the bank, the third party may become subject to the provisions of the FDCPA. Although the bank itself may not be subject to the FDCPA, it may face reputational risk if the third party violates the FDCPA in collecting the payday loans direct lender no credit check. A compliance program should provide for monitoring of collection activities, including collection calls, of any third party on behalf of the bank.

Federal Trade Commission Act (FTC Act)

The Federal Trade Commission Act (FTC Act) declares that unfair or deceptive trade practices are illegal. (See 15 USC 45(a)). State nonmember banks and their institution-affiliated parties will be cited for violations of section 5 of the FTC Act and the FDIC will take appropriate action pursuant to its authority under section 8 of the Federal Deposit Insurance Act when unfair or deceptive trade practices are discovered.

Examiners should focus attention on marketing programs for payday loans, and also be alert for potentially abusive collection practices. Of particular concern is the practice of threatening, and in some cases pursuing, criminal bad check charges, despite the payment of offsetting fees by the consumer and the lender's knowledge at the time the check was accepted that there were insufficient funds to pay it. If evidence of unfair or deceptive trade practices is found, examiners should consult with the regional office and the region should consult with Washington.

Where entities other than banks engage in unfair or deceptive trade practices, the FDIC will coordinate its response with the Federal Trade Commission. (Refer to FIL-57-2002, dated May 30, 2002, for further information.)

Privacy of Consumer Financial Information/Part 332

Payday lending arrangements are subject to the same information sharing restrictions and requirements as any other type of financial service or product provided by FDIC-supervised institutions to consumers. The bank should ensure consumers are appropriately provided with a copy of the bank's initial, revised, and annual notices, as applicable. In addition, the bank should ensure that a consumer's nonpublic personal information is used and disclosed only as permitted and described in the privacy notice.

Jerry Daniels is a very trusted resource in the financial industry and has written many articles relating to consumer services and Personal Loans Online.

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Jerry Daniels