We hope the City Council will follow our lead, and take the necessary steps to protect DC residents without taking away a valuable tool that helps Washingtonians make ends meet between paychecks.
Sonny Eyabi, President DC Financial Services Association

Payday loan operators in the Washington D.C. are going on the offensive in advance of the D.C. City Council's September 18th vote on the "Payday Lending Consumer Protection Act of 2007" (B17-132). The Act would cap payday loan rates at 24% APR. The bill is essentially a ban on the industry, because if passed, the maximum fee a lender could charge is 92 cents per $100 loaned.

D.C. payday loan operators recently formed the DC Financial Services Association (DCFSA). DCFSA launched an advertising campaign featuring consumers who believe payday advance is a responsible, and critically important financial option. One woman interviewed put a question directly to the D.C. City Council - "If the City Council votes this out, are [they] going to pay the electric bill? Can we as a whole come to the city council and apply for a loan?" Click play at left to view interviews. More- Radio spot 1, Radio spot 2, TV commercial 1, TV commercial 2.

"DCFSA hopes Washingtonians will see these advertisements, and tell their representatives on the City Council not to pass legislation which would essentially ban payday advance in the District," said DCFSA President Sonny Eyabi.

The DCFSA is proposing a that the D.C Council meet the industry in the middle. Earlier this month, the group proposed alternate rules that would better protect payday advance customers while preserving a popular, well-regulated short-term credit option. These reforms include requiring all lenders to:

-- Make sure consumers understand the cost of the product by fully disclosing all fees in simple and easy to understand language

-- Help customers avoid getting into a "cycle of debt" by allowing only one rollover and offering and extended payment plan, at no cost, to any customer who cannot pay back the loan when due

-- Verify that customers have the ability to repay, before approving the loan

-- Support tougher penalties for any lender not following the law

-- Fund financial literacy programs in the District

"DCFSA encourages the DC City Council to enact these no-nonsense reforms into law," said Eyabi in a statement August 8th. "Our members will be required to institute these reforms to better protect our customers. We hope the City Council will follow our lead, and take the necessary steps to protect DC residents without taking away a valuable tool that helps Washingtonians make ends meet between paychecks."

DCFSA believes these reforms are a sensible alternative to (B17-132). "If payday advances were offered at 92 cents per $100 loaned, because of operating costs, lenders would actually lose money on every advance they make," added Eyabi.

According to DCFSA, the current maximum fee for a payday loan in DC is $16.11 per $100 borrowed.

"Payday advance stores in DC care about their customers. Our customers are our friends, our neighbors, the police officers who protect us, the teachers who educate our children and the healthcare workers who mend us. We sincerely hope the City Council will enact common sense reforms to protect these consumers and not pass any proposal which would essentially ban payday advance in the District," concluded Eyabi.

All DCFSA members are required to abide by the following practices:

1. Limit Rollovers – A member company will limit a customer to one rollover of a deferred-deposit transaction. Following the single rollover, a customer must payoff the transaction in full. (Effective 9/1/2007)
2. Extended Payment Plan – A member must offer an extended payment plan (EPP) to any customer who is unable to pay a deferred-deposit on the transaction’s original due date. The member will extend the term of the EPP for at least 60 days and will not charge any additional fees or interest for the EPP. A customer may not take out any additional loans while they are in the EPP. A customer shall be allowed to utilize an extended payment plan at least once in a twelve month period.
3. Ability to Repay – A member must underwrite deferred-deposit transactions in a way that ensures the customer’s ability to repay the transaction in full on the transaction’s original due date.
4. Right to Rescind – A member will give its customers the right to rescind, at no cost, a payday advance transaction on or before the close of the following business day.
5. Full Disclosure – A member will comply with all local and federal disclosure requirements including the Federal Truth and Lending Act. Members agree to disclose the cost of the payday service fee both as a dollar amount and as an annual percentage rate (APR) on the loan contract. A member will post all fees in a conspicuous manner and provide each loan applicant with a full disclosure of all loan and payment terms prior to accepting a loan application.
6. No Criminal Action – A member will not threaten or pursue criminal action against a customer as a result of the customer’s account not being paid or the customer’s check being returned unpaid.
7. Appropriate Collection Practices – A member must collect past due accounts in a professional, fair and lawful manner. A member will not use unlawful threats, intimidation, or harassment to collect accounts. Members will follow the Fair Debt Collection Practices Act.
8. Encourage Consumer Responsibility – A member will inform consumers of the intended use of the payday advance service. A “customer notice” must appear on all marketing materials, including all television, print, radio and online advertising, direct mail and in store promotional materials. (Effective 9/1/2007)
9. Compliance – A member will comply with all applicable laws. A member will not charge a fee or rate for a payday advance that is not authorized by local or federal law.
10. Enforcement – A member will participate in self-policing of the industry. A member is expected to report any violations of these best practices to the DCFSA, which will investigate and take appropriate action.
11. Support Balanced Legislation – A member will work with local legislators and regulators to support responsible legislation of the payday advance industry that incorporates these best practices.
12. Community Reinvestment – Members will make all efforts to invest in their local communities in the District of Columbia. This shoulDCme in the form of charitable donations, community partnerships, financial literacy initiatives and general community involvement. Member companies themselves, as well as the association as a whole, will work to provide opportunities for this community outreach.