These guidelines were initiated due to controversy over agency programs between banks and payday lenders that are patterned after those used to provide credit cards, car loans and mortgages.

Payday advances allow consumers to get a small amount of cash, for a fee, for a short period of time against their next paycheck. Under an agent-assisted bank loan program, the partner financial institution sets credit criteria, approves and funds the loan and the CFSA member assists in marketing and loan distribution. Many financial products such as credit cards, mortgages and payday advances are offered in numerous states by financial institutions charging rates authorized by their home state. This process is commonly referred to as the 'Most Favored Lender Doctrine.'

The guidelines were developed after conversations and consultation with CFSA-member companies, policymakers and other stakeholders in the banking industry.

CFSA's guidelines are consistent with OCC guidances, federal law and the CFSA's Best Practices. CFSA is committed to promoting responsible industry lending practices that provide appropriate consumer protections and address the concerns of policymakers to ensure the safety and soundness of financial institutions. CFSA's Best Practices and 'Suggested Guidelines for Agent-Assisted Bank Loan Programs' go a long way toward achieving these two important goals. Additionally, when CFSA members enter into relationships with banks, the banks must also agree to follow CFSA's Best Practices.

CFSA's guidelines go on to recommend that agent-assisted bank loan programs follow additional consumer protections outlined by the state in which the agent does business, where the provisions do not conflict with the federal law that governs the bank relationship. The guidelines also will enhance consumer protections for agent-assisted bank loan programs by:

* Promoting the acceptance of state licensing requirements, state limits on rollovers and reasonable limits on the amount of the loan;
* Providing consumers with notification that their use of payday advance services as a longterm financial tool may create financial hardship;
* Prohibiting the use or threatened use of criminal process to collect a payday advance debt;
* Providing a point-of-sale notice of government agency contact information for communicating unresolved complaints;
* Affording customers a free, next business day right of rescission for any reason;
* Disclosing to consumers all fees or costs they will incur accessing the loan.

The guidelines also promote the safety and soundness of financial institutions by suggesting the following business practices:
* Banks and non-bank agents are encouraged to perform due diligence on one another sufficient to determine whether the agent-assisted loan program will satisfy all applicable laws and banking regulator policies.
*Banks and payday advance companies are encouraged to enter into a written agreement that, among other things, requires periodic reports on the overall financial performance of the program; and
*Payday advance companies are encouraged to partner with banks that agree to maintain capital, concentration limits, and loan loss allowances at levels commensurate with the level of the bank's short-term lending activity.

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