Amid lawmaker and public concern, Payday lenders will introduce new policies to offer customers extra time to pay off loans and inform them about how to use their short term loans responsibly.
The Community Financial Service Association of America (CFSA), which represents about 60 percent of the U.S. payday lenders, said Wednesday that it is launching a $10 million education campaign along with financial literacy programs.
We have listened to concerns raised about our industry and have developed innovative solutions to address them, said Darrin Andersen,
president of CFSA.
Payday lenders, which are already effectively barred from doing business in certain states, have been under fire from critics over lending practices which can charge fees of about $15 on $100 loans, the equivalent of a 390 percent annual interest rate.
The CFSA says that short-terms loans are expensive to administrate, noting that most banks have stopped offering them. Lenders say businesses must pay for costs of running the business and recover higher default losses.
The group says 90 percent of all customers pay off their loans in time. For those who canâ€™t, the new policies allow for an option called the Extended Payment Plan will allow customers who canâ€™t meet their obligations to repay loans over additional weeks.