Don’t Confuse Innovative Service with Irresponsible Payday Practices

Bloomberg recently highlighted the online “payday lending” marketplace. While Bloomberg portrayed the type of loans as “installment loans,” they are a business model that leverages today’s online consumer culture that is very different from traditional installment lending. 

To some in the media, who prefer to conflate all consumer lending business models, the difference may not matter.  But that is a disservice to consumers looking for a responsible lender to help them in their times of need, as well as to the well-established, installment lending industry. What distinguishes the members of the American Financial Services Association from the lending version of a “swipe right” dating app can make all the difference, not only to a consumer’s experience, but to their overall financial health.

Members of AFSA are not “payday lenders.”  Many of our members have been operating brick and mortar businesses in communities across the U.S. for decades.  They are integral parts of the economic life of the families and businesses they serve.  In some cases, they have been providing loans to households and businesses in towns long before a bank branch opened.  While digital innovations have become part of AFSA members’ operations to better serve their customers, there is rarely a loan process that does not involve a customer interacting with a loan officer or lending representative. 

For example, an AFSA member might use its website for an initial questionnaire or screening process to better ascertain the needs of a prospective customer seeking a small-dollar loan. But that’s only the beginning of a process that typically involves if not a visit to the lender’s office, then ongoing contact with the lender to determine that customer’s loan qualifications, processing the loan and walking the customer through the payment processes.  That is decidedly not the process of the online payday lenders in the Bloomberg article and it is a distinction that we must ensure is made.