What is the Consumer Finance Association and How is it Related to the Payday Loans Industry?

The payday loan industry finds its voice through the Consumer Finance Association, a trade organisation that represents a group of licenced lenders of unsecured, short-term loans. Some key characteristics of making these types of loans are as follows:

• Serve the customer who needs a short-term advance of money
• Be able to determine who can afford to repay on such loans and adhere to strict responsible lending guidances issued by the OFT.
• Ensure clear communication, including customer contracts, with borrowers
• Enable member companies to deliver high standards of service, including how they provide helpful, courteous advice to borrowers
• Ultimately, ensure a satisfying experience for borrowers

A good part of the work of the CFA is educating its customers on how to use short-term loan borrowing. This includes the following:

Know the ideal circumstances for using payday loans – These are loans intended to be repaid in a relative short period of time, usually at the time of your next paycheque, for modest amounts (between £50 and £800, with the average loan size being £230).

Understand the repayment plans – While 30 days is the economical time period for a payday loan, it is possible to extend it over two or more paycheque periods. But all extensions involve higher costs, usually at higher rates and additional fees or penalties.

Negotiating changing circumstances – Some customers might fall into more difficult circumstances, such as the loss of employment. Lenders who belong to the CFA are encouraged to offer constructive and helpful means of achieving repayment, including referrals to independent support organisations (Consumer Credit Counseling Service, Money Advice and National Debtline agencies).

Another function of the CFA is to assist borrowers in making complaints for poor service. If a lender provides a dissatisfying response to a borrower after a formal complaint has been lodged, CFA refers that individual to the Financial Ombudsman Service for investigation and resolution.

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