Congressional Acts Associated with Payday Loans

Any bank engaged in payday loan lending practices, whether directly or indirectly, is solely responsible for the compliance with regulations to provide notification to any consumer who has applied for the short-term loan upon the denial of their application, or upon taking action adverse in nature based on certain information obtained in the application process. If any such action is taken upon the receipt of information obtained from a consumer reporting agency, the customer inquiring about a payday loan must be notified and provided with information pertaining to the consumer reporting agency including their respective name and address. Information in databases or “bad check lists” that track delinquency of outstanding payday loans are, considered to be in their nature, consumer reports. Therefore, companies that provide such information through tracking services (in example, Teletrack) are referred to and should be recognized as consumer reporting agencies. Any adverse action taken by a third party lender that is not recognized as a consumer reporting agency, must direct the consumer to the bank offering the lending service. Details regarding the character of the information should not be directed to the third party.

Truth in Savings Act, Electronic Funds Transfer Act and Regulation E

The disclosures set forth and any other requirements under the provisions of TISA and EFTA must be met when payday loan arrangements include the establishment of “electronic funds transfers” or the opening of a deposit account. Examples of this include providing access to funds from a deposit account, or debiting a payment subsequent to the deposit of a payday loan from a borrower’s deposit account.

FDCPA- Fair Debt Collection Practices Act

Upon engagement in the act of payday loan lending by a bank, through a third party agreement, the third party, on behalf of the bank may become subject to the provisions outlined in FDCPA. While the bank itself my not fall privy to the FDCPA, it may in fact risk un-repairable damage to its reputation if the FDCPA is violated in whole or in part by the third party involved in the arrangement in regards to the collection of the payday loan authorized and provided by the bank. The monitoring of collection practices including but not limited to collection calls by the bank or third party engaged in the loan arrangement should be provided under a compliance program.