The Payday Advance transaction has recently come under nationwide attack by the Consumer Federation of America (CFA). Payday Plus Software, Inc. views the Payday Advance as a valuable service provided to fully informed customers. The service is wanted and needed by customers in times of financial emergencies. They are offered only to customers with steady and verifiable income sources who have personal bank accounts, typically over 6 months. Opponents complain that fees are interest, and when calculated on an annualized basis, are too high. When you consider that the charge is a fee for services provided in a high risk transaction, when you understand that the fully informed customer accepts the agreement before entering the transaction, and when you consider the costs the consumer may face by not having access to those funds, you should find that the fees are not adverse. Opponents also argue that consumers require greater consumer protection beyond the current protection offered in existing legislation. Just like anyone can accept and max out every credit card offer that comes in the mail, anyone can also abuse Payday Advance services. In those states that specifically regulate Payday Advances, existing licensing requirements, permits, bonds, etc., provide both industry oversight and consumer protection. In any case, no law can be written that will prevent consumers from abusing the system and getting themselves in too deep.
To describe what the service is, in some states, the State Legislative/Regulatory Branches help you determine how you run your business and thus what kind of service you are allowed to offer your customers and what fees you are allowed to charge for those services. Generally though, whether the service is legislated, regulated, or not, in your state, essentially, the service provided is to hold a customer's check for deposit at a later date, for a pre-agreed upon fixed fee.
The service allows the customer access to cash they do not otherwise have which helps them out of whatever cash bind they are in. Your customers use the cash for many financial emergencies. They may have overdrawn their bank accounts and need the cash to cover the overdraft. This can save them hundreds of dollars in overdraft fees. Cars breakdown and if there is no cash for repairs, your customer may not be able to go to work and loose their job. There are lots of reasons people get themselves into binds. I can easily remember a couple of occasions when it would have cost me far less money to get a Payday Advance, than to bounce a series of checks at month end when paying bills.
Of the states that legislate or regulate Payday Advances, each seems to have different regulative bodies to provide oversight. Please review the State Legislation section of this website for more information.