How to Choose a Payday Lender - Lending Bear

How to Choose a Payday Lender

September 26, 2018
How to Choose a Payday Lender

It’s no secret that payday loans are popular.  The Community Financial Services Association ( estimates that approximately 12 million households use short-term small-dollar “payday” loans annually.  But if you’re looking for a payday loan, you should understand that not all payday lenders are created equal.  Choosing the right payday lender can mean getting the cash you need quickly, easily, and confidentially.  Choosing the wrong one?  Well, that can lead to problems.

State Licensed

The first thing to know about payday loans is that, contrary to the many media reports on the topic, payday loans from state-licensed lenders are actually highly regulated.  In the U.S., 35 states permit and regulate payday lending.  Depending on the state where you’re doing business, the state laws often dictate how much you can borrow, how long you can keep the cash before you have to pay it back, and how much lenders can charge you to borrow the money.  Some states even operate statewide databases that track borrowers by Social Security Number in order to prevent consumers from taking on more than one payday loan at a time.

The states even go a step further and closely examine each lender on a regular basis to ensure that they are offering their loans in accordance with state law.  Lenders that have problems with compliance are subject to fines and penalties.  This process of regulation and careful supervision from state authorities ensures that consumers are treated fairly and receive payday loans that are clearly and conspicuously advertised and delivered.  So the first step in choosing the right payday lender is to find one that is state licensed.  How will you know? Look for a copy of the license on the wall of your store or on the company’s website. Examples of such licenses can be seen on this page of the Lending Bear site –

Storefront vs. Online

In the past, most payday loans were offered through retail storefront locations.  However, with the arrival of the internet and particularly the smartphone, more and more payday loans originate online.  Should you opt to receive your loan from an online lender, make certain that the lender company is licensed to do business in the state where you live.  This is particularly important on the internet where unlicensed lenders operating from offshore locations are prevalent.

Direct Lenders vs. Lead Generators

Should you choose to seek your loan from an online lender, be aware that not all companies with ads offering “payday loans” will actually loan you the money.  Many of these advertisements are from so-called “lead generation” companies that sell the data you provide on your loan application (such as your name, address, and Social Security Number) to actual lenders who then make you the loan.  For this reason, you need to look for the words “direct lender” on the company’s website.  Lead generators are required by law to disclose the fact that they will not actually loan you money and this disclosure, not surprisingly, is buried in the fine print on their websites.  But direct lenders are easy to find—many have stores located near your home so you may already be familiar with their brand—and they display their status proudly on their website.  Direct lenders want to work with you—not just sell your data to the highest bidder.

Look for the CFSA Seal

CFSA stands for the Community Financial Services Association and is the leading trade group of responsible, state-licensed small-dollar lenders.  CFSA members must agree to abide by a set of ground rules or “best practices” ( that provide considerable protections to consumers.  Among these protections are truthful advertising, maintaining the privacy of customer personal information, and of course, complying with all state and federal laws.  The CFSA seal is validation that the payday lender you’re working with is of high quality, follows the law, and is completely transparent about the costs of the loan you are considering.

Today, borrowers have more options than ever before to secure a small-dollar loan that meets their short-term cash needs.  By making sure that you use a state-licensed, direct lender that is a member of the Community Financial Services Association you can be sure that your payday loan will be safe, secure, and worry-free.