Payment flexibility has become a staple in virtually every market. Consumer financing options aren’t merely a “nice to have;” shoppers seek out businesses and retailers that provide flexible, affordable payment options. However, consumer financing is more than customer applications, credit approvals, funding the business and accepting consumer repayment; myriad state and federal regulations shape and govern consumer financing programs.
This article from United Consumer Financial Services reviews these regulations and outlines what every merchant needs to know about offering financing. Because businesses who partner with United Consumer Financial Services to sell more with consumer monthly payments, are assured that our compliance team handles every aspect of regulations, so they don’t need to.
Consumers Demand Financing Options
Consumer financing increases purchasing power, giving shoppers greater choice and increased affordability for big-ticket purchases. As businesses increasingly see the essential nature of providing flexible payment, they must understand the importance of maintaining regulatory requirements. Offering consumer financing isn’t as simple as providing a scheduled payment plan; businesses must meet and adhere to state and federal regulations dictating consumer financing programs. The risks of noncompliance can be detrimental to a company.
Partnering with a proven, professional, and knowledgeable financing firm positions your business to sell more while remaining compliant with evolving regulations. United Consumer Financial Services, a consumer financing firm with a compliance department that protects your business, delivers financing solutions built for you and your clients.
The Regulatory Landscape
The regulatory landscape in consumer financing is constantly changing, and with both state and federal regulations to maintain, businesses must ensure they stay on top of shifting guidelines and policies.
Federal Regulations
When offering financing to consumers, merchants must comply with federal laws designed to protect borrowers and ensure transparency. These laws apply across all 50 states and are enforced by agencies like the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) and include:
- Truth in Lending Act (TILA)
- Equal Credit Opportunity Act (ECOA)
- Fair Credit Reporting Act (FCRA)
- Federal Trade Commission (FTC) guidelines
State Regulations
While federal laws create a broad framework, state regulations add a complex, ever-changing layer of compliance requirements. Each state has its own rules, and non-compliance—even unintentionally—can lead to severe consequences.
- Leasing Requirements – Some states require merchants or their financing partners to obtain a lender or broker license to offer financing. Requirements can vary based on loan amount, interest rate, and type of financing offered.
- Interest Rate and Fee Restrictions – States often cap the maximum allowable APR or consumer financing charges. Violating these caps can void contracts, causing businesses to lose sales and damage their reputation. Plus, what’s legal in one state might be prohibited in another, so if a business expands across state lines, it must learn and maintain new restrictions.
- Disclosure Mandates – Some states might require additional disclosures beyond the Truth in Lending Act, which could include:
- Language in plain terms
- Special forms
- Age restrictions
- Timing requirements for presenting disclosures
- Advertising Rules – Local regulators scrutinize how consumer financing is advertised. Merchants must ensure ads for their financing programs meet local standards and that claims are legally compliant.
- Constant Legal Updates – State laws can change frequently—new bills are passed, interest rate limits are adjusted, and court rulings affect interpretation. Staying up-to-date on the legalities of consumer financing requires dedicated legal monitoring and regular updates.
Without expert help, merchants could easily fall out of compliance simply by expanding into a new state or running a nationwide promotion.
The Compliance Burden on Merchants
For the reasons listed above –– and more –– compliance isn’t one-size-fits-all. Each business, depending on its location, where it does business, and the types of financing it offers, must meet varying regulations.
When businesses attempt in-house financing, they’re often surprised by the time, cost, and expertise needed to manage compliance. Unfortunately, the overwhelming nature of managing collections and customer care on top of compliance often results in errors that can cost businesses significantly. With so many spinning plates, merchants need support to execute a financing program that serves customers, increases cash flow, and maintains compliance.
The Value of a Strong Compliance Partner
Your consumer financing program will only be as effective insomuch as your program is compliant across many evolving regulations. United Consumer Financial Services boasts a dedicated compliance department, providing you with the expertise and peace of mind that your financing meets all federal and state laws. We employ a team of attorneys to research regulatory requirements so you –– our clients –– maintain compliance. We handle all compliance-related matters so you can spend your time, energy, and talents running your business and selling.
United Consumer Financial Services, backed by more than 45 years of experience, delivers
- Straightforward application and a prompt credit decision so your customers can agree right away to move forward with their project or purchase or service
- High approval rates that help you onboard more customers while making your services more accessible
- Simple, stress-free payment options that serve the customer
- A transparent fee structure that contributes to a positive client experience
- Financing expertise that eliminates the burdens of in-house programs
- A complete compliance center that takes care of all compliance-related needs
UCFS manages your entire consumer financing program for the full lifecycle of the loan, including ensuring your business maintains compliance.
Key Takeaways for Merchants
When choosing a consumer financing partner, remember these key points:
- Compliance is essential, not optional. Non-compliance will cost your business, literally and figuratively, leading to huge fines and the potential for closure.
- Attempting to manage it alone is costly and risky. A robust consumer financing program has many moving parts, including keeping up with regulations. In-house financing programs require businesses to handle collections, customer care, and payment, which consume precious time, energy and resources.
- Robust compliance departments reduce legal exposure, customer complaints, and reputational risk. A dedicated compliance department keeps your business out of legal trouble while maintaining positive customer relationships.
- The right financing partner takes the burden off your plate. Partnering with United Consumer Financial Services provides your business with the support needed to serve customers, maintain cash flow, and ensure compliance.
Partnering with UCFS for Peace-of-Mind Financing and Compliance
United Consumer Financial Services has the experience and expertise to deliver full-service consumer financing. A Marmon Holdings Company, a division of Berkshire Hathaway, UCFS facilitates affordable, accessible consumer financing that helps you sell more while we handle compliance at every step.
Contact our team to learn how we can help you implement a conversion-driving, compliant consumer financing program today.