Recently, Freakonomics host Stephen Dubner examined the debate surrounding payday loans, drawing on anecdotal evidence and the available academic research to question whether payday loans harm or help consumers. Listen to the full podcast online here.
After hearing from both sides of the debate, Dubner spoke with several academics, like University of Kansas Professor Bob DeYoung, who recommends further research before wholesale reforms:
"We need to do more research and try to figure out the best ways to regulate rather than regulations that are being pursued now that would eventually shut down the industry... My position is I want to make sure the users of payday loans who are using them responsibly and for who are made better off by them don't lose access to this product."
DeYoung highlights an important - yet overlooked - aspect of the payday lending debate: how the people who actually use short-term loans feel about them.
"If we take an objective look at the folks who use payday lending, what we find is that most users of the product are very satisfied with the product. Survey results show that almost 90 percent of users of the product say that they're either somewhat satisfied or very satisfied with the product afterwards."
In fact, new research found that nearly all borrowers surveyed (96 percent) say payday loans have been useful to them personally, and a majority (75 percent) are likely to recommend payday loans to friends and family.
Yet for these consumers, the people who have never needed to visit a storefront lender are leading the charge to eliminate this option.