Harris Poll: 95% Oppose Government Deciding Whether They Can Take Out Payday Loans
According to a new survey, 95 percent of payday loan borrowers believe that it should be their choice – not the governments’ – whether or not to take out a payday loan. The survey, the first in-depth look at the borrowing habits of payday loan borrowers, was conducted by Harris Interactive and commissioned by Community Financial Services Association of America (CFSA), the trade association representing storefront lenders.
“Payday Loans and the Borrower Experience” surveyed 1,004 respondents, ages 18 and older, who borrowed from CFSA-member storefront lenders in the last year. Overwhelmingly, borrowers favor a regulated environment that is reasonable, but preserves their ability to make their own financial decisions. In contrast with common misconceptions about payday loans and those who borrow them, the poll reveals that borrowers fully understand their options and choose the service over a variety of other financial services.
“A lot of bureaucrats and economists have looked at the industry, but this is the first large-scale, serious study that asked actual borrowers how they feel about the product, why they use it, and their experience with payday lenders,” said Patrick O’Shaughnessy, chairman of the Board of Directors for the CFSA and president and CEO of Advance America, a nationwide provider of consumer financial services. “The voice of the customer rings loud and clear— payday loan borrowers value having this credit option and don’t want to lose it.”
Though 91% of borrowers surveyed were satisfied or very satisfied with the experience, these loans have come into the crosshairs of federal and state regulators. A number of states have introduced legislation that, if passed, would make it much harder for consumers to obtain regulated short-term credit. And just last year, the Consumer Financial Protection Bureau released a white paper analysis that lacked a basic understanding of how and why borrowers take out payday loans.
“Independent research has proven that there are severe unintended consequences of limiting or eliminating a person’s right to take out a payday loan,” said O’Shaughnessy.
A Federal Reserve Bank of New York staff study compared households in states where short-term loans are available to households in Georgia and North Carolina, states that effectively banned short-term lending through interest rate caps. The study found that consumers in Georgia and North Carolina “bounced more checks, complained more about lenders and debt collectors, and have filed for Chapter 7 (‘no asset’) bankruptcy at a higher rate.” Further, Portland Business Journal reported that since passing a 36 percent APR cap on payday loans— which forced brick and mortar lenders to close their centers— Oregon “has become a hotbed for illegal Internet payday loans.”
“In the absence of regulated, short-term credit, consumers turn to more expensive, less transparent options – or worse, illegal lenders that offer none of the valuable consumer protections found in regulated storefront lenders,” said O’Shaughnessy. “And, as seen from the results of the Harris survey, borrowers overwhelmingly agree that the choice of which business to patronize belongs to them, not to regulators.”
The full results of the poll can be found at harrispaydayloanpoll.com.