National Survey Shows Payday Borrowers Are More Favorable and Informed About Payday Loans Than Voters Without Payday Loan Experience

National Survey Shows Payday Borrowers Are More Favorable and Informed About Payday Loans Than Voters Without Payday Loan Experience

March 25, 2016

New research released by premier polling firms Global Strategy Group (D) and the Tarrance Group (R) suggests that misperception around payday loans, rather than fact and experience, is driving conventional wisdom and fueling regulatory action and political criticism of the product. In fact, both borrowers and voters are concerned about additional regulations that would restrict access and the ability for consumers to choose payday products.

Contrary to the claims of regulators and consumer advocates, the survey research shows that borrowers appreciate having the payday loan option and fully understand the loan terms. When compared with banks, payday customers give the payday lenders higher marks for treating them fairly.

"It's clear from this survey research that the CFPB's misguided effort to regulate payday loans has completely left out the most important voice, the payday loan customer," said Dennis Shaul, CEO Community Financial Services Association of America (CFSA) which commissioned the survey. "The CFPB has not addressed the reality that its new regulations will restrict access to credit for the millions of households that use payday loans to responsibly manage budgetary shortfalls and unexpected expenses."

The Consumer Financial Protection Bureau (CFPB) is expected to announce its regulations on payday loans and short term credit in the coming weeks or months. In March 2015, the bureau released its rule concepts to regulate payday loans and other forms of short-term credit. Based on these rule concepts, many believe that a significant number of payday lenders will be forced to cease operations.

Summary of Poll Findings

People who have used payday products have much better perceptions of the product than voters, appreciate having the payday loan option, and fully understand the loan terms.

• Over nine in ten borrowers agree that payday loans can be a sensible decision when consumers are faced with unexpected expenses, while 58% of voters share this view.
• While 60% of borrowers believe that payday loans are fairly priced for the value they provide, especially when compared to alternatives, only half that number (30%) of voters agree.
• Nearly all borrowers (96%) say the payday loans they have taken out have been useful to them personally and three-quarters are likely to recommend payday loans to friends and family (75%).
• Virtually all borrowers (96%) say they fully understood how long it would take to pay off their payday loan and the finance charges they would pay before taking out the loan.

This is because most voters live in a very different financial world than payday loan borrowers.

• When asked what they would do when faced with a short-term financial crisis, the plurality of borrowers (40%) would choose a payday loan, while the plurality of voters (49%) would just ask a friend or relative for the loan.
• In contrast, almost one-quarter (23%) of payday loan customers indicate they have used a payday loan to provide financial assistance to one of their friends or relatives.
• And nearly three-quarters of borrowers (74%) say they had no other option available when they got their most recent payday loan.

But both borrowers and voters are concerned about additional regulations that would restrict access and the ability for consumers to choose these products.

• The survey research found that 60% of voters expressed some level of concern when told that 60-80% of the payday loan industry could be wiped out from proposed regulations. In another question, 58% of voters expressed some level of concern over the reduced access to credit for the nearly one in four Americans who do not qualify for credit from banks, credit unions or credit cards.
• Voters are evenly split (47%/48%) as to whether payday lending should be more tightly regulated or not, while 66% of borrowers want their current ability to access these loans preserved.
• While 80% of borrowers say current requirements to take out a payday loan are enough, around half (47%) of voters agree.
• Less than a third of borrowers (26%) and voters (31%) say the purpose of payday loan regulation should be to limit borrowing frequency.

Methodology

Global Strategy Group and The Tarrance Group conducted two telephone surveys on behalf of the Community Financial Services Association of America (CFSA). First, a nationwide survey of 1,000 likely 2016 voters between January 9 and 13, 2016. The margin of error at the 95% confidence level is +/- 3.1%. The margin of error on sub-samples is greater. Second, a nationwide survey of 1,000 payday loan borrowers, including oversamples of 321 African American payday loan borrowers and 300 Hispanic payday loan borrowers. The survey was completed between January 12 and 19, 2016. The margin of error for the total sample at the 95% confidence level is +/- 3.1%. The margin of error on oversamples and sub- samples is greater.