Originally published in the Clarion-Ledger on 12/10/13.
PDF: Payday Loan Poll
More than nine of 10 consumers who used payday lending services report they are satisfied with the service, according to a poll commissioned by the trade association representing the payday lending industry.
The figures were released last week by the Community Financial Service Association of America (CFSA), reflecting the sentiment of 1,004 respondents surveyed by the respected polling firm Harris Interactive.
“The great majority of borrowers we surveyed said that, for them, payday loans are an important and valuable credit option that helps them overcome financial shortfalls,” said Humphrey Taylor, Chairman of the Harris Poll at Harris Interactive. “Our survey findings reveal almost all borrowers understood the cost of their loans and how long it would take to repay them.”
Payday lending often finds itself in the crosshairs of government and advocacy groups, who point to shortcomings of some players in the industry, as well as what many consider predatory practices, high fees and trapping consumers in cycles of debt. In some states, the industry has been curtailed or banned outright.
I’ve written in the past about some efforts by the Consumer Financial Protection Bureau, Federal Trade Commission and others to increase regulation and oversight. After one such post last spring, I was contacted by one payday lender who said, “I assure you I don’t have horns and a tail.” Fair enough.
The results of this poll are interesting, and it was a wise decision to commission the reputable Harris organization to do the survey.
Among the findings:
- Ninety-seven percent of borrowers agree that their payday lender clearly explained the terms of the loan to them, including nearly nine in 10 (88 percent) who strongly agree.
- Sixty-eight percent prefer a payday loan over incurring a late fee of approximately $30 (four percent) or an overdraft fee of $35 from their bank (three percent) when faced with a short-term financial crisis and unable to pay a bill.
- Fewer than one in 10 said that a payday loan was their only option and they had no other resources available.
Without a doubt, there have been abuses, and regulators are right to keep a watchful eye to make sure consumers aren’t being harmed, while ensuring that consumers can choose. For their part, the industry has always vociferously defended itself, insisting that their products are filling a consumer niche for small loans, that their practices are no more predatory than other players in the financial industry, and that consumers are well aware of the consequences of short-term borrowing.
This study is just one set of data, but it demonstrates that the picture could be more complicated than it seems.