What is it that makes some folks look down on the payday lending industry, alternative financial products and the companies that offer these types of loans? New data from a recent survey indicates that misrepresentations being spread around instead of facts and actual experience may be partly responsible. In fact, these very factors may we what is helping to stoke the fires of new regulatory actions and even political pressure on the payday lending industry. It turns out that voters and borrowers alike are worried that new payday lending regulations would eliminate consumer choices while restricting access to much needed small dollar lines of credit.
These findings directly content with the claims made by “consumer advocate” groups and financial regulators. The survey data reveals that payday loan customers enjoy having the option to take out these types of loans and that they fully understand all of the terms of these loans. Compared to the ratings that banks get from their customers, the ratings given to payday lenders are markedly higher and borrowers have remarked that payday lenders treat them fairly.
Remarking on the survey conducted by Community Financial Services Association of America, the organizations CEO Dennis Shaul said, “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. 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 CFSAA was the organization that commissioned the aforementioned survey.
The Consumer Financial Protection Bureau (CFPB) is slated to make public its new payday loan and short term credit regulations in the near future. Back in March of 2015, the CFPB released an outline of its new rules that are designed to regulate the payday lending industry along with other types of short term lines of credit. The concepts of the new rules have led many to believe that a large number of payday lending companies will be pressured into shutting their doors and ceasing operations completely.
American consumers who have actually used payday loans have a better overall view of these types of financial products than voters who have never used them. They appreciate the loans and have a solid grasp of all fees and terms of the loans. About 90 percent of these borrowers agree that payday loans can be sensible options when people are faced with emergency expenses. This compares to about 58 percent of voters who share the same view. And about 60 percent of payday loan borrowers think that the loans are priced fairly/provide a good value, compared to just 30 percent of the voting population who agree with this view.
About 96 percent of payday loan customers questioned in the survey have found these loans to be useful and about 75 percent say they would recommend these short term lines of credit to family and friends. And 96 percent also say that they completely understood how long it would take to pay off their loans along with any fees that they had to pay before they even took out their loans.
We all need to realize that experience matters, no matter what the topic is. People who actually use or have used payday loans are much better informed about the industry in general. Voters who haven’t used payday loans, along with the organizations that plan on regulating these types of financial products need to realize this, and use the practical knowledge of actual payday loan customers when making decisions about the future of the short term lending industry.