WASHINGTON—Three-out-of-four Americans believe the payday loan industry needs to be more tightly regulated.
According to new research by the Pew Charitable Trusts, there is broad support among Americans for the kinds of reforms being proposed by the Consumer Financial Protection Bureau when it comes to payday loans.
Pew noted that approximately 12 million Americans use payday loans annually, spending an average of $520 in fees to repeatedly borrow $375.
In March 2015, the CFPB proposed a framework for regulating these and similar loans. The Pew Charitable Trusts then conducted polling in May to gauge Americans’ views on payday lending, the key elements of the CFPB proposal, and the types of loans that would be likely to result from it. The survey found that:
- Seventy-five percent of respondents believe that payday loans should be more regulated; similarly, in a 2013 Pew survey, 72% of payday loan borrowers said they wanted more regulation.
- By large margins, the public favors each of the major components of the CFPB framework, including requiring loans to be repayable in affordable installments.
- Respondents overwhelmingly see as unfair the prices charged for loans currently offered by payday lenders, some of which probably would still be available under the proposed CFPB framework.
- By a ratio of more than 5-to-1, respondents favor allowing banks to offer small loans at lower prices than those charged by payday lenders.
- Respondents believe the types of small loans that would probably be offered by banks have fair prices, even though the rates are higher than those for mainstream credit, such as credit cards.