ARLINGTON, Virginia., October 14, 2020 / PRNewswire / – According to a new survey conducted by Morning Consult on behalf of the Online Lenders Alliance, a strong majority (66%) of American adults believe that the maximum amount that lenders should be allowed to charge for a loan of two weeks of $ 100 far exceeds the 36 percent annual rate cap proposed in congressional legislation and promoted by consumer groups. Additionally, after learning that more than 90 million Americans are either underbanked or struggling with credit, two-thirds of adults (69%) think it is important that underbanked consumers have access to loan products.
When asked what is the maximum amount the government should allow lenders to charge adults $ 100 with a two-week repayment period, 15 percent of adults reported $ 2.00 — an interest rate of 52% when annualized. 15% more said $ 5.00 should be the maximum amount allowed (130 percent APR). Sixteen percent of adults said $ 10.00 should be the maximum amount allowed (261% APR).
Three more percent said $ 15.00 (391% APR), 6% said $ 20.00 (521 percent APR), two percent said $ 25.00 (652% APR), 2% said $ 30.00 (782% APR), 2% said more than $ 30.00, and five percent said there should be no limit to what lenders can charge.
“This survey revealed what those of us involved in this industry have always known: APR is a misleading measure to assess the true cost of short-term, low-value loans,” said Mary jackson, CEO of the Alliance of Online Lenders. “These financial products are lifelines for millions of savvy and creditworthy Americans who need access to credit but are turned down by banks and other institutions. This is why more than two-thirds of adults support efforts to provide access to credit to consumers who are underbanked or have credit difficulties. “
“Further, this survey shows that most Americans understand that a 36% rate cap will reduce access to financially underserved Americans by preventing even lenders from meeting their compliance costs when offering these forms of credit.” Jackson continued. “And more than half of consumers support lenders by taking borrowers’ credit history into account when pricing loans.”
In order to fall under the cap of 36% of the APR proposed in some congressional laws, lenders offering a two-week loan of $ 100 would not be able to load $ 1.38 in fees and interest.
In addition to this consumer survey, a recent study Federal Reserve economists have found that “because the fixed costs are large relative to the loan amount, small loans require higher interest rates than larger loans.” The same study also found that interest rate caps “often restricted the availability of credit.”
Other results from the Morning Consult survey include:
- When looking for a loan or cash advance, online non-bank lenders are the fifth most popular option behind banks (both physical and online only), check cashing stores, or account withdrawals. of retirement.
- Consumers who got a loan or got cash in the past 12 months are more likely to support higher limits on what the government should be allowed to charge.
- Use of non-bank lending services increases as credit score levels decline (i.e., two percent of consumers with excellent credit have used an online non-bank lender in the past 12 months). months, while nine percent of consumers with poor credit have done so).
- Americans strongly support expanding access to credit for unbanked or underbanked consumers and strongly support lenders who base the price of loans on the consumer’s credit history.
The survey has been completed between June 29 and July 10, 2020 among a national sample of 10,999 adults. Interviews were conducted online and data was weighted to approximate a target sample of adults based on age, education, gender, race and region. The results of the full survey have a margin of error of plus or minus 1 percentage point.
About the Alliance of Online Lenders (OLA)
OLA is the premier trade association for FinTech, focused on credit inclusion and bringing together a diverse group of innovative companies with a common goal: to serve hardworking Americans who deserve access to trustworthy credit. Our members are entrepreneurs, publicly traded companies, lenders, credit bureaus, advertisers, lead generators, compliance professionals, and software developers who leverage technology to responsibly improve business performance. the financial health of consumers. Consumer protection is our top priority; OLA members adhere to rigorous best practices and a code of conduct, ensuring consumers are fully informed and treated fairly. For more information visit www.onlinelendersalliance.org.
SOURCE Online Lender Alliance