Poll Reveals Bipartisan Support for Plan to Curb Payday Loans
By Lindsay Frankel
An overwhelming majority of Americans from both parties who expect to vote in the 2020 primary said they support new legislation that would cap interest rates on all consumer loans at 15 percent, according to a poll conducted by Business Insider.
The bill, known as the Loan Shark Prevention Act, was introduced by Rep. Alexandria Ocasio-Cortez and Sen. Bernie Sanders earlier this month. Ocasio-Cortez told supporters that the limit on interest rates would effectively eliminate the payday loan industry. Currently, the average annual interest rate on payday loans is nearly 400 percent, according to the Consumer Financial Protection Bureau. The bill would also cap interest rates below the average APR for new credit card offers, which sits at 19.26 percent, and would therefore impact what many Americans are paying in interest.
73 percent of Democratic primary voters and almost 70 percent of Republican primary voters indicated that they support or strongly support the proposed rate cap. And just over 60 percent of those who don’t plan to vote in the 2020 primary were in favor of the legislation as well. Only 7 percent of Democratic primary voters and 13 percent of Republican primary voters were against the proposed bill.
Support for the legislation came from all income brackets, though higher-earning Americans indicated stronger support for the cap than the average person surveyed. However, Business Insider notes that the small sample size doesn’t allow for any significant conclusions to come out of that data.
Americans are carrying collective credit card debt that exceeds $1 trillion, according to the Federal Reserve. High interest rates only exacerbate the burden of debt for low-income Americans. And Americans who don’t have access to a credit card typically seek even more expensive methods of borrowing, such as payday and title loans. To make matters worse, payday loans prey on low-income minorities, the elderly, and people with disabilities.
“Predatory lending and our credit rating system targets lower income Americans and people who are living paycheck to paycheck with manipulative practices and hidden fees—trapping millions in a cycle of systemic poverty as their hard-earned money is funneled into exorbitant bonuses for Wall Street executives,” Ocasio-Cortez’s team wrote in an email to supporters.
Responses from the poll are consistent with survey data from Pew Charitable Trusts, which found that 7 in 10 Americans want stricter regulations for payday loans providers.
But critics say the bill, which places even stricter limits on consumer loans than similar legislation brought previously, would curtail access to credit for low-income Americans. That’s because subprime borrowers pose a high level of risk to lenders, and representatives of the payday loan industry contend that the fees they charge are necessary to maintain profitability in no credit check loans.
Still, Ocasio-Cortez and Sanders have brought alternative solutions to the table, including postal banking, that would provide lower-cost access to credit for subprime borrowers.