As you may have seen, in February, Morning Consult conducted a survey on behalf of the Center for Responsible Lending (CRL) that claimed that “70% of voters support a 36% interest rate cap on payday and consumer installment loans.” That survey is highly flawed and unreliable. It has been cited in a variety of media outlets, including The Hill, LA Times, and others.
In recent weeks, CRL has released several state-specific breakdowns featuring data from this poll, including one on Michigan on February 18 and one on South Carolina on February 24. We expect they will continue releasing these research reports and fact sheets on key states in the coming weeks.
As the Online Lenders Alliance has noted previously, there are several serious issues with this survey and its methodology. CRL continues to release the results of this deeply flawed study, it is important that we—and our members—forcefully rebut them at every opportunity. Below are four key points that you can use in discussions where the CRL poll arises:
- The construction of the questions relies on APR, a metric that is flawed because it causes substantial confusion among users and non-users of short-term, small-dollar loans, especially for loans under one-year in duration. Evidence shows that the vast majority of consumers understand the terms, conditions, and true costs of the loans they take out but may not fully understand APR
- The survey left out critical information about the results of a 36% APR cap proposal. While the survey asked whether respondents would support an interest rate cap of 36%, it failed to ask respondents if they would support such a cap if it eliminated or severely reduced access to credit for 90 million consumers who are considered non-prime or credit challenged. Including this information would have likely provided more accurate results about consumer preferences.
- The survey included “priming,” a well-known tactic used to create biased results which, for that reason, is discouraged amongst reputable researchers. Including only the APR while excluding relevant context and stating misleading statistics as part of the lead-in to the question (“As you may know, the average annual interest rate on payday loans is 391%…”) installs bias into how respondents answer the questions, making the results statistically flawed.
- The survey results omitted income—a key determining factor among those who need short-term installment loans—as a weighting variable, which creates Omitted Variable Bias. Omitted Variable Bias occurs when a variable known to have a relationship with the outcome is omitted. That means that those who were surveyed and included in the results have been skewed towards a population that is more unlikely to need emergency access to credit and who are more unlikely to have actually used the products in question. Including income levels as a weighting variable would likely impact any question related to financial services, especially access to credit.