Activist group the Woodstock Institute recently released a “survey” of 600 people. It looks to be designed to mislead those Illinois policymakers concerned about the increasingly obvious and damaging consequences of a new Illinois lending law.
The poll’s principal question purports to gauge support for the unreasonable Annual Percentage Rate (APR) cap that has decimated non-bank lending in the state. Unsurprisingly, given the question, the survey finds support is “overwhelming”.
You do not have to be a professional pollster to grasp the fact that asking individuals if they support capping prices for anything, will only generate a usable or valuable response if it also points out what respondents will lose in exchange. In this case, that would be access to safe, affordable non-bank credit, which has declined radically in Illinois.
It is human nature to declare support for lower prices and that is precisely what has happened here. The survey was clearly designed to generate a single finding. For this reason, the Woodstock Institute’s poll can be dismissed and its primary conclusion deemed worthless.
Furthermore, the Woodstock Institute claims that their poll demonstrates that two thirds of low-income respondents (about 250 of the sample) “continue to have access to credit”. It cites the top three sources of “emergency cash” as credit cards, personal savings and borrowing from church, family, friends etc.
Bearing in mind nearly one in twenty households in Illinois is unbanked (FDIC) and credit cards are generally unavailable to the unbanked populations, we are left with personal savings (not a form of credit, not sustainable, and a surefire route to destitution) and borrowing from family and friends.
The idea that the latter act of desperation is preferable to access to a well-regulated, credit-building installment loan from a licensed lender, reflects a mindset that cares little for the disempowerment of individuals and families that the new law has caused, its removal of personal agency and reduction of financial capability. Perhaps unintentionally, the survey demonstrates that huge numbers of Illinoisans now have no way to build positive credit histories and become financially mobile.
Far more reliable than the Woodstock Institute’s flawed poll is the independent academic research being carried out by economists Brandon Bolen and Tom Miller and Principal Federal Reserve Economist Gregory Elliehausen, using data from a major credit bureau. We will be discussing these findings on this website in due course.