It’s probably no surprise to anyone in the credit industry that the government pays close attention to the payday loan sector, hoping to discourage consumers from using such short-term loans. But a report by the Financial Consumer Agency of Canada probes the extent of consumers’ use of such loans and the reasons such loans have appeal to consumers. The agency surveyed 1,500 consumers who use payday loans.
Payday loan use, according to the report, has more than doubled in recent years for Canadian households. Now, 4 percent of our households use them. While most users are low- to moderate-income Canadians, those with higher incomes are among those reporting use of such loans.
Payday loans are generally small — with three quarters of them amounting to less than $1,000 and 55 percent them worth less than $500. Nearly half of respondents said they typically use payday loans for unexpected but necessary expenses, but nearly 41 percent use them for recurring expenses like rent or utility bills.
Of the survey respondents, only 43 percent said they are aware that the cost of a payday loan is higher than traditional loan options. Payday loan users generally are not availing themselves of other credit options, either because they don’t qualify or don’t know about other options. Sixty percent of those using payday loans said they don’t have access to a credit card, and 88 percent said they don’t have access to a line of credit.
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