Payday loans and predatory lending services last resort: survey

December 5, 2016

TORONTO – A survey of low-income ACORN Canada members who turn to predatory lending services, such as payday lenders and other high interest alternative financial services, shows the majority do so because they are denied adequate services from traditional banks.

The survey of 268 ACORN Canada members, whose findings were published today by the Canadian Centre for Policy Alternatives’ Ontario office, reveals the majority of respondents who have drawn on high interest shadow banking loans had nowhere else to turn.

“Traditional banks are turning them down for credit requests, they’re making it hard for them to cash cheques or secure something as basic as overdraft protection — services that are readily extended to higher income bank clients,” Joe Fantauzzi, a Masters candidate in public policy at Ryerson University who analyzed the survey results.

“Low-income bank customers face a double standard in the traditional banking world. That’s why the majority of survey respondents said they turned to high interest shadow banking operators.”

Among the survey’s key findings:

  • Half (50 per cent) of survey respondents used a high interest financial service to cash a cheque;
  • 45.3 per cent said they turned to a high interest financial service because they had no overdraft protection on their regular bank account;
  • 30 per cent say they needed the service to pay for food;
  • 20 per cent used the service to make a rent-to-own purchase;
  • 17 per cent say it helped pay for housing.

The findings also point to a desire for traditional banks or credit unions to offer overdraft protection, small loans, no-fee accounts, and lines of credit to low- and moderate-income earners.

There are an estimated 1,500 payday lending outlets in Canada — many of which charge customers around 500 per cent in annualized interest rates — and Ontario is home to more than half of them.

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For more information please contact: Manisha Aggarwal-Schifellite, CCPA-Ontario communications associate, 416-598-5984 or [email protected]. Download the report at