Even well-off need quick cash; Industry-sponsored survey results surprise pollster
- PUBLICATION: The Province
- DATE: Tuesday, October 30, 2007
- BYLINE: Damian Inwood
- SOURCE: The Province
A survey of B.C. "payday-loan" customers shows the majority are well-educated and hold steady jobs while almost half have annual household incomes of more than $50,000.
"What's becoming more and more clear is that they're an educated and informed consumer," said Stan Keyes, president of the 20-member Canadian Payday Loan Association, which commissioned the survey.
"It puts to rest all the anecdotal evidence being put forward by those who would choose not to look at the facts but would sooner come up with a snappy headline."
But Scott Hannah, president of the Vancouver-based Credit Counselling Society, said the survey shows that only half the customers were satisfied they fully understood the total cost of their loans, including interest and fees.
The payday-loan survey is the first of its type ever done in B.C.
It comprised a telephone poll of 400 payday-loan customers, conducted across B.C. in August and September, with a margin of error of 4.9 per cent, 19 times out of 20.
Those surveyed were chosen from 8,252 people who use the services of six CPLA-affiliated companies in B.C.
The survey showed 96 per cent of customers have a debit card, 63 per cent have a savings account at a bank or credit union and 51 per cent have a major credit card.
It showed 77 per cent have full-time work and 53 per cent have either community college or university education.
B.C. payday-loan companies are regulated by legislation passed last week in Victoria. Keyes said the new law mirrors a "code of best business practices" which the six CPLA companies follow.
The new law restricts payday loans to a maximum of $1,500 over 62 days or less. It also bans "rollover" loans.
Keyes said CPLA members -- the biggest in B.C. is Money Mart -- do not give loans based on social-assistance payments and customers have to have ID, a job and a bank account.
"There's no doubt that this is now a mainstream, legitimate financial product," said Keyes, from his office in Hamilton, Ont. "Two million customers are using it every year in Canada."
He said that while some people claim payday loans "are putting people into a spiral of debt" the survey shows the loans offer "a safety valve."
Money Mart's Victoria-based president, Patti Smith, said the survey "reveals what we have always known about our customers -- that they are average Canadians who value convenience, customer service and easy access to their own money."
Toronto pollster Michael Marzolini said the survey results surprised him. "I always looked at users of payday loans as being a very different demographic," he said.
"I expected people who were younger, less educated, less employed and certainly lower income."
But Hannah said the survey doesn't reflect the experience the CCS has when payday-loan customers arrive in financial trouble.
And he questioned the value of a poll where respondents were picked from a list of CPLA customers.
While the survey showed that only 21 per cent of loan customers had exhausted traditional sources of borrowing, Hannah said most of those coming to CCS with problems had done exactly that.
"The survey shows a lot of consumers don't fully comprehend the full cost of their loans if they don't pay it back on time," he added.
Survey provides profile in percentages
A payday-loan customer:
- Owes an average of $22,765 to financial institutions, excluding mortgages.
- Borrows $381.14 on average, with 56 per cent borrowing less than $300.
- Has an average age of 40.
- 77 per cent work full-time.
- 53 per cent have completed post-secondary education.
- 44 per cent have household incomes in excess of $50,000.
- 66 per cent gave emergency or unexpected expenses as the main reason for the loan.