First-Ever Survey of Payday Loan Consumers in Manitoba Conducted by Pollara

(Winnipeg) – September 18, 2007 – The Canadian Payday Loan Association (CPLA) today released the first statistically-relevant survey ever completed of payday loan customers in Manitoba. Canada's leading public opinion survey company, Pollara, completed the survey of 350 payday loan customers from September 6-13, 2007. The survey is accurate +/-5.2%, 19 times out of 20.

The survey clearly identifies the demographic profile of a payday loan customer in Manitoba, their specific attitudes and opinions about payday loans and their other credit options. Previous to today's survey, the government, industry and critics were left to guess or assume "who" a typical payday loan customer, "why" they use a payday loan instead of other credit options and "what" they think of the payday loan product.

The survey was submitted to the Manitoba Public Utilities Board as part of the CPLA's evidence for the board's hearings this November to determine the maximum fees that payday loan providers can charge in the province. In addition, the CPLA submitted a report from two focus groups that further detailed specific opinions about the industry and the payday loan product.

"This ground-breaking research in Manitoba helps us understand who is using payday loans, why they choose the product and why they prefer the service over other credit options," says Stan Keyes, President, CPLA.

"After years of surveys in the financial sector, I'm surprised by the sophistication and knowledge of payday loan consumers," says Michael Marzolini, Chairman of Pollara. "This data puts to rest a number of widely-held misconceptions about the payday loan industry. For the first time, we can now talk about this industry's customers in terms that are real and statistically-relevant. For the purposes of Manitoba's Public Utilities Board, this will be important and will carry more weight than the usual anecdotes, 'gut hunches' and speculation."

"Payday loan customers are every day Manitobans," says Keyes. "It is clear that they know what they're doing, know what they're paying and have good reasons for choosing a payday loan over other available credit options."

Highlights of the surveys include:

Demographics of Payday Loan Customers

Contrary to conventional assumptions, the average payday loan customer is employed, educated and is not representative of "low income" households.

The average payday loan customer is 38 years old
77% of customers are currently employed full-time
Almost half (46%) have completed post-secondary education
Overall household income reported for payday loan customers tends to be either on par with - or ahead of - the general Manitoba population. Notably, only 13% of payday customers reported household income of less than $25,000 compared to 28% of the general Manitoba population. 39% of payday loan customers reported household income in the $25,000-$50,000 bracket compared to 30% of the general Manitoba population. Another 39% of payday loan customers reported income of $50,000 or more compared to 42% of the Manitoba population with the same household income.

Personal Credit Profile

Although some have suggested people use payday loans because they have no other option, the surveys demonstrate that customers have access to a wide variety of credit products, however still choose a payday loan for short-term, small-sum borrowing.

Customers owe an average of $24,357 to various financial institutions, excluding mortgages.
Customers have access to a variety of credit options, but choose a payday loan over a line of credit, credit card, retail card, overdraft or other forms of credit largely due to the "convenience" of the payday loan product, "ease of use" and "long hours of operation". Only 15% of customers indicated they used a payday loan because they had "no other option".

Borrowing Habits

While holding relatively large debt loads, customers average only $300.05 when they borrow from a payday loan outlet. Contrary to some critics that say that customers can't afford to repay their loans, a large majority of customers say they have paid back every loan they have ever taken on time.

The average payday loan taken out by a payday loan customer is $300.05.
Customers said they expect to pay an average of $24.67 for a $100 loan for two weeks.
79% of customers have paid back all their payday loans on time, while another 18% have paid back "most" of their loans on time.
Customers in focus groups indicated they are responsible borrowers and pay back their loans on time. They indicated they pay back their loans on time to avoid added interest charges and bad credit.

Educated and Informed Consumers

A major criticism levelled against the payday loan industry has been that it "takes advantage" of people who don't really understand what they are "getting themselves into". Customers rejected this notion and indicated they are informed and deliberate borrowers with a very strong level of knowledge of the terms and fees they pay for their loans.

Customers clearly understand the costs and terms of their payday loan. This understanding is on par with their understanding of the fees and terms that they pay on their mortgage, credit cards and bank fees.
Payday loan customers rejected the characterization of them by critics and in some media that that they are generally poor, uneducated, are being taken advantage of by payday lenders and don't really know what they are getting themselves into.
Customers described themselves as "average, working Canadians" who from time to time need short-term credit to help get them to their next paycheque.
Customers in focus groups indicated they make an "informed choice" when they take out a payday loan and generally only do so in emergency situations

Payday Lenders vs. Banks and Credit Unions

Many have wondered why someone would take a payday loan rather than seeking generally less expensive credit options from their bank or credit union. Customers indicated that they preferred payday loan companies for their overall convenience and ability to access small-sum loans, whereas banks and credit unions will only extend loans for larger amounts than the customer actually wants.

Customers rate payday loan companies above banks and credit unions in the areas of, "hours of operation", "fast", "convenient" and "easy to use". Customers believe payday loan companies are on par with banks - and ahead of credit unions - when it comes to being "respectful" and providing "good service". Customers rate payday loan companies on par with credit unions for providing "good value" - although significantly recognize that banks provide better value.
Customers in the focus group indicated that they prefer taking a loan from a payday loan company over a bank because they only need a small amount of money for a short period of time, however banks require them to take a minimum of $500 or $1,000 in credit. Customers also indicated that payday loan companies did not judge them or require justification for needing the money, had better overall customer service and were generally more convenient.

Reasons for Needing a Payday Loan

Customers indicated that they generally seek payday loans for emergency situations or unexpected expenses. They often require only a small amount of money to hold them over until their next payday and prefer to borrow a few hundred dollars rather than getting more credit than they want with a credit card or line of credit.

Almost 60% of customers cite "emergency" or "unexpected" expenses as the principal reason for requiring a payday loan. A further 18% use payday loans to avoid bouncing a cheque or avoid incurring late charges on bills that are due.
Specific examples of "emergencies" in the focus groups included unexpected car maintenance, extended sick-leave from work, job transition and unexpected medical expenses.

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For more information:

Michael Marzolini
Chairman, Pollara
Email: mmar@pollara.ca
(416) 921-0090

Stan Keyes
President of the Canadian Payday Loan Association
Email: stan.keyes@cpla-acps.ca