B.C.’s economy is growing more than any other province in Canada. And the workforce fuelling much of that growth has helped the province’s payday loans industry expand 21% over two years, according to a study released Thursday (January 28) from Vancity.
"While this industry growth has likely been driven by a number of factors, high poverty rates and a dearth of affordable financial services is likely contributing to the high payday loan usage rates throughout the province," the report said.
The report authors determined the number of dollars lent to clients of payday loans services grew from $318 million in 2012 to $385 million in 2014.
Earlier this week, economists at TD forecast B.C.’s economy would continue to lead the pack among all provinces in Canada in 2016, growing 2.5%. Ontario’s economy is expected to expand 2.2%, while oil-rich Alberta is expected to shrink 0.3%.
But between 2012 and 2014, before the oil shock battered the Canadian economy and sent the loonie spiraling downward, the number of users taking out payday loans in B.C. rose from 125,000 to 198,000.
The report attributes the 58% jump in usage to factors such as the rise of online access to loans, employers abandoning the practice of advancing paycheques to cash-strapped employees and the overall phenomenon of rising debt load.
“In 2014, 12% of households had a total debt-to-income ratio above 250%, nearly double the level in 2000,” the report noted, citing 2014 data from the Bank of Canada.
B.C. and Nova Scotia are the only two provinces that had data available for payday loans.
While the number of dollars lent in B.C. has grown 21% on the West Coast, the rate has gone up by a smaller amount — 16% — in Nova Scotia.
The report determined 5.56% of adult British Columbians (198,000) used payday loans in 2014 compared with 5.43% of adult Albertans and 4.02% of adult Ontarians.
A 2013 Environics poll cited in the Vancity report found the No. 1 reason B.C. payday-loan clients cited for using these services was the need for emergency cash to pay for necessities (54%). British Columbians also pointed to needing help with an unexpected expense (38%) and avoiding late charges on routine bills (25%).
The report recommends the provinces co-ordinating to create standardized legislation for payday loans in lieu of federal legislation.
Responses from B.C. cities have been more patchwork, however.
In 2105, Maple Ridge banned new payday loan shops from opening in the city, while existing ones were permitted to continue operating.
Burnaby city council was asked in 2015 to amend a bylaw so that new payday loan shops would be limited. The amendment has yet to go to a public hearing.
Chilliwack city council voted last month to ask Ottawa to decrease the maximum interest rate that can be charged on short-term loans.
Payday loans are capped at $1,500 with a maximum length of 62 days. In B.C., borrowing $100 for two weeks can incur fees of $23 — the equivalent to an annual interest rate of 598%.
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