Abstract
Concern about the impact of payday lending concentrates on the clients, but who are they? This chapter provides a statistical portrait based on reputable Statistics Canada surveys that allow us to consider both the characteristics of payday loan clients in comparison with non-clients and how those characteristics have changed over time. While the view of payday loan clients as a financially vulnerable population is consistent with our results to a certain extent, the survey evidence suggests caution in taking this portrayal too far. Net worth appears to be more important than income in determining who uses payday loan services. We also find an increasing reliance of clients, especially repeat borrowers, on sources of income other than wages and salaries, particularly social assistance, public retirement income, and other transfer income. Education remains a factor associated with a reduction in the incidence and frequency of payday loan borrowing, suggesting a potential role for financial literacy in payday loan borrowing.
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- 1.
While some of the evidence for CFCS refers to activities undertaken in 2013 or 2008, we refer to the results by their survey date (2014 or 2009) throughout our discussion or, when no date is mentioned, the reference is to the latest CFCS in 2014.
- 2.
Each province is divided into large geographic strata. The first stage of sampling consists of selecting smaller Primary Sampling Units (PSU) from within each stratum while the second stage consists of selecting dwellings from within selected PSU. The CFCS sample consisted of dwellings from the two rotation groups that completed their last Labor Force Survey interviews in January and February of 2014. The survey covers the civilian, non-institutionalized population that is 18 years of age and over. Response rates were 56.3% in 2009 and 55.6% in 2014, and almost all respondents (93.4% in 2009 and 97.7% in 2014) answered the questions on payday loan borrowing.
- 3.
The SFS is based on independent samples from two overlapping frames, the Labor Force Survey (LFS) area frame and a frame constructed from the urban portion of the 2009 T1 family file (T1FF). The LFS area frame strata were grouped into urban and rural strata within each province, while the urban T1FF frame was stratified by province and by four levels of predicted household net worth . The response rate was 60% in 2012 and all respondents answered the question on payday loan borrowing.
- 4.
Absence of detail about the sampling procedures makes it difficult to evaluate them or compare them with those used by Statististics Canada.
- 5.
Currency figures reported in this chapter are in Canadian dollars.
- 6.
FCAC notes that the median family income was $78,000 in 2014, so that rought one in five payday loan users comes from a family with income above the median.
- 7.
Median family income was $63,866 in 2005 according to Statistics Canada: http://www12.statcan.gc.ca/census-recensement/2006/dp-pd/tbt/Rp-eng.cfm?LANG=E&APATH=3&DETAIL=0&DIM=0&FL=A&FREE=0&GC=0&GID=0&GK=0&GRP=1&PID=96428&PRID=0&PTYPE=88971,97154&S=1&SHOWALL=0&SUB=0&Temporal=2006&THEME=68&VID=0&VNAMEE=&VNAMEF=
- 8.
Since these are cross-sectional surveys, it is important to remember that those in the client and non-client groups are not the same in each survey and that mobility from the client to the non-client group is likely associated with economic fortunes that are at least partly captured in the wealth data.
- 9.
In the CFCS, tangible assets include : houses or property (in or out of Canada, including one’s principal residence), vehicles (cars, trucks, watercrafts, RVs, trailers, snowmobiles, ATVs, etc.), collections, antiques, jewels, and other valuables. Financial assets include cash savings (from savings or chequing accounts), investments (stocks, bonds, term deposits, GICs, non-Regsitered Retirement Savings Plan mutual funds), registered disability savings plans, tax-free savings plans, and private pensions.
- 10.
This figure is consistent with a figure of 41% of payday loan users having a credit card in the Environics Research Group (2005, p. 4) poll.
- 11.
Financial literacy refers to consumers’ ability to make effective financial decisions using acquired financial knowledge and education. Financial literacy could also be defined as measuring how well an individual can understand and use personal finance-related information (Huston 2010).
- 12.
The models presented here include the full range of personal characteristics and family circumstances. Other models with more limited regressor lists have been estimated but the important and statistically significant results are unchanged. These results are available from the authors upon request.
- 13.
Pyper (2007) also analyzes the 2005 SFS using logistic regression. She finds that younger families, families with $500 or less in their bank account, families behind in their bill or loan payments, and families without a credit card were more likely to have taken a payday loan.
- 14.
The coefficients for income and income squared are only significant for the 2012 SFS . These coefficients in column 3 of Table 2.1 imply that households with income up to $175,000 are more likely to take a payday loan and households with income above $175,000 are less likely.
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Simpson, W., Islam, K. (2018). A Statistical Profile of Payday Loan Clients from National Surveys. In: Buckland, J., Robinson, C., Spotton Visano, B. (eds) Payday Lending in Canada in a Global Context. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-71213-0_2
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