An increasing number of British Columbians are using payday loans to make ends meet, according to a new report from Vancity — but the payday loan industry says the bank's numbers don't add up.
Between 2012 and 2014, there was a 58 per cent jump in the number of people in the province using payday loans, according to the report, Short-Term Gain, Long-Term Pain: Examining the Growing Payday Loan Industry in B.C.
The short-term loans provide consumers with quick access to small amounts of money, usually accompanied by high fees and interest rates. In Canada, payday loans are capped at $1,500, with a maximum term of 62 days, according to the report.
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Linda Morris, senior vice president of business development for Vancity, said more than half of payday loan users in B.C. need access to emergency cash to pay for necessities.
"It could be to pay the rent, or they have a sudden expense — maybe they have a car and it breaks down and they just don't have the spare money," she said. "So it could be a variety of things, but it's urgent things that come up and they can't stretch their dollars any further."
Morris said problems arise when borrowers can't repay the loans in such a short period of time.
"As they get deeper and deeper into this loan cycle ... they have trouble paying and they end up borrowing from another place," said Morris.
She said the number of people with 15 payday loans or more increased by nearly 604 per cent in the same timeframe.
Industry disputes claims
But Stan Keyes, president of the Canadian Payday Loan Association, says the numbers in the report don't match what he's seeing in the industry.
"I don't understand how Vancity can come to that conclusion as British Columbia is the only province that collects, then reports individual borrowers numbers," he said.
"There is nothing in that research to indicate that this is an accurate statement."
Keyes said growth in the payday loan industry in B.C. has actually decreased dramatically over the last six years due to extremely stringent regulations.
Poverty rates partly to blame
The report suggests nearly six per cent of B.C. residents used payday loans — making them one of the highest users of the loans in Canada, suggests Vancity.
It says there is likely a number of reasons for the jump in the number of overall users, one of them being high poverty rates and "a dearth of affordable financial services."
According to the report, most payday loan users in B.C. are employed and have completed post-secondary education.
Solutions suggested in the report include potential federal regulation of the industry, enhancing consumer protection bureaus, and increase access to affordable, high-quality credit.
Short-term gain, long-term pain: examining the growing payday loan industry in B.C.
Short-term gain, long-term pain: examining the growing payday loan industry in B.C. (PDF KB)
Short-term gain, long-term pain: examining the growing payday loan industry in B.C. (Text KB)