New ACORN report shows how predatory lenders used the pandemic to prey on low- and moderate- income people
Posted March 31, 2022
Posted on March 31, 2022
ACORN released a new report outlining how predatory lenders descended on moderate income communities hurt by the pandemic. While the pandemic had a devastating impact on low- and moderate- income communities, the government and banks left people in this global health and financial crisis with no choice but to go to predatory lenders such as Easy Financial, Money Mart, Cash 4 You, Cash Money and more who were deemed “essential” during the heart of the pandemic.
For Executive Summary in English, click here
For Full report in English, click here
Pour le résumé exécutif en français, cliquez ici
Pour le rapport complet en français, cliquez ici
Easy Financial (GoEasy) – one of Canada’s biggest predatory lenders – brags in its annual report that 78% of its customers were denied a loan from a bank/credit union. With a massive growth in its loan portfolio – from $10.9 million in 2009 to $1.25 billion in 2020 – and a massive expansion plan, Easy Financial earned half a billion dollars just in the first 9 months of 2020 in interest and insurance alone.
The report is based on an online survey ACORN conducted to explore how the pandemic affected the use of high interest predatory loans, both payday loans and installment loans. The survey conducted between November 2021 and January 2022 collected a total of 440 responses out of which 113 people said they had to take a predatory loan during the pandemic.
Summary of the findings:
- More than half of the respondents do not see their financial situation getting better. 60% are very concerned with most federal support programs having ended or winding up.
- The growth in installment loans (a loan of more than$1,500) continues to see an increasing trend. 56% of respondents took out a payday loan ( a loan less than $1,500) while 46% took out an installment loan, up from 11.7% in 2016 when ACORN did a similar survey. . It was low at 11.7% in 2016 when ACORN did a similar survey. 40% of respondents took out a loan one or two times/year, but 25% took out a loan 10 or more times – clearly reflecting the aggressive and exploitative business model of these lenders.
- 83% of the respondents took these loans for basic expenses such as rent, groceries, car repairsetc.
- Lenders continue to exploit people’s vulnerabilities using various tactics – not explaining the cost of borrowing, offering loans on the pretext of improving credit score (24% people took loans as they were promised it will help them do so) or attaching insurance to the loan – all to extract more money.
- Borrowers are not choosing predatory lenders by choice. The absence of a non-predatory loan alternative is the driving factor pushing people to take out predatory loans. 55% of respondents first went to the bank or a similar institution before going to a payday lender. One-third people have no overdraft protection, maxed out credit cards, no line of credit.
- If respondents missed payments, they were penalized by the exorbitant NSF fee by the banks and the fees charged by the predatory lenders.
In both its election platform and mandate letter to the Minister of Finance, the Trudeau government has made a clear commitment to crack down on predatory lending and lowering the Criminal Rate of Interest.
ACORN is demanding action!
ACORN is calling on the federal government to take urgent actions-
- Immediately launch the consultation as promised in the Budget 2021 to lower the criminal interest rate to deal with predatory installment loans.
- Lower the interest rate of installment loans from 60% to 30% including all fees, charges, insurance.
- Start a Fair Credit Benefit to help people in financial emergencies and provide much needed alternatives to predatory loans.
- Lower the NSF fee from $45 to $10.