Consumer Group Report Reveals High-interest Borrowing Pitfalls

For immediate release
Attention News/Business/Banking/Student News Editors
Consumer Group Report Reveals High-interest Borrowing Pitfalls
Not Ready for Prime Time: Canadians In the Sub-Prime, High-interest Lending
(OTTAWA)—A report released today by the Public Interest Advocacy Centre (PIAC), “Not Ready for Prime Time”, sets out some key findings of its research in the field of high-interest lending which includes payday loans and subprime mortgages. Among others, it pinpoints the early misuse of credit in consumers’ financial lives as a main factor in causing them to resort to high cost borrowing later in life, as evidenced by the outcome of focus groups conducted in Edmonton, Toronto and Vancouver. Somewhat surprisingly, one of the chief credit problems for focus group participants arose with student loans, particularly when the education for which it was undertaken was not finished.
“We have a program designed to better the life prospects of Canadians that, if the focus group results are borne out in the general population, may be a contributing factor to low financial status. That result would be exactly the opposite of what is intended,” said Esteban Uribe, the PIAC researcher who wrote the report.
The report notes the accepted view that the differences in the Canadian and American mortgage markets make a repetition of the recent events in the United States unlikely. At the same time, the report sets out concerns that, through financial vehicles such as securitization, risks of default appear to be increasingly transferred to investors and borrower households, possibly without their full understanding of the same.
The report makes specific recommendations for early consumer education, and stresses the need for transparency and better consumer awareness of the consequences of high cost transactions. It suggests that each province should independently review lending practices and control interest rates through public hearings not only to accord with the intent of the federal government reform to decriminalize usury in these transactions, but also with a view to protect the interests of users from onerous and abusive terms.
The Report is available at:
 
 

 
 
Contact:
Michael Janigan
Executive Director and General Counsel
Public Interest Advocacy Centre
(613) 562-4002×26
Fax No. 613 562-0007
Esteban Uribe
Research
Public Interest Advocacy Centre
(613) 562-4002×26