Breaking the Short Term Loan Cycle: Influencing the factors affecting default rates of consumers using the payday lending market

Organization

Money Mentors

Published

2005

Summary

In a study conducted through Credit Counselling Services of Alberta (CCSA) (French, 2002), there appeared to be significant differences between CCSA clients who used payday lending markets (PLM) and other CCSA clients. In general, PLM users appeared to be at greater risk of failing to complete the CCSA’s Orderly Payment of Debts (OPD) program than other CCSA clients. These preliminary findings are what led to this two-year study, which was funded by Industry Canada and conducted by The Support Network and Credit Counselling Services of Alberta. The intent of the research was to increase knowledge about users of the PLM market and provide a means by which they can successfully repay their debts through interest relief, money management coaching and skills development. This study set out to address four research questions: 1) If all OPD CCSA clients were analyzed would the results be the same in that PLM clients are at a greater risk of failing to complete the OPD Program? 2) If PLM clients are, in fact, at greater risk, are there specific factors that can be identified that make it more difficult for them to complete a debt repayment program? 3) If specific factors can be identified, what programs or services can be developed to assist these consumers with their financial difficulties in both the short and long term? 4) Can these programs be effective in decreasing the likelihood of default or in improving financial skills?

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OCA Funded Research
This research received funding support through the Office of Consumer Affairs' Contributions Program.

Contact information

Source: Consumer Policy Research Database