Vancity one of the first to offer payday loan alternative
Vancouver, BC – A poll released today by Vancity indicates 67 per cent of payday loan users in the Lower Mainland and Greater Victoria are borrowing several times a year.
The credit union poll, which was conducted by Insights West, indicates 35 per cent took out a payday loan once a month or more. Having an unforeseen expense they didn’t anticipate (38 per cent) and getting behind on bills (37 per cent) are the main reasons why borrowers said they used payday loans. Another 22 per cent said it was because they had a debt that was due.
Today Vancity became one of the first mainstream financial institutions to launch an alternative to payday loans for its members. The new Vancity Fair & Fast Loan™ reduces costs for borrowers and helps them break the cycle of debt.
Under the Vancity Fair & Fast Loan, if a member borrowed $300 for the minimum term of two months and paid it off after two weeks, it would cost $2.20, which is 19 per cent annual percentage rate (APR). Under B.C. legislation, the maximum amount that can be charged for a $300 payday loan is $69, which would be 600 per cent annual percentage rate.
Members can borrow up to $1,500 and be approved in about an hour. And because borrowers have up to two years to pay back the loan, they can build their credit history in the process. The loans are relatively small and have more inclusive qualifying criteria so members with lower credit ratings have a better chance of being approved.
According to Consumer Protection BC, the provincial regulator of payday loans, more than 100,000 British Columbians took out 800,000 payday loans in 2013.
The Vancity poll indicates up to 60 per cent of payday loan users are somewhat or very likely to consider a short-term, same-day loan from a credit union. It also found 37 per cent of survey respondents carried a balance on their credit card, 23 per cent had to borrow money for an unforeseen expense and 22 per cent got behind on bills.
The poll was conducted among 990 Lower Mainland and Greater Victoria adults, which includes an oversample of 131 payday loan users.
“The Vancity Fair & Fast Loan is a low cost, long term alternative to help members get out of the cycle of debt and build their credit history,” says Linda Morris, Vancity’s senior vice-president of business development, member and community engagement. “It’s one of the ways we are working to enhance the financial well-being of those who have been underserved by mainstream financial institutions.”
Additional sources of information:
– Insights West Vancity poll results snapshot, presentation and data tables
– Backgrounder: Payday Lending in BC, Consumer Protection BC
– Pay Day Lending: In Search of a Local Alternative, see page 15, Centre for Community Based Research and funded by the Wellesley Institute (2010)
Vancity is a values-based financial co-operative serving the needs of its more than 501,000 member-owners and their communities through 57 branches in Metro Vancouver, the Fraser Valley, Victoria and Squamish. As Canada’s largest community credit union, Vancity uses its $17.5 billion in assets to help improve the financial well-being of its members while at the same time helping to develop healthy communities that are socially, economically and environmentally sustainable.
For more information:
Lorraine Wilson | Vancity
Mario Canseco | Insights West