How Are the Most Vulnerable Households Navigating the Financial Impact of COVID-19?

The COVID-19 pandemic has already had an unprecedented impact on the financial lives of households across the United States. During June and July 2020, Prosperity Now conducted a national survey of lower-income households to better understand the circumstances these households are confronted with and the strategies they use to secure resources to navigate this crisis.



Financial Health Index: 2019 Findings and 3-Year Trends Report

This report explores consumer financial health, wellness/ stress and resilience for Canadians across a range of financial health indicators, demographics and all provinces excluding Quebec. This report provides topline results from the 2019 Financial Health Index study and three-year trends from 2017 to 2019.



High-Cost Alternative Financial Services: The Customer Experience

In early 2017 Momentum reached out to over 50 community members and participants to better understand local experiences with high-cost alternative financial services. In addition to connecting with individuals through interviews, Momentum hosted community consultations in partnership with Poverty Talks! and Sunrise Community Link Resource Centre. The following document summarizes what we learned from these conversations and the loan contracts that borrowers shared with us. It also identifies several themes that emerged from these discussions.



Summary Brief: High-Cost Alternative Financial Services

Many Albertans turn to high-cost alternative financial services when they need a short-term fix for a financial issue. Though these services are expensive and unsafe, they are often the only option for low-income individuals, particularly those who struggle to obtain credit at mainstream financial institutions. High-cost alternative financial services contribute to a two-tiered banking system, in which the poor often pay more for inferior services.

Without more stringent regulation, and in the absence of safe and affordable short-term credit options, Albertans living on lower-incomes will continue to experience financial exclusion and take on heavy debt loads – both of which are major contributors to long-term poverty.



High-Cost Alternative Financial Services: Policy Options

Many Canadians turn to high-cost alternative financial services when they need a short-term fix for a budgetary issue. Though these banking and credit alternatives are a convenient choice for individuals in search of fast cash, particularly those who face barriers to obtaining credit at a bank or credit union, access comes at a steep price and with a high degree of risk. On its own, one high-cost loan has the potential to trap a borrower in a cycle of debt, not only amplifying their short-term problem, but also limiting their ability to secure the income and assets needed to thrive in the long term.

The policy recommendations presented in this brief, and summarized in the chart on page two,  are inspired by the regulatory initiatives across the country, and reflect ways in which all three levels of government can contribute to better consumer protection for all Canadians.

 



Handout 4-8: Alternative financial services


This handout is from Module 4 of the Financial Literacy Facilitator Resources. Alternative financial services are outside of the traditional, regulated banking system. They do not take deposits like a bank or credit union.

To view full Financial Literacy Facilitator Resources, click here.




Small-Dollar Credit – Protecting Consumers and Fostering Innovation

Short-Term Gain, Long-Term Pain: Examining the Growing Payday Loan Industry in B.C.

Fringe Financial Institutions, The Unbanked, and the Precariously Banked: Survey Results from Prince George, B.C.

All In: Building the Path to Global Prosperity Through Financial Capability and Inclusion

Welcome to the financial mainstream? The hazards facing low income people when navigating the financial world

Health Check: Low-income Household Finances in Canada

Municipal Financial Empowerment: A Supervitamin for Public Programs. Strategy #5: Integrating Asset Building

A population-based study of premature mortality in relation to neighbourhood density of alcohol sales and cheque cashing outlets in Toronto, Canada

The Real Cost of Payday Lending

Since the early 1990s payday lending businesses have become increasingly prolific in most parts of Canada, including Calgary. Social agencies and advocates working to reduce poverty view payday lenders and other fringe financial businesses as problematic for those looking to exit the cycle of poverty. Payday lenders charge interest rates that, when annualized, top 400%. The industry justifies this by stating that comparisons to an annual rate are unfair as loans are not meant to or allowed to last longer than two months. However, the fact remains that these businesses charge far more for credit than mainstream financial institutions and are more prevalent in lower income neighbourhoods.



Considering A Payday Loan? 10 Questions To Ask


If you’re short on cash, a payday loan may seem like a quick way to get money, but there is a high cost. Fees on payday loans are generally much higher than those on other forms of credit, and they will take a big bite out of your budget. Make sure you have all the facts about a payday loan by asking the following questions.


Payday Loans: An Expensive Way to Borrow

Fair Financing: Expanding Small-Dollar Short-Term Credit for Albertans

Dealing with Dollars NL: A look at financial literacy gaps and barriers

One Size Does Not Fit All: A Comparison of Monthly Financial Services Spending

How Should We Serve the Short-Term Credit Needs of Low-Income Consumers

CFPB Proposal for Payday and Other Small Loans

Supplemental findings on payday, payday installment, and vehicle title loans, and deposit advance products

Banking on the Margins: Finding Ways to Build an Enabling Small Dollar Credit Market

Banking the Poor: Policies to Bring Low-Income Americans Into the Financial Mainstream

Choosing Financial Services Where the Options are Limited: A Report on a Survey of Financial Service Choice of Residents in Inner-city Neighbourhoods in Toronto, Vancouver & Winnipeg

“There Are No Banks Here.” Financial & Insurance Exclusion in Winnipeg’s North End

Does Community Access to Alternative Financial Services Relate to Individuals’ Use of These Services? Beyond Individual Explanations