Credit unions – Prosper Canada Learning Hub

The Role of Credit Unions in Providing Alternatives to Payday Lending

December 16, 2021/0 Comments/in Canadian Credit Union Association Alternative financial services, Credit unions, Fintech, Payday lending, Policy recommendations Laura Lamb Research Report Canada Best practices, Financial literacy, Unbanked, Underbanked /by Shermeen Beg

High levels of household indebtedness in Canada has been a concern for policymakers at all levels of government over the past decade. As the economic costs of COVID-19 grow, household indebtedness becomes a faster growing and increasingly more serious concern.

While responsive government policy, such as the federal government’s Canadian Emergency Response Benefit (CERB), has curbed some short-term impacts on indebtedness, the program was developed to fill a temporary gap. The most vulnerable households are low-income households with limited access to credit, who frequently turn to high cost payday lending for financial relief. While regulations on the payday lending industry have increased substantially, low-income Canadian households remain left with few, if any, practical alternatives.

The low-income households in greatest need of alternatives are the financially excluded, specifically the underbanked and the unbanked.

At the same time, it is important to recognize that not all payday loan clients are in low-income households. A 2016 report by the Financial Consumer Agency of Canada states that close to 40% of payday loan borrowers have household income of $55,000 or greater and 20% having income of $80,000 or greater.

Thus, payday loan borrowers are not a homogeneous group.

Some Canadian credit unions have developed payday loan alternatives for the financially excluded, however, these more reasonably priced loans are only accessed by a very small portion of would-be payday loan clients.

The objective of this research is to review the alternative payday loan products currently offered by Canadian credit unions, to identify the barriers to offering more payday loan alternatives, and to make recommendations to expand the offerings.

State of Fair Banking in Canada 2020: Borrower and Lender Perspectives

February 5, 2021/0 Comments/in DUCA Impact Lab Consumer protection, Credit & Debt, Research and evaluation Banking, Credit unions, Debt, Demographics, Household debt, Lending, Mainstream financial services, Race/ethnicity, Safe financial products Angus Reid Group, DUCA Impact Lab Research Report Canada Asset building, Budgeting, Credit, Credit cards, Goal setting, Mortgage, Payday lending, Saving, Student loans /by Carrie Wong

The DUCA Impact Lab defines fair banking as any financial product or service that lives up to the following set of principles:

Pricing is clear, transparent, and well understood
Pricing is representative of the cost of funds, cost of administration and risk, rather than what the market will bear
It is clear to all parties how any personal data is being used by the lender
Personal data is only used for purposes agreed to by both the borrower and lender
The terms and conditions, including penalties and the rights of each party are clearly explained and well understood by both lender and borrower
Products are only recommended that will bring the borrower closer to their expressed goals
The borrower is clear on what the institution will do (and not do), with deposits to earn a return
The assessment of risk is objective, transparent and not prejudicial
Financial institution recommendations are not biased towards in-house product recommendations
Products empower consumers when they need access to financial services, not just when they do not

Their Fair Banking 2020 report presents data on the following areas:

Debt load and its impact on Canadians
Financial confidence
Divide between borrowers and lenders
How financial products are priced
Poor credit and ability to access to financial product and services
Demographic snapshot: People of colour and Indigenous Canadians

State of Fair Banking in Canada

January 30, 2020/0 Comments/in Angus Reid, DUCA Impact Lab Consumer protection, Credit & Debt, Research and evaluation Banking, Barriers to services, Consumer protection, Credit scores, Credit unions, Debt, Financial behaviour, Financial planning, Fringe financial services, Mainstream financial services Angus Reid, DUCA Impact Lab Research Report Canada /by Carrie Wong

Everyone needs to bank and nearly everyone has a relationship with at least one financial institution. Financial Institutions need relationships with consumers too, in order to thrive as businesses. The role these relationships play in financial decision making for Canadians is an important consideration for anyone seeking to understand the financial health of Canadians and the impact of the banking sector in Canada. This report discusses the findings from a national sample of both banking consumers and lenders who were asked about their perspectives on fairness, access, credibility and transparency.

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

January 30, 2020/0 Comments/in Seymour Management Consulting Inc. Financial well-being Alternative financial services, Banking, Canada, Consumer behaviour, Credit, Credit scores, Credit unions, Debt, Debt management, Financial capability, Financial health, Financial literacy, Financial well-being, Fringe financial services, Household debt, household income, Income volatility, Mainstream financial services, Millennials, Research Financial Health Index Research Report Canada /by Carrie Wong

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.

The Financial Health Check: Scalable Solutions for Financial Resilience

June 26, 2019/0 Comments/in Ideas 42 Asset building and saving, Financial behaviour/decisions, Research and evaluation Behavioral economics, Credit unions, Evaluation, Financial behaviour, Financial capability, Financial well-being, Goal setting, Online services, Research, Saving, Scaling, Technology, United States Abigail Kim, Antoinette Schoar, Katy Davis, Owen Footer, Piyush Tantia Research Brief United States /by Glenna Harris

A large majority of American households live in a state of financial vulnerability. Across a range of incomes, people struggle to build savings, pay down debt, and manage irregular cash flows. Even modest savings cushions could help households take care of unexpected expenses or disruptions in income without relying on costly credit. But in practice, setting aside savings can be difficult.

Research from the field of behavioral science shows that light-touch interventions can help address these barriers. For example, changing default settings or bringing financial management to the forefront of everyday life have had powerful effects on savings activity. The Financial Health Check (FHC) draws on such insights to offer a new model of scalable support for achieving financial goals.

Using Design to Deepen Relationships in the Financial Sector

May 17, 2018/0 Comments/in Bridgeable Research and Design Financial behaviour/decisions, Financial inclusion Canada, Capacity building, Credit unions, Fintech, Instructional design, Low income, Safe financial products, Technology Bridgeable Research and Design Training/Toolkits Report United States /by Jenni Bolton

This publication reveals the outcomes of Bridgable's work with a federal credit union, cutting through their overwhelming number of offerings to better engage with their low-income members. It also discusses why agility is a better bet than digitization when it comes to our changing financial ecosystem. Finally, it will break down their approach to one of the most popular design methods today, the design sprint, and how it can produce results while also lowering risk. Note: This link will allow you to download the document from the Bridgeable website.