Not Ready for Prime Time: Canadians In the Sub-Prime, and High Cost Lending


Esteban Uribe


Public Interest Advocacy Centre (PIAC)




This study has examined a number of factors that would appear to have contributed to the growth of the subprime, high-interest lending market. One such factor is the underlying economic conditions of Canadian society. Over the last twenty-five years, income levels have stagnated or decreased in constant dollars for lower and middle income Canadians. In real estate markets, where prices have been surging, there is little chance for the
participation of Canadians from these income levels in the housing market financed by traditional lenders. As well, the increasing retreat of traditional banks from the retail and consumer banking through branch closures has further driven increased recourse to high cost lenders. This report contains the results of several focus groups sessions carried out in Edmonton, Toronto and Vancouver with users of subprime, high-interest
lending in the particular areas of payday loans and subprime mortgages. The
focus groups were conducted to inquire into the experiences of consumers
who use these services and gather their insights with respect to why and how
they had recourse to these services. The focus group participants referred to
several factors that had contributed to them falling through the cracks of the
credit system and having to use subprime providers. A key driver was the existence of problems with the use of credit as a young adult when their financial skills and judgment were not well developed. In particular, debt problems associated with student loan debt were frequently mentioned as a
contributing factor in the worsening of personal finances when the education
was finished. Ironically, for many subprime borrowers, the effort to improve
educational status had catastrophic results on credit standing and shut them
out of traditional lending markets.

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

Contact information

Public Interest Advocacy Centre (PIAC)
285 McLeod Street, Suite 200
Ottawa, ON   K2P 1A1
(613) 562-4002
(613) 562-0007

Source: Consumer Policy Research Database

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