One in four insolvent debtors in Ontario have payday loans, up 38 per cent in the last two years, says a study by insolvency firm Hoyes, Michalos & Associates.
Despite the high interest costs involved, heavily indebted Ontarians are turning to payday loans to pay off their pre-existing debts. These debtors use multiple payday loans from different payday loan lenders.
The straw that breaks the camel's back
In a press release issued Feb. 21, Ted Michalos CPA, Licensed Insolvency Trustee, expresses concern over the increase in use of payday loans. "Payday loans have become the straw that breaks the camel's back for many people, leading to an alarming increase in the percentage of payday loan induced insolvencies,” he says.
Doug Hoyes, CPA, Licensed Insolvency Trustee, says using payday loans is not limited to low income households, despite popular belief. “Middle and high income earners are much more likely to use multiple payday loans if they have pre-existing debt, creating an even worse debt burden that they cannot hope to repay," he says.
A never-ending cycle of borrowing
"As Licensed Insolvency Trustees, we meet with people every day who are struggling to repay high interest loans,” says Hoyes. “We are issuing a pre-release of our Joe Debtor study with this payday loan data in advance of public hearings to be held by the Standing Committee on Social Policy on Bill 59 and the Putting Consumers First Act.
In doing so, we hope to ensure that legislators have the information they need to ensure changes to Ontario regulations surrounding payday loans really do put consumers first and reduce the likelihood that already debt burdened Canadians will be caught in a never-ending cycle of payday loan borrowing," he says.