FCAC study points to worrisome trends in consumers' use of payday loans

News Release

For immediate release

Payday loans are an expensive way to borrow money and should be the focus of greater consumer awareness.

October 25, 2016          Ottawa, Ontario          Financial Consumer Agency of Canada

The Financial Consumer Agency of Canada (FCAC) today released "Payday loans: Market trends," a research report highlighting the need to foster greater consumer awareness of the high costs of payday loans.

In early 2016, FCAC conducted a survey of 1,500 payday loan users across Canada. The survey results show that payday loan users are often unaware of the high costs of these loans, compared to alternatives. In addition, many Canadians use these small-value, short-term loans of typically $500 or less to cover unexpected expenses or a loss of income, where a household emergency savings fund could help. Though most payday loan users are low- to moderate-income earners, some earn higher-than-average incomes.

Based on these findings, the Agency has revised its Web content on payday loans and will develop new consumer education materials on the importance of setting aside emergency funds. FCAC is also working with provincial and territorial stakeholders to promote awareness of the high cost of payday loans compared with other forms of credit.

Quick facts

  • FCAC administered the survey to 1,500 Canadian payday loan borrowers. The objective was to better understand the profile of payday loan users, the reasons they resort to these loans, their access to alternative forms of credit when they took out their loans, and their level of awareness of the high cost of payday loans.
  • Many payday loan users are unaware of the high cost of payday loans compared with the alternatives. For example, fewer than half the respondents (43 percent) understood that a payday loan is more expensive than a cash advance on a credit card. In some provinces and territories, payday loan charges are equivalent to an annual percentage rate of 500 percent.
  • Most payday loan users reported borrowing the funds to cover necessary expenses. When asked to identify, from a list of options, their reasons for using a payday loan, 89 percent of respondents selected at least one of the following: to cover necessary and unexpected expenses; to cover necessary and expected expenses; and, to avoid late charges on bills.
  • Payday loan use is not restricted to low-income Canadians. Though the majority of respondents had low-to-moderate incomes, 20 percent of respondents reported household incomes exceeding $80,000, including 7 percent with incomes over $120,000.
  • Payday loan users reported low access to traditional credit products. At the time of their last payday loan, 65 percent said they did not have a credit card; 88 percent said they did not have a line of credit.


“Payday loans are an expensive way for consumers to borrow money. The uptake of these short-term, high-cost loans has more than doubled in Canada recently, to four percent of Canadian households. This is, in my view, a trend that merits more attention. As a result of this study, FCAC has bolstered its consumer education material and has committed to working closely with the provinces and territories to raise awareness about the high cost of this form of credit.”

Lucie Tedesco
Commissioner, Financial Consumer Agency of Canada

“High household indebtedness and low levels of consumer savings, particularly the absence of a household emergency fund, make a payday loan a solution for many consumers despite their very high cost. We will do more to ensure that Canadian consumers understand the costs of and alternatives to payday loans and how to set up a budget and plan for unexpected financial situations.”

Jane Rooney
Financial Literacy Leader, Financial Consumer Agency of Canada

Associated links


Natasha Nystrom
Media Relations Officer
Financial Consumer Agency of Canada

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