Efforts to encourage Canada’s major lenders to provide relief from certain repayments have not reached the segment of the market that serves the more vulnerable consumers.
Canada’s largest banks have offered different forms of short-term relief through deferred mortgage payments and reduced credit card interest rates to some consumers. The message from firms that offer higher cost credit through payday and instalment loans has been to offer more credit.
On March 17, Canada’s largest banks all announced they would include up to a six-month payment deferral for mortgages, and “the opportunity for relief on the credit products”. On April 3, they all announced one element of that “relief”, a pledge to lower credit card interest rates by half for those consumers who have been hit by financial hardship and arranged for deferrals of minimum payments on credit card balances.
The lowered interest rates will provide a genuine cash flow benefit for consumers unable to make those minimum payments. The outstanding amounts will continue to grow – at a lower rate – and will ultimately need to be repaid. Mortgage deferrals similarly only change the timing of when the amounts will be repaid, and in the meantime, interest will continue to accumulate.
But those interest rates will be much lower than those faced by consumers with lower credit scores who rely on Canada’s higher cost instalment lenders, payday lenders and rent-to-own companies to finance their lives. These lenders continue to emphasize continued borrowing over any ability to defer payments in their public communications that address COVID-19.
A review of the published releases and web sites of those firms shows little obvious leeway on loans. Some firms refer to possible leniency for customers having difficulty in making repayments, but those messages have always been part of those lenders’ sites and are always less prominent than the provisions that offer to lend more money during the COVID-19 situation. Payday lenders would find it difficult to accommodate deferred payments without running afoul of legislation that limits the duration and bans the “rollover” in most major provinces, although there are some published accounts of payday loan repayments being delayed by an extra week.
Instalment lender Easyfinancial and its rent-to-own affiliate Easyhome share a queue of “COVID-19” announcements. The most prominent announcement includes a pledge to “continue to be there for our customers by providing them with access to the credit they need today”. Much lower in the file, in an item posted March 17, the firm notes that customers may be able to defer payment or extend terms.
Another prominent national instalment lender, Fairstone lists five “financial relief options” in its COVID-19 information link. The first is loan insurance, that will require the borrower to incur larger costs to make sure the lender is repaid if the borrower loses their job. That is followed by additional borrowing, refinancing and extending the loan term, before the fifth item, which is potential payment deferrals.
MoneyMart is Canada’s largest payday and instalment lender. Its COVID-19 information page also leads with borrowing: “We know that now, more than ever, people need fast, hassle-free access to cash”. The fifth item on its information list is a general ‘talk to us’ if borrowers are having problems making payments.
The closure of non-essential retail locations has led all these lenders to emphasize phone service. Rent-to-own firms Easyhome and Aaron’s also promote “curbside” or “streetside” pickup and delivery of the rented furniture and housewares, as well as payments to minimize face-to-face contact with customers.