A Statistical Profile of Payday Loan Clients from National Surveys

Examining payday loan utilization among households with mainstream credit access

“…T-test and chi-square results indicate that at statistically significant levels (p < 0.05), payday loan clients tend to be younger, have larger families, be single parents, have more income earners in the family unit, lower after-tax household income and less wealth, similar to previous findings on payday loan users (Simpson and Islam, 2018;Financial Consumer Agency of Canada, 2016;Lamb, 2016;Bowles et al, 2011;Buckland and Dong, 2008;Gross et al, 2012;Simpson and Buckland, 2009;Devlin, 2005). In addition, a smaller portion of payday loan clients completed a university certificate or degree, as has been found in previous studies (Simpson and Islam, 2018;Financial Consumer Agency of Canada, 2016;Lamb, 2016). However, a larger portion have non-university postsecondary credentials, which appears to be a unique result for this sample of payday loan users with access to lower-cost credit alternatives.…”

“…Survey respondents were asked to estimate, as best they could, asset and debt information for the whole family as of the date of the survey. Quadratic terms for age, wealth, income, earners and family size are included in the regression models given expected nonlinear relationships, based on the rejection of the linearity hypothesis with likelihood ratio tests, following Jappelli (1990), Simpson and Islam (2018) and Simpson and Buckland (2009).…”

“…The empirical literature examining the socioeconomic characteristics of payday loan clients reveals many trends. Past research suggests that the likelihood of being a payday loan client rises with lower income, less wealth, lower age groups, higher debt levels, lower levels of education, single-parent families and larger families with fewer earners (Islam and Simpson, 2018;Simpson and Islam, 2018;Financial Consumer Agency of Canada, 2016;Lamb, 2016;Bowles et al, 2011;Buckland and Dong, 2008;Gross et al, 2012;Simpson and Buckland, 2009;Devlin, 2005). Other sociodemographic characteristics identified in past research include employment status, financial literacy, marital status, race, gender and home ownership (Hogarth et al, 2003(Hogarth et al, , 2005Devlin, 2005;Wang and Guan, 2017).…”

Vulnerable consumer experiences of (dis)empowerment with consumer protection regulations

“…The majority of consumers use payday loans to pay for necessities (Financial Consumer Agency of Canada, 2016), with most turning to them as a last resort after being denied credit at mainstream financial institutions (Fantauzzi, 2016). Recent estimates show that 75% of payday loan consumers in Canada are repeat borrowers (Simpson & Islam, 2018).…”

“…Similar to the USA, Canadian payday loan consumers tend to have lower income, lower net worth, and lower levels of education than non‐borrowers (Simpson & Islam, 2018). The majority of consumers use payday loans to pay for necessities (Financial Consumer Agency of Canada, 2016), with most turning to them as a last resort after being denied credit at mainstream financial institutions (Fantauzzi, 2016).…”