Are you wondering whether you should pay off debt or save during the pandemic?  Well, you are not alone. Countless Canadians are asking themselves the same question.

The pandemic has undoubtedly changed our lives for the long term.  With our movements restricted and the world of work so uncertain, its been a key moment to think about whether the extra money saved on commuting, socializing, or memberships should be saved, spent or used to pay off debt.  Right  now, and for the next few months for the very least, it’s time to pay off those debts.

In reality, Canadian savings have fallen well short of the recommended level of 10% of net income.  According to Statistics Canada, Canada’s household saving rate fell to 14.60 per cent in the third quarter of 2020 from 28.20 per cent in the second quarter of 2020.  Coupled with recent news reports about rising debt, the statistics paint a compelling view of the Canadian debt burden.

Saving during the pandemic

In a crisis, interests rates falling to record lows make debt cheaper to service. In other words, it is literally in your best interests to pay off as many debts as possible.  Significantly for savers, low interest rates is a bad thing, meaning you have money sitting in an account that doesn’t make you much of anything.

If you have savings and debt, you could be losing money right now. Three or months savings is always encouraged to provide a buffer zone in case the unexpected happens, like losing a job, a fall in wages, or a medical diagnosis. But if you are debt-free,  if the worst happens, you won’t have payments you cannot meet hanging over your head.  For more information on saving, check out our tips on how to keep more money in your pockets.

Above all, speaking with a non-profit credit counsellor can make all the difference.  If you are debt and need help getting started, contact us and we will connect you with one of our knowledgeable non-profit credit counsellors.

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According to the government, AFSs are high-cost financial services outside of traditional financial institutions like banks and credit unions. For example, they include offerings like payday loans, instalment loans, lines of credit, and auto title loans.

Significantly, Credit Counselling Canada was invited to submit its ideas on strengthening protections for Ontario Consumers.

Imposing limits on the amount lenders can charge

Credit Counselling Canada was happy to weigh in with its suggestions for strengthening protections for Ontario consumers.  We noted how research findings have highlighted the need for more vigorous regulatory enforcement of laws to safeguard vulnerable financial consumers.  For instance, for many lower-income Canadians and increasingly middle-class borrowers, high-cost instalment loans have become a debt trap.

Critically, one important way to prevent harm to vulnerable consumers is by imposing limits on the amount which lenders can charge for the cost of borrowing. Furthermore, a fixed limit is easier to administer and more straightforward for consumers.

If you are facing a severe debt problem, we recommend that you call one of our member agencies today.  They will offer you free, private, non-judgmental guidance from an accredited credit counsellor on the best way for you to deal with your debts.  Let us help you find the right solution for your situation. After all, you have got nothing to lose by calling – except your debt.

For more information on the Ontario Ministry of Government and Consumer Services consultation process, see Alternative Financial Services.

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Consumer rights and debt is an increasingly important topic. As modern societies move toward open data movements in government, health care and banking, it’s important to note that North American society wasn’t built on a bedrock of a citizen’s right to know.

Sociologist Michael Schudson reveals how consumer rights movements between the 1950s and 1970s were based mainly on environmental activists’ demands, consumer advocates and investigative journalists.  Schudson outlines this drive toward modern transparency in his book, “The Rise of the Right to Know: Politics and the Culture of Transparency, 1945-1975.”

Schudson’s book campaigns for greater openness across several domains such as truthful communication in health care and transparency at all business and government levels. Today, in an era of constant information and the uncertainty amid COVID-19, it’s important to revisit this idea of consumer rights, specifically around consumer debt.

Most find it hard to open up about their finances and lack the courage to ask for help

Broadly, consumer rights ensure people obtain accurate and unbiased information and that they are not mistreated. Additionally, being informed on individual rights increases economic welfare. It also improves societal health by bolstering demand for openness and encouraging industries to make ethical progress.

In the consumer debt space, access to non-judgmental, confidential options is essential. Most find it hard to open up about their finances and lack the courage to ask for help. Despite a recent drop in consumer insolvencies, Canada is a heavily indebted nation. Unfortunately, that is not going to change anytime soon.

In a recent Credit Counselling Canada survey, Canadians revealed the issues they face when seeking debt assistance. The greatest challenge was a lack of focus on financial wellness and education (72 per cent). Next, a lack of transparency around fees (70 per cent). Then, concern about conflict of interest and a lack of transparency around an organization’s motives (69 per cent).

The survey also shows motivates people to get out of debt. It’s one of the oldest tropes in recovery, and a claim that’s been repeated for decades. You’ve got to hit rock bottom before you can change course. Strikingly, nearly four in 10 Canadians would have no idea where to turn when facing rock bottom.

More work needed to build awareness

Major work is needed to increase awareness of consumer rights around debt and debt relief. Canada is taking steps in the right direction. The Financial Consumer Agency of Canada recently renewed its Consumer Protection Advisory Committee, seeking to strengthen financial literacy and ensure appropriate regulations are in place. Nevertheless, more can be done.

Canada should look towards models in the U.K., Australia and New Zealand. Together these countries have invested upwards of $115 million in financial help services to supplement their COVID-19 relief packages. Although Canada has responded swiftly to address the immediate emergency, there is no long-term strategy to build Canadians’ financial well-being beyond the crisis. These countries have put the interest of indebted consumers first.  Moreover, they have developed a progressive framework of sustainable options, including the critical service of non-profit credit counselling.

Protecting the right to unbiased, safe and holistic debt relief requires action from several players. Governments, local community foundations and charitable foundations can band together to support the financial literacy goals of non-profit credit counselling. Funding can also help shift the economics of debt repayment through incentives for banks and credit unions to innovate.  Meanwhile, community centers and organizations can provide space and resources for consumer debt education. Finally, Canadians can seek out Canada’s non-profit, certified credit counsellors as a smart place to start.

It takes a collaborative approach

There is no panacea for Canada’s consumer debt problem. A cross-sector, collaborative approach that includes the non-profit, credit counselling sector is essential.

There is a clear path ahead.  One that involves a dual commitment to economic transparency and a progressive consumer debt approach. Egalitarian society advances when consumers have greater access to information and a protected set of rights. As we make our way through the second wave of the pandemic, we must strive to enshrine and elevate those rights.  Learn about Credit Counselling Canada’s bill of rights for Canadians in debt.

CEO of Credit Counselling Canada

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It’s the start of a New Year, and like thousands of Canadians, you may be worried about the size of your debt.

For decades, non-profit credit counselling has provided a pathway for indebted Canadians to get back on track. Now we have more proof that credit counselling works. Back in 2003 and 2004, Equifax Canada and Trans Union of Canada carried out independent research on successfully closed credit counselling files. The research showed that credit counselling does help Canadians get back on track with their personal finances after being in debt.

More recently, a 2019 report by Credit Counselling Canada (CCC) using data from TransUnion comparing long-term outcomes of Canadian Debt Relief options points to clear benefits. Five years after filing, DMP clients have the highest credit scores over those who filed a consumer proposal or bankruptcy. DMP clients also reduce their total debt substantially.

Paul Le Fevre, Director, Operations, Equifax Canada outlined these results in a media release “Equifax Canada analysis shows that consumers who have successfully completed a Credit Counselling Program through an accredited not-for-profit agency demonstrate a significantly improved credit score and lower delinquency rates compared with average Canadian consumers”. In fact, consumers in the research data who participated in accredited credit counselling programs significantly increased their credit scores. Indeed, they have a reduced credit risk compared to Canadians who didn’t access non-profit credit counselling.

Getting Further Ahead Without Debt

Credit counselling clients who repay their debt successfully through a non-profit agency are farther ahead because of the in-depth education. Education does make a difference. Learning how to manage money effectively and plan for the future and living without credit are key factors in their success.

Here is just one example of thousands of testimonials that CCC members receive each year.

 “When my husband and I went to the agency, we were heading towards bankruptcy. We decided on a debt repayment program and were to pay a percentage of our debt  once a month. I really feel that this program saved us from going bankrupt, and getting our credit and record back on track. We also used the budget planner that is recommended with the plan to help us out. Now our debt is paid off, and we can afford the things we could not before. We are both so glad that they could help us out, and hopefully can help others out, too.”   Susan N, Nova Scotia  

Financial Literacy Approach

In the last year alone, CCC members provided money management education to over 160,000 individuals. The largest percentage was through direct contact with consumers needing assistance one on one. Over 60% of the total accessed education and training through workshops, webinars and financial literacy sessions in schools, community groups and lunch and learn opportunities. Education is the backbone of the services members provide to consumers. The demand for financial education has grown exponentially.  Across the country, CCC members are extremely well equipped to be the ‘go-to’ resource when financial questions arise.  

We have advocated for education through accredited, non-profit credit counselling agencies for decades. It is refreshing to see this confirmation that the work we do really does make a difference! People learn valuable financial skills, including developing spending plans, setting savings goals and establishing emergency funds. Credit Counselling Canada members are all registered charities /non-profit organizations.  They provide accredited services that assist Canadians across the country. 

No matter your age, skill level or current financial position, CCC members can help. Contact a member now to see how we can help you.  

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It’s your right to know. Consumer rights ensure people obtain accurate and unbiased information and that they are not mistreated. Additionally, being informed on individual rights increases overall economic welfare and societal health. Especially by bolstering demand for such openness and encouraging industries to make ethical progress.

Your Right to Know

In the consumer debt space, access to unbiased, confidential options is essential. Most find it hard to open-up about their finances. Even more may lack the courage to ask for help when they need it. Despite a recent drop in the household debt-to-income ratio and a decline in consumer insolvencies, Canada is a heavily indebted nation.  A reality that won’t change any time soon.

Focus on Financial Wellness

A recent study conducted for Credit Counselling Canada addressed issues around consumer debt. It found that Canadians struggle with an industry that lacks ethics, transparency and accessibility to trusted debt services. The greatest challenge those surveyed faced in seeking debt assistance was a lack of focus on financial wellness and education (72 per cent). A similar number (70 per cent) cited a lack of transparency around fees, conflict of interest and a lack of transparency around organization’s motives (69 per cent).

Click to enlarge

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Sudden life changes

When it comes to women and money, fewer women than men feel empowered about their finances. That’s equally true when it comes to managing debt. Yet, with more women than ever working and helping to take charge of family finances, women need to develop good financial literacy.  According to the Women’s Institute for a Secure Retirement and National Center for Women’s Retirement Research, the average woman spends 15% of her working years outside the workforce caring for children and elderly parents compared to the average man’s 1.6%.  In other words, women have much less time to build up their savings.  This is an important consideration as women are more likely than men to become single parents.  In addition, 80-90% of women will have sole responsibility for their finances at some point in their lives – usually due to divorce and the fact that on average women outlive men by about seven years.  When you add it all up, women need to do all they can to educate themselves so they are prepared to handle sudden life changes.

Higher burden of debt

While women may be lagging behind when it comes to proactively managing their own finances, they tend take on more of the responsibility in terms of debt repayment.  Often its women leading the charge when tackling the family debt load.

There are a lot of issues holding women back from achieving true financial well-being.  That why it’s so important that women hit the ground running to get the earliest possible start in managing their finances.  For women and money, the key is starting in your teens or early twenties.  Starting early makes all the difference for a women hitting her forties, fifties or sixties.  It’s never too late to start.

Knowing where to begin

Many women in debt aren’t sure where to start. Or where to get help.  As a result, women can drift from year to year without a solid financial plan for the future.  The best thing you can if you’re in this situation is to pick up the phone and call a non-profit credit counsellor.  This goes double if you find yourself drowning in debt.  An accredited and certified non-profit credit counsellors will help you develop a plan so you can get started. Here’s more on how to find a counsellor near you.

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Building credit when you’re a newcomer to Canada can take time. Fact is, most newcomers will need a Canadian credit history to be approved for major purchases such as a mortgage. Similarly, most banks in Canada will require you to have a good credit history before they will give you a credit card. Despite having many years of good credit history with worldwide credit products, such as products from VISA and MasterCard, you may struggle to get a credit card or mortgage in Canada right away.

How long does it take to establish credit?

Building good credit is a process that takes time. Just remember, slow and steady is the best approach to establishing a good credit history.  For instance, each time you ask for a loan or new credit product, your credit report will be reviewed.  Multiple inquiries on your report in a short period could be a red flag to creditors — it suggests that you may taking on credit too hastily, so it’s important to space out inquiries. Opening too many accounts could also affect your credit score, so it’s best to be selective and open one account at a time.

Putting an exact time on how long it will take is difficult; depending on a person’s financial situation, and whether they have good payment habits, it might take anywhere from 6 months to a few years to establish good credit.

What if you have a bruised credit history?

Recovering from bruised credit is possible.  To begin with, actions like paying your bills and credit cards on time can help.  On the other hand, missing bill payments or maxing out your credit card(s) will hurt.

Ultimately, having bruised credit can affect your employment prospects, as many employers check credit reports before making a job offer. Similarly, bruised credit can affect your ability to  secure a safe place to rent, as many landlords refuse to rent to people with poor credit.  Likewise, it can hurt your ability to obtain the best interest rates for major purchases such as a car or a mortgage.

What are the steps to establishing/rebuilding your credit?

Establishing or rebuilding credit takes time, dedication and persistence to prove to lenders that you are a trustworthy consumer. If you are  recovering from a bankruptcy or consumers proposal, it is going to feel like having to start from scratch.

While there is no quick fix, there are solutions. Here are a handful of ways people can rebuild their credit in Canada.

• Open a Secured Credit Card – where you put down an upfront security deposit equal or higher than the card limit, and diligently pay it off on time
• Play by the Rules – keep accounts in good standing, and 30 percent below the card limit
• Go Slow, Start Small and Have Patience – while establishing good financial literacy habits
• Limit Your Credit Inquiries – two many credit products in a short timespan raises flags
• Hang Onto Longstanding Accounts – especially those in good standing which help increase the average age of a persons accounts
• Get Help – speaking with a certified and accredited non-profit credit counsellor from Credit Counselling Canada can help.  Here’s more on how to find a counsellor near you.

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When you’re in debt, are you one of four-in-10 Canadians who don’t know where to turn for help?  A new national survey by Credit Counselling Canada paints a picture of confusion. Many consumers don’t know where they can turn to for help if they hit debt rock bottom. The study addresses consumer sentiment on issues ranging from a lack of ethics, transparency and accessibility to trusted debt-help resources across the country.

The Got Debt? Poll, an Angus Reid survey of 1,510 Canadians, reveals that while Canadians can identify and agree on the warning signs, nearly four-in-10 (37%) would have no idea where to turn when facing it themselves.

The warning signs of debt struggles

There is overwhelming agreement that before hitting “debt rock bottom”, a series of warning signs may present themselves as a caution of further trouble. Across the board, nine-in-10 Canadians agreed that the following situations signified a person’s struggles with debt:

• Always borrowing money to make it to the next paycheque (93%)
• Receiving constant calls from creditors (91%)
• Continually going over their credit limit (90%)
• Credit card regularly gets declined (90%)
• Only paying the minimum/interest but not paying down the principle (90%)
• Utilities cut off because they can’t pay their bills (89%)

Read more about the new study.

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