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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Saving enables us to reach our financial goals, whether for a down payment on our dream home, putting money aside for a  car, retirement, or the inevitable emergency.

Unfortunately, Canadian savings continue to fall 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.

The COVID-19 pandemic has had a tremendous effect, of course. Still, Canadians savings levels were at a low ebb even before COVID-19 hit the scene. Why don’t Canadians save?  Well, partly because we do not learn to become savers or pay ourselves first.  More often than not, today’s youngsters are more likely to spend all their pocket money as soon as it arrives than to save. Unhappily, it’s the kind of habit that follows young adults right up to their first paycheque.

Top Tip List

We’ve put together a top tip list that will help you and your children get right into the saving habit.

• Spend no more than 90% of what you make. The rest should go into savings. Pay 10% to yourself first, then work with what is left in terms of spending and giving.  Try it for 28 weeks until it becomes a habit.  Though things may be tight to begin, start with a small amount and build from there.  Many bank accounts offer automatic saving features that make it even easier to save
• Add a little more to the amount every few months – you’ll be surprised how quickly its get to be a habit
• When supported by your employer, try saving through payroll deductions at work.
• Move savings into another account where you have to pay to withdraw money, so that it is not so readily accessible
• Focus on creating an emergency fund of at least three months of living expenses. Once you have achieved three months, continue until you have six months. Now, that’s cause for celebration!
• Use various saving account features to spark your savings and watch your money grow. Options like RRSPs, RESPs, TFSAs and other savings tools can help you get more from your savings

Make saving a fun family project teaching your kids to save. Even children as young as 4-5 years can get into the spirit

Of course, saving may not be possible when you are out of work. In that case, it is a matter of starting as soon as you can.

By developing the beneficial life habit of saving today, you’ll get to keep a lot more money in your pocket tomorrow!

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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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 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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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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In 2018 and 2019, Credit Counselling Canada continued pressing the OSB office for change, and in July 2019 the OSB opened a consultation on draft Directive  No. 1R5 Counselling in Insolvency Matters and enhancements/revisions to be made to insolvency counselling.  The draft directive rolled back several of the provisions that were of concern in Directive No. 1R4, resulting in positive changes to the legislation.

• Reduced the administrative burden for the not-for-profit/charitable credit counselling industry and provided for the removal of potential and perceived barriers for LITs to rely on qualified third-party counsellors;
• Eliminated the requirement to request a variance;
• Removed the requirement to audio record counselling sessions.

With this step in the right direction, we welcomed the opportunity to respond to the new draft directive with our comments. This is a summary of our submission. The full submission can be viewed here.

Directive No. 1R5 Counselling in Insolvency Matters was published in November 2019, and comes into effect in January 2020.

Overview

Credit Counselling Canada is governed by a volunteer board of directors. Our association members are accredited based on required governance, financial stewardship and operational standards. Given our expertise and credibility, members are often asked to provide expert opinions to the media as well as to governments contemplating legislative change.

Honesty, transparency, unparalleled expertise and professionalism are the basis of our members counselling services. We are not-for-profit and registered charities. We have been in operation for decades providing counselling services and money management education to individuals and families across Canada. For more than two decades we have offered counselling support services to trustees who do not have adequate resources, time or capacity to provide effective insolvency counselling services and develop quality educational material for their clients.  Trustees previously had flexibility to partner with not-for-profit/charitable credit counselling agencies to provide the legislated required debt counselling services to insolvent consumers.

We can assure the Superintendent that our association provides careful oversight and audits of our members who are required to track and report on performance data on the components of credit counselling programs. In addition, many of our members across Canada are already regulated in several provinces that have legislation requiring registration, licensing and oversight.

Our Perspective – Insolvency Counselling

While doors need to be closed to third party debt consultants who undertake to mislead consumers, helping Canadians who are in financial distress should be the overarching goal of debt counselling.

In terms of referral arrangements between trustees and debt counselling service providers, we agree that there should not be any closed-door arrangements. However, there is nothing inappropriate in trustees using external service providers that are highly competent, accredited and can provide quality counselling to indebted consumers.

We Request – An Exemption for Not-for-Profit Credit Counselling

By filing our response to the draft directive, we ask that the Superintendent implement a final directive that meets the objective of dealing with and eliminating inappropriate and harmful practices without causing unwarranted consequences for accredited not-for-profit/charitable credit counselling services and insolvent Canadians.

To achieve fairness, we again ask that accredited not-for-profit/charitable credit counselling services be granted a formal exemption from the proposed draft directive.

With over 50 years of respected collective history, we have helped hundreds of thousands of financially distressed Canadians across the country by improving financial literacy, providing counselling in making financial choices or in finding solutions to over-indebtedness. We are open to discuss applicable standards for all counsellors to ensure quality services are provided at a consistent level across Canada, including the concept of those standards being monitored/audited by the OSB.

We agree that there should be an effective monitoring and oversight framework to identify and address inappropriate behaviour and that it should include new powers for the Superintendent to issue administrative monetary penalties (AMPs).  AMPs would address infractions by trustees quickly in terms of non-compliance with new counselling standards whether the service is offered by the trustee or through an external service provider.

We appreciate the OSB giving us the opportunity to participate in this consultation.  As the OSB continues to refine the supervisory framework, we hope it will consider positively our suggestions so that quality services can continue to be delivered with integrity while respecting the right of trustees to use qualified external counselling services.

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