People of all ages are using credit – or accessing payday loans – to pay their rent and put food on the table.
Murray Baker, manager of financial empowerment at Family Services of Greater Vancouver, said rising inflation and interest rates are impacting everyone, particularly low-income and vulnerable people. He said it’s having a “huge impact” on people in Metro Vancouver because some of the areas seeing the highest increases are food and rents.
“It would be different if it was going up on luxury cars – that's not going to impact the clients we see,” he said. “It's the food and rent that is really hitting those individuals hard.”
Baker said people who have lower incomes, have unstable employment, or are seniors or persons with disabilities may be accessing credit just to make ends meet.
“They're not accessing credit to buy luxury items or discretionary items; they're having to access credit just to get by day to day,” he said. “Food on the table, feeding their families, making sure they have money at the end of the month for rent.”
Baker said people who don’t have a great credit ratings or have instability in their employment may find it very difficult to get credit through banks or other financial institutions, so they’re often pushed to access credit through “predatory” lenders that may charge 45 to 60 per cent interest on loans.
“That's one of the areas that we're seeing a growing number of people impacted,” he said. “And once people are trapped in that downward debt cycle, it's really hard for them to get out of there.”
Baker said he deals with some “heartbreaking” cases, such as a senior on a fixed income who had accessed a loan to help out a family member, and was then paying $1,000 a month to service those loans.
“When you access them, you have to pay. And if you miss payments, there are penalties involved. And the interest rates are prohibitively large,” he said. “Quite honestly, I was concerned for his mental wellbeing because he was so stressed about this. Imagine a senior in his 70s, not living an exorbitant life, and all of a sudden struggling to … come up with this money to pay off these loans.”
Family Services was able to help the man get a loan through a credit union, which reduced his payment to $350 a month.
“Some of the most difficult I see are people that are struggling, seniors who have maybe worked all their lives, they haven't lived an extravagant lifestyle or anything, and they're struggling with homelessness or food security,” he said. “So, those are some of the most heartbreaking stories of clients that I see.”
Baker relayed the story of a client with disabilities who had taken out payday loans, but did not fully understand what they were signing.
“He thought the interest he was paying was, six per cent but it was 46 per cent,” he said.
Some people, said Baker, feel like they have no choice but to get pay day loans because they can’t get credit through a bank.
“They’re choosing the predatory lender because, in fact, the bank is closed to them. They cannot access credit through the bank. So it's a forced decision that's drawing people there,” he said. “And then unfortunately, when the economy's tough, some of these places really thrive because people – it's a case of, do I take out a payday loan or do I default on my rent or do I have a bare table for dinner?”
Financial Literacy Month
November is Financial Literacy Month in Canada, a month aiming to strengthen financial literacy across the country. This year's theme is Make Change that Counts: Managing Your Money in a Changing World.
Financial Consumer Agency of Canada said this year’s theme reflects a complex and changing financial landscape. In the context of higher cost-of-living, rising interest rates and record levels of household debt in Canada, FCAC is shining the spotlight on debt management.
According to Family Services of Greater Vancouver, the number of people being impacted by inflation and cost of living increases continues to rise across the Lower Mainland: nine out of 10 Canadians are tightening their household budgets as inflation and high prices persist; high inflation drove a record number of Canadians to food banks in 2022; and nearly half of Canadians report being worse off financially than a year ago.
Baker said financial empowerment is about providing education to individuals, so they can make better, more informed financial decisions. When they have solid information about finances, he said they’re able to make good decisions and ask the right questions.
“If you have some base knowledge and you're asking well-thought-out questions, there's probably a lesser likelihood that you're going to be taken advantage of financially,” he said.
Baker said he’s always been puzzled why financial empowerment isn’t taught to students in school.
“A life skill, such as financial empowerment, it's something that you're going to use your entire life,” he said.
If people have an understanding of budgeting, financial goal setting, putting money aside into savings, Baker said it can have a drastic impact on their lives.
Help is available
Family Services offers general workshops on topic such as: money basics (money skills, budgeting, credit and debt); growing your money (saving and investing, saving for retirement, registered disability savings plans) and registered education savings plans); money and you (money and relationships, consumerism, frauds and scams); navigating benefits; and filing taxes. Services are offered in English, Spanish, French, Farsi, Cantonese and Vietnamese, and some workshops are offered at public libraries across the region.
“The message we want to get across is that if people are struggling, there is help available,” he said. “Certainly our workshops are good for general information. But our one-to-one coaching is really helpful.”
While workshops and one-to-one coaching can't immediately solve people’s financial issues in one session, Baker said they often leave an hour-long session less stressed than when they arrived.
“They realize that there are some options available, whereas when they first come in they think there's no hope,” he said. “They leave knowing, ‘Hey, we talked about some different strategies or things I can do.’”
Through one-to-one coaching, Family service staff will work with an individual on their personal situation.
“Our approach is really a trauma-informed approach, client-centred,” Baker said. “We support and provide the information and strategies and options, but ultimately, it's up to the client what action they want to take. We really find that that's beneficial because it puts them in control, and they gain that confidence knowing that they're making the decision.”
Baker said there were an increased interest in the programs after the pandemic hit. It’s also picked up as inflation has risen.
For folks who are struggling financially, Family Services’ first step is to see if there are ways to increase their resources, which could include using the benefits wayfinder tool that provides a list of potential benefits they may be able to receive.
“So often, we have clients that come in, and they're not even aware that they're missing out on a particular benefit,” Baker said. “So one of the things that we do is we ensure that their taxes are filed and up to date, which sometimes people with low income do not file taxes, because their rationale is 'I don't make enough, it's not worth me filing.' But by not filing, they're missing out on a lot of government benefits oftentimes.”
Family Services also helps folks find out about community benefits that they may be eligible for, such as grants that may help seniors pay for housing or affordable internet services. Other actions could include finding ways of cutting expenses and providing information about food banks and other food programs if food insecurity is an issue.
Baker said single parents is one group that is finding it particularly difficult, as are seniors who may not be in a position to take on a job or another job. He said college and university students are accessing food programs in increasing numbers, having experienced “very significant” increases in rental rates.
“It's an area, actually, I spent most of my career working in that area, writing books for students on how to finance college and university. So it's an area that I have been involved in studying and writing on for many years. And it's, you know, this is probably one of the worst situations in terms of current students.”
Baker is the author of the book, The Debt Free Graduate: How to Survive College or University Without Going Broke. He was inspired to write the book after seeing the “huge debt” students were had upon graduation and the impact it had on their lives for many years after graduating from university, including their ability to get married, to start a family, to start their own business, to buy consumer goods (which impacts the whole economy) and to put money aside for their own financial futures.
“It really has some far-reaching effects,” he told the Record.
Debt has an impact on people’s lives – from their relationships with family members to mental health issues, Baker said. He stresses that there’s no shame in seeking help.
“People do not have to feel stigmatized if they have debt,” Baker said. “We do our coaching in a very nonjudgmental way – we don't care how people got to the situation; our concern is, how can we support you in terms of getting out of this situation?”
The team at Family Services works with a variety of clients, including some who are earning six-figure incomes but are in danger of losing their homes because of debt.
“People look around Lower Mainland and you see nice houses and people driving fancy cars. Or you're on social media, and people are sharing their new purchases and things like that. There's the perception that ‘everybody else is doing well, but me,’” Baker said. “And sometimes you're comparing to an illusion rather than a reality. You don't know all those people driving nice cars, how much debt they have.”
For coaching appointments, contact Family Services of Greater Vancouver at email@example.com or call 1-800-609-3202.