Thank you. I'm sorry about that.
ACORN is very encouraged by the federal government's decision to lower the interest rate for instalment loans from 48% to 35% APR. The evidence, through a series of surveys and testimonies of low- and moderate-income people, refutes the claims of lenders that it helps people in any way or improves their credit scores.
The latest survey by ACORN of low- and moderate-income people highlights the impact of high-cost loans to 623 community contacts. This research was funded by the federal office of consumer affairs, and the report was reviewed by distinguished professor in economics and public policy Brenda Spotton Visano.
The study shows that 80% of respondents reported stress, anxiety and depression; 72% said it resulted in even more debt; and 67% reported adverse effects on their credit score. One-third said their loans got refinanced multiple times; and the majority were highly unsatisfied with the high-cost loan.
As far as claims made by lenders that this move will impact their profit margins and the industry will cease to exist are concerned, there is enough evidence that points to the contrary. Many states in the U.S. have lowered the interest rate for a two-year, $2,000 instalment loan to 32.5% APR and to 25% APR for a five-year, $10,000 instalment loan, yet lenders continue to thrive.
Quebec is the only province in Canada that already has an interest rate cap of 35%. Goeasy, in fact, in its annual report said it will be expanding in Quebec. It also said in its annual report that the new federal interest rate will benefit Goeasy and those with scale in the long term, and it is well prepared to adapt if this federal interest rate is lowered.
Research in Alberta by El Hazzouri et al. on payday lending shows that a lower allowable interest rate did not result in decreased access to credit, nor did it result in more, riskier borrowing. Payday loans in most provinces had a fee of $21 per $100, which now stands at $15 per $100, but payday lending continues to thrive. Decreased access to high-cost credit results in much better alternatives, not riskier alternatives as the industry suggests.
The U.S.A.'s National Consumer Law Center's extensive survey of research found that once a state limits rates, in state after state, consumers are better off and find better ways to cope with financial challenges. Credit union DUCA's 2020 report on the “State of Fair Banking in Canada” notes the significant negative economic and well-being impacts of high-interest predatory lending. The report helped inspire the launch of DUCA's escalator loan, which provides access to fair credit for borrowers.
These are the kinds of models we want to support, not high-interest fringe lending.
The amount of money someone would save by taking out a $5,000 instalment loan over five years, with the rate lowered from 48% to 35%, is $2,000 and more. This is a substantial amount of money saved for those who need it most.
I'll now hand it over to Donna Borden to share her experience.
Thank you.