Payday Loans and the Recession

Recession not creating boom in loans, industry says

The recession isn’t causing an explosion in demand for payday loans, those in the industry say.

"I think there has been some speculation that the payday loan industry would experience a big boom because of the recession," said Michael Thompson, spokesman for the Cash Store. "That certainly hasn’t been the case for our company."

One of the reasons is that a person has to have a job or a form of income to secure a payday loan. The short-term loans usually amount to a couple of hundred dollars.

"When people lose their jobs, they are losing their security against their loan, so I think that is having some impact," Mr. Thompson said.Stan Keyes, president of the Canadian Payday Loan Association, said that many lenders belonging to the association say the number of transactions has stabilized and they are not bringing in new business.

The association represents some of the companies involved in the Canadian payday loan industry, including the big player, Money Mart.

Mr. Keyes said that people who have paycheques and qualify for payday loans are not spending as much.

"They are making their paycheque stretch. They are saving, which is a good thing. They are putting off any expenditures for another day whenever they can."

Mr. Thompson said it may be a bit too early in the recession to predict the full effect on the payday loan industry.

"But we certainly haven’t seen a big explosion in our business as a result, so far."

Story by CLAIRE MELLOR Business Reporter

News source: thechronicleherald.ca

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