After years of surveys in the financial sector, I'm surprised by the sophistication and knowledge of payday loan consumers. This data puts to rest a number of widely-held misconceptions about the payday loan industry.
Michael Marzolini, Chairman, Pollara

Contrary to claims by consumer activists, the average payday loan customer is employed, educated and is not representative of 'low income' households. The most recent demographic study of Payday Loan customers in Canada found the average payday loan customer is 40 years old, 77% of customers are currently employed full-time and more than half (53%) have completed post-secondary education.

A major criticism leveled against the payday loan industry has been that it "takes advantage" of people who don't really understand what they are "getting themselves into". Customers rejected this notion and indicated they are informed and deliberate borrowers with a very strong level of knowledge of the terms and fees they pay for their loans.

Customers clearly understand the costs and terms of their payday loan (69%). This understanding is on par with their understanding of the fees and terms that they pay on their mortgage (72%), credit cards (73%) and bank fees (68%).

The demographic study, conducted by Pollara, also found that overall household income reported for payday loan customers in British Columbia tends to be on par with the British Columbian population. 50% of British Columbians report household income of less than $50k per year, compared to just 56% of payday loan customers.

The survey of 400 payday loan customers, commissioned by the Canadian Payday Loan Association (CPLA), was conducted from August 14 to September 19, 2007.

Previous to today's survey, the government, industry and critics were left to guess or assume 'who' a typical payday loan customer is, 'why' they use a payday loan instead of other credit options and 'what' they think of the payday loan product.

"This groundbreaking survey tells us that payday loan customers in British Columbia deliberately choose this service over banks and credit unions," says Stan Keyes, President, CPLA. "Customers are well educated and responsible borrowers with many credit options. They know exactly what they are doing and what they are paying."

"After years of surveys in the financial sector, I'm surprised by the sophistication and knowledge of payday loan consumers," says Michael Marzolini, Chairman of Pollara. "This data puts to rest a number of widely-held misconceptions about the payday loan industry. For the first time, we can talk about this industry's customers in terms that are real and statistically-relevant. This research is important and should carry more weight than the usual anecdotes, 'gut hunches' and speculation."

"This survey will begin to put to rest inaccurate comments made about the education, income, knowledge and reasons why people look to payday loans instead of other forms of credit," added Keyes.

Other highlights of the surveys include:

Personal Credit Profile
Although some have suggested people use payday loans because they have no other option, the survey demonstrates that customers have access to a wide variety of credit products, however still choose a payday loan for short-term, small-sum borrowing.

- BC payday loan customers owe an average of $22,765 to various financial institutions, excluding mortgages.

- Customers have access to a variety of credit options, but choose a payday loan over a line of credit, credit card, retail card, overdraft or other forms of credit largely due to the "convenience" of the payday loan product, "ease of use" and "long hours of operation". Only 21% of customers indicated they used a payday loan because they had "no other option".

Borrowing Habits
While holding relatively large debt loads, customers borrow an average of $381.14 when they visit a payday loan outlet. Contrary to some critics that say customers can't afford to repay their loans, a large majority of customers say they have paid back every loan they have ever taken, on time.

- The average payday loan taken out by a payday loan customer is $381.14, with more than half (56%) borrowing less than $300.

- Customers said they expect to pay an average of $29.04 for a $100 loan for two weeks.

- 85% of customers have paid back all their payday loans on time, while another 13% have paid back "most" of their loans on time.

Payday Lenders vs. Banks and Credit Unions
Payday loan customers are deliberate in their reasons for selecting payday loan outlets over banks or credit unions for their short-term borrowing needs.

Customers indicated they preferred payday loan companies for the overall convenience and ability to access small-sum loans, whereas banks and credit unions will only extend loans for larger amounts.

- Customers rate payday loan companies ahead of banks and credit unions in the following areas: Hours of operation, speed, convenience, ease of use, respectfulness and good service.

- Payday loan companies came behind banks on good value, but still rated ahead of credit unions in this area.

Reasons for Needing a Payday Loan
Customers indicated they generally seek payday loans for emergency situations or unexpected expenses. They often require only a small amount of money to hold them over until their next payday and prefer to borrow a few hundred dollars rather than getting more credit than they want with a credit card or line of credit.

- Two-thirds of customers (66%) cite "emergency" or "unexpected" expenses as the principal reason for requiring a payday loan.

- A further 17% said they took out a payday loan to avoid service charges on bills or bouncing checks.

- Only 6% of customers said they took out a payday loan to "buy something".

- Only 21% indicated they took out a payday loan because they had "no other option" - countering the popular notion that this is the primary reason for seeking a payday loan.