Payday Loan Customer Survey~ New Brunswick & Nova Scotia ~

Presented to:Canadian Payday Loan Association

October 2007

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The Canadian Payday Loan Association (CPLA) commissioned POLLARA to conduct a telephone survey of payday loan customers in New Brunswick and Nova Scotia to develop an understanding of payday loan customers’ perceptions of the payday loan industry.

The CPLA represents 23 companies with 501 retail financial services outlets across Canada. Member companies service nearly 2 million Canadians a year by providing short term loans in small amounts to help cover unanticipated expenses.

Lists of payday loan customers were provided by CPLA members. In total, 5,836 records were used for this study.

POLLARA conducted a total of 400 telephone interviews with payday loan customers in New Brunswick and Nova Scotia between August 18th and August 29th, 2007, resulting in an overall margin of error of plus or minus 4.9%, nineteen times out of twenty.

Methodology

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Profile of Respondent Payday Loan Customers in New Brunswick and Nova Scotia

The average age of a respondent payday loan customers in New Brunswick and Nova Scotia is 39 years.

The vast majority are employed full-time (76%).

The majority (59%) of respondent payday loan customers have a post-secondary education from community college (34%), university (18%) or post-graduate/professional programs (7%).

One-half (50%) are married, while 17% are separated or divorced, and 31% have never been married.

Respondent payday loan customers would expect to pay, on average, $28.04 for interest and administration fees to borrow $100 for two weeks.

On average, two-thirds (63%) of respondent payday loan customers normally borrow less than $300 when they get a payday loan.

The average amount of money that respondent payday loan customers in New Brunswick and Nova Scotia currently owe to financial institutions, excluding mortgages, is $23,149.

Respondent payday loan customers have household incomes generally on par with the general population of New Brunswick and Nova Scotia. 56% of the NS and NB residents report household incomes of less than $50,000 a year, compared to 51% of respondent payday loan customers.

Key Findings

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Profile of Respondent Payday Loan Customers in New Brunswick and Nova Scotia (Continued)

Almost all respondent payday loan customers currently have a debit card (99%) and a chequing account

at a bank or credit union (93%). At least half have a savings account at a bank or credit union (62%) or

a major credit card (55%).

Payday Loans Companies vs. Other Financial Institutions

Respondent payday loan customers rate their impressions of payday loan companies lower than other

financial institutions, expect credit card companies (credit card companies receive an average

impression rating of 5.4, while payday loan companies receive a rating of 5.8). Banks receive the

highest average impression rating at 6.8.

There is no significant difference in awareness of the approximate amount of money payday loan

customers pay for all fees for their loans with various financial institutions. The majority of respondents

are aware of the approximate amount they pay for all fees, including administration fees and interest

charges on their payday loans (67%), for their various bank accounts (70%) and credit cards (74%).

Key Findings

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Why Payday Loans?

According to the majority of respondents, the attraction of payday loans has to do with the process being quick and easy (55%), while about one-in-five say the most important reason for their acquiring a payday loan is that they have more convenient locations (18%).

Only 15% of respondent payday loan customers indicate that they use payday loans because they have no other alternative sources for borrowing.

The main reason for securing a payday loan, according to respondents, is that they needed money to pay for necessities (38%). One-in-three (30%) say they needed a payday loan to help with an unexpected expenses, like a car or household expense.

More than four-in-five (84%) respondent payday loan customers say they paid all of the loans that they received in the past back on time, while 13% said they paid most of their loans back on time.

Satisfaction with Payday Loan Experience

On average, respondent payday loan customers rate their satisfaction with their understanding of the terms of their payday loan and when payment on the loan was due at 8.8 out of 10.

Also rated high is satisfaction with the way they were treated by the customer service representative who provided the loan (8.9) and the overall customer service experience (8.6).

Respondent payday loan customers rate payday loan providers higher than banks and credit unions regarding ‘long hours of operation’, ‘fast’, ‘convenient’, ‘easy to use’, ‘good service’, and ‘respectful to me’. Additionally, customers rate payday loan providers higher than credit unions concerning ‘good value’.

Key Findings

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Impressions of Institutions

Q3-7. I’d like to ask you some questions about different kinds of companies in Canada. Using a scale of 1 to 10, where one is “not at all favourable” and ten is “very favourable”, how would you rate your impression ofeach of the following groups of businesses in Canada? (READ AND ROTATE)

4% 29% 42% 10% 9% 7%

11% 32% 37% 13% 8%1%

11% 35% 32% 8% 6% 9%

8% 30% 24% 6%5% 28%

10% 51% 31%4%

3%1%

0% 20% 40% 60% 80% 100%

Banks

Credit Unions

Home And Car Insurance Companies

Payday Loan Companies

Credit Card Companies

Mean:

6.8

6.2

6.2

5.8

5.4

VeryFavourable (10)

SomewhatFavourable (7-9)

Neutral(4-6)

Not VeryFavourable (2-3)

Don’t Know/Refused

Not At AllFavourable (1)

Although banks top the list (at 6.8), respondent payday loan customers in New Brunswick and Nova Scotia do not have a strong favourable impression of the various credit providers mentioned.

Respondent payday loan customers give credit card companies a lower impression rating than payday loan companies (5.4 compared to 5.8, respectively).

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Financial Products or Services Ever Used

Q2A-D. Which of the following financial products or services have you ever had or used in the past? (READ AND ROTATE LIST; ALLOW MULTIPLE MENTIONS)

43% 57%

62% 38%

65% 35%

100%

0% 20% 40% 60% 80% 100%

A payday loan

A personal loan with a bankor credit union

A car loan

A line of credit

Yes No Don’t Know/Refused

All survey participants have, at some point, been payday loan customers.

More than three-in-five respondent payday loan customers in New Brunswick and Nova Scotia have a personal loan with a bank or credit union (65%), or a car loan (62%).

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Financial Products or Services Currently Use

Q8A-G. Which of the following financial products or services do you currently have? (READ AND ROTATE LIST; ALLOW MULTIPLE MENTIONS)

23% 77%

30% 70% 1%

40% 59% 1%

55% 45% 1%

62% 38% 1%

93% 7%

99% 1%

0% 20% 40% 60% 80% 100%

A debit card

A chequing account at a bankor credit union

A savings account at a bankor credit union

A major credit card, such as VISA, MasterCard, AMEX

Overdraft protection at your bank

A home mortgage

A retail credit card, such as a Canadian Tire Card, Sears Card, or a Gas Card

Yes No Don’t Know/Refused

The vast majority of respondent payday loan customers have a debit card (99%) and a chequing account at a bank or credit union (93%).

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Satisfaction with Financial Services and Products

Q9-19. Thinking about the following financial products or services overall, please tell me how satisfied are you with each product or service that you use? Please use a scale from one to ten where 1 means you are “very dissatisfied” and 10 means you are “very satisfied” with the product or service. (READ AND ROTATE)

49% 30% 11% 9%0.02

51% 37% 5%5% 2%

58% 27% 2%4% 10%

60% 32% 5%3%

62% 17% 2%8% 11%

63% 18% 4%4% 10%

76% 20% 2%1%2%

81% 16%1%1%

82% 14%2%2%

83% 14%2%1%1%

89% 8%2%1%

0% 20% 40% 60% 80% 100%

Debit card

Overdraft protection at your bank

Home mortgage

Chequing account at a bank or credit union

Savings account at a bank or credit union

Car loan

Line of credit

Credit card

Personal loan with bank or credit union

Retail credit card

Payday loan

Mean:

8.6

8.0

8.0

8.0

7.8

7.2

7.0

6.8

7.1

6.4

6.1

Satisfied (7-10)

Neutral(4-6)

SomewhatDissatisfied (2-3)

VeryDissatisfied (1)

Respondent payday loan customers in New Brunswick and Nova Scotia are most likely to express satisfaction with their debit card (providing an average rating of 8.6 out of 10).

In contrast, satisfaction with a payday loan is rated slightly lower than credit cards (6.1, compared to 6.4, respectively).

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Knowledge of Fee Payment

Q20-23.Thinking about the various financial products that you hold, do you know the approximate amount that you pay for all fees, including administration fees and interest charges on...? (READ AND ROTATE; What about on...?)

67% 28% 6%

70% 26% 5%

74% 23% 2%

76% 22% 2%

0% 20% 40% 60% 80% 100%

Your home mortgage

Your major credit card

Your savings or chequing account at a bank or credit union

Your payday loan

Yes No Don’t Know/Refused

The majority of respondent payday loan customers report that they are aware of the approximate amount that they pay for all fees, including administration fees and interest charges on their mortgages (76%), major credit cards (74%), savings and chequing accounts (70%), and payday loans (67%).

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Solution to Short Term Financial Need

Q25. If you needed, say, $300 a few days before your next payday, what would you do? (DO NOT READ; PROBE: “Is there anything else?”; ALLOW MULTIPLE MENTIONS)

3%

1%

1%

2%

4%

7%

15%

15%

18%

24%

63%

0% 20% 40% 60% 80%

Use A Payday Advance Or Payroll Loan Company

Borrow From A Family Member

Get A Cash Advance From Credit Card

Do Without/Wait Until Payday

Borrow From A Friend

Use Bank Over-Draft Protection/Line Of Credit

Withdraw Money From SavingsAccount/Other Investments

No Need/Never Short Of Cash

Borrow From An Employer

Other

Don’t Know/Refused

Two-thirds (63%) of respondent payday loan customers in New Brunswick and Nova Scotia say they would use a payday advance or payroll loan company if they needed $300 a few days before their next payday.

One-quarter (24%) say they would borrow the money from a family member.

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Reasons to Choose Payday Loan

Q27. There are many reasons why people choose to obtain a payday loans instead of getting other financial products or services. What was the most important reason you chose to obtain a payday loan in the past rather than using another source of financing? (DO NOT READ LIST; PROBE: Any other reasons?)

5%

9%

4%

4%

4%

6%

7%

8%

15%

18%

55%

0% 20% 40% 60% 80%

Quick And Easy Process

A More Convenient Location

No Other Alternative Source For Borrowing

Discipline Of A Short Term Or Revolving DebtForces Me To Pay It Back More Quickly

Necessity/Needed it in an Emergency

Bad Credit/No Credit Check

Less Expensive Than Other Sources Borrowing Cash

Greater Privacy

Less Harm To My Credit

Other

Don’t Know/Refused

The majority (55%) of respondent payday loan customers feel the most important reason for choosing to obtain a payday loan in the past rather than using another source of financing was because it is a quick and easy process.

Only 15% of respondent payday loan customers feel they use payday loan because they have no other alternative source for borrowing.

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Reasons Payday Loans are Needed

Q28. Which of the following was the main reason why you needed a payday loan? (READ LIST)

2%

2%

4%

7%

7%

10%

30%

38%

0% 20% 40% 60% 80%

For ‘Emergency’ Cash To Pay For Necessities

To Help Out With An Unexpected Expense,Like A Car Or Household Repair

To Help Avoid Late Charges On Routine Bills

To Help Get Through Temporary Reduction In Income

To Avoid Bouncing Cheques

To Buy Something You Wanted

Other

Don’t Know/Refused

Two-in-five (38%) respondent payday loan customers in New Brunswick and Nova Scotia report the main reason why they needed a payday loan was for emergency cash to pay for necessities.

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Amount Normally Borrowed with Payday Loan

Q30. On average, how much money do you normally borrow when you get a payday loan? (ENTER DOLLAR AMOUNT ONLY. NO CENTS)

13%

50%

29%

8%

0%

20%

40%

60%

80%

100%

$1-$150 $151-$300 $301+ Don’t Know/ Refused

Mean: $312.60

On average, two-thirds (63%) of respondent payday loan customers normally borrow less than $300 when they get a payday loan.

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Payday Loan Payments

Q31. Thinking about all the payday loans you received in the past, did you pay back all, most, some, or none of the loans back on time?

Paid Back Some Of The

Loans On Time1%

Paid Back Most Of The Loans

On Time13%

Paid Back None of Loans On

Time1%

Paid Back All The Loans On

Time84%

More than four-in-five (85%) respondent payday loan customers in New Brunswick and Nova Scotia report they paid all the loans they received in the past back on time.

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Satisfaction with Payday Loan Experience

Q32-35. Thinking about all the payday loans you received in the past, did you pay back all, most, some, or none of the loans back on time?

20% 32% 27% 10% 10%3%

46% 43% 8%1%2%1%

53% 35% 9% 2%1%1%

53% 40% 5%1%2%1%

0% 20% 40% 60% 80% 100%

The way you were treated by the customer service representative who provided your loan

Your understanding of the terms of the loanand when payment on the loan was due

The overall customer service experience

The total cost of the payday loan, including interest and administration fees

Mean:

8.9

8.8

8.6

6.3

VerySatisfied (10)

SomewhatSatisfied (7-9)

Neutral(4-6)

SomewhatDissatisfied (2-3)

VeryDissatisfied (1)

The vast majority of respondents said they are satisfied with the way they were treated by the customer service representative who provided their loan (93%) and the their understanding of the terms of the loan and when payment on the loan was due (88%).

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Attributes of Financial Institutions

Q35-41. (READ AND ASK ALL) Now I would like you to think about three types of companies that offer cash advances or loans, namely, banks, credit unions, and payday loan providers. I am going to read you a list of attributes that you might consider when getting a cash advance or short-term loan, and I would like you totell me which of the three providers you think is best described by the attribute. (READ AND ROTATE)

26% 14% 54% 7%

48% 8% 37% 8%

50% 9% 34% 7%

69% 5% 25% 1%

79% 5% 15% 1%

84% 3% 12%1%

86% 2%10%2%

0% 20% 40% 60% 80% 100%

Long hours of operation

Fast

Convenient

Easy to use

Good service

Respectful to me

Good value

Payday LoanProvider

CreditUnion

Bank Don’t Know/Refused

Respondent payday loan customers rate payday loan providers higher than banks and credit unions regarding ‘long hours of operation’, ‘fast’, ‘convenient’, ‘easy to use’, ‘good service’, and ‘respectful to me’. Also, respondents rate payday loan providers higher than credit unions concerning ‘good value’.

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Payday Loans & Related Issues

Q43-45. I’m going to read you a list of statements. For each, please indicate whether you agree or disagree, using a scale from one to ten where one means you “disagree strongly” and ten means you “agree strongly”.(READ AND ROTATE)

6% 8% 12% 8% 65% 2%

46% 32% 17% 3%2%1%

47% 33% 17% 2%2%1%

0% 20% 40% 60% 80% 100%

Since the large banks may not provide short-term loans for small amounts, Canadians who need or want these

services should have the option of obtaining them from payday loans providers

Since credit cards can be used at any time, as long as the credit limit is not exceeded, you should also be

allowed to get a payday loan whenever you need it, as long as you repay the loan

If you take out a payday loan, the payday loan provider should be able to share your personal financial

information with other lenders, banks and credit unions

Mean:

8.3

8.1

2.6

StronglyAgree (10)

SomewhatAgree (7-9)

Neutral(4-6)

SomewhatDisagree (2-3)

DisagreeStrongly (1)

Don’t Know/Refused

Eight-in-ten (80%) respondent payday loan customers agree that since large banks may not provide short-term loans for small amounts, Canadians who need or want these services should have the option of obtaining them from payday loans providers.

Two-thirds (65%) of respondent payday loan customers strongly disagree that a payday loan provider should be able to share your personal financial information with other lenders, banks, and credit unions.

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