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When Patrick O\u2019Connell picks up the phone these days to help Prince Edward Islanders in financial distress, he\u2019s hearing a familiar concern: the rising cost of living, which is driving people deeper into debt.<\/p>\n
O’Connell, a licensed insolvency trustee for P.E.I. with Allan Marshall & Associates, said many of the Islanders he speaks with are struggling to make ends meet as everyday expenses continue to climb.<\/p>\n
He said last month was the busiest his firm has ever been on the Island, handling more insolvency files on P.E.I. than ever before. <\/p>\n
“Pretty much over 90 per cent of the people now would be saying, \u2018I just can’t keep up with my groceries and with gas and on my current income, it’s just everything seems to be going up, and my income hasn’t gone up… at the same rate as my expenses,\u2019\u201d O’Connell told CBC News.<\/p>\n
Debt-to-income ratio rises<\/p>\n
Recent data from Statistics Canada shows debt payments are eating up a bigger share of Canadians\u2019 monthly income once again.<\/p>\n
The ratio of Canadian household debt-to-income had been declining every quarter since 2023, but since the third quarter of 2024, that trend has reversed.<\/p>\n
Household credit market debt as a proportion of household disposable income rose to 174.9 per cent in the second quarter of this year, up from 172.2 per cent in the third quarter of 2024.<\/p>\n
In other words, Canadians owed $1.75 in credit market debt for every dollar of household disposable income in the second quarter.<\/p>\n
Susan Eisner, CEO of Solve Your Debts \u2014 a non-profit debt management group serving Atlantic Canadians \u2014 said her organization is also seeing more clients struggling to manage day-to-day costs.<\/p>\n
\u201cInflation may have slowed, but of course, affordability has not improved for many households,\u201d Eisner said.<\/p>\n
\u201cPeople are just relying on credit, and their availability to credit, just to make ends meet. So it’s not maybe frivolous spending or on the fun things anymore. It’s on groceries and gas and phone bills and things like that, just trying to get through.\u201d<\/p>\n
The hidden cost of fast cash<\/p>\n
O\u2019Connell said his firm has noticed a growing number of people turning to payday loans to make ends meet.<\/p>\n
He warned that many payday loan companies now operating online may not be properly licensed or even based in Canada.<\/p>\n
\u201cIf the debtor can’t pay it back, they’re very aggressive with their collection activities,\u201d he said.<\/p>\n
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Susan Eisner, CEO of Solve Your Debts, says affordability has not improved for many households, causing people to rely on credit for necessities like groceries and gas. (Solve Your Debts)<\/p>\n
Eisner said her organization has seen the same trend.<\/p>\n
Eisner said that while most provinces have legislation regulating payday loans and licensing requirements, her group has noticed a rise in unlicensed, unregulated lenders since the pandemic.<\/p>\n
She said these operators often ignore the rules and are difficult to hold accountable because they work online. They could be running their business from a coffee shop, a basement or virtually anywhere, making it a challenge to track their actual location.<\/p>\n
\u201cThey’re harassing people. They’re charging fees that are criminal. And, you know, once people get into these loans, in these situations, the pressure builds, and then they have to get another one and another one and another one,\u201d Eisner said.<\/p>\n
\u201cWe’ve seen clients that have had upwards of 10 to 15 payday loans at one time.\u201d<\/p>\n
Eisner said these lenders can often offer cash very quickly, even within hours, but at a cost: Borrowers are typically required to give pre-authorized access to their bank accounts, which allows lenders to withdraw funds on payday, leaving borrowers vulnerable to high interest rates and mounting fees.<\/p>\n
\u2018You’re not alone. There’s help\u2019<\/p>\n
Eisner said people feeling overwhelmed by debt shouldn’t delay reaching out for help.<\/p>\n
\u201cThere still is a stigma around financial issues. Nobody likes to talk about it. Nobody likes to feel like they failed or like they’ve done the wrong thing. But you’re not alone. There’s help, and reach out sooner than later,\u201d she said.<\/p>\n
\u201cDon’t wait for the collection calls. Don’t wait till you can’t pay the bills. Don’t wait till the mortgage is coming due.\u201d<\/p>\n
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It’s important for families to talk openly about money, says Patrick O’Connell. (Submitted by Patrick O’Connell)<\/p>\n
O\u2019Connell agrees. He said it\u2019s important for families to talk openly about money.<\/p>\n
\u201cThe first thing would be \u2014 before you ever use a credit card or a loan or a line of credit \u2014 that you sit down at home or somewhere with your family and you say, \u2018If we spend this money on this credit card or this loan or this line of credit, do we have a plan to pay this back?’\u201d<\/p>\n
He said learning basic budgeting skills can also make a big difference, adding that the Office of the Superintendent of Bankruptcy<\/a> website offers free resources and tools to help Canadians improve their money management.<\/p>\n Meanwhile, Eisner said the financial pressure Canadians are feeling now could get worse next year.<\/p>\n