MNP Consumer Debt Index Highlights Divergent Experiences of Canadians during COVID

Lower-income earners, young Canadians, women, and renters most at risk of debt-burden or insolvency

MNP Consumer Debt Index Sinks to Second-Lowest Reading Since Inception (94pts)

CALGARY, AB – October 13, 2020 – As the country enters its seventh month of economic disruption, the pandemic recession is putting a spotlight on the divergent experiences of Canadians during COVID. 

“In many ways, our MNP Consumer Debt Index highlights the divergent experiences of Canadians during COVID. While some are able to continue working in their present jobs, but from home, others continue to struggle with financial uncertainty and not knowing whether their job will still be around after the pandemic,” says Grant Bazian, President at MNP LTD, the country’s largest insolvency firm.

Now in its fourteenth wave, the quarterly MNP Consumer Debt Index conducted by Ipsos tracks Canadians’ attitudes about their debt situation and ability to meet their monthly payment obligations. The Index currently stands at 94 points, the second-lowest reading ever — on the heels of a record-low in March of this year. Those earning less than $40,000 a year, renters, women, and millennials are the most likely to say their current debt situation is worse than it was in the past. These groups are also at higher risk of insolvency, according to the research.  

“Unemployment and debt challenges were already present before the pandemic. The income loss as a direct result of the pandemic limits more Canadians from being able to pay off existing debts and thus puts them in severe financial distress,” says Bazian.

Several indicators making up the MNP Debt Index point to debt trouble, particularly as payment deferrals and government emergency aid programs wind down. Half (47%) of Canadians now say they are $200 or less away from insolvency, a four-point increase from the last wave. This includes 26 percent who are already insolvent to begin with, also up four points.

Younger Canadians, women, renters, and lower-income earners are more likely to find themselves in trouble. For instance, those who rent are significantly more likely to be insolvent; almost six in 10 (57%) renters say they are $200 or less away from insolvency, including 32 percent who say they’re already insolvent.

It is no surprise, then, that three in 10 (31%) renters say they regret the amount of debt they’ve taken on in life, and only 31 percent say they’re able to cover their living expenses for the next 12 months without going into further debt. 

Generation Z Canadians seem to be the most deeply impacted by the economic downturn, losing out on either summer employment or jobs in the hard-hit hospitality sector. Seven in 10 (69%, +16) are $200 or less away from insolvency, including four in 10 (39%, +8) who already are. Half of women (49%, +4) also say they are dangerously close to insolvency, with a quarter (25%, +3) saying they’re already there. Households earning less than $40,000 a year are the most likely (67%, +4) to find themselves $200 or less away from insolvency, which includes four in 10 (38%, +6) who already are.

There are other signs more trouble could be on the horizon as bills quickly become due. Four in 10 Canadians (43%, +3) say they’re worried about their current level of debt, the second-highest proportion since 2017 (peaking 46 percent in March 2020). Furthermore, whether one has a job or not, the fact remains that four in 10 (39%) are still worried either they or someone in their household could lose their job; unchanged from the last wave. And, women are increasingly concerned about job loss in their household (42%, +3).

“Given the challenges this year has presented and the underlying issues which pre-date the pandemic, many Canadians are now in a position where they need help to deal with their debt. These individuals need to know there is a vast system in place — a network of MNP Licensed Insolvency Trustees across the country who can offer customized guidance to help them determine the best path forward,” says Bazian. “Bankruptcy is one option, but it is really the last course of action after exhausting all other available avenues.”

Licensed Insolvency Trustees are the only federally regulated debt professionals who can provide expertise on all debt relief options and ensure those struggling financially have access to the complete range of solutions available.   

Bazian says that depending on the extent of the debt and the individual’s income, dealing with debt problems may involve some combination of the following:

1. Budgeting — Creating a monthly financial plan to help track income and expenses and potentially free up more cash to pay down debts.

2. Refinancing — Re-negotiating the term and interest rate on existing credit accounts to reduce the monthly cost of debts and make them easier to repay.

3. Liquidating — Selling high-value assets such as vehicles, recreational properties, sporting goods, and jewelry to provide the financing needed to pay down debt.

4. Consolidating — Combining all debts into a single monthly payment with a lower average interest rate to reduce the number of payments and their total cost.

5. Consumer Proposal — Working with an MNP Licensed Insolvency Trustee to negotiate a legally binding debt settlement with creditors that will reduce the amount owing, and which can take up to five years to repay.
   
   
6. Bankruptcy — A legal process that provides immediate protection to individuals experiencing financial trouble and can extinguish debts through a combination of asset liquidation and (potentially) monthly payments.
   
   Bankruptcy may be the right option for those who have (1) had wages garnished, (2) are unable to make credit card and loan payments on time, (3) are receiving past due notices or calls from debt collectors, or (4) who owe more money than the value of things they own.

“Everyone’s debt situation is different, so don’t just rely on what people have told you or what you’ve read online. Get professional, unbiased advice,” says Bazian.

MNP LTD offers free consultations via videoconferencing and by phone. Visit MNPdebt.ca to book an appointment or to start a live chat.

Other survey highlights include:

• Over half (56%, +6) of millennials say they regret the amount of debt they’ve taken on in life.
• Groups that are less confident in their ability to cover their living and family expenses in the next 12 months without taking on more debt include women (57%, -1) and Gen Z Canadians (48%, -6), with the latter group showing the deepest decrease since the last wave.
• Over four in 10 (44%, +5) households in the $40,000 - $60,000 bracket find themselves $200 or less away from insolvency, including 22 percent who are already insolvent (+6). One in three (35%, +7) households earning $60,000 - $100,000 a year say the same — of which 17 percent are insolvent (+5). One-quarter (24%, -1) of households earning over $100,000 a year say they can’t meet their debt obligations, and 15 percent of these households say they are already insolvent (-3).
• Those in Quebec are reporting the highest increase of those who are insolvent (26%, +8), bringing the total proportion of Quebecers who are within $200 or less from insolvency to 51 percent (+10).

About MNP LTD

MNP LTD, a division of the national accounting firm MNP LLP, is the largest insolvency practice in Canada. For more than 50 years, our experienced team of Licensed Insolvency Trustees and advisors have been working with individuals to help them recover from times of financial distress and regain control of their finances. With more than 230 offices from coast-to-coast, MNP helps thousands of Canadians each year who are struggling with an overwhelming amount of debt. Visit MNPdebt.ca to contact a Licensed Insolvency Trustee or use our free Do it Yourself (DIY) debt assessment tools. 

About the MNP Consumer Debt Index

The MNP Consumer Debt Index measures Canadians’ attitudes toward their consumer debt and gauges their ability to pay their bills, endure unexpected expenses, and absorb interest-rate fluctuations without approaching insolvency. Conducted by Ipsos and updated quarterly, the Index is an industry-leading barometer of financial pressure or relief among Canadians. Now in its fourteenth wave, the Index currently stands at 94 points, the second-lowest reading ever, on the heels of having hit record-low in March of this year. Visit MNPdebt.ca/CDI to learn more.

The latest data, representing the fourteenth wave of the MNP Consumer Debt Index, was compiled by Ipsos on behalf of MNP LTD between September 1-3, 2020. For this survey, a sample of 2,001 Canadians aged 18 years and over was interviewed. Weighting was then employed to balance demographics to ensure that the sample’s composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±2.5 percentage points, 19 times out of 20, had all Canadian adults been polled. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to, coverage error and measurement error.

A summary of some of the provincial data is available by request.