COVID-19's Financial Impact on Canadian Consumers: Week 2

As the COVID-19 pandemic creates major economic and financial distress for consumers around the globe, in Canada, millions of jobs are affected or at risk. In an effort to help organizations make sound decisions, TransUnion is conducting weekly surveys to better understand consumers’ evolving perceptions and expectations. Here are the main findings from week two.

More consumers affected but seeing short-term relief on the horizon

The outbreak’s reality has hit consumers of all generations and income levels. Compared to just a week ago, significantly more Canadians are being stressed financially. However, the launch of the Canadian Emergency Response Benefit (CERB) may be helping as fewer consumers report concern about their ability to pay bills over the short term.

Sixty-three percent say household income has been impacted

Data collected in the week ending 6 April shows:

• More than three out of five (63%) Canadians are currently financially affected — a significant increase over just last week (57%)
• The Atlantic region of Canada had the lowest percentage of consumers impacted by job losses (6%); but the highest proportion of small business owners financially affected (17%)
• The youngest generations have been most affected by unemployment, with 38% of Gen Z and 34% of Millennials indicating they’d lost their job.

Sixty-five percent affected by reduced hours or job losses

Of the 63% of Canadians financially affected by COVID-19:

• Thirty percent indicated this was due to a reduction in working hours (33% in week one)
• Twenty-five percent stated they’d lost their job (23% in week one)
• Ten percent were small business owners reporting a loss of income or having to close (9% in week one)

Of those not currently impacted financially, 8% are expecting to be at some point (down from 10% in week one), while 15% aren’t sure if their household income will be affected (no change from week one).

Sixty-eight percent concerned about ability to pay bills and loans

This is down slightly from the previous week (70%) and possibly linked to the launch of the Canadian Emergency Response Benefit (CERB), which could also be positively affecting short-term consumer confidence. This week, 40% of those impacted think they can go one to three months before not being able to pay bills, up from 34% in week one.

Impacted Canadians said they won’t be able to pay:

• Credit card debt (53%)
• Auto loans (24%, up 26% from week one)
• Personal loans (22%, up 38% from week one)

And while comparatively lower in the bill payment rankings, one concerning development was consumers’ inability to pay medical bills increased over 50% week-over-week.

Budget shortfall is C$959.20

On average, affected consumers expect they’ll be short by C$959.20 (up 2.8% from C$933.40 in week one) when paying bills or loans. The number of consumers short less than C$250 has decreased, while those short between C$1,000 and C$2,000 has increased. There’s an expectation of inability to pay bills or loans in 6.4 weeks (5.8 weeks in week one).

Thirty-three percent plan to pay only a portion of bills or debt

With one out of three (33%) impacted Canadians planning to partially pay bills or debt, the country’s already high debt balance per consumer will increase. To bridge the payment gap:

• Twenty-one percent plan to borrow money from a friend or family member (down from 25% in week one)
• Twenty-five percent will use money from tax-free savings accounts or registered retirement savings plans (double the 12.5% choosing this route in week one)
• Ten percent will take out personal loans for short-term liquidity (double since week one)
• Thirty-six percent have reached out to lenders to discuss payment options (25% in week one)

Payback plans vary across regions. In Western Canada, 70% of consumers are concerned about their ability to pay bills and loans (69% in week one), compared with 67% in the Central Region (70% in week one), and 58% in the Atlantic Region (69% in week one).

Pay attention to fraud risks

As the world adjusts to newly implemented working practices, fraudsters have been quick to find ways of exploiting the pandemic — targeting businesses and individuals.

Over a quarter (27%) of Canadians have been targeted by a fraud scheme related to COVID-19. This includes 25% who didn’t become a victim and 2% who did. Almost one in three Canadians said they’re using free credit monitoring available through many major banks and lenders.

It’s important organizations be proactive in guarding against these attacks. You can educate employees and customers on what to look out for, review monitoring strategies and empower consumers to monitor their own accounts, and update breach response toolkits.
 

Additional resources:

To help businesses and consumers navigate this difficult time, we’re constantly developing helpful resources. To learn more about our weekly consumer research and download the latest reports and infographics, visit https://www.transunion.ca/financial-hardship-study.