Families of Color Hold More Consumer Debt Compared to White Families

5 mins read · February 3, 2021
DUCA Impact Lab

Statistics · Banks · Credit Unions · Black Communities · Indigenous Peoples · People of Colour

This report establishes the context for the existing inequities in the financial system in Canadian communities.

Summary

In partnership with the Angus Reid Group, DUCA Impact Lab conducted their second State of Fair Banking in Canada study. This study reveals significant differences in Canadians’ banking experiences, particularly during the pandemic. The project conducted a survey of borrowers and a survey of employees of lending institutions and examined similarities and differences in financial behaviours and perspectives among these two groups.

For the 2020 study, the authors added new questions to explore the state of fair banking across ethnic groups, comparing experiences of White, Black, People of Colour, and Indigenous borrowers.

Methodology

Two groups were surveyed in this research:

• Borrower segment: A randomized sample of 1,006 Canadian adults who have held personal household debt over 12 months. The sample frame was balanced on age, gender, region. and ethnic groups that were Black, Indigenous, and People of Colour, with all respondent sample sizes of White (n=853), Black (n=224), Indigenous (n=269), People of Colour (n=262) for the year 2020.

• Lender segment: A randomized sample of 250 Canadian adults employed or who have worked in the past two years at a lending institution (credit union, bank, financial technology company, lending company, or private lender). All respondents are members of the Angus Reid Forum.

Key Findings

Despite small shifts from 2019, the composition of Canadians’ debt remains essentially the same. Credit card debt remains a common form of non-mortgage debt, while payday loans, student loans, and private loans are the most difficult to shed (with the higher principal or interest rates).

People of Colour & Indigenous Canadians

Looking at borrowers by ethnicity, Black and Indigenous Canadians report worse financial outcomes overall.

• 74 percent of Black Canadians and 67 percent of Indigenous people have high-interest debt (including ongoing balances on credit cards or payday loans).

• Roughly one in five Canadians of colour and Indigenous Canadians report being treated worse than white Canadians by financial institutions across various categories, and this was more pronounced among Black Canadians. In turn, lenders are split in their assessment and are more likely to think people of colour/Indigenous Canadians receive better service levels.

• The COVID-19 pandemic has disproportionately affected Black and Indigenous Canadians, who were more likely to report falling behind on debt payments and financial goals. While people of colour are more likely to have approached their financial institution during this time, many Black Canadians still needed help but were reluctant to do so.

Effect of Debt on Health and Health Services

• The lack of ability to address health care needs due to having personal debt is highest among Indigenous borrowers. When asked, "Do you think your personal debt has impacted your life in any of the following ways?", about 33 percent responded they had to skip meals due to debt troubles.

• However, all three non-White groups tend to report a higher negative impact than White borrowers, with only 68 percent of White individuals saying no to having any troubles with health care needs.

Takeaways

On aggregate, average figures can overlook important dynamics related to wealth gaps between groups. Insights like these help inform us about different financial experiences different groups have in Canada and highlight the need to develop financial products and services that help equity-deserving households achieve financial stability and manage their credit and debt effectively. 

To review the full study results or learn more about DUCA and the DUCA Impact Lab, please visit https://ducaimpactlab.com/ideas/.

References

DUCA Impact Lab. (2021, February 3). State of Fair Banking in Canada Borrower and Lender Perspectives. DUCA Impact Lab.