Blogger Beware

For our Buyer Beware Ad project we investigated payday loans at Money Mart. We were concerned with the rates that fringe banking companies like Money Mart charge its customers. We also wanted to compare the rates of payday loans to mainstream banking services like credit cards and lines of credit. We were interested in the government regulations regarding payday loans. And also wanted to know the reason people used payday loans rather than other alternatives out there. Our ultimate goal was to inform the public about the legitimacy of payday loans.

Our primary research included visiting Money Marts, RBC and interviewing a person that has used payday loans in the past. Our secondary research was mainly online.


Our research revealed that Money Mart payday loans are much more expensive than other mainstream banking loan or credit card services. They are a useful service for people that are caught with unexpected bills like car repairs and need cash right now. But they should not be relied upon as a regular source of cash because it can lead to a cycle of debt and poverty that is difficult to get out of. For example, in Manitoba Money Mart charges $19.50 per $100 borrowed and it is due to be paid back the following payday. A payday loan is like a credit card that is already a month overdue and the interest is compounded every 14 days instead of every 30 days.

Finding a 2005 report on Fringe Banking in Winnipeg’s North End was the research highlight for me. It contained valuable general fringe banking information and had research and survey data specific to Winnipeg.

Another important research discovery was the fact that Manitoba’s payday loan regulations are being updated on October 18, 2010.…just five days after our project is due. This was significant because it shows how topical our project is and its importance in today’s economy.

Low income and under educated users of fringe banking services are often not aware of alternatives offered by mainstream banks. And if they are aware they often choose fringe banking services because they feel more respected at those establishments than at mainstream banks.

Education is the key to preventing existing and potential fringe banking clients from getting caught in a cycle of debt that these services can often lead to; education for consumers about general financial management practices and the alternatives to the over-priced fringe banking services; and education of mainstream banks of the expectations and needs of low income clients so that potential clients feel more welcome at their banks. This education of consumers and bankers will increase bank clientele and help improve the financial management skills of low income individuals so that they do not have to rely on fringe banking services.

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