Paper explores impact of consumer protection on vulnerable borrowers

Man holding open an empty wallet

New research from York University’s Schulich School of Business shows consumers are ambivalent toward stricter government consumer protection interventions in Alberta’s payday loans industry.

Ela Veresiu
Ela Veresiu

The findings are contained in the paper, “Vulnerable Consumer Experiences of (Dis)Empowerment with Consumer Protection Regulations,” recently published in the Journal of Consumer Affairs. The article was co-written by Ela Veresiu, associate professor of marketing at Schulich, together with Schulich’s most recent marketing doctoral graduate, Rowan El-Bialy (now an assistant professor of marketing at the University of Arizona’s Eller College of Management); Mohammed El Hazzouri, an associate professor at Dalhousie University; and Kelley Main, dean of the Faculty of Graduate Studies and a professor of marketing at the University of Manitoba’s Asper School of Business. 

As payday loans are a highly unequal service relation of power and domination that empowers lenders by positioning disempowered borrowers as indebted and solely responsible for future obligations, the study set out to examine how increased consumer protection regulations affect financially vulnerable consumers’ experiences.

“We chose the location of Alberta, Canada as our study’s context for two main reasons,” says El-Bialy. “Alberta was the first province in Canada to introduce stricter regional-wide payday loan regulations intended to protect consumers, and Alberta has a large population that experiences financial vulnerability due to multiple economic, historical and political factors.”

“We do not find a straightforward answer, rather some payday loan consumers perceive stricter regulations as either empowering, disempowering or both, depending on their individual situations,” notes Veresiu. “For example, the most vulnerable consumers in our sample, namely those receiving government support and those with multiple, precarious sources of income, found it harder to obtain a payday loan after the new regulation was put in place, especially if they owed previous debts.”

The results of this research demonstrate that stricter consumer protection regulations in the context of the payday loan industry have produced several favourable short-term outcomes for financially vulnerable consumers, thus empowering them. It is, however, necessary to recognize that the payday lending industry is dynamic and that regulations will need to continue evolving alongside it.