Nearly half of all insolvencies in 2022 were filed by Millennials, even though they make up less than 27 per cent of total Canadian adults, according to a new study.
Millennials owed an average of $47,283 in unsecured debt, according to the study conducted by Ontario-based Licensed Insolvency Trustees Hoyes, Michalos & Associates Inc.
The report says Millennials were the only age group to see a rise in their unsecured debt obligations last year.
“The average insolvent Millennial is just 33 years old, yet they are 1.7 times more likely than Baby Boomers and 1.4 times as likely as Generation X to file insolvency, relative to the population,” licensed insolvency trustee Ted Michalos said in the report released on Monday. “We’ve noticed an overall trend since 2016 that the average insolvent borrower continues to get younger, with student loan debt and extremely high-cost loans being the main drivers of their insolvency.”
KEY FINDINGS
More than one in three Millennials carried student loan debt, owing on average $16,725, and student debt represented 30 per cent of their total unsecured debt load.
More than half had at least one extremely high-cost loan, with an average balance of $11,940, up 17.4 per cent from 2021.
Eighty-seven per cent of Millennials owed credit card debt, and average credit card debt increased 1.5 per cent from 2021 to nearly $14,000.
Tax obligations also rose significantly among Millennial debtors, as 46 per cent had tax debts, up from 37 per cent in 2021. They owed an average of $12,137 in 2022, and Canadian Emergency Response Benefit (CERB) collection was a contributing factor.
RAPID LOANS
The study also revealed a trend in the growth of rapid high-cost loans, including “traditional payday loans and extremely high-interest lines of credit and installment loans.”
In 2022, the average insolvent debtor with a rapid loan owed a total of $12,100 to an average of four different lenders, up from $10,819 and 3.8 lenders in 2021.
Minimum interest rates on high-cost installment loans range between 29.9 per cent and 59.9 per cent with high fees on top of interest charges.
In 2022, 53 per cent of all insolvent debtors—not just Millenials—had at least one rapid loan.
“We are seeing not just an increased use of traditional payday loans, but a much more dramatic rise in the use of larger, longer-term high-cost loans,” licensed insolvency trustee Doug Hoyes said. “We estimate that one-third of quick cash loans among insolvent borrowers are now high-interest installment loans.”
