The Cost of Providing Payday Loans in Ontario
A Report Prepared for the Ministry of Small Business
and Consumer Services
January 24, 2009
The Cost of Providing Payday Loans in Ontario
January 24, 2009
Ernst & Young LLP | 1
Table of Contents
1.
Executive Summary..............................................................................................................2
2.
Introduction.........................................................................................................................3
2.1
Background....................................................................................................................3
2.2
Scope and Limitations of This Report ...............................................................................4
3.
Methodology........................................................................................................................5
3.1
Segregation of Costs.......................................................................................................5
3.1.1 Fixed and Variable Operating Costs...............................................................................5
3.1.2 Costs of Loan and Supplementary Capital .....................................................................8
3.1.3 Bad Debt Costs .........................................................................................................10
3.1.4 Costs to Provide Loans to First-Time and Repeat Customers..........................................11
3.2
Data Collection Procedures............................................................................................12
3.3
Key Assumptions ..........................................................................................................13
4.
Key Findings ......................................................................................................................14
4.1
Cost of Providing Payday Loans ....................................................................