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The Rise in Consumer Credit and Bankruptcy: Cause for Concern?

Author

Listed:
  • James MacGee

    (University of Western Ontario)

Abstract

Canadian households are saddled with unprecedented amounts of debt. As a percentage of income, debt levels of Canadians are higher than at any point in recent history and are now higher than those of American households. Recent debates have largely focussed on the housing market and on the risks associated with household mortgage debt. This report looks more specifically at consumer credit – i.e., automobile loans, credit card debt, and lines of credit, most notably – and personal bankruptcies. Consumer credit accounts for roughly 45 percent of total household interest payments and often offers variable interest rates, leaving borrowers more vulnerable to higher interest rates. Further, the rapid extension and use of relatively new consumer credit products, especially home equity lines of credit, raises real concerns about whether lenders and borrowers have been overly optimistic in regards to the risks associated with high consumer debt levels.

Suggested Citation

  • James MacGee, 2012. "The Rise in Consumer Credit and Bankruptcy: Cause for Concern?," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 346, April.
  • Handle: RePEc:cdh:commen:346
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Exler, Florian & Tertilt, Michèle, 2020. "Consumer Debt and Default: A Macro Perspective," IZA Discussion Papers 12966, Institute of Labor Economics (IZA).
    2. James MacGee & Thomas Michael Pugh & Kurt See, 2022. "The heterogeneous effects of COVID‐19 on Canadian household consumption, debt and savings," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(S1), pages 54-87, February.
    3. Igor Livshits, 2015. "Recent Developments In Consumer Credit And Default Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 29(4), pages 594-613, September.
    4. Tertilt, Michèle & Exler, Florian, 2020. "Consumer Debt and Default: A Macroeconomic Perspective," CEPR Discussion Papers 14425, C.E.P.R. Discussion Papers.
    5. Robert McKeown, 2017. "How Vulnerable Is The Canadian Banking System To Fire-sales?," Working Paper 1381, Economics Department, Queen's University.
    6. Ian Irvine & William Sims, 2012. "A Taxing Dilemma: Assessing the Impact of Tax and Price Changes on the Tobacco Market," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 350, May.

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    More about this item

    Keywords

    Economic Growth and Innovation; Canada; household debt; consumer credit; Survey of financial Security; financial literacy;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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