CREDIT CRUNCH

The chickens are coming home to roost for a growing number of debt-ridden Manitobans.

There has been a 20 per cent increase in the first half of this year in the number of Manitobans seeking help from the Credit Counselling Society (CCS) -- a non-profit agency that helps Western Canadians find solutions to their financial and debt problems.

And it's a similar story at Community Financial Counselling Services (CFCS), another non-profit. It has seen a 12 per cent increase in the number of consumers seeking help, and that's on top of a 20 per cent increase in 2009.

"We have seen that debt problems have been rising in Manitoba, not only by the amount of people we help, but also by the amount of debt people have," said Christi Quinn, a credit counsellor in CCS's Winnipeg office. "That really flies against the notion that the recession is over."

Quinn said she's also noticed a change in the way financial institutions and other creditors are treating customers who have fallen behind in their payments.

"Creditors are definitely taking quicker action just to minimize their risk," she said.

Capital One Financial Corp., for example, has filed 128 statements of claim so far this year in Winnipeg's Court of Queen's Bench against local credit card-holders. That compares to only six in all of 2009.

Capital One spokeswoman Laurel Ostfield said the number of delinquent Capital One credit card accounts has been rising in Canada, and she suspects last year's economic recession has something to do with that.

"But we haven't become any more aggressive in our collection practices," she said. "Legal action is still a last resort."

She said Capital One still urges its customers to ask the company for help if they are having difficulty making payments.

"We do have programs to help them."

CCS president and CEO Scott Hannah and CFCS executive director John Silver said there are many reasons consumers get into financial difficulty, including the loss of a job, injury or illness, marital breakup, excessive use of credit and lack of a household budget. But the Top 2 in 2009 were excessive use of credit and the lack of a spending plan, Hannah said.

In the case of one local CCS client, it was her husband getting laid off last year that put her family -- with one child living at home -- behind the eight ball. The woman, in her early 40s, said although she still had a job, they started falling behind on their credit card and by the end of the year owed about $10,000 on their card and to payday loan companies.

After seeing an ad on a bus, she called the CCS in January and a credit counsellor worked out a payment schedule with her creditors and helped her budget. The agency also provided tips on how to put aside money for a rainy day, and taught her it's OK to still allow themselves an occasional treat, such as a night at the movies.

Although this has given them five years to pay off their debts, she's hoping to do it much more quickly if her husband, a cook, can find another full-time job.

"They showed me that there is light at the end of the tunnel, and for the first time in a long time I'm finally seeing it."

Silver and Rock Lefebvre, vice-president of research and standards for the Certified General Accounts Association of Canada, said they expect the number of Canadians in financial distress to get worse.

"Nothing is improving in terms of people's use of credit," Silver said.

murray.mcneill@freepress.mb.ca

The change in key Visa and MasterCard numbers between the fiscal year that ended on Oct. 31, 2004, and the year that ended on Oct. 31, 2009:

53.4 million

number of cards in circulation in 2004

69.7 million

number in circulation in 2009

$192.2 billion

net dollar volume of transactions in 2004

$296.2 billion

net dollar volume in 2009

0.8

percentage of accounts in delinquency for 90 days or more in 2004

1.3

percentage in arrears in 2009

3.19

annualized net loss rate (in percentage terms) in 2004

5.38

net loss rate in 2009

-- Canadian Bankers Association

Statistics on the type of clients the Credit Counselling Society deals with in Western Canada:

42

average age

56

percentage who are female

38

percentage who are single

41

percentage who are married or in a domestic partnership

21

percentage who are widowed, separated or divorced

$32,380

average amount they owe

7

average number of creditors they owe money to

$3,220

average monthly income of a CCS client

41

percentage of their net income that goes to paying for housing

Republished from the Winnipeg Free Press print edition July 15, 2010 B6