Bad Credit Credit Cards – Canada’s income-supporting CERB abyss stares firmly back at us

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Is it too much to ask that we have some good news without all the bad? In recent weeks, it feels like that’s a definitive “yes.”

Although Canada’s overall COVID-19 positivity rates and hospitalizations are steadily coming down, modelling shows more contagious variants of the virus could soon drive huge spikes in cases and overwhelm the health-care system.

Similarly, the vaccine should represent a beacon of hope and an end to all the concessions we’ve had to make. And yet, any light at the end of the tunnel is overshadowed by production delays and delivery shortages.

What does this all mean in terms of household economics — specifically Canadians’ and household debt? Well, it’s all interconnected. Canada’s consumer debt problem is far from new; however, it’s become more complex during the pandemic.

The most recent employment report reveals a loss of 213,000 jobs in January, pushing the unemployment rate to 9.4 per cent — the highest level since last August. The persistent impact of the K-shaped recovery, along with long-term unemployment and a large cohort of low-income workers, will fuel an uncertain economic future.

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Cash infusions — including the Canada Emergency Response Benefit (CERB), the Canada Recovery Benefit (CRB) and the Canada Emergency Wage Subsidy (CEWS) for businesses — have so far sustained the economy and saved many Canadians from intense hardship during several national lockdowns and partial recoveries. But for some, these infusions have also created a false sense of security and numbed them to overall indebtedness, by no means resolving it.

Other programs such as payment deferrals (mortgage, car payments, credit cards, etc.) have also helped Canadians stay afloat, but only temporarily as many are now being asked to repay the deferred payments. Credit Canada has seen cases where clients are being asked to pay all deferred payments in one lump sum. This is causing a great deal of stress, and reveals a pattern of taking what you can when you can, and dealing with the consequences later.

For many, the end of payment deferrals also coincides with massive, post-holiday credit-card bills and, more detrimentally, CERB paybacks and larger tax bills. There will be a wave of panic and anxiety in the coming weeks when people see they owe taxes on CERB this year, as it wasn’t taxed at the source.

It isn’t a question of if the financial storm will come, but when, and how long it will last.

Nine million Canadians applied for CERB, and by the end of last year one million had already repaid benefits after realizing they were ineligible. Most recently, the government announced that ineligible self-employed Canadians won’t be forced to repay the funds if they earned at least $5,000 in gross self-employment income in 2019 and met all other eligibility requirements. Additionally, Canadians who received COVID-related income supports and had less than $75,000 in taxable income in 2020 will have a year with zero interest on tax debt.

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While these leniencies are meant to calm the panic caused by ineligibility payback pressure, many will still face a large debt bill in the coming months. How many will struggle with repaying it?

As we approach one year since CERB was introduced (March 15), it’s time for the government and financial institutions to contend with the repercussions of financial supports and payment deferrals, and how to approach repayments in both cases. There is no “one-size-fits-all” solution. The government and creditors will need to look at every individual case and develop individualized and customized repayment plans that allow Canadians to recover.

Whether a person is repaying CERB overpayments, benefits received in error, larger tax bills or catching up on deferred debt payments, there must be an allowance to pay back over a reasonable period of time based on financial ability. This would help prevent vulnerable Canadians from being pushed further into a hole. Repayment plans need to take into account a person’s income, expenses, debt and any other financial obligations and responsibilities they might have. Let’s not put further stress or strain on household finances, thereby hobbling any chances of a nascent recovery.

To its credit, the government sprinted into action and created different financial support programs to help those impacted by COVID-19. We cannot let those efforts be in vain — or worse, allow them to backfire.

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Frederich Nietzsche held that “if you gaze long enough into an abyss, the abyss also gazes back into you.” Together, we can pull Canadians out of this economic gap before they lose all hope and trust.

Keith Emery is co-CEO of Credit Canada, Canada’s first and longest-standing not-for-profit credit counselling agency.

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