TransUnion expects spike in debt delinquencies in Alberta, Saskatchewan
Alberta and Saskatchewan will soon see a ‘sharp’ increase in the number of people falling behind on their debts for the rest of this year, credit agency TransUnion says.
The debt monitor said in a study released Wednesday that it is expecting the number of consumer credit delinquencies to increase by double-digits in Saskatchewan, and as much as 60 per cent in parts of Alberta.
Oil’s impact
The two provinces are disproportionately dependent on oil prices to drive their economy. In Alberta’s case, more than a quarter of the province’s GDP is tied to oil revenues, which have halved in the past year. In Saskatchewan’s case, the ratio is still high at more than one sixth of GDP tied to oil.
Cheap oil has hit those economies in many ways. “First, oil price drops cause lower oil sector investment,” TransUnion says. That leads to higher unemployment, which leads to less disposable income to spend in all other aspects of the economy.
“Consumers then have lower ability to service debt, finally resulting in higher delinquency rates,” TransUnion says.
The number of people who pay off only twice their minimum credit card payment has increased by 10 per cent in Fort McMurray since last summer, TransUnion says. (Ryan Remiorz/The Canadian Press)
“Based on an historical analysis of the last oil crash and recent payment behaviour trends, we expect materially higher delinquency rates in Alberta and Saskatchewan in the second half of 2015,” the company’s research director Jason Wang said.
“If lenders do not take proactive measures to address the impact of the decline in oil prices, we could potentially see double-digit delinquency rate increases in Saskatchewan, and as much as a 60 per cent rise in areas of Alberta.”
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