Credit cards, mortgage rates meant heavy debts in 1981

What if you owed as much as you earned in a year?

That was the harsh reality for many Canadians back in 1981, according to a yet-to-be released government study into consumer credit.

It concluded that the numbers of those going into debt was increasing.

"It's easy, we almost all do it — and we do it more and more," the CBC's Jason Moscovitz began his report as a credit card was seen being processed for a purchase. 

$1,000 average debt

"There are an estimated 20 million credit cards in Canada. Canadians owe about $20 billion — about a thousand dollars [$2,600 in 2018] per Canadian," he added. "And that's without mortgages."

It was a reality Janet McClain of the Canadian Council on Social Development was all too familiar with.

"Very few people can afford to buy a set of tires any more, or major purchases that are a necessity in Canada, without using credit," she said.

The research in the study also showed that poorer Canadians were paying the price.

Some who earned only $3,000 or $4,000 a year (about $8,000 to $10,500 in 2018) owed four times that much.

"There are families with incomes of $10,000 a year [$26,000 in 2018] with debts of $11,000, $12,000 and more," said reporter Jason Moscovitz.

The existence of debts didn't come as a surprise, said McClain. But the amount debtors owed did.

"We had assumed that lower-income people were in debt," she said, "but that the size of their debts was not as large as it's turned out to be."

It wasn't about Disney World

And they weren't in debt because of extravagant spending.

"They did not do it by trips to Florida and other assumptions about where debt comes from," she said.

The increase in consumer debt, she said, was "primarily ... a result of the tremendous increase in the cost of mortgage debt today."

Credit counsellor Ed Wintour pointed out that as credit-card interest rates rose, payments might not have to increase — but it was going to take consumers longer to pay off their debts.

One of the side effects of debt was constant demands from collection agencies to pay up.

A woman who asked to remain anonymous, with her face obscured, said one was relentless.

"I just recently started work," she said, "and I received a call from a bill collector last week, and he said ... 'now I find out you're working. The jig is up. You owe me X number of dollars and I want it."    

There was a kicker.

"The report paints a bleak picture," said Moscovitz. "But it's even bleaker than that. That's because the report is based on figures from 1977. In terms of what's happened to interest rates since then, 1977 is a long time ago."