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With new tax debt from government assistance, Christmas credit card bills and deferral programs ending, people's financial situation due to COVID-19 could take a serious hit early this year as these factors being to add up.
"It's coming. There is a tsunami or whatever you want to refer to it as," said John Eisner, president and CEO of Credit Counselling Services of Atlantic Canada.
Christmas credit card bills are just starting to come out, so Eisner doesn't know for sure if people racked up large amounts of debt. But he is concerned that people did spend more this Christmas to overcompensate for the experience of COVID-19 in 2020.
"My message was it's more important who was around the tree, not what's under it," he said.
On P.E.I., the deadline for property tax payments and fees was extended to Dec. 31, which has now passed. Mortgage deferrals in many cases also came to an end in the fall. Many people on employment insurance or other recovery benefit program could also see their payments come to an end this year if they are not able to go back to work.
Credit Canada has also warned about the financial impact of people having to repay up to $14,000 because they received Canada Emergency Response Benefit (CERB) program payments but were later deemed ineligible.
Sarah Millar, CEO of Consolidated Credit Union in Summerside, also said she hasn't started seeing clients impacted by credit card debt due to Christmas purchases so far this year. The credit union doesn't offer credit cards, but it did have mortgage and loan deferral opportunities for clients financially affected by COVID-19. Even so, she said a "very small" number of member clients took advantage of those programs. Millar added that the credit union also hasn't had any requests for COVID-19 related extensions since July or August of last year. The demand for mortgages at the Summerside credit union has been "as high, or higher" in 2021 as it was last year.
Millar noted that there is still some uncertainty about how the remainder of 2021 will unfold, but so far since the pandemic hit the Island and impacted businesses in March, P.E.I. has fared better than other places off-Island. This is largely due to the provincial government's policies as well as federal government programs to help Islanders financially. This is also reflected in the relatively low number of businesses that have closed on P.E.I. as well as people's willingness to follow the rules and regulations set out by the province to keep everyone safe, she added.
Even so, Eisner is mindful that some people are going to be financially impacted by debt this year. In these cases, he said people should reach out for financial help sooner than later to keep their credit status in good order.
"Maybe you can maintain that. Maybe it's just the sake of a consolidation loan. Eliminate two or three credit cards. Roll it all into one easy payment, only if it makes sense," he said. "Credit cards and lines of credit are usually where the problems lie."
Eisner also says that people seeking help for credit counselling in severe cases should find out if they are going to be charged a large fee for a referral to an insolvency trustee "to go bankrupt." Eisner said Credit Counselling Services of Atlantic Canada, a non-profit counselling agency, will make that referral for free.
Eisner said he wants to see financial institutions extend deferrals given the ongoing financial and economic uncertainty around the impact of COVID-19 in 2021, such as last week's announcement by Air Canada that it was cutting 1,700 more jobs.
"Ask yourself, where would you be if you lost your job? A lot of people, if you look at the data, say most people are one paycheque away from being in trouble," he said. "I've got to tell you, I don't believe that's the end of things. I don't want to scare people. It's not fearmongering. The unknown of the economy should really be enough to say, "I really need to get on my 'A' game and get my finances in order."
Terrence McEachern is a business reporter for the SaltWire Network.