The number of Canadians turning to high-cost payday loans has more than doubled since 2009 to four per cent of households, according to a report published on Tuesday by the Financial Consumer Agency of Canada (FCAC).
The consumer watchdog said that, as a result of its findings, it will bolster its consumer education material and work closely with provinces to raise awareness about the high cost of payday loans.
Payday lenders have grown in popularity because they offer quick access to cash without the extensive checks that banks make and are prepared to lend to borrowers with damaged credit records who may have struggled to pay back loans in the past.
However, they have attracted criticism over their sky-high interest rates which can be as high as 500 per cent on an annualized basis, according to the FCAC.
The FCAC said it conducted a survey of 1,500 payday loan users across the country in early 2016 and the results showed that payday loan users are often unaware of the high costs of these loans compared with alternatives.
The watchdog said its study found that fewer than half the respondents understood that a payday loan is more expensive than a cash advance on a credit card.