PR case studies: Canadian Payday Loan Association

The Canadian Payday Loan Association (CPLA) represents Canada’s retail payday lending industry. Payday loan operators provide short term, unsecured loans averaging $280 per transaction over a ten-day period. The industry, however, was the only unregulated segment in Canada’s financial services sector. To address growing criticism that the payday loan industry should be regulated, FH was retained by CPLA to mount a comprehensive nation-wide campaign to seek legislative change that would enable regulation. The cornerstone for this initiative was to convince the federal government to amend s. 347 of the Criminal Code (Criminal Rates of Interest) so that provinces could be given the authority to set rates for payday loans and, in so doing, provide real protection for consumers. Over the course of eighteen months beginning in early 2005, FH led a strategic media relations and government relations campaign, supplemented by grass-roots and stakeholder relations, targeting key media and key political and bureaucratic decision makers at the provincial and federal levels of government. A multi-level, multi-party government relations exercise was pursued, supplemented by a focused and highly successful national and provincial media campaign. In early 2006, a number of provincial governments began signaling their support for provincial regulation of the payday loans industry and were encouraging the federal Justice Minister to introduce the required criminal code amendment. At the same time, several national, provincial and media press stories were generated which added to a growing momentum for regulatory change. With sustained effort, in May of 2007 the federal government gave Royal Assent to legislation which gives authority to the provinces to regulate the payday loan industry through consumer protection mechanisms that set a clear maximum on the cost of borrowing. Through FH’s country-wide media and government relations efforts, eight provinces have already moved to regulate the industry, providing both consumer protection and continued access to payday loans.
 

1. What is/are the relevant issue(s) in the case?

The issue here for the Canadian Payday Loan Association (CPLA), which represented about 40 percent of companies in the payday loan and cheque cashing industry (Payday loans not just for low-income earners, 2007), was the growing concern from the public regarding the interest rate charged to payday loan and cheque cashing users – which could actually be more than 1,000 per cent per annum. In some cases, the interest could be as much as 15,000 percent per annum (Kitching & Starky, 2006). Despite the ridiculous amount of interest rate and service fees, the payday loan market was growing rapidly at the beginning of the 21st century. For example, Rentcash’s revenue grew by 250 percent in 2005 comparing to the year before (Rentcash, 2005). In addition to the criticism about the charges, many believed payday loan companies literally drained income from the lower-income families and created a vicious circle for those who are less fortunate. Moreover, the class action cases against these unregulated financial institutions at a time attracted a lot of media attention, such as the case in Alberta filed in 2005 (Class-action suit filed against payday loan company, 2005) and the case in Ontario filed in 2003 (Payday loan victims get $100 million, 2009).  

The industry’s growth was alarming – it lent some $1 billion a year to two million Canadians per year (Payday-loan paralysis, 2007). Given the negative media coverage of the payday loan, compounded with the number of people used payday loan services at a time, CPLA realized it was in its best interest to seek regulation that would improve the public image of the industry, while preserving a very lucrative business model (charging from $17 to $25 to borrow $100 in different provinces in Canada (Payday Loans: an Expensive way to borrow, 2012)).

2. Based on Grunig & Hunt’s models of PR (p.53,Think Public Relations, 2013), which model is the organization using? Provide examples.

I believe the organization used the two-way asymmetric model. First of all, it hired FleishmanHillard (FH) to run an extensive public relations campaign, which has offices in more than 100 cities around the world (Offices, 2013). The power that CPLA had, especially in monetary terms, was massive. 

Secondly, the campaign that FH ran for CPLA was extensive – it ran from 2005 to 2007. The length of the campaign indicates that the amount of work that CPLA and FH put into in order to effect the changes that they wanted to create.

In addition, CPLA was very active in promoting the legitimacy of the industry. For example, the President of CPLA wrote letters to the editor to rebute the negative coverage regularly (Payday loans not just for low-income earners, 2007).

3. Describe the publics of the organization and what message(s) the organization is communicating with these publics.

 

Publics	Messages
Members of CPLA (allies)	We have to work together and lobby to the government in order to preserve the industry.
Government – federal and provincial (allies)	We want to effect legislation that would ensure the industry offers a service that helps those who need it, as well as to ensure the industry is viable.
Consumer Protection Office (allies)	We want to protect the rights of consumers and operate a viable business.
Consumers (allies)	We are fulfilling the needs for those who choose a payday loan over other forms of credit. We are working with the government to introduce legislation to put a cap on the interest rate on payday loan.
Financial Consumer Agency of Canada  (allies)	We want regulations, we want to protect consumers, and we want to operate a viable business.
ACORN (adversaries)	We are here to provide a service needed by Canadians, and consumers choose payday loan service over other credit options deliberately.

4. For at least one press release, compare how the press release appears in the organization’s online newsroom to how the story appeared when it was published in the media.

The CPLA issued a press release in November 2007 after United Way issued a report on poverty in Toronto. According to the report issued by United Way, it believed the growing number of payday loan stores as a warning sign as to why many in the city were becoming poorer. It urged the Ontario government to regulate the industry, and the government should set an interest rate cap and limits on fees. The report was mainly based on past studies on fringe financing, and the United Way also conducted an audit of Toronto payday and cheque cashing outlets in 2006. According to the United Way, they counted 317, up from 39 locations in 1995 (Rankin, 2007).

The CPLA then issued a survey about 500 payday loan borrowers in Ontario (which was conducted by Pollara, a public opinion survey company). The survey issued by CPLA somewhat contradicted the finding of the United Way’s report. It claimed its clients were generally educated and had access to other financial institutions such as banks. To report indicates that the payday loan customers chose payday loan service over other credit options deliberately.

The CPLA’s survey did go into the Toronto Star article published on 26 November 2007. Though it did not quote the President of CPLA, the numbers were quoted – such as 60 percent of payday loan customers had a savings account, and about half had a major credit card. The data included in the news article helped CPLA to send its message to the public (United Way Poverty Report Doesn't Reflect Reality of Payday Borrowers, 2007).

5. Provide analysis of how the organization uses and benefits from (or could benefit from) social media. Provide links to all major social media accounts for the organization, if available.

Given the nature of the industry and based on the demographic of its market segment (male, aged between 18 and 34, urban residents with some post-secondary education (Kitching & Starky, 2006)), I believe CPLA and its members can benefit from using Facebook and Twitter.

First of all using these social media platforms could help CPLA to reach its target customers. Moreover, Facebook and Twitter have many female users, CPLA could consider using these platforms to reach a new target group.

In addition, these platforms can help CPLA to engage with customers and potential customers. It would allow CPLA to explain its stance, the practice of the industry, and even share stories of customers (such as the success stories where people who need short-term credit benefit from payday loan service for urgent issues, as payday loan stores tend to have longer business hours).

My conclusion for the case is that a PR campaign is not the end goal – it is work in progress. This is especially true when you look at recent articles concerning the industry (Payday lenders' lines of credit questioned in Manitoba, 2013) – even though legislation has been put in place, the industry came up with creative ways to charge the customers. The Cash Store and Instaloans are facing a proposed class-action lawsuit about overcharges even after payday loan laws have been introduced (Payday lenders' lines of credit questioned in Manitoba, 2013). PR is not a magic bullet to replace unethical business practice, PR is supposed to be here to help business to get the message across for its excellent products and services. 

Bibliography

 

Class-action suit filed against payday loan company. (2005, 4 27). Retrieved 6 1, 2013, from CBC: http://www.cbc.ca/news/canada/story/2005/04/26/payday-loan-050426.html

Payday loans not just for low-income earners. (2007, 5 15). Retrieved 6 2, 2013, from CPLA: http://www.cpla-acps.ca/english/clippings_2007_10.php

Payday-loan paralysis. (2007, 1 8). Retrieved 6 2, 2013, from CLPA: http://www.cpla-acps.ca/english/clippings_2007_2.php

United Way Poverty Report Doesn't Reflect Reality of Payday Borrowers. (2007, 11 26). Retrieved 6 3, 2013, from CLPA: http://www.cpla-acps.ca/english/pr_2007_12.php

Payday loan victims get $100 million. (2009, 6 10). Retrieved 6 1, 2013, from Toronto Star: http://www.thestar.com/news/ontario/2009/06/10/payday_loan_victims_get_100_million.html

(2012). Payday Loans: an Expensive way to borrow. Ottawa: Financial Consumer Agency of Canada.

Offices. (2013). Retrieved 6 2, 2013, from Fleishmanhillard: http://fleishmanhillard.com/offices/

Payday lenders' lines of credit questioned in Manitoba. (2013, 2 7). Retrieved 6 3, 2013, from CBC: http://www.cbc.ca/news/canada/manitoba/story/2013/02/07/mb-payday-loan-line-credit-manitoba.html

Kitching, A., & Starky, S. (2006). Payday Loan Companies in Canada: Determining the Public Interest. Ottawa: Library of Parliament.

Rankin, J. (2007, 11 26). Proliferation of lending stores a signal people are poorer. Retrieved 6 3, 2013, from CPLA: http://www.cpla-acps.ca/english/clippings_2007_18.php

Rentcash. (2005). Annual Report. Edmonton: Rentcash.