Parachute: Helping Canadians Stop the Debt

Freefall
This case was written by Abigail Leu, Tailai Wang, Sarah Shah, and Sahar Trivedi under the supervision of S.
Carayannopoulos, and revised by David Swanston. It is for academic purposes and not intended to illustrate
effective or poor management practices. Some facts in the case may have been disguised.

INTRODUCTION
Bruce Hodges, Founder & CEO of Parachute, was walking down the street on the
way to work in the spring of 2022 when he was stopped in his tracks by a poster for an
alternative lender. He snapped a quick picture and sent it to his team to remind them of
why they were meeting today (refer to Exhibit 1 for the photo).

Approximately 8 million Canadians had “near and subprime1" credit scores (below
720) that disqualified them from accessing mainstream financial service providers. When
in need of a loan, these Canadians were forced to turn to alternative lending sources with
interest rates ranging from 30-400%2. This had led “near-prime and subprime” Canadians
into a debt spiral: they needed a loan to pay for purchases or expenses but the only
borrowing options they could access had high interest rates; the high interest rates added
to their expenses and reduced their chances of paying back the debt. As debt levels
increased, many consumers had been forced to file for bankruptcy or a consumer
proposal which had long-term repercussions.

This was one of the core reasons that Bruce founded Parachute, an alternative
lending fintech company with a social mission - to help “near prime at risk” consumers.
Parachute provided them with debt consolidation loans, financial literacy education and
incentives to improve their financial practices, and ultimately, their credit score. With
Parachute’s help, consumers could improve their financial standing and regain access to
mainstream financial service providers.

Parachute was nearing its pilot target of issuing $500,000 in loans. They needed
more money to help fund more loans, operations, and expansion. Bruce was meeting

1
Definition: credit scores are based on credit history and are used as an indicator of credit risk. Scores
above 680-700 are considered good (prime). Subprime credit scores are viewed as indicative of a poor
credit history. More information on how credit scores are determined is provided later in the case
2
Dobby, C. (2022, September 17). Canada could finally lower its 60% interest cap on loans - but the industry
is fighting hard to keep rates high. Toronto Star. Retrieved September 28, 2022, from
https://www.thestar.com/business/2022/09/17/canada-could-finally-lower-its-60-interest-cap-on-loans-but the-
industry-is-fighting-hard-to-keep-rates-high.html
1
with his team today to develop a feasible and convincing plan to scale in order to raise
more capital. The plan had to show how Parachute could achieve its social mission while
generating profits that would allow it to grow. The company wanted to raise $5 million on
a valuation of $25 million by the end of 2022. Bruce’s’ team knew that for their next equity
raise to be successful, they would need to demonstrate the capacity to achieve $100M of
annualized revenue by their fifth year of operations. Ultimately, Parachute was aiming to
expand across Canada and into the United States.

Parachute needed to identify a business model where they could create social
good by providing consolidation loans, while educating consumers to overcome their debt
burdens and make better financial choices, all while still earning a profit. Doing this would
require that they create a customer acquisition strategy, including a marketing plan, which
would allow Parachute to achieve the scale necessary to attract the desired equity in the
upcoming raise.

LENDING INDUSTRY
In Canada, several lenders exited the near and subprime space during the financial
crisis in 1990s. This vacuum was filled with a number of new competitors who accepted
customers with lower credit scores, in exchange for higher borrowing rates (compared to
traditional lenders) ranging from 30%-60%3. Many consumers who used these lenders
found themselves in a debt spiral, unable to repay their debts. Furthermore, the high
levels of debt often created significant stress and could contribute to mental health issues.

The Canadian subprime lending market was large and growing, with continued
expansion expected for the near future. Refer to Exhibit 2 for a breakdown of the total
addressable market (TAM). These subprime loans were typically used for bill payments,
debt consolidation, and home & auto repairs, but had been used for various other
purposes as well. Parachute focused on debt consolidation and was not currently open to
expanding beyond that for the next 12 months.

In recent years, this industry had been disrupted by financial technology (fintech) lenders
who used online technology to provide easier access to loans for businesses and
individuals, and the pandemic further inspired more Canadians to move their financial
activities online. The fintech lenders completed the entire lending process online:
application and user registration, document submission, customer authentication and

3
Easyfinancial. (2022). Retrieved September 28, 2022, from https://www.easyfinancial.com/

2
4
verification, loan approval, loan disbursement, and loan recovery . However, this
increased loan accessibility could lead to increased debt for individuals who had difficulty
managing their borrowing and spending.
 Parachute wanted to differentiate itself in the industry by focusing on lending in an
ethical and socially responsible manner and helping consumers get out of the debt cycle.

Industry profitability drivers

There were three primary sources of revenue for lenders: fees on loans, interest
on loans, and loan repackaging and selling.

● Fees on loans: Application Fees or Origination fees were often charged by

lenders whenever a new loan was created. Origination fees could be up to 5%
and late fees (penalties on top of interest) could be applied as well5.

• Interest on loans: Some of the loans available to those with credit scores above
700 had an APR6 of approximately 6%, whereas subprime loans could have APRs
of up to 400%7. The interest made up the vast majority of profits made by the
lender net of costs of funds, any loan losses, and origination costs (the cost to
acquire a customer and underwrite them, which had an average cost of $500). As
risk went up, interest rates went up, but delinquencies went up as well.

● Loan repackaging and selling: Kilgour Williams started selling repackaged

consumer loans from US Fintech companies in Canada in 2014. The same
could be done for bundles of consumer loans from Canadian lenders. High
interest consumer loans were seen as a slightly risky investment but
provided high yields due to increased interest rates on the loan itself8.

4
Financial innovations: 4 ways fintech changed the lending industry. Planet Compliance. (n.d.). Retrieved
September 28, 2022, from https://www.planetcompliance.com/financial-innovations-4-ways-fintech changed-
the-lending-industry/
5
Bryan. (2022, August 17). What is a loan origination fee? Loans Canada. Retrieved September 28, 2022, from
https://loanscanada.ca/loans/what-is-a-loan-origination-fee/
6
Annual percentage rate (APR) refers to the yearly interest generated by a sum that's charged to borrowers or
paid to investors.
7
Dobby, C. (2022, September 17). Canada could finally lower its 60% interest cap on loans - but the industry
is fighting hard to keep rates high. Toronto Star. Retrieved September 28, 2022, from
https://www.thestar.com/business/2022/09/17/canada-could-finally-lower-its-60-interest-cap-on-loans-but the-
industry-is-fighting-hard-to-keep-rates-high.html
8
The repackaging of U.S. Fintech Loans Comes to Canada. (2017). Retrieved September 28, 2022, from
https://financialpost.com/news/fp-street/the-repackaging-of-u-s-fintech-loans-comes-to-canada
3
Canadian Credit Activity
Consumer credit activity had been increasing as the economy reopened and
consumer confidence improved in the post-COVID world. Canadian credit health was in
line with the historical average and had recovered from the pandemic’s effects (refer to
Exhibit 3 for the Canada Credit Industry Indicator). By the third quarter of 2021,
applications for credit were increasing year-over-year (YoY), back to their pre-pandemic
levels. Originations (how many new accounts opened) were also seeing significant
growth.

Growth was being led by the lower-risk prime plus and super prime consumer
segments. Mortgages and lines of credit increased from second quarter of 2020 to
second quarter of 2021 and exceeded pre-pandemic levels as well. New credit issued
had significantly increased across all credit products with newly originated balances were
up substantially compared to the previous year.

In the third quarter of 2021, consumer delinquencies continued to decline across

all products YoY. This was primarily due to high levels of consumer liquidity as well as
government subsidies which supported consumers and prevented them from becoming
delinquent.

Industry Participants
The lending industry was composed of companies, banks, and other financial
institutions that provided loans and credit in return for interest payments and repayment
of principal. Lenders generated profit through the interest payments collected from
borrowers and incurred losses in the event that a borrower defaulted on a loan. Primary
expenses in the industry included the costs of funds, administration, origination, loan
losses and pursuit of funds owed by borrowers in delinquency.

Prime lenders
Banks were typically focused on lending to consumers with credit scores above 720
(prime and above-prime credit scores). Banks tend to charge lower interest rates than
those charged by other lenders due to the creditworthiness of their customers. They had
loan options for cars, large purchases, home repair, renovation, debt management,
sudden expenses, investing, everyday expenses, school, and retirement9. Terms could
greatly vary depending on how much you were borrowing, payment period, and credit

9
Find ways to borrow better. Borrowing – Loans & Lines of Credit | TD Canada. (2022). Retrieved
September 28, 2022, from https://www.td.com/ca/en/personal-banking/products/borrowing/
4
scores. However, there were two main types of payment plans - fixed rate loans and
variable rate loans (refer to Exhibit 4 for an explanation of a fixed or variable rate loan) 10.

Sub-prime and near sub-prime lenders

 These companies were sometimes referred to as high interest rate or “alternative”
lenders. They typically served customers with credit scores below 720. Consumers
generally turned to these lenders when they were unable to access loans from banks.

There were many products and many organizations that fell under the alternative
lending umbrella. Organizations sometimes were active in more than one product
category. What was consistent across subprime and near sub-prime lenders was the
high interest rates they charged which were sometimes viewed as predatory. The
industry was consequently heavily scrutinized and subject to many different regulations.

Some of the larger competitors in alternative lending included EasyFinancial,

Fairstone Financial, and Money Mart. They charged rates up to 47% and loan
repayment terms ranged from 9 to 84 months, targeting consumers with credit scores
between 550- 700 for normal loans but at times also serviced consumers who fell into
the payday lending space (payday loans discussed below). These loans may be
considered predatory lending as they had extremely high interest and had hidden
provisions that charged borrowers additional fees11.

Payday loans were relatively small loans ($100 up to $1,500) that were meant to
cover a cash shortfall until your next paycheque. They were typically extended to those
with credit scores below 600 and charged rates and fees which could make the effective
annual interest rate over 400%12 and terms from 12-60 months13.

Refer to Exhibit 5 for an overview of legislation on high interest loans in

provinces and territories.

Other industry players:

● ACORN Canada (Association of Community Organizations for Reform Now)

10
RBC Royal Bank Personal Loans. RBC Royal Bank. (2022). Retrieved September 28, 2022, from
https://www.rbcroyalbank.com/personal-loans/personal-loans.html
11
Webber, M. R. (2022, September 25). What is a pay day loan? how it works, how to get one, and legality.
Investopedia. Retrieved September 28, 2022, from https://www.investopedia.com/terms/p/payday loans.asp
12
For example, a payday loan can cost $17 on $100 of borrowing, which is the same as an annual interest rate
of 442%.
13
Money Mart: Financial solutions for the hard working Canadian. MoneyMart. (2022). Retrieved
September 28, 2022, from https://www.moneymart.ca/
5
o ACORN Canada was a community union of low to moderate income people
who pursued socio-economic justice. They had lobbied government for
legislation regulating and limiting payday loan fees and interest rates. They
wanted regulations that lowered the maximum interest rate on installment
loans from 60% to 30% and created a federally funded credit source for
low-income individuals in need of short-term funds14.
 ● Credit Counseling

o Credit counselors were ostensibly focused on advising consumers with their

financial situation to get them back on track. These counselors typically
specialized in certain financial situations - bankruptcy, consumer proposals
and debt management programs were the most prominent services
available in this category. Bankruptcy was a legally binding debt solution
that involved surrendering assets and attending some credit counseling
sessions, making some agreed upon payments and filing monthly reports.
The debts of the consumer were then discharged (written off) in 9 or 21
months. The bankruptcy remained on a consumer’s record for seven years.
A consumer proposal required regular payments and allowed consumers to
keep more of their assets, had less of an effect on their credit score and
stayed on their credit record for three years15. A debt management program
required regular monthly payments where interest rates were reduced
allowing for debt to be paid off faster. This still had a negative impact on
consumers’ credit bureaus, appearing two years after the program was
finished.

Bankruptcy and consumer proposal services were mostly “not-for-profit” but still
charged for their services. Their operations were supported by donations from the
banks as well as the fees they charged. Consumer proposals were also working with
the corporations who would lose money if the consumer defaulted on payments.

DETERMINANTS AND USES OF CREDIT SCORES

A credit score was a three-digit number that was a numerical representation of the
credit risk (risk of default on the loan repayment) associated with the borrower at the time

14
It's time to criminalize high interest rates. ACORN Canada. (2022). Retrieved September 28, 2022, from
https://acorncanada.org/take-action/its-time-criminalize-high-interest-rates
15
Consumer proposal vs. bankruptcy: Which is right for you?: MNP Ltd. MNP Debt Management. (2022).
Retrieved September 28, 2022, from https://bankruptcy.mnpdebt.ca/faqs/difference-between-consumer
proposal-and-bankruptcy
6
of a loan or credit account application16. Lenders used the score to determine an
applicant’s eligibility for borrowing instruments such as loans, mortgages, a credit card or
a line of credit. Credit scores were often also used to determine risk of payment default in
other contexts such as renting an apartment or applying to open an account with a mobile
telephone provider or other utility as well as employment screening.

There were a number of providers of credit scores. In Canada, scores were generated
by the credit bureaus (Equifax & Transunion) and Fair Isaac (FICO)17. The credit score,
 often referred to as a FICO score, was a proprietary tool created by the data analytics
company FICO and was used in 90% of credit decisions by lenders in North America,
including Parachute18. No credit bureaus or FICO revealed their proprietary credit score
calculator formula, but the calculation incorporated five major components with varying
levels of importance. These categories, with their approximate relative weights are listed
below. No single factor or incident determined the score completely19:

● Payment history (35%): The score considered whether you have paid your
credit accounts consistently and on time. It also factored in previous
bankruptcies, collections, and delinquencies. It took into consideration the size
of these aforementioned factors, the time it took to resolve them, and how long
it had been since the problems appeared.

● Amount owed (30%): Lenders considered credit utilization ratios - the

percentage of available credit that was actually used. This component of the
credit score focused on the current amount of debt, as well as the number of
different accounts held by the borrower and the specific types of accounts
being used.

● Length of credit history (15%): If borrowers had been using credit responsibly
for a long period of time, it was positively reflected in their credit score.

● New credit (10%): When individuals applied for credit frequently, it was
interpreted as an indicator of potential financial pressures. Each credit
application lowered the applicant’s credit score.

16
How your credit score impacts your financial future. How Your Credit Score Impacts Your Financial Future |
FINRA.org. (2022). Retrieved September 28, 2022, from https://www.finra.org/investors/personal finance/how-
your-credit-score-impacts-your-financial-future
17
There was often confusion around scores because the two credit bureaus and FICO used different
scoring
18
Hayes, A. (2022, August 4). FICO score. Investopedia. Retrieved September 28, 2022, from
https://www.investopedia.com/terms/f/ficoscore.asp
19
Langager, C. (2022, July 13). How is my credit score calculated? Investopedia. Retrieved September 28,
2022, from https://www.investopedia.com/ask/answers/05/creditscorecalculation.asp
7
● Credit mix (10%): Lenders liked to see a healthy credit mix that showed that
borrowers could successfully manage different types of credit. Revolving credit
(credit cards, retail store cards, gas station cards, lines of credit) and
installment credit (mortgages, auto loans, student loans) should both be
represented, if possible.

All of these categories were taken into account in the overall score, which could
range from 300 to 90020. Refer to Exhibit 6 for an overview of a good credit score.
CANADIAN BORROWER PROFILES

Credit rating segmentation

Refer to Exhibit 7 for a marketing sizing based on credit rating and Exhibit 8 for
Canadians with non-Prime credit scores and products.

New-to-credit consumers21
In 2022, 29.5 million Canadian consumers had access to credit (up 1% from the
prior year). This was driven by new consumers entering the credit market for the first time,
specifically Generation Z. While credit cards were the most popular entry product for
credit, new-to-credit consumers had lower credit limits which could constrain engagement
and lead to lower spending and balances. New-to-credit consumers typically received low
credit limits due to their lack of credit history. Sixty-four percent of new-to-credit
consumers also opened a second credit product within 24 months; a second credit card
or an installment loan were the most popular choices.

Consumer Profile (who/why people take out loans)

Approximately 8 million Canadians had credit scores below 720 that disqualified
them from accessing bank loans. These individuals often required loans due to personal
circumstances (divorce, job loss, illness, and many other situations), low financial literacy,
overspending and poor financial decisions22. Their credit scores forced them to turn to
alternative lending sources.

20
The Ultimate Guide to Your Credit Score. Understanding Your Credit Score And Why It Matters | Envision
Financial. (2022). Retrieved September 28, 2022, from https://www.envisionfinancial.ca/simple
advice/money/understanding-your-credit-score
21
Transunion Canada. (2021, December 7). Research report. Canadian Credit Market Shows Continued
Positive Momentum. Retrieved September 28, 2022, from https://newsroom.transunion.ca/canadian-credit
market-shows-continued-positive-momentum/
22
Dobby, C. (2022, September 17). Canada could finally lower its 60% interest cap on loans - but the
industry is fighting hard to keep rates high. Toronto Star. Retrieved September 28, 2022, from
8
23
A survey completed by the government of Canada showed that about 60% of the
respondents who accessed loans from companies such as Money Mart did not
understand that a payday loan was more expensive than available alternatives.
Respondents were also much less likely to have savings compared to the general
population. Out of these participants, more than 60% did not have access to a credit card,
and 88% did not have access to a line of credit. Approximately forty-five percent of
consumers used payday loans for unexpected, necessary expenses such as car repairs,
and 41% use them for expected expenses like utility bills. The rest used them for avoiding
late bill charges (17%), purchasing something (7%), or other reasons (2%). While payday
loans were used mainly by low-to-moderate income earners (more than 50% lived in
households with annual incomes of less than $55,000), 20% of customers had household
incomes greater than $80,000.

DEPLOYING PARACHUTE
Founded in 2022, Parachute was a Toronto based consumer fintech company co
founded by Bruce Hodges and Mark Levitan. There were five team members (Karen, Joe,
Mark, Bruce, Caitlin) and three advisors (Melaina, Mike, Darryl). They recently closed
their pre-seeding round where they raised $650,000 from the venture capital firm Highline
Beta, as well as several angel investors. This helped to complete Parachute’s launch into
the Canadian market in summer 2022. Currently, their lending service was only available
in Ontario, but the company had plans to expand into the rest of Canada.

Parachute targeted individuals with credit scores ranging from 580-700, and in
contrast to some industry players, would only extend loans to individuals who could afford
the debt, ie., their monthly debt payments could be afforded given other financial
obligations.

Similar to many of its competitors, Parachute offered loans to consolidate debt.

However, a significant differentiator between Parachute and other loan providers was that
it aimed to improve credit scores, increase savings, reduce stress, and improve the
financial literacy and financial health of its customers. Exhibit 9 provides a summary and
comparison of Parachute to other major industry players.

https://www.thestar.com/business/2022/09/17/canada-could-finally-lower-its-60-interest-cap-on-loans-but the-
industry-is-fighting-hard-to-keep-rates-high.html
23
Financial Consumer Agency of Canada (2016). Payday loans: Market trends. Government of Canada.
Retrieved from www.canada.ca
9
Product
Parachute assisted its customers in three main ways: they offered reset debt, they
provided a roadmap to financial goals, and provided financial rewards to clients who were
fiscally responsible.

Reset debt involved consolidating all of the high-interest debt owed by a customer
into one bundle. It was converted into a loan with Parachute and a plan was created that
allowed the consumer to repay Parachute at a lower, more manageable interest rate than
what was being charged on the original debt.
 The personalized “roadmap” provided continuous updates, education, and
feedback to assist the borrowers in achieving monthly financial goals and improving their
credit rating.

Parachute financially rewarded borrowers for practicing responsible financial

behaviour such as making the Parachute loan payments on time, maintaining a debt
utilization ratio below 50%, paying bills on time, and not taking on new debt. For each
month that the client achieved these goals, a pro rata share of 10% of the principal of the
loan amount was put into a virtual account that the customer received at the end of the
loan. This effectively lowered the interest rate that the consumer was being charged as
the consumer demonstrated the ability to repay the debt. At the conclusion of the loan,
not only was the customer debt free, he/she had also had a better credit score and was in
a better cash position.

Parachute offered loans of up to $25,000 based on credit approval. The Parachute

loans had five features that differentiated them from other loan providers: Competitive
interest rates given the credit score, monthly cash-back earnings, tips and education on
managing money, and financial rewards for positive money management.

The application process

The first step was to fill out an application form to check eligibility for the debt
consolidation loan. Applications were rejected if the applicant’s credit score was below
Parachute’s credit score range or the applicant’s debt profile indicated they wouldn’t be
able to afford the loan.

Consumers used open banking24 meaning that they gave Parachute permission to
access their banking data to be used to assess their credit application, as well as monitor

24
Open banking refers to the use of application programming interfaces (APIs) that allow a third party, in this
case Parachute, to connect with a consumer’s banking, transaction and financial data with the customer’s
permission. For more information go to https://www.investopedia.com/terms/o/open banking.asp
10
for insights, coaching, and rewards. Through the application, Parachute received 12
months of data on all of their financial activity.

If eligible, the client’s debt was simplified into one easy monthly payment at one
interest rate, which made the debt easy to monitor and manage. Parachute’s interest
rates varied from 24.99-29.99% depending on the customer’s credit risk.

Next, customers completed a financial wellness survey and financial literacy

assessment to measure their financial wellness and literacy. This enabled Parachute to
provide a personalized roadmap and strategy to help achieve better financial well-being
while paying off the loan over time.

The entire process was conducted online on consumers' phones or computers.

Parachute was currently exploring ways to add more applications via open banking. In
the future, technology would ideally be used to understand more about borrowers and
identify characteristics that better predict their default risk, allowing Parachute to expand
to and assist those with even lower credit scores.

How Parachute initially reached customers

Initially, the main way that Parachute reached their target customers was via ad
campaigns on Facebook, Google, and Instagram. They expanded their acquisition
strategy and increased engagement from consumers with 600+ credit scores via Google,
Microsoft, and other search engines. Another way they reached customers was through
Borrowell, Lendforall, Finder, and email campaigns. Exhibit 10 provides a detailed
description of Parachute’s target market.

Bruce wondered if there were any partnerships that could help Parachute achieve
its customer acquisition objectives.

CONCLUSION
As Bruce continued to walk to work, he wondered about the people he was
walking past. How many of them were carrying a debt burden that was being made worse
by high interest loans? He considered how many lives could be improved if he was able
to scale Parachute and achieve Parachute’s mission of being “the fastest way to be debt
free and financially fit”.

To grow, Parachute needed money for loans, the team, and for technology. In order to
secure the funding, they needed a convincing and feasible plan to attract investors.
Bruce wanted to raise $5 million on a valuation of $25 million by the end of 2022 but
markets were constrained, and valuations were dropping. His team knew that to

11
be successful in its next equity raise they would need to provide a marketing plan and
customer acquisition strategy to attract multiple demographics and achieve their target of
$100 million in annualized revenue by year 5. As an example, this amounted to acquiring
5000 customers with credit scores between 600-700 in Canada with an average loan size
of $15,000.

An important aspect of the plan was that the business model had to create social
good. How could Parachute earn a profit while educating consumers so they could make
better financial choices and providing consolidation loans that did not charge predatory
interest rates?

Bruce took a deep breath as he reached for the door into the Parachute offices.
This was going to be a long and important day.
Exhibit 1: Payday Loan Photo

Source: Bruce Hodges, May 2022

12
Exhibit 2: Market sizing of industry
Source: 2021 Acquisition of LendCare. goeasy Ltd. Retrieved September 28, 2022, from
https://investors.goeasy.com/static-files/4bc68b6a-8be6-433b-9bc1-20a4d52c28a9

13
Exhibit 3: Canada Credit Industry Indicator
Source: Transunion Canada. (2021, December 7). Research report. Canadian Credit Market Shows
Continued Positive Momentum. Retrieved September 28, 2022, from
https://newsroom.transunion.ca/canadian-credit-market-shows-continued-positive-momentum/

14
Exhibit 4: Fixed vs Variable Rate (by RBC)
Source: RBC Royal Bank Personal Loans. RBC Royal Bank. (2022). Retrieved
September 28, 2022, from https://www.rbcroyalbank.com/personal-loans/personal
loans.html

15
Exhibit 5: Mapping of Legislation on High Interest Loans in
Provinces and Territories

Some of the Ontario payday legislation indicates you can’t be charged more
than $15 for every $100 that you borrow, you can’t be sold or offered any goods or
services in connection with the payday loan, and “rollover” loans are not allowed with
the same lender. This means you can’t roll what you owe on a payday loan into a
second payday loan from the same lender25. This doesn’t prevent a consumer from
going to another lender. Payday loans were short-term, high-cost loans, and their use
has more than doubled in Canada recently to 4% percent of all Canadian households.
55% of payday loans were worth between $1-$500, 20% were between $501-$1000,
4% were between $1001-$1500, and 7% were over $1501; customers often have
multiple loans, with multiple providers26.

Source:

Acorn (2021). Study on high interest loans. Retrieved from acorncanada.org

25
https://www.ontario.ca/page/payday-loan-your-rights
26
https://www.canada.ca/en/financial-consumer-agency/programs/research/payday-loans-market-trends.ht ml
16
Exhibit 6: What is a Good Credit Score
Source: CreditcardGenius. (2022). Credit Score In Canada: What These 3 Digits Say
About You. Retrieved September 28, 2022, from https://creditcardgenius.ca/blog/credit
score-canada

17
Exhibit 7: Market Sizing by Credit Score
 Source: 2022 Annual General and Special Meeting. goeasy Ltd. (2022). Retrieved
September 28, 2022, from https://investors.goeasy.com/static-files/45f6676b-ebea
4109-9cc6-b57c3eef2efd

Source: What is a Credit Score & How is a credit score calculated in Canada? My
Money Coach. (2022). Retrieved September 28, 2022, from
https://www.mymoneycoach.ca/credit/check-credit-rating-report-score/what-is-a-credit
score

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Exhibit 8: Canadians with Non-Prime Credit Scores and
Products
 Source: Investor Presentation Q4 2021. goeasy Ltd. (2021). Retrieved September
28, 2022, from https://investors.goeasy.com/static-files/ce8bd07a-2613-44fc-ae28-
15501286b8d8

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Exhibit 9: Summary of Industry Participants
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Exhibit 10: Client Profile to Qualify for a Parachute Loan ●

At least 18 years
● Credit score over 580

● At least $30,000 in annual income

● Cannot be on employment insurance or disability

● Debt-to-income ratio less than 45% (monthly debt payments ÷ monthly gross
income)

● No bankruptcy or consumer proposal history on credit bureau

● No active judgment (public record count is zero)

● Less than 6 inquiries27in 6 months

● Canadian bank account

● Canadian resident At least 2 trades on credit file, minimum of 1 revolving trade

(credit cards, line of credit, auto loans, mortgage, etc.)
 ● Current revolving limit of at least $100

● Maximum 98% revolving credit utilization

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Inquiries occur when a client applies for new debt - see content on new debt in the credit scores section
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