Debt-Relief Programs and Money Left on the Table: Evidence from Canada's Response to Covid-19

Canadian Journal of Economics

Jason Allen, Robert Clark, Shaoteng Li, Nicolas Vincent

Abstract

This paper analyzes the effectiveness of debt-relief programs targeting short-run household liquidity constraints implemented in Canada in response to the COVID-19 pandemic. These programs allowed individuals to push off mortgage and credit card payments and cut in half interest rates on credit card debt. Using credit bureau data, we document that, despite potential savings above $4 billion, enrollment was limited: 24% for mortgages and 7% for credit cards. By exploiting the richness of our data set, we provide evidence that close to 80% of individuals were unaware of the credit card relief program while others faced important fixed non-monetary costs preventing uptake.

Keywords: Credit and credit aggregates; Coronavirus disease (COVID-19); Debt management 

JEL codes: H5, G31