A Very Shiny Debt Trap

Danial Obermann’s bills were due. It was spring 2024, and the former trucker was having trouble keeping up with the cost of living in Vancouver.

“I had not yet been awarded my long-term pension, and I was looking for some financial resources in order to catch up on some bills,” he said.

The pensioner remembers opening his email to a message from a financial technology company called Spring Financial. So he checked out their website and applied for a loan.

“I read it and think, ‘OK, they'll lend me some money. Let's see what they have to offer here,’” Obermann said. “Next thing you know, I'm missing money out of my bank account.”

Obermann said he had applied for a loan of $5,000. But the money never came, and he said he was never sent a loan agreement.

Instead, Spring Financial had signed him up for its “Foundation” program, marketed as a credit-building program that offers a loan after 12 months of payments every two weeks. And although Obermann called the company to cancel, it kept taking money out of his bank account.

So Obermann went to the Civil Resolution Tribunal of British Columbia, accusing Spring Financial of deceptive practices. The tribunal’s decision shows he won and was able to get a refund for the payments he had made totalling more than $180.

But Obermann’s complaint is one of many. The Better Business Bureau reports a pattern of complaints that the company does not properly explain its products. Dozens of users in Reddit’s community for personal finance in Canada accuse Spring Financial of dishonest tactics.

The Tyee has not seen evidence that Spring Financial has broken any law.

But Gregory Best, a licensed insolvency trustee, says vulnerable Canadians turn to the company’s high-cost credit products under immense financial pressure. And anti-fraud consultant Vanessa Iafolla says that as high-interest lenders proliferate online, it’s easier than ever to be trapped in debt.

“These loan systems are marketed as humane or person-centred payday loans,” said Iafolla, a principal with a Halifax, Nova Scotia-based company called Anti-Fraud Intelligence Consulting. “All it's really doing is, in a very shiny digital space, trapping people in a cycle of wage poverty.”

The Tyee attempted to contact Spring Financial by mail, telephone and email and through the company’s online chatbot for this story. Spring Financial did not respond to requests for comment.

Interest rates over 30 per cent

On its website, Spring Financial boasts the fastest personal loan in Canada, offering same-day loans of $500 to $35,000. The financial technology company advertises personal loans, debt consolidation and credit-rebuilding services.

“Apply online in minutes and get your money quickly, often the same day,” the company says about its personal loans on its website. “All credit scores welcome.”

In British Columbia, Spring Financial is regulated as a high-cost credit grantor. These companies offer quick loans at high rates of interest, including payday loans and high-cost credit products.

Similar to payday loans, high-cost credit loans are financial products that charge between 32 per cent and 35 per cent annual percentage rate, the maximum allowable limit on interest rates. The annual percentage rate, or APR, is the actual yearly cost of a loan, including interest, fees and points.

That’s a much higher rate than that of other common credit products, such as credit cards and lines of credit. For example, RBC’s Avion Visa Platinum charges an interest of nearly 21 per cent on purchases. Vancity offers a $5,000 line of credit at 17.75 per cent APR.

Many of these high-cost credit loans are fixed-credit loans, which offer clients a lump sum of money up front and are repaid with scheduled payments, often monthly or biweekly.

For example, a lender could provide a two-year $5,000 loan at 34 per cent annual percentage rate. A borrower would make monthly payments of about $289.96 and pay about $1,959 in interest.

When debt cascades

Iafolla said that even though there is a difference in how high-cost credit companies and payday lenders are regulated, both have a similar effect.

“These loans are problematic because they are designed to get at people who cannot afford credit otherwise or cannot access credit otherwise,” Iafolla said.

“For a lot of people, what happens is this cascading effect where you take a loan on your next paycheque, and a payday loan on your next paycheque, until you're just in a cycle.”

Most customers turn to Spring Financial to pay their bills, make car payments or afford medical expenses, according to a former employee who asked to remain anonymous because he feared career repercussions.

“Everyone had a rough financial past,” he said. “Some were a little desperate and needed the money more urgently.”

The Tyee agreed to refer to the employee under the pseudonym James, which is not his real name. Emails between company management and James, examined by The Tyee, reveal he worked as a loan adviser for Spring Financial until leaving in 2024.

During the two years he worked at the company, James reviewed dozens of applications each day from Canadians with low credit scores and little money.

“They couldn't go anywhere else, so this was the only option they had,” he said. “I started to feel like, ‘Are we really helping people?’ Because this kind of puts people into a whole debt cycle.”

To prevent predatory lending practices, the federal government had at the time set the legal upper limit at approximately 48 per cent annual percentage rate. According to James, Spring Financial was offering loans right near that limit, with 46 per cent APR.

James remembers feeling pressure from management to approve a high volume of loans. He said that when he started in 2022, the base salary for loan advisers was $45,000 per year with bonuses for advisers who could approve 20 loans over a month.

Quotas are a common incentive for finance employees. But James said that monthly targets started rising and rising. By the time he left, he said, he was expected to approve 60 loans per month.

He said he and co-workers started working longer hours, coming in on days off and missing family commitments to meet their targets. After about a year and a half, the pressure started to get to James — as soon as he was able to find another opportunity, he left.

“It’s a toxic workplace, and what they're doing, it just doesn't feel right,” he said. “It just feels like they're taking advantage of people.”

Lenders with no physical offices

Spring Financial is one of 29 high-cost credit grantors in British Columbia, 16 of which operate only online, according to the latest data from Consumer Protection BC.

And that data shows thousands of British Columbians have turned to high-cost credit products in recent years.

Between July 1, 2023, and June 30, 2024, there were 69,964 high-cost fixed-credit loans executed in B.C., valued at a total of approximately $444 million. That’s nearly double the value compared with 12 months prior, totalling about $214 million across 49,497 high-cost fixed-credit products.

It’s unclear if the previous fiscal year was only an outlier or if this signals a trend of more British Columbians turning to high-cost credit. Consumer Protection BC started collecting data on high-cost credit lenders only in 2022 and has not yet compiled and published 2025 data, a spokesperson said in an email.

But experts like Best, a licensed insolvency trustee at Smythe Insolvency in Vancouver, are seeing high-cost credit products proliferate. Best helps people manage their assets when they can’t pay off their debts.

“I only see the people that aren't able to pay them off,” he said. “But with the people that we assist, we're certainly seeing an upward trend of high-cost credit products.”

Best said many of his clients previously turned to companies like Spring Financial when they were already under financial pressure. He added products that offer to help Canadians rebuild their credit — like Spring Financial’s “Foundation” — have become more prominent over the past 10 years.

According to Best, these products are part of a growing ecosystem of credit products, including buy-now, pay-later apps and other financial tech company offerings, that signal a change in how Canadians understand personal finance.

“I think it all stems from the same problem, which is inflation and cost of living,” Best said. “It's tougher to make ends meet. People are in debt, and the focus tends to be that the way out of debt is to focus on credit rebuilding, which just gets you further into debt.”

Anti-Fraud Intelligence Consulting’s Iafolla said the spread of online credit products comes as the stigma against debt starts to go away.

“We used to treat debt as something that was emergency use only,” she said. “We are reorienting consumers to understand debt in a new way that is fundamentally unhelpful for human beings and is extremely beneficial for profit-making organizations and institutions.”

That’s partly because these companies are able to operate online, according to Iafolla. People have turned to payday and high-interest lenders for decades, but now, Canadians under financial stress can decide to access high-interest loans without leaving the house.

“The point again, all of this is frictionless,” she said. “You want friction, because friction will tell you the pain is coming.”

‘Not good for the individual or the economy’

Iafolla said she expects to see the debt economy grow as financial technology companies continue to create new, innovative ways to sell credit.

“It's a bigger problem than I think people realize, because in Canada, while this is growing, we are not seeing regulation keeping up,” she said. “It's just allowing for people to accumulate debt on top of debt on top of debt.... We’re not doing good for the individual or the economy.”

In an effort to fight what Ottawa calls on its website “predatory lending,” in 2024 the federal government lowered the criminal interest rate to 35 per cent annual percentage rate from about 47.9 per cent APR.

But Iafolla said that hasn’t been enough to stop Canadians from being trapped by debt.

“I'm worried, in this landscape, that the way that we are treating this is a band-aid solution,” she said. “We've lowered the criminal interest rate over the years to 35 per cent, and that’s great. But if people are still being trapped in this cycle, we're not actually solving the problem at all.”

Data from the Office of the Superintendent of Bankruptcy shows that during the first quarter of this year, 37,121 Canadians filed for insolvency. That’s up 8.5 per cent from the same time last year.

In 2022 the B.C. government implemented laws that will require high-cost credit lenders to get annual licences, that banned hidden fees on credit products and that gave borrowers certain rights, such as the right to cancel loans.

But in practice, Obermann said, these laws are not enough. His case at the Civil Resolution Tribunal shows how companies like Spring Financial are still able to put people into complicated high-cost credit arrangements.

The tribunal found that enrolling Obermann in the “Foundation” loan was deceptive after Spring Financial provided no evidence of a loan agreement or its application process.

“The effect of the agreement is to mislead the consumer into entering an agreement where they pay interest on a loan they do not receive,” tribunal member Peter Mennie said in his decision.

Mennie added that Obermann’s attempts to cancel his loan meant Spring Financial had no right to withdraw money from the account.

And while Obermann won at the tribunal, he said the company has likely put others in a similar situation. He's calling for Consumer Protection BC to investigate — and be more proactive in enforcing the law.

“I don't want to see anybody else get deceived,” he said. “Especially people like myself. People that are struggling to begin with, financially, physically and mentally.”