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CONSUMER DEBT: What Collection Agencies Can & Cannot Do

From Mumbai to Manitoba, there are often horror stories in the media of people being (verbally) abused, beaten up, chased down, dragged out and subjected to such other atrocities because they have some form of debt obligation, such as a personal loan, credit card purchases, purchases by way of installments, or a line of credit to be repaid, again by installments. Their tormentors are known as collection agents; those familiar with the organized crime or loan shark syndicates may call them goons.  Although this article wont necessarily apply to the latter, it will to the Collection Agencies.

As of June 1, 2006, there is a Nationally Ratified List Of Prohibited Practices.

  • “TORONTO– Banning threatening language and limiting the number of phone calls collection agencies can make to consumers are just some of the measures the McGuinty government is putting into place to help protect Ontario families from over-aggressive collection agencies. “Consumers who have been harassed by phone calls from collection agencies will find relief in the province’s new, stronger standard of prohibited practices for collection agencies,” Government Services Minister Gerry Phillips said. “Having a standard also allows the public to have a better understanding of what collection agencies can and can’t do.” The new regulation of the Collection Agencies Act responds to consumer complaints about collection agencies and harmonizes Ontario law with a nationwide list of prohibited practices to improve consumer protection .Coming into force today, the regulation adopts the nationally ratified list of prohibited practices, which includes: banning the use of threatening or profane language; strengthening limits on contacting employers; limiting contact with debtors who have referred the matter to their legal counsel or who suggest the matter be taken to court; and clarifying definitions of harassment. To help address the issue of consumer complaints about collection agencies, the regulation also provides a specific limit of no more than three calls to a debtor in any seven-day period. The ministry consulted with the collection industry to develop a standard to be followed by all collectors. “The government is committed to balancing consumer protection with creditors’ need to collect outstanding debts,” Phillips said.

In a Backgrounder issued on the same date, the Ministry added:

A collection agency is an organization hired by a business to collect money that is owed. Some businesses use collection agencies when customers’ accounts are overdue. Ontario regulates collection agencies through the Collection Agencies Act and its regulations. The Act’s regulations forbid collection agencies from:

Contacting a consumer until six days have passed from sending the consumer written notice of the following:

  1. The name of the creditor;
  2. The balance owing;
  3. The name of the agency and its authority to demand payment.

In addition, the collection agency should not be:

  1. Continuing to contact a consumer if he or she did not receive the notice unless a second copy of the written notice is sent to an address provided by the consumer, and then contact may only be made six days after sending notice;
  2. Contacting a consumer if he or she (or his or her lawyer) sends a registered letter to the agency disputing the debt and suggesting the matter be taken to court;
  3. Contacting a consumer if he or she notifies the agency by registered mail to communicate only with a lawyer appointed by the consumer (the lawyer’s name, address and telephone number must be provided to the agency);
  4. Contacting a consumer on Sunday, except between the hours of 1 p.m. and 5 p.m., and on a holiday;
  5. Contacting a consumer, other than by ordinary mail, more than three times in a seven-day period without consent, once the agency has actually spoken with the consumer;
  6. Using threatening, profane, intimidating or coercive language, or using undue, excessive or unreasonable pressure;
  7. Continuing to contact a consumer if he or she has told them that he or she is not the person they are looking for unless they take reasonable precautions to ensure he or she is that person;
  8. Giving false or misleading information to any person;
  9. Recommending to a creditor that legal action be commenced against a consumer without first sending notice to the consumer;
  10. Contacting a consumer’s employer except on one occasion to obtain employment information, unless the employer has guaranteed the debt, the call is in respect of a court order or wage assignment or the consumer has provided written authorization to contact the consumer’s employer; and
  11. Contacting a consumer’s spouse, a member of the consumer’s family or household, or a relative, neighbour or acquaintance except to obtain the consumer’s address and telephone number unless the person contacted has guaranteed the debt or the consumer has given permission for the person to be contacted.

The Ministry recommended a few precautions to avoid consumer debt wholes when dealing with Collection Agencies and a resolution:

  1. A debt assigned to a collection agency for recovery should be paid as soon as possible. If in desperate need, borrow it as cheaply as possible;
  2. Rates on credit cards or personal loans are to be compared before committing;
  3. Never to send cash. Payments are to be made in such a way that there is a receipt, either a cancelled cheque from the bank or a receipt from the agency;
  4. Negotiate a doable payment schedule and hang on to it; and
  5. Payday loans, marketed as a quick and easy way to get cash until the next payday, are toxic. They charge additional fees making these loans too high to repay.

What are My Rights?

Under the Consumer Protection Act an individual will have certain rights available to him or her when making purchases under credit and usually not in the place of business of the vendor, such as over the phone from the comfort of your home.  The following is a list of such rights:

Cooling off period

If the deal is worth more than $50, it can be cancelled within 10 days.

Timely remedies

Notifying the company during the 10-day cooling off period (preferably in writing) that there would be no deal,  the company has 15 days to return the money. The business has the right to take back the goods provided under the agreement by either picking them up or paying for the cost of sending them back.

Unsolicited goods are not to be paid for nor returned

Better, use them or throw them out.  The same goes for credit cards you never asked for.

Pre-paid goods or services over $50 must have a written contract

Such as membership contracts or magazine subscriptions.

Contracts must be clear and comprehensible

Vague language is discouraged in contracts. All required information must be clear, prominent and easy to understand. If there is a dispute over unclear language, it must be interpreted in favour of the consumer by law.

Credit terms must be fully disclosed

Anyone providing goods or services on credit must give the consumer a written statement showing all financing charges and the annual percentage rates of the credit transaction. It must also explain how any extra charges would be calculated if you failed to make the payments.

Misrepresentation is illegal

All charges in a contract must be what they say they are. For example, a business may not add a $20 surcharge for a “tax” that is not really for tax.

Sales incentives may not be false, misleading or deceptive

A salesperson can offer you an incentive to help find other buyers, but the description of the incentive cannot be false, misleading or deceptive.

Consumer agreements must disclose all details

If a company isn’t delivering as per its contract with you, or if there is an aspect of the deal the company was required to disclose by law but didn’t, the contract could be cancelled within one year of entering into it.

Goods cannot be repossessed if two-thirds or more of the total amount has already been paid

A seller can’t take back goods bought but not paid for fully, as long as two-thirds or more of the cost has been paid, except by court order. However, a seller can take you to court if a payment is missed to get full payment by way of a judgment, thereby hurting your credit rating.

Deliveries must be made on time

If a delivery doesn’t arrive within 30 days of the promised date, the contract could be ended by sending a cancellation letter. But the right to cancel the agreement is lost if delivery is accepted after the 30 days.

Anyone who violates the Consumer Protection Act will have to pay a fine

Individuals, sole proprietorships and partnerships violating certain sections of the act are liable to a fine of up to $50,000 or imprisonment of up to two years less one day. A corporation can be fined up to $250,000.

Contact the lawyers at Levy Zavet PC to discuss your debt obligations and perhaps consolidating your loans to a more affordable payment option.  In some circumstances negotiating a compromise with your lenders could be a successful means of releasing your liability and having a fresh new start.