Let’s face it. Debt collectors aren’t very popular. If you’re interacting with one, it is because you owe money or you’re owed money, and in both cases, it’s not much fun. Coupled with this is the fact that before the industry was regulated, there were—and in some cases still may be—unscrupulous players who can be aggressive, harassing people by email and phone at all hours of the day and night. However, these days, reality is better than perception. Debt collection is tightly regulated in Canada and in this first part of our two-part series, we’ll look at who they are, what they can and cannot do when contacting you and how we can help.
Who are debt collectors?
Anyone who undertakes debt collection must follow a series of strict rules that oversee the industry. Although these rules differ from province to province, in general, every individual (a collector) and every company (collection agent/agency) in this business must comply with all of the legal requirements where they operate. In Ontario, it’s the Collection and Debt Settlement Services Act and its regulations; in BC, it’s under the Business Practices and Consumer Protection Act, among others. Collection agencies must be licensed, and depending on where you live, in order to obtain one, there may be exams to take, fees to be paid, financial security left in trust, a background check and a level of experience required. And although individuals no longer have to be licensed in some places, they do have to follow all of the same laws as the agencies.
What a debt collector can and cannot do when contacting you
Debt collectors cannot do as they please when getting in touch with you. As mentioned, the rules may be different in your province, but in general, they must call you within set hours of the day/night, usually, somewhere between 7 am-10 pm during the week, with limited contact hours on weekends. Although in Quebec, there can be no contact on Sundays or state holidays, and they must first contact you in writing, not by phone (same for BC). A debt collector also cannot contact you endlessly. In Ontario, once they have reached you the first time, they cannot continue to call or write more than three times a week, including leaving voicemails, sending emails, etc.
A debt collector is able to call your employer or friends and family in limited circumstances. In Quebec, they can call those close to you in order to reach someone who has agreed to cover for you if you didn’t pay (your surety/guarantor) and to get your address or phone number, but only once. In other circumstances, you must give them written permission to reach out to people you know (usually via the small print in your contract). Collectors cannot ask you for any amount they choose. With some exceptions, like a bank or a loan company, they can only request the money owed to the original creditor. So if you owe $1,000 to your yoga instructor, the debt collector can only ask for $1,000. If there was interest or penalties on the original debt, they can ask for that too, but not more. They also cannot charge you a “collection fee” or a “close the file fee” unless that too was part of your initial deal with the creditor.
No intimidation
What a debt collector cannot do is use threats or unnecessary pressure to get you to pay. They cannot make you think you are about to be arrested, either, because you cannot go to jail for an unpaid debt in Canada, despite what you may have heard. They cannot falsify government or any other “official-looking” documents to intimidate you. They can’t share your personal information with anyone, including those around you. And in some provinces, if you have made a written request for banks, trust and loan companies, insurance companies and retail associations to get in touch with your lawyer (and you’ve told them how), they must then go through your lawyer. And as we will look at next week in part two, in some cases, you can also instruct them to no longer contact you by phone.
Secured vs unsecured debt
There can be differences between a secured debt (mortgages, car loans, etc.) and an unsecured debt (credit cards, gym memberships, etc.). If you owe money to the bank for your mortgage or to a car company for your vehicle, they may have more power to recoup the loan, including seizing your property and repossessing your car, respectively, without much formality.
You have to check your initial agreement and the last invoice or notice sent to you to know exactly how much is owed if the deadline to seek legal action for the debt has passed (more about this next week), and what the debt collector can ask for. Give us a call. We are here to help.
It’s important to note that the rules we’re discussing here are in very broad terms and may not apply in all places and circumstances. This is why it is always good to seek legal advice before responding to or hiring a debt collector.
The take-away
Regardless of where you live in Canada, there are rules to how and when a debt collector can contact you and your employer, friends and family. If you receive a call or a letter from a collection agency, or you need to hire an agency to recover a debt, we will be able to advise you as to how to move forward. Join the more than 4,400,000 people already protected by LegalShield and sign up today.
Next: Tips on what to do when you’re contacted by a debt collector
Articles on the LegalShield.ca website are for informational purposes only and do not constitute legal advice or opinion in any manner. Laws mentioned in the articles vary from province to province. Any links to third-party sites in our articles are for general information purposes only and LegalShield is not affiliated with, nor does it endorse, the content of linked sites. It is always advisable to seek legal counsel—and LegalShield can help.
