Debt Statute of Limitations Ontario: a guide to Ontario debt collection laws

Posted on 3 September 2022

Written by Ashvin Sharma

When it comes to debt collection, each province in Canada has its own laws and regulations. Debt collection itself can be a pretty stressful situation to deal with. Perhaps you have unmanageable debts that you are already struggling with, and then you face multiple collection calls from collection agencies or creditors. Collection agencies will do what they can to reclaim their money, and some will try all kinds of tricks to encourage you to repay your debts. For this reason, it is important to understand Ontario debt collection laws, as well as the debt Statute of Limitations Ontario. In this article, we will explain your rights and share when you may be better off not paying a collection agency or debt collector based on the rules in Ontario.

What are the Ontario debt collection laws?

If you are struggling to repay a debt to one of your creditors, they could send the debt to a collection agency. Most often these debts are assigned to a collection agency, but in some cases collection agencies will choose to purchase the debt and take on the collection themselves. A collection agency is a company that creditors use to recover overdue debts. When it comes to Ontario debt collection laws, collection agencies must follow the legislation laid out in the Ontario Collection and Debt Settlement Services Act. These laws are applicable only to collection agencies, as opposed to the internal collection department of the creditor you owe. It is in the interest of collection agencies to collect as much repayment from you as possible, as they will typically earn more based on what they can reclaim. All kinds of debt can be assigned to collection agencies, from personal loans to car loans to credit card debt. If you do not make your repayments immediately, collection agencies will use all kinds of tactics to try and reclaim their funds. They can even choose to take legal action, like freezing your bank account or pursuing a wage garnishment against you in order to get you to pay. Thankfully, Ontario debt collection laws are in place to monitor the actions that collection agencies can take.

Can Ontario debt collectors simply start calling you?

Thankfully for debtors, Ontario debt collectors and collection agencies cannot simply begin calling you relentlessly. They are required by law to first issue a prior warning, delivered usually via mail or email. This is known as a notice of collection, and it must include some simple information like the following:

  • The creditor who is owed the debt
  • The amount of debt owed
  • The type of credit – e.g. car loan debt or credit card debt
  • The original amount of debt owed when it was first due
  • The current amount of debt owed
  • The name of the debt collection agency, including contact details
  • Confirmation that the collection agency is registered in Ontario
  • A statement that a detailed breakdown can be provided if requested
  • A consumer disclosure statement sharing your rights, and how to file a complaint against the collection agency if needed

Once this notice of collection has been issued, there is a six day waiting period during which the collection agency will not act. This is a good amount of time to consider your options. After this point, the collection agency may call you to collect the debt that you owe. If, however, you have not received the notice, the collection agency must resend it to you without demanding a payment until after the sixth day following the resend.

What are collection agencies in Ontario permitted and not permitted to do?

Naturally, receiving calls from debt collectors or collection agencies can be stressful, particularly when you are struggling to make your repayments. This is why there are Ontario debt collection laws and a debt Statute of Limitations Ontario to protect debtors, and to ensure harassment is prevented. In line with the Collection and Debt Settlement Services Act, debt collectors can:

  • Make reasonable attempts to collect their debts in line with Ontario legislation, provided a notice of collection has been received
  • Pursue legal action including bank account freezes and wage garnishments, provided the correct steps have been followed

In line with the Collection and Debt Settlement Services Act, debt collectors cannot:

  • Threaten legal action without previously authorizing the action with the original creditor
  • Share any Draft Statement of Claims that look as though they have been issued by the court. If you receive one, you should send it to Consumer Protection Ontario to make them aware

How often can debt collectors call?

In Ontario, there are several rules on when debt collectors may contact debtors. These debt collection laws are as follows:

  • Calls to debtors are permitted between 7am to 9pm Monday to Saturday, and 1pm to 5pm on Sunday
  • No calls permitted on statutory holidays
  • Collection agencies can only call up to three times in one week without prior consent from you for more frequent contact
  • Contact counts as a phone conversation, leaving a voicemail, or sending an email – if you do not answer, they may continue to try and call you
  • Discussion has to be reasonable – harassment, threats, unreasonable, or offensive language are not permitted

Collection agencies are able to contact your friends and family, but only to confirm your contact details. There may be instances where you have given permission in writing for a loved one to take calls on your behalf, or they may have guaranteed payment on your debt or been a cosigner. Although collectors may call your employer, they can only do so without your permission to confirm that you work at the business. They may also call to ask your employer about the status of a court order for a wage garnishment.

What is the debt Statute of Limitations Ontario?

The debt Statute of Limitations is the legal maximum time following a debt being taken out within which legal proceedings may be initiated. It is essentially the time limit for debt collection in Ontario. For standard unsecured debts, including personal loans and credit card debt, the debt statute of limitations Ontario is two years. Past this time period, a collection agency can no longer pursue legal action against you for an overdue debt. This two year period is restricted to the date of the last payment, or the last time you acknowledge a debt when speaking to a debt collector. Any more recent payments or discussion of the debt will reset the two year period. Even when the period has passed, it does not mean the debt disappears – you still owe the money. This means that debt collectors can continue to call you to try and get you to repay, even though they cannot take legal action against you. You should also note that avoiding your debts can have a negative impact on your credit score as late payments and accounts in collection will remain on your credit report for six to seven years. Often, it is best to face up to your debts and seek debt relief as soon as you can. Secured debts work slightly differently when it comes to the debt Statute of Limitations Ontario. Rights can be enforced ay any time if payments are not received, and the limitation period for these according to the Income Tax Act is ten years.

How long can debt collectors try to collect in Ontario?

Being chased by debt collectors is tough. You likely do not want to open the door or answer your phone in case a collector is there. It is even more challenging when you do not know how to repay your debts. It is understandable, therefore, that you want to know when you can finally relax. While the Canadian government states that legal action cannot be taken beyond six years after the debt was last acknowledged, provincial rules work slightly different. According to the debt Statute of Limitations Ontario, this time period is technically two years. If you live in Ontario and have a debt you have not repaid, a debt collector or collection agency therefore has two years to take legal action against you for this particular debt. Once again, if acknowledged or if payments are made, this time period resets. A collector will also get more time to chase you if you change your address or phone number and do not inform the creditor. Once the time period has passed, many debt collectors will likely stop calling when they can no longer threaten you with legal action. The major credit bureaus in Canada will only keep information on debts that are six or seven years old, and so if you have not made a payment on a debt for seven years it will be removed from your credit report.

How to deal with debt collectors

There are a few ways in which to deal with debt collectors or collection agencies. Below is a summary of the primary ways of handling them.

  • Make your payments. If you are certain you owe the debt, and have the funds available or are able to borrow from family or friends, this may be your best option to stop them contacting you once and for all. Here is what happens if you don’t pay a collection agency.
  • Negotiate with debt collectors yourself. It is very important to handle this carefully, and ensure that if you make a settlement, it is documented and has legal validity. You should be confident in your approach, and be aware of your rights. You may stand a good chance of negotiating a good settlement if your debt is old. You should determine beforehand how much you can repay, and have a final agreement sent to you in writing. Ensure you can keep up with all of your repayments else it could undo all your hard work. Here is a guide on what to say to collection agencies.
  • Choose to not pay your debt. If you really have nothing to lose and are not worried about your credit score, you may choose to ignore debt collectors entirely and refuse to pay. For others, this may be too stressful to handle and there could be consequences like a wage garnishment.
  • Speak to a Licensed Insolvency Trustee. Licensed Insolvency Trustees are the only professionals in Canada legally able to file all forms of debt relief. A consumer proposal is a great option for reducing your debt by up to 80%, while enabling you to keep your assets. Another option is filing bankruptcy. Bankruptcy allows you to begin a fresh financial future, clearing all of your unsecured debts. Both options provide complete protection from creditors and debt collectors via a stay of proceedings.

Thankfully, you do not have to wait for the debt statute of limitations Ontario to expire, or spend months or years feeling nervous about answering your phone. At Spergel, our team of experienced Licensed Insolvency Trustees are here to help you make sense of your debt relief options. Unlike other bankruptcy firms, you will be assigned your own trustee to walk you through the debt relief process. Book a free consultation to start your journey to a fresh financial future.


Ashvin Sharma

Ashvin Sharma is a Chartered Insolvency and Restructuring Professional and LIT (Licensed Insolvency Trustee) overseeing all of Spergel's offices in the Greater Vancouver Area and British Columbia. He is also our resident expert on homeownership debt and health debt. In his spare time, Ashvin loves to play sports, spend time with family and friends, and serves as a volunteer coordinator for "Free-Them", a Canadian organization committed to raising awareness about human trafficking.

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