Debt collection is one of the most stressful experiences for any Canadian. As if it was not difficult enough to find yourself in financial difficulty, the concept of being harassed by debt collectors or collection agencies is hardly what anybody wants. Thankfully, there are laws in place across Canada to control what debt collectors are able and not able to do. Similarly, each province has its own set of laws and regulations to ensure debt collection does not get out of hand. If you find yourself receiving collection calls, your first step should be to know your rights when it comes to handling debt collectors or collection agencies. In this article, we cover Ontario debt collection laws to demonstrate the rules and regulations a debt collector must abide by when attempting to contact you. We will also share how to best deal with a collection agency, and what to do to stop them contacting you altogether.
How do Ontario debt collection laws work?
If you find yourself in a situation whereby you cannot make your debt repayments, the creditor you owe money to may decide to either assign or sell the debt to a debt collector or a collection agency. A collection agency is a company that has the sole intent of recovering any debts that are overdue, whether they have purchased the debts that are in arrears, or if they are calling you on behalf of your creditor. They will either earn a fee from your creditor for the debt collection, or it will be a debt they have bought that they want to recover. Either way, the more they are able to collect, the more they are likely to earn. In Ontario, the Ontario Collection and Debt Settlement Services Act is in place to regulate how collection agencies operate across the province. Collection agencies must register and follow this legal act. You should note that these Ontario debt collection laws do not apply to your creditor’s internal debt collection department – it is solely for collection agencies. All sorts of debts will be assigned or bought by collection agencies, from car loan debts to credit card debts, and bills. If you are not complicit with collection agencies and do not pay your debts, collection agencies can quickly become aggressive in reclaiming their debt. They will use all kinds of tactics to collect, and can even take legal action against you (like a wage garnishment or freezing your bank account) to reclaim their funds. The Ontario debt collection laws control what debt collection agencies are able to do to ensure a fair process when it comes to contacting you. We cover this in more depth below.
Making initial contact
In Ontario, collection agencies or debt collectors are not able to simply begin contacting you. They must send you prior notice via mail or email which includes specific information related to the debt. This includes the creditor of the debt, the amount you owe, the type of credit, the amount of debt on the date it was first owed and the current amount, and the name of the debt collection agency. It should also include confirmation that the collection agency is registered in Ontario, a statement that they will provide a breakdown of the amount owed, and a consumer disclosure statement sharing information on your rights and how to file a complaint if you feel a legal breach has been made. Following receipt of this notice, there is a six day waiting period before collection agencies can begin calling to collect the debt. This time allows you to think about your options and decide what to do. If, for any reason, this collection notice has not been received, the collection agency must resend it to the details you provide, and there will be another six day waiting period.
Pursuing legal action
In line with Ontario debt collection laws, a collection agency may not threaten you with legal action without receiving written authorization from the original creditor. Sometimes, collection agencies will issue a Draft Statement of Claims that has been issued by the court. This is actually not permitted by the Ontario regulations. If you happen to receive one of these, you should send it to the Ontario regulator at Consumer Protection Ontario, and also file a complaint to the Law Society. While it is possible that debt collectors may pursue legal action against you, it is expensive and time consuming as they will need to obtain a grant from the courts for most legal actions including wage garnishment. For this reason, it does not often happen.
Frequency of communication
You may be wondering how often debt collectors can call you. This is all covered in the Ontario debt collection laws. Debt collectors may call you Monday to Saturday, from 7am to 9pm. On Sundays, they can contact you between 1pm and 5pm. No contact is permitted on statutory holidays. Upon speaking to a collection agency for the first time, debt collectors may only contact you up to three times in a single week, unless you have explicitly provided consent to hear from them more regularly. ‘Proper contact’ includes speaking to you on the phone, leaving a voicemail, or sending an email. If you do not answer the phone and the collection agency does not leave a message, they can call you back repeatedly. While collection agencies may continue to call you, the discussion has to be civilized. They are not permitted to harass you or use insulting language. If a collection agency causes communication charges for you – for example, calling charges – you can let them know and they can no longer try to communicate with you in that same method of communication. The collection agency will also need to reimburse any of these fees once shown proof.
Amount of repayment requested
In Ontario, you will only ever need to pay the amount of debt you owe. Collection agencies or debt collectors are not permitted to charge you any additional fees. The only exception to this rule is for any Provincial Offences fines that may be owed to municipalities. In this instance, collection agencies may add an additional fee where the municipality allows it. Should you request one, your debt collector must share a breakdown of the amount of debt owed. This must include, for instance, the original amount of the loan, the interest rate, fees, and so on. This is particularly helpful information if you are considering a debt settlement like a consumer proposal.
Who else can collection agencies contact?
Legally in Ontario, debt collectors or collection agencies are permitted to contact your friends and family. In doing so, they are only allowed to ask for your contact details, or contact a guarantor of your debt if you have given written permission for them to do so. Collection agencies frequently request payment from those who have cosigned a debt. Collection agencies are also able to contact your employer without asking, but only to confirm your employment status or to ask for an update on a wage garnishment if one has been pursued.
How long can debt collectors try to collect in Ontario?
In Ontario, the statute of limitations for unsecured debts is two years. Beyond this time period, collection agencies can no longer pursue legal action against you for any past debts. This timeframe begins at the date of the last payment, or the last time you acknowledged the debt with a debt collector, whichever is most recent. After this two year period, the debt is still owed however. It will not disappear. Debt collectors will likely still continue to chase you for payment, but for many there is less to be feared when you know that legal action cannot take place. It is important to note, however, that avoiding your debts for an extended time period will continue to have an adverse affect on your credit score. Your credit report will be impacted by overdue payments and accounts in collection for six to seven years from the date of your last payment. Tax debt works a little differently – the Canada Revenue Agency may collect for ten years. For secured debts including mortgages and car loan debts, creditors may choose to enforce their rights at any time.
If you are being contacted by a collection agencies, it is highly likely you will want to put a stop to it as quickly as you possibly can. There are a few considerations you need to make at this stage. Here are some of the most obvious debt relief options for you:
If the debt is definitely yours and you can afford to pay back your debt in full, this is the best option. By repaying your debt in full, debt collectors or collection agencies will have no further reason to contact you and you can move on with your life. This is the simplest option. You may even be able to borrow the funds from a friend or family member if you are able to commit to repaying them on agreement.
Negotiate a payment arrangement
If, perhaps, you can afford to make a partial payment, negotiating a settlement with your creditor may be a good idea. It is essential you handle negotiations with care and confidence and know your rights before approaching your debt collector. You could offer to pay a lump sum, or create a payment schedule in instalments. No matter what agreement you put in place, you should only ever offer an amount or a schedule you can realistically afford. You should never send cash as a payment, and always ensure to get any agreement in writing. Within this written agreement, ask that they include a clause that states that if payments are made on time, the collection item will be removed from your credit report once you have paid the debt in full. If you cannot afford to make the debt repayments, explain this to the collection agent but do not be bullied into agreeing to a payment plan that you simply cannot afford. This can make your debt problems even worse in the long run. If your debt is old, you stand a stronger chance of negotiating a good settlement. A successful negotiation process typically looks like this:
- Realistically assess how much you can afford to repay
- Carefully consider how you will approach negotiations with your creditor in a persuasive manner
- Ensure you know your rights
- Be confident and do not fear hanging up the phone if the conversation takes a turn for the worse
- Document the conversation as you go so that you can remember what is being said
- Have the agreement formally documented
- Ensure you can keep up with your repayments, otherwise the negotiation could be for nothing
Speak to a Licensed Insolvency Trustee
A Licensed Insolvency Trustee is the only professional in Canada legally able to file all forms of debt relief and find you protection from your creditors. For this reason, they are the first point of call when you are struggling to make your debt payments. They will ask you all the essential questions regarding your income, budget, and debts. Most often, this will involve filing either a consumer proposal or a bankruptcy. Licensed Insolvency Trustees are experts in reviewing your financial circumstances and helping you to understand the best debt relief option for you.
A consumer proposal is a legal form of debt settlement that can reduce your debt by up to 80%. It is the process of putting forward an affordable monthly repayment amount that is a percentage of your total debt and spread out across a period of up to five years. Most creditors are likely to accept the terms of a consumer proposal as it is preferential to the consequences of filing bankruptcy instead. There are many advantages of filing a consumer proposal, including the ability to keep your assets and full protection from your creditors thanks to a stay of proceedings. A Licensed Insolvency Trustee will help you to negotiate this settlement offer with your creditors on your behalf. At Spergel, unlike other bankruptcy firms, you will be assigned your own Licensed Insolvency Trustee to walk you through the process instead of passing you from person to person. We also have a 99% acceptance rate on any consumer proposals we file.
Sometimes, bankruptcy is what is required to begin a fresh financial future. Bankruptcy is the process of assigning any non-exempt assets over to a Licensed Insolvency Trustee in exchange for the clearance of all your unsecured debts. Once you are discharged from bankruptcy, your debts are gone and you can truly enjoy a fresh start. Bankruptcy has the added advantage of offering full protection from your creditors.
Spergel is a compassionate team of debt relief experts, and we can answer any questions you may have on Ontario debt collection laws. Book a free consultation with one of our experienced Licensed Insolvency Trustees who can explore your options with you so that you can stop collection calls for good and move forward with your life.