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We all start out with good intentions of wanting to pay our bills on time. But sometimes life throws us a curveball – be it job loss, illness, or unexpected car repairs. Without an emergency fund to fall back on, you may end up neglecting your creditors. And when that happens, you’re likely to find yourself dealing with debt collectors. Are you aware of Ontario debt collection laws?
Why is a debt collector calling me?
Your creditor has sent the debt you owe to a collection agency to recover it on their behalf. If successful, the collection agency will earn a fee paid by your creditor for this service. The fee is typically a commission on the amount collected.
Another possible scenario is that your creditor has sold its overdue debts (including yours) to a collection agency or debt buyer. In this case, the collection company is calling you on its own behalf, because it now owns your debt.
What types of debt can a debt collector recover?
Any debt can be assigned to a collection agency. This includes credit card debt, past due utility bills, bank or car loans, lines of credit, and even a judgement debt under a lawsuit.
Do I have any rights when it comes to collection calls?
Yes. In Ontario, you’re protected by the Ontario Collection and Debt Settlement Services Act (the “Act”). The Act sets out strict laws on what a debt collection agency can – and cannot – do. Among other things, it attempts to curb collection agencies from using harassing or intimidating tactics to get you to repay the debt you owe.
But it’s important to note…
The Act only applies to third party agencies.
If the calls are coming from your original creditor, or even from a collection agency that purchased the old debt from your original creditor, the Act will not apply.
What are my rights under Ontario Debt Collection Laws?
Here are 10 rights all Ontarians need to know about when dealing with collection agencies.
#1. You should not be receiving any calls unless (1) the collection agency has given you written notice first, and (2) 6 days have passed since that notice was sent.
The notice can come either by regular mail or email, and must include:
- The name of the business or person to whom you owe money (your original creditor).
- The original amount you owe.
- The current amount you owe, if different.
- The type of credit it is (credit card debt, utility bill, car loan, etc.).
- The collection agency’s name and contact information.
- Confirmation that the collection agency is registered in Ontario.
- A statement that the collection agency will provide you with a breakdown of the current amount owing, if requested.
- A consumer disclosure statement outlining your rights and the steps you can take if you believe the collection agency has broken the law.
If you did not receive a notice, the debt collector must resend it to you. They must also wait the 6-day period after resending it before attempting to discuss the debt with you. That is, of course, unless you authorize them otherwise.
#2. You cannot be threatened with legal action.
While a debt collector has the right to sue you, they rarely will. Litigation is expensive. It won’t pay off for them unless you own a home or have a verifiable source of income to garnish.
You need to watch out for “Draft Statements of Claim” that look like they were issued by a court. If you receive a document like this from a debt collector and it says “Draft” anywhere on it, they are breaking the law. You should report this to the Ministry of Government and Consumer Services and the Law Society of Ontario.
#3. You don’t have to accept phone calls at inconvenient times.
Unless you agree otherwise, debt collectors must refrain from calling you:
- Prior to 7 a.m. or after 9 p.m. Monday through Saturday;
- Prior to 1 p.m. or after 5 p.m. on Sunday; and
- On statutory holidays.
#4. You can only be contacted 3 times in a 7-day period.
This is true, unless you agree otherwise with the debt collector.
Contact means the debt collector either:
- Spoke with you on the phone;
- Left a voicemail; or
- Sent you an email.
Regular mail does not constitute contact, nor does calling when you don’t pick up and they don’t leave a voicemail.
#5. A debt collector cannot threaten you or use profane or obscene language.
#6. A debt collector must not contact you using a method of communication that incurs costs to you.
Let’s say the collection agent is calling on your cell phone, and you incur fees for accepting calls on this phone. Once you notify the agency of this, or as soon as they become aware of it, they may no longer call you on that number.
You aren’t required to prove any costs are incurred. However, if you want them to reimburse you for the costs, you will need to submit proof of charges to them.
#7. Debt collectors cannot discuss your debt with third parties.
They can only get contact information for you from those third parties.
Exceptions include cases where:
- You’ve given permission in writing otherwise.
- The third party has guaranteed payment of your debt (for example, is a cosigner).
- They’re requesting confirmation of your employment status with your employer.
- They’re asking your employer about the status of a court-ordered wage garnishment.
#8. You only owe the current amount of your debt.
Debt collectors can’t charge extra fees or expenses other than the actual debt you owe. The only exception is for Provincial Offences fines owing to municipalities. The municipality may permit them to add a fee.
#9. If you ask for a breakdown of the current amount you owe, a collection agency must comply.
#10. You can’t be sued on the debt if 2 years have passed since your last payment.
However, if you acknowledge the debt when talking to the debt collector, that 2-year period starts over again.
And remember: Just because they can’t sue you, doesn’t mean they can’t still call or write to you to recover the debt you owe.
Do you have any tips on how to handle a debt collector?
Even though you may dread picking up the phone when you suspect it’s a debt collector, it’s in your best interest to do so. If it’s a legitimate debt, the sooner you address it, the sooner you can resolve it.
Here’s our recommendation on how you should handle collection calls.
#1. After receiving a collection agency letter, confirm the details of the debt against your personal records.
Make sure this is a legitimate debt and that they have the right debtor to begin with.
#2. After receiving a collection agency letter, take the 6-day waiting period to figure out your options.
- Can I pay the debt back in full?
- Can I afford partial payment?
- Should I try to negotiate a deal with the debt collector?
- Can I really keep up with a repayment plan?
- Should I talk to a financial professional first?
#3. Report a debt collector’s illegal activity, if any.
#4. Don’t run from your debt.
Do your best to be proactive and try to resolve the matter as quickly as you can. Past due debt negatively impacts your credit report for longer. Late payments, defaults, and accounts in collections will stay on your report for 6 to 7 years from the date of your last payment.
#5. Talk to a Licensed Insolvency Trustee.
The best way to deal with your debt is to contact a Licensed Insolvency Trustee.
Adamson & Associates Inc. Licensed Insolvency Trustee Can Help
We understand Ontario debt collection laws and know how to put a stop to collection calls. Our seasoned experts can assist you with the full range of debt relief options available, from simple budgeting all the way to Bankruptcy.