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. Here's what this law covers.
Insolvency stats for 2017 in Ontario tell only half the story when it comes to the state of personal finances. Dig a little deeper, and you’ll find that business confidence is falling as the threat of interest rate increases heightens. At a time when household debt in Ontario is rocketing, it’s likely that more Ontarians will need to seek debt solutions in the years to come.
Personal bankruptcies fall, but Consumer Proposals rise in Ontario
The headline numbers indicate that personal insolvency numbers are improving across Canada. In Ontario, the improvement has been marginally better than Canada’s overall fall of 2.9% in personal insolvency stats:
- Total personal insolvencies in Ontario fell by 3.6% from 2016, to 38,167
- Personal bankruptcy numbers fell by 9.3% to 15,336
- Consumer proposals rose by 0.5% to 22,831
While this news is to be welcomed, it’s tainted by the outlook for the future:
|Ontario Insolvency Statistics|
(Source: Government of Canada)
Household debt in Ontario is higher than in the rest of Canada
Household debt in Ontario has rocketed since the Global Financial Crisis. In 2010, the average Ontario household owed $119,000. By the end of 2016, this average debt had increased to $154,000. This is 171% of disposable income – up from 150% in 2010, and 8% higher than the rest of Canada.
This increase in indebtedness has taken place in a low-interest rate environment, an environment that is changing.
Interest rate rises will increase financial vulnerability in Ontario
The Bank of Canada is expected to increase interest rates steadily over the next three years. Banks and other lenders will increase their lending rates. Personal loans and mortgages will become more expensive. The Financial Accountability Office of Ontario (FAO) has forecast that the amount of money spent on debt repayment by households here will increase significantly:
- By 2021, households are expected to be paying 15.3% of their income in debt repayment
- This is the highest portion since 1990
Wages are unlikely to keep pace with this increase in payments. The increase in the debt burden is coming at a time when businesses are less certain of the future.
Business gloom could boost personal debt problems
A recent report by the Ontario Chamber of Commerce (OCC), the 2018 Ontario Economic Report, shows that business confidence has taken a tumble. As minimum wages are increased to $15 an hour, emergency leave is introduced, hydro rates hit highs, and the political backdrop in the United States causes uncertainty about NAFTA, businesses have become more pessimistic.
In 2012, 47% of businesses were confident about the provincial outlook. Now that figure is down to just 23%.
Insolvencies could rise in Ontario
Robust employment and low-interest rates have supported the build-up of debt in Ontario since 2010. Rising house prices have helped to hold back the numbers of insolvencies. This delicate balance is now at risk. Personal insolvencies may rise, and it will be ordinary people who are most affected.
The average Ontario household would be well advised to assess their debt position. They should consider their ability to service their mortgages and consumer credit. The trick to weathering any financial storm is to ensure that you have contingency planning in place if the unexpected happens.
As a Licensed Insolvency Trustee, we offer a range of services including:
- Credit counselling
- A range of debt management resources
- Consumer proposals
- Advice on and options to avoid bankruptcy
We are experts in credit counselling, proposals, trustee services, and bankruptcies. If you, or a client of yours, needs our help contact us today. Or call us at 519-310-JOHN (5646).