The Rules for Creditors and Collection Agencies
If you are struggling to pay your debts, you may have dealt with calls from creditors or collection agencies. These calls can be tough to handle, stressful and even sometimes harassing. If you are receiving calls from debt collectors, collection agencies or your creditors, it is important that you understand your rights.
These rights will vary depending on the province that you live in. For example, in Ontario, all collection agencies must be registered with the provincial government. For specific rules that apply to creditors and collection agencies in your province, you should contact the appropriate government agency in your province.
It’s important to distinguish between creditors themselves and collection agencies. A collection agency is a company that is paid by a creditor to collect money that is owed to them. By law, you must receive a notice in writing if your debt has been sent to a collection agency.
This notice must list the amount of money that the creditor says that you owe, the name of the creditor and the name of the collection agency.
In addition to the requirement that you must be notified by your creditors, here are a few things that collection agencies generally cannot do:
- Take legal action against you without first contacting you.
- Communicate with you without identifying themselves and informing you who is owed money and how much is owed.
- Demand payment from someone who claims not to owe money without taking reasonable steps to confirm that this person does, in fact, owe money.
- Contact friends, relatives, coworkers, neighbours or employers for reasons other than to confirm your contact information, unless these people have co-signed your debt.
- Give or imply false information.
- Contact you in a manner that would constitute harassment.
When it comes to determining when a collection agency can contact you, this depends on the province. In Ontario, collection agencies cannot call:
- Between 9pm and 7am on Monday-Saturday
- On Sunday, except between 1pm and 5pm
- On a holiday at any time.
In addition, under Ontario law, collection agencies cannot charge you any fees, use threatening or profane language or use excessive pressure or harass you.
What to Do if you Receive Calls from Creditors or Collection Agencies
Depending on the state of your debt and the organization you are dealing with, you may be contacted by the creditor or by a collection agency. Some creditors have debt collection departments that will contact you to pay debts that are past due. Others will send your debt to a collection agency.
If you are contacted, here are a few steps to follow:
- Confirm who is calling. Is it the creditor or a collection agency?
- Find out the name and phone number of the specific person who is calling.
- Get details on the debt owed, including who it is owed to, how much is owed, and when the debt started.
- Tell the person calling that you will contact them back when you have verified the debt.
If you recognize the debt and it is outstanding, the best practice is to pay the debt right away. If you cannot pay the full amount, let the creditor or collection agency know and try to work out a plan for paying the debt in installments. Make sure that you receive confirmation of this arrangement in writing and that you receive a receipt for any payments that you make.
If you are called by a debt collection agency, you should deal only with them, not with the original creditor. Speaking to both the collection agency and the creditor could cause serious confusion.
If you do not recognize the debt or if the debt has already been paid, contact the collection agency and/or the original creditor and inform them of this. Provide them with any documentation that shows the debt has been paid.
Contact the major creditor bureaus in Canada (Equifax and TransUnion) and see if the incorrect debt appears on your credit report. If it does, contact these bureaus and the original creditor and have this error corrected.
If you are receiving frequent calls from creditors and cannot repay your debts, you may wish to speak with a licensed trustee in bankruptcy. Both the bankruptcy and consumer proposal processes can stop creditors from calling.