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The worst worst-case scenario for many Canadians is having their debt turned over to a collection agency. These formidable companies have a reputation for being tenacious, challenging to work with, and nearly impossible to get rid of.
There have been many instances where dishonest, harassing, or other threatening or unsavory practices have violated consumer rights and prompted the need for stricter regulation, despite the fact that the majority of collection agencies operate within the professional and ethical confines of their industry.
It’s critical for consumers to understand the debt collection laws that agents must abide by, their rights when dealing with a collection agent, and what they can do if either of these is being broken. This is true even though increased government oversight has made significant progress in bringing an end to abusive collection practices across Canada.
What are the main laws that affect a Canadian who is in debt?
Receiving collection calls leaves Canadians feeling not only overburdened but frequently perplexed. Your legal options as someone who owes money to creditors may frequently rely on your province of residence, the kind of debt you have, and the company that your bill collector works for.
What company does the collector work for, calling to seek payment on an overdue account?
Frequently, the answer to this query is simple. The solution, however, can occasionally be rather complicated.
Your original creditor or a debt buyer could be the owner of your unpaid account. The business that gave you credit, products, or services is your original creditor. A portfolio of unpaid accounts may be sold by some original creditors to another company. Debt buyers are those who buy these unpaid accounts.
The fact that there are two different types of debt purchasers further complicates things. Traditional debt collectors will buy debt. The primary source of income for conventional collection agencies is the commission-based collection of debts owing to third parties. The secondary source of income is the collection of accounts the agency owns. Pure debt buyers make up the second group of debt purchasers. The pure debt buyer doesn’t pay commissions to collect accounts that are owed to other people.
Some first-time debtors never sell their unpaid accounts to debt collectors. A small number of Canadian businesses sell their unpaid accounts after just six months of nonpayment. However, it is more typical for Canadian businesses to sell their bad debt portfolio when the date of the last payment is at least two to six years in the past.
Collection calls are made when less than six months have passed since the date of your previous payment.
Their own debt collectors are used by original creditors and debt buyers. These are frequently described as the company’s internal collecting department. For the first six months that your account is delinquent, regardless of whether your original creditor still owns it or a debt buyer does, there is a very good chance that you will be contacted by collection agents who work for your creditor.
Generally speaking, provincial governments do not regulate the actions of debt collectors who are acting on their own behalf. This means that registering a complaint with the government agency overseeing collection companies in your province will be a waste of time if you are receiving harassing phone calls from a collector employed by your creditor.
When a debt is owed to a financial institution that is subject to federal regulation, the federal government has passed a law that offers some protection to customers who are receiving collection calls. This means that regardless of the collector’s employer, you have the right to complain to a federal regulator if you get collection calls regarding money owed to a bank or a credit card business.
What is a collection agency, exactly?
Regardless of whether they are the original creditor or a debt buyer, your creditor may elect to work with a collection agent to get your unpaid account settled. A company hired by a creditor to collect money owed to the creditor is called a collection agent. Collection agencies and collection lawyers are the two different categories of collection agents. Collection agencies handle almost 95% of all work performed by collection agents in Canada.
On behalf of their creditor clients, collection firms demand payment in writing and over the phone from persons who owe money. When bill collectors call a customer at their home or place of employment, tensions between them and the company can quickly escalate.
Collection agencies are businesses that must adhere to a code of conduct that imposes obligations on them and forbids certain behaviors, in addition to being licensed in each province and territory where they make collection calls. There are ten provinces and three territories in Canada, and each province has a very different code of conduct for collecting agencies.
Regarding provincial legislation governing the actions of collecting agencies, there are two problems. How much protection are consumers given by the provincial statute governing collection companies, to begin with? Second, how well—or poorly—do senior civil officers in a given province enforce the regulations that govern collecting agencies?
Consumer safeguards under some provincial rules governing collection agencies, such as those in Ontario, British Columbia, and Alberta, are far higher than under regulations in other jurisdictions. No matter how much protection a consumer receives under a provincial law governing the behavior of collection agencies, it might not matter if those in charge of enforcing the law do not do so effectively.
Receiving collection calls from two distinct collection organizations is against the law. simultaneously
Many Canadians who receive collection calls lament the fact that different collection firms are calling them about the same debt. In actuality, this is infrequent. First off, it’s against the law for a creditor to simultaneously assign a debt to multiple collection agencies for collection. Second, a collection agency has no incentive to make an effort to recover a debt for which it will not be paid.
Normally, creditors assign a debt to a certain collection agency for a predetermined period of time, usually between six and twelve months. If an account is not paid at some point, the creditor will recall the account and transfer it to a different collection agency. In this manner, a consumer might get calls from ABC collection agency one week and then XYZ collection agency the following week.
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