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When you take out a loan, the cash comes with an agreement. This is basically a written form of pact that bounds you to repay the full amount and the interest rate. It also enlists a term until you have to repay the full amount, which is agreed upon by both parties. The repayment is in instalments which range from weekly to bi-weekly and monthly.
So, if you miss a payment, you are generally reminded by your lender via a letter, a phone call or email. However, if you keep on missing the payments or completely default on the loan, the lender will take a more extreme approach in trying to get their money back. One of the common ways to get the money back is through a collection agency. But what exactly is a collection agency?
What Is A Collection Agency?
In simple words, a collection agency is a type of organization that helps lenders collect the debt that is owed to them by any borrower. These people are professional and specialized in what they do. So, they remain persistent and more aggressive in putting pressure on you when it comes to collecting your debt. They start with sending you a formal letter and then move to phone calls until you pay off your debt or reach an agreement.
What Can A Collection Agency Do To You In Canada?
A collection agency is something no one wants to deal with. But fortunately for you, there are rules and regulations in place to protect the borrower from any forced decision or unethical collection practice.
One of the most important rules is first contact. A debt collection firm must send you written notice before they can begin collecting the debt you owe. This letter must include the following information:
- Their company’s name
- They’re attempting to collect a debt
Can a collection agency in Canada charge you interest or fees?
No, a collection agency cannot charge you interest on the debts they are attempting to collect, nor can they charge you a fee for their services. However, the amount you owe could already include any interest you owe to your original creditor.
Can a collection agency take you to court?
If you refuse to pay your debts, a collection firm might initiate legal action against you. If they decide to sue you, they will send you a written notice of legal action, and you will be required to appear in court for a hearing. In case, if you don’t show up or don’t employ a lawyer to represent you, your creditor will win by default.
If you elect to attend the hearing, you’ll have two options:
- No judgement will be issued if you win.
- If you lose, a judgement will be entered against you, and you will be required to repay a portion or all of the debt. Wage garnishment is another possibility.
Is it possible for a collection agency to contact you at work?
Yes, a collection agency has the right to call your place of business. There are, however, some guidelines that your debt collector must follow. They are only permitted to phone your workplace to verify your employment, and after they have done so, they are no longer permitted to contact you.
Also, if they do make that one call to your employment, they are unable to reveal the existence of your debts, so you don’t have to worry about your financial problems being known to everyone at work.
If you’ve granted them written permission to contact you at work, they’re free to do so.
Is it possible for a collection agency to contact your friends and family?
Only friends and family can be contacted by collection agencies to inquire about your address and phone number. They are unable to contact them to discuss your debt or recommend that they pay it for you. They can only contact a co-signer or someone you have asked them to contact about your debt.
Is it possible for a collection agency to contact you at any time?
No, there are specific guidelines for when and how a collection agency may contact you. They can phone you from 7 a.m. to 9 p.m. Monday through Saturday, and from 1 p.m. to 5 p.m. on Sunday. They are unable to contact you during the holidays. They are also not authorised to call you on your cell phone unless you have given them your cell phone number as your primary contact information.
However, because each province has its own debt collecting rules and regulations, this can vary slightly depending on where you live.
What a Collection Agency Cannot Do
Here are certain things that a collection is prohibited to do by law. These include:
1. Harassment: Collection agencies are not allowed to speak to you, your family, your friends, your employer, or anyone else you know in a harassing manner. This includes the following:
- Using obscene or forceful words or threats
- Undue calls, as well as excessive pressure (depending on the province you live in, the number of times a debt collector can contact you will vary)
2. False Information: Collection agencies are prohibited from providing or implying false information. Any attempt to deceive you is forbidden.
3. Legal Action: Debt collectors cannot threaten you with legal action unless your creditor has given them formal permission. They can’t threaten you with legal action if they don’t have the legal authority to do so.
What to expect when dealing with Collection Agency
What is the procedure for dealing with a collection agency now that you are aware of what they can do to you? Dealing with collection agencies can be scary, and understanding their procedures might help you feel more at ease when dealing with them.
The first contact they will make with you will be through a letter informing you that your account is in collections. The letter will also include a request for you to restart your payment plan. Their next contact will be in the form of a phone call, about 5-7 days after their initial letter. They will continue to call until they are able to reach you.
When they are able to contact you, they will provide you with all of the information you require, including who they are and how much money you owe. It’s now time to pay down your loans. While we understand that dealing with collection agencies is unpleasant, paying your bills is always the best option since if you don’t, you risk facing legal action.
If you have any questions or need help regarding the collector agency, please find it here.
The Bottom Line
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