Area of Law: Credit, Debt and Bankruptcy
Answer # 252
Collection agenciesRegion: Ontario Answer # 252
How do collection agencies work?
Collection agencies are either hired by creditors to collect debts on their behalf, or collection agencies purchase debts at a discounted rate and keep the entire amount if they are able to collect it. If a collection agency phones you, this probably means you have more severe financial difficulties than you think.
If the creditor passed on the debt to a collection agency, and you are still unable to pay off the debt, you may consider credit counselling, or can attempt to negotiate different payment terms, or payment of a reduced lump-sum amount with the collection agency.
When dealing with collection agencies, be sure to keep a written record of every time you are contacted and include:
- the name and telephone number of the person calling and the Agency they work for,
- the date and time of each call,
- the specific debt they are calling about, and
- the details of what is discussed, such as repayment terms or settlement offers.
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What a collection agency can do
In Ontario, the Collection and Debt Settlement Services Act (Act) regulates what a collection agency can, and cannot do. Although collection agencies can be very persistent, the law places limits on their behaviour. There are procedures a collection agency must follow.
Under the Act, collection agencies must first send you a written notice through the mail. This notice must include:
- the name of the creditor (the person or business that says you owe them money),
- the amount the creditor says you owe, and
- the name of the collection agency and proof of its authority to demand payment on behalf of the creditor.
After sending the notice, the agency must wait six days before it can contact you.
What a collection agency cannot do
The Act sets out a number of restrictions on the behaviour and authority of collection agencies.
They cannot continue to contact you if:
- You send them a registered letter saying that you dispute the debt and suggest the matter be taken to court;
- You or your lawyer send them a registered letter providing your lawyer’s contact information and notifying the agency to communicate only with your lawyer; and
- You are not the person they are looking for and you have told them so.
In addition, a collection agency cannot:
- contact you on Sunday, except between the hours of 1 p.m. and 5 p.m.
- contact you on any other day of the week between the hours of 9 p.m. and 7 a.m.
- contact you on a statutory holiday
- use profane, intimidating or coercive language, or threaten you in any way, including by mail, email, text, over the phone, or in person
- tell you false or misleading information
- tell you they have started a court action when they have not
- add any extra fees or amounts to the money you owe
- contact you anymore if you have gone bankrupt and your licensed bankruptcy trustee has informed them of this fact
Making an agreement with a collection agency
If you reach an agreement with a collection agency regarding the debt owed, make sure you:
- put any offers made by either party, such as payment terms or settlement offers, in writing as proof of the negotiation terms;
- put the final agreement in writing and signed by you and the collection agency before you make any payments, and
- when you do make payments, never pay in cash. Always have proof of the payment, such as a cancelled cheque.
The collection agency should stop calling once an agreement is in place.
If you need help dealing with a collection agency, or if you think the collection agency is breaking the law, you may make a complaint to the Ministry of Government and Consumer Services. You may also be entitled to bring an action against them in Small Claims Court.
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