How Long Can Debt Collectors Try To Collect In Canada? A Guide to Canadian Debt Collection Laws

For many Canadians, having their debt turned over to a collection bureau is an absolute worst-case scenario. These fearsome businesses have earned a reputation for being persistent, difficult to work with and about incommunicable to shake.

Although most drove agencies work within the professional and upstanding bounds of their industry, at that place take been numerous cases when deceitful, harassing and otherwise threatening or unsavoury practices have violated consumer rights and stirred the demand for stricter regulation.

While broader authorities oversight has accomplished much to reign in collection practices beyond Canada, information technology'due south important for consumers to understand the debt collection laws agents must follow, their rights when dealing with a collection agent what they can do when either of these are existence violated.

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What are the fundamental laws impacting a Canadian struggling with debt?

Canadians who are receiving collection calls are not only overwhelmed but also they are frequently confused.  Your rights equally someone owing monies to creditors will oft depend upon the province in which y'all live, the blazon of debt that you owe, and your pecker collector's employer.

PART Ane:   INTRODUCTION

i.      Who is the employer of the collector calling demanding payment of an unpaid account?

The answer to this question can often be straightforward.  In some instances, however, the answer can exist quite complex.

Your unpaid account may be owned by either your original creditor or information technology may be owned by a debt heir-apparent.  Your original creditor is the company that provided you lot with goods, services, or credit.  Some original creditors will sell their portfolio of unpaid accounts to another firm.  These purchasers of unpaid accounts are known as debt buyers .

To make matters more complicated, there are two distinct categories of debt buyers.  Traditional collection agencies will purchase debt.  As far as traditional collection agencies are concerned, their primary acquirement source is collecting debts owed to others on a commission ground, and collecting accounts information technology owns is a secondary source of revenue.  The second category of debt buyer is the pure debt buyer.  The pure debt heir-apparent does not collect accounts owed to others on a commission basis.

Some original creditors never sell their unpaid accounts to debt buyers.  At that place are a handful of Canadian firms that sell their unpaid accounts when they have been unpaid for as little equally six months.  Information technology is more mutual, however, for Canadian firms to sell their portfolio of bad debts when the date of last payment is at least two to half-dozen years in the past.

ii.    Collection calls when the date of your last payment is less than half dozen months agone

Original creditors and debt buyers employ their own collectors.  These are often referred to as a firm'southward inhouse collection department.  Regardless of whether your unpaid account is owned by your original creditor or a debt buyer for the first six months your account remains unpaid the odds are very high that you are receiving collection calls from collectors employed by your creditor.

Equally a general dominion, provincial governments do not regulate the acquit of creditors who are collecting their own debts.  This means that if you lot are receiving calumniating phone calls from a collector employed by your creditor you will be wasting your fourth dimension filing a complaint with the government body regulating collection agencies in your province.

The federal regime has enacted some legislation that provides some protection to consumers who are receiving drove calls where the debt is owed to a federally regulated financial institution.  This means that if you are receiving collection calls in connection with monies owing to a bank or a credit bill of fare visitor—regardless of the employer of the collector—then y'all tin file a complaint with a federal regulator.

three.     What is a drove bureau?

Your creditor—regardless of whether your debt is owned by your original creditor or a debt buyer—may decide to hire a collection agent to collect your unpaid account.  A collection agent is a firm authorized by a creditor to collect monies owing to the creditor.  At that place are 2 types of drove agents, drove agencies and drove lawyers.  Over ninety-5 percent of all the collection agent piece of work in Canada is carried out by collection agencies.

Collection agencies communicate with those attributable monies—in writing and via telephone—demanding payment on behalf of their creditor-clients.  The flashpoint for unpleasant interactions between nib collectors and consumers ascend where collectors are phoning a consumer at domicile or at their workplace.

Drove agencies are firms that are not only licensed in each province and territory where they make drove calls but too they are subject to a code of conduct that imposes sure duties upon them and prohibits certain conduct.  Canada has a full of 10 provinces and iii territories and the lawmaking of deport imposed on collection agencies varies tremendously from one province to the adjacent.

There are 2 problems with respect to provincial laws regulating the carry of drove agencies.  Firstly, what amount of protection is afforded to consumers under the province'due south police regulating collection agencies?  Secondly, how effective—or ineffective—are the senior civil servants in a item province enforcing laws regulating drove agencies?

Some provincial laws regulating collection agencies, including Ontario, British Columbia, and Alberta, provide much greater protections to consumers than laws in other provinces.  It may not matter how much protection is afforded to a consumer under a province'southward law regulating the conduct of collection agencies if those responsible for administering the police neglect to fairly enforce it.

iv.     It is illegal for y'all to be receiving drove calls from two different collection agencies simultaneously

Canadians receiving collection calls volition often mutter that they are receiving calls from multiple collection agencies with respect to the same debt.  In fact, this rarely happens.  Firstly, information technology is illegal for a creditor to identify an account for collection with more than 1 collection agency at the same time.  Secondly, a drove agency has no involvement in attempting to collect an account for which it will non be compensated.

Creditors typically place an business relationship for collections with a specific collection bureau for a pre-determined length of fourth dimension; usually somewhere between six to 12 months.  At some point, if an account has non been paid the creditor will call up the account and place information technology with a second collection agency.  Accordingly, a consumer might be receiving calls from ABC collection agency one calendar week then it could be receiving calls from XYZ drove agency the following calendar week.

v.     What are the odds that I volition exist sued over an unpaid account?

It is important to understand that drove agencies are compensated on a commission basis.  Accordingly, given the significant costs associated with litigation, the odds of a collection agency suing a consumer on behalf of a creditor are quite remote.  If you lot are to be sued and then you are much more probable to be sued by your original creditor or a debt buyer.  Debt buyers oftentimes sue files because they may have only paid pennies on the dollar to buy an unpaid account.  Furthermore, creditors are much more likely to sue an individual in circumstances where a person owns real belongings in his or her name.

PART Two:   STATUTE OF LIMITATIONS

Depending upon the type of debt that you owe and the length of fourth dimension since your last payment you may exist in a position to avoid paying a debt.  This can be a complex topic and anyone who wishes to avoid paying a debt due to the expiry of a limitation period is advised to speak with a lawyer licensed to practice law in their province.

i.       Overview

With respect to unsecured consumer debt, each province and territory in Canada has enacted a law that might permit a consumer to avoid paying a debt after the decease of a sure corporeality of fourth dimension.  These laws are referred to as a Statute of Limitations.  The public policy rationale for a Statute of Limitations is to facilitate commerce and bring certainty to the marketplace.

ii.    Limitation periods across Canada

The length of a limitation catamenia varies significantly from one province to some other.  The bulk of Canadians, nonetheless, alive in a province where the Statute of Limitations is 2 years.  In Quebec it is three years.  In Manitoba, New Brunswick, Newfoundland, Prince Edward Island, and the three territories the limitation catamenia is six years.

The Statute of Limitations volition be of no assist, whatsoever, to those with certain types of debts:

  1. Secured debt (ie., mortgages and car loans)
  2. Unsecured debt where the creditor has obtained a judgment confronting the consumer
  3. Unsecured debt where the creditor has commenced a lawsuit against the consumer earlier the decease of the relevant limitation flow
  4. Kid support or spousal support
  5. Debts arising from fraud
  6. Court fines
  7. Monies attributable to the government
  8. Student loans

iii.     Five key facts about limitation periods

  1. The relevant limitation period is the province or territory in which you live
  2. The clock begins to run on the limitation menses on your unpaid account sometime in the six-month period later on the engagement of your last payment
  3. You can restart the clock on a limitation flow—before the death of a limitation flow–past (a) making a written acknowledgement of the debt, or (b) making a partial payment
  4. Some provinces put a pause on the running of the limitation periods during certain time periods during the Covid-19 pandemic
  5. The expiry of a limitation period does not mean that an unpaid business relationship is forgiven, it simply provides the consumer with a powerful defense that can be used when defending a lawsuit in court

Part Three:   PROVINCIAL LAWS REGULATING CREDIT REPORTING AGENCIES

Creditors employ credit reports to decide whether or not to extend credit to an individual and at what rate of interest.  Credit reporting agencies assign a credit score to a particular individual.  The higher a person's credit score, the easier information technology is to obtain credit and the less expensive the interest rate obtaining credit.

Credit reports also comprise details almost an individual's credit history including unpaid accounts, court judgments, enrolment in credit counselling programs or filings under federal defalcation legislation.

Credit reports may too exist used past employers when deciding whether or not to hire someone.  Furthermore, landlords may refer to credit reports when making a decision whether or not to rent a residential unit of measurement to an applicant.

Credit reporting agencies are regulated by provincial governments in Canada.  At that place are two major credit reporting agencies in Canada, Equifax Canada and TransUnion.

Under Ontario law, an unpaid business relationship must be removed from a consumer'due south credit written report seven years from the appointment of last payment.  In every other province, an unpaid account must fall off a consumer's credit study six years from the date of last payment.  It is Equifax Canada'due south policy to remove unpaid accounts from the credit reports of Ontario residents six years after the appointment of last payment.

Some unethical collection agencies and debt buyers may act to have an business relationship appear on a person's credit report afterwards the date when it should legally drop off their credit study.  This practice is illegal and constitutes defamation.

Navigating the Process

If you are receiving communications from a bill collector and so information technology is helpful to make some notes so that you are aware of the declared debt, the name of the creditor, the amount owing, and the bill collector's contact information.  It is also useful to know if your creditor has obtained a judgment against you in connection with this alleged debt.

It is important to understand that y'all are nether no legal obligation to speak with a pecker collector.  Furthermore, it is illegal for a bill collector to disclose the being of a debt to anyone other than the person who is legally responsible for the debt.  Bill collectors are, however, entitled to speak to anyone for the purposes of attempting to obtain contact data for the person who owes money on an account.

If you are receiving drove calls then you may want to contact a Licensed Insolvency Trustee to hash out some of your various options for dealing with your current debt situation.

Get a free consultation near you. We have trustees everywhere from Toronto to Quebec and more. Go your questions answered.