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Beware of Fake Credit Counsellors

I’ve known about fake credit counsellors for a long time, and I hate to admit it, they are everywhere.

Some collection agencies have adopted the label of credit counsellor to make their collection activity sound and look less threatening. However, at the end of the day, their duty, their contractual duty, (contractual because they have been hired by the creditor to collect their debt) has been always to the creditor, not the debtor.

Some trustees in bankruptcy have referred to themselves as credit counsellors when their duty under the Bankruptcy and Insolvency Act is not only to the creditor, but to seize all eligible (exigible) assets from the debtor for the benefit of the unsecured creditors in a bankruptcy proceeding. No doubt, the designation of credit counsellor puts a different more friendly face on for desperate debtors looking for debt relief from creditor pressure.

Some unlicensed debt repayment advisors call themselves credit counsellors and advertise inflated stories and successes when they are not acting lawfully. (without a proper license.)

Some licensed “not-for-profit” credit counsellors claim to be better than licensed “for profit” credit counsellors when the government’s license for both is exactly the same, and for those unaware, credit counselling is basically unregulated by governments. Instead, it is the debt pooling and trust accounts (the receipt and disbursement of funds) that get most of the attention. In other words, there is no objective, verifiable criteria to determine who does the credit counselling better.

The matter of fake credit counsellors found publicity recently through a Toronto Star article that highlighted an individual that was charged with 5 counts of personation to gain advantage as a substitute teacher in the Toronto school system. The Dunwoody Group Inc. learned and reported that this individual was previously a credit counsellor at one of Canada’s largest not for profit credit counseling organizations – Consolidated Credit.

Very interesting.

The Dunwoody Group Inc. drew attention to the recent Ontario election results where a majority liberal government will likely implement new legislation that will allow “not-for-profit credit counseling organizations to be exempt from licensing and background checks. Neither these organizations nor the employees they hire will be scrutinized by an independent regulatory body.

The above story about an alleged not-for-profit credit counsellor being caught breaking the law may indicate that the proposed exemptions may not be a good idea. However, there are a number of other reasons that this kind of thinking should be disregarded. Firstly, it is discriminatory and unfair for a government to exempt one class of licensees from another without some clear, identifiable criteria. Secondly, it is discriminatory and unfair to presume that “private-for-profit” credit counsellors need to be more tightly controlled than “not-for-profit” corporate entities. What is really being said is that not-for-profit entities are good and for-profit companies are bad and can’t be trusted.

There are many interesting reasons for this. Governments seem to favour not-for-profit organizations over private sector companies providing social or family services. Credit counselling falls under the general heading of family services and seems to have acquired a similar outcome.

It seems to me that the best way to get rid of fake credit counsellors is to legislate real ones. Regulators need to clearly define what a credit counsellor is and what their license allows them to do. It may also follow other professions where a qualifying examination is required to get the license. This way the public can have some assurance that credit counsellors are qualified to counsel people as well as receive, distribute and account properly for trust funds. This would further eliminate any basis for favouritism of one corporate entity over another. All licensees would and should be treated equally.

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