May 12, 2014

By Margaret H. Johnson

If you are being pursued by debt collectors or worried that you will be, you might be wondering what is going to happen next and what you should do. How does debt collection work? What is the debt collection process? What are the debt collection rules and your rights?

Great article about debt collection and what you NEED to know! Read this in case you get a call one day you will know what to do!

When a creditor has a customer who has fallen behind on payments for a while, that creditor may hire a debt collector to try to get their money back, paying the collector a commission (percentage) from the funds recovered. Or the creditor may actually “sell” the debt (account) to a debt collection company for a reduced amount, and the debt collector will attempt to recover that plus profit by getting as much of the owing balance as possible from the debtor. These debt collection companies are also known as 3rd party debt collectors.

Initial Contact - Tracking You Down

Your first encounter with a third party debt collector will probably be in the form of a letter mailed to your address on file. Five days after the letter is sent to you, the collector is then allowed to contact you by phone. If you receive a phone call out of the blue regarding a debt, you can request that the letter be sent to an address you specify before any more action may be taken.

Can a debt collector call my family and friends? Can a creditor call my employer?

If your address or phone number has changed recently, your employer, family or friends may be contacted first in an effort to track you down. The debt collector is allowed to contact your relatives, friends, or neighbours only for the purpose of obtaining your address and phone number, they cannot discuss your debts with anyone that is not signed on the debt. Your relatives, friends, and neighbours do not have to provide any information to anyone that contacts them.

The debt collector is allowed to contact your employer on one occasion only, for the purpose of obtaining your address or phone number (if they have been unable to reach you through your home phone number) and/or to confirm your employment, business title and business address. Your employer cannot provide any information about you unless you have authorized them to do so.

Full Disclosure and Proof of Debt

When you are contacted by a debt collector, you should be informed in writing who the collection company is, who the original creditor is, when the debt was incurred or sold, and how much the total balance owing is. The debt collector is legally required to inform you of this information in a private written communication.

I don't remember this debt, how do I know this is my debt?

If you are not sure that it is your debt, don’t assume that it is and don’t feel pressured to pay it quickly just to make it go away. It is possible that the debt may have been yours, but you had already paid it and it had been reported as unpaid in error. Or the debt may not be yours due to identification error (someone else with the same or similar name) or identity theft. Request that the debt collector send you “proof of debt’ ie the invoice, or loan/credit card application with your name and/or signature. And absolutely do not take ownership of the debt (by making payments) until you have seen proof and/or know that it is yours. If you make any payment on a debt, you legally take ownership of that debt and will not be able to dispute that in court.

Also, if the debt is quite old, check if it is still present on your credit bureau file or if it has been “stat barred”-- removed due to expiring the statute of limitations. ( In British Columbia the debt could actually be “extinguished”)

Debt Collection Phone Calls

Once you have received a letter or spoken with the collector over the phone for the first time, you can expect to receive daily phone calls, voice messages and emails.

Debt collectors are not allowed to contact you outside the hours of 7am to 9pm (your local time) Monday to Saturday, outside the hours of 1pm and 5pm on Sundays, and not at all on Statutory Holidays.

Debt collectors may not use the following tactics, which constitute harassment toward the debtor:

  • the use of threatening, profane, intimidating or coercive language;
  • the use of undue, excessive or unreasonable pressure;
  • threatening to publish or publishing a debtor's failure to pay.

And NO you cannot be put in jail for not paying your creditors.

If you feel that you are being harassed by a debt collector, you can request to speak with the collector’s manager, as well as ask them for their licence number, which can be reported to your provincial or territorial authority.

Can a creditor call me at work (in Canada)?

Unless you permit them to contact you at work, no the debt collector can not call you at work. They must call you at your home phone number or other number that you provide.

If you wish to end the phone calls, you can notify the debt collector in writing, to communicate in writing only and provide a mailing address to contact you.

For a more complete list of illegal collection practices see the Government’s Harmonized List of Prohibited Collection Practices (this reflects a minimum level of protection; jurisdictions may elect further restrictions.)

What to do when a debt goes to 3rd party collections in Canada

Can a collection agency garnish my wages in Canada?

Yes a debt collector can garnish your wages IF they have obtained a judgement in court to do so. You will be advised of a small claims lawsuit and will be able to attend the court hearing. The judge may be able to assist with finding a resolution and ensure that your rights are protected. If the debt is relatively small, however, it is unlikely that the collection agency will pursue a judgement for wage garnishment due to the legal fees involved. Advise the debt collector to "procede as you see fit". Often the mention of garnishing wages are merely idle threats. However, to avoid the potential of having a judgement against you and having your wages garnished, see the list below for actions you can take to prevent this.

Solutions to debt collection on your legitimate debt:

  1. Call our office to make arrangements to pay the balance owing to the debt collector
  2. Proving that you have financial difficulty, arrange a payment plan that you are comfortable with (express the plan in writing, and stick to what you say)
  3. Attempt to make a settlement offer on the debt, at a reduced balance. Make sure this offer and acceptance/refusal is documented in writing.
  4. If unable to pay the full balance or arrange a payment plan, you have other options available to you such as debt consolidation, consumer proposal and bankruptcy. Call Solutions to speak with a counsellor about your options: 1-877-588-9491

You may want to read this very informative article on illegal debt collection practices from : Even in Debt... (You Have Rights Too)

Remember, if you are experiencing financial difficulties do not wait. Call Solutions Credit Counselling at 1(877)588-9491 or fill out our Debt Consolidation Questionnaire and get your Free Credit Counselling Advice today.

For more information visit Debt Canada - your Canadian credit education centre.

If you are a woman in debt, speak with Women and Money first. We specialize in helping women with their personal and business financeMoney management advice you can count on!

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