FCAC Consumer Alert - Debt Reduction Companies: Beware of "Too Good to Be True" Offers

We at Solutions Credit Counselling work only for our client – You. We do everything we can to save you money.

The purpose of this is to advise our clients and the public regarding the differences between a Canadian Independent Debt Consolidation and Credit Counselling Agency such as Solutions, and an American Debt Settlement company. Remember, with respect to Debt Settlement companies: “If it sounds too good to be true then it probably is”.

Canada has recently been inundated with American companies, offering “Debt Settlement” services. These questionable “Debt Reduction” operations have been investigated by the U.S. government and recent US legislative changes have forced “Debt Settlement” companies to cease operations in the US. However, many of these “Debt Settlement” companies are now targeting Canadian consumers with false claims of their ability to reduce debt by 40-80% in a short period of time and many Canadians are being lulled into believing these claims.

Reasons to Avoid American Debt Settlement Companies

  • The majority of American Debt Settlement Companies are not Licenced to Operate in Canada. 

If a company is allegedly licensed to perform Debt Settlement operations in the US; that doesn’t automatically permit licensing in Canada. Most provinces require Debt Settlement companies to be licenced and bonded by the respective Provincial Consumer Protection branches. Consumer Protection BC issues licences to debt collectors, bailiffs and debt poolers based on the requirements of the Business Practices and Consumer Protection Act and the Debt Collection Industry Regulation. Unfortunately, it does not appear that Canadian legislation is ideally drafted to deal with this type of company 

  • Call Centres for American Debt Settlement Companies Are Frequently Located in the US, with Only a “Virtual Office” in Canada.

Frequently a settlement company with a Canadian address holds only a Post Office Box which is shared between many companies. There are landlords that offer “virtual offices” for rent with mailing address and receptionist located in Canada. Search the address of the company in Google and determine if any other companies appear in the results with the same location. You can also go to Google Maps and switch to a “Street View” to see if this address is a physical location or just a Post Office Box.

  • American Debt Settlers Are Not Canadian Credit Counsellors.

Employees of an American Debt Settlement company are American citizens, working and living in the US and have little to no knowledge about the Canadian credit industry or financial regulation. When you phone they ask very few questions about your assets and financial situation and without this information it is impossible for a reputable agency to provide a proper Debt Settlement Plan. These companies appear to care only about collecting as many fees as possible, as quickly as they can. Frequently your creditors receive none of these funds.

  • American Debt Settlement Companies’ Fees Are Usually Aggressively Collected.

Fees charged by American Debt Settlement companies often equal the amount of money that they require you to “save” with them. More than half of Canadians who pay fees to these companies end up with more debt and no settlements at the end of the program. American Debt Settlers require you to execute contracts stating that they may collect all fees in advance, prior to providing any service. As soon as you commence paying their fees, your money frequently leaves Canada. And, should you request your money back after not receiving any Debt Settlement services who is available to assist you? Are you prepared to retain an American lawyer in the State where the company is located?

  • American Debt Settlers Have Little to No Relationships with Canadian Creditors.

Canadian Creditors refuse to work with these companies and deal only with reputable established Canadian Debt Collection and Credit Counselling Agencies. Before signing a contract with an American Debt Settlement company, call your creditors and ask if they are prepared to accept a settlement offer from them. Also carefully read the contract you’re considering signing.

  • Canadian Creditors Can Sue You While You’re Paying American Debt Settlers.

American Debt Settlers’ contracts state that they may collect all fees prior to providing any service. That includes not notifying your creditors of their agreement with you. While you keep paying the fees, your creditors are frequently not advised, and do not get paid. They will therefore, seek all legal options available to them to collect outstanding debts from you. They may file a lawsuit against you, obtain judgment, after which they may place a lien on your property, garnish wages or bank accounts and seize property. At that point, a majority of Canadians leave the American Debt Settlement program deeper in debt than before due to accumulated interest, court costs and the like.

  • American Debt Settlers Portray Themselves as a Canadian Companies on their Websites.

This is only one of the many ways American Debt Settlement companies are misleading Canadian consumers and many of us fall for it. Some of these companies have somehow managed to meet the Canadian Presence Requirements (which are minimal), and acquire a .ca website domain name.

  • Perform a Search on a Company You’re Looking at in Google.

Make sure you check online and see what people say about the company, any media coverage and if there have been any lawsuits filed. Some American Debt Settlement companies have changed their name (often more than once), and continue to operate under a different name. Lack of information also should raise concerns.

If you have made an agreement with a Debt Settlement company and have experienced an unfortunate or unforeseen situation please contact us at This email address is being protected from spambots. You need JavaScript enabled to view it. or 1.877.588.9491 ext.119.

 

At Solutions™ Credit Counselling Services, a Federally Registered Canadian Company that is Government licensed and bonded, we offer an excellent debt settlement service. For more details see our information on Solutions™ debt settlement.