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Debt Recovery Services: How to Deal with Them & Stop Debt Collectors

How to deal with debt recovery services, what debt collectors can do, and how you can stop these collection agencies from calling.

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What are Debt Recovery Services?

Debt recovery services are a creditor’s attempt to collect on debts that are owed. If you have had a loan that is recorded as defaulted (meaning you didn’t make the payments that you were required to make), a creditor can send this loan to a third-party collection service. These organizations are also known as debt recovery services.

How the Debt Recovery Process Works

If you miss a payment on your debt, the creditor will likely try to contact you. They may try to get in touch by phone, email, or through a letter. At this point, you may be responsible for paying additional interest or late fees due to missing a payment. However, you usually have 30 days from the bill due date to make a payment before it is reported to the credit bureaus. If a creditor contacts you before this 30-day period is up, you may be able to negotiate with them to come to an arrangement that makes financial sense for you.

After this 30-day period, the debt will usually be sent to a separate department within the same company that is responsible for chasing down late payments. While this isn’t a collection agency, ending up in this situation will still hurt your credit report if the company has reported your missed payment to the credit bureaus (which they usually will).

If this department is unable to collect on the debt, the company may contact third party debt recovery services to handle the debt.

What happens in this process is the initial creditor usually sells the debt to the debt recovery services company and that company then tries to collect from the debtor.

What Debt Recovery Services Are Allowed to Do in Canada

Debt recovery services, often called collection agencies, will do what they can to collect on debts. However, there are rules that they need to follow. Some of these rules vary depending on the province in which you live.

In general, debt recovery services in Canada are not allowed to:

  • Attempt to collect a debt without making a reasonable effort to contact you first in writing
  • Start or recommend legal action without notifying you
  • Communicate with you in a harassing manner, such as using threatening, profane, or intimidating language
  • Communicate with you without properly identifying themselves and explaining the debt they are trying to collect (such as the amount owed, who it was originally owed to, etc.)
  • Contact your friends, family members, or neighbours other than to request your current contact information
  • Contact your employer for any reason other than to find out your current work status
  • Provide false information or imply false information
  • Request payment after a person has claimed not to owe the money unless the agency has taken reasonable steps to confirm that they do
  • Call during prohibited times
    • These times vary by province. For example, in Ontario, debt recovery services and collection agencies are not able to contact people between 7am and 9pm Monday to Saturday or on Sunday between 1pm and 5pm.
    • In Ontario, collection agents are not able to contact a person more than three times within a seven-day period unless they have the person’s consent
    • Also, Ontario prohibits debt recovery services from calling on statutory holidays
    • In these cases, “contact” means speaking with you, leaving a voicemail, or sending an email

While debt collection agencies and debt recovery services are legally allowed to attempt to collect on unpaid or past-due debts, they still have to follow the rules. If an agency does not, you can contact your provincial or territorial consumer affairs office to complain.

What You Should Do if Debt Recovery Services or Collection Agents Call You

Getting a call from a collection agency can be both scary and frustrating. However, these agencies have a job to do and they won’t just disappear if they have a legitimate claim. If you receive a call from debt recovery services, you’ll want to try your best to stay calm. While you may be nervous or angry at the call, staying calm (and taking notes if possible) will give you the best results.

If you are not in a position where you can talk freely and calmly when debt recovery services call, explain that you are busy and request that they call you later. If they do not hang up the phone, you can end the call after you’ve requested that they contact you later.

When you do talk to a debt recovery services agent, the first thing you’ll want to do is to confirm as much information about the caller and the debt they are trying to collect as possible. Find out the name of the agency, the name of the person calling, the amount they are trying to collect, who the debt was originally owed to, and more. This will help you verify that the debt is actually yours and that the collection agency is legitimate. There are several scams out there where callers claim to be acting on behalf of a collection agency in order to steal personal information, so stay alert.

If you have confirmed that the agency is legitimate (this can be done by checking your provincial or territorial consumer affairs office or the Better Business Bureau) and the debt is yours and has not been paid, the easiest solution is often to pay the debt as quickly as possible. If you’re not able to pay it in full, explain your situation and try to negotiate a payment schedule.

If the agency agrees to a schedule, you’ll want to make sure you get the terms of the agreement in writing before you make any payments.

You don’t need to provide collection agents with any information about your other debts, your salary, or any other personal or financial information. They may try to use this information against you if they can.

How to Stop Debt Recovery Services

The easiest way to stop debt recovery services from calling is to pay the debt that is owed or to come to an arrangement with the collection agency. However, depending on the amount owing and your financial situation, this can be easier said than done.

It’s important to note that there is a statute of limitations to collect on debts. The federal law states that legal action cannot be taken to collect on a debt in cases where it has been six years after the debt has been acknowledged. However, in certain provinces, this time period is shorter. For example, in Ontario, legal action cannot be taken on any debts that have not been acknowledged in two years.

Acknowledging a debt means confirming the debt in writing or making a payment. If you acknowledge your debts, the time period during which legal action can be taken is restarted.

However, while legal action is not possible once this period has ended, the debts are still owed. Technically, debts are still owed until they are paid or settled. Even if legal action is no longer possible and even if the debts have been removed from your credit report, they do not disappear.

Getting Help with Debt Recovery Services and Financial Issues

If you are unable to pay your debts or if you are receiving calls from debt recovery services, speaking with a Licensed Insolvency Trustee can be a good idea. Trustees are individuals who have received specific training and who are licensed by the federal Office of the Superintendent of Bankruptcy. If you are unable to meet your financial commitments, a trustee can review your situation and provide you with details on the debt relief options that are available to you.

Trustees are bound by a strict code of ethics, so they will give you details on all possible options, not just the ones that they can administrate. Once you have this information, it is up to you to decide how you will proceed.

One option that could be available is a consumer proposal. In a consumer proposal, the trustee determines what a fair offer to your creditors will be. This offer is usually for only a portion of the debt. It is then sent to all of your unsecured creditors who are then able to vote on whether they wish to accept it. If those creditors that are owed the majority of the debt accept the proposal, it becomes binding for all of them. In short, a consumer proposal is a way to pay only a percentage of the debt you owe rather than the full amount.

You receive legal protection when you file a consumer proposal. This means your creditors cannot contact you, they cannot take steps to collect the debt, they cannot send debt recovery services after you, and they cannot take legal action against you. If legal action is already in place, it must stop when the proposal is filed.

Threatening and taking legal action is one of the strongest powers that debt recovery services have. If they take you to court and are successful, they could be able to freeze your bank account or garnish your wages. If you are unable to pay the debts that you owe, a consumer proposal may be the right option for you. Speaking with a trustee can help you determine if filing one makes sense.

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