There are many reasons people don't pay their debts — financial setback, poor repayment habits, overspending or sometimes they're just not happy with a product they bought. Whatever the reason, it's important to communicate with the person who is owed money. When creditors understand the problem, chances are they will work out a reasonable, manageable way for the consumers to repay debts.
On the other hand, consumers who don't co-operate with their creditors may find their accounts turned over to collection agencies.
What is a collection agency?
A collection agency is an organization that obtains or arranges for payment of money owed to a third party; this could be a person or a company.
How do I deal with collection agencies?
If you've been notified in writing that an account has been turned over to a collection agency, don't panic. The agency isn't in business to make life unbearable for you — its management just wants to collect the money you owe its client.
What should I do?
- If possible, pay the money you owe. You won't have to deal with the agency once the account has been cleared.
- If it's impossible for you to pay the full amount at once, contact the agency, explaining why. Offer some alternative method of repayment, either in a lump-sum or a series of monthly payments. Follow up in writing and, if possible, enclose a good-faith payment.
- Never send cash. Always make payments in such a way that you have a receipt — either a cancelled cheque from your own bank or a receipt from the agency.
- Once the account has been officially turned over to a collection agency, you'll be dealing only with that agency when making arrangements for payment. Don't contact the original creditor — this just creates confusion — unless there's an error in the account. If that's the case, advise both the creditor and the collection agency.
- Your attitude towards paying the debt has a lot to do with how co-operative the agency will be. For example, when making payments to the agency, be sure not to bounce cheques and miss payments. However, if your financial circumstances change, contact the collection agency and explain your current status and follow up in writing.
- Debts should not be treated lightly. They can result in court action, which could lead to money being taken from your paycheque (garnisheed) or seizure of your assets.
The Collection Agencies Act prohibits collection agencies from doing certain things.
The Ontario Ministry of Government Services consulted the collection industry to develop a standard to be followed by all collectors. Having a standard also allows the public to have a better understanding of what collection agencies can and can't do. The regulations forbid collection agencies from:
- contacting you until six days have passed from sending you written notice of the following:
• the name of the creditor
• the balance owing
• the name of the agency and its authority to demand payment
- continuing to contact you if you did not receive the notice unless a second copy of the written notice is sent to an address provided by you, and then contact may only be made six days after sending notice;
- contacting you if you send a registered letter to the agency saying that you dispute the debt and suggest the matter be taken to court;
- contacting you if you or your lawyer notify the agency by registered mail to communicate only with your lawyer, and you provide the lawyer's name, address and telephone number;
- contacting you on Sunday, except between the hours of 1 p.m. and 5 p.m., and on a holiday;
- contacting you other than by ordinary mail more than three times in a seven-day period without your consent, once the agency has actually spoken with you;
- using threatening, profane, intimidating or coercive language, or using undue, excessive or unreasonable pressure;
- continuing to contact you if you have told them that you are not the person they are looking for unless they take reasonable precautions to ensure you are that person;
- giving false or misleading information to any person;
- recommending to a creditor that a legal action be commenced against you without first sending you notice;
- contacting your employer except on one occasion to obtain your employment information, unless your employer has guaranteed the debt, the call is in respect of a court order or wage assignment or if you have provided written authorization to contact your employer;
- contacting your spouse, a member of your family or household, or a relative, neighbour or acquaintance except to obtain your address and telephone number unless the person contacted has guaranteed the debt or you have given permission for the person to be contacted.
If your financial problems are getting out of hand, you should consider contacting a credit counselling service for help.
Assistance is offered, in many cases for a nominal fee, by member agencies of the Ontario Association of Credit Counselling Services. Credit counselling, available from more than 27 member agencies across the province, helps more than 20,000 Ontarians a year find the road to financial health.
For the telephone number of the Credit Counselling Service nearest you, call toll free 1-888-746-3328.
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