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Collection Agencies (Ontario)
Legal Guide
Chapter 4 - Prohibited Practices under the CAA- Overview
- Collection Only Against Debtor
- Debtor's Right to Block Collection Efforts
- Regulation Of Collection Communications
(a) Overview
(b) General Rules Applicable to All Collection Communications
. Some Forms of Misrepresentation Prohibited
. Communication Methods that Result in Charge to Debtor Prohibited
. No Publication of Failure to Pay
. Collection Agency Communication by E-mail
(c) General Rules Applicable to Collection Communications Made to Certain Classes of Persons
. Overview
. Dates and Times for Phone and In-Person Contact
. Frequency of Contact
. Threatening Language
. 'Pressure'
(d) Specific Rules Applicable to Collection Communications Made to Debtors
. Demand Letter to Precede In-Person or Phone Collection Communications
. Where Debtor Makes Unsolicited Request
. Debtor's Right to Block Collection Efforts
. Redirecting Collection Communications to Lawyer or Paralegal
(e) Specific Rules Applicable to Collection Communications Made to the Debtor's Family, Neighbours, Friends and Acquaintances
(f) Specific Rules Applicable to Collection Communications Made to the Debtor's Employer
(g) Call Recording
- Identification of the Creditor and/or Collection Agency
(a) Overview
(b) Misrepresentation of Identity or Purpose Prohibited
(c) Collection by Collection Agency with Multiple Creditor Clients
(d) Collection by Collection Agency Under Control of Single Creditor Client
(e) Direct Collection by Creditor
(f) Some Exceptions Where Collecting Recent Debts under Non-Contingency Arrangements
(g) Where Collection Agencies Collects Own Debts
- Misrepresentation
(a) Overview
(b) General Prohibition
(c) Prohibition Against Misrepresentations Related to the Debt
(d) Prohibitions Against Use of Misleading Documents
. Use of Fascimile Court Documents Prohibited
. Orders Against Harsh, False, Misleading or Deceptive Documentation
. False Advertising
(f) Misrepresentation Tort
- Extra Charges and Dealings Prohibited
(a) The Main Extra Charge Prohibition
. Overview
. Exceptions for NSF Charges
(b) Defining "Debt"
. Overview
. Damage Allegations and Punitive Charges are not Debt
. Contractual Collection Charges
(c) Payments and Agreements to Charge Additional Amounts in Exchange for Favours Prohibited
(d) No Charges To Be Made Against Debtor for Collection Communications
(e) Money-Lending Prohibited
- Threatening and Commencing Legal Proceedings to Recover the Debt
(a) Overview
(b) Threatening to Commence Legal Action
. Rules Applicable
. Threat of Criminal Proceedings
(c) Commencing Civil Legal Action
. Overview
. Commencing Legal Action on Behalf of a Creditor
. Collection Agency Commencing Legal Action as the Assignee of the Debt
. Continuing an Already Commenced Legal Action as the Assignee of the Debt
- Service of Notices and Orders
1. Overview
The Collection and Debt Settlement Services Act ("CADSSA") and it's General Regulation ("G Reg") set out a range of consumer protection rules to guard alleged debtors against the more offensive practices of collection agencies. These rules include the following, all of which are discussed in detail in this chapter:- the requirement of a demand letter prior to commencement of telephone and in-person collection efforts,
- the right of a debtor to terminate collection communications by sending a registered letter to the collection agency repudiating the debt and suggesting that the matter be taken to court,
- extensive regulation of the manner of collection communications, both to the alleged debtor and to third parties,
- identification requirements for collection agencies and collectors,
- prohibitions against collection agency misrepresentations,
- prohibitions against the making of extra charges against the debtor, and
- rules governing the threatening of, and the commencement of, legal proceedings to recover the alleged debt.
Like most consumer protection legislation, these rights are all themselves protected by a 'no waiver' provision [CAA s.22.1], which provides that "(a)ny waiver or release of any right, benefit or protection provided by this Act or the regulations is void". This provision is broad enough to cover situations where the alleged debtor casually says 'oh, that's ok', or - at the more formal extreme - where they have signed a contract which on it's face purports to 'contract out of' these CAA rights. In short, do not assume that because of some actions or statements on your part, or because of something that you have signed, that you have lost the rights set out in this chapter. They persist despite even fully intentional efforts to get rid of them (even by yourself).
Additionally, in an 'anti-avoidance' provision new in 2013, the Act provides that "(i)n determining whether this Act applies to an entity or transaction, a court or other tribunal shall consider the real substance of the entity or transaction and in so doing may disregard the outward form" [CADSSA 2.1].
2. Collection Only Against Debtor
Efforts to collect a debt from someone who "the collection agency or collector knows or reasonably ought to know is not liable for the debt" are prohibited [G Reg 22(5)(a)]. This is meant to prohibit past practices where a collection agency might pursue someone who feels a moral obligation towards the debtor, such as a parent.
In addition, if a person tells the collection agency or collector that they are not the debtor (as might happen when they share the same name with the debtor), then collection communications are prohibited unless "all reasonable precautions" are made to ensure that the person is in fact the debtor [G Reg 22(5)(b)].Case Note::
This latter issue was considered in the case of Anderson v Excel Collection Services Ltd (Ont Div Ct, 2005). Anderson involved a negligence-grounded claim against a debt collector who wrongfully alleged that the plaintiff was a debtor, and continued to pursue them for the debt even after the alleged debtor had verbally advised them of their mistake. While the plaintiff was successful at trial in an action for damages, the Divisional Court reversed on appeal, holding that simple mistake as to the identity of the debtor was inadequate to establish the collection agency's liability. Before liability would be found against the collection agency with respect to their ongoing collection communications, the court required actual negligence on the part of the collector as to the identity of the debtor. The case stands for the proposition that a collection agency will only be held liable for continued collection efforts after a verbal denial where it truly is negligent or careless with respect to the identity issue. Readers interested in this point should also review s.3 following on how to formally bar ongoing collection efforts.
3. Debtor's Right to Block Collection Efforts
At any time, an (alleged) debtor may require the collection agency or collector to stop all future collection efforts - other than court action - by sending them a notice by any verifiable means, including personal service, certified mail, courier, facsimile or e-mail, "stating that the debtor disputes the debt and suggest(ing) that the matter be taken to court" (sometimes referred to as a 'statutory cease and desist letter') [G Reg 22(1)].
While technically this notice can be sent at any time to pre-empt collection efforts, as a practical matter the right is triggered by the debtor's receipt of a initial 'notice' from the collection agency [see s.4(d) below], because before that time they will not know that the debt has been placed with the agency. Logically the letter should include the file identification information listed on the notice, so that the collection agency can connect it to the proper file.
Of course, further collection communications consented to or requested by the debtor are allowed, even after the notice is sent. However, attempts by creditors or collection agencies to secure such consent prior to the notice being sent may offend CADSSA's 'no waiver' provision [CADSSA s.22.1; see s.1 above]. The consent must reflect a true intention on the part of the alleged debtor to communicate despite the sending of the earlier letter.Notes:
Care should be taken when drafting these 'sue me' letters (also referred to as 'statutory cease and desist' letters') to not inadvertently provide collection agencies (and their creditor clients) with an 'acknowledgement' advantage. This is an aspect of limitations law that holds that in certain circumstances, the date from which a claim starts to run for limitation periods (in Ontario, typically two years) re-starts from the date that the debtor acknowledges liability or makes part-payment/performance of the debt, even though that date is later than the original limitation commencement date.
Generally, for 'acknowledgements' to be effective, they must be made "before the expiry of the limitation period applicable to the claim" [Limitations Act s.13(9)] - so if the limitation period has entirely run out, you are safer. I say 'safer', because collection agencies are past-masters as squeezing money out of people. If they are after you despite you believing that a limitation period has expired you may need legal assistance.
That probably why G Reg 22(1) (which sets out this 'sue me' letter right) says that the debtor should "dispute() the debt and suggests that the matter be taken to court". Be careful, and seek legal advice if you're not sure.
See Limitations Act, s.13.
4. Regulation Of Collection Communications
(a) Overview
This section covers the rules governing communications made by a collection agency or collector. They are structured as: general rules applicable to communications to everyone [(b)], general rules applicable to certain listed classes of persons [(c)], and then specific rules applicable to each of several different classes of persons [(d-f)].
While most such communications are made to the debtor, they are also often made to third parties, usually those who know or are somehow associated with the debtor, in an attempt to gain information about the debtor - or in the hope of shaming the debtor into payment (for situations where a collection agency is attempted to directly collect the money from such a third party, see s.2 above).
As well, some specific rules also apply to collection communications by virtue of their being subject to the Consumer Protection Act's (CPA) 'unfair practice' provisions (see Ch.7). This coverage arises by virtue of the definition of "representation" set out in the CPA, which covers "a representation, claim, statement, offer, request or proposal that is or purports to be, ... made for the purpose of receiving payment for goods or services supplied or purporting to be supplied to consumers" [CPA 1].
Every collection agency shall maintain a working toll-free telephone number [G Reg 13(10.1)].
(b) General Rules Applicable to All Collection Communications
. Some Forms of Misrepresentation Prohibited
It is a violation of the CADSSA for any collection agency or collector, in a contact (which includes email and voicemail: Reg 20) related to the debt, to misrepresent to anyone [G Reg 24(b)]:- their own identity,
- the identity of the creditor, or
- the purpose of the contact.
Further prohibitions against misrepresentation by collection agencies and collectors are discussed in s.6 below.
. Communication Methods that Result in Charge to Debtor Prohibited
It is prohibited for a collection agency or a collector to try to collect debts using a method of communication that results in a charge to the debtor for the communication [CADSSA 22(b)]. This may apply to some some text-messaging and similar telecommunications contracts that charge by the incoming message.Note:
In 2017 this provision was excepted "if the charge or cost of communication or attempted communication ... is fully reimbursed to the person communicated with". Or, (if I read this right, this is laughable) such charges are also allowed "with whom communication was attempted within 15 days of the person presenting evidence of the charge or cost to the collection agency" [G Reg 19.10(1)]. So, if the debtor is charged for the call, they can have it refunded within 15 days on presenting the collection agency with the evidence of the charge (ie. the bill). Also, the 'bill' must be presented to the collection agency with 60 days of the debtor being made aware of the charge [G Reg 19.10(2-3)]. The wording of this provision [CADSSA 22(b)] is ambiguous as to whether it applies with respect to communications made to non-debtor third parties, but it is plain that it does apply to communications made to debtors.
If a debtor notifies the collection agency that a certain method of communication causes them to incur costs, or if the collection agency otherwise becomes aware of that fact, they shall stop that method of communication [G Reg 21.4].
. No Publication of Failure to Pay
The debtor's failure to pay may not be published, nor may such publication be threatened [G Reg 22(6)3].
. Collection Agency Communication by E-mail
"A collection agency that communicates with a debtor by e-mail shall not subsequently refuse to accept communications from the debtor by e-mail" [G Reg 21.3].
(c) General Rules Applicable to Collection Communications Made to Certain Classes of Persons
. Overview
The CAA regulates collection communications made to the classes of people listed below [G Reg 22(6)]:- the debtor
- the debtor's spouse, a member of the debtor's family or household, a relative, neighbour, friend or acquaintance of the debtor
- the debtor's employer
- a guarantor of the debt
- a person mistakenly believed to be the debtor.
While collection communications made to some of these classes of people are also the subject of specific rules set out in (d) to (f) below, they are as a group subject to the following rules.
. Dates and Times for Phone and In-Person Contact
Unless at the request of the person being phoned, collection communications by telephone are restricted as to time and days as follows [G Reg 22(6)1,(7)]:- on a Sunday they may only be made between 1pm and 5pm local time;
- on any other day they may only be made between 7am and 9pm; and
- they are prohibited on the following public holidays:
- New Year's Day.
- Family Day, being the third Monday in February.
- Good Friday.
- Victoria Day.
- Canada Day.
- Civic Holiday.
- Labour Day.
- Thanksgiving Day.
- Christmas Day.
- December 26.
- Any day fixed as a holiday by proclamation of the Governor General or Lieutenant Governor.
. Frequency of Contact
With the below exceptions, collection communications may not be made "more than three times in a seven-day period on behalf of the same creditor" [G Reg 22(6)2]. This does not refer to calendar weeks, but any consecutive (or 'running') seven day period.
However, this rule does not apply to collection communications [G Reg 22(8,9)]:- sent by ordinary mail,
- consented to or requested by the subject of the communications,
- to someone other than the debtor, where the purpose of the communication is to locate the debtor, and
- where the debtor has not yet spoken to the debtor by either phone or in person (so once they have spoken with the debtor, this exception no longer applies).
In no event shall collection communications be made "in such a manner or with such frequency as to constitute harassment" [G Reg 22(6)6]. 'Harassment' is a pretty vague standard but anyone claiming it should have a detailed record of the time, date, method and content of any such communications for use as evidence. What constitutes 'harassment' is also addressed in the Ch.8: "Tort Remedies".Case Note:
In R v Sabine (NBQB, 1990), which was not a collections case, the defendant was convicted of criminal phone harassment for making 14 consecutive silent phone calls to an on-duty security guard. The key finding was that the intent of the calls was to harass. The case may have application to collection situations of rapidly repeated calls, especially where the debtor has already repudiated the debt or otherwise expressed an intention to ignore the collector's efforts. . Threatening Language
Collection communications may not use "threatening, profane, intimidating or coercive language" [G Reg 22(6)4]. More serious threats may come under the Criminal Code's 'threatening' provisions [CCC 264.1].
As a practical matter, as with harassment (mentioned above), the problem with asserting such claims is evidence. Thankfully, inexpensive technologies are available to record telephone conversations conducted on one's own telephone, where such statements are most likely to be made. Keep in mind that it is a criminal offence to intercept a conversation that you are not a party to, unless you are acting on behalf of a person who is a party to the conversation [CCC 184].Case Note:
The OLRB case of Canadian Bonded Credits Ltd v Paré (2006) is an example of a successful recording of a conversation with a collector, resulting in the termination of their employment by the involved collection agency [see Ch.8, s.1(c)]. . 'Pressure'
Collection communications may not use "undue, excessive or unreasonably pressure" [G Reg 22(6)5].
The evidence comments applicable to 'harassment' and 'threatening language' (above) apply here as well, although 'pressure' as a concept is quite vague.
(d) Specific Rules Applicable to Collection Communications Made to Debtors
. Notice to Precede Collection Communications
No collection agency or collector shall demand payment, engage in collection efforts or "in any other way contact the debtor" unless they have sent them a notice at least six days before. The notice must be private, written and set out [G Reg 21(1,2)]:- "(t)he name of the creditor to whom the debt is owed and, if different, the name of the creditor to whom the debt was originally owed";
- "(t)he type of financial or other product that incurred the debt, described in sufficient detail to distinguish among different products offered by the same creditor";
- "(t)he amount of the debt on the date it was first due and payable and, if different, the amount currently owing";
- "(t)he statement that the collection agency will provide a breakdown of the current amount owing, if requested";
- "(t)he following mandatory statement:
“Should you have any questions or would like further information regarding the current amount of your debt or the amount of your debt when it was first due and payable and, if applicable, would like a breakdown of the difference between those amounts, please contact our office at the number below as this information is available upon request.” - "(t)he identity of the collection agency and collector who are demanding payment of the debt";
- "(t)he authority of the collection agency to demand payment of the debt";
- "(t)he information that if the debtor notifies the collection agency or collector that a particular method of communication causes the debtor to incur costs, or if the collection agency or collector otherwise becomes aware of that fact, the collection agency and collector are prohibited from subsequently contacting or attempting to contact the debtor using that method of communication.";
- "(t)he contact information of the collection agency, including the full mailing address and toll-free telephone number and, where available, e-mail address and fax number."
A written demand for payment may be included with the notice [G Reg 21(3)].
With this 'notice' the debtor must also be sent this 'disclosure statement' [Reg 247/18 "Additional Information to be Provided a Debtor", s.1]:
Debt Collection: Information About Your Rights
An exception to this notice requirement is where the collection agency does not have debtor’s identity, address or e-mail [G Reg 21.1] (see following clause).
"The written notice may be sent by ordinary mail or by e-mail, except where the debtor has withdrawn his or her consent to the use of e-mail and provided a current address for ordinary mail." [G Reg 21(4)].
If the debtor, on being contacted, states that they haven't received the demand letter then it must be re-sent to the address provided by the debtor, and for the six days after the demand letter is re-sent no collection efforts may be undertaken, but this re-sending is only requied once [G Reg 21(5,6)].
No collection agency shall report a debt to a consumer reporting agency until after the six days, or whatever extended time is required due to re-sending, whichever is later have expired [G Reg 21(7)]. However, "a collection agency may report a debt to a consumer reporting agency if it makes at least two attempts, or such greater number of attempts as is reasonable, to locate the debtor’s address to which to send the notice ... and is unable to locate it" [G Reg 21(8)].
. Where Collection Agency Does Not Have Debtor’s Identity, Address or E-mail
"(I)f a collection agency does not have a debtor’s identity, home address or e-mail address, it may initiate verbal or text message communication with a person believed to be the debtor before sending the written notice referred to [above] ... solely for the purpose of confirming such information in order to send the written notice" [G Reg 21.1(1)].
Such communications, if done verbally or by text message, shall [G Reg 21.1(2)]:- "provide the person with only as much detail of the debt to which the communication relates as is required to verify that the person is the subject of the debt";
- "explain to the person that the details of the debt will be confirmed in a written notice";
- "explain that the collection agency will contact the person again after the written notice to discuss payment";
- "provide the person with the contact information of the collector and collection agency"; and
- "if the communication is via text message, inform the person that if the person notifies the collection agency that text messages cause the person to incur costs, the collection agency is prohibited from thereafter contacting or attempting to contact the person using that method of communication, and will reimburse the person for any costs incurred if the person presents evidence of such costs" [see above "Communication Methods that Result in Charge to Debtor Prohibited"].
. Where Debtor Makes Unsolicited Request
Where a debtor makes an unsolicited request to discuss a debt the collection agency may discuss the debt in greater detail than described above [in "Where Collection Agency Does Not Have Debtor’s Identity, Address or E-mail"] [G Reg 21.2].
. Debtor's Right to Block Collection Efforts
Debtors should be aware of their right to block all non-court collection efforts (including communications) from a collection agency by the sending of a registered letter to the collection agency [see s.3 above].
. Redirecting Collection Communications to Lawyer or Paralegal
As well, collection communications from a collection agency may be redirected to the debtor's lawyer or paralegal by sending the collection agency or individual collector a registered letter "requesting that the collection agency or collector communicate only with the debtor's lawyer or licensed paralegal", and setting out their address and telephone number [G Reg 22(2)].
Of course, collection communications consented to or requested by the debtor are allowed.
(e) Specific Rules Applicable to Collection Communications Made to the Debtor's Family, Neighbours, Friends and Acquaintances
With the below exceptions, collection communications by a collection agent or collector are prohibited from being directed to "debtor's spouse, a member of the debtor's family or household, or a relative, neighbour, friend or acquaintance".
The exceptions are where [G Reg 22(3)]:- the person being contacted has guaranteed the debt and the communication is with respect to that guarantee;
- the debtor has requested that the otherwise protected person be contacted; and
- the communication is "for the sole purpose of obtaining the debtor’s home address, personal telephone number or other contact information".
This last exception may leave it open for a collector to identify themselves and their reason for calling before asking the permitted 'address and phone' question. However once the information is obtained, the exception expires.
For these purposes [G Reg 20]: "spouse" means,
a spouse as defined in section 1 of the "Family Law Act", or
either of two persons who live together in a conjugal relationship outside marriage. (f) Specific Rules Applicable to Collection Communications Made to the Debtor's Employer
With the below exceptions, collection communications by a collection agent or collector are prohibited from being directed to a debtor's employer (this includes the employer's other employees: G Reg 20).
The exceptions are [G Reg 22(4)]:- where the debt is the result of a court order or judgment, including a court order or judgment made in favour or the collection agency or a collector;
- where the employer being contacted has guaranteed the debt and the communication is with respect to that guarantee;
- where the debtor has authorized in writing that the employer be contacted;
- where the communication is made one-time only "for the sole purpose of confirming one or more of the debtor's employment, the debtor's business title and the debtor's business address"; and
- where the debt alleged is a wage assignment given to a credit union or caisse populaire.
(g) Call Recording
In a progressive move in 2018, CADSSA required that collection agencies that "employ() or appoints 10 or more collectors or authorizes 10 or more collectors to act" to record all phone calls made and received "if the calls relate to the collection of a debt of a debtor but are not with a creditor" [G Reg 31(1)], and more specifically if they are made in any of the following circumstances:- made or received by any means, including over regular phone lines, over cell phone lines or through the internet;
- made before an initial collection notice is sent to obtain basic information [see Ch.4, s.4(d): "Where Collection Agency Does Not Have Debtor’s Identity, Address or E-mail"];
- made to or received from,
(i) the debtor or a person who the caller believes is the debtor,
(ii) the spouse or common law partner of the debtor or a person who the caller believes is the debtor,
(iii) a member of the family or household of the debtor or a person who the caller believes is the debtor,
(iv) a relative, neighbour, friend or acquaintance of the debtor or a person who the caller believes is the debtor,
(v) the employer of the debtor or a person who the caller believes is the debtor, and
(vi) a person who guaranteed the debt.
The person calling or receiving the call shall be advised that "the call is being recorded to comply with this Act" [G Reg 31(4)]. The recording shall be maintained for a year [G Reg 31(5)]. The calls must be recorded in a format that is "readily accessible" [G Reg 31(2)].
The collection agency "may block, remove, redact or otherwise anonymize the number that identifies a credit card, a bank account or any other financial account of an individual and that is conveyed on the recording" [G Reg 31(3)].
The person with whom the call is recorded "may request a copy of the recording by making a written request for it to the agency" [G Reg 31(6)]. The collection agency must send a copy of the recording to the person within 10 days after they receive the request, at no charge, either to the address provided or "to the person by electronic means", as the person requests [G Reg 31(7)].
Also, the Registrar may request copies of the recordings [G Reg 31(8)], and they must be sent them within 10 days of the requests and "in the manner that that the Registrar specifies" [G Reg 31(9)].
These recording duties do not apply to calls made between a collection agency (on the one hand), and creditors or "a credit counselling agency or consumer counselling agency in its provision of debt settlement services" (on the other hand) [G Reg 31(1), 32].
5. Identification of the Creditor and/or Collection Agency
(a) Overview
For the Collections Agency Act (CADSSA) legal regime to function effectively, it requires that anyone engaging in collection efforts identify themselves clearly to the alleged debtor or anyone else they are dealing with in respect of the debt. Therefore, collection dealings with a debtor may only be undertaken by persons in the "name in which the debt is lawfully owing" [ie. by the creditor directly] or through a registered collection agency" which itself "shall not carry on business in a name other than the name in which it is registered or invite the public to deal at a place other than that authorized by the registration" [CADSSA 4(2),5].
Further, creditors may not 'knowingly' engage or use collection agencies that are not properly registered [CADSSA 24(1)], nor may collection agencies use collectors that are not registered [CADSSA 24(2)].
In aid of these restrictions, the legal definitions of "collection agency" and "collector" (a person "employed, appointed or authorized by a collection agency to collect debts") are broad and captures anyone, individual or corporate, "who obtains or arranges for payment of money owing to another person" [CADSSA 1(1)].
This section elaborates on these rules and addresses the identification that a collection agency, collector or creditor must give when engaged in collection efforts. Specific identification requirements that apply to initial demand letters from a collection agency are set out in s.4(d), above.
(b) Misrepresentation of Identity or Purpose Prohibited
It is a violation of the CADSSA for any collection agency or collector, in a contact related to the debt, to misrepresent to anyone [G Reg 24(b)]:- their own identity,
- the identity of the creditor, or
- the purpose of the contact.
Other forms of misrepresentation by a collection agency or collector are dealt with in s.6, below.
(c) Collection by Collection Agency with Multiple Creditor Clients
In the typical collection agency situation, where a collection agency has multiple creditor clients, it can only can only use their CADSSA-registered names during collection activities [CADSSA 22(d)].
(d) Collection by Collection Agency Under Control of Single Creditor Client
Where a collection agency is controlled, directly or indirectly, by a (ostensibly 'client') creditor then it must disclose the full name of that client creditor in all communications and an itemized breakdown of each account in arrears owing to the creditor [G Reg 13(14)]. This appears to be a provision to prevent the use of 'tame' or in-house collection agents by big creditors.
(e) Direct Collection by Creditor
Where a creditor is collecting a debt themselves, they must do so under the name in which the debt is owed [CADSSA 5].
(f) Some Exceptions Where Collecting Recent Debts under Non-Contingency Arrangements
Where the below-listed circumstances apply, the collection agency or collectors may contact a debtor in the name of the direct creditor - despite the prohibition against contacting a debtor using, or carrying on business under, a name other than their registered name [CADSSA 2(d)], and despite the prohibition against inviting the public to deal at a place other than that authorized by the registration. As well, in these circumstances, they need not first send the debtor a demand letter [see s.5(d) "Demand Letter to Precede In-Person or Phone Collection communications"] [G Reg 19.1.1(1,2)].
These exemptions operate where all of the following conditions and contractual terms apply:- the debt is no more than 60 days overdue;
- fees are not contingency-based;
- the collection agency or collector may not receive or request to receive any money from the debtor directly; and
- the collector must, in every contact with the debtor, give the name of the debtor and the name of the collector.
Before acting in this fashion however the collection agency which employs the collector must notify the Registrar in writing that they have entered into such a contract with a creditor, and shall provide the name and address of the creditor [G Reg 19.1.1(3)].
This is an exemption apparently designed to allow businesses to use registered collectors (and thus their employer collection agencies) to collect recent debts without appearing to have sent the matter to an external collection agency. It seems to amount to a 'farming out' of otherwise in-house 'debt nagging' to collection agencies.
(g) Where Collection Agencies Collects Own Debts
"Every person registered as a collection agency that collects debts for itself as a creditor shall disclose its full name in all correspondence and communications" [G Reg 13(14.1)].
6. Misrepresentation
(a) Overview
A number of legal principles, both statutory and common law, may be brought to bear on collection agencies or collectors when they engage in misrepresentation - be it intentional (ie. fraud), negligent or innocent. They are discussed in this section, and readers may also want to have reference to Ch.8, which discusses tort remedies to bad collection agency behaviour.
(b) General Prohibition
Collection agency and collectors are prohibited from giving "any person, directly or indirectly, by implication or otherwise, any false or misleading information" [G Reg 24(a)].
This is a very broad provision that on it's face is not even limited by any requirement that the 'false or misleading information' be given in the context of collection activities - though it's very likely that a court would read that requirement into it.
Note that there is no intentionality requirement here, so that it applies against all forms of misrepresentation (ie. intentional, negligent and innocent). But note as well that the CAA offence provisions (ie. prosecution) that apply to this rule do require that the misrepresentation be made "knowingly" [see Ch.6, s.9: "CADSSA Enforcement: Offences"; CADSSA 28(1)], so that the effect of this prohibition will be primarily administrative in nature.
(c) Prohibition Against Misrepresentations Related to the Debt
It is prohibited for any collection agency or collector, in a contact (ie. any communication, including e-mail and voice-mail: G Reg 20) related to the debt, to misrepresent to anyone any of the following [G Reg 24(b)]:- their own identity,
- the identity of the creditor, or
- the purpose of the contact.
Since, once again, there is no intentionality requirement here, the prohibition applies against all forms of such misrepresentation: intentional, negligent and innocent.
Also, "upon the request of a debtor, a collection agency shall provide to the debtor a breakdown of the current amount owing under the debt" [G Reg 13(10.2)].
(d) Prohibitions Against Use of Misleading Documents
. Use of Fascimile Court Documents Prohibited
There is a prohibition against a collection agency or collector using, "without lawful authority, any summons, notice, demand or other document that states, suggests or implies that it is authorized or approved by a court in Canada or another jurisdiction" [G Reg 24(c)]. Once again, since there is no intentionality requirement here, the prohibition applies against all forms of such misrepresentation: intentional, negligent and innocent.
This provision covers both outright forgeries of court documents and as well those that are made to 'look and feel' as though they are official court documents. Cases of outright forgery (such as where the documents purport overtly to be real court documents), may also fall afoul of the Criminal Code provisions against forgery and uttering forged documents [CCC 366-368].
. Orders Against Harsh, False, Misleading or Deceptive Documentation
The Registrar, where it has reasonable and probable grounds that "any letters, forms, form letters, notices, pamphlets, brochures, advertisements, contracts, agreements or other similar materials used or proposed to be used by the collection agency in the course of conducting its business" are "harsh, false, misleading or deceptive" may by order "alter, amend, restrict or prohibit" their use [CADSSA 21(2)]. In aid of this the Registrar has the right, at any time, to require copies of such materials be given to them by the collection agency [CADSSA 21(1)].
Appeal procedures for such orders are discussed in Ch.5: "CADSSA Appeal Procedures".
. False Advertising
Another CADSSA provision, which appears to be intended for application against collection agencies misleading their (creditor) customers, can conceivably also have application to debtors. It applies where "the Registrar believes on reasonable and probable grounds that a collection agency is making false, misleading or deceptive statements in any advertisement, circular, pamphlet or similar material", and it allows the Registrar to order the immediate cessation of it's use [CADSSA 25(1)]. While it is not typical practice for a collection agency to direct an "advertisement, circular, pamphlet or similar material" at debtors, it is conceivable.
Appeal procedures for such orders are discussed in Ch.5: "CADSSA Appeal Procedures" [CADSSA 8, 25(3)].
(f) Misrepresentation Tort
Common law tort remedies are also available in the event of misrepresentation by a collection agency, a collector and even against creditors personally engaged in direct collection activities. If this occurs then an action may lie under any of several torts, including: fraudulent (intentional) misrepresentation, negligent misrepresentation, and negligence. If misrepresentations are made to third parties then the collection agency or collector may also have liability in defamation (libel or slander).
While many people would want and expect punitive damages in such cases, they are awarded only in the most egregious and intentional cases of misbehaviour.
These issues are discussed more extensively in Ch.8: "Tort Remedies".
7. Extra Charges and Dealings Prohibited
(a) The Main Extra Charge Prohibition
. Overview
The General Regulation prohibits "(c)harges incurred by a collection agency or collector in collecting a debt and charges incurred by a creditor to retain a collection agency or collector" from being added to what constitutes "debt" [G Reg 25(1)]. Such charges, with the exceptions discussed below, may not be collected.
. Exceptions for NSF Charges
The one express exception made in the CAA is for NSF ('not sufficient funds') charges. These are charges - from a bank, the creditor or the collection agency - for 'bounced' cheques. NSF charges are only allowed where any of the following circumstances apply:- They are Contractual and Exact in Amount
This exception operates is the contract upon which the debt is based "provides that the debtor is liable for such charges if incurred by the creditor and sets out the amount of the charge" [G Reg 25(2)(a)]. This seems self-explanatory.
- There Has Been Prior Notice of Liability for NSF Charges
This provision operates if "the creditor has provided information to the debtor, by any method, that the debtor is liable for such charges if incurred by the creditor and the debtor knows or reasonably ought to know of his or her liability for such charges and the amount of the charge" [G Reg 25(2)(b)].
This amounts to a 'fair notice' provision, whereby a creditor or collection agency that wishes to invoke a right to such a charge must set it out in a prior notice to the debtor, such as might be done in a demand letter. Note however that the requirement that the charge be exact in amount does not apply here, only that the debtor "knows or reasonably ought to know" it's amount.
- There is Express Statutory Authority for the Charge
This exception applies where the collection of such charges is otherwise "expressly permitted by law" [Reg 25(2)(c)].
An example of this is located in the Residential Tenancies Act where the recovery of both NSF bank charges and internal NSF 'administrative charges' (to a maximum of $20) are expressly allowed for [RTA General Reg 516/06, s.17(4,5)].
(b) Defining "Debt"
. Overview
As with Ontario's rent review regime (under the Residential Tenancies Act) - where what is and is not "rent" has to be clearly defined for the system to work - no system of regulating 'extra' collection charges can operate without a clear idea of just what is and isn't included in a 'debt'.
Drawing this line in each case requires some consideration. For instance, most consumer financing and future performance (ie. pay-later) contracts provide that in the event of default the creditor may add onto the principal debt a variety of additional (and sometimes quite specious) charges (ie. cancellation fees, administrative charges, service fees, etc). Nominally, such charges come under the main rule defining debt: if the charges (including interest) arise from the original contract between the parties, then it is debt.
. Damage Allegations and Punitive Charges are not Debt
A second point that must be made on this issue is that an allegation of damage, even if made within the context and existence of a contract - and even if based on a right purporting to arise under a contract (it could also be under a tort claim) - is not a 'debt'. Creditors must go to court to 'convert' a damage allegation into a 'debt', which is what it becomes once a court issues a judgment declaring it owing. Without such a court ruling no collection agency may include the value of such damage allegations within the amounts that they attempt to collect.
Debtors may see this issue arise in a collateral fashion if their contract claims that charges can be added to the debt in the event of certain instances of default (eg. late payments, service charges, cancellation fees, etc). The common law calls these 'penalty clauses' and will not enforce them unless they are reasonable pre-estimates of the quantum of damages that can be expected to arise from the defaults that are alleged. In other words, unreasonable or extortionate penalty clauses will not be honoured by a court. This principle can also be applied against the nebulous 'administrative charges' and 'default fee'-type of charges made against debtors in contracts.
Of course, the oppourtunity to have such charges adjudicated or declared to be punitive only arises if the matter gets into a court, which most debts sent for collection do not.
So an alleged debtor may be well-advised to exercise their rights under (s.3 above) to challenge, by way of registered letter, the creditor to take them to court over the issue. This procedure comes with the added bonus it bars the collection agency from any further collection attempts until the court finally rules on the issues.
. Contractual Collection Charges
Another variation on this issue is where foreseeable 'collection-agency'-related expenses are included within the original contract [where such charges are for NSF cheques see (a) above]. Under pure contract law such charges can be characterized as 'debt', and as such the creditor or collection agency would claim (firstly) that such charges are immune from the general prohibition against 'extra' charges.
However this position runs afoul of the general 'non-waiver' provision of the CADSSA, which holds that "(a)ny waiver or release of any right, benefit or protection provided by this Act or the regulations is void" [CADSSA 22.1]. That is, the debtor can argue that the contractual terms which attempt to make 'collection agency'-related charges collectable is in effect a waiver of the main G Reg 25(1) consumer protection against extra charges.
Additionally, such charges would seem to run directly against the CADSSA's prohibition against a collection agency's efforts to "collect or attempt to collect, on its own behalf or for a person for whom it acts, any money in addition to the amount owing by the debtor" [CADSSA 22(a)].
Note however that the Consumer Protection Act [CPA s.75] allows extra contractual collection-related charges to be allowed for in "credit agreements" (consumer loan or credit agreements): CPA s.75
A lender is not entitled to impose on a borrower under a credit agreement default charges other than,
(a) reasonable charges in respect of legal costs that the lender incurs in collecting or attempting to collect a required payment by the borrower under the agreement; .... (c) Payments and Agreements to Charge Additional Amounts in Exchange for Favours Prohibited
There is also an obtuse CAA provision that prohibits the collection agency or collector from [CADSSA 22(c)]:- receiving, or entering into an agreement to collect additional amounts from a debtor, be they styled as a "charge, cost, expense or otherwise";
- for the benefit of either itself or the creditor;
- in exchange for "any forbearance, favour, indulgence, intercession or other conduct by the collection agency" (ie. consideration or favours).
As best I can guess this is directed at preventing collection agencies from entering into collusion-type contingency arrangement to collect additional non-debt amounts from debtors, perhaps with fee-splitting in mind. For "additional" amounts I can only read 'non-debt' amounts, as discussed in (b) above.
(d) No Charges To Be Made Against Debtor for Collection Communications
It is prohibited for a collection agency or a collector to try to collect debts using a method of communication that results in a charge to the debtor for the communication [CADSSA 22(b)]. There are some text-messaging and similar telecommunications contracts that charge by the incoming message - this provision should apply to those situations.
(e) Money-Lending Prohibited
In an attempt to prevent collection agencies or collectors from profiting from the compounding of the debtor's troubles, they are prohibited from engaging "directly or indirectly in the business of lending money whether as principal or as agent" [G Reg 13(15)]. The phrase "as agent" means that they cannot lend money on behalf of someone else either.
There is an exception "except to the extent the person has purchased a debt and is renegotiating terms for the payment of that debt", but "the renegotiation of terms for the payment of a debt with a debtor does not include the extension of additional credit to the debtor" [G Reg 13(15,15.1)].
8. Threatening and Commencing Legal Proceedings to Recover the Debt
(a) Overview
This section explains the rules that govern a collection agency when they either threaten to commence legal action against a debtor, or when they actually commence such proceedings.
(b) Threatening to Commence Legal Action
. Rules Applicable
A collection agency or collector may not threaten, directly or indirectly, to commence civil proceedings (ie. sue) to obtain a judgment for the debt, unless they have written authority from the creditor to actually commence such a proceeding [G Reg 23(1)]. This rule does not apply if the debt is owed directly to the collection agency [G Reg 23(4)].
As well, they may not threaten such a proceeding if it is "otherwise prohibited by law" [G Reg 23(1)]. This rule is interesting, and it may have been widely overlooked to date. For example, when considered in light of the Limitations Act, 2002 - which bars a party from bringing an action more than two years after the debt is 'discovered' (or, in the case of a debt, 'due') - it may operate to bar all threats of litigation after the limitation period has expired. The wording of s.4 of the Limitations Act 2002, which sets out the basic limitation period applicable to most causes of action, supports this conclusion: ie. "a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered").
In short then, continued pursuit of a debt by a collection agency after a limitation period has expired - insofar as it involves threatening litigation - is illegal. This is at odds with normal civil litigation practice, where the expiration of a limitation period is not in itself fatal to a claim. Limitation expirations are not jurisdictional in nature (ie. they do not deprive a court of the authority to consider the matter), they are only one amongst other defences that a defendant can advance.
That said, the threat of legal action may be made in an indirect manner, as the CAA Regulation requires a collection agency or collector - before they recommend to the creditor that legal action be taken - to give notice to the debtor that it intends to make such a recommendation [G Reg 23(2)]. This rule does not apply if the debt is owed directly to the collection agency [G Reg 23(4)].
. Threat of Criminal Proceedings
The CAA rules presume that any threat to commence legal action refers to civil action.
Criminal proceedings should not normally be a concern in a true debt collection situation because any liability arising from truly criminal acts (such as fraud or uttering a bad cheque) are not truly 'debts' (which must originate from legitimate contracts). Rather they are 'damage' claims that only become debts after a court issues a judgment that such monies be paid.
So, while this does not prevent the bringing of criminal charges in the proper case, they should not be normally be threatened in a true debt situation. If a collection agency or collector threatens criminal prosecution it is likely best addressed by the debtor under the harrassment provision discussed in s.4(c) above.
Further, it is a violation of professional ethics for a paralegal [Rules of Conduct R4.01(5)(l)] or lawyer [Rules of Professional Conduct R4.01(2)(l)] to threaten criminal proceedings in a civil matter. So if a paralegal or lawyer does this they can be subject to professional discipline.
(c) Commencing Civil Legal Action
. Overview
These rules only address the situation where the collection agency or collector is involved in advancing the lawsuit. It is entirely possible for the creditor to advance legal action entirely on their own, either personally as self-represented litigants or with legal counsel.
. Commencing Legal Action on Behalf of a Creditor
The basic rule here is that a collection agency or collector may only commence legal action on behalf of a creditor if they have written authorization from the creditor to do so [G Reg 23(3)(a)]. However, the rule does not apply if the debt is owed directly to the collection agency [G Reg 23(4)].
However, with the (relatively) recent advent of paralegal regulation in Ontario, the Law Society of Upper Canada now takes the view that collection agencies and collectors may not represent a creditor in Small Claims Court (where all claims under $25,000 are heard) except through a licensed paralegal or lawyer. Therefore the provisions discussed in this chapter only apply where the collection agency has a paralegal (or more rarely, a lawyer) on staff who conducts the legal action, or hires one for the case.
. Collection Agency Commencing Legal Action as the Assignee of the Debt
It may come as a surprise to many, but the law allows debts (in fact, even non-debt causes of action such as torts or contract breaches) to be 'assigned' (typically sold) freely, and there is quite a thriving market in such dealings - particularly in relation to financed purchases of consumer goods, typically in bulk bundled purchases by other finance companies.
Once this is done the 'new' creditor has the same right to sue the debtor as did the previous creditor, so the unknowing consumer may find themselves on the receiving end of a lawsuit from a company that they have never even heard of.
However, when the purchaser is a collection agency or a collector, some rules apply before they can sue. These rules are that [G Reg 23(3)(b)]:- the assignment must have been done in writing,
- the assignment must have been for valuable consideration (ie. it must have been bought with money or something of value),
- the original creditor must not retain any residual legal interest in the debt (ie. it must be a full assignment),
- the collection agency or collector has given written notice of the assignment to the debtor, and
- the collection agency or collector must have given the debtor notice of its intention to commence legal proceedings.
The effect of these rules, particularly the notice requirement, is to put the debtor in the same position with respect to the assignee (new company) as they were with respect to the assignor (original company). So if the assignee sues them the debtor can defend using all the defences that they could have used against the original company, even those based on the misbehaviour of the original company. One advantage of advancing such a defence is that the 'new' assignee creditor will have little to no knowledge of any misbehaviour of the assignor, and that it will usually be hard for them to organize a defence to such allegations.
. Continuing an Already Commenced Legal Action as the Assignee of the Debt
The CAA requires that where a lawsuit was commenced before the assignment took place, and an assignment subsequently occurs while the litigation is still ongoing, the collection agency or collector must give the debtor notice of the assignment [G Reg 23(3)(b)(ii)].
In such a case the giving of the notice to the debtor is not enough to entitle the assignee creditor to continue the lawsuit. The 'new' creditor is still required to obtain an order from the court to 'continue' the action in the name of the new assignee. The Small Claims Court Rules (which govern claims for $25,000 and under) make no express allowance for such a 'continuance' but in such cases that court is allowed to make reference to the Rules of Civil Procedure (RCP) (the rules governing the higher Superior Court), which do prescribe such rules (RCP R11).
9. Service of Notices and Orders
Any Notice or Order required under the CAA or its Regulation may be served personally on the recipient, or sent by registered mail to the latest address appearing on the Ministry's records [CADSSA 26(1)]. Service by registered mail is effective on the third day after mailing, "unless the person on whom service is being made establishes that the person did not, acting in good faith, through absence, accident, illness or other cause beyond the person's control receive the notice or order until a later date" [CADSSA 26(2)].
The LAT also has authority to order any other form of service, or to 'regularize' (approve despite technical non-compliance) past service in respect of any matter before it [CADSSA 26(3)].
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