Simon's Megalomaniacal Legal Resources

Collection Agencies (Ontario)
Legal Guide

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Chapter 6 - CADSSA Administrative Enforcement

1. Overview
   
2. Complaints
   
3. Investigations, Inspections and Evidence Obtained
   (a) Investigators
   (b) Warrantless Entry
   (c) Search Warrants
   (d) Use of Information Gained by Inspector
   (e) Inspectors and Others Not Compellable Witnesses in Civil Proceedings
   
4. Freezing Orders
   
5. Compliance Orders
   
6. Cessation Orders
   
7. Misrepresentation-Related Orders
   
8. deleted
   
9. Service of Notices and Orders
   
10. Offences
    (a) Overview
    (b) Categorizing Mens Rea for CADSSA Offences
    (c) Full Mens Rea Offences
    (d) Strict Liability Offences
    (e) Individual, Corporate, Director/Officer and Attempt Forms of Offence
    (f) Penalties and Restitution Orders
    (g) Limitation
    (h) Evidence
    
11. Administrative Penalties
    (a) General
    (b) Absolute Liability
    (c) Effect of Administrative Penalty on Other Sanctions
    (d) Enforcement
    . Administrative Offences
    . Fines
    (e) Appeals

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1. Overview

One of the grounds for the Registrar refusing an application for registration of a collection agency or a collector, or for refusing to renew, suspending or revoking an existing registration, is that the applicant or registrant has engaged - or is engaging - in illegal or dishonest collection-related activities [see Ch.3 "Registration and Regulation of Collection Agencies under the CADSSA", s.2(d,e)].

Additionally, the Registrar may make Orders against a collection agency with respect to the use of documents that are "harsh, false, misleading or deceptive", or that are "false, misleading or deceptive" (see Ch.4 "Prohibited Practices under the CADSSA").

To assist in the enforcement of these administrative remedies, the CADSSA grants the Registrar the enforcement authorities set out in this chapter. This chapter also explains the regulatory prosecution provisions created under the CADSSA.


2. Complaints

Anyone may complain to the Registrar about the behavour of an Ontario collection agency, though there is no duty on the Registrar to commence a formal investigation into it.

However, where the Registrar does decide to pursue the matter they may make a written demand on the collection agency requiring them to "furnish the Registrar with such information respecting the matter complained of as the Registrar requires" [CADSSA 12(1)].

Such a Registrar's demand must indicate "the nature of the inquiry involved" [CADSSA 12(2)], a vague requirement that could be met with minimal information.


3. Investigations, Inspections and Evidence Obtained

(a) Investigators

To assist in enforcement of the legislation, the Director may appoint investigators [CADSSA 15(1)]. During investigations, investigators can be identified by requesting that they show their certificate of appointment, and they must do so on request [CADSSA 13(3), 15(2,3)]. No one shall obstruct an inspector during the course of an inspection.

(b) Warrantless Entry

Investigators have the right to enter a registrant's business premises "at any reasonable time" without a search warrant to access documents and computer records for the purposes of (this authority is explained more fully in CADSSA s.13):

• ensuring compliance with the Act and Regulation;
  
  
• addressing a complaint; or
  
  
• ensuring that the registrant remains entitled to be registered.

(c) Search Warrants

Additionally, a justice of the peace (JP) may, on application by an inspector, issue a search warrant to allow entry to any place - including a dwelling place - to access documents and computer records. A search warrant may be issued if the JP "is satisfied on information under oath that there is reasonable ground for believing that" (this authority is explained more fully in CADSSA 16-16.2.1):

"a person has contravened or is contravening this Act or the regulations or has committed an offence under the law of any jurisdiction that is relevant to the person's fitness for registration under this Act";

and that either (i) or (ii) apply:

(i) there is, "in any building, dwelling, receptacle or place anything relating to the contravention of this Act or the regulations or to the person"s fitness for registration", or

(ii) "information or evidence relating to the contravention of this Act or the regulations or the person"s fitness for registration that may be obtained through the use of an investigative technique or procedure or the doing of anything described in the warrant".

An investigator may seize anything not mentioned in the warrant if it is in plain view [CADSSA 16.1].

(d) Use of Information Gained by Inspector

Information gained by an inspector or anyone "in the course of exercising a power or carrying out a duty related to the administration of this Act" may, absent the consent of the person to whom the information relates, only be used for the following purposes [CADSSA 17(1)]:

• "in connection with a proceeding under this Act or in connection with the administration of this Act or the regulations";
  
  
• enforcement of the collection agency legislation or consumer legislation of other jurisdictions;
  
  
• disclosure to a law enforcement agency, or
  
  
• to obtain legal advice respecting it's use.

(e) Inspectors and Others Not Compellable Witnesses in Civil Proceedings

No inspector or other person engaged in the enforcement of this Act may be compelled to give testimony in any civil proceedings (ie. lawsuits) with respect to information they have obtained [CADSSA 17(2)]. So if a debtor wants to sue a collection agency they cannot rely on in-person testimony obtained by any government official engaged in the enforcement of CAA, though such evidence could be given if the official (and their superiors) are willing.


4. Freezing Orders

If the Director of Collection Agencies "believes it advisable for the protection of clients or customers" of a person against whom a search warrant has been issued, or of a person against whom criminal or other legal proceedings relating to a contravention of the CADSSA have been or are about to be commenced, then they may issue an Order to anyone in control of a collection agency's trust fund to freeze withdrawals and to hold the funds until otherwise directed [CADSSA 19(1)]. The trust fund requirement on collection agencies is discussed in Ch.3, s.3(d).

The collection agency may avoid the freeze order by posting a bond acceptable to the Director [CADSSA 19(2)].

Any third party receiving such an order (eg. the bank holding the trust account) may apply to the Superior Court for directions as to whether the order applies to them, and if so how [CADSSA 19(3)]. The Director may also apply to the Superior Court, without notice to any other party, to determine how to dispose of such frozen funds [CADSSA 19(6,7)].

The collection agency to whom the freeze order relates may apply to the License Appeal Tribunal (LAT) for a hearing to determine whether the freeze order should be cancelled in whole or part [CADSSA 19(5)].


5. Compliance Orders

Where it appears that a person is not complying with the Collection and Debt Settlement Services Act, the Director may apply to the Superior Court for an Order compelling compliance [CADSSA 27(1)].

Any resulting order may be appealed to the Divisional Court [CADSSA 27(2)].


6. Cessation Orders

In 2013, cessation orders expanded to more than their original purpose of addressing 'false advertising' to a more general function [CADSSA 25(2-4)]. From that time 'cessation orders' may be addressed against:

• false advertising [CADSSA 25(1)][see Ch.4, s.6(d)];
  
  
• debt settlement service prohibited representations [see Ch.4A][CADSSA 16.3];
  
  
• debt settlement services false information [see Ch.4A][CADSSA 16.4];
  
  
• prohibiting collection agents or collectors from engaging "in any prohibited practice or employ any prohibited method in the collection of debts" [CADSSA 22(e)];
  
  
• prohibiting collection agents or collectors from engaging "in any prohibited practice or employ any prohibited method in providing debt settlement services or in respect of debt settlement services agreements" [CADSSA 22(f)].

Cessation orders may be challenged using the procedures for refusal of registration [see the Appeal Procedures under Ch.5] [CADSSA s.8, 25(3)]. The effective time of such orders is immediate, although "the Tribunal may grant a stay until the Registrar’s order becomes final" [CADSSA 25(4)].


7. Misrepresentation-Related Orders

There are also provisions in the CADSSA authorizing the Registrar to order a registrant to:

• "alter, amend, restrict or prohibit" any "harsh, false, misleading or deceptive" "letters, forms, form letters, notices, pamphlets, brochures, advertisements, contracts, agreements or other similar materials " that it uses [CADSSA 21(2)];
  
  
• order the immediate cessation of the use of "false, misleading or deceptive statements in any advertisement, circular, pamphlet or similar material" [CADSSA 25(1)].

The subject of misrepresentation by collection agencies or collectors is also considered in Ch.4. s.6 "Prohibited Practices under the CAA: Misrepresentation", and generally in Ch.8 "Tort Remedies".


8. deleted


9. Service of Notices and Orders

Any Notice of Order required under the CADSSA or its Regulations 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 Licence Appeal Tribunal 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)].

These service rules do not apply to prosecution procedures (considered in s.9 below), instead the service rules set out in the Provincial Offences Act apply.


10. Offences

(a) Overview

The Collection and Debt Settlement Services Act (CADSSA) provides generally that "(n)o collection agency or collector shall, .... engage in any prohibited practice or employ any prohibited method in the collection of debts" [CADSSA 22(e)]. Readers will find details of these violations in Ch.4 "Prohibited Practices under the CADSSA". The Ministry of Consumer and Business Services may respond to violations of these, or other CADSSA provisions, by way of prosecution under the Provincial Offences Act (POA).

The POA is the workhorse statute for regulatory enforcement in Ontario. POA prosecutions can be by way of Certificate of Offence (ie. tickets under Part I of the POA) or under the more elaborate Part III information or summons procedures. Most CAA offence prosecutions (of which there are very few) will proceed under Part III.

Case Note:
Prosecution responses to aggressive debt collection activities are not be limited to the CADSSA. In R v Sabine (NBQB, 1990) the (non-collector) 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 resist the collector's efforts.

(b) Categorizing Mens Rea for CADSSA Offences

Generally, most regulatory offences are offences of 'strict liability', meaning that the prosecution must only show that the offending acts or omissions were 'done', and then the burden shifts onto the defendant to prove that they exercised 'due diligence' to avoid the act or omission happening (ie. that they were neither intentional nor negligent with respect to the act or omission). However, due to the insertion of the term "knowingly" in the offence provision, most CADSSA offences require that the prosecution prove that the defendant intended to commit the act or omission element of the offence ('full mens rea') [CADSSA 28(1)].

These two types of offences are set out in (c) and (d), below.

Case Note:
For example, the case of Ministry of Government Services v Canadian Credit Corporation (OCJ, 2007) was a CAA regulatory prosecution which alleged that the defendant employed three unregistered collectors [CA s.24(2)]. In two of the instances the registrations had been allowed to lapse, and in the third a transfer from another collection agency was not properly done. The primary issue at trial was the interpretation to be placed in the mens rea element of the offence, set out in the legislation [CA 28 ] as "knowingly". The court held that the standard was one of subjective mens rea, which could encompass any element of positive thought or awareness on the part of the accused such as full intention, recklessness (thinking of the risk and then consciously disregarding it) or wilful blindness (intentionally not considering the risk). It expressly ruled out a negligence, or 'should have a known', standard. Finding that no officer or director of the corporation was aware of the lapsed/untransferred registrations, and unwilling to impute the knowledge of an employee of the problems to the corporation itself, the court dismissed the charges (the result is less a comment on CADSSA law as on the muddled area of corporate immunity from legal responsibility generally).

(c) Full Mens Rea Offences

The main CADSSA full mens rea offence provisions provide that [CADSSA 28(1)]:

28(1) A person is guilty of an offence if the person,

(a) knowingly furnishes false infomation in any application under this Act or in any statement or return required to be furnished under this Act or the regulations;

(b) knowingly fails to comply with any order, direction or other requirement made by this Act or the regulations;

(c) knowingly contravenes this Act or the regulations, [except as set out in (d), below] ....

The violations which ground these full means rea offences are located through this Isthatlegal.ca Collection Agencies Guide.

(d) Strict Liability Offences

The strict liability CADSSA offence provisions set out that [CADSSA 28(1)(d)]:

28(1) A person is guilty of an offence if the person,

(d) contravenes section 16.3 or 16.4, subsection 16.5 (1), (2), (3) or (4), 16.6 (1) or (6) or 16.8 (2) or clause 22 (f) or any regulations made under those provisions.

The violations which ground these strict liability offences are:

• Act 16.3 (prohibited and mandatory DSS representations) [see Ch.4A, s.2(c,d)];
  
  
• Act 16.4 (false documents or information re DSS) [see Ch.4A, s.3(c)];
  
  
• Act 16.5(1-4) (DSS agreement requirements) [see Ch.4A, s.3(a-c)];
  
  
• Act 16.6(1)(6) (regulation of payment for DSS) [see Ch.4A, s.4(a)];
  
  
• Act 16.8(2) (refund on cancellation of DD agreement) [see Ch.4A, s.4(a)]; or
  
  
• Act 22(f) (prohibited DSS practices and methods) [see Ch.4A, s.2(a)].

(e) Individual, Corporate, Director/Officer and Attempt Forms of Offence

The following parties may be charged with the CADSSA offences [CADSSA 28(1,2]:

• individuals (almost always registrants or applicants for registration);
  
  
• corporations (almost always registrants or applicants for registration); and
  
  
• "officer or director of a corporation is guilty of an offence".

In 2013 an 'attempt' form of all of these offenses was added [CADSSA 28(2.1)]. It is beyond the scope of this Guide to elaborate on the law of attempt.

(f) Penalties and Restitution Orders

The maximum penalty for any natural person (ie. individual, or director/officer of a corporation) convicted of a CADSSA offence is a fine of $50,000, imprisonment for two years less a day, or both. The maximum penalty for a corporation is $250,000 [CADSSA 28(2.2)].

On convicting a party the court may also order, on application by the prosecutor, that the defendant "pay compensation or make restitution" [CADSSA 28(3)]. 'Compensation' is recompense for damages caused by the violation, while 'restitution' is in the nature of reimbursement for out-of-pocket expenses similarly incurred.

(g) Limitation

No prosecution may be commenced more than two years "after the facts upon which the proceeding is based first came to the knowledge of the Director" [CADSSA 28(4)].

This is a standard which assumes that all prosecutions are conducted by the Director, rather than private parties. This bias assists private prosecutors, who - where the Director has no prior knowledge of the events - may bring prosecutions at anytime.

(h) Evidence

These prosecutions will be conducted under generally accepted rules of evidence applicable to regulatory prosecutions, with the exception only that a Director's certificate confirming any of the following is rebuttable proof of the facts stated therein [CADSSA 29]:

• the registration or non-registration of any person;
  
  
• the filing or non-filing of any document or material required or permitted to be filed with the Registrar;
  
  
• the time when the facts upon which proceedings are based first came to the knowledge of the Director; or
  
  
• any other matter pertaining to such registration, non-registration, filing or non-filing.

11. Administrative Penalties

(a) General

With amendments passed in 2017, an 'administrative penalty' regime established itself in CADSSA. It is much simpler and more straight-forward than regulatory prosecutions under the Provincial Offences Act (which still exist), but it is also weaker in natural justice. But, given the general lack of vigour of regulatory prosecution it is to be preferred.

Central to it's administration is the role of an 'assessor' designated by the Registrar [CADSSA 1(1)]. An assessor may, when "satisfied that a person has contravened or is contravening a prescribed provision of this Act or the regulations may, by order, impose an administrative penalty" [CADSSA 29.0.1(1)].

The stated statutory purpose of an administrative penalty is to promote compliance with the requirements established by this Act and the regulations [CADSSA 29.0.1(2)]. The amount shall reflect the purpose of the penalty and shall be an "amount prescribed by the Minister, which amount shall not exceed $10,000" [CADSSA 29.0.1(3)].

No such order may be made "more than two years after the day the assessor became aware of the person’s contravention on which the order is based" [CADSSA 29.0.1(9)].

When an assessor orders an administrative penalty, they are "not required to hold a hearing or to afford a person an opportunity for a hearing" [CADSSA 29.0.1(10)], and the Statutory Powers Procedures Act (SPPA) does not apply [CADSSA 29.0.1(11)] [if interested, there is an Isthatlegal.ca Guide that covers the SPPA]. However, there are (very) limited appeals provisions, below.

(b) Absolute Liability

'Administrative penalties' are absolute liability 'offenses'. This is a concept draw from regulatory prosecution law where the normal standard is 'strict liability' (where a defendant, once proven that they performed the actus reus of the offense, may avoid conviction if they prove on a negligence standard that they tried to avoid committing the actus reus). But with 'absolute liability' the defendant is liable even if [CADSSA 29.0.1(6)]:

• the person took all reasonable steps to prevent the contravention on which the order is based (which would otherwise be a 'strict liability' defence); or
  
  
• at the time of the contravention, the person had an honest and reasonable belief in a mistaken set of facts that, if true, would have rendered the contravention innocent (otherwise, a 'mistake of facts' defence).

(c) Effect of Administrative Penalty on Other Sanctions

That said, no ordering of an administrative penalty, prevents:

• prosecution of a regulatory offence [see s.10] [CADSSA 29.0.1(7)];
  
  
• "the exercise of any measure against a person provided by this Act or the regulations, including the application of conditions to a registration by the Registrar, the suspension or revocation of a registration or the refusal to renew a registration" [see Ch.3, s.2(d,e)] [CADSSA 29.0.1(8)].

However, if the person pays the order (or varied order) in accordance with it's terms "the person cannot be charged with an offence under this Act in respect of the same contravention on which the order is based and no other measure shall be taken against the person in respect of the same contravention on which the order is based" [CADSSA 29.0.3]. In short, if the defendant pays the administrative penalty fine, they should be done with the matter.

(d) Enforcement

. Administrative Offences

The administrative penalty offences that an assessor may order are listed by topic at this link (go to the chart lower down on the page) [Act 29.0.1(1), Gen Reg 33 and Reg 461/17: "Administrative Penalties", s.1(1),2 - Table 1]:

Table 1: Administrative Penalty Offences
Where an assessor orders a contravention respecting items 1, 7 to 12, 15 to 17, 38, 43 and 44 of Column 1 of the Table, "and if the contravention has been continuing for two or more consecutive days, the order shall be in respect of the entire period and shall treat the continuing contravention as a single contravention" [Reg 461/17 "Administrative Penalties", s.2(4)].

An assessor may impose an administrative penalty for a contravention against either the collection agency or the collector that committed the contravention, but not both [Reg 461/17 "Administrative Penalties", s.1(2)].

. Fines

For offences other than in Column 1, the fine is $200 "for each time that the contravention occurred" [Reg 461/17 "Administrative Penalties", s.2(1)].

For offences in Column 1, the fine is as follows [Reg 461/17 "Administrative Penalties", s.2(2)]:

• first contravention, $200 for an individual and $1,000 for a corporation;
  
  
• second contravention, $400 for an individual and $2,000 for a corporation;
  
  
• third and subsequent contravention, $1000 for an individual and $6,000 for a corporation.

A second, third or subsequent order is only counted if it is issued within two years after the first order was issued [Reg 461/17 "Administrative Penalties", s.2(3)].

Contravention Orders are deemed to have been served:

• on the day it is given by personal service;
  
  
• on the day it is sent by e-mail; or
  
  
• on the third day after it is mailed by registered mail.

Fines must be paid within 30 days after being served [Reg 461/17 "Administrative Penalties", s.4].

If the order (or varied order) fine is not paid, "the order may be filed with the Superior Court of Justice and enforced as if it were an order of the court" [CADSSA 29.0.4(1)], and for this purpose is "a debt due to the Crown" [CADSSA 29.0.4(3)] (see Ch.1, s.3: "Debts Owed to Ontario"). The date of the order for post-judgement interest is the date the order is filed with the court [CADSSA 29.0.4(2)].

(e) Appeals

While they are not governed by the SPPA (Statutory Powers Procedures Act)[CADSSA 29.0.2(8)], the CADSSA does provide for appeals from administrative penalties. They may be commenced within 15 days of receipt of the order by delivering a written notice of appeal in the form and in the manner prescribed to the Director [CADSSA 29.0.2(1,3-4), Reg 461/17 "Administrative Penalties" s.5(1)]]. The Director "may extend the time period for appealing and may determine the circumstances in which extensions are given" [CADSSA 29.0.2(2)].

The filing of an appeal operates to stay the order until the appeal is disposed of [CADSSA 29.0.2(5)].

The Director must give the subject of the order "a reasonable opportunity to make written submissions" before disposing of the appeal [CADSSA 29.0.2(6)], and they "may confirm, revoke or vary the order within the limits, if any, established by the regulations made by the Minister" [CADSSA 29.0.2(7)]. The Director shall not vary the amount of the fine unless the varied amount is still in accordance with the regulations (ie. only if the categorization of the contravention is wrong regarding whether it is first, second, third or subsequent offences) [Reg 461/17 "Administrative Penalties", s.5(2)].