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Collection Agencies (Ontario) Legal Guide
(01 July 2013)

Chapter 6 -
CAA 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. Misrepresentation-Related Orders
  7. Restitution from Bond Funds
  8. Service of Notices and Orders
  9. Offences
    (a) Overview
    (b) Mens Rea for CAA Offences
    (c) Individual, Corporate and Director/Officer Forms of Offence
    (d) Penalties and Restitution Orders
    (e) Limitation
    (f) Evidence
______________________________________________


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 CAA", 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 CAA").

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


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" [CAA 12(1)].

Such a Registrar's demand must indicate "the nature of the inquiry involved" [CAA 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 [CAA 15(1)]. During investigations, investigators can be identified by requesting that they show their certificate of appointment, and they must do so on request [CAA 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 CAA 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 CAA 16-16.2):
"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 [CAA 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 (ie. consent to it's broader use), only be used for the following purposes [CAA 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 [CAA 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 CAA 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 [CAA 19(1)]. The trust fund requirement on collec tion 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 [CAA 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 [CAA 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 [CAA 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 [CAA 19(5)].


5. Compliance Orders

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

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


6. Misrepresentation-Related Orders

There are also provisions in the CAA 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 [CAA 21(2)];

  • order the immediate cessation of the use of "false, misleading or deceptive statements in any advertisement, circular, pamphlet or similar material" [CAA 25].
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".


7. Restitution from Bond Funds

The requirement that registrants post bonds, and how they are handled in the event of forfeiture (of the bond), is discussed in more detail in Ch.3, s.3(d).

However, where a bond is forfeited the Minister of Finance may pay the bond funds (or funds generated from sale of collateral security), to [Reg 9(1,2)]:
  • judgment creditors where the claim is collection-related;

  • non-judgment claims made to the Registrar and where the claim is collection-related if they are less than $100 in amount;

  • proven bankruptcy claims if the claim is collection-related, and

  • the Account of the Ontario Court in trust for the above potential claimants.

8. Service of Notices and Orders

Any Notice of 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 [CAA 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" [CAA 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 [CAA 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.


9. Offences

(a) Overview

The Collection Agencies Act (CAA) 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" [CAA 22(e)]. Readers will find details of these violations in Ch.4 "Prohibited Practices under the CAA". The Ministry of Consumer and Business Services may respond to violations of these, or other CAA 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.

The main CAA offence provision sets out that [CAA 28(1)]:
28(1) Every person who, knowingly,

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

(b) fails to comply with any order, direction or other requirement made under this Act; or

(c) contravenes this Act or the regulations,

... is guilty of an offence ...
Prosecution responses to aggressive debt collection activities are not be limited to the CAA. 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 alread y repudiated the debt or otherwise expressed an intention to resist the collector's efforts.

(b) Mens Rea for CAA Offences

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, all CAA offences require that the prosecution prove tha t the defendant intended to commit the act or omission element of the offence [CAA 28(1)].

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 CAA law as on the muddled area of corporate immunity from legal responsibility generally).

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

The following parties may be charged with the CAA offences:
  • individuals (almost always registrants or applicants for registration);

  • corporations (almost always registrants or applicants for registration); and

  • "director or officer of a corporation who knowingly concurs in such furnishing, failure or contravention".
(d) Penalties and Restitution Orders

The maximum penalty for any natural person (ie. individual, or director/officer of a corporation) convicted of a CAA 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 [CAA 28(1,2)].

On convicting a party the court may also order, on application by the prosecutor, that the defendant "to pay compensation or make restitution" [CAA 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.

(e) 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" [CAA 28(4)].

This is an 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.

(f) 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 [CAA 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.

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