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

Chapter 2 -
Exemptions from the Collection Agencies Act (CAA)

  1. Overview
  2. Fully-Exempt Activities
    (a) Direct Collection by a Creditor
    (b) One Debt Collection Effort on Behalf of Another
    (c) Lawyers
    (d) Insurance Companies, Agents and Brokers
    (e) Insolvency Officials
    (f) Real Estate and Business Brokers
    (g) Banks, Loan and Trust Corporations and Credit Unions
    (h) Telephone Companies and Related Service Providers
    (i) Debt Consolidation is Not Exempt
  3. Partial CAA Exemptions
    (a) Extra Charge and Other Exemptions Respecting Not-for-Profit Credit
    Counselling Services
    (b) Collectors Need Not State Collection Agency Name Where Collecting Recent
    Debts under Non-Contingency Arrangements with Creditors
    (c) Family Support Collectors May Include Extra Charges
    (d) Debts Owed to the Crown May Include Extra Charges
_______________________________________________

1. Overview

This chapter sets out situations when collection-related activities are exempt from the CAA legal regime. Unless such activities are performed by a registered collection agent or collector, or unless they are exempted as set out in this chapter, then they are illegal [CAA s.4(1)].

Keep in mind that these are exemptions from the CAA regime only. Any collection activities which are listed here as exempt, in whole or part, from the CAA regime are still subject to the constraints imposed by tort law [Ch.8], by the Consumer Protection Act (CPA) [Ch.7], and - in extreme cases - by the Criminal Code [see the Sabine case discussed in Ch.4, s.4].


2. Fully-Exempt Activities

(a) Direct Collection by a Creditor

First off, the definition of "collection agency" itself (ie. "a person ... who obtains or arranges for payment of money owing to another person") [CAA 1(1)] necessarily exempts from the CAA legal regime collection activities conducted by a direct creditor.

In other words, you can collect your own debts without falling under CAA regulation. That doesn't mean of course that such 'self-collection' is entirely unregulated, as it will be governed by both the general criminal law and common law tort remedies [see Ch.8], and the Consumer Protection Act (CPA) provisions discussed in Ch.7.

(b) One Debt Collection Effort on Behalf of Another

This exemption applies to "an isolated collection made by a person whose usual business is not collecting debts for other persons" [CAA 2(f)]. I read this as exempting debt collection for someone else if it is with respect to one debt only, but that with respect to that one debt it allows as many otherwise lawful collection efforts as are required.

(c) Lawyers

Lawyers and their employees engaged in debt collection as an aspect of the "regular practice of his or her profession" are exempt from the application of the CAA [CAA 2(a)].

However the professional discipline case of Law Society of Upper Canada v Deanna Lynn Natale [Law Society Hearing Panel 192 (Ontario), 2011] attests to the fact that the exemption of lawyers from the CAA does not mean that they are completely free from constraint in their collection practices. The case involves allegations that the lawyer breached several Rules of Professional Conduct (rules governing lawyers made by the Law Society of Upper Canada) in the aggressive conduct of her collection-based practice.

(d) Insurance Companies, Agents and Brokers

Licensed insurance companies, licensed agents and registered insurance brokers engaged in debt collection of business-related debts, and their employees so engaged, are exempt from the application of the CAA [CAA 2(b)].

(e) Insolvency Officials

The CAA does not apply to "assignee, custodian, liquidator, receiver, trustee or other person licensed or acting under the "Bankruptcy Act" (Canada), the "Corporations Act", the "Business Corporations Act", the "Courts of Justice Act" or the "Winding-up Act" (Canada) or a person acting under the order of any court" [CAA 2(c)]. Such persons are sometimes put into the position of collecting debts when the debts form part of the estate of a debtor whose assets they are managing in insolvency proceedings.

(f) Real Estate and Business Brokers

Any "broker or salesperson registered under the Real Estate and Business Brokers Act, 2002, or an official or other employee of such a broker" is exempt from the CAA with respect to the collection of business-related debts [CAA 2(d)]. This legislation can cover a broad range of business activities, and each individual case where the exemption may apply should be considered to see if the creditor is so-registered.

(g) Banks, Loan and Trust Corporations and Credit Unions

Some banks ["listed in Schedule I or II to the "Bank Act" (Canada)"], foreign banks ["authorized foreign banks under s.2 of the Bank Act], loan or trust corporations "registered under the "Loan and Trust Corporations Act", a credit union incorporated under the "Credit Unions and Caisses Populaires Act" and employees of any of them acting "in the regular course of his or her employment" are exempt from the CAA [CAA 2(e,g); CA Reg 19.2].

The exemption for banks likely stems from the (arguable) legal position that their status as a federally-regulated activity gives them immunity from provincial regulation. Loan and trust corporations, and credit unions however are provincially regulated.

(h) Telephone Companies and Related Service Providers

A telephone system or company is exempt from the CAA when [CA Reg 19]:
  • collecting debts for Tele-Direct Limited or Tele-Direct (Publications) Inc.; and

  • using its own debt collection procedures to collect the accounts of third parties where the debt relates to a service of which telecommunications is an integral part.
The first of these exemptions is plain enough, while the second appears to relate to situations where the telephone enterprise contracts with other related service-providers to enable them to offer heavily telecommunications-related services to the public. In that case the primary telephone enterprise can collect their debts for the related service-provider. In essence, the telephone enterprise is offering collection services to the related service provider as part of a larger telecommunications services contract.

(i) Debt Consolidation is Not Exempt

In R v Gnish (OCJ, 2004) the defendant, who operated what amounted to a debt consolidation service (negotiating on behalf of the debtor for pro rata payment schemes with all creditors based on the debtor's ability to pay), was charged with operating a "collection agency" without being registered. The defendant at no time took possession of monies to be distributed to creditors, as trustee or otherwise. They argued in defence that since their contractual relationship was with the debtor, that the CAA did not apply to them - implicitly (and unsuccessfully) arguing that the legislation only applied to debt collection on behalf of creditors.

While the court found that a plain language reading of the CAA did capture the defendant's activities within the definition of "collection agency", it also noted that the partial exemption of non-for-profit credit counselling agencies [see s.3(a) below] implicitly required that they come under the definition of "collection agencies" in the first place, for otherwise the exemption would be pointless [CA Reg 19.1]. That being the case, the defendant's main argument that the CAA applied only to those collecting debts for creditors was flawed.


3. Partial CAA Exemptions

(a) Extra Charge and Other Exemptions Respecting Not-for-Profit Credit Counselling Services

In an effort to assist non-profit credit counselling services, they (corporations that are either full or associate members of the Ontario Association of Not-For-Profit Credit Counselling Services) are exempt from the CAA's general prohibition against 'engaging in any prohibited practice or employing any prohibited method in the collection of debts' [CAA 22(e)]. They are also specifically exempt from the prohibitions against [Reg 19.1(2)]:
  • collection agencies or collectors adding extra charges to th e collection amount (over and above the debt) [CAA 22(a)] [see Ch.4, s.7(a)];

  • collection agencies or collectors using collection communication methods that result in a communication charge being imposed on the recipient [CAA s.22(b)] [see Ch.4, s.7(d)];

  • collection agencies or collectors from entering into collusion-type contingency arrangement to collect additional non-debt amounts from debtors [CAA 22(c)] [see Ch.4, s.7(c)], and

  • using a name other than their registered name in collection activities [CAA 2(d)] [see Ch.4, s.5].
While corporations providing not-for-profit credit counselling services must still be registered under the CAA, they (and their corporate officers) are exempt from both the examination requirements and from registration fees [CA Reg 19.1(2,3)]. As well, their employees who act as collectors need not be registered [CA Reg 19.1(1)].

(b) Collectors Need Not State Collection Agency Name Where Collecting Recent Debts under Non-Contingency Arrangements with Creditors

This is an exemption that seems designed to allow businesses to use registered collectors (and their employer collection agencies) to collect recent debts without appearing to have sent the matter to an external collection agency. Without this exemption the collector would have to state the name of their collection agency to the debtor, which might jeopardize what the creditor hopes will be an ongoing business relationship.

Where the below-listed circumstances apply, 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 [CAA 2(d)], and despite the prohibition against inviting the public to deal at a place other than that authorized by the registration [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; 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 they shall provide the name and address of the creditor [CA Reg 19.1.1(3)].
Note: Reg 19.1.1 also provides that collection agencies and collectors acting in such circumstances are exempt from "clauses 20 (a) and (g) of this Regulation", however no such clauses exist, nor can I find anything in the Act or Regulation that - but for a typographical error in the legislation - might fit this role.
(c) Family Support Collectors May Include Extra Charges

Anyone acting as an assignee of the Attorney-General for collection purposes under the Family Responsibility and Support Arrears Enforcement Act [FRSAEA s.4] may, if the terms of their assignment so provide, charge the debtor such "fees, costs, disbursements, surcharges and other charges" despite the CAA s.22(a) prohibition against collecting or attempting to collect "for a person for whom it acts any money in addition to the amount owing by the debtor".

(d) Debts Owed to the Crown May Include Extra Charges

A de facto exemption to the prohibition against collecting or attempting to collect "for a person for whom it acts any money in addition to the amount owing by the debtor" [CAA s.22(a)] operates in favour of the Crown and public entities. Under the Financial Administration Act [FAA s.10] debts owed to the Crown or a public entity may, once in default, accumulate such interest and penalties as are specified by policy of the Minister of Finance (which in turn is subject to limitations established by Cabinet).

However where another statute or agreement specifically addresses what interest and/or penalties are due in the case of default, then those terms supercede this general FAA authority. At the discretion of the Minister of Finance, such interest and penalties are subject to reduction or forgiveness, where "financial hardship, economic considerations or other circumstances warrant such authorization".

This exemption is a practical rather than a formal exemption from CAA s.22(a)'s prohibition, as technically these added charges are added to the Crown debt. The exemption still does not allow a collector or collection agency to add such charges for their own benefit.

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