- The Collection Agency Legal Regime in Ontario
- Debtor Advocacy
- Debts Owed to Ontario
1. The Collection Agency Legal Regime in Ontario
The business of collecting other people's debts in Ontario is regulated under the Collection and Debt Settlement Services Act (CADSSA) and it's Regulations. While some persons (eg. creditors collecting a debt directly without the use of an agency) and collection activities are exempt in whole or part from the CADSSA [Ch.2 "Exemptions from the Collection and Debt Settlement Act (CADSSA)"], all debt collection activities are governed by the common law of tort [Ch.8 "Tort Remedies"] and most (if the debt emanates from consumer purchases) are also governed by the unfair practice provisions of the Consumer Protection Act (CPA) [Ch.7 "The Consumer Protection Act and Collection Practices"].
Under the CADSSA, collection agencies are subject to a registration and administrative regulation regime involving several administrative entities: the Registrar of Collection Agencies, the Director of Collection Agencies and then ultimately the Minister of Consumer and Business Services [Ch.3 "Registration and Regulation of Collection Agencies under the CADSSA"]. There are also trust fund and competency examination requirements placed on collection agencies.
An appeal body (the Licence Appeals Tribunal) hears appeal of Registrar orders refusing applications for registration, refusing renewal of registration, revoking registrations and other related orders [Ch.5 "CADSSA Appeal Procedures"].
The CADSSA sets out a range of debtor protections [Ch.4 "Prohibited Practices under the CADSSA"], including provisions governing the identification of a collection agency when engaged in collection activities, extensive regulation of the communications that a collection agency may have with both debtors and third parties, and prohibitions on misrepresentation and the making of extra charges against debtors. As with other forms of consumer protective legislation, "(a)ny waiver or release of any right, benefit or protection provided by this Act or the regulations is void" [CADSSA 22.1].
There is also an administrative enforcement regime which provides the Registrar with the authority to issue compliance, fund-freezing and other orders against collection agencies and collectors, and the Director with the authority to Order administrative penalties (fines) [Ch.6 "CADSSA Enforcement"].
Since my last updating of this guide in 2013, there have been several extensive changes to the Act, including:
- the elimination of the registration of 'collectors';
- placing 'debt settlement services' (debt consolidation) under the collection agencies regime [see the new Ch.4A];
- placing 'debt purchasing' under the collection agencies regime;
- adding an 'administrative penalty' system to the Act;
- adding extensive regulation of lawyers, paralegals and their employees who engaged in debt collection to the Act;
- introduction of a call recording system for collection agencies used more than 10 collectors;
- abolition of the previous bond system that collection agencies had to comply with; and
- a wide Act-exemption for corporate debt collecting.
2. Debtor Advocacy
My standard advice for years to clients who, for reasons of poverty or otherwise, wish to resist debt claims and contacts from a collection agency has been to simply hang up the phone - without explanation or excuse - once they determine that they are dealing with a collection agency. That said, most people find such a simple tactic difficult to execute, likely due to the innate civility that they otherwise use when dealing with others in society at large. They feel an almost irrestible urge to explain themselves, believing that an appeal to reason or fairness will win relief or at least respite from collection efforts.
In this belief, otherwise sound in many respects in life generally, they will find themselves disappointed when dealing with collection agencies. A determined and competent collector will be satisfied by nothing short of full payment of the debt that appears on their computer screen, and they have neither the inclination nor the authority to 'go behind' that figure. Nor do they have the authority to consider the legitimacy of the debt itself, or to investigate or negotiate the equities of the situation. Any attempts by a debtor to explain that the debt is invalid, or that one's financial situation does not allow payment will go unheeded, and the conversation (which you can assume will be electronically recorded) will only be turned to these following topics in an effort to gain useful collection information:
Thankfully, at least in the case of non-judgment debts, the CADSSA provides a simple tactic for alleged debtors to use to avoid non-court collection efforts: the statutory 'cease and desist letter' [see Ch.4, s.3]. This (registered) letter basically challenges the collection agency and creditor to take the matter to court, and thereby prohibits any further non-court collection efforts until a judgment is obtained.
- acknowledgement of the debt (useful to combat limitation period claims);
- full details of the debtor's income and asset situation, including employment location and wages earned (useful for garnishment);
- bank accounts locations and numbers (garnishment);
- details of any other assets held (garnishment); and
- verification of current address and phone (legal service and formal collection
Persons taking advantage of the cease-and-desist letter right should then be prepared to do some homework to dispute the alleged debt in court, though most consumer debts are small enough (under $25,000) that they come under the Small Claims Court jurisdiction. Procedures for conducting such cases are explained in detail in the Isthatlegal.ca Small Claims Court (Ontario) Legal Guide.
3. Debts Owed to Ontario
Unlike privately-held debt (which can be negotiated as well), debts owed to the Crown in Right of Ontario are by law subject to discretionary settlement and reduction. This does not mean that such debts must be settled or reduced, but it does mean that the Crown must consider exercising their discretion if such a request is made by the debtor.
That said, no such discretion will be exercised unless the debtor fully discloses all requested and relevant income and asset information (with verification) to the Crown employee that they are dealing with. Legal authority for this discretion is set out in the Financial Administration Act [FAA 5(1)], and it allows for final settlement (ie. partial payment in full satisfaction) of the debt. If a settlement is executed then the debt is full extinguished.
It also allows for a determination that the debt is uncollectable, and even a 'compassionate' excusing or reduction of the debt [ie. a "determin(ation) that financial hardship, economic considerations or other circumstances do not warrant the collection or enforcement of any such obligation, debt or claim"]. However, in these latter two cases (ie. non-settlement resolutions), the government is not precluded from deducting unpaid amounts by way of set-off from future monies that they may end up owing you (such as income tax refunds) [FAA 5(3.1), 43]. In that sense such resolutions are not 'final'.