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Collection Agencies (Ontario) Legal Guide
(01 July 2019)

Chapter 3 -
Registration and Regulation of Collection Agencies under the CADSSA

  1. Overview
    (a) General
    (b) "Collection Agency" Defined
    (c) "Collector" Defined
    (d) Regulatory Bodies and Officials
  2. Application, Registration, Refusal and Revocation
    (a) Overview
    (b) Application
    (c) Registration and Renewal of Registration
    . General Entitlement to Registration
    . General Conditions of Registration: Collection Agencies
    . Examinations
    . Renewal
    (d) Refusal of Registration on Application
    (e) Refusal to Renew, Suspension or Revocation of Existing Registration
    (f) Cancellation by Registrant
    (g) Service of Notices and Orders
  3. Ongoing Duties of Registrants
    (a) Updating of Registration Information
    (b) Record-Keeping Duties
    (c) Compliance with Registrar Demands
    (d) Trust Funds, Payment of Collected Funds and Accounting
    . Trust Fund/s
    . Payment of Collection Funds
    . Accounting
  4. Regulation of False Advertising
______________________________________________

1. Overview

(a) General

The collection agency regime governs relations between debtors (on the one hand), and collection agency or collectors (on the other hand), if either "is located in Ontario when the dealing takes place" [CADSSA 2(0.1)].

The registration regime governing collection agencies is straightforward. While it is styled as a 'registration' regime, it amounts to a license, which - if not obtained - renders the unregistered collection activities illegal:
CADSSA 4.
No person shall carry on the business of a collection agency unless the person is registered by the Registrar under this Act.
In aid of this registration requirement, the CADSSA expressly prohibits creditors from knowingly engaging or using unregistered collection agencies (other for than debt settlement services) [CADSSA 24(1)].
Note:
In 2017 CADSSA abolished the registration of 'collectors' and located fuller responsibility on collection agencies for their activities as employees and agents.
(b) "Collection Agency" Defined

For these purposes, a "collection agency" is defined as follows [CADSSA 1(1)]:
“collection agency” means,

(a) a person, other than a collector, who obtains or arranges for payment of money owing to another person or who holds oneself out to the public as providing such a service,

(b) any person who sells or offers to sell forms or letters represented to be a collection system or scheme, or

(c) a person, other than a collector, who provides debt settlement services;

(d) a person who purchases debts that are in arrears and collects them;
(c) "Collector" Defined

Formally, a collector is defined as [CADSSA 1(1)]:
"collector" means an individual employed, appointed or authorized by a collection agency to collect debts for the agency, to deal with or trace debtors for the agency or to provide debt settlement services to debtors on behalf of the agency;
Collectors are the persons employed or otherwise engaged by collection agencies to do the actual 'debt'-work. Collection agencies "shall exercise due diligence to ensure that the individual complies with this Act and the regulations when acting as a collector" [CADSSA 4(3)].

Collectors have a duty to immediately notify their employer collection agency of any monies received in the course of their employment duties [CADSSA 23].

(d) Regulatory Bodies and Officials

The regime has an administrative Registrar of Collection Agencies ("Registrar") [CADSSA s.1(1), 3(1-2)]. The Registrar may establish written policies regarding the interpretation, administration and enforcement of this Act which - if it does - it shall maintain as a public record [CADSSA 3(3,4)].

There is also a Director who is overseen by the (as of June 2019) Minister of Government and Consumer Services ("or whatever other member of the Executive Council to whom administration for this Act is assigned under the Executive Council Act") [CADSSA 1(1)].

As well there is an appellate body called the Licence Appeal Tribunal ("LAT") for appeals of refusals, suspensions and revocations of registrations [CADSSA 1(1)], and of some Registrar orders [as discussed in Ch.5].


2. Application, Registration, Refusal and Revocation

(a) Overview

Collection agencies and collectors must be registered under the Collection Agencies Act. As well, branch offices of a collection agency may not operate unless they are authorized by the primary collection agency's registration [G Reg 13(3)].

Registration of a collection agency is not transferable [G Reg 13(7)]. However registration of a collector may be transferred on termination of employment, failing which after 60 days the collector shall make application made to the Registrar for registration [G Reg 13(9)]. Applications for registration may be refused and existing registrations may be revoked for cause.

(b) Application

Applications must be made on the approved forms [G Reg 1(1), and the Minister-required fee Minister must be paid [CADSSA Reg 1(5)].

Even if an initial application for registration is refused, a new one may be brought "upon new or other evidence" or "where it is clear that material circumstances have changed" [CADSSA 9]. While a 'change in material circumstances' is a typical ground in administrative law allowing the making of a new application, the vague "new or other evidence" criteria seems to allow parties a 'second-chance' on the presentation of any fresh evidence, regardless of whether it could have been presented originally. This is a generous standard that may be an artifact of the common law's lenient attitude towards commercial licenses.

(c) Registration and Renewal of Registration

. General Entitlement to Registration

Subject to the express grounds of refusing an application for registration [set out in (d) below], an applicant is entitled to be registered as a collection agency or collector [CADSSA 6(1)].

A registration may be subject to terms and conditions imposed by either the CADSSA General Regulation, the LAT [under CADSSA 8(5)] or as consented to by the applicant [CADSSA 6(2)].

. General Conditions of Registration: Collection Agencies

Standard registration conditions for a collection agency include [G Reg 12(1)]:
  • where the individual "has had at least two years of actual experience in all phases of the collection agency business, or has related experience that, in the opinion of the Registrar, is equivalent to that actual experience", or where a corporation that an individual who satisfies this requirement is involved in the management of the collection agency [G Reg 12(2)];

  • that they provide an Ontario address for service [G Reg 13(2)];

    The address of a collector is the address of the collection agency that employs, appoints or authorizes them [CADSSA 26(1.1)].

  • it is a requirement that a collection agency "shall operate from a permanent place of business in Ontario that is not a dwelling and that shall be open during normal business hours" [G Reg 13(10)];

  • that the individual is 18 years of age or older;

  • where a corporation, that it be incorporated under Canadian legislation, either federally or in any province [CADSSA 11].

  • where the applicant is a corporation, that they file a current financial statement prepared by a licensed or certified public accountant, or - where recently incorporated - an opening financial statement certified by a licensed or certified public accountant [G Reg 13(5)];

  • where the applicant is an individual or a partnership, an opening financial statement prepared by a licensed or certificated public accountant [G Reg 13(5)];

  • that the applicant file "copies of all forms and form letters that it proposes to use in dealing with debtors, as well as copies of forms of agreement that it proposes to use in its dealings with persons for whom it acts or proposes to act" [G Reg 13(4)].
Additionally, the Registrar "may require further information or material to be submitted by any applicant ... within a specific time limit and may require verification by affidavit or otherwise of any information or material then or previously submitted" [G Reg 13(11)].

. Examinations

All applicants, and the "active officer(s) and director(s)" of an applicant corporation must pass a written examination on collection law before registration will be granted.

Additionally, where a corporation is already registered, any new active officers and directors must (unless they are already registered as an individual) also pass the examination if the registration of the corporation is to be maintained [G Reg 15(1,3)].

Such examinations are not necessary if the individual, officer or director was registered under the Act within the last year [G Reg 15(2)].

The Registrar shall arrange the conduct of the examination, and a passing mark is 75% [G Reg 15(4-6)]. Where a mark of less than 75% is obtained, the Registrar may review the examination paper and alter the mark "as he or she considers proper" [G Reg 15(7)]. The examination may be retaken once after a failure but where there are two failures then further examinations may only be taken in four month intervals thereafter [G Reg 15(8)]. The Minister may require a fee to be paid for the examination [G Reg 1(5)].

. Renewal

Unless an application for renewal is filed before the expiration date set out in the certificate of registration, the registration expires on that expiry date [G Reg 13(1)].

However where a registrant has applied for a renewal, the registration continues until it is either granted or - if the Registrar delivers a Notice of Proposal to refuse the renewal - the time for appealing [see Ch.5: "CADSSA Appeal Procedures"] is resolved, or the appeal is resolved, as the case may be [CADSSA 8(8)].

Renewal forms must be accompanied by a current financial statement prepared by a licensed or certified public accountant [G Reg 13(6)]. Such a financial statement must include a statement from the licensed or certified public accountant that "the registrant has complied with the provisions of this Regulation respecting trust accounts" [G Reg 14].

The Registrar may charge a fee, set by order of the Minister, for such a renewal [CADSSA 29.1(1)], and renewals must be made on the approved form [G Reg 1(1)]. The Minister may require a fee to be paid for the registration [G Reg 1(5)].

(d) Refusal of Registration on Application

Registration is not automatic just on making an application. It may be refused if [CADSSA 6, 7(1)]:
  • the applicant's financial position renders it unreasonable to expect that they would be financially responsible in their debt collection activities;

  • the past conduct of the applicant (or if a corporation, it's officers and directors) "affords reasonable grounds for belief that the applicant will not carry on business in accordance with law and with integrity and honesty";

  • if a corporation, the applicant is carrying on activities that are, or will be, if the applicant is registered, in contravention of this Act or the regulations (eg. also acting as a loan company).
In the event of such a refusal, the applicant will receive formal notice and has a right to an appeal hearing [see Ch.5: "CADSSA Appeal Procedures"].
Case Note:
In one of the very few License Appeal Tribunal cases, the Registrar refused registration in 8017 v. Registrar, Collection Agencies Act 2013 CanLII 51149 (ON LAT). The applicant deliberately misled on the application that he was not subject of any active criminal charges, but the application was revoked not because of the substance of the charges, but because he lacked integrity with his false answer.
(e) Refusal to Renew, Suspension or Revocation of Existing Registration

In the case of an already-registered collection agency, the Registrar may refuse to renew, suspend or revoke their registration for any of the same reasons that they can refuse an application [as per (d) above], and additionally if the registrant is in breach of a term or condition of their registration [CADSSA 7(2)].

In the event of such a refusal, suspension or revocation the registrant will receive formal notice and has a right to an appeal hearing [see Ch.5: "CADSSA Appeal Procedures"].

(f) Cancellation by Registrant

In addition, a registrant may - in writing - request the Registrar to cancel it's registration, which the Registrar may do [CADSSA 8(7)]. Such cancellation must be made on the approved form [G Reg 1(4)]. In the case of cancellation there is no 'Notice of Proposal' duty on the Registrar, nor any appeal right.

(g) Service of Notices and Orders

Any Notice or Order required under the CADSSA 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)].

Once an appeal is afoot, the Licence Appeal Tribunal ("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)].


3. Ongoing Duties of Registrants

(a) Updating of Registration Information

Registered collection agencies and collectors have a duty to keep their registration information current.

Collection agencies have a duty to notify the Registrar in writing within five days of any of the following [CADSSA 1(2),20(1)]:
  • a change in their address for service,

  • in the case of a corporation, any change in officers, directors or controlling interest [G Reg 16];

  • in the case of a partnership, any change in partners, and

  • any commencement or termination of the employment, appointment or authorization of a collector.

    Note that there is no requirement for a collection agency, either on renewal or
    otherwise, to notify the Registrar of any changes in the forms and letters that they use unless requested to do so [this is only a requirement of initial registration: see s.2(c) above].
Such notifications must be made on the approved form [G Reg 1(3),16] and are effective when received by the Registrar or, where mailed, on the date of mailing [CADSSA 20(3)]. The Registrar may charge a fee, set by order of the Minister, for the making of such a notification [CADSSA 29.1(2)] (though I have been unable to verify is such a fee has been ordered).

(b) Record-Keeping Duties

Both collection agencies and their branch offices shall "keep on its premises proper records and books of accounts showing money received and money paid out and such books shall include a receipts journal, disbursements journal, general journal, clients' ledger, general ledger and such additional records as the Registrar considers necessary in accordance with accepted principles of double entry bookkeeping" [G Reg 13(12)].

"Every collection agency or branch thereof shall maintain and store the records of its activities conducted under the Act separate from the records it maintains with respect to any other activities" [G Reg 13(12.1)]. Such records must be maintained for six years from the date of entry [G Reg 13(13)].

(c) Compliance with Registrar Demands

Additionally, in either the case of a collection agency or a collector, the Registrar "may require further information or material to be submitted by ... any registered person within a specific time limit and may require verification by affidavit or otherwise of any information or material then or previously submitted" [G Reg 13(11)].

Specifically, on the demand of the Registrar, a collection agency shall [CADSSA 21(1,3,4)]:
  • provide the Registrar with "copies of 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";

    This material is relevant to the Registrar's authority to determine if such materials are "harsh, false, misleading or deceptive", and if so to "alter, amend, restrict or prohibit" it's use [CADSSA 21(2)].

  • "file a financial statement showing the matters specified by the Registrar and signed by the proprietor or officer of the collection agency and certified by a person licensed under the Public Accounting Act, 2004."

    This information is held in confidence by the Registrar.
(d) Trust Funds, Payment of Collected Funds and Accounting

. Trust Fund/s

Collection agencies must maintain a trust fund in which they deposit all collected funds (minus earned fees), and advance payments from creditors for services as yet unrendered and expenses not yet incurred [G Reg 17(1)]. This provision does not apply to funds received where they are owed to collection agency itself as creditor [G Reg 17(1.1)]. Such funds may only be disbursed or withdrawn "in accordance with the terms and conditions" with which they are charged [G Reg 17(5)].

For trust funds from debtors located in Ontario, the collection agency shall deposit them into the trust fund within two days. However, the trust funds must only be deposited (or transferred from another trust account) to an Ontario account unless the creditor gives "clear instructions" and the non-Ontario trust account "has the equivalent restrictions on the use of trust funds as would apply to a trust account in Ontario" [CADSSA eg 17(4-4.2)]. No collection agency shall maintain a non-Ontario trust account unless the Registrar, having been notified of the creditor's "clear instuctions", so consents in writing [G Reg 17(4.3)].

Funds paid from a trust account must be directed directly to the recipient (ie. the creditor) [G Reg 17(4.4)].

Such an account, known as the "Collection and Debt Settlement Services Act Trust Account" must be maintained as a separate trust account in either an Ontario branch of any bank, a loan and trust corporation, or of a credit union [G Reg 17(2)]. The collection agency or branch shall request that the financial institution shall use that name "in any written reference the bank, corporation or credit union makes to the trust account" [G Reg 17(2.1)]. The trust account must be separate from any other accounts, and unless the Registrar grants specific written permission, there shall be only one such trust account [G Reg 17(3)].

. Payment of Collection Funds

Monies collected for creditors, minus fees with respect to the debt the money is collected on, shall be paid to them by the 20th day of the next month following their collection (unless the funds are owed to the collection agency). However where the amount is less than $15 then the monies must be paid within 90 days of collection [G Reg 17(6), 18(1-1.1)].

These provisions do not eliminate any common law right to lien or set-off that the collection agency otherwise has against the creditor client, nor that any other third party creditor has against the creditor client (eg. garnishment) [G Reg 17(7)].

However where collected monies held in trust are not, for whatever reason, paid out within six months of their collection, then they shall be paid to the "Minister of Finance who may pay the money to the person entitled thereto upon satisfactory proof being furnished by the person that the person is entitled to receive the money" [G Reg 18(2)].

. Accounting

In trust law, an "accounting" means a detailed explanation to the beneficiary of the funds (ie. the creditor client) of how the trustee has handled them. Such an accounting must accompany each payment of funds made under the payment rules, with respect to those funds (see above) [G Reg 18(1)].

Additionally, a collection agency has a duty to provide an accounting for all trust funds received to either the Registrar, the creditor client, or any person the creditor client has so authorized within 30 days of a request being made for it [G Reg 17(8)].


4. Regulation of False Advertising

In addition to the debtor protections against false advertising discussed in Ch.4, s.6 ["Prohibited Practices under the CAA: Misrepresentation"], the CADSSA also allows the Registrar, where reasonable and probable grounds exist, to order immediate cessation of the use of "any advertisement, circular, pamphlet or similar material" that makes "false, misleading or deceptive statements" [CADSSA 25]. While this provision can conceivably have application to communications made to debtors, it appears to be designed primarily to protect creditor clients of collection agencies against false business advertising.

Such orders are appealable using the procedures set out in Ch.5 ["CADSSA Appeal Procedures"].

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