Simon looking earnest in Preveza, Greece
Simon Shields, Lawyer

Advising Self-Representing
Ontario Litigants
Since 2005

tenant / small claims / welfare (ontario works) / odsp / human rights / employment / consumer /
collection agencies / criminal injuries compensation / sppa (admin law)
/ line fences / animal cruelty / dogs & cats / wild animal law (all Canada) / war / conditions of guide use

home / about / client testimonials / areas of practice / about self-representation

Your
Self-Representation
Service Options

Simon Shields, LLB



























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

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

  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
    . General Conditions of Registration: Collectors
    . Examinations
    . Bonds
    . 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 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:
CAA 4.
No person shall carry on the business of a collection agency or act as a collector unless the person is registered by the Registrar under this Act.
In aid of this registration requirement, the CAA expressly prohibits creditors from knowingly engaging or using unregistered collection agencies to collect their debts [CAA 24(1)]. Similarly collection agencies are prohibited from employing, appointing or authorizing unregistered collectors to act on their behalf [CAA 24(2)].

(b) "Collection Agency" Defined

For these purposes, a "collection agency" is defined as follows [CAA 1(1)]:
"collection agency" means a person other than a collector who obtains or arranges for payment of money owing to another person, or who holds out to the public as providing such a service or any person who sells or offers to sell forms or letters represented to be a collection system or scheme;
(c) "Collector" Defined

Collectors are the persons employed or otherwise engaged by collection agents to do the actual collection work. Formally, a collector is defined as [CA 1(1)]:
"collector" means a person employed, appointed or authorized by a collection agency to collect debts for the agency or to deal with or trace debtors for the agency;
Collectors have a duty to immediately notify their employer collection agency of any monies received in the course of their employment duties [CAA 23].

(d) Regulatory Bodies and Officials

The regime has an administrative Registrar of Collection Agencies ("Registrar") [CAA s.1(1),3]. There is also a Director [see the Ministry of Consumer and Business Services Act] who is overseen by the Minister of Consumer and Business Services [CAA 1(1)].

As well there is an appellate body called the Licence Appeal Tribunal ("LAT") for appeals of refusals, suspensions and revocations of registrations [CAA 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 [CA Reg 13(3)].

Registration of a collection agency is not transferable [CA Reg 13(7)]. However registration of a collector may be transferred, on application made to the Registrar [CA 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 [CA Reg 1(1)]. The required fee to register a collection agency is $290, and for a collector $190 [CAA 29.1(1); CA Reg 11(1,3)]. An additional $290 fee applies to each branch office that the collection agency maintains [CA Reg 11(2)].

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" [CAA 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 [CAA 6(1)].

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

. General Conditions of Registration: Collection Agencies

Standard registration conditions for a collection agency include [CA Reg 12(1)]:
  • that the applicant "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".

    This 'experience' requirement logically only applies to individuals (ie. non-corporate) applicants, but the text of Reg s.12 plainly implies that it applies to corporations as well. Unless this requirement is read to apply narrowly to corporations that have obtained 'experience' in other Canadian jurisdictions, it is hard to see how a corporation applicant could demonstrate such experience.

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

  • where the applicant is an individual, that they are 18 years of age or older;

  • where a corporation, that it be incorporated under Canadian legislation, either federally or in any province [CAA 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 [CA Reg 13(5)];

  • where the applicant is an individual or a partnership, an opening financial statement prepared by a licensed or certificated public accountant [CA 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" [CA 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" [CA Reg 13(11)].

. General Conditions of Registration: Collectors

Standard registration conditions for a collector (all of whom are individuals) include [CA Reg 12(2)]:
  • that they are 18 years of age or older;

  • that they are either a citizen or a permanent resident who is ordinarily resident in Canada;

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

  • an opening financial statement prepared by a licensed or certified public accountant [CA Reg 13(5)];

    The wording of Reg 13(5) indicates that this requirement applies to an individual collector, however it is hard to see on what basis a financial statement can be provided since presumably before the application they were not carrying on business as a collector.

  • that they will be employed by a collection agency [CA Reg 13(8)].

    The definition of "collector" covers persons who are "employed, appointed or authorized" by a collection agency, so it seems logical to read 'employed' in this context more broadly than the strict employer-employee relationship.

    Note that when a collector's employment terminates then they have 60 days to either transfer their registration, failing which - if they intend to continue to act as a collector - they must reapply for a fresh registration [CA Reg 13(9)].
Additionally, the Registrar "may require further information or material to be submitted by any applicant or 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" [CA 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 [CA Reg 15(1,3)].

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

The Registrar shall arrange the conduct of the examination, and a passing mark is 75% [CA 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" [CA 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 [CA Reg 15(8)].

There is a $10 fee for each examination [CA Reg 11(4)].

. Bonds

The following is a brief summary of the bond requirements that are imposed on collection agencies, their terms of forfeiture, and the disposition of bond funds in the event of forfeiture [CAA 31; CA Regs ss.2-10, 13(6)].

Collection agencies are required to maintain bonds, which are essentially a monetary security deposit to ensure compliance with collection agencies law. A bond can be posted by the registrant personally (with collateral security such as assignable government-issued bonds), but it is often arranged with a third party insurance company. The amount of the bond varies with the volume of collections, and for a first-time registrant is $5,000.

A bond may be cancelled by the registrant but if so still persists for two years in order to ensure that any residual claims against the agency may be secured (the standard Ontario limitation period for such claims is two years). On cancellation of the bond, the registration of the collection agency is also cancelled.

Technically, forfeiture of a bond means that it's amount becomes a debt owing to the Crown (ie. the Ontario government). If any of the following occur, the the Registrar may (ie. at their discretion) declare the bond to be forfeit:
  • conviction of the collection agency, or any of it's collectors or officials, of any criminal offence involving theft, fraud or conspiracy to commit the same;

  • conviction of the collection agency, or any of it's collectors or officials, of any CAA offence (see Ch.6. s.9: "CAA Enforcement: Offences");

  • an act of insolvency by the collection agency;

  • civil judgment has been issued against the collection agency or any of it's collectors or officials "based on a finding of fraud"; or

  • other civil judgments issued against the collection agency or any of it's collectors or officials remain unpaid for 90 days.
Then, if the bond is forfeited the Minister of Finance may pay such 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.
If the amount of the bond is inadequate to cover the liabilities of the collection agency then Ontario may commence insolvency proceedings against the collection agency. After all claims against the bond are exhausted then bond funds shall be returned to bond poster, after deduction of the Minister of Finance's expenses.

. 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 [CA 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: "CAA Appeal Procedures"] is resolved, or the appeal is resolved, as the case may be [CAA 8(8)].

Renewal forms must be accompanied by a current financial statement prepared by a licensed or certified public accountant [CA 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" [CA Reg 14].

The Registrar may charge a fee, set by order of the Minister, for such a renewal [CAA 29.1(1)], and renewals must be made on the approved form [CA Reg 1(1)]. The required fee for renewing a collection agency registration is $290, and for a collector it is $190 [CA Reg 11(1,3)].

(d) Refusal of Registration on Application

Registration is not automatic just on making an application. It may be refused if [CAA 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: "CAA Appeal Procedures"].

(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 [CAA 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: "CAA 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 [CAA 8(7)]. Such cancellation must be made on the approved form [CA 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 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)].

Once an appeal is afoot, the 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 [CAA 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 [CAA 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 [Reg 16];

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

  • any commencement or termination of the employment 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 [this is only a requirement of initial registration: see s.2(c) above].
Similarly, collectors have a duty to notify the Registrar in writing within five days of any of the following [CAA 20(2)]:
  • a change in their address for service, and

  • any commencement or termination of their employment.
Such notifications must be made on the approved form [CA Reg 1(3),16] (there is no fee) and are effective when received by the Registrar or, where mailed, on the date of mailing [CAA 20(3)]. The Registrar may charge a fee, set by order of the Minister, for the making of such a notification [CAA 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" [CA Reg 13(12)]. Such records must be maintained for six years from the date of entry [CA 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" [Reg 13(11)].

Specifically, on the demand of the Registrar, a collection agency shall [CAA 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 [CAA 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, within two days of receipt, all collected funds (minus earned fees), and advance payments from creditors for services as yet unrendered and expenses not yet incurred [CA Reg 17(1,4)]. Such funds may only be disbursed or withdrawn "in accordance with the terms and conditions" with which they are charged [CA Reg 17(5)].

Such an account, known as the "Collection Agencies Act Trust Account" must be maintained in either a Province of Ontario Davings Office, an Ontario branch of any bank, a loan and trust corporation, of a credit union [CA Reg 17(2)]. 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 [CA Reg 17(3)].

. Payment of Collection Funds

Monies collected for creditors, minus fees, shall be paid to them by the 20th day of the next month following their collection. However where the amount is less than $15 then the monies must be paid within 90 days of collection [CA Reg 17(6), 18(1)].

These provisions to 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 the creditor client (eg. garnishment) [CA 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" [CA 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) [CA 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 [CA 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 CAA 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" [CAA 25]. While this provision can conceivable 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 ["CAA Appeal Procedures"].

Lawyer License #37308N / Website © Simon Shields 2005-2017