You have debt and you want help, and you hear the ads on the radio or throughout the internet promising to eliminate your debt, but you don’t know who to trust. Are debt counsellors real, or are they a scam? Are they different than seeing a trustee? What does a debt coach do?
There are two categories of debt coaches that are generally reputable:
Not for Profit Credit Counsellors
In Ontario there are two organizations that provide accreditation to not-for-profit credit counsellors: The Ontario Association of Credit Counselling Services and Credit Counselling Canada. Both organizations require their member organizations to have appropriate training, and to follow strict guidelines for dealing with clients and their money.
I have personally worked with many counsellors from these groups over the years, and I can confirm that they provide a valuable service. They can help you with budgeting and money management, and if you are able to repay your debts in full they can prepare a debt management plan.
However, they cannot work out a deal where you pay less than the full amount owing and they cannot deal with certain debts, like tax debts. For this reason, they are not the solution for everyone.
Consumer Proposal Administrators and Bankruptcy Trustees
Obviously I am biased, but I can tell you that to act as a consumer proposal administrator or bankruptcy trustee you must have extensive training (generally a minimum of three years) and you must be licensed by the federal government. All of the trustees at Hoyes, Michalos are federally licensed, and in good standing.
A bankruptcy trustee provides two specific debt relief solutions: personal bankruptcy and consumer proposal services. However, we are required by law to explain all your options. So we can give you advice on debt consolidation and debt management plans to help you compare these options to the services provided by trustees. That's why we encourage people who are uncertain about what to do about their debts to at least give us a call or e-mail us. We are always happy to provide some direction. In fact 4 out of 5 people who call us we help without the need to file bankruptcy OR a consumer proposal.
Now we get into the grey area. There are other less reputable groups that may be a scam, so be careful if you encounter:
Anyone can call themselves a debt consultant; no training is required, and there is no government or other regulation. They often make spectacular claims like “we can reduce your debt by 70%”, but without a government license they can’t actually file a consumer proposal on your behalf. What they do is charge you a fee to send you to an 'officer of the court' in other words, a trustee.
A debt coach is a pretty broad term. The services they offer can range from helping you with building a personal budget, repairing your credit or, like 'debt consultants', offer to give you advice on how to settle your debts. It's this last area where again, you wander into the realm of unlicensed professionals offering debt relief services for a fee that worries me.
How Do You Know If It’s a Scam?
Before you pay money to hire someone to deal with your debts, ask them these questions:
- Are you regulated by the federal government?
- Are you a member of any professional associations?
- Are you a member of the Better Business Bureau?
- Do you charge up-front fees?
- Exactly what services will I be paying for?
- Will you do the service or are you going to refer me to someone else?
By investigating who you plan to use up front, you can protect yourself from scam artists who just take your money, and provide no service. If you are still unsure, give us a call at 1-866-747-0660 and we’ll tell you whether or not the company you are selecting is real, or a scam.