Top 10 Tips For Dealing With A Collection Agent

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Posted in Debt Help
Posted by J. Douglas Hoyes, CA, CPA, LIT, CIRP, CBV

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Are you tired of collection calls? Unfortunately, ignoring the calls or waiting for the collection agents to forget about your debt won't work. If you have an outstanding debt that has been sent to collections, it's important to be proactive when dealing with the situation. At the same time, there are some do's and don't when dealing with collection calls.

We asked two industry insiders, Blair Demarco-Wettlaufer who on a previous show told us how to stop collection calls, and Mark Silverthorn who revealed several "dirty tricks", to help us create a list of things you should know when dealing with collection agents. Here is our top 10.

Top 10 Tips For Dealing With Collection Calls

  1. Ask for proof of the debt in writing. Under Ontario law, a collection agency is required to notify a debtor, in writing, at least six days before they start phoning you, and they must disclose the amount owed, who the creditor is, and the name of both the collection agency and the individual collection agent.
  2. If you dispute the debt, communicate your dispute with the collection agent.  Tell them why you dispute the debt, perhaps because you have proof that you already paid it, and that may end the matter.
  3. If you don’t want to talk to the collection agency, you can send them a registered letter requesting no further phone calls and they are no longer allowed to call you. Keep in mind that a letter does not stop further collection action, such as a lawsuit, but it does stop the phone calls.
  4. Don’t be intimidated when a collection agent says they will sue you.  It is highly unlikely that a collection agent will actually sue you. It almost never makes financial sense for them to spend money on lawyers to pursue you. However, the original creditor, like a bank or credit card company, is more likely to sue you if the debt is large enough and if they know you are working they may request and are likely to be granted a wage garnishment against you.
  5. If you do owe the debt and you want to pay, don’t be bullied into making a promise you can’t keep.  Only offer a payment plan that you can realistically afford.
  6. You can offer a lump sum settlement for less than the full amount owed. However, before sending them any money, get a conditional letter of settlement from the collection agency that says how much you will pay, when you will pay it, and that once you make the final payment you are fully absolved from any demand on the remaining balance.
  7. Remember the Limitations Act.  In Ontario a standard creditor, like a bank or credit card company, has two years to commence legal action.  After two years, it’s too late. Don’t let a collection agency intimidate you by threatening to sue you for a debt that is more than two years in arrears.
  8. Remember the credit bureau purge policy.  In most cases a debt will automatically be purged and not appear on your credit report after six years of inactivity. So, there is generally no point in making a payment to a collection agency on a debt that is about to be, or has been, purged from your credit report.
  9. As we discuss in the Let’s Get Started segment, only pay a collection agency when it is in your best interest to do so.  If the debt is small, like an old cellphone bill, and that’s the only negative item on your credit report, paying to clean it up may be in your best interests.  However, paying old debts, or just paying one debt when you have many other debts may not solve your other debt problems.
  10. Finally, our most important tip for dealing with collection agencies: If collection agents are calling you because you have too much debt, you need to make a plan to deal with all of your debt, not just the one debt the collection agent is calling you about.  That’s when a consumer proposal or personal bankruptcy may be the best option to stop the calls and deal with your debts once and for all.  It’s a great feeling not having to worry about collection agency phone calls.

Read the full transcript below.

Resources Mentioned on Today's Show:

FULL TRANSCRIPT show #70 with Mark Silverthorn and Blair Demarco-Wettlaufer

collection-agent-tips-transcript

Doug Hoyes: For our first show of 2016 we’re going to bring back two of my guests from 2015 to help us answer one of the most common questions I get asked, and that’s, “how do I stop the collection agents from calling?"

So on today’s show we’ve got the top ten tips for dealing with collection agents.

I’ve got lots of great tips from two industry insiders, so I’m going to play you clips from my conversations with them, and then I’ll be back in the last segment to give you a quick summary of the top ten tips for dealing with collection agents.

And of course everything we discuss today, including all of the tips and a full transcript of today’s show is available on our website at hoyes.com, that’s h-o-y-e-s.com.

So let’s get started with some facts from Blair Demarco-Wettlaufer, who manages a collection agency. Back on show #20 he told me something that many people don’t know, and that’s that there is something a collection agent must do before they attempt to collect a debt.

Here’s what he said:

Blair Demarco-Wettlaufer: In Ontario, which is probably most of the people listening to this show, what’s required by the Collections Agency Act of Ontario is a file comes in, it gets put into our database, our contact management system and a collection letter goes out. That’s actually required by law. We have to send a letter and wait six days before we start calling.

Doug Hoyes: So, in every single case, you have to notify the debtor in writing?

Blair Demarco-Wettlaufer: Yes, in Ontario.

Doug Hoyes: In Ontario.

Blair Demarco-Wettlaufer: Ontario and B.C. Now, obviously if we get a file that is two or three years past due, we might get no address at all or an address where mail’s been returned or an address that isn’t forwarded anymore. But we still are required by laws, written in 1975, to mail out a letter and wait the six days.

Doug Hoyes: Okay. So, as a practical point here then, if I’m listening to this show and I’ve got debt and I get a call from a collection agency, I should have already got a letter or I can at least ask, well send me something in writing, then.

Blair Demarco-Wettlaufer: Actually that’s in the Act. If a consumer gets a surprise call from an agency, and obviously Canada Post isn’t without its quirks, and they say, I didn’t get a letter; they have the right under The Collection’s Agency Act to have that letter re-sent. They can ask for it by mail, if the consumer and the agency are willing to co-operate, they could e-mail it to them or fax it to them.

But the important thing is the consumer has a right to know how much is claimed is owed, who the creditor is, what the lawful name of the collection agency is and the name of the agent reaching out to them. Those are key points that have to be made.

Doug Hoyes: Okay, so you get the file and the debt could be, like you say, anywhere from 30 days and up in age, the first thing you do is send out a letter?

Blair Demarco-Wettlaufer: Right.

Doug Hoyes: And you said you have to wait six days?

Blair Demarco-Wettlaufer: Six days in Ontario.

Doug Hoyes: So there you go.  Tip #1 for dealing with a collection agent, by law, in Ontario, they are required to send you a letter (obviously in writing), stating who they are collecting for, how much is owed, the name of the collection agency, and the name of the collection agent who is contacting them.  And after sending the letter they have to wait six days to make sure you’ve received it, and only then are they allowed to call you.

If you don’t think you owe the debt, or if you think the collection agent has an incorrect amount, you have every right to ask for something in writing with all of the details.  If the collection agent can’t produce that letter, they can’t call you.  That’s the law.

So what if you truly don’t owe the money?  What if you get a phone call for a debt that isn’t yours?    That was my next question to Blair:  If I don’t owe the money, what should I do?

Blair Demarco-Wettlaufer: Well, first of all you should definitely pick up the phone and talk to the agent and let them know. The problem is a lot of agents aren’t educated in the laws or they’re not sophisticated enough to listen because they’ve been trained to demand the money and throw the excuses to the side. Regardless, you should communicate clearly and effectively that you dispute the debt, why you dispute the debt and what you want to do; if you can do that verbally, great. You know it could be an issue of identity theft, my I.D was stolen a year ago, I have a police incident report number, here you go, give that. Or, I’ve disputed this debt, I have a copy of the letter I sent to Bob the dentist three months ago, I’ll send you a copy, fine.

Ultimately though, if you send a letter, a registered letter to the agency, disputing the debt and requesting no further calls, they’re done.

Doug Hoyes: So, I can actually stop you from calling me by sending you a registered letter.

Blair Demarco-Wettlaufer: Yes. You can’t stop the consequences but you can stop the calls.

Doug Hoyes: So, and the consequences in that case obviously in that case would be if I actually do owe them money then I guess you’re going to place it on my credit report. You could return it back to the original creditor who could decide to take me to court and sue me.

Blair Demarco-Wettlaufer: A lot of agencies actually have their own internal paralegals and lawyers where they will initiate the legal action. You know especially when you’re dealing with debts upwards of $3,000 and more. That’s when small claims court becomes viable for the cost. You know, no one is going to sue anyone over a $53 library fine. It’s just not going to happen. But if you owe on your Visa $6,000 and you’re gainfully employed, yes the threat of legal action could be real.

Doug Hoyes: And so, collection agencies will actually commence lawsuits. It’s not your common collection tactic obviously. It doesn’t happen in most cases I would assume.

Blair Demarco-Wettlaufer: Well, it depends on the creditor and the agency. There are some law firms acting as collection agencies and they sue 30, 40 percent of the accounts that come into their office.

Our office, we’ll choose a handful of files that we’ll take legal action on every year. If the debt’s over the two year mark, it falls outside the statute of limitations in Ontario. If the person isn’t gainfully employed, we don’t want to take legal action because it’s the creditor throwing good money after bad. If the debt is too small, if it’s under $3,000, we generally don’t encourage it. And if the client doesn’t have ironclad documentation, a signed contract, invoices, then we can’t put a case together.

So, there are a lot of things that have to happen, realistically, for legal action rather than an emotional agent on the phone saying I’m going to sue you if you don’t pay this.

Doug Hoyes: Right, so what you’re saying if I’m a debtor, the threat of a lawsuit, it might be a real threat but you just gave us a list of a whole bunch of times where it’s not going to happen. And so you got to kind of understand your rights.

I think this is some great insider information.

Over the years I have had thousands of people come to my office because they're afraid that a collection agent will take them to court.  As Blair Demarco-Wettlaufer just said, at his collection agency there are only a handful of files he gets every year where they will recommend that the original creditor take legal action.

If the debt is small, which at Blair’s firm may be around $3,000 or less, it’s not worth the time and legal fees to go to court.  He also talked about the Statute of Limitations, and we’ll get back to that, because that’s a key point, but I want to get back to this point about getting sued by a collection agent.

Back on show #35 my guest was Mark Silverthorn, a former collection agency lawyer who wrote a book called, The Wolf at the Door: What to do When Collection Agents Come Calling, and I asked him about dirty tricks used by collection agents, and that’s where we talked about collection agents threatening to sue debtors.  Here’s what he said:

Mark Silverthorn: Well, the number one dirty trick would be threatening to sue a consumer in circumstances where the bill collector does not have expressed permission from the creditor to do so. In Ontario, it is illegal for a collector employed by a collection agency to threaten to sue you if the creditor has not authorized the collection agency to sue you. And typically, creditors don’t authorize collection agencies to sue files. If they want to file suit they would give it to a lawyer or a law firm; it would never even get sent to a collection agency in the first place.

Doug Hoyes: So, it's highly unlikely that a collection agent will sue me.

Mark Silverthorn: That's correct. In my book The Wolf at the Door, I estimate that collection agencies collectively across Canada, fewer than one in 10,000 accounts placed with them for collection.

Doug Hoyes: One in 10,000 times you're going to get sued, the rest of the time it's an idle threat in effect is what you're saying.

Mark Silverthorn: Right. Now if a creditor does want to sue you, then they'll send it to a lawyer or a law firm or they'll do it internally. So, I don’t want your listeners to think that the odds of you being sued are one in 10,000. It's when if you get a call from a collection agency or you get a collection notice from a collection agency, your account is going to be with that agency for a period of time and while it's there the odds are relatively remote that you're going to be sued.

Doug Hoyes:  So there you have it, from two independent sources, a collection agent, and a former collection agency lawyer, both confirming that it is possible for a collection agency to sue you, but it's unlikely.  A collection agency has to have permission from the creditor to sue you, and it has to make financial sense, and often it doesn’t.

But, as both Blair and Mark are saying, that doesn’t mean you will never get sued.  It simply means that it’s unlikely that it will be the collection agency that will sue you.

In my experience, collection agencies very rarely sue anyone. But it is quite common for the actual creditor, like the bank or credit card company, to sue you for an unpaid debt, particularly if the debt is more than a few thousand dollars, and if they know that you have a job and therefore it is likely they will actually be able to collect if they sue you.

Blair talked about how to deal with a collection agent if you don’t actually owe the debt.  Of course in most cases if they are calling you, it’s because you owe the debt, so then what do you do?

One approach is to confirm with the collection agent that they actually have all of the necessary information.

Blair already told us that if the collection agent doesn’t have ironclad documentation, such as a signed contract or invoices, they can’t put a case together, so they won’t sue you.  Blair also said they must send you a letter before they start calling.  So that’s what I asked Mark Silverthorn: how should I deal with a collection agent if I do owe the money?  Here’s his answer:

Mark Silverthorn: Well, if I recall correctly in most provinces, a collection agency is required to send you a written notice five or six days before they start calling you. So, that it's very possible that you've received a written notice from a collection agency before they've made a call. Now certainly, if a person wants to speak to someone at a collection agency, they can. And what they may want to do is ask the collector certain questions and at any time the consumer should feel comfortable terminating the call. But I just made a list of some of the questions that you might want to ask a collector.

Doug Hoyes: Fire away.

Mark Silverthorn: Well, what is your name? What is the correct spelling of your last name? What is the correct spelling of your first name? What is the name of your employer? What is your phone number? Is there an email address where I can contact you or your supervisor? What is your fax number? What is the name of the creditor on whose behalf you are calling? What is the account number you are calling about? What is the outstanding balance on the account? What is the date of last payment? Are you able to provide me with any documentation proving that I owe this account? And would your client consider accepting a lump sum payment equal to 25% of the current outstanding balance?

Doug Hoyes: So, I guess what you're saying is, yeah you can push back. You don’t have to just let them yell at you and scream at you and tell you to put your TV on the front porch, which is not even legal anymore anyways. You can ask questions, you can push back. And that's the starting point as a consumer. Get the full information, get them to put it in writing for you is what you're saying.

Mark Silverthorn: Right, and I mean if you ask the collector for the spelling of their name, the collectors may, if it's an unprofessional collector, the collector may be intimated by that because the collector - I mean the reason why you're asking those questions is because if you want to make a complaint against the collector you need to know the collector's name.

Doug Hoyes: That’s some interesting advice.  Mark is saying that you don’t have to allow the collection agent to bully you.  You are well within your rights to ask questions, and if the collection agent doesn’t have all of the facts, or is doing something unethical, you may be able to scare them off.

But again, the more common situation is that you owe the money, so let’s go back to Blair Demarco-Wettlaufer for his suggestions on what to do when you get a call from a collection agent.

Blair Demarco-Wettlaufer: Well, there are a couple of things that you can do. Obviously if you want to pay it or you feel you should pay it or you want to avoid the consequences for nonpayment, you should reach back out to the collection agent when you get the letter or you get the answering machine message. And you should be honest.

Most agents are motivated to collect the payment in full because they work on a contingency - the company, the collection agency works on a contingency or commission basis. They only get paid if they collect. And some agents are working in boiler room call centres where they’re driven.

But you as the consumer, what you should do is make a realistic payment arrangement. You shouldn’t promise something that you can’t do. You should not promise – if you’re reaching for that $100 a month payment, don’t offer it, offer 70, offer 50. Offer something realistic. From the agent’s standpoint, the agents often hear every day, I want to pay that bill, but I can’t. My dog got sick or I’ve just lost my job.

There are a couple of things you can do to negotiate that will get you traction with the agent. The first is if you want to show the agent that you’re serious about taking care of this, you can do what’s called a good faith payment in our industry.

Let’s say you owe $1,000 and you just lost a job and you’re starting a new job in two weeks and you want the agency to leave you alone. You can say to the agent, Bob, I want to take care of this. I can’t right now. I have no income currently. I’m going to pay you $50 right now to show my intent and I will talk to you in three weeks. If you actually follow through with that $50 payment, it’s not a lot but it shows the agent you’re actually serious. Actions speak louder than words.

The other option you can do is if you want to make arrangements on a balance, you can offer a series of payment arrangements; either through post-dated cheques or pre-authorized payments. Be careful with this, though. Make sure that you get your arrangements by email or you’re sending cheques that are clearly identified as post-dated and that they’re made out to the right party, to the collection’s agency trust account.

The last thing that you can do is, let’s say you dispute a portion of the debt or a portion of the debt is interest that has accumulated over time or you were unsatisfied with the services. You can offer what’s called a settlement, a lump sum settlement where if you owe $1,000 you’re offering to pay $700. Protecting yourself as a consumer in this case is very important. Before you pay one dime you should get what’s called a conditional letter of settlement from the collection agency that says on condition of Frank paying $700 by December 5th, he is released from any claim and obligation relative to this debt. And that way if Frank makes the payment, he is absolved from any demand on the remaining balance. In most provinces, if you make a partial payment on the debt, that acknowledges liability for the full balance.

So, if you don’t get that letter first, you know if the agent says oh just pay $700 and we’ll make this go away, that doesn’t protect the consumer and the file could be reassigned to another agency a year down the road and interest could accumulate. Always get a settlement letter before you make a settlement amount.

So, there are a number of ways that you can negotiate with an agency, but the important thing is to be honest and to only promise what you actually can do.

Doug Hoyes: That’s good advice.  If you know you owe the money and can afford to make some payments, offer to do what you can do.  If you can raise some cash to settle the debt for less than the full amount owing, great, make an offer, but always get the settlement in writing.

Earlier Blair mentioned the Limitations Act, or what they call on television the Statute of Limitations.

Blair Demarco-Wettlaufer: For legal action it’s two years in Ontario.

Doug Hoyes: Two years in Ontario. So, that means if I’ve disappeared off the face of the earth for two years, legal action hasn’t commenced, well probably it’s – it can’t now. That would be my defence in court.

Blair Demarco-Wettlaufer: Right, the ship has sailed.

Doug Hoyes: The ship has sailed. So, let’s say I’m a year and a half into this and I’m talking to the collection agent and I do what you said number one there make a good faith payment of $50. Well, I just started the two year clock again.

Blair Demarco-Wettlaufer: Bingo, the clock resets, absolutely.

Doug Hoyes: So, if I’m going to make a deal, I go back to what you said, then. You better make sure you can honour it because if I pay that 50 bucks, I’ve now given the collection agent two more years to pursue me, in effect.

Blair Demarco-Wettlaufer: Exactly. And for credit reporting, reporting to the credit bureau, it has a six year window in Ontario, that clock resets too with the payment.

Doug Hoyes: Yeah that’s pretty dangerous if you aren’t going to be able to continue on with it.

Blair Demarco-Wettlaufer: So, the important thing is to know how much you owe, what are the consequences? Have the consequences been avoided? I mean a lot of cases, collection agencies aren’t sophisticated. They’ll list the file on the credit bureau and then call the consumer. To my mind that’s incredibly dumb. It’s far better to call the consumer and say I haven’t put this on the bureau yet. My client’s asked me to, what would you like to do? And consumers react far better to knowing it hasn’t been listed with the bureau yet.

Doug Hoyes: So, how do you get paid, then?

Blair Demarco-Wettlaufer: Collection agencies – nine out of ten times in Canada, collection agencies work on a contingency basis or a commission basis. They get to keep a portion of what is collected. And this is important for consumers to know because there’s this misconception from T.V and U.S news that collection agencies buy the debt. That’s very common in the U.S and it’s starting to become common in Canada, but the debt would have to be two, three, four years old for someone to buy it.

In most cases, the creditor retains ownership and hires the collection agency to act on their behalf. And they could receive anywhere between 10 percent to 50 percent of the amount they are collecting, depending on the age, balance and type of creditor.

Doug Hoyes: So, if I’m a collection agent and I know that I’m going to collect somewhere between 10 and 50 percent is my commission, my contingency fee; I much would rather get a lump sum, which was your third option there that you mentioned. So, if it’s a $5,000 debt, I'd much rather as the collection agent get 2,000 bucks right now and write off the rest, take the money then I would get $50 a month for the next five years.

Blair Demarco-Wettlaufer: A lot of old school agencies work like that. In fact, they’ll send out as that initial collection letter, a letter offering a settlement right off the get go. It’s like Oliver Twist begging on a street corner. Please sir, can you only pay $700 of the $1,000?

I personally believe a lot of consumers end up in collections, they’re not bad people. Nine out of 10 consumers ending up in collections are procrastinators; they don’t understand their financial rights. They weren’t aware of the debt. They’ve had bad circumstances happen or they’ve reacted emotionally to a debt and they’ve made a bad decision.

Most consumers don’t have a spare $6,000 in their back pocket. That’s why they end up in collections. I, personally, would rather see a consumer make regular payments for the balance in full where it doesn’t strain the consumer rather than pin them up against the wall and ask them for a settlement.

Doug Hoyes: That’s a lot of great, practical advice on how to deal with a collection agent.  We’ve got a lot more to come, but we’re going to take a quick break and then we'll be right back.  You’re listening to Debt Free in 30.

Doug Hoyes: It’s time for the Let’s Get Started segment here on Debt Free in 30.

My name is Doug Hoyes, and I’m joined by Blair Demarco-Wettlaufer who’s a collection agent, and today we are talking about the top tips for dealing with collection agents.

I’ve written articles where I’ve said you should never pay a collection agent.  As we discussed in the first segment it’s unlikely they will sue you, and if collection activity stays on your credit report for six years, which is typically how it works here in Ontario, whether I go bankrupt or pay a collection agent or do some other means of settling the debt, my credit rating’s pretty much pooched anyways. That’s why I’ve said you should never pay a collection agent.

Now, obviously you disagree. You believe there are cases where yes I should pay a collection agent.

Blair Demarco-Wettlaufer: There are cases where you shouldn’t. I absolutely agree.

Doug Hoyes: Okay, so let’s talk about the “shouldn’t” then first. When should you not pay a collection agent? It doesn’t make sense.

Blair Demarco-Wettlaufer: You should not pay a collection agency if you dispute the debt and you don’t feel the debt is legitimate. By paying it, you’re giving that debt legitimacy. If the debt is passed the ultimate Statute of Limitations, six years, unless it’s some weird case like a student loan or a provisional offences act, the Statute of Limitations is over. It won’t be on with your credit bureau, it won’t be open for legal action. You shouldn’t pay it in that case.

Doug Hoyes: What about the two year?

Blair Demarco-Wettlaufer: That’s for legal action.

Doug Hoyes: For legal action, okay.

Blair Demarco-Wettlaufer: Now there are a bunch of exceptions for this. So, it’s hard for me to give a general rule. If you borrow money from a credit union, credit unions in Ontario have this special thing called the wage assignment. And you sign a piece of paper and it says if I don’t pay this you can just take 20 percent from my pay. Only credit unions have this power and they can go just show your signed letter to your employer and you lose 20 percent of your pay and it’s good for ten years. Those are unique exceptions. Or student loans, they don’t have the same statute.

Doug Hoyes: Government taxes obviously another one.

Blair Demarco-Wettlaufer: Exactly. But I mean if someone is calling you for your Rogers bill from 12 years ago, no, times up. You should not pay that.

Now, if it’s on your credit rating already, paying it will improve your credit rating slightly. Obviously, Equifax and Trans Union, the credit bureaus in Canada, they have a super-secret score formula that changes constantly and they’re not going to share it with you or me or the consumer.

But let’s say you have a Fido cell phone. It shows up as a trade line item and it’s an R1 because you’ve been making your payments. And then you get a little behind and now it’s an R2. And then you stop paying it completely it becomes an R9. People have heard that term, you have an R9 rating.

And then the file gets sent to a collection agency.  At that point it’s still worth while paying because the collection agency hasn’t recorded it as a registered item. Registered items are bankruptcies, judgments and collection items. If I, as a collection agency, list that on the credit bureau, it’ll show up as Kingston Data and Credit/Fido for an original balance of $283 and a balance with interest of $302. That is a negative rating to that person’s credit for six years from the date of delinquency. If they pay that it will be reduced to a zero balance or if they settle it, it will be reduced to a zero balance with the words settlement next to it. And that will improve their credit score. To what degree, only the IT wizards at Equifax and Trans Union know. But it will improve their rating.

I can tell you we get a call in our office every other day, every three days from somebody calling us going, I can’t get a car, I can’t get a house. There are legitimate reasons to pay the debt. And if you can avoid it going to your credit bureau as a registered item by a collection agency, yes you should pay it, but only if the collection agency has the right to put it on your bureau. Someone calling you on a 12 year old debt can’t put it on your bureau.

Doug Hoyes: So, if the debt has already gone and it’s now showing up in the registered item sections, can I make a deal with you to clean that up or is it too late at that point?

Blair Demarco-Wettlaufer: It’s generally too late. There are a couple of things. The credit bureau isn’t a snap shot, it’s a regular reporting cycle. So, the credit cards you’re reporting every month we’re reporting every month. We don’t have the right to just wipe it away. That being said it’ll happen. We’ll get a file in our office that should have never been on the bureau. So, we do have the power to reach into our rating and make it vanish. But we can’t use that as a negotiation tool.

Some smaller collection agencies use that and if Trans Union or Equifax ever found out, they’d pull their ability to list on the bureau, they’re not – we’re not supposed to gamify or play jiggery, pokery with people’s credit ratings. That’s not supposed to happen.

Doug Hoyes: Really what this all comes down to as well, getting back to the question should I pay a collection agency or not, what’s the total amount of the debt? If we’re talking about a $500 cell phone bill, well okay I guess I could go bankrupt and get rid of that, if that’s my only debt that seems kind of silly.

Blair Demarco-Wettlaufer: Exactly.

Doug Hoyes: So, something that’s reasonable…

Blair Demarco-Wettlaufer: It should be in your big game plan. If you can get out of debt in less than seven years and you’re not treading water on horrible interest rates, absolutely you should pay your debt. If you can’t get out of debt or you’re paying $300, $400 a month and you’re just satisfying minimum payments or interest rates, yeah you should look at a consumer proposal or a bankruptcy. I’d be the first to say that because you’re just throwing good money after bad and you’re not improving your personal situation.

The big picture matters. And if you can negotiate with the agency for a settlement, some agencies have to go back to the creditor; some agencies have blanket authority to accept your settlement on the phone right then and there.

The bigger creditors will tell the agency you can settle that debt for 70 percent or you can wave the interest. So, you can absolutely pay that and in a lot of cases, it’s worthwhile to pay it before it gets to the bureau or to pay it to correct your credit rating if you plan on getting a car or a house, two, three, four years down the road.

But if you can’t get out from under in seven years or you have to pay one creditor to borrow money to pay another creditor, no you shouldn’t – things have gone horribly pear shaped, you should look at bankruptcy.

Doug Hoyes: Thanks Blair.  We’ll be right back on Debt Free in 30.

Doug Hoyes: Welcome back.

It’s time for a summary of our top ten tips for dealing with collection agents:

First, ask for proof of the debt in writing. Under Ontario law a collection agency is required to notify a debtor, in writing, at least six days before they start phoning you.

Second, if you dispute the debt, talk to the collection agent, and provide proof if you don’t owe the money.

Third, you can send them a registered letter requesting no further phone calls and they are no longer allowed to call you.  That doesn't stop further collection action, such as a lawsuit, but it does stop phone calls.

Fourth, don’t be intimidated when a collection agent says they'll sue you, because they almost never sue anyone.  However, the original creditor, like a bank or credit card company, is more likely to sue you if the debt is large enough and if they know you are working and they are likely to get a wage garnishment against you.

Tip  number five: Don’t be bullied into making a promise you can’t keep.  Only offer a payment plan that you can realistically afford.

Number six:  Before sending money on a lump sum settlement, get a conditional letter of settlement from the collection agency so they can’t change the deal later.

Tip number seven: Remember the Limitations Act.  In Ontario a standard creditor, like a bank or credit card company, has two years to commence legal action.  After two years, it’s too late, so don’t let a collection agency intimidate you by threatening to sue you for a debt that is more than two years in arrears.

Tip  number eight: Remember the credit bureau purge policy.  In most cases a debt will automatically be purged and not appear on your credit report after six years of inactivity. So there is generally no point in making a payment on a debt that is about to be, or has been purged from your credit report.

Tip number nine: Only pay a collection agency when it is in your best interest to do so.  Paying one debt when you have lots of other debts doesn’t solve your debt problems.

Finally, our most important tip for dealing with collection agencies: If collection agents are calling you because you have too much debt, you need to make a plan to deal with all of your debt, not just the one debt the collection agent is calling you about.  That’s when a consumer proposal or personal bankruptcy may be the best option to deal with your debts once and for all, and give you a fresh start.  It’s a great feeling not having to worry about collection agency phone calls.

That’s our show for today.  Full show notes are available on our website, including links to everything we discussed today and our top ten tips. So, please go to our website at hoyes.com, that’s h-o-y-e-s-dot-com, for more information.

Thanks for listening. Until next week, I’m Doug Hoyes, that was Debt Free in 30.