How to Deal With A Collection Agent

Are you tired of collection calls? Unfortunately, ignoring debt collector 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 a collection agency in Canada.

Understanding Collection Agencies

Collection agencies work as intermediaries between creditors and debtors. When a creditor, such as a bank, credit card company, or service provider, has been unsuccessful in collecting a debt directly from you, they may refer your account to a collection agency. These agencies specialize in pursuing overdue accounts, employing various strategies to recover funds on behalf of their clients. Collection agents may be paid by commission, receiving a percentage of the amount they collect, or they may have purchased old debt for pennies on the dollar, hoping to collect more than their investment.

Provincial laws and regulations govern the practices of collection agencies in Canada. For instance, in Ontario, the Collection and Debt Settlement Services Act outlines the rules that agencies must follow when contacting debtors. These regulations set various rules regarding the times when collectors can call, the information they must provide, and prohibited practices like harassment or misrepresentation.

Your Rights When Dealing with Collection Agents

When a collection agent contacts you, it’s crucial to know your rights about what a collection agent can and cannot do.

1. Collection agencies must provide written notice before calling you.
2. They must disclose the name of the collection agency, the original name of the creditor, and the amount of debt owing, including fees and interest.
3. Collectors can only call during specific hours and days of the week.
4. You have the right to request that agencies communicate with you only in writing.
5. Collection agents are prohibited from using harassing, threatening, or intimidating language.
6. You can request verification of the debt from the collection agency.
7. Agencies can’t disclose your debt to third parties, including your employer and family members, if they are not co-signers.
8. Collectors must truthfully disclose if they have the authority to take legal action.
9. You have the right to dispute a debt you believe you don’t owe.
10. Collection agencies can’t contact your employer except to confirm your employment.
11. You can report unfair collection practices to your provincial consumer protection office.

Understanding the Statute of Limitations

The Statute of Limitations sets a time limit for creditors to take legal action to recover a debt. In Ontario, this limit is generally two years from the date of your last payment or acknowledgment of the debt. Key points to remember:

1. After the limitation period expires, creditors can’t sue you for the debt.
2. The clock resets if you make a payment or acknowledge the debt in writing.
3. This doesn’t erase the debt but limits the creditor’s legal collection options.
4. Collection agencies may still attempt to collect after this period.
5. The limitation period varies by province and type of debt.
6. Some debts, like government student loans, may not have a limitation period.
7. Making a payment on an old debt can restart the limitation period.

Understanding the Statute of Limitations can help you make informed decisions when dealing with old debts and collection agencies.

Of course, if you can’t afford to repay your debts on your own, there are legal options to stop collection calls for good.

Top 10 Tips For Dealing With Collection Calls

1. Ask for proof of the debt in writing. Under Ontario debt collection laws, a collection agency is required to notify a debtor, in writing, and they must disclose the amount owed, who the creditor is, and the name of both the collection agency and the individual collection agent. A debt collection agency can still call you before sending a letter or e-mail, but must still offer proof of the debt in writing. 

2. Clearly communicate your dispute with the collection agent.  If you don’t think you owe the money, tell them why you dispute the debt, perhaps because you have proof that you already paid it, and that may end the matter.

3. Send a recorded notification requesting no further phone calls. If you don’t want to talk to the debt collection agency, you can request they no longer call you by sending them an email, fax, or registered mail. 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. Don’t be bullied into making a promise you can’t keep.  Only offer a payment plan that you can realistically afford. If you can’t make the payments, they will call back when you default on debt payments the second time and you will jeopardize any settlement agreement you made.

6. Offer a lump sum settlement for less than the full amount owed. Start negotiations with a lower offer than your maximum. If proposing a payment plan, start with lower monthly payments than you can afford. 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 Statute of Limitations on Debt. 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. 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, repayment 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. There are situations in which you should not pay a collection agency.

10. 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.

When to Consider Professional Help

When dealing with debt becomes overwhelming, it may be time to seek professional assistance. Here are some signs that indicate you might need help, along with an overview of available debt relief options.

Signs you may need debt counselling:

• You’re using credit to pay for necessities
• You’re only making minimum payments on debts
• You’re receiving frequent collection calls
• You’re considering payday loans to cover expenses
• You’re unsure of your total debt amount
• You feel overwhelmed managing your debts

Overview of debt relief options:

Seeking professional help early can provide more options and potentially better outcomes. A Licensed Insolvency Trustee can assess your situation and recommend the most appropriate solution for your financial circumstances.

1. Credit Counselling: Credit counsellors can help with budgeting advice and help you repay debt through a debt management plan.
2. Debt Consolidation: If you have good credit, you may be able to combine multiple debts into one new loan at a lower interest rate.
3. Consumer Proposal: A Licensed Insolvency Trustee can help you file a legally binding offer to creditors to pay a percentage of your debt. A consumer proposal can stop legal collection action like a wage garnishment.
4. Bankruptcy: Personal bankruptcy is a legal process that eliminates most unsecured debts but should only be considered a last resort.

If you’re struggling with debt and need professional guidance, talk with our team at Hoyes Michalos. Our experienced Licensed Insolvency Trustees can provide a free, confidential consultation to assess your situation and discuss your options.

Similar Posts:

1. Why You Should Not Pay a Collection Agency
2. What to Do When Creditors Threaten Legal Action
3. What Can A Collection Agency Do to Me? Top Collection Rules
4. Ontario Statute of Limitations Act and Old Debts
5. How Long Can You Run From Your Debt? And Should You?