Debt Collection in Canada: What Debt Collection Agencies Can and Can’t Do – MoneySense

Debt collection agencies are obliged to follow certain rules about how they make contact and what information they can request; However, many Canadians are unsure where the line is drawn between legal collection practices and harassment.

Knowing these rules and what rights you have can turn a stressful situation into something you can handle with confidence. In this article we explain what debt collection agencies are allowed to do, what you should pay attention to and what steps you can take to protect yourself.

Why collection agencies are calling you

Like one collection agency contacts you, this usually means that your account has passed the stage where the original lender can recover the money itself. In Canada, creditors such as banks, credit card companies and utilities typically start their own internal collections department when payments are missed. These internal teams are still considered collection agencies and must follow the same legal standards regarding communication and conduct.

Ideally, this is the phase in which you enter into discussions with the creditor Fixing the problem early can prevent it from being transmitted or sold to an external collection agency. Typically, bills are sent to third-party collections after approximately 90 to 180 days of non-payment. Once a debt ends up with an external collection agency, that agency becomes your main point of contact. This explains why calls can be made even if the original creditor has no longer been contacted.

Understanding how this process works can help make the situation less overwhelming. “Knowing who is contacting you, why they are contacting you and what your rights are makes it easier to respond calmly and avoid being pressured into making decisions that are not in your best interests,” says Craig Stewart, certified credit counselor with Credit Canada.

What collection agencies can do in Canada

The collection rules differ per province; However, all collectors are required to follow Canadian consumer protection laws. Here it is what they are allowed to do:

• Contact you by phone, email or post: Collectors can contact you using standard communication methods, as long as they adhere to provincial limits on how often they can contact you.
• Call only during permitted hours: Collectors can only call during certain hours, typically Monday through Saturday from 7:00 AM to 9:00 PM and Sunday from 1:00 PM to 5:00 PM (except holidays). The rules differ per province.
• Asking you to repay a legitimate debt: They may explain the amount you owe and discuss possible reimbursement options, as long as the information is accurate and communication remains professional. They cannot deceive or pressure you into paying.
• Contact your employer for limited reasons: Collectors can call your current employer to confirm your employment status, job title or work address, but they cannot discuss your debts with your employer.

What debt collectors can’t do (this is harassment)

Even though debt collectors may contact you, Canada has strict limits on how they can behave. If a collector violates the following rules, it is considered harassment and, in many cases, a violation of provincial law. “Understanding these rules will help you know your rights and help you navigate the situation without feeling intimidated,” says Stewart.

These are what collectors are not allowed to do:

• Threaten, intimidate or use abusive language: Collectors must speak respectfully and must not shout, insult or make illegal threats.
• Contact your friends or family about the debt: They are not allowed to discuss your debts with anyone except you, your spouse, or a co-signer.
• Call excessively or outside permitted hours: Repeated calls intended to annoy or pressure you are not allowed, and debt collectors must follow provincial calling times.
• Misrepresent who they are: A collector may not pose as a lawyer, government official or law enforcement officer. They must clearly identify themselves and the agency they work for.
• To add unauthorized charges: Collectors cannot charge interest, penalties or collection fees unless the original contract or provincial law allows this.
• Press you to borrow money: They cannot encourage you to take out new high-interest loans to pay off old debts.

If a collector engages in any of these behaviors, it is considered harassment and you have the right to file a complaint or seek help from a nonprofit credit counselor.

How to take back control when dealing with debt collectors

Dealing with debt collectors can be stressful, but there are steps you can take to stop the calls and regain control.

Step 1: Confirm that the debt is legitimate

Always ask the collector to provide details in writingincluding the original creditor, the amount owed and how it was calculated. Check your credit report to verify the debt and do not make any payments until you are sure the debt is valid. “Always get the debt in writing before paying anything. Sometimes people are contacted about old debts that have already been paid, or even errors on their credit report,” says Stewart.

Step 2: Keep track of all interactions

Write down the dates and times of the calls, the names of the callers, the agency they work for and what was discussed. Maintaining one detailed report can help you if you want to dispute the debt or file a complaint.

Step 3: Contact us early to explore refund options

If the debt is still with the original lender’s internal collection department, often involved early gives you more flexibility. You may be able to:

• Set up a payment plan that fits your budget
• Negotiate a lump sum settlement

Different creditors have different guidelines for what they will accept on an account for collection, but you may be surprised at how willing some creditors and collection agencies are to settle for a lower amount. Your options will ultimately depend on the creditor, the age of the debt, and whether it has been assigned or sold to a collection agency.

When negotiating, explain your current financial situation and offer a payment that fits your budget. The shorter the term and the higher the payment, the more likely they are to accept your offer. Remember to always put a final agreement in writing