How to Deal With Collection Agencies: Know Your Rights

It can feel embarrassing if you’re forced to deal with a collection agency, but it is a common reality faced by many. With interest rates soaring, inflation at a 30-year high and the country coming out of a global pandemic, many Canadians are strapped financially.

If you have started to receive calls from collection agencies due to your outstanding debt, it’s important that you deal with collection agencies the right way.

Know your rights

Collection agencies are legally required to contact you in writing through regular mail.  The written notice must provide the following information: 

  • Name or business of creditor
  • Amount of money owed
  • Name of collection agency assigned to collect the debt

Every Canadian jurisdiction has laws detailing what collection agencies can and cannot legally do. Although the laws vary somewhat across provinces, legally, collection agencies have the right to contact consumers about debts owed. But – consumers have rights too!

You should know that collections agencies cannot:

  • Collect more money than you owe the business or person who hired them
  • Make collect telephone calls to you or charge you for telephone calls
  • Threaten or intimidate you or use abusive language
  • Threaten you with action outside the authority of the collection agency
  • call so often or in such a way that you or your family feels harassed
  • Contact your employer, friends, family or neighbours unless they are trying to obtain your address or if one of the above people have co-signed for a loan
  • Contact you outside of certain hours and on certain days/holidays

There may be additional laws that apply in your province of residence, so it is a good idea to check with your provincial government on what collections agencies are allowed and not allowed to do where you live.

Don’t ignore it
Creditors may legally contact you when you owe them money, but in certain provinces (BC, Ontario, Nova Scotia, Alberta and Quebec), you can request agencies to discontinue calling you at your residence. There are also legal restrictions on contacting you at work.

While you should only speak to collection agencies when it is convenient for you, do not ignore their attempts to contact you. Contact a not-for-profit credit counselling service if you have financial difficulty and need assistance arranging workable payments and interest provisions. These services can contact the creditors and negotiate feasible payment schedules on your behalf. Creditors can be asked to stop or lower interest accruing on the debt, and any future contact is redirected to the counselling service until the debt is paid in full.

Pay off the debt
The best way to get rid of collection agencies is to pay off your debt. First, ensure the debt is yours and the amount owed is correct. If you happen to have a lump sum of money available, perhaps from a tax refund or an inheritance, you may try and negotiate a settlement agreement with the agency at about 60-70% of the original debt cost.

If paying off the entire debt is not possible, explain to the creditor your circumstances and offer a repayment schedule that would pay off the debt. Outline the specific payments you would make and how often until the debt is paid off in full. Make sure you get a receipt with every payment made, such as a cancelled cheque or proof of payment from the collection agency.

When dealing with collection agencies, never send cash or miss an agreed-upon payment. If you need additional help consolidating your bills into an affordable monthly payment, a not-for-profit credit counselling service can help you formulate a budget that works with your finances.

Repair your credit rating
Debts that remain unpaid are indicated as R9 on credit reports for years and significantly impair your ability to get loans. While debt settlements will remove the debt, it can still affect your credit score especially if you had several missed payments. Nonetheless, a low credit score can be improved and is better than filing for bankruptcy. Learn how to improve your credit score.

If you are being contacted by a collection agency and need help or advice, contact us for a free consultation. We can help you clear your debt and feel good about doing it.

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