This post was initially published in 2014.
If you have an account with a business and it becomes past due or in default, your creditor may elect to turn it to a collection agency to try to recoup some of the outstanding monies.
Collection agencies have a bad reputation for borderline, if not, illegal behavior and practices. These agencies are paid on commissions, usually 20 to 30 % of the amount owing.
In Canada, they are regulated at the provincial level. Rules may be different depending on where you live.
In British Columbia, all collection agencies must be licensed and abide by the Business Practices and Consumer Protection Act.
Know your rights
In BC, a collection agency can:
- Call you from Monday to Saturday between 7.00 am and 9.00 pm.
- Call you on Sundays from 1.00 pm to 5.00 pm.
- Contact you by mail or e-mail
- Contact your employer, friends or relatives to obtain your address, phone number or confirm your employment, but only if they haven’t been able to contact you by mail, e-mail or phone
- Discuss your debt with your employer, friends or relatives, but only with your permission
- Report your debt to Equifax and TransUnion, under certain circumstances. It may impact your credit score, but not necessarily
- Take legal action against you, provided that they either own the debt OR have permission from the creditor AND notify you in writing
In BC, a collection agency cannot:
- Contact you outside of the above-mentioned hours
- Call you on a statutory holiday
- Harass you, e.g.. calling you every hour or exercise undue pressure
- Harass your employer, friends or relatives about your debt
- Ask for more money than you owe, i.e. charge interests and fees
- Keep contacting you if the debt is properly disputed or if you file for consumer proposal or bankruptcy
- Keep contacting you if you are not the debtor
- Keep phoning you if you have requested communication in writing or through your lawyer
- Threaten you, intimidate you or swear at you
- Threaten to take you to Courts, if they are actually not doing it
Statutes of limitation
Back in 2013, the BC Limitation Act was amended. A creditor now only has 2 years to collect a debt or to file a lawsuit.
The 2 year-period starts either:
- on the day the debt was incurred, or
- on the day a partial payment was made, or
- when liability was admitted in a provable way
Let’s say for example you bought a dishwasher on credit with an appliance store on June 2nd 2018. The merchant offered you to pay for it 3 months later, i.e. on September 2nd 2018.
Comes September 2nd, and you don’t pay anything. The merchant has until June 2nd, 2020 to recover the monies from you.
Now let’s say you make a partial payment on Sept 2nd. The merchant has until Sept 2nd, 2020 to recover the monies from you. Make sense?
A collection agency has no legal power
Ultimately, a collection agency cannot force you to pay or “make” you pay. Just like creditors, they don’t have the legal authority to do so.
In order to compel you, they need:
- A court order from a judge
- To enforce said court order
Both cost money and time. Depending on the amount of the debt, a creditor or collection agency probably won’t bother suing you.
It’s very common for collection agencies to say that they will garnish your wages, freeze your bank account, seize your car or your house etc…
This has no basis in reality! In order to do the above, court orders are required! See above point.
If you feel like you are not treated fairly or are threatened by a collection agency, you can file a complaint with Consumer Protection BC and/or the Better Business Bureau.
Please note the Business Practices and Consumer Protection Act does not exempt you from paying your debt.
If you’ve fallen on hard times, it’s always best to negotiate with your creditor, before your debt is sent to a collection agency. If you don’t agree with a debt, dispute it.