Failing to pay a debt can have serious consequences: you could be taken to court, your assets could be seized, funds could be taken directly from your paycheque, and your credit rating could be adversely impacted. When you owe a debt, a company may use a collection agency, an outside body that will act directly on their behalf to seek payment from you. While collection agencies in Ontario must be registered and are regulated under the Collection Agencies Act, it is important that you know your rights when dealing with one.
Responding to a collection agency
Once you have been contacted by a collection agency, it is important to respond to them promptly. To avoid confusion, do not contact the original creditor.
If you agree to the amount owed and you can pay the debt, do so as soon as possible. If you are unable to pay, offer an alternative payment arrangement that is suitable to both parties. For example, you could suggest paying in monthly instalments until the debt is paid. If such an arrangement is made, write a letter confirming it and include your first payment with the letter. Do not pay in cash, but with a method that will give you a record of the payment, such as by cheque.
If you do not agree with the amount owed, send a registered letter saying that you dispute the debt to both the original creditor and the collection agency. Do not make a payment or offer to pay. The collection agency is then prohibited from continuing to demand payment from you unless it obtains a court order to do so.
A collection agency cannot demand payment of a debt from you without express written authority from the company you owe the debt to, and without first notifying you of the agency’s intention to collect a debt. Such notice must be sent in writing to your last known address, and the collection agency cannot seek collection until six days have passed following the sending of the notice. The notice must contain the names of the creditor and collection agency, the amount owed, and the law that allows the collection agency to demand payment.
As outlined in the Collection Agencies Act, a collection agency cannot:
Collect additional charges to the debt owed
You should keep a record of contacts you receive from a collection agency, including the date, time, and frequency of any calls.
Making a complaint
If a collection agency has performed a prohibited activity, you can send a complaint to the Ministry of Consumer Services, which will investigate and potentially charge the collection agency with committing an offence. Penalties include suspension of the collection agency’s licence, fines, or imprisonment. If the nature of collection agency phone calls is fraudulent or abusive, the collection agency may be criminally liable. As well, you may be able to sue the collection agency for damages.
For more information we encourage you to contact the Ministry of Consumer Services at www.ontario.ca/mcs or toll free at 1-800-889-9768. In addition, you can find more information about consumer protection topics at any time in a series of Community Law School webinars archived online at www.yourlegalrights.on.ca/training-topic/consumer-law. Be empowered, and stay tuned.
This column is brought to you by Community Law School (Sarnia-Lambton) Inc., and Community Legal Services and Pro Bono Students Canada at Western University. It provides legal information only. The information is accurate as of the date of publication. Laws change frequently so we caution readers from relying on this information if some time has passed since publication. If you need specific legal advice please contact a lawyer, your community legal clinic, Justice Net at 1-866-919-3219 or the Law Society Referral Service at 1-800-268-8326.