Calls from debt collectors are an unfortunate fact of life for many who live with excessive debt. Knowing how to deal with debt collection agencies, however, can make the ordeal a bit less stressful and even help you negotiate down your debt.
What is the best way to deal with debt collectors? Before dealing with collection agencies, it’s important to learn how they work and what they can and cannot do in Canada.
How Does Debt Collection Work in Canada?
Debt collection agencies are companies that work to recover unpaid debts from debtors. When someone doesn’t make their debt payments to an original creditor, that creditor might hire (or sell the debt to) a collection agency. From there, the agency has its debt collectors reach out to the debtor to demand repayment of the money owed.
Some creditors might have internal debt collection departments rather than outsourcing collection to a third party. In either case, it’s important to know what the collection agency (or department) is and isn’t allowed to do.
What Collection Agencies Can Do
So, what can collection agencies actually do in Canada? The rules vary from province to province, but a collection agent can generally:
- Call you between 7 (or 8) am to 9 (or 10) pm Monday through Saturday. Also, they can only call one time in a day. On Sundays, collection agents are limited to 1 pm to 5 pm.
- Continue trying to collect on outstanding debt indefinitely. As long as you have unpaid debt, a collection agency can continue trying to collect on it.
- Take you to court over outstanding debt. While rare, a debt collection agency can take you to court in order to collect unpaid debt. Here, they often seek actions such as wage garnishments. However, this is typically reserved for large debts because filing court cases can cost the collection agency thousands of dollars.
- Reach out to acquaintances to collect your contact information. If your phone number changes, a collection agent may contact your friends, family, employer(s), or others to get your current contact information.
Inform credit bureaus of your outstanding debt. This can impact your credit score and hurt your ability to get financial services in the future.
What Debt Collectors Cannot Do
Now that you know about a few of the things that collectors can do, it’s important to know what they can’t do. Knowing what they aren’t allowed to do is a key part of understanding how to deal with debt collection agencies and avoiding the most egregious behaviours of collection agents.
Here’s a short list of some of the things debt collection agencies aren’t allowed to do:
- Call You Too Frequently. While a debt collector is allowed to call you within certain hours of the day, they are limited in the number of times they can call (both per day and per week). While the specific rules vary from province to province, daily calls could be considered harassment and should be reported to your local consumer protection office—the Government of Canada website maintains a list of links to different protection offices.
- Simply Take Money from Your Bank Account. In order to garnish your wages, a debt collection agency must take you to court first and win. They cannot simply take money out of your account or garnish your wages without a court order (with the exceptions of federal debt recovery or money owed to a credit union).
- Use Threatening Language. Creditors and collection agents are expressly prohibited from using profane or intimidating language in communications. Threats of violence are especially prohibited. If a debt collector uses threatening language or makes a specific threat of harm to you, a loved one, or your property, contact the Financial Consumer Agency of Canada right away.
- Share Information about Your Debt with Others. While a collection agent can call your friends, family, employer(s), and others to get your contact information or confirm your employment, they absolutely cannot tell those people about your outstanding debt.
- Pursue You Over a Debt Owed by Another Person. Sometimes, a debt collector may try to contact you over a debt that someone else owes. This could be because of a simple mistake (such as having a wrong phone number on file, a debtor with a similar name, or even identity theft). Or, a collector might try to collect a debt a loved one of yours owed from you—which they aren’t allowed to do unless you co-signed on that debt. Wondering how to deal with collection agencies trying to collect debts that aren’t yours? If this happens, it’s important to inform them that the debt isn’t yours and ask them to desist. If they persist, report them to your local consumer protection office.
- Add Interest to Existing Debt. A collection agency cannot add interest to a debt they’re trying to collect on. However, this doesn’t mean that your debt cannot grow. For example, if your debt with the original creditor increases, then the collection agency may try to collect on the new balance.
How Debt Collectors Get Your Information
There are a few ways that debt collectors can gather your information to contact you. First, the original creditor you owed the debt to may provide them with the contact information they had for you.
Alternatively, debt collection agents may retrieve your contact information from the credit bureaus and your credit report if they have access to it. Other online research could also be conducted to uncover your address, email, and phone number—such as a review of your social media profiles where your information might be public.
Finally, if they know the contact information of your friends, family, employers, or others who know you, debt collectors may try to collect your information from them.
How to Identify a Debt Collection Scam
Sometimes, unscrupulous fraudsters might try to pose as debt collectors to try to trick you out of money—something that makes debt management even more difficult than it already is. If you pay the scammer, your actual debt won’t go down since they aren’t the original creditor or the collection agency that you owe money to.
So, part of knowing how to deal with collection agencies is being able to parse the real collectors from the fraudulent ones. Some of the warning signs to look out for include:
- Requests for Nonstandard Payments. Fraudsters might try to avoid traditional transactions that would allow you to easily reverse the charge if you discover it’s fraud. For example, they may demand cash payments, gift cards, or other untraceable payments.
- Threats of Jail Time or Violence. A legitimate debt collection agency cannot use threatening language. Additionally, you cannot be sent to jail over unpaid debts—at worst, a collection agency might take you to court to have your wages garnished so they can recover the money they’re owed.
- Requesting Payments for Debt You Don’t Recognize. Scammers might make up debts to try to trick people already drowning in debt into making payments to them. In some cases, however, an actual debt collection agency might contact you for a debt resulting from identity theft. So, when a debt collector calls, be sure to request (and receive) proper documentation from them before paying anything. Also, it can help to check your credit report to verify that the debt is listed there. In fact, checking your credit report for debts you don’t recognize can help you spot instances of identity theft.
- Requests for Sensitive Information. A scammer might try to trick you into giving them information they could use to commit identity theft—such as your bank account number.
- Failure to Disclose Information. A fraudulent collection agent might actively avoid giving you important information about the debt they’re supposedly trying to collect on—such as who the original creditor is, the date the debt was incurred, or other important information.
If you suspect that someone is impersonating a collection agent and contacting you under false pretenses, report the issue to your local consumer protection office.
How to Deal with Debt Collectors
Dealing with debt collection agencies can be incredibly stressful—even under the best of circumstances where the debt isn’t too large and the collection agency is being courteous. While it can be difficult, it is often necessary to know how to deal with collection agencies in an effective manner.
Here are a few basic tips to help you deal with a debt collector:
Don’t Ignore Collection Calls
It can be incredibly tempting to just shut your phone off and ignore incoming calls from collectors—especially if they’re being extremely pushy (which they shouldn’t be). However, it’s important to resist this temptation.
An important part of managing your debt is working with your creditors. And, to do that, you need to have an open line of communication with them.
By remaining open to communication and being cordial, you may even be able to negotiate down your debt or get the collection agency to agree to a favourable repayment plan that you can more easily afford.
Request Documentation of Your Debt
When talking with collection agents, it’s vital that you request written documentation of your debt. This can help you sort out legitimate collection calls from fraudsters.
Never make payments on a debt from a collection notice until they’ve sent over appropriate documents that let you know to who the money was originally owed when the debt was incurred, what the debt was for, and other information that lets you verify the authenticity of the debt.
If the collector cannot (or will not) provide documentation, or the documents reflect a debt that you did not incur, then that could be a warning sign you’re dealing with a scam artist instead of a debt collection agent.
Don’t Enable Harassment
Just because you owe someone money doesn’t give them or the collection agency they work with the right to belittle and harass you. If you feel that a debt collector is crossing the line—either by contacting you too often, using threatening language, or doing something else they aren’t permitted to do—ask them to stop.
If the collector continues to engage in harassing behaviour, then alert the authorities to the abuse and let them take care of it. You don’t have to put up with collection calls at odd hours or threats simply because you’re behind on payments.
Negotiate for Reducing Your Lump Sum
You may be surprised at how willing some creditors and collection agencies are to settle for a reduced payment on the money they’re owed. When collection agents call, consider explaining to them your current financial situation and asking if they’re willing to reduce the total of your balance or put you on a longer-term repayment plan that provides a more affordable monthly cost that won’t force you to choose between rent and making debt payments.
Consider Working with a Credit Counsellor
You don’t have to deal with creditors and their debt collectors by yourself. Instead, you could work with a credit counsellor from Credit Canada to help you negotiate with your creditors and even set up a debt consolidation program (DCP) that makes it easier to repay your debt and know exactly when you’ll be debt-free.
Even if a DCP isn’t a good fit for your situation, a credit counsellor can help you identify the best ways to get out of debt—such as referring you to a licensed insolvency trustee, creating an avalanche or snowball debt repayment plan, or helping you establish a monthly budget to free up funds for paying off debt.
Reach out to us today to get started! We look forward to helping you live a debt-free life.