How to deal with collection agencies

If you’ve ever been late or defaulted on a payment, you may have found yourself at the mercy of a collection agency — and you know how awful it feels.

Basically, if you fail to pay a lender, that lender may sell your debt to a third-party collection agency. They then use whatever tactics are at their disposal to get you to pay them.

A collection agency’s first move, by law, is to send you written notice through the mail (not by email) advising you of the name of the creditor to whom you supposedly owe money, the amount they say you owe, and the name of the agency and its authority to demand payment.

Just six days after sending the notice, you may find yourself on the receiving end of harassing calls or additional letters, and just trying to avoid them can make you dread opening the mail or answering the phone. The law allows collection agencies to send letters without restriction, and to contact you up to three times in seven days. (Contact means that they speak to you, leave a message, or send an email.)

If you think the agency is in error, advise them by registered letter of the mistake or have your lawyer do so. They must then stop trying to contact you until the matter is resolved.

While they can be intimidating, there are some restrictions placed on them by government regulations. Collection agencies are prohibited from calling on Sundays, except between 1 p.m. and 5 p.m., or any other day between 9 p.m. and 7 a.m. They can’t contact you on stat holidays. The law also prohibits the use of threatening or profane language, as well as undue, excessive or unreasonable pressure.

While the agency can contact your employer once to find out your employment status, they cannot contact your employer again unless your employer has guaranteed the debt, they are making contact with regard to a court order or wage assignment given to a credit union, or you have provided them written consent to make such contact. They can’t contact your spouse or a member of your family or household, relatives, or neighbours except to get your address or phone number unless the person has guaranteed the debt or you have given your permission. They cannot give out false information about you, nor can they recommend to a creditor that they pursue legal action without notifying you first.

They are also prohibited from levying additional charges — they are allowed to attempt to collect only the amount of the original debt (although it may continue to accrue interest).

As unpleasant as those calls and letters can be, avoidance isn’t the answer. Once the debt goes to collections, it no longer belongs to the original lender, and you have little choice but to deal with the collections agency. Of course, the simplest solution is to pay the debt. Once the debt is paid, the harassment stops. If you can’t pay the entire debt, try to make arrangements to pay it off over time.

Failure to make arrangements could result in a negative report to the credit bureau or even legal action that could end up in court, in the seizure of your property, or a claim on your pay cheque.

If you think you’ve been mistreated by a collections agency, send them a letter telling them why and that you expect them to comply with the law. If the behaviour persists, file a complaint with Consumer Protection Ontario.

If you’re feeling the pressure of debt collection, contact a credit counsellor to find out your options.

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