Canada Pushes Back on Debt Settlement With New Regulations

In Ontario a bill passed recently which significantly impacts the delivery of debt settlement services there. First, I owe a big hat tip to a good friend up there in the great white north for alerting me to this.

This new bill impacts both debt settlement companies and credit counselors.

Bill 55, the Stronger Protection for Ontario Consumers Act 2013, appears to label and define debt settlement providers as debt collectors or a debt collection agency.

The law says a collection agency or a collector is “a person, other than a collector, who provides debt settlement services.”

Debt settlement services are further defined as “offering or undertaking to act for a debtor in arrangements or negotiations with the debtor’s creditors or receiving money from a debtor for distribution to the debtor’s creditors, where the services are provided in consideration of a fee, commission or other remuneration that is payable by the debtor.”

This new law imposes new requirements on debt settlement service providers. Specifically:

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  • No collection agency or collector that provides debt settlement services shall require or accept any payment or any security for the payment, directly or indirectly, in advance of providing the services.
  • A collection agency or collector that enters into a debt settlement services agreement before being registered shall not be entitled to receive any payment or security for payment under subsection (1) for debt settlement services provided under the agreement.
  • If a collection agency or collector requires or accepts a payment in contravention of this section, the debtor or person who has made the payment may demand a refund by giving notice in accordance with section 92 of the Consumer Protection Act, 2002 and section 16.9 of this Act within one year of making the payment.
  • A debtor who is a party to a debt settlement services agreement may, without any reason, cancel the agreement at any time from the date of entering into it until 10 days after receiving the written copy of the agreement.
  • A debtor who cancels a debt settlement services agreement under section 16.7 may demand a refund of all payments made under the agreement by giving notice to the collection agency in accordance with section 92 of the Consumer Protection Act, 2002 and section 16.9 of this Act within one year after entering into the agreement.
  • No collection agency or collector shall make false, misleading or deceptive statements in any advertisement, circular, pamphlet or similar material published by any means.
  • An officer or director of a corporation is guilty of an offence if he or she knowingly concurs in the commission of an offence mentioned in clause (1) (a), (b) or (c) or fails to take reasonable care to prevent the corporation from committing an offence mentioned.
  • An individual who is convicted of an offence under this Act is liable to a fine of not more than $50,000 or to imprisonment for a term of not more than two years less a day, or both, and a corporation that is convicted of an offence under this Act is liable to a fine of not more than $250,000. – Source

The Government of Ontario says the new law is designed to help consumers settle debts fairly and honestly and has the following key provisions.

“Currently, there are 18 companies and 34 credit counselling providers offering debt settlement services in Ontario. Some companies charge customers large upfront fees and describe the services they will provide in hard-to-understand contracts, and fail to deliver the promised reduction in debt.

To protect vulnerable, indebted consumers, the legislation creates new standards of conduct for companies by:

  • Banning companies from charging upfront fees for debt settlement services 
  • Limiting the amount of fees consumers are charged and prohibiting the payment of fees before services are provided 
  • Requiring clear, transparent and detailed contracts that include information about the effect of the contract on the consumer’s credit rating 
  • Requiring credit counsellors to disclose information to the consumer about how their organization is funded 
  • Establishing a 10-day cooling-off period, providing consumers more time to consider their agreements with companies 
  • Allowing the licences of non-compliant companies to be revoked.



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