Big Changes for Collection Agencies

There are now significant changes to Ontario’s collection laws.  Neil Abbott and Sam Starkman of Gowlings have a good summary of some of the most important of these changes:

A large change is that the definition of “collection agency” will now include a person who purchases debts that are in arrears (past due) and collects them; before they merely stood in the same position as the original debtor, but now they must either use or be a registered collection agency. The legislation, however, provides many exemptions where this would not apply, such as:

  • where a debt was purchased by virtue of acquiring/merging with a business that owned the debt; or
  • where a person has purchased a financing agreement or payments due thereunder.
  • [Please see the original article for even more examples.]

The amended regulations also include some exemptions.  For example:

  • property managers collecting rent owed by tenants; or
  • where the debtor is not an individual, the owner of a sole proprietorship, a member of a partnership or someone who provided a personal guarantee.
  • [Again, please see the original article for even more examples.]

Perhaps one of the most important changes is this:

… at the request of a debtor, a collection agency must now provide the debtor with a breakdown of the current amount owing under the debt. While the legislation does not describe the particulars that must be provided in a “breakdown”, it is fair to assume that the collection agency must be prepared to outline the following information:
—  balance when first due;
—  interest accrued since due date;
—  interest rate; and
—  any fees/penalties.

To my mind, this last-mentioned point may be the most important one.  I have seen clients dealing with collection agencies over paid debts, and all attempts to get the agency to tell them what payments and when they seek are simply met with more (and often more obstinate) demands for payment.  Hopefully this new requirement will cut that particular Gordian Knot.

The article also provides details of the elimination of some of the red tape previously faced by collection agencies.

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