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What is debt collection?

Debt collection is the process of recovering money from an individual or business that has an outstanding debt.

Typically, this process involves a company transferring your financial account to a third-party collection agency. This agency will then contact you to recover the outstanding amount. The original creditor will first attempt to reach out to you to ensure payment. However, if payment is not made, they will then pass your information to a debt collection agency.

Sharing your information with a third party allows the original company to reduce the resources spent on tracking your case. It also serves as an effective tactic to pressure you into paying as quickly as possible. Fortunately, Canada has systems in place to protect you from the aggressive tactics of collection agencies, which are often highlighted in the media. Managing your debts does not have to be as daunting as it may seem.

Debt Solutions

What happens if you ignore a collection agent?  

Ignoring a collection agent is not advisable. Collection agents can be persistent in their efforts to recover outstanding debts. From incessant phone calls to a barrage of letters, they will employ various methods to get your attention. They may even escalate the situation by issuing a summons, compelling you to address the debt in court.

Allowing debt to accumulate will negatively impact your credit score, making it clear that ignoring debt collection is not the answer. Establishing open communication with either the collection agency or the original creditor is the most effective approach to promptly find a resolution and minimize the adverse effects on your credit history.  

What should you not say to collection agents?

While open communication and cooperation are encouraged to reach an amicable solution with your collection agent, there are crucial points to keep in mind when interacting with them.

Negotiating with collection agencies requires skill. Here are some key considerations to remember when speaking with collection agents:

Do not disclose any of your personal information

Phone calls are their primary method of contact, and they will frequently ask personal questions. Therefore, it is crucial not to share any personal information.

They will likely request your credit card details and other personal data. It is important to inform them upfront that you will only respond to written communications. This ensures you have documented proof of all interactions, should you need to defend yourself in the future.

Do not provide your bank details

Do not share your bank account information with collection agents; you are not legally required to provide them with these details. A collection agent's primary objective is to secure the full payment of your debt as quickly as possible, and obtaining your bank details is often seen as the most direct path to achieving this.

Providing your bank or credit card details removes any leverage you might have, so do not give them out, no matter how frequently they ask.

Do not admit to the debt

Perhaps the most crucial point to remember when dealing with a collection agent is to never admit to the debt. The moment you acknowledge your debt, you lose the ability to fairly defend yourself against that debt or any other loan you owe.

Maintain a mindset of being innocent until proven guilty, as many collection agents may even attempt to make you pay more than what you legally owe. It is better to say nothing than to share too much information.

What happens if your debt is sent to a collection agency?

When your debt is transferred from the original creditor to a collection agency, a specific protocol is followed, and various scenarios are possible.

The first thing you are likely to receive is a notice before collection agents make direct contact with you. This notice outlines the key details of the debt you owe, including:

• The name of the collection agency
• The name of the original creditor
• The amount of money you owe

Once this information has been communicated to you, you are then obligated to address your debt and repay your loans or any amount due. If you are unable to repay the debt, there is an opportunity for negotiation to reach an agreement:

• Offer a lump-sum payment
• Explore hardship assistance programs
• Negotiate a payment plan
• Consider debt consolidation loans

If, after reviewing all your options, you are unable to reach a negotiation that works for all parties involved, the collection agency's next steps could include:

• Summons to appear in court
• Continuous collection attempts
• The agency abandons your file (the best-case scenario)

5 Tips for Dealing with Collection Agencies

Now that you are fully aware of the processes and protocol involved in debt collection, here are some tips for dealing with collection agents:

1. Effective Communication

Clear communication is essential for amicably resolving your case with collection agencies. Maintaining a dialogue with collection agents portrays you as a reasonable individual, encouraging them to work with you rather than against you. While it is important to be mindful of the type of information you share, it is equally crucial to maintain a smooth conversation with them.

2. Do Not Be Intimidated

A terrifying image of collection agents is often pre-established to scare you into paying without question; do not let them intimidate you. Take the time to thoroughly review your account, credit, and debt so that you are not overwhelmed by illegitimate fees or interest. Furthermore, you may even be able to dispute the debt if you calmly examine what you are truly dealing with.

3. Check the Timeline

If you have a clear understanding of where your debt originated, you should be able to determine how long it has existed and, crucially, its history since it was incurred. Credit bureau policies ensure that any debt that has been inactive for six years or more will be automatically removed from your credit report.

Therefore, it is unnecessary to repay a debt that will not impact your credit report in the near future. Keeping this in mind could save you a significant amount of money.

4. Get Everything in Writing

It is crucial that all your interactions with a debt collection agency are documented in writing. By restricting your communication to written correspondence, you create a clear record of all your conversations.

If you negotiate a reduced repayment but then face repercussions for not paying your original debt in full, without written proof of your negotiations, you could be sued. This could negatively impact your credit report and further damage your credit score. To protect yourself, ensure all communications go through official channels and that you have everything documented in writing.

5. Clarify the Details

Ensure you are fully aware of your credit history, the exact amount you owe, your debt repayment schedule, and any other relevant loan information. This knowledge will help you confirm that you are not being overcharged and identify any payments you may not be obligated to make. Debt collectors will find it much harder to intimidate you if you are informed about your rights and possess all the details concerning your debt.

Debt Collection in Canada

There is much misinformation regarding what debt collectors are legally permitted and prohibited from doing. Fortunately, Canada has robust legislation in place, with enforcement measures comparable to those of the U.S. Federal Trade Commission, to safeguard your rights and prevent debt collectors from abusing their authority.

So, what can and cannot debt collectors do?

What Debt Collectors Can Do

• Beyond contacting you directly, debt collectors are permitted to reach out to your friends and family. However, their communication with these individuals is strictly limited to obtaining your phone number or address.
• Debt collectors can only contact you during specific hours: Monday to Saturday between 7 AM and 9 PM, or on Sunday between 1 PM and 5 PM.
• If you fail to make payments and collectors wish to escalate the matter, they have the right to pursue legal action against you.

What Debt Collectors Cannot Do

• Debt collectors cannot contact you during holidays.
• They cannot encourage someone you know to pay your debts on your behalf.
• They are prohibited from engaging in aggressive behavior, which includes intimidation tactics and abusive language.
• Using misleading or false information.
• Debt collectors are not permitted to contact you on your mobile phone unless you have specifically provided them with that number.
• Certain Canadian provinces impose limits on how frequently debt collectors can call you. It is advisable to check if local legislation applies to your situation.
• Debt collectors cannot initiate lawsuits, wage garnishments, or imprisonment without first successfully suing you in court.

Debt collectors must always follow proper procedures and maintain a non-aggressive demeanor when seeking repayments. Keep this in mind when interacting with them; you retain autonomy and power in these situations.

The ultimate goal is to reach an agreement with your creditors or the collection agency to find a solution as quickly as possible, thereby preventing any further damage to your credit report and credit score.  

If you are unsure how to manage your debt, various solutions are available depending on your specific situation and needs. Please do not hesitate to contact Groupe Serpone to learn more about our services.

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