Announcing The Winner of Our Financial Literacy Scholarship (Spring 2022)
We are awarding $750 to a student every semester. All you have to do is show us how financial literacy has made a difference in your life.
Most of us carry some form of debt, be it on a credit card, line of credit, or auto loan. And while a little bit of debt is always manageable, you may find yourself in a situation where keeping up with payments becomes challenging and frustrating. Sometimes you may have no choice but to default. In this scenario, your creditor may choose to sell your debt to a collection agency, as they’ve decided chasing payment is no longer feasible.
Collection agencies have been known to be intense, persistent, and, at times, downright abusive. Therefore, it’s crucial to be aware of what they legally can and can’t do when they pursue you to pay back your outstanding debt. Collection fees are a prominent concern – can a collection agency charge you additional fees on top of the debt you owe?
A debt collection agency is a company that specializes in past-due debts. Creditors will often hire a collection agency to act on their behalf after they’ve failed to collect past unpaid debt on their own. Sometimes, a creditor will sell a borrowers’ debt directly to a collection agency. If you fail to make your debt payments, a debt collection agent may contact you to collect the money you owe.
A collection agency that has purchased the debt from your creditor can take you to court. If the agency wins the judgement against you, they can garnish your wages or take money directly from your bank account. They can also place liens against your assets, such as your home. If you fail to pay the outstanding debt, they can legally take possession of your home and sell it, using the cash proceeds to settle the debt.
Learn more about what your collection agency can do to you.
A collection agency is prohibited from charging you any collection-related fees on top of the amount you owe. Don’t be fooled by agencies that attempt to legitimize and rationalize any additional charges – they have no right to do so.
However, a collection agency has the right to force you to cover their legal expenses. Also, they can charge you fees for non-sufficient funds on payments you submit.
No, a collection agency can’t tack on any new interest charges on your debt. However, they can seek payment for any interest charges levied by the creditor.
You may feel a sense of unease upon discovering that your debt has been sold to a collection agency, dreading hostile collections agents and endless pressure tactics. Luckily, governments have been cracking down on collection agencies’ practices and have drafted explicit guidelines to regulate their conduct. Particularly for debt collectors from a federally regulated financial institution.
Here’s what your debt collector is not legally allowed to do:
Is your debt collector harassing you? Find out how to stop collection harassment in Canada.
Despite regulations in place to curb collection agencies’ tactics, some organizations blatantly ignore the rules and employ coercive methods to collect unpaid debt. If you feel mistreated by debt collectors, remember that you have rights as a consumer – you can directly address the abusive behaviour. If the collection agency was hired by a federally regulated financial institution, you could submit a complaint with the Financial Consumer Agency of Canada. In cases where your creditor sold your debt to a collection agency, you can file a complaint with your provincial Office of Consumer Affairs.
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