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When taking out a loan from a lender, you are basically entering an agreement saying that you will repay them that amount (plus interest and any fees) over an agreed-upon payment schedule. If you are late on these payments or stop making them altogether, you will likely hear from your lender via a letter, over the phone, or by email. 

However, if you miss multiple payments or completely default on the loan, the lenders may take a more extreme approach in trying to get their money back. This may include enlisting the services of a collection agency. 

What Is A Collection Agency?

A collection agency is hired by a lender to try and help collect the debt that is owed to them by you. These companies are often more aggressive and persistent when it comes to collecting your debt and will put much more pressure on you. They will begin with a letter, then move to phone calls until you pay off your debts or come to an agreement. 

What Can A Collection Agency Do To You In Canada?

Collection agencies are something no one wants to deal with, but thankfully, there are rules and regulations in place to protect the borrower from unethical collection practices. 

First Contact

Before a debt collection agency can start pursuing the debt you owe, they must give you a written notice that includes: 

  • Their business name
  • The debt they are trying to collect (the lender you owe money to and how much you owe)

Can A Collection Agency Charge You Interest Or Fees In Canada?

No, a collection agency cannot charge interest on the debts they are collecting nor can they charge you any fees for their collection service. However, the amount you owe may already include interest you may have incurred with your original creditor. 

Can A Collection Agency Take You To Court In Canada?

Yes, a collection agency can take legal action against you if you refuse to repay your debts. If they decide to file a lawsuit against you, they will send you a written notice of legal action to which you will need to attend a court hearing. Depending on if you fail to attend or fail to hire a lawyer to attend for you, your creditor would win by default. 

If you decide to go to the hearing, you’ll either

  • Win: No judgment will be granted
  • Lose: Judgment will be granted and you’ll be obligated to repay part or all of the debt. This can also lead to wage garnishment

Will A Collection Agency Take You To Court If Your Debt Is Small? 

A debt collector could technically sue you to collect a small debt, but it’s unlikely to happen. A small amount of debt may not be worth pursuing in court, especially if the cost of the lawsuit is higher than the amount of the overdue debt. 

Will A Collection Agency Take You To Court If Your Debt Is Big? 

If your debt is large enough to make it worth the cost of suing you, a collection agency could take you to court to collect the overdue debt. As long as the statute of limitations has not yet passed — which differs depending on the province you live in — a debt collector is within their rights to take legal action. 

For instance, the statute of limitations for debt in Ontario is two years. That means a debt collection agency has two years from the date of your last charge, payment, or written acknowledgment of your debt. But once that time frame has passed, a debt collector can no longer threaten litigation, though they can still try to collect the money outside of court.

Can You Stop A Court Proceeding? 

The best way to avoid being taken to court is to pay your debt. But if this is impossible for you, your creditors or debt collectors could continue to hound you for your unpaid debt and threaten to sue you for payment.

To put a stop to litigation, there are a couple of options you may want to consider:

Offer A Settlement 

If you’re able to pay at least part of your debt, consider making the collection agency an offer to settle your debt. You could offer a payment amount that is less than what you owe, or agree to a payment plan that allows you to repay your debt through affordable payments over a specific time frame. You may want to enlist the services of a debt settlement company that can negotiate with your creditors and come up with a plan to satisfy your debt.  

File A Consumer Proposal Or Bankruptcy

If your debt situation is dire, you may need to resort to a consumer proposal or bankruptcy. These are legal forms of debt relief that require the assistance of a Licensed Insolvency Trustee (LIT) and are governed under the Bankruptcy and Insolvency Act (BIA). 

Both debt relief options are designed to relieve you of your debt and avoid litigation from creditors and debt collectors. However, they both negatively affect your credit score and bankruptcy could mean the loss of some valuable assets.

Can A Collection Agency Call You At Work?

Yes, a collection agency can call your workplace. However, there are some rules your debt collector must abide by. The only reason they are allowed to call your workplace is to verify your employment and once they have done that, they are not allowed to contact your workplace anymore. 

Also, when they do make that one call to your workplace, they cannot disclose the existence of your debts, so you don’t have to worry about everyone at work knowing about your financial issues.

However, if you’ve given them permission in writing to contact you at work, then they may do so. 

Can A Collection Agency Call Your Friends And Family?

Collection agencies can only call friends and family to inquire about your address and phone number. They cannot call them to discuss your debt or suggest they pay the debt for you. The only person they can call regarding your debt is a co-signer or someone you have requested they contact. 

Can A Collection Agency Call You Any Time?

No, there are strict rules about when and how a collection agency can call you. Generally, they can call you between 7 am and 9 pm from Monday to Saturday and between 1 pm to 5 pm on Sunday. They cannot call you at all on holidays. And, unless you’ve given them your cell phone number as your primary contact information, they are not allowed to call you on your cell.

However, this can vary slightly depending on the province you live in as each province has their own debt collection laws and regulations.  

When Can A Debt Collection Agency Contact You By Province

Monday To FridaySaturdaySunday
Alberta7 am to 10 pm7 am to 10 pm7 am to 10 pmMore Info
British Columbia7 am to 9 pm7 am to 9 pm1 pm to 5 pmMore Info
Ontario7 am to  9 pm7 am to 9 pm1 pm to 5 pmMore Info
Quebec8 am to 8 pm8 am t0 8 pmNot AllowedMore Info
Nova Scotia8 am to 9 pm 8 am to 9 pmNot AllowedMore Info
New Brunswick7 am to 9 pm7 am to 9 pm1 pm to 5 pmMore Info
Manitoba7 am to 9 pm7am to 9 pmNot AllowedMore Info
Prince Edward Island8 am to 9 pm8 am to 9 pmNot AllowedMore Info
Saskatchewan8 am to 9 pm8 am to 9 pmNot AllowedMore Info
*Please Note: Collection agencies cannot call you on statutory holidays.

Can A Collection Agency Garnish Your Wages?

Yes, a debt collector can collect on overdue debt by having your wages garnished. However, to do this, they must first take you to court and obtain a judgment against you. The amount that can be garnished depends on your income and the type of debt you owe. 

A debt collection agency must act within the statute of limitations in your province to take you to court to have your wages garnished. Once this time frame expires, they are no longer legally able to sue you and have your wages garnished.

Can A Collection Agency Seize Your Home?

Depending on the province, a debt collector may be able to obtain a judgment against you in court to register a lien on the title of your home. Even if you never used your home as collateral for the debt in question. If you don’t repay your debt, the collection agency could then obtain a court order to sell your home and use the proceeds of the sale to satisfy your debt. This is an expensive and serious process. Creditors and collection agencies would only choose this option if the debt in question is large. 

Again, the debt collector must exercise this option within the statute of limitations. Otherwise, they cannot put a lien on your home and seize it for non-payment of debt.

What A Debt Collection Agency Cannot Do?

While the laws vary by province, certain practices are not allowed no matter where you live: 

Harassment – Collection agencies cannot speak to you, your family, your friends, your employer or anyone you know in a manner that constitutes as harassment. This includes:

  • Using threats or profane or coercive language
  • Using too much pressure, including excessive calls (depending on the province you live in, the number of times a debt collector can contact you will vary)

Fake Information – Collection agencies cannot provide or even imply false information. Any attempt to mislead you is prohibited. 

Legal Action –  Debt collectors cannot threaten you with legal action unless they have written authority from your creditor. They also cannot threaten you with legal action if they have no lawful authority. 

What Should You Expect When Dealing With A Collection Agency?

Now that you are aware of what a collection agency can do to you, what is the process of dealing with them like? Dealing with these collection agencies can be very intimidating and knowing a bit about what their process looks like can help you become a little more comfortable when working with them.

Well, the first contact they will make with you is via a letter, which should explain that your account is in collections. The letter will also be a request that you start your payment plan once again. Their next contact will come about 5-7 days after their initial letter and will be in the form of a phone call. They will keep calling until they can get ahold of you.

Once they can make contact with you, they will give you all the information you need, such as who they are and what you owe. Next up, it’s time to pay off your debts. While we understand it’s not fun to work with these agencies, paying your debts is always the best way to go, because if you don’t, you could potentially face legal action.

What Should You Do If Your Debt Is Sold To A Collection Agency?

The best answer is to, of course, answer them and agree to pay your debts. This can be done by paying in full, setting up a payment plan, or settling your debt. Each option will have its pros and cons, depending on your financial situation and preferences. Generally speaking, it is best to pay the debt in full. However, we realize that can be difficult, especially if the amount of debt you owe is quite substantial. Any way that you can get this debt off of your credit report and off of your back is positive, so any of the previous methods is better than simply letting the debt get worse.

Need to know how to qualify for debt settlement? Find out here.

If you still have questions or concerns about dealing with a collection agency and what they can and cannot do, be sure to visit the website of the Government of Canada, as it can help address these concerns and has other helpful links present.

Bottom Line

While there are numerous actions a collection agency can take to try and collect the debt, there are also laws to protect you from debt collection practices that are considered aggressive and unethical. Depending on the province you live in, the rules may vary, so be sure to consult with your province’s debt collection regulations. You can also contact your provincial or territorial consumer affairs office if you’re having trouble with your debt collector.

Debt Collection FAQs

Can I stop my debt collector from calling me? 

Yes, you can get your debt collector to stop calling you by sending a written request to contact you by mail only. If you have a legal advisor, you can also have your debt collector contact them instead of you by sending in a written request. Lastly, you can stop your debt collector from calling you by notifying them and your creditor that you’d like to dispute the matter in court. 

Can a debt collector add charges to my debt? 

No, by law, the debt collection agency cannot charge you for expenses incurred while trying to collect your debt. They also cannot charge you any interest on your debt. 

Can a collection agency charge me with a crime? 

No, collection agencies cannot charge you with a crime if you do not pay your debt. Nor can they threaten you with it, this can be considered a form of harassment. They can only take you to court where a judge may rule in their favour and force you to pay your debt. This can lead to wage garnishment or seizure of your assets. 
Kale Havervold avatar on Loans Canada
Kale Havervold

In his over six-year career as a professional writer, Kale has focused on writing about finance, technology, cryptocurrency, entertainment, and sports. Kale's work has been published on Yahoo, RentHop, the Regina Leader-Post, LoansCanada.ca, and ReboundFinance.com. Kale loves to create a wide variety of personal finance-related content. Including everything from how-to guides to featured articles, to advice pieces and everything in between. Whether he’s writing about the newest piece of technology or providing tips to help people with their finances, Kale is passionate about educating Canadian consumers and making sure they have the information they need to make the best decisions.

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