If you currently have a credit account in collections or if you’ve ever had to deal with a debt collector then you understand that the process can be both intimidating and complicated. No one ever plans to have a credit account go into collections. This means that when it comes to dealing with and speaking to a debt collector, the average Canadian is underprepared and ill-informed.
Here’s everything you need to know about debt collectors in Canada and how to deal with them should one of your credit accounts ever go into collection.
Who Are Debt Collectors?
A debt collector is a company (sometimes referred to as a collection agency) that is typically hired by a creditor or lending company to recover unpaid debts. Debt collectors get involved when someone stops making payments on a loan or credit account. Debt collectors usually work for either a set fee or a percentage of the total debt owed to the creditor they are working for.
Who Will You Need To Deal With?
Depending on the creditor that you owe, you will either deal with an in-house debt collector or a debt collection company that was hired by your creditor.
If you are contacted by an outside debt collector then your original creditor has either hired them to work alongside them or has sold your account to the debt collection agency in question. Either way, you will typically be contacted in writing first and then you will begin to receive phone calls from your collection agent.
How To Deal With A Debt Collector In Canada
Some creditors may hire a collection agency to collect on the monies they are owed. But dealing with these agencies can be very stressful, especially if they’re constantly calling you. And if you don’t respond, they may even reach out to friends, family, and your employer in an effort to connect with you.
While you may rather ignore these collection agencies, it’s important that you deal with them in a timely and effective manner. Here are some tips to keep in mind when dealing with a debt collector:
Confirm They’re Real
Unfortunately, there are scam artists that operate within the collection agency industry in hopes of scamming unsuspecting consumers out of their money. Before you deal with a collection agency and start making payments, vet them first to ensure they’re legitimate.
More specifically, request all the appropriate written documentation about your debt. This paperwork should outline who the funds were owed to, when you incurred the debt, and the exact type of debt. If the collector is unable to provide this documentation, or the documents include information about debts you never took out, these could be red flags that you’re dealing with a scammer.
Questions to Ask When You Receive Your First Collection Call
When your debt collector contacts you for the first time make sure you receive the following information and take note of it for your own records:
- Ask if you are speaking with your original creditor or a debt collection company that has been hired.
- Ask for the name of the person who you are speaking with, their phone number, and the name of the collection company they work for.
- Ask for detailed information about the debt they are trying to collect: who you owe the money to, how much money you owe and when the debt started.
- Make sure the information you are provided sounds familiar to you. If it doesn’t, go back through your files and try to verify the information.
Pick Up Their Calls
Collection agencies will make every effort to get in touch with you to collect what you owe. While it may be easier to simply ignore these calls, you’ll eventually need to deal with these agencies and make good on your debts.
Collection agencies are not allowed to harass you, but it’s still important that you make an effort to communicate with them and your creditors to deal with your debt.
Negotiate With Them
In some cases, it may be possible to negotiate an agreement to reduce your debt or come up with a more affordable repayment plan. When speaking to a collection agent, explain your situation and ask if there’s any chance that you can work out a different arrangement that will make it easier for you to cover your repayments.
How To Negotiate A Payment Plan
Consider negotiating one of the following plans with the collection agency:
- Partial payment. Start your negotiations by asking if you can reduce the full amount that you owe. Even a slight debt reduction can be just enough to help you afford your lowered payments.
- Payment plan. Crunch the numbers to determine how much you can afford to pay each month towards repaying the debt. Present this written-out plan to your collector to see if it’s possible to negotiate a lower monthly amount based on your finances.
Tips On Dealing With Your Debt Collector
If the debt that your debt collector is trying to collect is, in fact, yours then it’s in your best interest to pay it off right away. Paying back the amount you owe as soon as you are contacted by a debt collector is the quickest and easiest way for you to fix the problem. However, keep these tips in mind when you are able to or decide to repay your debt:
- Do not pay it back with cash.
- Make sure that you receive a receipt or other form of verification for any and all payments you make.
- Make sure you are dealing with the original debt collector who contacted you first. Furthermore, once you’ve been contacted by a debt collector do not try to contact your original creditor as this may cause confusion (unless absolutely necessary).
What Should You Do If The Debt Isn’t Yours?
If once you’ve verified the information provided to you by your debt collector and you’ve decided that the debt is in fact not yours, here’s what you should do:
Contact Your Creditors
Speak with your debt collector and explain to them why you don’t think the debt is yours. Then get in contact with your original creditor to see if they can resolve the issue or tell you how to proceed.
Contact The Credit Bureau
Request a copy of your credit report from either Equifax or TransUnion. If the debt, which you believe is an error, does appear on your credit report you’ll need to contact Equifax and TransUnion and your original creditor to get the error removed.
Incorrect information on your credit report can negatively affect your credit score which in return can prevent you from getting approved for the credit and loans you may need in the future.
Your Rights When Dealing With A Debt Collector
There are laws in Canada that protect the consumer from unfair debt collection practices. When dealing with a debt collector here are some red flags that you should watch out for:
- A debt collector is allowed to contact your family members, friends, and employer to ask for your phone number or address. But they are not allowed to ask for any other information. If a debt collector is harassing you or the people you know, contact the Financial Consumer Agency of Canada right away.
- A debt collector should never imply or ask for anyone but you to pay back your debt.
- A debt collector should never use abusive, threatening or rude language.
- A debt collector is not allowed to contact a consumer after 9pm or before 7am, on holidays or at certain times on Sunday.
Debt Collector FAQs
Are Debt Collectors in Canada Regulated?
What should I do if I can’t afford to pay my debt collector?
What is the statute of limitations?
The best way to deal with debt collectors is by paying off the debts you owe. If you’re unable to afford to make payments, consider negotiating a payment plan or speaking to a credit counsellor. They can help you find a debt relief option that suits your situation.