If you’ve taken out a loan that you can’t pay back, your lender could enlist the help of a debt collection agency to collect what you owe. Thankfully, Ontario has specific regulations in place to protect consumers from unfair collection practices. These laws outline what actions debt collectors can and cannot take, ensuring fairness throughout the process.
As a consumer, it’s important to get familiar with Ontario’s debt collection rules so you can better understand your obligations and legal rights.
Key Points:
- Debt collection is the process by which third-party agencies attempt to recover unpaid money owed by consumers.
- Debt collectors are required to follow specific rules when it comes to how they treat consumers while attempting to collect unpaid debt.
- It’s important for consumers to know their rights under Ontario laws to protect themselves against unfair practices.
What Is Debt Collection In Ontario?
Debt collection in Ontario refers to the process by which collection agencies attempt to recover unpaid debts. Lenders sell unpaid debts to collection agencies after unsuccessful attempts to get delinquent borrowers to cover their loan payments.
Under Ontario law, collectors must follow strict guidelines to ensure consumers are treated fairly. In Ontario, the Collection and Debt Settlement Services Act (CDSSA) regulates collection agencies, requiring them to follow strict rules to protect consumers from predatory practices.
How Do Debt Collectors Recoup Outstanding Debts?
In Ontario, the debt collection process typically follows these steps:
Step 1: Written Notice
Your first contact with a debt collector will be a letter saying your account is now in collections and requesting that you pay off your debt. The notice should include information about the name of the agency, the original creditor, and the amount owed.
Step 2: Contact From The Debt Collector
Debt collectors must wait six days after sending a written notice before they can call you to collect the debt. This period gives you some time to go over the debt information.
Once this time has passed, the debt collector may call you and let you know that you owe a debt and that they will be trying to collect it.
Step 3: Confirm The Debt
Before making any payments, it’s wise to verify that the debt collector is legitimate and that the debt you’re being asked to repay is in fact yours. You have the right to ask for written proof of the debt before making a payment.
Step 4: Make The Payment
The next thing you should do is pay off the debt. If you do not, the debt collector will keep pressing you and may eventually resort to legal action.
| Can I Dispute The Debt? Yes, you can dispute a debt from a debt collector if you believe the debt is incorrect, not yours, or has already been paid. In this case, ask the collection agency for written proof of the debt and send a formal dispute letter. Avoid making payments or admitting to the debt until it’s verified, as this could reset the statute of limitations. |
What Are Your Rights Under Ontario’s Debt Collection Laws?
Your rights as a consumer are protected under Ontario’s Collection and Debt Settlement Services Act. Knowing your rights helps you respond confidently and appropriately so you can properly defend and protect yourself.
| Right To Proper Notification | Before contacting you, a collection agency must send a written notice that includes: – The creditor’s name – The amount owed – The agency’s contact information – They cannot call you until six days after this notice is sent. |
| Right To Limited Contact | Collectors may only call: – Monday–Saturday: 7am to 9pm – Sunday: 1pm to 5pm – No calls on statutory holidays |
| Right To Privacy | Collectors may contact third parties only to obtain contact details or to verify employment; they cannot disclose the debt or demand payment from friends or family (except cosigners). |
| Right To Dispute | You can (and should) request written verification of the debt and ask the collector to communicate in writing. If the agency continues to act unlawfully after you dispute the debt, complain to Consumer Protection Ontario (or other relevant regulator). |
Learn more: Canadian Debt Collection Laws: How To Stop Collection Harassment
What Debt Collectors In Ontario Can & Cannot Do
As mentioned, debt collectors in Ontario are required to adhere to strict rules when it comes to collecting unpaid debt. Understanding their obligations is important to ensure you can identify whether you’re being treated fairly or not.
What Collectors Are Allowed To Do
Debt collectors are allowed to do the following:
- Contact you about an outstanding debt.
- Contact you within specific hours.
- Provide information on your account and repayment options.
- Contact your employer only for employment verification.
What Collectors Are NOT Allowed To Do
Debt collectors are not permitted to do any of the following:
- Harass, threaten, or use abusive language.
- Contact your friends, relatives, or employer about the debt (except in specific legal cases).
- Charge unauthorized fees or interest.
- Misrepresent themselves as law enforcement or legal representatives.
- Contact you outside permitted hours.
- Continue contacting you after you’ve requested communication in writing only.
Learn more: What Can A Collection Agency Do To Me In Canada?
What Is The Statute Of Limitations On Debt Collection In Ontario?
In Ontario, the statute of limitations on debt collection sets a limitation on how creditors or collection agencies pursue unpaid debt. More specifically, the statute of limitations in Ontario for debt collection is two years, which means debt collectors have two years from the date they became aware (or should have become aware) of a missed payment or default to initiate legal action to recover the debt.
The statute of limitations clock typically starts at either the last payment, acknowledgement of the debt, or first default, as per the Limitations Act of Ontario. Making a payment or admission can reset this clock.
It should be noted that this does not erase the debt itself. It only limits the time that collectors have to file a lawsuit. After the two-year period expires, collection agencies cannot sue you in court, though they may still try to collect the debt in some way.
| Note: The limitation period can reset if you make a payment or acknowledge the debt in writing. Understanding this timeline is crucial for protecting your rights and responding appropriately to collection efforts. |
Learn more: Statute Of Limitations In Ontario For Debt
What To Do If A Debt Collector Is Breaking The Law In Ontario
If you feel that a debt collector is breaking the law, you can do something about it:
Send A Formal Letter
The first thing you should do is send the agency a letter that includes the following:
- What they did wrong.
- How their actions violate Ontario’s debt collection laws.
- Your expectation that they comply with the law right away.
Keep a copy of this letter for your records.
Gather Evidence
If nothing happens and they continue to break the law, collect proof and supporting documents to back up your statements, which may include:
- Digital call recordings
- Letters or emails from the agency
- Statements from your employer, friends, or family
File A Complaint
Armed with this evidence, you can file a complaint with the government.
How To Get Help With Debt In Ontario
Struggling with debt can be overwhelming, but there are several strategies and programs available to help you deal with your mounting debt:
Credit Counselling
Non-profit credit counselling agencies offer free or low-cost advice, budgeting help, and debt management plans. They negotiate with creditors to reduce interest and consolidate payments.
Debt Consolidation
Debt consolidation involves combining several debts into one loan, ideally with a lower rate. It simplifies repayment and may reduce monthly costs.
Consumer Proposal
A consumer proposal is a legally binding agreement filed through a Licensed Insolvency Trustee (LIT) that allows you to settle your debt for less than what you owe. It stops collection calls and legal action.
Bankruptcy
As a last resort, bankruptcy eliminates most unsecured debts and must be filed through an LIT. However, it has long-term credit consequences and may result in the loss of valuable assets.
Learn more: Debt Relief Guide
Final Thoughts
Understanding debt collection laws in Ontario will empower you to deal confidently with creditors and collection agencies. By knowing your rights and the restrictions placed on debt collectors, you can protect yourself from unlawful practices. Staying informed is key to maintaining control over your financial situation and ensuring that you’re treated fairly.
