If you stop making payments, lenders or credit card companies will try to collect payments from you directly. Beginning with an overdue notice on your bank statement, the lender may later escalate to phone calls, emails, and other forms of contact if you still do not make any payments. If you do not respond or make a payment, your lender may take more severe actions. Generally, once an invoice is 90 days past due or more, lenders and credit card companies will not hesitate to sell your debt to a collection agency.
If a collection agency takes over your debt, they are required by law to notify you before they come after you to collect what you owe. The notification should be in writing and should be sent to you within 5 days of the agency’s attempt to get in touch with you.
The notice should include the following information:
The debt collection process may work slightly differently from one province to the next. That said, the general process typically involves the following steps:
As mentioned, you should first receive a written notice from the debt collection agency. The letter will request that you continue repaying what you owe and notify you of the agency’s intent to collect your outstanding debt.
Legally, debt collectors are allowed to call you 5 days after they send you a written notification. If they cannot get a hold of you because you’ve changed your phone number or address, they are legally permitted to reach out to your family, friends, and employer, but only for the purposes of obtaining your phone number or address.
You may try to ignore calls in an effort to avoid dealing with the agency, but they can be persistent and will likely make repeat calls if you don’t answer. Eventually, they may try other avenues to collect what you owe, including taking you to court.
When the debt collection agency finally makes contact with you, they must provide you with evidence of the outstanding debt you still owe. More specifically, they’ll need to provide you with the following information in writing:
Once you’ve been provided with all the required information about your debt, you’ll need to find a way to pay it back. If you’re unable to pay the entire amount back right away, explain your situation to your debt collector and offer up an alternative solution to avoid any further or more aggressive debt collection actions.
If you’re unwilling to pay back the debt you owe, the debt collection agency may attempt to get you to settle your account by taking legal action.
If you don’t pay back your debt, you may be subject to litigation if the agency believes it will help them collect. They must provide you with at least 21 days’ notice in advance of legal action.
You’ll need to attend a court hearing if the debt collection agency takes legal action against you. If the judge determines that you are required to repay the amount the debt collection agency is suing you for, a judgment may be signed that will require you to legally pay off your debt.
With a judgment signed by the court judge, your debt collector has the authority to garnish your wages as a means to satisfy the debt owed. Otherwise, you may have to file for bankruptcy or a consumer proposal to get out of the debt, which can have significant consequences on your credit.
Depending on whether or not your lender has already sold your debt to a collection agency, here’s what you can do:
If you find out that your creditor plans to transfer your debt to a collection agency, you should get in touch with your creditor immediately to see if you can work out an arrangement to settle your debt.
For instance, you may negotiate with the creditor to pay either some or all of what you owe to avoid collections. You may also be able to make alternative arrangements with the creditor to repay your debt.
If the debt has already been transferred to a debt collection agency, you have some options:
Your credit score can take a hit if your debt is transferred to a collection agency. The debt will show up on your credit report as outstanding debt that has not been paid and has gone to collections. When this happens you’ll receive a credit rating of R9, which is the lowest credit rating you can receive.
Payment history is the most important factor in your credit score. A history of missed debt payments can also have a negative effect on your scores. Even if the debt collection agency gives up and stops calling you, the debt will still show up on your credit report, which can pull your credit score down.
It’s important to note that even if you fully repay the debt, the collection may still be recorded on your credit report, unless your creditor agrees to remove it.
Debt collection can significantly negatively affect your credit. A low credit score can be detrimental to your financial and credit profile. You’ll have a tougher time getting approved for loans and credit products. And even if you’re able to secure a loan, you may be charged higher interest, which will make your loans more expensive.
Low credit can also extend beyond loan products and can also negatively impact your ability to get hired for a job, sign a lease, obtain insurance, or even sign a cell phone contract.
It’s important to understand your rights when your debt has been sent to collections. Debt collectors are not allowed to do any of the following:
To find out more about your rights when your debt has been sent to collections, you can call the federal Consumer Affairs office, or the office in your province or territory:
| Province | Phone Number | |
| British Columbia | 604‑320‑1667 Toll Free: 1‑888‑564‑9963 | info@consumerprotectionbc.ca |
| Alberta | 780‑427‑4088 Toll Free: 1‑877‑427‑4088 | service.alberta@gov.ab.ca |
| Saskatchewan | 306‑787‑5550 Toll Free: 1‑877‑880‑5550 | consumerprotection@gov.sk.ca |
| Manitoba | 204‑945‑3800 Toll Free: 1‑800‑782‑0067 | consumers@gov.mb.ca |
| Ontario | 416‑326‑8800 Toll Free: 1‑800‑889‑9768 Phone (TTY): 416‑229‑6086 Phone (TTY) 2: 1‑877‑666‑6545 | consumer@ontario.ca |
| Quebec | 418‑643‑1484 Toll Free: 1‑888‑672‑2556 | N/A |
| New Brunswick | 1‑866‑933‑2222 | info@fcnb.ca |
| Nova Scotia | 902‑424‑5200 Toll Free: 1‑800‑670‑4357 | askus@novascotia.ca |
| Newfoundland & Labrador | 709‑729‑2600 Toll Free: 1‑877‑968‑2600 | consumeraffairsaccount@gov.nl.ca |
| Prince Edward Island | 902-368-4550 Toll Free: 1‑800‑658‑1799 | ccs@gov.pe.ca |
| Yukon | 867‑667‑5111 Toll Free: 1‑800‑661‑0408 (ext 5111) | consumer@gov.yk.ca |
| Northwest Territories | 867‑767‑9161 (ext. 21022) | consumer_affairs@gov.nt.ca |
| Nunavut | 867‑793‑3303 Toll Free: 1‑866‑223‑8139 | consumerprotection@gov.nu.ca |
| Federal | 1‑800‑328‑6189 | N/A |
When taking out a loan or line of credit, you make a promise to a lender to pay back the entire amount loaned, plus interest. If you’re having trouble paying back your loan, be sure to contact your lender to try to find a solution. You can also contact a credit counsellor to help you manage your debt and explore different debt relief options.
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Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.
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