Surprisingly, even financially stable people have debts with collections agencies. With life’s ups and downs, it’s easy for a phone bill or loan payment to slip your mind. In this article, we’ll answer commonly asked questions about debt collections.
Common Debt Collection Questions
1. Are debt collection agencies regulated?
Yes. The Ministry of Government and Consumer Services regulates debt collection agencies in Ontario. To operate, debt collection agencies must register with the Ministry of Government. In addition, they must register with the Consumer Services Registrar of Collection Agencies. Every two years, the registrations renew. Individual collectors are not required to register. Debt collectors must abide by the debt collection practices act.
Debt agencies and sole collectors must also abide by the Collection and Debt Settlement Services Act. They face enforcement action if they do not comply.
2. Are debt collection fees tax deductible?
Debt collection agencies cannot charge you any fees. There is nothing to tax deduct.
3. Can debt collection agencies take you to court?
It is not good to ignore collection calls. Failure to communicate intent to pay, negotiate or dispute debt can cause more issues. The debt collector may escalate to legal action. They might also advise the original creditor to file a lawsuit against you. The collector cannot take you to court without the written authority of the lender. However, there can be exceptions.
In some cases, the debt collections agency can act as the plaintiff in a court proceeding, but only if:
- The creditor has no interest in the debt;
- The collection agency notifies the debtor that there was already a legal proceeding before they assigned the debt; or
- The creditor did not initiate a legal proceeding before assigning the debt
A debt collection agency must also notify you if they intend to advise legal action to the creditor. Finally, be aware of the statute of limitations on your debt. If enough time passes, a creditor or debt collection agency cannot sue you in court for the debt.
4. How does debt collection work?
If you’ve missed payments on your debt, that amount becomes delinquent debt. Your creditor might assign your overdue debt to a collection agency. When collecting debts, an agency must first contact you with a letter. Written notice is legally required before escalating to other action. Six days after serving written notice, a debt collector can start calling to collect. But, they cannot call more than three times a week.
Debt collection agencies will call you for weeks, sometimes even months, to collect. Additionally, they might contact your family or employer to obtain your personal information. For example, your address or telephone number. The calls stop once you pay or address the debt.
5. How do I dispute debt collection?
You can dispute debt collection by contacting the collection agency. When you get in touch, inform them of your dispute. You might consider using email or a mail courier instead of making a phone call. These communication methods provide proof of your message to the collector. Debt collection disputes can lead to legal consequences. The creditor who passed your debt to the agency may take legal action against you. For example, filing a lawsuit.
The benefit of disputing debt is ending contact from the collector. Legally, the collection agency cannot contact you without your consent after a dispute.
6. How do I negotiate debt collection?
You can call the collection agency and ask to negotiate a payment plan to settle your debts. Remember, agencies are usually willing to negotiate if it means getting paid. They cannot obtain funds from your bank account. Instead, they rely on your communication to settle the debt.
Before you call:
- Make sure you know your rights and debt collection agencies’ responsibilities.
- Verify that the debt is yours.
- Take a hard look at your finances and assess how much money you can pay. Perhaps you have enough to offer a lump sum payment. Or maybe you can ask the agency to consider monthly payment plans.
During the call:
- Start negotiating with a number lower than what you’d be willing to pay. Since the agency’s first priority is to get money from you, there’s always a chance that they’ll accept a lower payment.
- Don’t disclose too much information, as the collector may use it against you.
- Don’t get emotional. Collectors use tactics that play on your emotions. Remember this and remain calm if it happens.
- Take notes.
- Insist that the collector provide you with an agreement made over the phone in writing.
If you aren’t confident in your negotiations skill, consider using the services of a credit counsellor or debt settlement company. They can help negotiate a payment plan on your behalf.
7. How to report debt collection harassment
If a debt collection agency is harassing you, you can file a complaint with the Ministry of Government and Consumer Services. Alternatively, you can send the agency a cease and desist letter. Harassment might look like any of the following scenarios:
- Pressuring you
- The collector contacts you on a statutory holiday, three or more times in a seven day period without your consent
- Sharing misleading or false information to anyone about you, including to your family, friends and employer
- Threatening, swearing at, or intimidating you
Before filing, you should inform the agency of your intent to file a complaint. To assist with your complaint, you should keep a record of the incidents with the debt collector. These details will become helpful when emailing or writing a letter to file a complaint. Include the following information in your notice:
- The debt collection agency’s name
- Description of rights violation and harassment
- Whether or not you’ve contacted the Ministry of Government and Consumer Services
After you inform the agency, you can file your complaint online. The Ministry will review and respond within 15 business days. They may also contact you to request more information.
8. Does debt collection hurt your credit?
Yes. Debt collection agencies can report your debts to the credit bureaus. The debt can stay on your credit report for seven years and hurt your credit score.
9. Will paying a debt collector hurt my credit?
Paying a collector doesn’t hurt your credit more than your credit is already affected by the debt in collections. If you pay the debt, the agency should report the payment to the credit bureau. However, it will likely still remain on your credit report for a few years.
10. Do I have to give a debt collector my social security number?
No. If a debt collector asks you for this information, file a complaint immediately. Your social security number is important. Only provide it to people you trust.
Receiving calls from debt collectors can be stressful. Make sure you are aware of your rights and the rules debt collection agencies must follow. If you’re struggling with paying your debt, consider debt relief today.