It’s a debt collector’s job to track down people with overdue debts and get them to pay, but that doesn’t mean they can try to get the money by any means necessary. Know your rights when dealing with collectors — and what to do if your rights are violated.
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Step 1: Know when debt collectors will get involved
Collection agencies usually won’t get involved straight away. In most cases, your credit card issuer will contact you after more than 30 days have passed without a debt payment.
After 180 days (6 months), the account is considered “in default” and you will no longer have access to your credit. Your issuer can then choose whether or not to enter the debt collection process. Some issuers may continue to directly contact you after your account is in default, but others may use a debt collector to deal with the situation.
Step 3: Prepare for actions debt collectors can take
If written, phone or face-to-face contact doesn’t lead to an agreement between you and the debt collector or collection agency, they have 2 other options:
Legal action. If you don’t pay the debt, the collector can seek a court order to garnish your wages. Depending on the province you’re in, they could take up to 50% of your disposable income if they win.
Repossession. If your debt is significant, your lender can initiate proceedings to repossess any assets used as collateral.
Dodging debt collectors — a very bad idea
Getting a call from a debt collector can be stressful, but know that they’re not your enemy. Avoiding calls from debt collectors can lead to even more unpleasant situations and, in the end, you’ll still have to pay.
Instead, be upfront. Work with the collection agency. Let them know how much you can afford to pay and be realistic about it. After all, you and the collection agency likely want things to be over as soon as reasonably possible.
Step 4: Find the solution that works best for you
When you’re having trouble making credit card payments, the sooner you deal with credit card debt issues, the better chance you have of working out payment terms that fit your circumstances. Steps you can take include:
Contact your credit card issuer. Let your issuer know about challenges or changes in your circumstances so they can work with you to arrange a repayment plan. Many credit card issuers have support and hardship officers available to help you work through these difficulties before things get even more out of hand, so it’s important to contact them as soon as you can.
Talk to a financial counselor. Financial counselors can give you specialized advice based on your situation, and may also negotiate with lenders on your behalf. You can also find tips from experts online. The National Foundation for Credit Counseling website has more information about these services if you want to get in contact with someone near you.
Consider debt settlement. Debt relief companies help you negotiate with your lenders to settle debts for less than you owe. This might be a helpful option if you can’t afford to pay the debt.
Seek free legal help. There are community legal centers and free legal aid services across Canada. The Department of Justice has a list of free legal aid services you can access in every province and territory when you need support and guidance with your debts. The Canadian Bar Association also has information on free legal aid services for qualified individuals as well as pro bono organizations that offer legal assistance for little or no cost.
Step 5: Follow through
The most important step you can take is to follow through on the plans you make. If an agreement is reached with a collection agency, abide by it. If you’re working with a financial adviser, stay on top of all communications with them.
Debt only grows more daunting as you ignore it, and collectors can exponentially increase that feeling. Make a plan and stick to it to find your way back to financial freedom.
However, balance transfers aren’t for everyone. They often come with fees, and you may not be able to pay off the debt within the introductory period if you can’t make large enough payments.
Evaluate your debt and do the calculations to see if a balance transfer will save you money in the long run.
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Your rights when dealing with debt collectors
Confrontation by a debt collector can be intimidating, so it’s important to know exactly what your rights are if they contact you. While collection agencies are under provincial regulation, banks as well as many trust and loan companies are considered federally-regulated financial institutions (FRFI) and must adhere to a number of rules. Some of the key things to keep in mind include:
Respectful and polite behaviour.
Collectors cannot apply excessive or unreasonable pressure on you to repay your debt, nor are they allowed to use threatening, intimidating or abusive language. They also can’t suggest to your friends, family, neighbours or employer that they should repay what you owe unless those people are guarantors or cosigners of your debt.
Collectors may not call you on your cell phone unless you’ve provided this number as a way to contact you. Again, they may not reach out to your friends, family, neighbours or employer to get any information other than your phone number and address unless:
You’ve consented to this
These people are cosigners/guarantors of your debt
Your employer is being contacted to confirm your employment.
Collectors may not contact you on holidays or outside the following hours:
Monday through Saturday, 7am-9pm
Disputing the debt.
If you don’t believe the debt is yours, or if you disagree with the amount that is owed, you have a right to legally dispute it. Exact legal procedures vary across provinces and territories, but a good first step is to contact the collection agency to correct the mistake and explain that you don’t owe anything. It may also be necessary to contact your creditor to correct any mistakes they may have on file. If the issue remains unresolved, you may want to speak to a lawyer about next steps.
You have a right, at any time, to seek legal advice to deal with debt. In some cases, you may want to inform the debt collector that you plan to seek legal advice and suggest a time for them to contact you or a representative who will speak to them on your behalf.
Debt collectors have no right to mistreat you. Don’t hesitate to make a formal written complaint to the debt collection agency about any unreasonable behavior.
Contact the Financial Consumer Agency of Canada to report FRFI violations of these rules. Alternatively, contact your provincial office of consumer affairs to report violations committed by provincially-regulated institutions.
What to watch out for
There are several things to be wary of when it comes to debt collectors.
Forceful tactics. Don’t let the debt collector pressure you into paying before you’re certain the debt is legitimate. Request validation of the debt in writing the first time you’re contacted — they’re legally obligated to comply.
Mistaken information. Verify the debt amount and any information associated with it against your own records. If they don’t match up and you don’t think you owe the debt, dispute the debt in writing.
Misleading information. If a debt collector tries to convince you they’ll garnish your wages, take money from your bank account or send you to jail if you don’t pay, know your rights and report them if necessary.
Debt collectors can be intimidating, but knowing your rights and having all your financial ducks in a row can help ease your anxieties. You may not be able to steer clear of the entire process, but you can fully own what’s in your control.
Debt collectors will set up a debt payment agreement with you through their agency. There may be an interest rate depending on the particular debt agency, but generally, there’s only an agreed amount and payment term. Your creditor, however, may have added penalties and interest fees onto your debt (according to the terms and conditions of your agreement) prior to sending it on to collections. So, you could be facing extra charges anyway.
The time limit that creditors have to pursue legal action for your unpaid debts (called the “statute of limitations”) varies among provinces and territories, with most jurisdictions opting for a limit of either 2 or 6 years. If a court order is involved, this could potentially go up to 10 years with the option to renew for another 10 years. Consult an attorney to discuss the laws that could apply to your specific situation.
It’s ideal that you repay your debt before you leave or as soon as possible because the process to collect the outstanding debt does not change regardless of location. When you return, you could have an unfavourable court ruling staring you in the face and be required to hand over some of your assets.
Canada’s 2 main credit reporting bureaus, Equifax and TransUnion, typically keep defaults on file for 6-7 years. Creditors can report old debts again, though, and get those records back on your credit file.
The bank can do this only if it has included a provision in its agreement with you that gives it the “right of offset” (or “right of set-off”). Such a provision allows the bank to recover any money you owe – for example, on a credit card or loan – by taking money you’ve deposited with it or one of its affiliates.
Right of offset statements are often placed in agreements for accounts, loans, or credit cards and may sound similar to the following: “We may debit any other account you have with us with the amount of any payment you are required to make to us and credit the amount to the outstanding debt under this agreement.”
Any unpaid credit card debt that you haven’t addressed with your bank could lead it to take money from your account (if it has the right of offset) or consider using a debt collector to settle the account, so you’ll want to pay up as soon as possible.
Kliment Dukovski is a credit cards writer. He's written over 600 articles to help readers find and compare the best credit cards. Kliment has also written on money transfers, home loans and more. Previously, he ghostwrote guides and articles on foreign exchange, stock market trading and cryptocurrencies.
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