Understanding debt collection in Canada: Protecting your financial health

Debt collection can be a daunting experience for many Canadians. Navigating the process alongside MNP’s team of experts can help you better understand how it will impact your credit score and gain the knowledge needed to maintain your financial health well into the future.

What debt collection looks like in Canada

Debt collection in Canada is governed by both federal and provincial laws, ensuring consumers are protected from unfair practices. When you fail to make payments on a debt, your creditor may take several steps to recover the money owed. These steps can include:

1. Internal collection efforts: Initially, your creditor may use their own collection department to contact you and attempt to recover the debt.
2. Hiring a collection agency: If internal efforts fail, the creditor may hire a third-party collection agency to recover the debt on their behalf.
3. Selling the debt: In some cases, the creditor may sell your debt to a collection agency which then becomes the new owner of the debt and is responsible for collecting it.

It’s important to verify the legitimacy of the agency and the debt before making any payments.

Your rights when dealing with debt collectors

Canadian law provides several protections for consumers dealing with debt collectors. These rights include:

• Limited contact: Debt collectors can only contact you during specific hours and are prohibited from contacting you on holidays or Sundays, except between 1 p.m. and 5 p.m.
• No harassment: Debt collectors cannot use threatening, profane, or abusive language, nor can they apply undue pressure or misrepresent the situation.
• Privacy protections: Debt collectors are restricted in their ability to contact your family, friends, or employer about your debt.

If you feel that a debt collector is violating your rights, you can file a complaint with the appropriate regulatory body in your province or territory.

Impact on your credit bureau

When your debt it sent to a collection agency, it can have significant impacts on your credit score. Credit bureaus, such as Equifax or TransUnion, track your borrowing and repayment history and a collection account can lower your credit score.

The negative impact on your credit score can last for several years, making it essential to address collection accounts promptly. Paying off the debt or negotiating a settlement with the collection agency can help mitigate the damage to your credit score.

How MNP Ltd. can help Canadians protect themselves

Debt collection can be a stressful and challenging experience, but understanding the process and knowing your rights can help you navigate it more confidently. The impact on your credit is significant, making it essential to address collection accounts promptly.

If you’re struggling with debt MNP Ltd. experts can provide a free consultation to help you take back control of your finances and achieve lasting relief from debt.