What tactics will debt collectors use to recover overdue bills?

Collection agencies use many tactics to enforce repayment of debt. The most common methods are phone calls and letters. However, depending on the amount owed, the situation can quickly escalate to threats of legal action — which, in turn, can result in wage garnishment and even asset repossession.

Know your rights

If you’re experiencing financial difficulty and feeling the stress of debt collection, you might be relieved to learn there are limits to how far a collection agency can go in their methods. Each province and territory has their own set of rules regarding collection practices which are administered by the applicable consumer protection agency.

While these rules do vary, they’re generally more similar than not. For a general idea of debt collection rules in your province, consider those established by the Consumer Protection Office of Manitoba.

A debt collector cannot:

• Phone or visit before 7:00 a.m. or after 9:00 p.m.
• Phone or visit on a Sunday or statutory holiday
• Deliberately mislead you with a paper that looks like a legal or court
• Harass you or your family
• Harass neighbours or friends to locate you or your family
• Threaten to repossess goods without having proper authority
• Remove any goods — except with court authority — unless you (or an adult having possession and use of the merchandise) is present and is aware of the removal
• Seize or attempt to seize any item other than what they are authorized to
• Collect via telegram

A collector must also identify their personal name, the name of their employer, the name of the business or person who is requesting money, and the balance owing. They may not request more than what is owed — service fees for collection agents cannot be added to the sum owing unless the law provides for it.

If you decide to make a payment to the collector, request a signed receipt. The receipt should be dated and include the name of the business or person requesting payment and the amount paid.

Collection in the social media age

Collection through social media channels is relatively new and Canadian authorities have not yet established clear rules surrounding the practice.

The U.S. Consumer Financial Protection Agency Bureau recently approved a new set of parameters for debt collectors to make contact on social media (e.g., Facebook, Instagram, Twitter), text, and email. Collectively known as the Debt Collection Rule, this framework may provide some hints to where our own regulations may be heading.

Per the U.S. Debt Collection Rule:  

• Collectors must clearly identify themselves immediately. For example, they cannot send a friend request and not say who they are and the reason for making contact.
• Collectors can only send private messages and must offer an opt-out option for receiving further messages via social media, email, or texts.

Until Canada implements similar rules, be aware debt collectors can use social media platforms to learn more about you. They can use public details such as contact information and where you work to contact your employer or even advance to eventual wage garnishment proceedings.

Initiating legal action

While most debt collection involves a steady volume of calls and letters — which are stressful enough — the situation can also escalate to legal action and potential judgements involving wage garnishment or property repossession.

If you cannot pay a debt, a collection agency or creditor may take you to court to obtain a judgment. Your creditor or a debt collector will initiate this process by serving you with a statement of claim. You will typically have 20 days from the date you are served to file a defence.

Judgements may include:

• Wage garnishment
• Liens on property and/or property seizure
• Costs and interest associated with the court proceeding

If you fail to appear in court a judgment may be granted by default.

Repossessing property

Creditors may only repossess property if you have pledged the asset(s) as collateral on the loan, or if the creditor has obtained a judgment in court and is executing a writ of seizure and sale.

Most provinces and territories have similar rules regarding the repossession of property purchased on credit with an outstanding balance. In Manitoba, you must receive written notice within 48 hours (excluding weekends and statutory holidays) if goods are repossessed due to default.

This notice must advise you:

• The goods have been repossessed
• Date the repossession occurred
• Minimum payment to have the goods returned
• How the amount owed is calculated
• Deadline to reclaim the goods (must be at least 20 days after the notice of repossession)
• Location the company is storing the merchandise

Repossession must also be performed by a licensed collection agent or the creditor. You may check with your provincial or territorial consumer protection agency to confirm if a collection agent is licensed.

Statutes of limitation

Believe it or not, creditors often have a timeline with which to collect on outstanding debts. The rules surrounding this issue are complex, and typically depend on when the debt was acknowledged. Timelines also vary significantly by jurisdiction typically, ranging anywhere from two to six years.

Consult the appropriate statute of limitation in your province or territory. If you need someone to clarify the legislation, a Licensed Insolvency Trustee can help.

Keep the creditors at bay

If you are struggling with debt and aggressive collection methods are causing you stress, contact a MNP  for a Free Confidential Consultation right away. Together with a Licensed Insolvency Trustee, you’ll review your financial situation and discuss all the available options for a financial fresh start.

Aside from providing a clear path to permanent debt relief, both Bankruptcy and Consumer Proposals include a stay of proceeding which comes into effect immediately. This puts an immediate end to any ongoing collections calls, wage garnishments (with some exceptions), and other creditor actions. It also prevent creditors from contacting you or pursuing a court judgement against you for as long as the debt solution is in place.

Don’t let your creditors run your life. We can help you shed your stress and take back control with a more affordable path forward and a clearer path to debt freedom.