Receivable/Accounts - Information for Credit and Collection Issues

Wednesday, August 2, 2017

More Change to the Ontario Collection & Debt Settlement Services Act


Well, this has come as a surprise … recently, Bill 59 was passed (which you can read here) outlining changes to a number of acts, including the Collection & Debt Settlement Services Act of Ontario – most of these changes were fairly straight forward, adding debt buyers under the licensing structure and communication rules with consumers that collection agencies must comply with.  However the collection laws in Ontario are broken into the Act itself, and then the associated regulations that deal with the enforcement and minutiae of the Act – the Ontario government is now accepting consulting and input from stakeholders, and has proposed a number of both expected and unexpected changes.  

You can read the notice from the Ontario government here:

http://www.ontariocanada.com/registry/view.do?postingId=24505&language=en 

Some of the proposed changes to the Regulations were expected, and understandable.

==>  Debt purchasers requiring regulation, which is perfectly reasonable.  However, there is a suggestion in the regulations that a creditor cannot collect debts for anyone else – this would prevent agencies from dabbling in debt purchasing as well as contingency work – they would have to be one or the other, not both.  It would probably only affect a handful of agencies, but it would be a dramatic impact to those companies.

==>  The implementation of administrative penalties was expected, and the regulations are a bit softer than initially proposed, but there is still no exemption or no-fault avenue when it should exist (for example, a collection agency calls a 416 area code number, believing the consumer lives in Toronto, when in fact they have kept their cellular number but moved to British Columbia, and the call is outside of allowed call times).

However, there were some very surprising proposed changes, some of which I can see being suggested based on news articles or interaction the Ministry of Consumer Services has had with collection agencies and law firms over the last year or two …

==> Limiting the exemption of lawyers and law firms performing collection and debt settlement services – I can see the need for this, but I’m honestly surprised that the Ministry is pushing this forward.  If worded correctly, it will be a good thing for consumer rights and protections.  Currently law firms bypassing the maximum fee of 10-15% for debt settlement or call frequency limitations or letter wording when collecting on small or statute-barred accounts will have to license as collection agencies – this isn’t an onerous process for them, but after licensing, they will need to change their fee structure and work flow to be compliant with the prohibited practices.  Law firms calling as part of the process of civil litigation will remain the same, but the practice of setting up equivalent collection floors or selling hundreds of legal demand letters to go out on $200 balance accounts that would never even see a Statement of Claim will have to be tracked under the Act.

==>  Adding an exemption for paralegals, but within the new limited scope of lawyers listed above.  This strikes me as fair, as paralegals often have to negotiate when filing or defending civil claims, but the limitations imposed on lawyers will limit them from setting up de facto debt settlement companies or collection agencies without licensing.

==>  The addition of an exemption to property managers or mortgage brokers collecting rent or condominium fees is a small surprise, as I hadn’t even thought of that, but is a reasonable allowance – every property management company shouldn’t have to license as an agency or manage a trust account.  Nice addition.

==>  Another reasonable addition is an exemption for factor companies who purchase receivables and call as the original commercial creditor.  A fair addition.

==>  The revised first notice rules finally address what can be done when no valid address is received by a collection agency – too often with utility companies or property management companies, the last known address is invalid when submitted to an agency, and lettering a file when the letter will most certainly be returned is ridiculous.  The proposed wording isn’t as clear as I would like when dealing with a consumer who cannot be reached, or might refuse their current address, but I’m sure this can be cleaned up with the consultation.

==>  Allowing an exemption for physically mailed letters when all parties agree to email is a positive addition, and properly avoids the thorny issue of shared email accounts that British Columbia did not really handle in their most recent changes to their provincial collection laws.  Nice addition.

==>  Preventing credit reporting without an initial notice is a good change in theory, but again, what about the scenario of consumers who cannot be reached, are trace accounts, or refuse their current address?  If they can add in language saying ‘first notice or 30 days from assignment’, or somesuch provision, that should solve that cloudy issue.

==>  Requiring reimbursement for consumers who have incurred costs from contact – something I would do with my agency in any case.  If a consumer called us and demanded they be reimbursed for $0.45 in text charges or pay-per-minute charges on a pre-paid cell phone, to solve the issue we would issue them a cheque – glad to see this clarified as a best practice for all agencies.  That being said, they should probably add an exemption for consumers who give consent to communicate on that number – on the debt settlement side, it wouldn’t be fair for a consumer to retain a debt settlement company, provide a cell number, work out their debts, and then later ask for $12.00 back to cover conversations stretching back six months.

==>  Removal of the bond requirements was not expected, and removes some bureaucracy and costs – not a bad change.

==>  The requiring of call recording is a reasonable suggestion for established agencies, but I would be concerned that it is an impediment to new agencies just starting out without extensive technical knowledge.  That being said, we were able to build Asterisk phone servers for our branches for free with VICIBox (www.vicibox.com), and anyone with some knowledge of Linux and Asterisk could do the same.  I’d recommend maybe giving new agencies a grace period of the first two years without this requirement, and when their license comes up for the first renewal they would need this in place.  There should also be a defined period of how long a call recording must be kept – I’d suggest two years.

As always, there’s a lot of ripple effects that could affect our industry in significant ways, so I’d recommend reading over everything and give it some thought and consideration, and send commentary a the link provided above -- the Ontario government will accept commentary up to September 8th, 2017.

Thanks kindly,

Blair DeMarco-Wettlaufer
KINGSTON Data & Credit
T 226-946-1730
E bwettlaufer@kingstondc.com