Receivable/Accounts - Information for Credit and Collection Issues

Friday, July 6, 2012

Cease and Desist Letters





Our office has received on occasion letters from lawyers demanding that we cease and desist collection activity on an account.

Our most recent letter received was from a law firm. This letter was titled “without predjudice”, and required our office to cease contacting a debtor, and to not affect their credit rating. This letter, to our experience, was highly flawed on a number of topics, it seems like a good topic of discussion for this week.



Stopping the Collection Agency

Many provincial collection agency laws in Canada require a collection agency to cease collection calls if so instructed in writing. Other provinces allow the consumer to request documentation for the debt.

For example, Ontario law states ”If a debtor sends a collection agency or collector, by registered mail, a letter stating that the debtor disputes the debt and suggests that the matter be taken to court, the collection agency or collector shall not thereafter contact or attempt to contact the debtor, unless the debtor consents to or requests the contact.”


This stipulation is for telephone contact, not for written notices. Furthermore, while this will halt collection activity, it will not halt the consequences of the collection activity, such as a small claims court or general court action if the balance is significant and a place of employment is know, or reporting the debt to the credit bureau.



Don’t Touch My Credit Rating!


Many of these letters demand that a person’s credit rating not be adversely affected. While collection laws govern collection activity, none of them specifically address credit reporting of debts. Each province has its own laws for addressing disputes on reported debts – consult your provincial collection laws for specifics.


The major credit bureaus, Trans Union and Equifax each have their own dispute process for consumers, which you can find here:

http://www.consumer.equifax.ca/dispute-ca/dispute_process/en_ca
http://www.transunion.ca/ca/personal/consumersupport/faq/disputes_en.page


Each of these dispute processes involve contacting the agency to validate or prove the debt – if the debt is verified, the negative rating remains on the credit bureau, regardless of any cease and desist letter.



"Without Predjudice"


Many lawyers (and consumers who have been exposed to the term) label letters “without predjudice”. It would be worth explaining that in a cease and desist letter, this term carries no weight, and means nothing. 


There is a few excellent articles that details the use of “without predjudice” here:


http://bcfamilylawresource.blogspot.ca/2009/09/whats-without-prejudice-and-whats-not.html
http://www.ontariolegal.com/blog/?p=146



Do It Yourself!


While some agencies might give more credence to a letter from a lawyer, retaining a law firm and paying an amount to have a lawyer’s letter sent is an expense that would go to better use, I am sure. Some law firms market cease and desist letters as a product, and it is worth stating, from an agency perspective, the letterhead at the top of the letter bears little impact to what actually happens to the collection file.

If you must send a cease and desist letter, I would recommend you do so yourself first. A registered letter will cost you a small amount of time and money. If the collection agency disregards your letter (which they shouldn’t), then by all means retain a lawyer.



Threats and Intimidation


Many law firms stand by the position that because they are representing a consumer, the agency will automatically back down. This is no better than a collection agency using intimidation tactics to pursue a debt in the first place.

If a debt is legitimate, one letter will not resolve the issue. If the collection agency representing the creditor is legitimate, the client is legitimate, and there is a financial obligation from the consumer, the debt stands, and the consequences will be brought to bear.



Why Are You Telling Us This?

Understand the collection agencies’ standpoint – our office reports millions of dollars of outstanding debt to the credit bureau each month, and we have banks of filing cabinets with client backup, and gigabytes of scanned debt documentation, if not the ability to contact our client to retrieve proof of debt easily. Proving a debt or enforcing consequences is as efficient and painless for our firm as contacting someone by phone.

If we hear from a debtor that they refuse to deal with the debt, we proceed with action, rather than continue to call the debtor over and over.  Some agencies may not operate this way, but "beating a dead horse" does not result in payment 99% of the time.

To our company, a cease and desist letter is the same as a verbal refusal to pay a debt – we determine the debt is not going to be resolved, and we proceed to consequences.

If a dispute is legitimate, of course our company would of course cease and desist collection activity, and remove unproven debts from the credit bureau, but our office attempts to vet our clients before they start listing files with us, and we only want legitimate debt listed with our company.

Consumers have a right to know what steps they can take, and should not be misled by being told that paying a lawyer $150 to send a cease and desist letter will make all their problems go away – all it will do is cease the telephone calls, something the consumer could do themselves.



Conclusion

If you are interested in knowing your rights, as either a creditor or a consumer, by all means contact my office for further information. My office number at Kingston Data and Credit is 226-444-5695.

Blair DeMarco-Wettlaufer
Kingston Data and Credit
Cambridge, Ontario
bwettlaufer@kingstondc.com