This week we received a notice in the mail from the Ontario Registrar of Collection Agencies, notifying us of changes to the Collection Agencies Act. This was not a big surprise, as these changes have been in the pipeline for some time, mostly revolving around the regulation of debt settlement services, and using the Collection Agencies Act as a vehicle to do so. I wrote about this some time ago here.
However, in review of the changes being rolled out, there are some interesting changes that we weren’t previously aware of – some fairly minor, some fairly significant. Here’s our review of the changes, and the entire set of the law can be found on the E-Laws website.
The most notable changes are as follows:
Effective January 1st, 2015
- The name of the act is changed to the Collection and Debt Settlement Services Act (CDSSA)
- Paralegals may now represent a debtor, and if a registered letter is received instructing the agency to only deal with their lawyer, or paralegal, the agency must comply.
- Collection agencies must now change the label on their Trust account to state the new act name.
Effective April 1st, 2015
- Some of the registration forms may change, most notably requirements for debt settlement services. No forms have actually changed yet, but the groundwork has been laid out.
Effective July 1st, 2015
- All the amendments for debt settlement come into force, specifically registration, service agreements provided to consumers, and practices employed such as fees taken and trust account management.
Hidden Behind The Curtain
The biggest, most starting change to me is the change of Regulation 74 (the act that governs registration) is listed to take effect January 1st, 2015. It says in 13(10) “Every person registered as a collection agency shall operate from a permanent place of business in Ontario that is not a dwelling and that shall be open during normal business hours. O. Reg. 309/14, s. 4 (3).” The key addition here is the part that says “In Ontario” – up until this point you could operate as an Ontario registered agency from a proper place of business. This is highly restrictive to national agencies not using a multiple branch process that might exist outside of Ontario, following Quebec’s similar requirement.
As well, there is now some exception language for a collection agency operating in a first-party representation role, calling as the creditor themselves. There are a number of exceptions under Regulation 74 19.1.1.(1) that detail the calling of accounts under 60 days old.
These changes, for the most part, have been expected, and are put in place to protect consumers from debt settlement schemes. There are reasonable effects such as a cap on debt settlement fees, cancellation periods, proper handling of consumer funds, and so on. The unexpected result is that already-licensed collection agencies are now looking to jump into the debt settlement field, and debt settlement companies based in the US are being forced to bow out of this industry. The regulation requiring an Ontario location is going to further hamper some businesses in the collection and debt settlement worlds.
I still assert that this is going to have a water change over the next several years – once it catches on, consumers will realize that they can choose the collection agency that will represent them to the creditor, and with a properly worded agreement, can retain a collection agency much like a creditor might. Agencies that base their collection tactics on yelling, unprofessional behavior, or repeated pounding on calls with their predictive dialer will find themselves losing ground in the new era of collections in Ontario.
As always, if any one has any questions or comments regarding this new regulation, and its ongoing effects, I’m always willing to chat.
KINGSTON Data and Credit