Receivable/Accounts - Information for Credit and Collection Issues

Monday, March 12, 2012

Collection Agency Trust Accounts

We often have to explain to clientele new to dealing with a collection agency how the handling of their collected funds works. This week's blog article addresses this with a basic overview on trust accounts as handled by collection agencies in Canada.

Unlike many states in the United States, it is a requirement of every province for a collection agency to hold a trust account, that is clearly identified with the bank as such, and account for every payment made into that trust account.

Most often, funds collected by the agency are issued to the client, less fees owed, on a monthly basis to the client. This is known as a net remittance. Larger clients may require a weekly, or even daily remittance from the agency, and many clients require a gross remittance with subsequent billing or invoice for fees.

Trust Account Payment Methods

For each payment a collection agency accepts on behalf of their client, it is to be placed in a trust account, separate from the agency's operating funds. Many agencies can accept payments from debtors in various ways

* Cheques, money orders, or bank drafts received made payable to the agency or the client can be deposited into the trust account.

* Many agencies can accept payments in person to a local location, and cheques or cash payments must be deposited promptly into the trust account.

* Debtors can deposit funds directly into the trust account, either by a third party deposit at a local branch of the bank that holds the trust account, or by Electronic Bill Payment through their native bank.

* Payments taken by electronic fund transfer (EFT) or credit card can draw funds into the trust account.

* Debtors pay remit post-dated cheques or pre-authorized payments for regular or scheduled payments to be taken on a pre-arranged date.

* Third party payment vendors, such as Western Union or Moneygram can transfer funds from a local retail location to the trust account.

Canadian Government Trust Funds Regulation

Each collection agency is required to have a single trust account where all funds collected are to be gathered and deposited in a prompt manner. Permission to manage additional trust accounts, usually for the purposes of dedicating an account to a specific client of sufficient stature, can be requested from the respective Collection Agency Registrar.

Each province has its own separate legislation regarding the accounting and dispersal of trust funds to clients collected by the agency. Each province requires the disbursement of funds between the 7th and 20th day of the following month to the respective clients.

One of the big challenges regarding trust funds is the clearing of deposited funds – NSF payments or pre-authorized payment reversals can often radically change a remittance to a client, and need to be taken into account.

Every agency needs to be able to provide a complete ledger of payments in and out of the trust account on an ongoing or live basis. Often database software can account for every payment taken and issued.

Any funds unable to be issued to the client (in the case of the client being out of business) are to be issued to the provincial governing body for holding or management.


This is only meant to describe in basic terms how a trust account is managed by a collection agency. If you have more complex questions regarding trust funds, or you have province-specific questions, you are always welcome to contact myself at our Cambridge office.

Blair Wettlaufer
Kingston Data and Credit


  1. Can a company transfer money into a client trust account if the funding account is not the operating account?

    1. I'm not sure I understand the question. Is the agency transferring from a trust account?