Licensing and Enforcement

There is often much hoopla in the media about licensing and accreditation surrounding debt. Several new or revised laws have come into place in Canada in the last year, mostly surrounding debt settlement companies, but more and more our industry is coming under scrutiny by the government and legislative bodies.

Why all the attention? Well, because of excessive, unethical, or simply unmonitored behavior with sensitive information by various companies or employees that are causing backlash. Most of the laws or legislation in place in the credit industry in Canada are reactive, rather than proactive, and have often come into place because of the abuse of good business practices.

For example, often collection agencies are in such a headlong rush to earn profit, they neglect or abuse the people paying them. There are many debt collection hate sites, negative reviews, and abused consumers all over Canada complaining on the internet. And debt settlement companies aren’t far behind, because it’s such a new industry no one has really decided what are good business practices to enforce.

So, let’s assume, for the moment, to operate in any number of aspects of the credit industry, you need a license. Why should this be the case?


What’s The Point of Licensing?

In this current day, to act as a debt settlement company, payday lender, collection agency, financial institution, credit reporting company, or practicing legal agent needs to be accredited or licensed in some way before they can open their doors for business. From the newest paralegal to Walmart’s entry as a financial institution of Canada, there are minimum requirements for doing business.

Most of these requirements are a test of competence and process management by the government to ensure that these companies are capable of following the federal and provincial statutes laid forth. Often, after initial licensing, regular audits are performed to ensure ongoing business process is on track with the legislation, and to look for aberrant behaviours.


Overarching Legislation

Beyond direct licensing or requirements, there are other organizations and legislative bodies that have requirements that may indirectly impact a company. For example, the Privacy Commissioner of Canada is responsible for enforcing the Personal Information Protection and Electronic Documents Act, which lays out requirements for all businesses involved in managing personal information (http://www.priv.gc.ca/index_e.asp). This often has requirements for a company’s business practices.


Consumer Outcry

Aside from mandatory licensing, often regulatory bodies will get involved if a company is showing abusive behavior, or unfair treatment of the consumer. For example, Ontario has an online consumer complaint form for the Ministry of Consumer Services, which regulates consumer reporting agencies (credit bureaus), collection agencies, and payday lenders.

If a complaint is filed with provincial body regulating consumer services, they will investigate the individual or the company involved, and often intercede on the consumer’s behalf, to ensure their rights are protected.


Organizational Accreditation

Beyond government bodies, many organizations require certain prerequisites to be belong to their organization. The International Debt Buyers Association just announced they are in the process of rolling out a certification program that will be mandatory for members (http://www.insidearm.com/daily/debt-buying-topics/debt-buying/dba-international-approves-debt-buyer-certification-program-mandatory-for-membership/), and the Ontario Association of Credit Counselling Services has an accreditation program for members as well (http://www.oaccs.com/accreditation.html).  

However, often membership in these organizations is not required to do business, although it does add credibility to the companies who seek out membership and are willing to meet the requirements of the organization.

So what happens if you find yourself dealing with a company that isn’t part of an association? Very little, as membership in most organizations is voluntary. However, if you are a client, you have real leverage to require your vendors to become members within a given timeframe, and bring their business practices up to par with their requirements. If you are a voluntary consumer dealing with one of these companies, you are certainly able to vote with your feet, and find another company to give your business to.


Client Pressure

Beyond all these mandatory requirements, a business exists to serve its clientele – if a client wants to enforce additional requirements, audits, or behavior, they can easily do so. Some financial institutions require their vendors to be PCI compliant, register as an ISO certified company (9001, 27001, or other applicable international standards), or may give specific direction to the companies.

I was the Operations Manager for a collection agency some years ago, and a financial institution client required all their collection vendors (four in Canada, over a dozen in the US) to become ISO 27001 certified within a few months. I can tell you that many of my days were focused on building the infrastructure to qualify for this standard.

So what happens if you are consumer forced to deal with a collection agency who is being abusive, or a debt settlement company who has charged you fees without delivering a service? If there is an interested client benefitting from their service, you can write to them directly, and explain that their company brand is jeopardized by their relationship with the vendor company, or you can write to the newspaper – recently a credit counseling company was scrutinized by the Toronto Star for not belonging to an accredited organization for their service group.


So Why Are You Writing About This?

It’s important in this day and age to understand that many financial service vendors who are often vilified in social media or in newspapers have many hurdles to business to exist, satisfy their clientele, and be responsible to the consumers they deal with.

If you are a client, it is important to undertake due diligence when a new financial vendor solicits you. For example, here is an article I wrote some time ago about auditing potential new collection vendors. http://receivableaccounts.blogspot.ca/2011/12/auditing-your-collection-agency-101.html.

If you are a consumer, it’s important you understand your rights, and the regulations that govern these financial companies. If a company ‘goes rogue’ and isn’t meeting the mandatory requirements of the law, an association they belong to, or the policies of their client, you have the right and the authority to bring it to someone’s attention.

Very few people are keeping an eye on the requirements out there, and those that do have a phenomenal amount of information to sift through. I was speaking to a collection agency colleague recently, and they were not aware that the Debt Collectors Act had been repealed by the Ontario government a year ago (http://www.e-laws.gov.on.ca/html/repealedstatutes/english/elaws_rep_statutes_90d04_e.htm) – certainly it didn’t impact them directly, but it’s a good example of the amount of change that exists in our industry.

If you have any questions about regulatory licensing, organizational memberships, or the expectation a creditor or consumer should have when dealing with a financial service vendor, feel free to reach out to me at 226-946-1730.

Blair DeMarco-Wettlaufer
Kingston Data and Credit
Cambridge, Ontario
226-946-1730