Receivable/Accounts - Information for Credit and Collection Issues

Friday, October 10, 2014

Collecting Across the Border

One of the questions that comes up is the issue of Canadian collection agencies collecting in the US, or American collection agencies collecting in Canada.  It would seem like a reasonable idea, as our countries are so close, and our business worlds are so entwined, but it isn’t as simple as you might think.

While on the surface, our countries look very similar, our laws and culture have significant differences that can pose challenges on both sides of the 49th parallel.  There are global US agencies that have opened Canadian branches, such as Allied International, NCO, and EOS NCN, and likewise there are Canadian agencies who perform US collections such as Kingston Data & Credit.

While I’ve been in the Canadian collection industry for 25 years now, I started in the US collection industry only 10 years ago, and it was quite the eye opening experience to try to manage a collection team in Canada performing collections across the US.  I’d like to share what I’ve learned over the last decade, and what I have discovered talking to creditors and colleagues on both sides of the border.

Collecting Into the US

Canadian collection agencies looking to collect in the US are often daunted by the cost and culture barriers.  Most states require licensing, and even some cities have their own collection laws and licensing process.  These laws are not harmonized, and can vary wildly – in some states, for example, community property laws mean the spouse is also liable for a debt, and in other states it would be a violation to disclose a debt to a spouse.  Collection letters are not mandated before a call, but may have unique requirements depending on the state.  Culturally, consumers are far more likely to wish to pay over the phone by credit card, which is highly discouraged in Canada.  These differences alone discourage most Canadian agencies from seeking US licensing.

The cost of licensing nationally in the US with licenses and bonds required may cost up to $100,000 – some states may only be a token fee, while others may require a bond of up to $100,000 and a licensing fee of thousands of dollars.  The requirements for the license may be a background check, fingerprinting, personal net worth statements, writing an exam in the state to be licensed, or more.  The opportunities are much larger in the US, but registering an agency can be much more difficult and costly.

If an agency is licensed, in most states individual collectors do not need to be registered or carry individual licenses – this often means that they have the option of outsourcing to offshore call centres, or to subcontractors.  However, the threat of litigation under the FDCPA or TCPA is quite high, so outsourcing can have it’s dangers.

The US has very gray areas compared to Canadian law about times and days unacceptable to call a consumer.  Where Canada has defined holidays or weekend call times by province, the FDCPA refers to unacceptable calls ‘and times and dates known to be inconvenient’.  As well, predictive dialing is severely constrained by case law that requires both disclosure of the “mini-miranda” on communication attempts, and requires third party confidentiality when leaving an answering machine message.  Furthermore, using predictive dialers to call cellular phones can be dangerous and cause litigation.

If an agency in Canada is armed with the knowledge of what can be done legally in the US, and has the capital and infrastructure to license themselves and make use of manual dialing solutions, the business market for collections is staggeringly large compared to the opportunities in Canada itself.

Collecting Into Canada

On the opposite side of the border, US debt collection agencies seeking to collect from Canadian consumers and companies have even more difficult obstacles to overcome.  While there is no national collection statute, each province maintains their own collection laws, and for the most part these laws are fairly harmonized.  However, the biggest difference is that individual collectors are required to be licensed in the majority of the provinces, and in the more populated provinces those collectors must be citizens or residents.  This prevents call centres outside of Canadian borders from making calls into Canada.  Also, these laws apply to both consumer and commercial collections, unlike the US where most laws are in place for only consumer collections.

With the residency requirements, offshore call centres are unheard of, and individuals are tracked on their behavior.  Rather than the tendency in the US for litigation if an agent violates a collection law, in Canada the collector may find their individual license revoked.  This means that the Canadian collection industry adheres far more closely to the collection laws as written.

In Canada, specifically in the provinces of British Columbia and Ontario, there is a requirement for a written notice to go out before collection calls begin.  This, combined with the postage cost in Canada being almost double what it is in the US, makes agencies far more cautious about the debt they actively pursue.  As well, stricter trust accounting rules require an agency have a designated trust account, and in some cases a trust account located specifically in the province they seek registration in.  The payment methods in Canada often are by direct deposit to one of the handful of national banks’ local branches, or by interact eTransfers issued by email, rather than telephone checks or credit cards.

There are other related laws that impact collections, such as the Personal Information Protection and Electronic Documents Act (PIPEDA) that covers privacy of information, and the Unsolicited Telecommunications Act that addresses the use of predictive dialers.

Many creditors in Canada originate in the US, and have their head offices based in America – it only follows that a US agency may find themselves being handed Canadian collection accounts if they have a strong relationship with a creditor.  However, if a legitimate US agency wishes to operate in Canada, they will set up a Canadian branch and hire Canadian citizens to maintain their presence north of the border.

Differences From The Inside

This fairly well sums up an overview of the differences in Canada and the US – however, there are a few items of trivia that collection professionals might find interesting:

* While Equifax and Trans Union maintain credit services in both Canada and the US, they maintain completely separate databases and business services arms.  To pull credit bureaus across the border requires a separate relationship with the foreign division.

* Collectors in Canada are absolutely not allowed to use aliases, and must by law give their true legal given name.  This often surprises US collection professionals I have spoken to.

* Given the laws, culture and smaller credit industry in Canada, debt buying is a much smaller prospect in Canada, and debt does not change ownership multiple times.

* Because of the legislative and cultural differences, the culture and approach of collection agencies in both countries can be very different.  With the threat of litigation ever present in the US, agencies in America often seem ‘timid’ to their Canadian counterparts, refusing to even leave an answering machine message for fear of a legal suit. 


Regardless of the difficulties, collection agencies on both sides of the border see opportunity in the neighbouring country, and in many cases find ways to make it work, either through affiliations with a company native to that country, setting up a branch office, or by navigating the complex licensing rules, if possible. 

Our countries are very close, and because of commerce and brands reaching across the border, this will always be an area for opportunity and frustration.  If you are a credit or collection professional in either Canada or the US, and have questions about specific laws or requirements in the US or Canada, I’m happy to pass on what I know, or point you in the right direction to seek the correct answer.

Thanks very kindly,

Blair DeMarco-Wettlaufer
KINGSTON Data and Credit
Cambridge, Ontario

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