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.
Conclusion
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
226-946-1730
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