More Collection & Debt Settlement Services Act Changes!

The Collection Agencies Act of Ontario, originally drafted in 1975, has often gone years without the slightest change – not recently, in the last three years there have been three major changes to the Act and Regulations.  Continuing that trend, a whole slew of regulations come into play July 1^st.  Many of the big items include removing the blanket exemption for lawyers, and requiring licensing for debt purchasing companies – but buried deep in the act are a number of changes that are worth paying attention to, both for agency owners, and consumers.

This is going to be a very long post – these changes are numerous and complex and are going to shake up the industry and how it handles communications or uses law firms or debt buyers.  Bear with me as I attempt to walk through all the different changes and quote the parts of the Act or Regulations that refer to those changes.  Of course, please note that my commentary is my personal opinion on a first read through of the Act and doesn’t constitute legal advice – if you disagree with any of my observations, I’m interested in hearing your opinion and having a discussion on how you interpret the new rules we work under.

If you would like to read the whole Act in it’s entirety it can be found HERE  and the associated regulations HERE. 

The Lawyer Exemption (As It Now Stands)

Okay, so this is the biggest part of the act, and very complex, with a number of changes throughout the act, and a lot of referrals by point form. 

First and foremost, if a lawyer advertises itself as offering collections as a service, certain sections of the Act apply – the lawyer must respond to any complaint received by the Registrar, the Registrar can freeze funds if a warrant or investigation by the Ministry is pending against the lawyer, the lawyer must keep the Registrar notified of it’s address for service, it’s shareholders, and it’s employees, the lawyer must provide the Registrar with copies of their form letters, demands, contracts and marketing materials upon request (and the Registrar may restrict use of these letters or materials if they feel it is harsh, misleading, or deceptive).  The Registrar may also issue a restraining order against the lawyer for improper actions under the Act where it applies to collections.

Another big section that’s addressed in 18.1 (4), is that lawyers may not add to the amount to be collected, nor may they engage in any prohibited practices that an agency must follow (ie number of contact attempts per 7 days, disclosure to third parties, calling on holidays or Sundays, etc).  Furthermore, the administrative penalties and fines listed in the Act and Regulations may be applied to the lawyer.  The Registrar may also request financial records from the lawyer where collections are involved (such as trust fund ledgers), and the lawyer must keep accurate financial records for collections.

However, to make things more complicated – large parts of the Act do not apply to collection agencies when acting as first party agents (calling as if they were the creditor).  These exemptions to the Act also are given to lawyers, if they are performing first party collections.

And the big ‘full stop’ for lawyers, where the larger sections of the Act applies, is if the lawyer has engaged in a debt purchase, the lawyer contacts a debtor or associated parties more than three times in seven days, or uses a predictive dialer, automatic dialling device, bulk texting or similar mass communication technology – the lawyer must respect requests to stop communication when instructed by a debtor, must use discretion with third party disclosure, and other parts of the Act that would normally apply to agencies.

18.1 (1) In this section,

….

(4) Despite clause 2 (1) (a) of the Act, the following provisions of the Act and the regulations apply to a lawyer or to an employee of a lawyer, reading the references, if any, to a collection agency in those provisions as being references to the lawyer or the employee, as the case may be, if the person holds himself or herself out to the public as a person who obtains or arranges for payment of money owing to another person in addition to the lawyer’s professional business:

1. Section 1, subsection 2 (0.1), sections 2.1, 12, 19 and 20, subsections 21 (1) and (2) and sections 22.1, 23 and 25 of the Act, except for the reference to section 16.3 or 16.4 or clause 22 (e) or (f) in subsection 25 (2) of the Act.

2. Sections 26, 27 and 28 of the Act, except for,

i. clause 28 (1) (d) of the Act,
ii. the reference to section 16.3 or 16.4 and subsection 16.5 (1), (2), (3) or (4), 16.6 (1) or (6) or 16.8 (2) or clause 22 (f) in clause 28 (1) (c) of the Act, and
iii. the reference to “or fails to take reasonable care to prevent the corporation from committing an offence mentioned in clause (1) (d)” in subsection 28 (2) of the Act.

3. Sections 29 to 29.1 of the Act.

4. Clauses 30 (1) (f), (h) and (i) of the Act.

5. Subsections 1 (3) and 13 (12) and (13) of this Regulation.

6. Sections 16, 18, 19.1.1, 19.6, 19.7 and 19.11 of this Regulation.

7. Section 33 of this Regulation if that section refers to provisions of the Act and this Regulation that apply to the lawyer or the employee, as the case may be.

8. Ontario Regulation 461/17 (Administrative Penalties) made under the Act, if that Regulation refers to provisions of the Act and this Regulation that apply to the lawyer or the employee, as the case may be. O. Reg. 319/18, s. 1.

Trust Funds Stay In Ontario

In other provinces, such as Quebec, Manitoba, or the Yukon, you are required as an agency to have a bank account within the province.  There is an administrative change in the regulations, basically requiring the same thing for Ontario now.  However, interestingly, there are exceptions for creditors that require funds to be deposited elsewhere (large financial institutions often require agencies to deposit to a trust account that they have some measure of control or supervision over), and now the Ontario Ministry would like to know about those other trust accounts in the other provinces.  This will be a no-brainer for Ontario-based agencies (who, by default, use an Ontario trust account even for collections in most other provinces), but will be a bit of a headache for agencies headquartered elsewhere.

(4.1) No collection agency or branch thereof shall, whether by cash, cheque, electronic transfer or otherwise, deposit any trust funds received from a debtor located in Ontario into a trust account outside of Ontario, or transfer trust funds deposited in the collection agency’s trust account into a trust account outside of Ontario, except in accordance with subsection (4.2). O. Reg. 460/17, s. 5 (2).

(4.2) On the clear instructions of a creditor, a collection agency or branch thereof may deposit trust funds received from a debtor located in Ontario into a trust account in another jurisdiction in Canada, or transfer trust funds deposited in the collection agency’s trust account into a trust account in another jurisdiction in Canada, if the trust account in the other jurisdiction has the equivalent restrictions on the use of trust funds as would apply to a trust account in Ontario. O. Reg. 460/17, s. 5 (2).

(4.3) No collection agency or branch thereof shall maintain a trust account in another jurisdiction in Canada outside of Ontario into which it may deposit or transfer trust funds received from a debtor located in Ontario, without informing the Registrar, in a form approved by the Registrar, of the account and the creditor’s instruction that the collection agency use the account, and obtaining the Registrar’s consent in writing. O. Reg. 460/17, s. 5 (2).

Welcome to the 21^st Century For Communication!

A significant change to the Act is changes to letters and notices to consumers – a few additions were made regarding notifying consumers of their rights, mandatory statements in the letter, and a breakdown of the debt (if possible).  Letters in Ontario will now require an enclosure of rights, or a duplexed letter with the rights on the back of the demand letter.

As well, the initial notice can be sent by email!  This will be a cost-savings for agencies (who typically do not meet their postage expenses on initial notices in Ontario), and a convenience for consumers (who check their email inbox far more often than their mailbox).   If a consumer advises that email is not a good form of communication, the agency must stop.  If an agency communicates with a debtor by email, they can’t later refuse communication by that channel.

Another change is that if an agency does not have a valid mailing address or email address, they can reach out to the consumer immediately (which is what has likely happened up to this point) and can have a limited presentation of the debt in that call – so they can confirm the identity of the consumer, make them aware of the debt, offer to send a written or emailed notice, and get into further details with the consumer before the notice is sent if the consumer wishes it.

Lastly, the rules for not incurring costs by communication have been updated – in the olden days of the 20^th century, this meant not communicating by telegram or collect call – now it deals with SMS or other future forms of communication.  Basically, if communication incurs a cost to the consumer, and the consumer informs the agency, the agency has to honour the consumer’s request to cease communication, and use a different communication channel that does not incur costs (letter mail, email, communication with a landline, etc.).

Finally, there is now an onus on a collection agency with 10 or more collectors to record all their calls, tell the consumer the call is being recorded, keep those recordings on file for at least a year, and provide it to the consumer if they make a written request, or to the Registrar if they make a request, all within 10 days.

21. (1) No collection agency or collector shall demand payment or otherwise attempt to collect payment of a debt from a debtor or in any other way contact the debtor before the sixth day after sending a notice described in subsection (2), except as permitted under subsection (3), section 21.1 or 21.2. O. Reg. 460/17, s. 11.

(2) The notice shall be a private written notice to the debtor setting out the following information:

1. The name of the creditor to whom the debt is owed and, if different, the name of the creditor to whom the debt was originally owed.

2. The type of financial or other product that incurred the debt, described in sufficient detail to distinguish among different products offered by the same creditor.

3. The amount of the debt on the date it was first due and payable and, if different, the amount currently owing.

4. The statement that the collection agency will provide a breakdown of the current amount owing, if requested.

5. The following mandatory statement:

“Should you have any questions or would like further information regarding the current amount of your debt or the amount of your debt when it was first due and payable and, if applicable, would like a breakdown of the difference between those amounts, please contact our office at the number below as this information is available upon request.”

6. The identity of the collection agency and collector who are demanding payment of the debt.

7. The authority of the collection agency to demand payment of the debt.

8. The information that if the debtor notifies the collection agency or collector that a particular method of communication causes the debtor to incur costs, or if the collection agency or collector otherwise becomes aware of that fact, the collection agency and collector are prohibited from subsequently contacting or attempting to contact the debtor using that method of communication.

9. The contact information of the collection agency, including the full mailing address and toll-free telephone number and, where available, e-mail address and fax number. O. Reg. 460/17, s. 11.

(3) Despite subsection (1), a written demand for payment may be included with the written notice. O. Reg. 460/17, s. 11.

(4) The written notice may be sent by ordinary mail or by e-mail, except where the debtor has withdrawn his or her consent to the use of e-mail and provided a current address for ordinary mail. O. Reg. 460/17, s. 11.

(5) If a debtor states to a collection agency or collector that the debtor has not received the written notice, the collection agency or collector shall resend the notice to the debtor at the address provided by the debtor, and no demand for payment or other attempt to collect payment of the debt shall subsequently be made until the sixth day after the day the notice is resent. O. Reg. 460/17, s. 11.

(6) A collection agency is required to resend the notice under subsection (5) only one time. O. Reg. 460/17, s. 11.

(7) No collection agency shall report a debt to a consumer reporting agency until the time period referenced in subsection (1) or (5) has elapsed, whichever is later. O. Reg. 460/17, s. 11.

(8) Despite subsection (7), a collection agency may report a debt to a consumer reporting agency if it makes at least two attempts, or such greater number of attempts as is reasonable, to locate the debtor’s address to which to send the notice required by subsection (1), and is unable to locate it. O. Reg. 460/17, s. 11.

21.1 (1) Despite subsection 21 (1), if a collection agency does not have a debtor’s identity, home address or e-mail address, it may initiate verbal or text message communication with a person believed to be the debtor before sending the written notice referred to in that subsection solely for the purpose of confirming such information in order to send the written notice. O. Reg. 460/17, s. 11.

(2) If a collection agency initiates verbal or text message communication for the purpose described in subsection (1), it shall, during the communication,

(a) provide the person with only as much detail of the debt to which the communication relates as is required to verify that the person is the subject of the debt;
(b) explain to the person that the details of the debt will be confirmed in a written notice;
(c) explain that the collection agency will contact the person again after the written notice to discuss payment;
(d) provide the person with the contact information of the collector and collection agency; and
(e) if the communication is via text message, inform the person that if the person notifies the collection agency that text messages cause the person to incur costs, the collection agency is prohibited from thereafter contacting or attempting to contact the person using that method of communication, and will reimburse the person for any costs incurred if the person presents evidence of such costs in accordance with subsections 19.10 (2) and (3). O. Reg. 460/17, s. 11.

21.2 Despite subsection 21 (1), a collection agency may discuss a debt with a debtor if the debtor makes an unsolicited request to do so and, in that case, may discuss the debt in greater detail than described in section 21.1. O. Reg. 460/17, s. 11.

21.3 A collection agency that communicates with a debtor by e-mail shall not subsequently refuse to accept communications from the debtor by e-mail. O. Reg. 460/17, s. 11.

21.4 If a person notifies a collection agency or collector that a particular method of communication causes the person to incur costs, or if the collection agency or collector otherwise becomes aware of that fact, the collection agency or collector shall not subsequently contact or attempt to contact the person using that method of communication. O. Reg. 460/17, s. 11.

(4) The written notice may be sent by ordinary mail or by e-mail, except where the debtor has withdrawn his or her consent to the use of e-mail and provided a current address for ordinary mail. O. Reg. 460/17, s. 11.

21.1 (1) Despite subsection 21 (1), if a collection agency does not have a debtor’s identity, home address or e-mail address, it may initiate verbal or text message communication with a person believed to be the debtor before sending the written notice referred to in that subsection solely for the purpose of confirming such information in order to send the written notice. O. Reg. 460/17, s. 11.

(2) If a collection agency initiates verbal or text message communication for the purpose described in subsection (1), it shall, during the communication,

(a) provide the person with only as much detail of the debt to which the communication relates as is required to verify that the person is the subject of the debt;
(b) explain to the person that the details of the debt will be confirmed in a written notice;
(c) explain that the collection agency will contact the person again after the written notice to discuss payment;
(d) provide the person with the contact information of the collector and collection agency; and
(e) if the communication is via text message, inform the person that if the person notifies the collection agency that text messages cause the person to incur costs, the collection agency is prohibited from thereafter contacting or attempting to contact the person using that method of communication, and will reimburse the person for any costs incurred if the person presents evidence of such costs in accordance with subsections 19.10 (2) and (3). O. Reg. 460/17, s. 11.

21.2 Despite subsection 21 (1), a collection agency may discuss a debt with a debtor if the debtor makes an unsolicited request to do so and, in that case, may discuss the debt in greater detail than described in section 21.1. O. Reg. 460/17, s. 11.

21.3 A collection agency that communicates with a debtor by e-mail shall not subsequently refuse to accept communications from the debtor by e-mail. O. Reg. 460/17, s. 11.

21.4 If a person notifies a collection agency or collector that a particular method of communication causes the person to incur costs, or if the collection agency or collector otherwise becomes aware of that fact, the collection agency or collector shall not subsequently contact or attempt to contact the person using that method of communication. O. Reg. 460/17, s. 11.

31. (1) A collection agency that employs or appoints 10 or more collectors or authorizes 10 or more collectors to act shall record all phone calls that are made or received by the agency or by such a collector if the calls relate to the collection of a debt of a debtor but are not with a creditor of the debt, including such phone calls if they are,

(a) made or received by any means, including over regular phone lines, over cell phone lines or through the internet;
(b) made for the purpose described in subsection 21.1 (1); or
(c) made to or received from,
(i) the debtor or a person who the caller believes is the debtor,
(ii) the spouse or common law partner of the debtor or a person who the caller believes is the debtor,
(iii) a member of the family or household of the debtor or a person who the caller believes is the debtor,
(iv) a relative, neighbour, friend or acquaintance of the debtor or a person who the caller believes is the debtor,
(v) the employer of the debtor or a person who the caller believes is the debtor, and
(vi) a person who guaranteed the debt. O. Reg. 319/18, s. 2.

(2) The recording required by subsection (1) shall be made in a format that is readily accessible. O. Reg. 319/18, s. 2.

(3) A collection agency that records a phone call as required by subsection (1) may block, remove, redact or otherwise anonymize the number that identifies a credit card, a bank account or any other financial account of an individual and that is conveyed on the recording. O. Reg. 319/18, s. 2.

(4) The collection agency or collector that makes or receives a phone call described in subsection (1) shall advise the person to whom the call is made or from whom a phone call is received that the call is being recorded to comply with this Act. O. Reg. 319/18, s. 2.

(5) The collection agency shall retain the recording that it makes of a phone call as required by subsection (1) for one year after the day the call is made or received. O. Reg. 319/18, s. 2.

(6) A person who makes or receives a phone call that a collection agency records as required by subsection (1) may request a copy of the recording by making a written request for it to the agency. O. Reg. 319/18, s. 2.

(7) Within 10 days of receiving a request made under subsection (6), the collection agency shall, at no charge, send a copy of the recording to the person at the address that the person gives to the agency, or to the person by electronic means if the person so requests. O. Reg. 319/18, s. 2.

(8) The Registrar may request a copy or copies of a recording of a phone call that a collection agency is required to make under subsection (1). O. Reg. 319/18, s. 2.

(9) The collection agency shall provide the copy or copies to the Registrar within 10 days of the date on which the Registrar requests them and in the manner that that the Registrar specifies. O. Reg. 319/18, s. 2.

32. Section 31 does not apply to phone calls made or received by a person or entity that is a credit counselling agency or consumer counselling agency in its provision of debt settlement services. O. Reg. 319/18, s. 2.

Credit Reporting Changes

Rolled into the changes to letter regulations, a new requirement is that an agency cannot report to the credit bureau about a debt until an initial letter has been sent, and the mandatory six day waiting period has expired. 

The exception is of course, if the agency can't find the consumer and makes a reasonable attempt to try to reach them (doing a telephone search and pulling a credit bureau report, for example).

21.

(7) No collection agency shall report a debt to a consumer reporting agency until the time period referenced in subsection (1) or (5) has elapsed, whichever is later. O. Reg. 460/17, s. 11.
(8) Despite subsection (7), a collection agency may report a debt to a consumer reporting agency if it makes at least two attempts, or such greater number of attempts as is reasonable, to locate the debtor’s address to which to send the notice required by subsection (1), and is unable to locate it. O. Reg. 460/17, s. 11.

Are We Going Overseas?

Without the requirement for collection agents to be licensed individually, what prevents Canadian agencies from partnering with call centres in Asia or South America, as happens in the US?  A couple things – first, there is a standing regulation that all branch offices must be authorized by the ministry, and secondly, while agents do not need to be licensed per se, the Ministry is requiring agents to be reported on hiring and firing, or changes.

Regulation 12.3 – A collection agency shall not operate any branch office unless such branch office is authorized by the registration. R.R.O. 1990, Reg. 74, s. 13 (3).

Less Regulations!

Some good news from the Act changes is that bonds are no longer required by agencies, and individual collectors no longer need to be licensed, which removes some administrative and financial burden from agencies … and as long as they don’t run afoul of Administrative Penalties, it’s less expensive to maintain licensing.

More Penalties?

Finally, Administrative Penalties have been added to the Act and Regulations – basically, if a collection agency engages in prohibited practices, they can be assessed a fine.  That fine will be determined by the severity of the violation, and how often the agency has made a violation in the past.

While the Registrar has always had the ‘nuclear option’ of revoking an agency or agent’s license over bad behaviour, this gives them a middle ground to penalize the agency for violations, and brings it in line with similar legislation in Alberta and British Columbia.

33. The following provisions are the prescribed provisions for the purposes of subsection 29.0.1 (1) of the Act:

1. Subsection 4 (2) of the Act.
2. Clauses 16.5 (1) (a) and (b) of the Act.
3. Subsections 16.5 (2) and (4) of the Act.
4. Subsection 16.6 (1) of the Act, together with section 28 of this Regulation.
5. Subsection 16.6 (6) of the Act, together with subsection 28 (6) of this Regulation.
6. Subsection 20 (1) of the Act.
7. Subsections 13 (3), (10), (12), (12.1), (13), (14), (14.1) and (15) of this Regulation.
8. Subsections 17 (2), (3), (4), (4.1), (4.3) and (4.4) of this Regulation.
9. Subsections 18 (2), 19.1.1 (3) and 21 (1) of this Regulation.
10. Subsections 22 (1) and (2) and paragraphs 1, 2 and 3 of subsection 22 (6) of this Regulation.
11. Subsections 23 (1) and 25 (1) and (2) of this Regulation.
12. Paragraphs 1, 2 and 3 of subsection 26 (1) of this Regulation.
13. Subsections 27 (1) and 28 (1) of this Regulation.
14. Paragraphs 1, 4 and 10 of section 29 of this Regulation.
15. Subsections 30 (1), (2) and (3) of this Regulation. O. Reg. 319/18, s. 3 (1).

Conclusion

If you made it to the end of this 4400 word blog, you deserve a hearty congratulations.  This was a lot to digest, and from speaking to my colleagues in the collection industry, I’m not alone in that opinion.  If you have a different interpretation of any of the Act or Regulation changes, feel free to reach out to me or comment below. 

It will be interesting to see how this plays out, with respect to technology changes (call recording, emails, SMS texts) and industry changes (small agency owners, law firms, debt buyers, etc).  Time will tell …

Thanks kindly,

Blair DeMarco-Wettlaufer
KINGSTON Data & Credit
Cambridge, Ontairo
226-946-1730
bwettlaufer@kingstondc.com