Zombie Debt

Yesterday there was an article from an insolvency trustee firm Hoyes & Michalos about collection agencies, and that they can pursue debts forever.
 
Well, yes they can, but that’s stupid of the agency to do so. 
 
I’ve heard and used the phrase ‘zombie debt’ over the years – that’s debt that has no purpose walking around, but does.  It’s past the statute of limitations for legal action, it’s past the statute of limitations for credit reporting, it’s not something that should survive beyond that because it’s a judgment, student loan, credit union wage assignment, or something like that.  Really, after 6 years, there’s no point in calling a consumer – the window of opportunity is closed.
 
First of all, it’s a waste of manpower.  The odds of someone paying an account that’s 90 days old are much higher than calling someone on a debt that’s 12 years old.  Collection agents have to be paid wages, and there is a cost to making collection attempts beyond that (licensing, insurance, software, lettering, etc). 
 
Secondly, there are no consequences.  A collection agency usually will offer consumers the opportunity to pay to avoid interest accumulating, reporting to the credit bureau as a registered item, or even legal action.  But after the window of opportunity to bring these consequences to bear, the agency is now toothless.  Sure, they could appeal to the consumer to repay the debt on moral grounds (‘it’s the right thing to do ‘) or by being annoying (‘these calls will continue until this debt is paid’) but no one wins there – it’s not going to work for an educated consumer, and it just brings the reputation of our industry down.
 
Lastly a consumer that isn’t going to suffer any consequences can just ask for the calls to stop – an email, fax, registered letter, or SMS is all it takes to stop an agency collecting zombie debt in it’s tracks.
 
Now a few agencies are bad actors, and they try to scare people into paying old debts – they’ll lie and threaten legal action, they’ll attempt to reset the debt’s age so they can report to the credit bureaus, or other unsavory tactics … but fortunately, those old school agency tactics are dying out.  Of the 178 licensed agencies in Ontario, I would guess there are less than 10 that would do such a thing – but of course, they are using tactics from 20-30 years ago and continue to give our industry a bad reputation.
 
Every province and territory has a law governing collection agencies, and every single one says an agency cannot threaten action they are not legally entitled to take – if you are a consumer and think your rights are being violated, or you need to make a complaint, here are some useful provincial links:
 
Alberta -- Creditors, collection agencies and debt repayment | Alberta.ca
British Columbia -- Debt collection - Consumer Protection BC
Ontario -- Stop collection agency calls | Ontario.ca
Quebec -- Debt Collection Agencies | Éducaloi (educaloi.qc.ca)
 
Worth mentioning -- in many provinces, courts were closed or suspended during the pandemic of 2020-2021, so the statute of limitations for legal action may be extended 6-12 months, depending where you live.

Also, worth noting, in the provinces of Alberta and Manitoba, it is expressly against the collection acts and regulator policies to call on a debt past the statute of limitations.
 
As well, if you have a debt on your credit bureau that’s over six years old (seven if there is a judgment) you can dispute the debt
 
Dispute Equifax Credit Report | Equifax Canada
http://www.transunion.ca/ca/personal/creditdisputes_en.page  
 
This is the twenty first century – many collection agencies have adapted to the times, and work with strict compliance guidelines, care about their reputation on social media, and have an open dialog with the regulators.  It’s time to stamp out the hard pursuit of zombie debt.
 
While my company is a collection agency, we’re happy to help consumers fight debts that aren’t legal or legitimate – if you need advice or help, feel free to reach out to us at Debt Settlement | Kingston Data & Credit (kingstondc.com)
 
And if you have questions, are an industry colleague who want to make things better, or one of the bad actors that want to yell at me for calling out their bad behaviour, feel free to drop me a line.
 
Thanks kindly,
 
Blair DeMarco-Wettlaufer
KINGSTON Data & Credit
Cambridge, Ontario
226-946-1730
blair@receivableaccounts.com