Family and Credit Counselling Services
Serving York Region
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Debt Settlement Services - Buyer Beware!


Ontario Introduces Rules to Stop Misleading Business Practices

If you find yourself in need of professional help for debt problems in Ontario, the following information is important for you as you research your options.


This past spring, the Ontario Ministry of Consumer Services affirmed its stance against unfair business practices. Tough legislative measures seek to protect consumers from “debt settlement services” (also may be referred to as “debt reduction,” debt relief,” and “debt negotiation” in their advertising and on their websites).


The government intends to impose the following new rules for debt settlement services, including:


  • Banning companies from charging upfront fees for debt settlement services;
  • Limiting the amount of fees consumers are charged;
  • Requiring clear, easy to understand contracts;
  • Establishing a 10 day cooling-off period, providing consumers more time to consider their agreements and opt out, if they choose;
  • Allowing the licenses of non-compliant companies to be revoked.


Debt Settlement Services are Plentiful in Ontario


Over 60 debt settlement companies are currently operating within the Ontario, with many generating consumer complaints; in fact, the Ontario Association of Credit Counselling Services reports receiving more than 100 complaints a month about debt settlement companies. The Financial Consumer Agency of Canada has recognized this growing problem with a “consumer alert” for consumers, warning them to beware ‘if it sounds too good to be true’. These companies claim to help settle your credit card debt (and other unsecured debt) with up to 70 per cent savings on the total amount that you owe. Misleading information about protecting credit ratings, and misleading claims of being linked to the government are only a few of the tactics used to exploit your situation. 


Debt Settlement Services – the Risk Factor

Generally, debt settlement companies ask that consumers withhold debt payments and instead grow personal savings for a lump-sum offer of settlement to creditors – sometime down the road, and often not specified in the agreement. Meanwhile, payment for the services of debt settlement companies continues to ramp up during your savings program. This means that these up-front fees are collected from you before a debt settlement company even contacts creditors! This process can mean a high risk for consumers, leaving them open to abuse by companies who are mainly interested in collecting up-front fees while leaving the consumer with the “short end of the stick” having to deal with disgruntled creditors who are not interested in waiting years for pennies-on-the dollar settlement.


How Credit Counselling Services differ from Debt Settlement Services?

First off, unlike a debt settlement service, not-for-profit credit counselling services take a thoughtful, caring and realistic approach to getting you out of debt. Credit counseling agencies in Ontario are recognized for exemptions under provincial legislation, while Debt settlement companies are not. For more information, please contact us at (905)707-7695 or 1-800-500-0003.




Get the Facts about Collection Agencies


When you fall behind in payments to your creditors, the actions they take to recover payments will accelerate as your amount owed increases. To begin, you may receive calls from the original creditor. However as you continue to miss payments and fall further in arrears the creditor may decide to take action by writing off the account. At this time the creditor will decide whether they will send the account to a law firm to file a lawsuit against you or pass the account on to a third party collection agency.  In the instance of legal action you will be notified by the courts (a process server will deliver a notice from the court to you) that legal action has been taken against you. If the original creditor takes the step of sending the account to a collection agency, you will receive a letter from that collection agency advising you to deal with them directly regarding your account. You can expect phone calls from the collection agency at this point as well.


What can a Collection Agent do?


  • A collection agent is allowed to contact you regarding the debts that you owe, and is allowed to use reasonable means to get you to pay the debt.


  • A collection agent is not required to tell you what your rights are. It is up to you to find that out yourself.


What is a Collection Agent not allowed to do?


  • Under no circumstance may a collection agent can make charges and threats that have nothing to do with the collection of the debt.


  • They may not make abusive calls in which you are harassed or threatened in any manner.


  • They are not allowed to make calls to your employer without your permission, other than a single call to confirm your employment.


  • They may not make frequent calls that constitute harassment.


  • They cannot call at times that are prohibited under the provincial Collections Act. (These times vary by province).


  • They may not give you any documents that can be perceived as court documents when they are not.


Know Your Rights


It is important for you to understand your rights. These include your right to make a complaint when dealing with collection agencies. Ontario residents may contact the Consumer Protection Branch, part of Ontario Ministry of Consumer Services. They can be reached as follows:


  • Phone: Toll-free at 1-800-889-9768: Toronto area at 416-326-8800



  • If you need immediate help with your debt do not hesitate to call us at 1-800-500-0003.




Take Action!


The best piece of advice we can offer is do not ignore your debts. Not opening the monthly statements does not make the problem disappear. If paying the full amount owing at once is not feasible, determine whether an alternative method of payment such as monthly payments is affordable. Remember to make this offer to the collection agency in writing and provide a first payment to show good faith to them.


Important Tips


  • Do not send cash - always have a record (such as cancelled cheques) of any payment you have made to the collection agency.


  • Any offers whether they are made by you or the collection agent should be put into writing before taking action.


  • Keep a clear and concise record of the agency’s name, the agent’s name, time and date of the call, the debt (name of original creditor and account number) and any other in information that has been discussed.


TIP:  You can also contact one of our qualified Credit Counsellors by email at or by phone at (905)707-7695 or 1-800-500-0003 for help and advice.