Dodgy Debt Collectors Gets Their Reins Tightened

by Billy Martell on June 29, 2015

debt-management-planNew consumer-protection rules are delivering a strong message to corrupt debt-settlement firms in Ontario.

As of July 1, revised regulations take effect in this province that restrict debt collectors’ ability to take advantage of consumers’ compromised financial states. In response to increasing complaints about high fees, vague and ambiguous contracts, and failure to reduce debts as promised, the government has cancelled upfront payments charged by debt-settlement services (other than a nominal amount) and introduced limits on the amounts that can be charged.

The new regulations also:

  • grant debtors a 10-day cooling-off period during which they can cancel a contract without explanation.
  • ban debt-settlement companies from charging fees before a debtor begins making payments to a creditor.
  • require clear contracts.
  • permit licences of non-compliant companies to be revoked.

But while bankruptcy trustees regard this as a move in the right direction, they continue to urge vigilance among consumers against unscrupulous debt-settlement companies.

Certainly just the news of the impending rules was enough to send some of the bad guys scurrying, says trustee Doug Hoyes, co-founder of Hoyes, Michalos & Associates Inc.

But, as he describes in a Hamilton Spectator article on the subject, the new regulations set up a possible conflict of interest for collection agencies that reinvent themselves as debt-settlement companies.

Under these new rules, a collection agency chasing someone for settlement on a bill can proceed to offer an avenue for settling other debts, as well. And that might be too tempting to resist.

“It certainly opens the door for a different form of collection activity,” Hoyes told the newspaper.

These alterations to the debt-settlement landscape have no impact on federally regulated bankruptcy trustees, who are already very accountable for their fees and behaviours.

As such, it’s arguably more critical than ever for consumers to exercise caution in seeking help for their debt problems and to ensure that the services they seek out comes by way of qualified individuals such as a licenced trustee.

Billy Martell – who has written posts on Bankruptcy Hamilton Ontario.

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