101 – How to Spot Bad Financial Advice

Wayne Kay 00:04
Bad financial advice. It’s everywhere. How do you figure out what the bad financial advice is when you are in a pickle? 

Welcome to the Debt Matters podcast, where we help Canadians find solutions to their debt with Licensed Insolvency Trustees from across Canada.

I’m Wayne Kay, and coming up on today’s show, we’re going to talk about just that, how to spot bad financial advice. There’s lots of ads out there that promise quick debt relief, but do they actually work? What can you believe when you see these ads? Are there some laws and regulations that control this? And how can you best protect yourself?

We’ll learn about that and more today with my guest, Leigh Taylor from LCTaylor Licensed Insolvency Trustee in Winnipeg. Hi there, Leigh.

Leigh Taylor 00:52
Hi, Wayne. How are you doing?

Wayne Kay 00:54
I’m doing great. Thanks very much for being on the show.

Leigh Taylor 00:57
My pleasure.

Wayne Kay 00:57
We always have some great discussions, and we’re always here to try to help people, because as you start feeling like you’re getting further and further and further in, do you find there’s maybe like a desperation where people start thinking, oh, I don’t even know what to do, but I got to do something.

Leigh Taylor 01:17
That’s really quite true. It usually takes maybe a year and a half to two years before people start trying to do something other than nothing about their financial difficulties. 

Whether you’ve lost your job or illness or marriage, breakup or whatever, people can usually survive for 18 months or so after that. Then they start getting desperate because they’ve kited their credit cards, they’ve run out of room, collection agents are starting to harass them, maybe somebody’s talking about suing them, et cetera. 

And most people don’t deal with that sort of thing very often, if at all, and they don’t quite know what to do. So they’re very susceptible to just about any kind of solution someone can come up with.

Wayne Kay 02:03
Right. And there’s all these ads all over the place that if you’re in debt, we can help you. But, yeah, right. There’s all these ads out there. But do they actually work?

Leigh Taylor 02:15
Well, there’s certainly lots of ads. What’s the old adage? I saw it on the Internet, therefore it must be true? And this belief will get you into a lot of trouble. It really will.

A lot of times people will hear ads on the TV, but they’re probably listening to an American station. And the laws in the United States are different from the laws in Canada, and so are the solutions. 

So you hear a lot of information out there. Some of it’s not true, some of it’s not applicable. People talk to friends who have been through maybe financial situations, didn’t understand it at the time, and a solution for them may not be the same solution for you. So the important thing is to get the information.

Wayne Kay 02:59
But is there anything you can believe in the ads?

Leigh Taylor 03:04
Well, some of them. The problem with deceptive ads is that they have a little bit of truth in them, and you say, oh, that must be true, and then they go on with sort of the magic bullet approach to solving your problems. And you really have to be careful with that, because you’ll find that the solution for your particular set of problems is going to be different than most.

You really have to talk to somebody that knows what the problem is. So if they offer a solution before they know what the problem is, you know right off the bat that you’re going to have a bit of a problem there.

Wayne Kay 03:40
Yes, that’s good. We’re going to talk more about the kind of warning signs coming up, but I’m just wondering, are there no laws or some kind of regulations that actually control this entire area?

Leigh Taylor 03:52
Well, the answer to that is yes and no. There are certainly laws, regulations, audits from the federal government with respect to Licensed Insolvency, Trustees, people that have the education, experience, and training to deal with financial problems. But there are virtually no laws specifically dealing or regulating what we call credit counsellors. You could be a credit counsellor, just hang out a shingle in your door and say, I’m a credit counsellor.

Wayne Kay 04:21
Really?

Leigh Taylor 04:22
Oh, yes. There is no limit on that. What the credit counsellor can say, he can say just about anything short of fraud. Sometimes that’s a pretty thin line to cross. They can promise you all sorts of things, but you really have to be careful. If somebody’s offering to help you, but they want you to pay upfront, you have to really be careful about something like that.

Once your money’s gone, so are the credit counsellors. That’s not to say that all credit counsellors are crooks, but there’s no regulations, and lots of them are. And if you’re going to go on the Internet, which is what people do these days, you don’t really know where those people are. You could be talking to a credit counsellor who has an office down in El Dorado or somewhere in Texas or anywhere, and you really don’t know how to deal with it. And the laws dealing with their operations may have nothing to do with what they tell you up here in Canada.

Wayne Kay 05:24
Really? I’m surprised there’s so many different laws, even province to province.

Leigh Taylor 05:30
Well, it’s true. There are a lot of similar laws. There’s Consumer Protection Act, certainly in Manitoba, and similar legislation, but they deal with more regulated things, like collection agents are regulated.

How effective the regulations are is another question. But there are some regulations they need to be licensed, et cetera. But you don’t need a license as a credit counsellor. You’re just going in there and pretending you know what people need to solve their problems, and it’s not always true.

Wayne Kay 05:59
Okay, you’ve seen this. You’ve been in the industry for quite a while, and so you’ve seen people probably come to you after dealing with some bad financial advice. Is that a fair assumption?

Leigh Taylor 06:16
Yes, I think we’ve seen lots of it and it’s sort of sad because we’d really like to help people, but we have to talk to them first if they’re already in trouble, that’s a bit of a problem. I’ve seen lots of situations where the credit counsellors say, well, give us $800 a month and we’ll start dealing with your creditors. So you do that and after six months or so you’ve probably paid them $4,000.

And it turns out that they really can’t do anything for you because they never had any statutory powers to stop the creditors from suing you or garnishing you. All they do is try to delay them. They say, well, we’ll negotiate with them. Well, the creditor doesn’t want to negotiate. You’re sort of out of luck, so that’s a bit of a problem.

And at the end of it, after they’ve got your money and you’ve either run out of patience or money, then they’ll say, well, you’ll have to talk to a Licensed Insolvency Trustee. Well, the sort of the sad part is that the Licensed Insolvency Trustees would have talked to you in the first place. They wouldn’t have charged you for initial consultations and told you what they could or couldn’t do. And you sort of wasted an awful lot of time, frustration and awful lot of the money that you don’t have. So those kinds of situations are just too frequent.

And like I said, with the Internet and everything, it’s too easy for people to get hold of them. It’s really easy to just send them an email or something and start that conversation. And the fact of the matter is most of the time you really don’t know who they are or anything about them or where they are. Trying to figure out where somebody actually is on the internet is sometimes an impossibility. And they do that on purpose.

Wayne Kay 08:06
Yes, well, they make it look too like they’re in an office in Ottawa. They make it look official. That’s how they can build the websites. And I’ve seen these as well and I’m like, wow, that looks like it’s pretty legit. But then you start digging into it and there’s all these issues with it. So what’s your advice for people to best protect themselves?

Leigh Taylor 08:30
Well, there’s all sorts of things that you can do. First of all, understand the situation. If you go and talk to a Licensed Insolvency Trustee to begin with, you’re starting off on the right foot. You might want to find out where their office is located. I mean, it’s always better to speak to somebody in person. 

It’s one thing during COVID, we had no choice. We had to do it by zoom and telephone calls and all this sort of stuff. But that’s pretty well over now, so it always makes more sense in person. You get a better understanding. It’s easier to ask questions and get a feeling that you can trust somebody when you’ve met with them. 

So that’s probably the first key. Find out where they are. Do they really have an office if you’re talking to them, let’s say in Winnipeg, do they have an office in Winnipeg or do they have a pretend one of these places where they have a phone but nobody actually is there, right? They transfer the calls to Etobicoke or someplace. So I think that’s the first thing. Deal with somebody local.

If they’re not local, they’re not going to be familiar with the local rules and regulations, the court system. If they’re not local, they’re not likely to be able to offer you all of the options, some of which may be in your best interest. 

Consumer proposals are very popular and everything, but they’re not always the right solution. And if the counsellor you’re talking to is somewhere in New Brunswick, it’s pretty hard for them to deal with any kind of a Bankruptcy situation, even if Bankruptcy is the best solution to your particular set of problems. So that’s sort of an important part of it.

Ask questions and make sure that you understand the answers. What I mean by that is that if you talk to a professional, I don’t care whether it’s an accountant, lawyer, Licensed Insolvency, Trustee, or whatever, you should be able to get a reasonable explanation that you understand. If they’re going to talk to you in a bunch of legalese or gobbly goop with all sorts of jargon that you don’t understand because you’re not a pro at it, ask them to explain it. 

If they talk about sections of the act or some sort of a magic program that the government’s come up with, get the details of it so you can go look it up yourself and see if that’s what it actually means. Just this morning I was handed a document, a printout from one of our staff found on, I guess was Facebook or whatever.

And it just talks about, oh, it costs nothing to solve these problems. We’ll find a way to end it all and it’s not going to involve Bankruptcy. The fact of the matter is, if they say it costs nothing, well, you know, there’s a catch to it. There’s always a price to pay for solutions. So you got to be really leery about those kinds of things.

Wayne Kay 11:24
And I love that you just saw that today. Somebody just handed it to you. So every day it’s like you’re discovering these new ones that are out there and you’re like, oh no. And then you’re probably awaiting phone calls.

The show is all about interviewing Licensed Insolvency Trustees because it’s regulated through the government and there to offer some advice. Now earlier on you were talking about how some of them may say, okay, we’re going to help you solve your problem. You’re going to give us $800 a month. So all of a sudden you’re already in financial binds. You don’t even know where this money is coming from and all of a sudden they tell you, okay, you got to pay $800 or they say $800 or you’re on your own and it’s just going to work. I guess if they would use any kind of scare tactics that would also be something to be aware of.

Leigh Taylor 12:12
Oh, they certainly do. Revenue Canada is a real serious bullet. Some people try to fire that at you. You owe Revenue Canada $35,000 and they’re going to do this, that and the other thing to come after you and we can help you with that.

And yes, that’s kind of scary if the average person knows what Revenue Canada can or can’t do. But Revenue Canada is not going to write off any of the principal debt anyway in very special circumstances for writing off partial penalty or interest. So it’s really not something that just anybody can deal with. 

It can be discharged and dealt with in a Bankruptcy or a Consumer Proposal. But Bankruptcies and Consumer Proposals are only dealt with by Licensed Insolvency Trustees. So the promises oftentimes are very shallow, enticing, but then again that’s where you get into trouble.

Wayne Kay 13:06
So any of these counsellors, credit counsellors, if there’s going to be a Bankruptcy, they have to recommend a Licensed Insolvency Trustee.

Leigh Taylor 13:16
Well, some of them will just disappear. They’ve got their money. They don’t care if they’re living down in New Orleans, any place. They really don’t care what you are going to do.

Wayne Kay 13:27
But legally through the government, if you’re going to do a Bankruptcy, it’s through LITs, right?

Leigh Taylor 13:33
Yes, has to be.

Wayne Kay 13:35
Okay.

Leigh Taylor 13:35
Now not all of these credit counsellor organizations, some of them are Canadian and they operate in Canada and they end up being fronts for Licensed Insolvency Trustees. 

They’ll say, okay, we can’t help you, so we promise to help you here, go talk to this Licensed Insolvency Trustee. But the truth of the matter is you could have gone to that Licensed Insolvency Trustee or any other Licensed Insolvency Trustee right from the beginning. You don’t have to get a referral.

Wayne Kay 14:07
So I guess when you’re in a bad financial situation, you can’t sleep because you’re stressed out, and so you go online and you start looking for a solution.

It’s fine to maybe write down some of the options. It’s fine to talk to some people, but don’t just limit it to one. Talk to a few different people I think would probably be the best advice, wouldn’t it?

Leigh Taylor 14:27
That’s probably a good idea. Yes, see what they say.

Get an idea of whether you have confidence in them. How long have they been around? If they just hung out a shingle last week, you may want to be a little leery about it. But if they’ve been around for 20, 30, 40 years, a little bit more credibility there too, right?

Wayne Kay 14:48
Okay, that’s wonderful advice because in desperation, as we said, at the very beginning, people you can understand, right? There’s fear, there’s embarrassment. There’s all these emotions. They never thought they’d be in this situation, and all they want is to get out because everything is feeling icky when you’re in that situation.

Leigh Taylor 15:09
That’s right. And most people, it’s the first time that they’ve gotten into that situation.

They don’t know where to turn. And really, they become very susceptible to misleading information and magic bullet solutions. So you have to be careful.

Wayne Kay 15:24
Any final advice you want to share with us?

Leigh Taylor 15:27
Well, a lot of this ends up coming to us because we’re Licensed Insolvency Trustees, and many, many times we said, well, gee, I wish you’d come to talk to us first. And that’s why we talk to people like you and put advertisements out to get people to give them knowledge firsthand that, yes, they can approach us.

Wayne Kay 15:48
And usually the first consultation is absolutely free, which is great, and it’s not like, come on in and we’ll set up your Bankruptcy. It’s, come on in. Tell us what the problem is, and here’s a few different options for you, and let’s look at what might work for you, which is, I think, very comforting for people to understand that there are options.

Leigh Taylor 16:08
That’s right. And it works terrific.

Wayne Kay 16:11
Leigh, always a pleasure. Thanks so much for being on the show.

Leigh Taylor 16:14
Okay. Thank you, Wayne.

Wayne Kay 16:16
My guest today, Leigh Taylor. And you can learn more or schedule a free consultation with LCTaylor Licensed Insolvency Trustee through the website LCTaylor.com. 

And that’s it for today’s Debt Matters podcast. Now, make sure you subscribe wherever you get your favorite podcast from. And of course, for more information, you can always check out debtmatters.ca. Thanks for listening.