What Debt Collection Agency Can and Cannot Do

Many debt collectors and collection agencies assume that debtors are not aware of their rights. And because of this, some resort to unscrupulous methods to persuade you to pay. There are rules and regulations that they must adhere to, though each of the province’s laws vary.  

This raises a lot of questions around exactly what collection agencies can and cannot do. Licensed Insolvency Trustee, Daniel Maksymchak explains what you need to know to protect yourself and the first thing you need to do when initially contacted. 

Daniel also covers:

  • How to negotiate with your creditors
  • The importance of getting agreements you make in writing
  • How to verify the company and debt are legitimate
  • What you need to know to avoid scams
  • Contacting an LIT to discuss your options to stop collection calls

Licensed Insolvency Trustees are federally regulated and approved by the Canadian government. They are the ones that will give you honest advice about all the options that are available to you. The sooner you take that first step the more options you will have.

Wayne Kay 00:04
What can a debt collection agency do and what can they not do when you owe them money? That’s our topic today on 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 we’re going to discuss debt collection. What is allowed? When are they allowed to call you? What information is a collection agency required to actually give you? Can they contact your brother or your sister or your friends or your family? Who are they able to actually reach out to? Can they take your property?

There’s so many questions about debt collection agencies and to help sort it all out, my guest today, Daniel Maksymchak from LCTaylor Licensed Insolvency Trustee in Winnipeg.

Welcome back, Daniel. My guest Daniel, joining me from Winnipeg. Hi there, Daniel.

Daniel Maksymchak 00:58
Hi, Wayne.

Wayne Kay 00:59
Welcome back to the show.

Daniel Maksymchak 01:01
Thanks for having me back. Always good to talk to you.

Wayne Kay 01:03
You got it. Well, this is going to be a great topic because it does happen to a lot of people where they dread phone calls. They hear the phone ringing and it strikes fear in their heart because on the other end of the line is a collection agency. This happens in our country.

Daniel Maksymchak 01:24
It certainly does. The second you miss a payment, they’re ready to call you within a few days in some cases. They want their money as fast as they can receive it. And if you owe it, they’re going to let you know that you missed the payment.

Wayne Kay 01:38
Okay, so when are they allowed to just call? Anytime?

Daniel Maksymchak 01:43
They’re not. So this is something that’s going to vary province by province. So where we’re located here at LCTaylor in Manitoba, the rights of collection agents versus the rights of the person who owes the money are governed by the Consumer Protections Office of Manitoba. They set guidelines, basically, or rules that prevent collection agents from doing certain things. One of those things that they’re prevented from doing is calling outside of certain hours within which they are allowed to call.

So in Manitoba, they’re allowed to call or visit physically, though that rarely happens, between 07:00 A.M. And 09:00 P.M. If they call you outside of that time, they’re out of bounds. That’s against the legislation. You should let them know that because that will let them know that you know your rights and hopefully they’ll stick more to the rules from that point on.

And that’s 07:00 A.M. To 09:00 P.M., six days a week, not including Sunday statutory holidays as well. They’re barred from calling you on as well.

Wayne Kay 02:41
Oh, wow, that’s good to know. Probably a lot of people feel that relief, knowing that and go, oh, thank goodness, it’s 09:00 P.M. Saturday. I won’t have a phone call. But they legally can phone you during regular office hours, right? It’s okay.

Daniel Maksymchak 02:57
Yes, exactly. Between 07:00 A.M and 09:00 P.M. So even a bit outside of office hours, right? That gives them a chance to get people theoretically before they leave to work, after they get home from work before nine Saturdays. Within those hours, it’s fair game.

Wayne Kay 03:11
So when they get a hold of you, walk me through what that’s like. What have you heard? What do they usually say?

Daniel Maksymchak 03:17
Well, there’s all sorts, right? There’s all kinds of collection agents in Canada who operate trying to collect debts from people in Manitoba who owe them. And they all vary. 

Oftentimes from what I’ve heard, it starts off, by the way, you’ve missed that payment. Please make that payment as soon as you can in hopes that it’s just an oversight. Usually it’s the bank or the utility calling you directly about that.

It’s not necessarily someone who’s outsourced to do strictly collection practices, but then if that debt remains unpaid for a longer period of time, of course they get more insistent. Calling more frequently, and potentially threatening to do things that they may or may not have the power to do. 

So depending on how far along the line things get, they could threaten to garnish your wages, they could threaten to seize money from your bank accounts, both of which are legal if they take the proper process to do that. And the calls will ramp up in frequency as well.

Wayne Kay 04:20
Okay, so are they required to give you certain information when you chat with them?

Daniel Maksymchak 04:27
When they call you, especially with the rise of scams, phone scams, email scams, those kinds of things, you’re going to want to verify that the person you’re speaking to is someone actually representing the company that you owe the money to, right? 

You’re going to want to request certain information from them before you even enter into any discussions about settling that debt or where you sent payment to or anything like that. You’re going to want to verify the name of the person calling you, the name of the company that they’re representing. 

It might be the bank or the utility itself that you owe, or it might be a collection agent that’s been hired by that company to collect their debts. And you’re also entitled to find out who it was that you originally owed the money to. So if you know 1,2,3 Collection Agency is collecting for a large bank, they have to tell you both who they’re calling from and which debt it is they’re collecting, like which bank they’re collecting the debt from.

And these are all things that they’re required to tell you by law. So if they refuse to tell you that I would not deal with them anymore until they’re prepared to do that, just because there’s so many scams out there that they go on phishing expeditions. Basically saying they’re calling from companies that people frequently owe money to and trying to divert payment to them instead of the people who are actually owed.

Wayne Kay 05:43
Will they give you a phone number where you can call the agency or Google the agency or something like that to keep safe?

Daniel Maksymchak 05:51
Yes, often they should do that. If they are a reputable collection agency, they should be prepared to provide you with that information so that you can verify that that might be a good idea.

If they give you a phone number, don’t just blindly call back the phone number that they said to call you at. If they’re from 1,2,3 Collection Agents, go online, make sure it’s actually the right phone number for that company, call them back, and then you can identify whether you really owe that company money or if it was a scam kind of trying to obtain money improperly.

Wayne Kay 06:24
One thing that happens to a lot of people who are in a lot of debt, they’re embarrassed. They’re stressed out, they’re embarrassed. They don’t want everybody to know about it. Can these collection agencies call your friends or your family?

Daniel Maksymchak 06:40
Under Manitoba law, they cannot. They’re not allowed to harass your neighbors or your friends to locate the whereabouts of you or your family.

Usually they try to do that. Oftentimes some kind of what we’ll call secondary lenders will require you to provide what they call references on the loan applications – theoretically to allow those people to vouch for your ability to repay the loan. 

But what we’ve seen sometimes is that those people will then use that information, if you’re behind in your payments, to call those people and badger them and pressure them to get you to pay the loan. 

But under Manitoba legislation, that’s illegal. So in that case, that would be something that you should call them on, and at that point, hopefully they’ll stop. 

Any of these things that we’re talking about in terms of being against the regulations, if those violations are continuing, that’s something that you should definitely contact the Manitoba Consumer Protections Office about and let them know what’s happening and hopefully they’ll help you out from there.

Wayne Kay 07:44
And also, if somebody’s in this situation where they’re getting these phone calls, that’s the perfect opportunity to contact you and find out what the options are. Right? That’s what that first consultation is about.

Daniel Maksymchak 08:00
Yes, that’s exactly right. If you’re receiving frequent calls from a collection agency, it probably means that you are overcome with debt. You don’t have enough money to repay the debts that you have, and that’s why they’re calling you in hopes that you will. 

So that’s a good indicator that you should be reaching out to a Licensed Insolvency Trustee to discuss your options as to what you can do, in terms of immediate needs. Getting those collection agents to stop calling you, and in terms of longer term goals, alleviating the debt so that you can move forward debt free. 

Both a Consumer Proposal and a Bankruptcy come with the stay of proceedings that prevent collection calls from contacting you.

Everything has to go through the Trustee or the administrator of the Consumer Proposal at that point. So that is something that would definitely provide relief from those collection calls.

Wayne Kay 08:47
Now, there’s going to be a lot of threats, as you mentioned, where they’ll say, oh, we’re going to garnish your wages or we’re going to do this or we’re going to take your lake property, or we’re going to take something. What does the law say about that? They can’t or they have to go through a lot of legal stuff to make it happen.

Daniel Maksymchak 09:05
Yes, exactly. It is possible they have to go through a lot of legal steps to make that happen. They would have to obtain a judgment from the court certifying that the debt you owe is legitimate and that it is a fact that you owe them the money. And once they have that judgment, that’s when they can use that judgment to do things like seeking a lien on your property or seeking a garnishment on your wages. There are things that are legitimate and can be done, but it’s not something that when you get off the phone with them, in most cases, they’re not going to do that the next day. 

It is a threat, but it’s not necessarily an immediate risk. But at that point, that’s a good time to call the LIT so that you can go and you can talk to one and find out your options and put something into place so that they can be prevented from garnishing your wages or putting any liens on your property or anything like that. 

Prevention, it’s better than dealing with it after the fact. Once you’ve already lost some of your wages to a garnishment or something like that, because once they take it, in most cases it’s not coming back.

Wayne Kay 10:07
So if they call and they say, this is the situation, can you negotiate maybe some kind of a payment plan or something lower and say, well, I can’t pay that amount, but I can maybe pay this amount.

Daniel Maksymchak 10:22
Yes, in many cases you can. Because the collection agents, especially when it’s been outsourced to a third party collection agent, it’s not the bank itself that’s calling you. 

Let’s say it’s a third party. Because in many cases those third party agents have either bought that debt from the bank at a fraction of the value of that debt or they’re receiving a commission and the bank has basically given out much hope of collecting that debt at least in full. 

That’s the point where a settlement is possible because the bank that bought you or the collection agent that bought your debt for pennies on the dollar, anything that you pay above that is profit to them. So they’re interested in considering that so that they can receive some money from this debt that they bought.

Or if they’re on commission, again, anything that they can collect from you is going to result in money for them as long as it’s something reasonable. So that’s definitely something that you can attempt. You mentioned a payment plan. Those are generally less successful from what debtors have told us, because there’s no guarantee that you’re going to continue with those payments. You start a payment, you come up with a plan with the creditor, you make the payments, and then you stop. And then you’re back to square one. 

So what the creditors prefer is kind of a lump sum offer. Of course, those are hard to come up with because it’s an amount of money all at once. But if you can call them and offer them some fraction of what you owe but all at once, that’s something that they’re going to be more agreeable to because they don’t have to worry about you anymore. They can take their payment, cash their cheque, and take you off the list and move on to the next person.

Wayne Kay 11:58
I’m glad you mentioned all that. I didn’t realize that was how it worked. You could actually negotiate. So if somebody’s in that situation, what are the steps that they should take?

Daniel Maksymchak 12:11
If you’re prepared to enter into a settlement and you can come up with a settlement that you can manage, they agree to definitely get that in writing.
That’s the agreement. They should send you a letter or some kind of correspondence confirming that that is the agreement that you have. And then once you fulfill that part of the agreement, keep proof that you did do that.

So if they’ve settled on a lump sum and you send them a cheque or a payment for that amount, keep proof that you sent them the amount and it was the amount that you agreed to in this letter. That way, if something down the road comes up and they try to take it to court or anything like that, you have evidence that you agreed to a settlement, you paid the settlement, that debt is resolved. 

That’s definitely something, because sometimes we hear about less honest debt collectors who will claim to have a deal, say, oh, yeah, just send me money and we’re good in a certain amount. Then they take that and then they come back asking for more money.

So you want to make sure that you have evidence that the deal is the final deal. It’s a full and final settlement of that debt, and when you make that payment, you’re done with it.

Wayne Kay 13:14
It looks like bookkeeping is very important or note keeping every time you have an interaction with somebody.

Daniel Maksymchak 13:21
Yes,it doesn’t hurt. And that’s for two reasons. One, so to make sure that they’re following the rules that we kind of talked about earlier in the show. And second of all, so that if there is an agreement reached, that you’ve documented that agreement and that if they attempt to breach that agreement, that you have evidence that the agreement was made and that you had held up your end of the deal.

Wayne Kay 13:40
An email just as good?

Daniel Maksymchak 13:44
That might be up to them if it ever did go to court. That might be up to the eyes of the person hearing the case. But in most cases these days, emails are considered to be useful evidence for this purpose.

Wayne Kay 13:57
Right, okay, good to know. Boy, you answered a lot of questions regarding this and what these debt collection agencies are able to do and things they can’t do, and I’m sure people feel a bit of relief. Final words of advice for us?

Daniel Maksymchak 14:12
Yes, I would say that if you are getting collection agent calls and you don’t have the means to pay those debts, it’s not a matter of you forgot the payment or something’s come up and they’re calling you for those reasons. 

But if people are calling you and demanding payments that you just don’t have the money to make, definitely call a Licensed Insolvency Trustee who’s local to your area. They can go through your options with you and find out how those payments can stop before things get out of control. And if you’re worried about potentially your wages being garnished or assets being leaned or some of the things that they may be threatening on the calls actually coming to fruition.

Wayne Kay 14:48
Yes. Great advice, Daniel. A pleasure. Thanks very much for all the information.

Daniel Maksymchak 15:19
Thanks for having me, Wayne. Good to speak with you.

Wayne Kay 15:21
My guest today was Daniel Maksymchak. You can learn more or schedule a free consultation with LCTaylor Licensed Insolvency Trustee through the website lctaylor.com. 

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

About Daniel Maksymchak

Daniel has worked in the bankruptcy and insolvency field since 2010. His career began in accounting, receiving his Chartered Accountant designation in 2009. He attained his Licensed Insolvency Trustee accreditation in 2014. 

Daniel is a member of the Canadian Association of Insolvency and Restructuring Professional (CAIRP) and has volunteered his time with numerous causes in the community. 

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