November 22, 2022

How to deal with a debt collector

Learn about the debt collection process, your rights, and how to keep as much money as you can.

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How to deal with a debt collector

Stressful phone call dealing with a debt collector.

While laws have been put in place to dissuade debt collectors from harassing you with disrespect, some will still try to intimidate you. It's their job. Knowing what debt collectors can and can’t do will make it easier for you to call out their illegal behaviour and negotiate with them to cleanly settle your debt.

Listen to our Debt Collection Q &A with BDO Licensed Insolvency Trustees Mike Comrie and Nicole Olsen.

What is a debt collector?

When you owe money and miss your payments, you’ll be contacted about it. This is the first stage of debt collection. Some companies (mostly banks, trust companies, loan companies, and life insurance providers) will get their own internal debt collection department to contact you, and they must follow federal laws regarding debt collections. Others will sell your debt to a collection agency, which means you’ll owe the agency directly. If they’re not federally regulated — which is often the case with third-party agencies — the rules will be based on your province. 

Regardless of who holds your debt, you’re always protected by laws that determine how they’re allowed to interact with you. 

What to do when debt collectors call 

First, are they even allowed to be calling you yet? In most provinces, a debt collector must first give you the opportunity to confirm the debt is yours. They will do so by sending you a letter or email notifying you of the unpaid debt. You should compare their information with yours (who you owe money to and how much, when it was originally due, how many payments you’ve already made and when, and the name of the collections outfit you’ve paid previously). This can help protect you against fraud and miscommunication, as sometimes the problem isn’t a missed payment so much as an error or dispute over how much you owed and when. 

Is there a statute of limitations on debt?

In Canada, there are federal and provincial laws that say a creditor or collection agency can’t take legal action to recover your debt after a certain period of time has gone by. They can no longer garnish your wages or sue you to collect your debt. The statute of limitations varies by province — and it doesn’t stop your creditors or the collection agency from continuing to try to collect payment.  

The tricky thing is that the statute of limitations on your debt resets if you acknowledge that debt. 

If you make a payment, send your creditor or the debt collector written confirmation of your debt, or tell them how you want to be contacted, the collection agency can take legal action to collect your debt—regardless of how old your debt is. 

If you think the statute of limitations applies to your debt, it’s best to get legal advice or speak to a Licensed Insolvency Trustee before you speak to a creditor or debt collection agency 

What are your rights? 

When a collector first calls you, it’s within your rights to confirm their identity. This includes their name, company, phone number, the creditor you owe money to, and the nature of the debt. Again, it’s always good to make sure the collector has the right information. 

Most importantly, you have the right to not be threatened, intimidated, or disrespected by debt collectors:

  • They can’t harass you with non-stop phone calls.
  • They can only speak to you once per day, between the hours of 7:00 am and 9:00 pm from Monday to Saturday, and 1:00 pm ­to 5:00 pm on Sunday. However, they can call you more than once during these hours to try to get a hold of you.
  • They can’t contact you on statutory holidays, which are always off limits.
  • In Alberta, Ontario, and Nova Scotia, they can only speak to you three times per week, but they can call you more than three times to try to get a hold of you.

You have the right to decide how you’d like to be contacted, and they don’t have the right to contact you any other way. If, however, you don’t provide a form of contact, they have the right to contact friends or family for your phone number.  

Finally, you have the right to report them if they try to manipulate you with false or misleading information. And if a debt collector ever makes you feel unsafe or you believe they’re violating your rights, your best course of action is to contact your provincial or territorial Consumer Affairs office

"If you get to a point where it's too complicated, and you can’t make sense of how to move forward or you don't understand what your rights are, contact a Licensed Insolvency Trustee.” 

— Mike Comrie, BDO Licensed Insolvency Trustee

How to speak with a debt collector 

The debt collector will likely start by asking you seemingly harmless questions. At this point, you’d be wise to limit the amount of information you give them.  

For example, if you go into too much detail about how you got into debt, the collector might start making assumptions about your spending habits and be less inclined to negotiate with you, instead implying that you could pay your debts if you cut your spending (which you would’ve done a long time ago had that been possible). 

Similarly, avoid giving them any additional banking or financial information or confirming any information they think they know about you (even if it’s true). This way everything is still speculative on their part.

Can I ask a collection agency to settle for less?

Yes. In fact, they’re actually quite open to reducing your payment. Collection agencies deal in quantity. For them, it’s better to settle multiple debts at a lower rate than let a single case drag on too long. 

But only agree to something you can afford. Before entering negotiations, calculate both a lump sum or monthly payment that you can realistically fit into your budget. A settlement should give you debt relief. If you successfully negotiate a price you can’t pay, you’re right back where you started.  

What percentage should I offer to settle debt?

If you plan on going it alone, start your negotiation by making it clear you’re unable to pay the full amount, then offer a lower price than what you expect to pay. A general rule is to offer 30% of your total debt. It may seem optimistic, but it gives you plenty of room for counter offers.

If they come back with a counteroffer, you can either take it, or try to negotiate somewhere between your offer and theirs. They can also set you up on a monthly payment plan if it helps you pay the amount you’re asking for. Once you reach a deal, make sure you agree that, upon payment, your debt will be cleared, and you won’t hear from them again.  

Always get the final settlement in writing from the collection agency. Do not settle for a verbal agreement from the collection agent. Sometimes a collection agency will accept a verbal agreement and then rescind the offer later on. 

If you’re not comfortable negotiating on your own with a collection agency, a Licensed Insolvency Trustee (LIT) can help. An LIT can help you figure out what you can afford and can also help you negotiate with your creditors (through a consumer proposal), as it’s what they’re trained and legally authorized to do.

5 debt collection myths debunked 

The more debt myths you can dispel, the better off you’ll be if you find yourself in it. 

True or False: Consumer proposal or bankruptcy stops debt collectors 

True. Both consumer proposals and bankruptcy come with protections against debt collectors, and all contact will stop. If you can’t pay back your debt and the constant calls are becoming too much for you, this may be a worthwhile option, but it’s important to understand what exactly you’re agreeing to. If you’re not sure it’s right for you, or you want to learn more about your options, contact an LIT to ensure you have all the facts before you decide.

True or False: Debt collectors can contact your friends, family, and colleagues 

True. They can contact the people you know, but they’re not allowed to talk about your debt at all. The only information they can ask for is your phone number, address, and current employer. Additionally, they’re not supposed to contact any of these people multiple times. The two main exceptions to this are if you give them permission or the person co-signed your loan. Since they’re connected to the debt, they can discuss it.

True or False: You should avoid the debt collector and pay the original creditor 

False. If a collection agency begins pursuing your debt, your original creditor may have sold your debt to them. If you go around the collector, you may pay off your debt without your ‘new creditor’ knowing. And the only thing worse than being pursued for an outstanding debt is being pursued for one you’ve already paid.

True or False: Debt collectors can garnish your wages or take from your bank account 

True. But the only way they can directly take funds from your wages or bank account is if you have signed a voluntary assignment or if they take you to court and obtain a judgement against you. If they decide to sue, they must do it within a certain timeframe. This is based on your province and when your debt was legally acknowledged. Since lawsuits can be expensive, debt collectors will usually try to settle the debt with you before it comes to this.

True or False: You must handle debt collectors on your own

Very False. Debt can weigh heavily and can start to make you feel alone. This is why it’s important to talk to close friends and family about what you’re going through. And if you need more help or perspective, you can always meet with an LIT. 

If you need support to negotiate with a debt collector or you’re looking for some help managing your debt, reach out to a BDO LIT for a free consultation. 

Do you have questions about debt?


November 22, 2022

How to deal with a debt collector

Learn about the debt collection process, your rights, and how to keep as much money as you can.

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