Dealing with a debt collector

From Financial Consumer Agency of Canada

A debt collection agency is a company that specializes in recovering unpaid debts. If you don't make your debt payments, a debt collector may contact you to collect money that you owe on a credit card, line of credit, or loan.

Your creditor, that is, the company that you owe money to, may try to get their money back by:

  • using its own debt collection department if it has one
  • hiring a debt collection agency to get the money back on its behalf
  • selling your debt to a debt collection agency

What happens when your debt is sent to a collection agency

You'll usually receive a notice in writing before a collection agency contacts you to collect the debt you owe.

The written notice should include:

  • the name of debt collection agency
  • the name of the person or business that you owe money to
  • the amount that you owe

Steps to take when you receive a notice that your debt is transferred to a collection agency

If you receive a notice that your creditor will transfer your debt to a collection agency, contact your creditor as soon as possible.

You may be able to:

  • pay a portion of the amount or the full amount owed to avoid having the debt transferred to collections
  • make alternate arrangements with your creditor to pay back your debt

Get information and tips on what to do when you contact your creditors to help reduce your debt.

What happens to your credit score

Once your creditor transfers your debt to a collection agency, your credit score will go down.

A low credit score means:

  • lenders may refuse you credit or charge you a higher interest rate
  • insurance companies may charge you more for insurance
  • landlords may refuse to rent to you or charge you more for rent
  • employers may not hire you

See how long information stays on your credit report.

What to do when a debt collector calls

Make sure to ask for and write down the following information:

  • the name of the person calling
  • the company the debt collector works for
  • the name of the company the debt collector is collecting money for
  • the debt collector’s telephone number

Ask for details on the debt, such as:

  • the amount you owe
  • who you owe it to
  • when you started owing it

Tell the debt collector that you'll call back as soon as you verify the information. Look at your bills and bank statements to help you confirm if the debt is yours and the amount you owe is correct.

You can ask the collection agency contact you only in writing. Ask your legal advisor to send a written request to your creditor by registered mail, including an address and phone number at which you may be contacted.

Paying your debt once it has been transferred to a collection agency

If the debt is yours and the amount is correct, paying the full amount you owe will resolve the issue.

When repaying your debt:

  • don’t send cash
  • always get a receipt for any payment you make
  • only deal with the debt collector who contacted you to make payments
  • don’t contact the creditor that lent you money, as this might create confusion

If it’s not possible for you to pay the full amount:

  • explain why to the debt collector
  • offer an alternate method of repayment, such as monthly payments
  • follow up in writing
  • include a first payment to show your commitment to paying back the debt, if possible

What you should do if the debt isn't yours

If you think that the debt isn’t yours, or that an error has been made:

  • tell the debt collector
  • contact the creditor to find out what steps you need to take to correct the error
  • check your credit report to see if the debt appears on your report

Order your credit report.

Check for errors on your credit report.

Your rights when dealing with a debt collector

You have rights with respect to how the debt is collected when dealing with a debt collector from a federally regulated financial institution or another party acting on its behalf.

Who a debt collector can contact

A debt collector can only contact your friends, employer, relatives or neighbours to get your telephone number or address.

This does not apply in the following cases:

  • the person being contacted has guaranteed (or co-signed) your loan
  • your employer is contacted to confirm your employment
  • you've given your consent to the financial institution that they can contact the person

If you gave consent orally to your financial institution, you must receive written confirmation of your consent either on paper or electronically.

When a debt collector can contact you

A debt collector can only contact you at the following times:

  • Monday through Saturday between 7:00 a.m. and 9:00 p.m.
  • Sundays between 1:00 p.m. and 5:00 p.m.

A debt collector can't contact you on holidays.

What a debt collector can't do

A debt collector can't do the following:

  • suggest to your friends, employer, relatives or neighbours that they should pay your debts, unless one of these individuals has co-signed your loan
  • use threatening, intimidating or abusive language
  • apply excessive or unreasonable pressure on you to repay the debt
  • misrepresent the situation or give false or misleading information
  • call you on your cell phone, unless you've provided that number as a way to reach you

A debt collection agency can't add any collection-related costs to the amount you owe other than:

  • legal fees
  • fees for non-sufficient funds on payments that you submitted

Making a complaint about a collection agency

If you feel that the debt collector you're dealing with isn't respecting your rights, contact the appropriate regulator.

If you're dealing with:

  • the debt collection department of a federally regulated financial institution
  • a debt collection agency hired by a federally regulated financial institution

Contact the Financial Consumer Agency of Canada.

If your creditor sold your debt to a collection agency and you want to make a complaint about the agency’s debt collection practices.

Contact the consumer affairs office of your province or territory.

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