When a person borrows money through some kind of a consumer loan, whether it be a secured loan like a car loan or a revolving line of credit like a credit card, the lender retains the right to pursue recovery when the borrower fails to make timely payments. However, there’s a big difference between legal recovery and outright harassment of people, using threats and verbal assault to secure payments.
Often, many lenders transfer outstanding loan accounts to third parties after making a few attempts to collect through warning. Either the collection work is outsourced while the lender still retains the right to the loan or the loan is outright assigned to a third party who buys the loan for a smaller amount. These third parties, or collection agencies, then take on the burden of actually collecting the debt owed for a share of the total recovery or for fees. Unlike the original lender, many of these collection agency third parties can by fly-by-night companies that don’t follow the best professional protocols when contacting borrowers. In some cases, they commit illegal activity trying to coerce borrowers to make payments to them.
Canadian law provides various protections for consumers, even when they have legally borrowed monies, to be protected from harassment and threats by lenders or their hired collection agencies. Irrespective of which province or territory a borrower happens to reside in, under Canadian national law specific rules apply to collection agencies. These include:
• The collection agency or lender has to provide the borrower a written notice of the collection action or make a reasonable effort trying to communicate the notice. The standard approach tends to be a written notice with a return signature card or proof of mailing on file.
• A prior notice must be provided to a borrower before a collection agency can go to court an initiate a legal action for collection or try to do so.
• Repeatedly contacting family members and friends about your debt owed to the point it is considered harassment, particularly during prohibited times of the day (i.e. dinner time, late at night etc.).
• Lying or falsely misrepresenting facts to other parties to secure payment action from a borrower.
• Trying to communicate with a borrower to get payment without first identifying who the caller is, the account in question, and the amount owed.
• Continuing to keep contacting or threatening a person to get payment when the person has already clearly stated he is not the borrower. The only exception to this rule is if the collection agency or lender can conclusively prove the party is in fact the borrower after all through records.
• Contacting family, friends, neighbours and acquaintances, including work, to get information about a borrower aside from basic contact information (i.e. phone number and street address). Only those parties that have been co-signers or guaranteed a loan will be exempted from this rule. Employers are also exempted to the extent they are requested to provide a borrower’s employment status and work contact information.
Unfortunately, despite the fact that laws are already in place to bar the above behavior by unscrupulous lenders and collection agencies, some still go ahead and practice harassment of borrowers anyways. Their hope is that people won’t complain or file a concern with a government regulator and instead will just pay the debt to stop the harassment.
For those dealing with just such a problem, every province has a specific office where a complaint can be filed and more information on how to deal with harassing creditors and collections agencies can be found. Each province has a consumer affairs office that will investigate the matter and contact the collector to direct them to stop their activities if necessary. Where a collection agency or lender shows a repeat pattern of harassment despite government warning, the Canadian government also retains the right to penalize the company legally in court for violation of the law.
However, just because they have been contacted by a legitimate borrower or collector doesn’t mean a consumer is being harassed. If a lender or its collector follows the law correctly, it has the authorization to keep pursuing contact within legal boundaries to secure a payment. That includes seeking a legal action against a borrower. None of these activities in and of themselves, if within the law, are harassment. So a borrower needs to make sure he can document the errant behavior with names, dates, and organization and ideally voice recordings or document copies. That makes the job easier for a consumer affairs office to follow up with a lender or collector and correct the problem.
Consumers should also be careful with payments when made to close out a loan balance. Ideally, payment should be made to the original lender if the company still has title to the loan. Making payments to collection agencies has a long history of problems, with many companies not fully clearing off accounts that have been paid in full. In some cases, the payments “disappear.” That leaves the consumer with a loan balance still in his name while he’s thinking the amount has been paid and the issue is over. Not surprisingly, the borrower is then shocked when collection actions still occur. Again, determining in writing who still has the loan and paying directly to that party, while documenting everything, creates a far better defense to someone arguing later money is still owed.