Many people borrow money to make large purchases such as homes, cars, or even appliances. When they do so, they sign an agreement that dictates they will pay a monthly cost for a given period of time until the item is paid off and the purchase is complete. Many of these agreements have clauses that allow the creditors to take back or repossess the item if the consumer stops making payments.
Creditors, or more often debt collection agencies, must follow certain steps when repossessing an item. After notice is given they must arrive at an appropriate time and speak with only an appropriate person. They may collect the item that the past-due loan was taken out for but no other property of the debtor’s.
Repossession mostly falls under the laws of the individual provinces in Canada which means that they can vary from place to place. However, there are some basic requirements involved in repossessing an item which are similar in most provinces. One of these basic requirements is 48 hours prior written notice, not including weekends and holidays. In the written notice there is certain information that must be included such as:
1) The items that are to be repossessed, including VIN or serial numbers
2) The date that the repossession is effective
3) How much money must be paid to get the items back
4) A calculation of the money due including how the final amount was reached
5) The latest date that the items can be reclaimed (in most provinces this must be at least 20 days after receiving the notice)
6) Where the items will be stored until the reclaimation period is up
In British Columbia, the law states that a collection agency may not attempt to contact a debtor in person until 5 days after they have sent a written notice. People who have not received this written notice can inform the collection agency of the fact and must be sent a copy of the letter to their provided address. The exception to this rule is when the debt collector has made a “reasonable effort” to notify the debtor by writing but is unable to for some reason.
Debt collectors are also forbidden from lying about their purposes to debtors in British Columbia. They are not allowed to supply false information but they are also explicitly not allowed to supply misleading information either. Misrepresenting their communication, for example stating to the person that answers the phone that they want to talk to the debtor for a reason unrelated to debt collection, is also illegal.
Items that are repossessed will be returned to the consumer upon payment of all debts and fees. It is illegal for the agency to keep merchandise once the debtor has paid the required fees. The actual amount owed after an item has been repossessed is the sum of:
1) The missed payments
2) The charges for past-due or missed payments
3) The actual cost of the repossession
Repossession can only be carried out legally by a licensed collection agency or agents of the creditor themselves. Repossession agents cannot remove merchandise from personal property without the debtor, the debtor’s spouse or licensed agent, or an adult resident of the home being present unless they have a court order. They also may not enter the home to repossess items during certain hours of the day or take or damage items that are not part of the original credit agreement.
It is generally illegal for collection agencies to harass or lie to debtors. In British Columbia these laws include but do not limit the definition of harassment by debt collectors to:
1) Using profane, intimidating, coercive or threatening language
2) Threatening to or actually publishing a debtor’s failure to pay
3) Exerting “excessive, undue or unreasonable” pressure
(Business Practices and Consumer Protection Act SBC 2004 Chapter 2 Part 7)
Repossession is usually involuntary but it can also be voluntary. Voluntary repossession occurs when a person decides they can no longer make payments on an item and returns it to the creditor in exchange for a cancellation of their remaining debt. Both voluntary and involuntary repossessions have negative effects on the consumer’s credit but voluntary repossession may not involve as many fees.
Unique scenarios and laws exist in some areas of Canada. For example, native leaders have the right to refuse entry to anyone attempting to gain access to aboriginal land. This makes repossessing vehicles on aboriginal land extremely difficult if the native leaders do not wish to allow it to occur.
Under the Consumer Protection Act of 2002 the province of Ontario forbid repossession of goods once two-thirds of the consumer’s payment obligations have been met. After this point goods may only be repossessed by a court order. This act applies to all agreements that have a provision for repossession should the consumer fail to meet their financial obligations, even if the agreement does not state this right.
Because repossession laws vary by province these are only an outline of the basic Canadian repossession laws. Some provinces have additional requirements or different rules regarding parts of the repossession process. The Ministry of Consumer Protection in Ontario and similar government agencies in other provinces can be contacted as a source of further information.
If you have concerns about the actions of a collection agency, contact your provincial or territorial consumer affairs office in Canada.