Debt settlement and financial recovery companies: Too risky an option?


Yannick Labelle, Marcel Boucher


Union des consommateurs




High levels of consumer debt are becoming increasingly alarming to many Canadians. The media, consumer advocacy groups, and Canadian lawmakers have all reacted with unease to complaints from consumers who have reported negative experiences with debt settlement and financial recovery services. Consumers have criticized these organizations for their excessive fees (often for services that have been exaggerated), the high prices for supplementary services not included in the contract, and the extension of expensive credit in more serious situations. These debt settlement and financial recovery services are very appealing to those Canadians who are suffering from serious financial difficulties, and are therefore most vulnerable to predatory and deceptive sales tactics. The purpose of this study was to examine Canadian consumer issues that have been raised by these services. To accomplish this, Union des consommateurs reviewed the existing literature on the subject, gathered data from companies’ websites and contracts, conducted a mystery customer survey of several government and non-government organizations, and studied the legislation relevant to debt settlement and financial recovery industries, both in Canada and abroad.
This study offers several potential solutions to the issue of for-profit debt settlement and financial recovery services. One possibility is the outright prohibition of these services by for-profit organizations. Union consommateurs also recommends that taking action to strengthen non-profit debt settlement and financial recovery services through increased funding and a more rigorous effort to inform Canadians about the risks associated with these for-profit organizations.

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OCA Funded Research
This research received funding support through the Office of Consumer Affairs' Contributions Program.

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Source: Consumer Policy Research Database

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