Debt collection agencies

A debt collection agency is a company that makes sure that money owed to a business, by a debtor, is repaid. If you have an outstanding bill with a business, they may decide to turn your account over to a collection agency.

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The role of a debt collection agency

A collection agency's job is to collect unpaid accounts. Companies hire collection agencies to collect on unpaid, past-due debts from individuals or other businesses.

Making sure that a collection agency is legitimate

If a company contacts you claiming to be collecting a debt, make sure you are dealing with a legitimate agency.

Take the following steps to protect yourself from potential fraud:

  • Be aware that collection agencies are forbidden from trying to collect a without first notifying you in writing or making a reasonable attempt to do so.
  • Do not share financial and personal information if you are not certain you are dealing with a real collection agency.
  • A legitimate debt collection agency will provide information such as the company name, address, web address and phone number. Ask for this information.
  • Find out what company they represent and the details of the debt.
  • Verify that the debt collection agency exists by checking with the Better Business Bureau or your regional consumer affairs office.
  • After you've verified that the collection agency is legitimate, call their office to check if they have, in fact, contacted you. Some scammers may deceptively claim to represent real agencies.

If you suspect that a fraudster has contacted you, report the incident to the Canadian Anti-Fraud Centre.

Dealing with a collection agency to repay your debt

Take your debts seriously. Leaving them unpaid long enough can result in legal action, which means that authorities can take money from your paycheque and/or seize your assets.

In most provinces and territories, a collection agency must notify you—in writing—when they take over your account. Once the account has been officially turned over to a collection agency, you'll be dealing exclusively with the collection agency to arrange for the repayment of the debt. The agency must contact you to attempt to recover the money you owe to its client (the business with whom you initially incurred the debt).

Tips for dealing with a collection agency:

  • First, make sure that the debt is yours and not an error.
  • In the case of an error in the account, inform both the business and the collection agency straightaway. Restrict all other communications with the debt collection agency.
  • Pay the money you owe when possible. The collection agency isn't allowed to collect more than the amount owed to the business. They also aren't allowed to charge debt collection fees.
  • When it isn't possible for you to pay the full amount right away, explain why.
  • Ask about alternative methods of repayment like paying a lump sum at a later date or a series of monthly payments.
  • Never send cash to make payments to a collection agency.
  • Make sure you have receipts for all the payments you make to the collection agency.
  • Always be sure to have enough money in your account to cover the withdrawal of cheques you write to pay back your debt.
  • If your financial circumstances change, inform the collection agency immediately by email or mail.
  • Keep a copy of all communications in case the collection agency takes legal action.

After you've paid back the full amount owed, you will no longer have to deal with the collection agency.

For more information, visit the Dealing with a debt collector page on Canada.ca.

Concerns about the actions of a collection agency

While rules vary across Canada, generally collection agencies are not allowed to:

  • Try to collect a debt without first notifying you in writing or making a reasonable effort to do so.
  • Recommend or start legal or court action to collect a debt without first notifying you.
  • Communicate with you or your family in a harassing manner.
  • Call to collect a debt at certain prohibited times. These prohibited times vary from one province or territory to another.
  • Imply or give false or misleading information.
  • Communicate or attempt to communicate with you without identifying themselves, saying who is owed the money and stating the amount owed.
  • Continue to demand payment from a person who claims not to owe the money, unless the agency first takes all reasonable steps to ensure that the person does, in fact, owe the money.
  • Contact your friends, family or neighbours for information—other than to get your telephone number or home address.
    • Exceptions would be granted if any of these people have guaranteed the debt or if you have asked the agency to contact them to discuss the debt.
  • Ask your employer for information other than your employment status, job title and work address.

If you have concerns about the actions of a collection agency, contact your provincial or territorial consumer affairs office.

Managing your debt

Make a plan to pay down your debt. Visit the Managing debt page on Canada.ca for help getting started.