Government of Ontario Releases Consultation Paper on Debt Collection Legislation
July 31, 2017
James H. Archer
The Ontario Ministry of Government and Consumer Services has recently issued a consultation paper entitled “Consultation on Collection and Debt Settlement Services Act Regulation Reform” (the “Consultation Paper”), addressing various items relating to debt collection regulation in Ontario. The Consultation Paper follows the recent enactment of Bill 59 which amended the Collection and Debt Settlement Services Act (Ontario) (the “Act”) to (1) require purchasers of debt to use a collection agency or register themselves, (2) ended the registration requirement for individual collectors employed by collection agencies, (3) authorized limits on the exemption of lawyers and (4) authorized administrative penalties. The Consultation Paper, among other things, proposes draft regulation language implementing certain of these amendments.
Comments on the Consultation Paper are due September 8, 2017.
The Consultation Paper proposes to exempt the following from the application of the Act:
- Third party billers – Creditors that permit third parties to use their billing processes and add items to their bills when collecting on behalf of such third parties;
- Property managers – Property managers, when collecting on behalf of third parties such as landlords or condominium corporations;
- Affiliates – Affiliated entities when collecting debt on behalf of an affiliate (unless the debt is a debt that was purchased in arrears);
- Repurchased debt – Creditors who repurchase a debt that was originally owed to them;
- Mortgage brokers – Mortgage brokers making arrangements for the payment of third party debts to be paid out of mortgage proceeds (including negotiating a reduction in debt obligations); and
- Debt purchased under terms permitting collection under original creditor’s name – This existing exemption will be clarified so that it will only apply if the debt is actually collected under the original creditor’s name.
In addition, the Consultation Paper proposes certain limits on the scope of the exemption for lawyers (which is to be extended to paralegals). In short, if the collection activity falls within a service that only a lawyer or paralegal may provide, then registration will not be required.
The Consultation Paper contains a number of proposals relating to contacting or communication with debtors:
- First notice rule – Some changes are proposed to the current requirement that collection agencies send a written notice to the debtor prior to contacting them, by permitting limited first contact to verify the address and obtain consent to send the notice electronically. It is proposed that certain additional prescribed disclosure be included in the notice.
- Reporting to credit reporting agencies – It is proposed that creditors be prohibited from reporting a debt to a credit reporting agency until the required first notice has been sent to the debtor.
- Communication using means that impose a cost – It is proposed that the existing prohibited practice be modified to provide there is no contravention if the cost is reimbursed within 15 days of the consumer presenting evidence of the cost (for example in the case where the debtor has a pay-as-you-go calling plan). This is intended to modernize the current provision to reflect current technology.
- Call recording – The Consultation Paper raises the issue of whether there should be mandatory recording of collection calls. If so, debtors would be advised the call is recorded and the recording would have to be retained for a certain period of time, proposed to be three years. Recordings would also be subject to review by regulators and available to debtors on request.
The Consultation Paper addresses a number of consequential changes as a result of the recent amendments requiring debt purchasers to register if collecting debts themselves. For example, the Consultation Paper proposes deleting the restriction on collection agencies controlled by a creditor from collecting debts owed to another creditor, and instead requires disclosure of such fact. This is to avoid a creditor who buys debt being prohibited from collecting debts for anyone else. In addition, the Consultation Paper proposes clarifying that a collection agency that has purchased a debt and is negotiating the terms of payment of that debt, is, to that extent, not subject to the prohibition against engaging in the business of lending money.
The Consultation Paper proposes that collection agencies no longer be required to post bonds. Instead, funds required to be deposited into trust accounts be directly deposited in such accounts without going through other accounts.
Several changes are proposed dealing with administrative penalties. Those matters requiring subjective evaluation will not be subject to administrative penalties; penalty amounts for individuals and corporations will be different, and, finally, penalty amounts will be assessed on a sliding scale based on the number of provider violations of the same provision that occurred within one year of the previous violation.
Following completion of the consultation process, the Consultation Paper indicates that final regulations will be published for review, with a proposed phase-in effective period of 60 days after such regulations are proclaimed in force.