Canada: Debt Collection

By D. Ross McGowan, Blair A. Rebane and Robert Dawkins

Originally published September 2005

Approximately one year ago the Business Practices and Consumer Protection Act (the "Act") was proclaimed into force. The Act imposed new restrictions on creditors and debt collectors’ ability to obtain consumer credit reports and prohibited certain debt collection practices. The Act implemented significant changes but received relatively little fanfare. Commercial creditors and landlords ought to ensure that they review and amend their practices to facilitate efficient and cost effective debt collection in compliance with the new regime.

Credit reports are critical documents in debt collection, assisting collectors in locating debtors, assessing ability to pay, and identifying assets that may be subject to court order enforcement proceedings or garnishment. To access credit reports for individual consumers, one requires consent, however commercial credit reports may be obtained without consent. Further, distribution of consumer credit reports is subject to numerous restrictions.

Pursuant to the Act, the circumstances under which a consumer report may be obtained are substantially similar to preceding legislation and include use in association with extending credit, collection of debts, entering into or renewing a lease, or otherwise as a requirement of a transaction involving the subject of the report. There have been significant changes with respect to the requirement of consent. Although consent to obtain a report may still be contained in an application for credit, insurance, employment, tenancy, or by another method that provides evidence of consent, prior consent must be obtained in all cases. It is no longer sufficient to merely advise the consumer that a report will be obtained and proceed to do so. Accordingly, failure to obtain consent at the outset of the relationship with a debtor may bar creditors from obtaining useful information to facilitate recovery.

The Act prohibits a number of debt collection practices that may not have been considered problematic in the past. The prohibitions apply to a "collector", broadly defined in the Act to mean "a person, whether in British Columbia or not, who is collecting or attempting to collect a debt."

The specified restrictions include:

• A collector must not initiate verbal communication with a debtor with respect to collection until 5 days after the collector has sent to the debtor written notice identifying the name of the creditor, the amount of the debt, and the identity and authority of the collector to collect the debt (this does not apply to creditors directly engaged in collection);

• A collector may only communicate with a debtor at his or her place of work if they do not have a home address or telephone number for the debtor and they contact the debtor for purposes of obtaining such contact information, have previously attempted to contact the debtor at home and been unable to do so, or have been authorized by the debtor to communicate with him or her at work. Only one verbal attempt to contact the debtor at work may be made if the justification for such contact is that the collector has been unable to communicate with the debtor at home.

• A collector may not, except on the request of the debtor, communicate by telephone or in person with the debtor on a statutory holiday (unless it falls on a Sunday), on Sunday except between 1 p.m. and 5 p.m., or on any other day, except between 7 a.m. and 9 p.m.

• A collector must not continue to communicate with a debtor, except in writing, if the debtor requests this, and has provided a mailing address.

• A collector may not continue to communicate with the debtor if the debtor has notified the collector and the creditor that the debt is in dispute and that the debtor would like the creditor to take the matter to court.

• A collector may communicate with a debtor only through the debtor’s lawyer if requested to do so and an address for the lawyer is provided.

• Except for purposes of obtaining the debtor’s home address or telephone number, a collector must not communicate or attempt to communicate with a member of the debtor’s family or household, or a relative, neighbour, friend or acquaintance of the debtor, unless such person has guaranteed the debt and is being contacted pursuant to the guarantee, or the debtor has authorized the collector to discuss the debt with the person contacted.

• A collector may not contact a debtor’s employer except for the purpose of confirming the debtor’s employment, business title and business address, or other purposes authorized in writing by the debtor.

The Act does permit certain of the foregoing practices with authorization of the debtor, including communication with the debtor at work and discussion of the debt with the debtor’s family, household, relatives, neighbours, friends, or acquaintances. Such authorization may facilitate contact with the debtor and allow access to persons who, if willing and able, can provide useful information in the event that enforcement proceedings become necessary. Accordingly, it may be prudent to obtain such written authorization from debtors/tenants at the time of commencement of the relationship.

Caution should be exercised in obtaining such authorizations to ensure they are fairly drawn. The Act neither expressly permits nor disallows these authorizations being obtained at the outset of the relationship with the debtor. It is possible that such collection practices may be challenged in the future and cautious conduct of creditors is likely to maximize the likelihood of this practice being deemed acceptable under the Act. Furthermore, any steps taken in reliance upon the authorizations must be respectful and courteous or risk being deemed harassment of the debtor.

Obtaining a consumer credit report without consent or engaging in prohibited debt collection practices constitutes an offence under the Act. Persons who commit an offence may be subject to fines of up to $10,000.00 and/or imprisonment of up to 12 months. Corporations committing offences under the Act may be fined up to $100,000.00. The Court has discretion to increase the stipulated fines to up to 3 times the court’s estimation of the amount of monetary benefit acquired or accrued as a result of the offence. In addition, persons who commit offences may be ordered to compensate aggrieved consumers for loss within the jurisdiction of the Small Claims Court, currently $10,000.00 and expected to increase in Fall 2005 to $25,000.00.

The Act also includes a comprehensive enforcement regime administered by the Business Practices and Consumer Protection Authority pursuant to which collectors may be subject to investigation by inspectors, administrative penalties, and compliance orders. Furthermore, the Act provides for a civil cause of action for loss suffered by debtors as a result of a breach of the Act by a collector.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.