The topics in the Dial-A-Law series provide only general information on legal issues within the province of Alberta. This service is provided by Calgary Legal Guidance funded in part by the Alberta Law Foundation. The purpose is to make you aware of your legal rights and responsibilities. This is not legal advice. If you require legal advice, you should contact a lawyer.
This topic discusses the regulation of collection agencies by the Fair Trading Act.
Collection agencies and collectors are in the business to collect money for creditors. Creditors are those persons or companies that you owe money to. If you believe that you do not owe money to a creditor, contact that creditor directly. If the creditor does not want to deal with you directly, try to arrange a repayment schedule with the collection agency.
You may also contact the Credit Counseling Services of Alberta to assist you in negotiating a reasonable repayment plan. The financial services may also assist in developing your money management skills. Plans available from the counseling service include:
- The Self Pool Plan: A counselor can help set up a repayment schedule directly with you and the creditors.
- The Debtor’s Assistance Board Plan: You make monthly payments to Credit Counseling Services of Alberta who in turn distributes the payment to your creditors.
- The Orderly Payment of Debts Plan: The Court consolidates your debts and set a monthly payment amount.
The plan you use depends upon the seriousness of your financial situation. Its success depends upon your following the agreed payment schedule. If you participate in any of the repayment plans through the Counseling Service, any Court action or collection proceedings will be put on hold.
Collection agencies are paid a fee or a percentage of the money they are able to collect from you. If they don’t collect any money – they are not paid. Consequently, collectors are often aggressive in their collection methods. They must be licensed under the Fair Trading Act and its Regulations. You may check with the Housing and Consumer Affairs office nearest you to find out whether the collection agency or collector that is calling you is licensed.
The Fair Trading Act sets out collection practices that are not permitted. A collection agency or collector may not use any of the following practices:
- Contact you before 7:00 a.m. or after 10:00 p.m. for the purpose of demanding payment of a debt on any day
- Threaten you directly or indirectly with an action that the collection agency or collector does not have lawful authority to do so. For example, collectors cannot tell you that if you do not pay the debt you will be sued or your wages will be garnisheed. They cannot give you specific Court dates or tell you that you be required to pay all costs of going to Court. These are decisions made only the Courts.
- Collections Agencies cannot threaten to send one of their agents to seize your property. Only an authorized civil enforcement agency can seize property and can only act when certain preliminary requirements have been satisfied. For example, the civil enforcement agency may act if a judgment has been granted against you by a Court and instructions are received from the creditor who obtained the judgment.
- It is a criminal offence to threaten to physically harm you, your family or your property if you do not pay. The police do not get involved in collecting debts unless there is a criminal offence committed, such as writing an N.S.F. cheque. Although failure to pay alimony or child support can lead to jail, collection agencies cannot institute such a penalty.
- Call you with such frequency as to constitute harassment of you, your spouse, or any member of your family.
- Give you false or misleading information. For example, tell you that they are part of a law firm or the legal department of a particular business.
- Contact you employer unless it is to verify your employment. They cannot jeopardize your job. If your employer threatens to fire you because of the calls, consider complaining to the Consumer Information Centre at 1-877-427-4088.
- Contact your spouse, relative, neighbor or friend unless it is only to get information on you such as your address or telephone number. If you co-signed a loan, you are also considered a creditor and responsible for the debt. If you agreed to relieve a spouse from debt in a separation agreement, the collection agency can still collect from either spouse or both.
- Contact you at work if you ask them not to contact you there and have made reasonable arrangements to discuss the debt with them and have done so.
Sometimes, the collection agency or collector may demand the entire amount of the debt owed even if you are late in only 1 or 2 payments to the creditor. The collection agency must be authorized to make such a demand by the creditor and there must be an acceleration term in the contract. Check the wording of your contract to see if they can make this demand.
If you think that the action of a collection agency or a collector are illegal or heavy-handed, you may contact the Alberta Government Services, Consumer Information Centre in Edmonton at (780) 427-4088 or toll-free from anywhere in Alberta at 1-877-427-4088.