How to Deal with a Debt Collection Agency

What is a debt collection agency?

A debt collection agency is a company that tries to recover money you owe. Sometimes they’re hired by your original creditor. Sometimes they’ve bought the debt outright and now own it themselves.

If you’ve missed payments on a credit card, loan, phone bill, or other account, there’s a good chance your creditor will eventually hand it over to collectors.

The people calling you work on commission, and their job is to get you to pay. That’s worth remembering when they turn up the pressure.

Source: Financial Consumer Agency of Canada – Dealing with a debt collector

What can debt collectors legally do?

Collection agencies have rules they must follow. In Ontario, these are set out in the Collection and Debt Settlement Services Act. Other provinces have similar legislation.

They can call you, but only at reasonable times. In Ontario, that means 7am to 9pm Monday to Saturday, and 1pm to 5pm on Sundays. No calls on statutory holidays. Other provinces have similar rules, though the exact hours vary.

They can contact you multiple times, but there are limits. In Ontario, once they’ve spoken with you, they can contact you only three times in seven days about the same debt without your consent.

They can send you letters and emails. In fact, they must send you a written notice before they start calling to collect. This notice must include details about the debt, such as the amount and the original person you owed money to.

They can contact other people, but only to get your phone number or address. They cannot discuss your debt with your family, friends, or neighbours unless that person co-signed on the loan.

They can contact your employer once to confirm that you work there. That’s it.

Source: Ontario.ca – Stop collection agency calls

What debt collectors cannot do

This is where most people are surprised. Debt collectors make many threats that they cannot legally carry out.

• They cannot harass you. Calling you repeatedly throughout the day, using abusive language, or making threats crosses the line into harassment.
• They cannot threaten you with jail. You cannot go to prison for owing money in Canada. Full stop. If someone threatens this, they’re either lying or it’s a scam.
• They cannot simply take money from your wages. Wage garnishment requires a court judgment first, followed by a separate court order to garnish your pay. They have to sue you and win before any of this happens. Most collectors never get that far because legal action costs money.
• They cannot withdraw money directly from your bank account without your permission or a court order.
• They cannot tell your family, employer, or anyone else about your debt. The only exception is if that person co-signed on the debt.
• They cannot pretend to be lawyers, police officers, or government officials.
• They cannot add fake fees or interest to the amount you owe.

Source: Financial Consumer Agency of Canada – Debt collection: know your rights

Can debt collectors take you to court?

Yes, they can sue you, but there’s a time limit.

Every province has a debt statute of limitations that caps how long a creditor can take legal action to collect an unsecured debt. After that window closes, they can still call you, but they cannot force you to pay through the courts.

Debt statute of limitations period by province

Province/Territory	Limitation Period
Ontario	2 years
British Columbia	2 years
Alberta	2 years
Saskatchewan	2 years
Quebec	3 years
Manitoba	6 years
New Brunswick	6 years
Nova Scotia	6 years
PEI	6 years
Newfoundland	6 years
Yukon	6 years
NWT	6 years
Nunavut	6 years

The limitation period starts from your last payment or the last time you acknowledged the debt in writing. This is important: if you make even a small payment or send an email admitting you owe the money, the limitation period resets. Collection agencies know this. Some will try to get you to make a token payment or confirm the debt just to restart the limitation period.

These time limits don’t apply to certain debts. CRA tax debts are subject to a 10-year limitation. Court judgments can be enforced for longer. Secured debts, such as mortgages, have different rules.

Source: Canada Revenue Agency – Collections limitation period

In practice, many collection agencies threaten legal action but never follow through. Lawsuits cost money, and if you don’t have assets or income they can seize, it’s often not worth their time.

Don’t assume they won’t sue. If you’re receiving legal threats, talk to someone who can assess your actual risk.

What happens if you ignore debt collectors?

The debt doesn’t disappear just because you stop answering the phone.

A collection account can remain on your credit report for six to seven years from the date of your last payment. This can affect your ability to get a mortgage, car loan, credit card, or even a rental apartment.

The statute of limitations only stops lawsuits. It doesn’t erase what you owe. Collectors can still contact you indefinitely, even after the limitation period has passed. The calls might slow down, but they don’t always stop.

If you’re ignoring collectors because you genuinely can’t afford to pay, that’s a different situation. You won’t budget your way out of debt you can’t afford.

Most people in that position need to consider formal debt relief options, such as a consumer proposal or bankruptcy. Both stop collection calls immediately and permanently address the debt.

How to respond when a debt collector contacts you

When a collector calls, don’t panic. Don’t agree to anything on the spot. Here’s what to do.

Ask for their name, the company they work for, and a callback number. Then tell them you need the details in writing before discussing anything further. They’re required to send you written notice anyway.

When the letter arrives, check whether the debt is actually yours. Mistakes happen. People are contacted about debts belonging to someone with a similar name, debts they’ve already paid, or debts that are past the limitation period.

If it’s not your debt, write back to let them know. Keep a copy of everything you send.

If it is your debt and you can afford to pay, you have options. You can pay in full. You can negotiate a payment plan. You can sometimes negotiate a settlement for less than the full amount, especially if the debt is old.

If you can’t afford to pay, say so. Don’t make promises you can’t keep, and don’t make a small payment just to get them off your back. That resets the limitation clock and puts you back at square one.

How to stop debt collection calls

There are a few ways to stop the calls.

If you dispute the debt, send a written notice stating that you don’t believe you owe it and requesting that the matter be taken to court. In most provinces, they must stop contacting you after that unless they actually file a lawsuit.

If you hire a lawyer or a licensed paralegal, they can send notice that all communication should go through them. Collectors must comply.

If you file for bankruptcy or a consumer proposal, an automatic stay of proceedings takes effect immediately, and collectors must stop all contact. This is the only way to permanently eliminate the debt and the calls at the same time.

Source: Ontario.ca – Stop collection agency calls

Warning signs of debt collection scams

Not everyone who claims to be a debt collector is legitimate. Scammers pose as collectors to intimidate people into paying money they don’t actually owe.

Watch for these red flags:

• They demand immediate payment by wire transfer, gift card, or cryptocurrency. Legitimate collectors don’t operate this way.
• They threaten arrest or jail. You cannot be jailed for debt in Canada.
• They refuse to give you their company name, address, or licence number in writing.
• They won’t tell you the original creditor’s name or the details of the debt.
• They pressure you to pay a debt you don’t recognize without giving you time to verify it.

If something seems suspicious, verify whether the agency is registered with your provincial consumer protection office.

In Ontario, you can search for the collection agency to confirm that it has a business license. A legitimate collector will have no problem proving they’re licensed to operate.

Frequently Asked Questions

Can debt collectors call my employer?

They can call your employer once to confirm you work there and obtain your work address. They cannot discuss your debt with your employer or call repeatedly. If they’re calling your workplace about your debt, that’s a violation you can report.

Can debt collectors visit my home?

In most provinces, yes, but they must follow the rules. They must visit at reasonable times, typically between 8am and 9pm. They must leave if you ask them to. They cannot harass you or discuss your debt with other household members. You don’t have to let them in or talk to them.

How long can a debt collector pursue me in Canada?

There’s no limit on how long they can contact you. However, the statute of limitations limits how long they can sue you.

In Ontario, BC, Alberta, and Saskatchewan, it’s two years. In Quebec, it’s three years. Everywhere else, it’s six years.

After that, you still owe the money, but they can’t force you to pay through the courts.

Does paying a collection agency hurt my credit?

Paying off a collection account is better than leaving it unpaid, but it doesn’t remove the record from your credit report. The collection notation remains on your credit report for six to seven years from the original default date.

Can I negotiate with a debt collector?

Yes. Collectors often have the authority to accept less than the full amount, especially for older debts. If you can offer a lump sum, you may be able to settle for 50-70% of the amount owed. Get any agreement in writing before you pay, including confirmation that they’ll report the debt as settled.

What happens if I can’t afford to pay?

If you genuinely can’t afford your debts, ignoring collectors won’t fix the problem. A consumer proposal lets you pay back a portion of what you owe over up to five years with no interest. Bankruptcy eliminates most unsecured debt. Both stop collection calls immediately.

Talk to a Licensed Insolvency Trustee. Consultations are free.

Can debt collectors take money from my bank account?

Not without your permission or a court order. They would need to sue you, obtain a judgment, and then obtain a separate order authorizing them to garnish funds.

If a collector claims they can just take money from your account, they’re bluffing or breaking the law.

How do I file a complaint against a debt collector?

Contact your provincial consumer protection office. You can also complain to the Financial Consumer Agency of Canada if the debt is with a federally regulated financial institution, such as a bank.

Keep records of all your communications with the collector, including dates, times, and what was said.

Dealing with debt you can’t afford

If debt collectors are calling and you know you can’t pay, that’s worth addressing head-on. The calls won’t stop on their own, and the stress takes a toll.

A consumer proposal or bankruptcy isn’t the right answer for everyone, but for people who genuinely can’t afford their debts, it’s often the most practical way to draw a line under it and move on. I meet people every week who wish they’d looked into their options sooner.

Most Licensed Insolvency Trustees offer free consultations. There’s no obligation, and you’ll leave knowing exactly where you stand.