In this article we’ll explore how long debt collectors can try to collect in Canada, what the statue of limitations is on debt in different provinces, and what happens if a collection agency continues to pursue a debt after the limitations period has passed.
What is a debt collector?A debt collector is an individual or organization that specializes in collecting debts from people who owe money to creditors.
Some debt collectors work on behalf of the federal government or other public sector organizations, while others are private operations who might be hired by your creditors (the person or business you owe money to) in order to recover the unpaid debt on their behalf.
Many debt collectors would be better described as ‘debt buyer’ operations; in this situation, the collection agency contacts your creditors and takes over the rights to your debt in exchange for a fee, so they can pursue your debt for their own benefit.
How will I know if my outstanding debt has been passed to a debt collection agency?If you owe money to a creditor or have stopped making debt payments on outstanding debts, your creditors may decide passing your debt to collection agents gives them a better chance of recovering their money – but what does that mean for you?
The good news is you won’t be blindsided by a debt collector appearing at your home to collect money. Collection agencies have to notify you that they are beginning the debt collection process, usually in the form of a written notice.
Once you have received the written notice you’ll have the chance to take action before the debt collector calls, either by contacting your creditors about the debt owed, or seeking debt advice from a Licensed Insolvency Trustee (LIT) or another debt professional.
How long are debt collectors able to collect outstanding debt in Canada?If you’ve been dealing with debt collectors over an extended period of time, you may have been threatened with all sorts of things, from harassing phone calls, to threats of legal action.
This can take its toll, but collection agencies can’t pursue you indefinitely.
Statute of limitations on debtUnder Canadian law, there is a statute of limitations on debt. What that means is a debt collector can only threaten you with legal action over an unpaid debt for a certain amount of time.
Debt collection isn’t a federal government issue in Canada, however, so when that limitation period begins depends on where you live.
Below are the statute of limitations in the various provinces and territories.
Two years: Alberta, British Columbia, New Brunswick, Newfoundland and Labrador, Ontario, and Saskatchewan
Three years: Quebec
Six years: Manitoba, Nova Scotia, Prince Edward Island, and the three territories (Northwest Territories, Nunavut, Yukon)
It’s important to note that these limitation periods normally only apply to unsecured debts, like debt to your credit card company or a payday loan firm. If you’re dealing with secured debt – debt secured against an asset like your home or car – you will not be able to use limitation laws to avoid a court judgement.
What happens if a collection agency tries recovering unpaid debts that have expired?Legally, the statute of limitations on debt means debt collectors can no longer threaten you with legal action once that period has passed. If they were to attempt to pursue legal action against you, no court or judge would hear the case.
That said, while the statue of limitations removes legal action as a weapon, it doesn’t explicitly stop debt collectors from continuing with other common tactics, including calling you, sending you emails, texting you, and otherwise making your life uncomfortable.
Fortunately, bother you and the debt collection agency will know that, without the threat of legal action, there is very little the agency can do to compel you to settle the debt. The reality is that most collection agencies will leave you alone once legal action is no longer on the table.
Can I file a complaint against debt collection agencies?While debt collectors have a right to collect debt, there are certain strict rules that they must follow as part of the collection process. In Ontario, for example, they have to abide by the three strikes rule – they can’t call, email, or talk you in person more than three times in a given week.
If a debt collector breaks the rules while making collection calls, or you feel they have acted improperly in any way, you can make a complaint against them to the appropriate regulator.
Contact your local Consumer Protection OfficeIf your creditors have passed your unsecured debt to a collection agency and you want to make a complaint about how that has been handled, you should get in touch with your local Consumer Protection Office.
Every province and territory will have their own office, but you can find names, addresses, and contact details on the federal government website.
Contact the Financial Consumer Agency of CanadaIf the debts you are being chased for are related to a federally regulated financial institution, you can make a complaint by contacting the Financial Consumer Agency of Canada (FCAC).
What does debt collection do to your credit report?Once your debt is transferred to a collection agency and the collection process begins, your credit score will begin to go down.
This is because credit bureaus, the credit reporting agencies who put together your credit report, will see an individual being chased by a debt collection agency as a credit risk.
A low credit score can impact your ability to be accepted for things like mortgages or credit cards, or cause lenders to charge you a higher rate of interest, but a debt repayment plan should enable you to rebuild your credit score over time.
How do I protect myself from creditors?Dealing with debt collectors is never fun. Harassing letters and phone calls demanding payment for old debts can leave you on edge, but it doesn’t have to be this way.
If you’ve received letters, emails, or phone calls from debt collectors and you’re not sure what to do, we can help. Get in touch with A. Fisher & Associates today.