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What to Do When You Receive a Debt Collection Letter or Call | Canada

By Kelly Gabriel

Q: Our son was over for dinner last night and I could tell something was bothering him. After some prodding, he told us that he received a call from a debt collection agency today for a debt that he thought he had paid off years ago. The debt collector wants him to make a $50 payment by tomorrow otherwise they may take legal action against him. He’s worried that this will affect his chances of getting a mortgage. What should he do?

A: I would not recommend that your son send any payment to this debt collection agency before getting more information. One of the trends we are seeing more of in Canada, is the practice of large creditors, like banks and credit card companies, selling off their old bad debt accounts to collection agencies. Sometimes there are accounts included in the mix of accounts sold that shouldn’t have been included, e.g. settled accounts or those past the statute of limitation.

Provincial Statue of Limitation
How Long Can a Debt Collector Enforce Payment?

Each province has its own rules governing what collectors can and cannot do, as well as a statute of limitation outlining the specific length of time a creditor (or their agent) has in which to enforce repayment of a debt through legal means.

Once an account is deemed to be beyond the limitation period, a creditor loses the right to enforce repayment of the debt. Keep in mind that there are some exceptions, like arrears for child support and government debt.

Close up of a man holding is head while looking at a letter

How to Communicate Effectively with a Debt Collector or Debt Collection Agency

It is highly unlikely that any collection agency would call up out of the blue and only give a person one day to make a payment or face legal action. If the account the debt collection company contacted your son about is beyond the statute of limitation for the province you live in, they cannot initiate legal action against him unless he acknowledges the debt.

Acknowledging a debt means making a payment or in some cases, confirming the debt in writing. When a debt is acknowledged, the limitation period restarts.

Related: Dealing with Creditors – When Should You Write to Them & Sample Letters

Encourage your son to contact the collection agency. He needs to ask that a statement of account to be sent to him before he does anything else. He should also advise the agency that if the account is beyond the statute of limitation, to cease all future communication with him. If the calls persist, he has the right to file a formal complaint with the appropriate consumer protection office.

Making Payment Arrangements with a Debt Collection Agency

If your son discovers that he indeed still owes the money, before he agrees to any payment arrangements, he will need to look at his budget carefully. This will help him consider what he can afford to pay, without falling behind on other payments.

The debt collector may also offer to accept a settlement from him for a reduced amount. If the offer is originally made verbally over the phone, have your son ask to receive it in writing from the collection agency. He should wait to make a decision whether or not to accept the offer until he receives their offer letter outlining the terms. Once he has received the written offer and agrees to it, only then should he forward the required payment.

As part of the settlement terms, he can negotiate how the agency reports the debt to the credit bureau companies. A debt that is either paid or settled in full will reflect more positively than an unpaid debt that has been written off.

If your son would like help looking at his budget and his debts, contact us for a free, confidential appointment. One of our Credit Counsellors would be happy to review his financial situation with him and help him get back on track.

Get to the Bottom of a Debt Collection Letter or Phone Call First

Information is powerful, so while it can take a little longer to get to the bottom of this upsetting phone call from the debt collection agency, getting all the facts and looking for the best way to resolve the situation will give your son peace of mind.

How to Get More Help to Get Out of Debt

If you need some help with overcoming your debt or dealing with creditors, contact a non-profit credit counsellor for free, confidential help. You can meet with them over the phone or in person, and they don’t obligate you to anything. The counsellor will review your whole situation with you and then suggest options to help you reach your goals. Typically, the earlier you contact a credit counselor, the more options you’ll have.

Worried about debt?
Get help to overcome it.
The sooner you start dealing with your debt, the sooner you’ll have it paid off. If you need some help getting started with a plan, or if you’re not sure if your budget is realistic, contact a non-profit credit counsellor for free, confidential help. Typically, the earlier you contact us, the more options you’ll have.

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