While many people living near the border don’t think anything of venturing into Canada, our neighbor to the north represents a completely different world when it comes to debt collection practices.
Much like the United States has done with the Fair Debt Collection Practices Act, the Canadian government has established a long list of rules and regulations to protect their citizens from unethical debt collection practices. If you are currently extending credit to Canadian customers, you will want to be sure to look into the details of collecting on those international debts so that you do not violate any Canadian collection laws.
Here are some of the basics when it comes to collecting outstanding international debts in Canada:
Who Can Collect?
The only people who are legally allowed to handle debt collection in Canada are first party lenders, debt buyers, lawyers, and licensed collection agencies. In every case, the person collecting the debt must adhere to the specific collection laws that apply to that particular province.
In order for agencies to legally collect debts, they must be licensed by each province where they are conducting business. These licenses can be obtained through the Office of Consumer Affairs.
In order to further ensure that agencies are performing their collection practices in an appropriate manner, there are quite a few requirements that they must meet before they can proceed with their collections.
Collection agencies in Canada must post a client’s trust bond in each of the provinces where they conduct business. Many of these provinces also require the agency to have a client’s trust account. The amounts required vary from agency to agency.
Many Canadian provinces also require that agency owners and even collection staff take and pass and exam in order to receive their license.
In an effort to further protect its citizens from unsavory collection tactics, the Canadian government also requires these agencies to submit to annual audits. They also must submit any collection letters that they intend to use for review before sending them.
Statute of Limitations
Similar to the United States, the general statute of limitations on collecting an outstanding debt in Canada is six years. However, some provinces have reduced this limitation to as little as two years.
Regardless of where you are attempting to collect in Canada, you want to be sure that you have not allowed the debt to expire based on the local statute of limitations.
Canadian regulations also permit a debt to appear on a credit report for a maximum of six years. In the province of Manitoba, the maximum is only five years. At the end of this period, the debt is eliminated from the credit report.
In order to view someone’s credit report in Canada, that person must sign a waiver consenting to their credit report to be accessed. There is a strict auditing system in place to prohibit collection agencies from pulling credit reports without this waiver.
While the exact details for debt collection might vary slightly from the United States to Canada, the basic premise behind the regulations is the same. The goal in both countries is to crack down on unethical debt collection practices.
In order to make sure that you are not violating any of the rules and regulations in place in either country, you should always consult with a professional debt collection agency or an attorney for debt collection.
You don’t want to find yourself on the wrong side of the law in any collection scenario, which is why working with the professionals is almost always worth the price.