Should consumers who’ve racked up debts they’re now unable or unwilling to pay down have the right to end collections calls?
At a time when Canadian borrowers have run up record amounts of debt, a new report from an advocacy group wants to make that possible across all provinces, calling on governments to change laws to help guard heavily indebted borrowers from the “aggressive and threatening” tactics used by collections agencies, including ceaseless phone calls in provinces where that remains allowed.
If and when collections calls are made, they should at least be recorded, says the report by the Public Interest Advocacy Centre (PIAC). Released Monday, the study is a critique of an industry its authors say “pushes the envelope” of provincial laws.
“The conduct of collection agents and agencies is cause for alarm,” the PIAC report said. “Steps should be taken.”
MORE: Canada’s consumer protection agency could get more bite
Email option
Among those steps should be “the recording of all telephone communications between collection agencies and consumers.” Better still, emails could serve as the preferred means in which creditors come calling, PIAC suggests.
“Provincial governments should consider exploring the opportunity for debt collection agencies to contact clients by email, once the debtor’s identity and the validity of the overdue account have been verified.”
The switch from calls to emails is one proposal among several PIAC is calling for as part of a shakeup of the “fundamental structure” of the collections industry, a field where “fear serves as the primary theme” presently. (Link to full report.)
‘The conduct of collection agents and agencies is cause for alarm’
That theme extends to the relationships between collections agencies and original creditors, who hire agencies after accounts on credit cards, lines of credits, student and personal loans or bills go unpaid for a period of three to six months.
“Original creditors, such as large banks, intimidate collection agencies by providing regular progress reports to a number of competitors simultaneously, in an effort to motivate collection agencies to ‘outperform’ each other,” the PIAC report said.
Collection agency owners download that pressure onto agents, who then hound customers for immediate repayment, according to the report. PIAC used a focus group of individuals targeted by debt collectors to help form its proposals.
MORE: Find out the collection agency rules in Alberta
Misleading claims
This group “generally reported the calls they received were aggressive and threatening, with collection agents who are often unwilling to negotiate a solution that will resolve the debt, expect full immediate repayment.” Claims about the legal and financial repercussions of failing to make an immediate payment were “misleading,” PIAC said.
Another key proposal would be sending a one- to two-page document outlining a debtor’s rights alongside additional background information to a contacted client, either by email or traditional mail. The document would be drafted by the province’s consumer affairs agency.
Consumer code
If provincial governments don’t act, perhaps Ottawa will. The list of proposals is also aimed at influencing a new financial consumer code the Tories are preparing to release soon – perhaps in tandem with the federal budget.
The federal government is looking for a way to beef up consumer financial protections, particular for “vulnerable” Canadians. The new framework would enhance the powers of the Financial Consumer Agency, experts say.
PIAC, however, doesn’t let borrowers completely off the hook, suggesting consumers faced with collections calls have a duty to get informed.
“We suspect future encounters with debt collection agents will be less intimidating and more productive if consumers have a greater awareness of their rights and responsibilities,” the report said.
WATCH: Trouble managing your debt? Global’s Richard Dagenais learns how to manage your money wisely with personal finance expert Babis Chronopolous from Investors Group.
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