Ignoring debt collectors may feel like the easiest way to reduce stress in the moment, but it usually does not make the debt go away. In Ontario, collection agencies may continue contacting you, report the unpaid debt to the credit bureaus, and in some cases, the creditor may decide to take legal action. The good news is that you have rights, and you may have options to stop the pressure and deal with the debt in a more structured way.
If a collection agency is hounding you for payment, it’s important to understand your rights as a debtor and what collection agents can and can’t do when contacting you. Not only will this alleviate your anxiety and dread, but it will also help you focus on finding a permanent solution to your unpaid debts.
In this article, we’ll explain how debt collection agencies operate, the laws they must follow, and how to handle communications with a collection agent.
What can happen if you ignore debt collectors?
- Collection calls may continue.
- The debt may stay on your credit report.
- Your credit score may be affected.
- The creditor may consider legal action.
- Ignoring the calls does not stop interest or collection activity.
A consumer proposal or bankruptcy may stop unsecured creditor contact through a stay of proceedings, where applicable.
How does a debt collection agency work?
A debt collection agency is a company whose job is to recover unpaid debts from borrowers. If you fail to pay a debt on time, your lender may hire a collection agency to chase you for payment. They may also sell your debt directly to the agency.
Debt collection agencies will contact you by phone, email, text message, and regular mail to get you to pay. If you move to a new location or change your phone number to avoid contact, they may utilize social media and public records searches to track you down. When speaking with you, collection agents may offer debt settlement plans to encourage payment.
Sometimes, collection agents may contact you excessively, use abusive language, and threaten you with legal action when they have no authorization to do so. Luckily, each province in Canada has laws in place that prohibit this behaviour. For example, in Ontario, the Collection and Debt Settlement Act sets out rules debt collectors must follow when contacting borrowers. In the next section, we’ll outline exactly what these rules are.
Having your debt sent to collections isn’t ideal as you may endure ongoing collection calls and increased risk of legal proceedings. In addition, having your debt sent end up with a collection agency will hurt your credit score. You’ll receive an R9 rating on your credit report, the lowest one in Canada.
What debt collection agencies can and can’t do
Knowledge of debt collection laws is your first line of defence when handling debt collection agencies, especially those willing to use unethical or illegal tactics. By understanding your rights as a debtor, you can prevent collection agencies from taking advantage of you and speak confidently with their agents.
For this article, we’ll be referring specifically to Ontario debt collection laws. However, most provinces in Canada have similar legislation.
A debt collection agency CAN:
- Contact you Monday through Saturday between 7:00 a.m. and 9:oo p.m. and Sundays between 1:00 p.m. and 5:00 p.m.
- Contact your friends, family members, neighbours, and friends, but only to obtain your phone number or address (this doesn’t apply in situations where your employer has co-signed your loan or you’ve given permission to the debt collector to deal with them regarding your debt)
- Contact your employer once to confirm your employment, address, or phone number (this doesn’t apply in situations where your employer has co-signed your loan or you’ve given permission to the debt collector to deal with them regarding your debt)
- Conduct a credit check on you
- Register your debt in your credit report (assuming you legally owe the debt)
A debt collection agency CANNOT:
- Contact you on a statutory holiday
- Contact you if your lawyer sends them a notice requiring the collection agency to only speak with them
- Contact you if you’ve notified the collection agency that you wish to resolve the debt in court
- Contact you more than 3 times within 7 days
- Use excessive pressure tactics or harass you
- Threaten or coerce you, or use profanity
- Disclose your debt to anyone or provide others with misleading information about your debt situation
- Threaten legal action when not authorized to do so by your lender or without a court judgment.
- Publish or threaten to publish your non-payment to pay.
Check out the following resources to learn more about what debt collection agencies can and can’t do:
- What You Need to Know About Ontario Debt Collection Laws
- Consumer protection agency – Stop collection agency calls
- Government of Ontario – Prohibited practices and conduct for debt collection agencies
How the Statute of Limitations restricts debt collection agencies
The Statute of Limitations is legislation that sets a time limit for creditors and debt collection agencies to take legal action to collect a debt. Nationwide, this period is six years, but each province and territory has its own time frame, which takes priority over the national one.
In Ontario, the Statute of Limitations for unsecured debts (such as credit cards and payday loans) is two years. Once this window of opportunity expires, collection agencies can no longer rely on lawsuits and court orders, such as wage garnishments, to enforce debt payments. This expired debt is known as statute-barred debt.
We encourage you to learn about how long debt collectors can pursue you for unpaid debts, including actions that reset the limitation period. It can help you make a wise decision about your debt when the collection agency starts calling you.
Remember: once the limitation period expires, the agency loses access to the court system to recover money owed. But they can still attempt to collect the debt using other tactics, such as calling you and sending letters.
Tips for dealing with a collection agency
Now that you understand what debt collection agencies can and cannot do, here are some tips for handling them once they start contacting you.
Verify the debt and the legitimacy of the collection agency.
In Ontario, all registered collection agencies must disclose certain details to confirm you owe the debt and that they have a right to collect it. These include the balance owed, name of the creditor, contact information about the agency, and a copy of the mandatory disclosure statement explaining your rights. If you’re concerned about the debt collection agency’s authority to collect the debt, contact your original creditor to verify if that’s the case.
Clearly communicate any dispute and provide evidence.
If you believe you don’t owe the money or you have already paid the debt, explain your position to the debt collector. Tell them you’ll review your bank statement and credit report and call them back as soon as you can. If you have conclusive proof you don’t owe any more money, ask the debt collector what you must do to correct the error.
Stay calm and be respectful.
Refrain from communicating with the collection agent in an aggressive or confrontational tone. Remain calm and treat the agent respectfully so you can reach an agreement and negotiate a plan to resolve the debt. Cooperation will go a long way toward preventing further escalation
Document every call, letter, and message.
Document the date, time, and details of each interaction you have with a collection agent. If the agency resorts to threats, harassment, and other unlawful tactics, you’ll have the evidence to take legal action against them.
Limit the amount of information you provide.
A collection agent may try to dig into your personal and financial life and use it as leverage against you. For example, if you discuss your budget and lifestyle, they may suggest ways to cut costs so you can pay them the full amount. So, only provide them with the information they need and nothing more.
Request communication in writing.
If you’d rather avoid speaking with a representative from the collection agency, request that they communicate only in writing.
Negotiate a payment plan or debt settlement you can commit to.
Don’t make promises you can’t keep. If you’re negotiating to pay less than what you owe, ensure your budget allows you to make the payments. Defaulting on your newly agreed payment plan can endanger future negotiations.
Don’t sign documents you don’t understand.
If you feel uneasy or uncertain about the terms and conditions of a payment agreement, don’t sign it. Have a lawyer review it first.
Don’t pay unless it makes sense to do so.
Not paying a debt collection agency may sometimes be the best option. Depending on factors such as the age of the debt, the amount owed, and the impact on your credit score, foregoing payment may be sensible. It may also be more advantageous to deal with the debt through a formal debt relief option, such as a consumer proposal, instead.
What to do if you feel harassed or threatened by a collection agency?
Let’s say the debt collection agency you’ve been dealing with becomes increasingly aggressive and volatile. Maybe they are calling your work multiple times, threatening to raid your bank account without a court order, or speaking to you in a disrespectful manner.
If a collection agency has crossed the line, consider doing the following solutions:
Instruct them to communicate with you only in writing by sending a formal cease-and-desist letter. This document is backed by law, so they are legally required to halt all phone calls (though they can still send you letters, emails, and text messages)
Report the debt collectors to a consumer protection agency. If the harassment continues, file a complaint with your provincial consumer affairs office. For example, if you live in Ontario, reach out to the Ontario Consumer Protection Agency. Here are the steps for filing a complaint.
Speak to an attorney. If the situation is dire and you believe the debt collection agency is violating consumer protection laws, consult a lawyer for guidance. They can help you clarify your rights, take action to stop the harassment and threats, and file a lawsuit if needed.
How to get debt collection agencies to stop contacting you
There are three things you can do if debt collectors persist with their calls and messages:
Pay the debt in full
If you pay off your balance in full, Ask the debt collection agency for a receipt of any payment you make, so you have proof should a dispute arise in the future. Avoid paying in cash since it’s harder to establish a paper trail (the money can also get lost in the mail).
Offer a lump sum payment for less than you owe
Negotiate a debt settlement to pay less than the full amount. Start by offering a lower amount than what you can actually pay. If you choose this option, ask the collection agency for a letter outlining the terms of the new payment agreement, making it clear that once you pay the reduced amount, you’re free from any further payment obligations
Explore other debt relief options
Collection agencies work for the creditor not for you. If you’re being pushed into payment terms you can’t realistically maintain, it may be time to look at solutions that are regulated under Canadian law, rather than continuing informal negotiations.
Depending on your circumstances, alternatives may include a debt consolidation loan or a debt management plan through a credit counselling agency. For some people, a consumer proposal or bankruptcy under the Bankruptcy and Insolvency Act may also be appropriate.
It’s important to know that only a Licensed Insolvency Trustee (LIT) can file and administer a consumer proposal or bankruptcy in Canada. In many cases, filing triggers a stay of proceedings, which generally stops unsecured creditors and collection agencies from continuing collection actions or contacting you directly although exceptions can apply depending on the type of debt.
Next step: Get clear, regulated advice before you sign anything
If collection calls are escalating or you’re considering a settlement, it can help to speak with a Licensed Insolvency Trustee first. At David Sklar & Associates, we offer a free confidential consultation to review your situation and explain your legal options including whether a consumer proposal, bankruptcy, or another approach may make sense for you.
FAQ: What to Do When a Collection Agency Calls
Start by staying calm and asking for details in writing. You can request the agency confirm the name of the original creditor, the amount claimed, and their contact information. Don’t feel pressured to agree to anything on the first call.
No. Ontario has rules that restrict how often they can contact you and when they can call. If the contact feels excessive or harassing, document it and consider filing a complaint with the appropriate provincial consumer protection authority.
They may contact your employer only to confirm employment or contact information in most situations, and they may contact family/friends only to obtain your address or phone number. They generally cannot discuss your debt with others.
They generally cannot threaten legal action unless they are authorized to take that step and intend to proceed. If you receive threats that seem misleading or aggressive, record the details and consider reporting the behaviour.
No. You can ask them to communicate in writing. This can reduce pressure, give you time to verify information, and help you keep a paper trail.
Avoid sharing unnecessary personal or financial details (like your full budget, where you bank, or workplace details beyond what’s required). Provide only what’s needed to verify the debt and communicate your position.
Tell the collection agency you dispute the debt and ask for written verification. If you have proof (payment confirmations, statements, identity theft reports), you can provide copies and request they correct their records.
For many unsecured debts in Ontario, there is typically a two-year limitation period for starting a lawsuit, calculated from when the claim was “discovered” (often tied to the date of default and last payment/acknowledgement). Because limitation periods can be fact-specific, it’s wise to get qualified guidance before taking steps that could affect your rights.
It can, depending on the situation. In many cases, making a payment or acknowledging a debt may affect limitation period calculations. If you’re close to a limitation period issue, consider getting legal advice before paying or signing anything.
Not on their own. Wage garnishment and most forms of forced enforcement generally require a court judgment (and additional legal steps). If you’re unsure whether legal action has started, you can ask for details in writing and consider speaking with a lawyer or a Licensed Insolvency Trustee.
