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Debt Settlement Services - Consumer Beware

Ontario Passes New Law to Stop Abusive Practices.

Ontario passes debt settlement legislationIn the spring of 2013, Ontario's Ministry of Consumer Services introduced legislation with tough measures to protect consumers from unfair business practices surrounding what are called "debt settlement services" (also known as "debt reduction", "debt relief" and "debt negotiation" in advertising sales pitches).

On November 27th, 2013 the Stronger Protection for Ontario Consumers Act passed Third Reading in a vote supported by all parties, and will now become law. We congratulate the Government of Ontario for taking this important action to protect vulnerable, indebted consumers against the abusive practices of some debt settlement companies.

For help with your debt call us at 1-800-267-2272 or complete our Online Debt Assessment to speak with one of our qualified credit counsellors.

The Debt Settlement Situation in Ontario.

There are more than 50 organizations offering debt settlement services in Ontario. The Ontario Association of Credit Counselling Services has received more than 100 complaints a month about debt settlement companies.

Debt settlement companies have also been the focus of a "consumer alert" from the Financial Consumer Agency of Canada (FCAC), which warns consumers to beware of "too good to be true" offers from debt reduction companies.

These companies offer to help you settle all your credit card debt (and other unsecured debt), with claims of up to 70 per cent savings on the total amount of money that you owe. The companies are known for:

  • high-pressure sales tactics
  • charging large up-front fees before any action is taken
  • describing their services in hard-to-understand contracts
  • providing misleading information about the effect on a credit report and credit score
  • making false claims that debt settlement companies are somehow linked to the government

This process can create a high degree of risk for consumers, who are open to abuse by companies interested only in collecting up-front fees while leaving consumers to deal with disgruntled creditors, most of whom are not interested in waiting for years to accept a pennies-on-the-dollar settlement.

The Stronger Protection for Ontario Consumers Act – What It Means for You.

The Stronger Protection for Ontario Consumers Act creates new standards of conduct for debt settlement companies by:

  • Banning the charging of up-front fees. Payment of fees before services are provided has been prohibited.
  • Placing limits on the amount of fees that can be charged to consumers.
  • Requiring clear and detailed contracts with specific information in some areas. One important example is that the effect of the debt settlement on the consumer's credit report and score must be disclosed.
  • Establishing a 10-day cooling-off period, which gives consumers more time to consider their options and how the agreement will affect them.
  • Allowing the business licenses of non-compliant companies to be revoked.

How Debt Settlement Services Differ From Credit Counselling.

Unlike debt settlement services not-for-profit credit counselling services in Ontario and across Canada offer time-honoured Debt Management Programs which take a thoughtful, realistic approach to debt solutions.

Credit counselling agencies in the province also are recognized for exemptions under provincial legislation. Debt settlement companies are not.

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Toronto, Ontario M2N 5W9
416-228-DEBT (3328)
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