Creditors, collection agencies and debt repayment

Overview

Alberta requires all collection agencies, collectors, debt repayment agencies and debt repayment agents to be licensed under the Consumer Protection Act and the Collection and Debt Repayment Practices Regulation.

The following agencies and agents are involved in consumer credit and debt repayment:

• Creditors give credit, loans or other agreements to consumers, allowing consumers to purchase products or services.
• Collection agencies work on behalf of creditors to collect unpaid debts or locates debtors for others.
• Debt repayment agencies can help you negotiate with creditors to help you pay what you owe.
• Collectors are employed or authorized by a collection agency to:
  • collect or attempt to collect a debt from a debtor
  • locate debtors in Alberta
  • act for or deal with a debtor
• Debt repayment agents help to make arrangements or negotiate with your creditors, (including receiving money from you to distribute to your creditor) for a fee.

The agencies are responsible for the behaviour of the collectors or agents they employ.

If you are having problems paying your bills, contact your creditors as soon as possible. Try to make arrangements with your creditors before your account is turned over to a collection agency.

More information is available in the following tip sheets:

• Bill Collection and Debt Repayment
• What Creditors Can Do If You Don’t Pay

Who the legislation does not apply to

The legislation does not apply to businesses or people collecting debts for which they are the original creditor or owner of the debt, a lawyer who is collecting a debt for a client, a civil enforcement bailiff or agency while seizing security or people working in the regular course of their employment while licensed under the Insurance Act.

What creditors do

When you use credit to make purchases or pay for services and fail to make payments your creditors may take legal actions to recover the money owed. Common types of credit are:

• credit cards
• bank loans
• student loans
• payday loans
• bank account overdrafts
• lines of credit
• finance agreements

A creditor can hire a collection agency to collect unpaid debts.

Secured credit contracts

Some creditors ask you to provide some type of security when you sign a credit contract. Security, also called collateral, is money or goods that you promise to give a creditor if you do not pay back your debt.

Common types of security include:

• savings bonds
• term deposits
• property such as vehicles, furniture or a house

If someone has co-signed a loan for you, their money or belongings may be the security for your debt.

If you sign a secured credit agreement and don’t make your payments, the creditor has a legal right to seize the security. If the value of the security doesn’t cover your debt, the creditor may also sue you for any money left owing, including interest and costs. In some cases, the court may also allow the creditor to garnish your wages and your bank account.

For more information about what to do if you are sued, and how to get your security back, see the What Creditors Can Do If You Don’t Pay tip sheet.

Seizure under a secured contract

A creditor must use a civil enforcement agency to seize the security. A civil enforcement bailiff, working with the agency will carry out the seizure.

Conditional sales contracts

A conditional sales contract is a special type of secured contract. When you buy goods under a conditional sales contract, the creditor owns the goods until you pay the debt in full. The goods are the security for the contract.

With a conditional sales contract, if you don’t make your payments as agreed, the creditor may either seize the goods that you bought on the conditional sales contract, or sue you to get a judgement for the amount that you owe.

Unsecured credit contracts

With an unsecured credit agreement, you get credit without promising security to the creditor. For example, you sign an unsecured credit contract when you get a credit card or a payday loan. You have an unsecured credit agreement with the utility company when they connect your gas, power, water or phone. You also have an unsecured agreement with your dentist for dental care.

Unsecured creditors can sue you if you don’t pay your bills.

For more information about what to do if you are sued, see the What Creditors Can Do If You Don’t Pay tipsheet and seek legal advice.

Seizing property

Creditors may take action to seize your property through a civil enforcement agency without the need for a judgment if:

• you have bought items through a time sales agreement and you are behind or have not made any payments
• the creditor is secured by a chattel mortgage and you have payment arrears
• the debt is rent owed to a landlord

Stopping a seizure of property

Talk to your creditor immediately. If you can start paying some of the money that you owe, the creditor may leave the seized property with you.

Garnishment

Garnishment is a legal procedure that a creditor can take after the court awards a judgement against you. The creditor asks the court to take the money (garnishee) you owe from a number of sources like

• your pay cheque
• your account at a financial institution such as a bank, treasury branch, trust company or credit union
• accounts receivable (money owing to you by others)

Bank account garnishment

A creditor who garnishees your bank account is allowed to take the entire amount of money that you owe.

Objection to a garnishment

To stop the garnishment process or to make changes to the garnishment by the creditor, you must obtain a court order. You will probably need a lawyer to do so.

If a creditor sues you

A creditor has the option of suing you in the Civil Division of the Court of Justice (formerly known as small claims court) or the Court of King’s Bench.

If you are sued, you will be served with a civil claim. Don’t ignore the claim.

If you are served with a civil claim:

• talk to your creditor
• pay the claim
• file a dispute note

If you receive a civil claim in Alberta, you have 20 calendar days from the time you are served to file the dispute note. If the claim is served on you outside Alberta you will have one month to respond.

If you do not file a valid dispute note within the required time or appear in court on the day of the hearing, the court will award the creditor with a judgement against you.

Once a judgement is granted the creditor can take several steps to get the money that you owe:

1. Register a writ of enforcement with the Personal Property Registry.
2. Garnishee your wages, bank accounts or accounts receivable.
3. Seize your property.

Owing money to a bank

If you have an overdue debt owing to a bank, the bank can use its right of set-off to recover the money. The right of set-off allows a bank to withdraw money from your accounts to pay your overdue debt. The bank does not have to give you notice or ask your permission before taking this action. The bank does not have to ask the permission of the court.

Banks may use their right of set-off to collect overdue payments on credit cards, loans, overdrafts or lines of credit. A bank may withdraw money that you have on deposit in any of its branches and apply it to your debt. The bank does not have to leave any money in your account.

After your judgement is paid

Once you have paid a judgement in full, the judgement should be discharged at the Court of King’s Bench and at the Personal Property Registry. Check to make sure this is done. You should also let the credit bureau know that you have paid the debt. They will enter this information on your credit record.

For more information, see the What Creditors Can Do If You Don’t Pay tipsheet.

What a collection agency can do

Collection agencies collect unpaid debts or locate debtors for others.

A collection agency or collector must:

• be licensed in Alberta
• use the name that is shown on their licence in all contacts and correspondence related to their collection activities
• provide you with information about the original creditor and current creditor of the debt and any details of the debt
• disclose in writing the fee the agency will charge for a non-sufficient funds (NSF) cheque before the submission of the cheque
• provide a receipt for all cash transactions and payments made in person or at your request
• give you an account of the debt if you ask for it
  • the accounting must include details of the debt
  • agencies only have to give you this information once every 6 months
  • if the agency cannot provide the accounting within 30 days from the request, they must cease collection activity until they can

A collector can:

• contact you at home between 7 am and 10 pm Alberta time
• contact your spouse, adult interdependent partner, relative, neighbour, friend or acquaintance to request your residential address, personal or employment telephone number
• contact you at work to discuss your debt unless you ask them not to
  • if you don’t want to be contacted at work, you must make other arrangements to discuss the debt and you must keep those arrangements
• contact your employer on one occasion to confirm your employment status, business title and the address of the business in preparation for legal proceedings

What a collection agency cannot do

A collector cannot:

• call you or members of your household, relatives, friends, neighbours or your employer so often that the number of calls received could be considered harassment
• use threatening, profane, intimidating or coercive language
• give any false or misleading information including references to the police or a law firm, credit history, court proceedings, lien or garnishment or imply that the collector or agency is part of a law firm or legal department of the collection agency or client
• threaten or state an intention to proceed with any legal action where the agency does not have the legal authority and consent of the creditor to do so
• discuss your debt or the existence of your debt with any person except you (unless you have given your express consent to do so), a guarantor of the debt, the creditor or someone you have identified in writing as your representative
  • if you want the collector to contact your representative to discuss your debt, you must provide that person’s current address and telephone number
• discuss your debt with a minor child
• continue to contact you if you inform the agency in writing or any other verifiable means that the debt is in dispute and that you wish the creditor to take you to court
• continue to contact you if you tell the collector that you are not the debtor unless after investigation, the agency is convinced you are the debtor
• cancel or alter a repayment arrangement if you have complied with the terms of the arrangement and have not misrepresented your financial circumstances or they have not materially changed
• make more than 3 unsolicited contacts in any period of 7 consecutive days
  • this does not include contacts with a third party to locate you or mistaken contacts with a third party or contacts by traditional mail
• pursue a non-judgment debt where the last payment or written acknowledgement of the debt is more than 6 years old
• suggest that a friend, spouse or other relative is responsible for your debt or ask that person for money unless he or she has accepted responsibility
  • for example, if he or she co-signed a loan
• a collector may not threaten to physically harm you, your family or your property
  • if any collector does this, charges may be laid under the Criminal Code of Canada
  • if this happens, call the police and inform Service Alberta
• take your property if you do not pay your bill
  • however, if the agency sues you and obtains a judgment, they may hire a civil enforcement agency to seize your property
  • a bailiff who works for a civil enforcement agency is the only person who can seize property
• bring in the police or send you to jail

If a collection agency has violated the rules above, or treated you unfairly, you can file a consumer complaint.

More information is available in the Bill Collection and Debt Repayment tipsheet.

What debt repayment agencies do

A debt repayment agency is a business that charges a fee to act for you in negotiating or making arrangements with creditors for you to pay what you owe. This is a voluntary agreement between the debt repayment agency (acting for you) and your creditors.

A creditor does not have to accept your payment proposal. Even if a creditor accepts your payment proposal, it can be cancelled if you do not abide by all the terms of the agreement. The creditor can then resume collection activity on your debt.

The agency must tell you within 30 days of being informed by a creditor that the creditor has decided not to participate in or has withdrawn from a debt repayment program.

For more information about how debt repayment agencies work, see the Bill Collection and Debt Repayment tipsheet.

Debt repayment contracts

A debt repayment contract must:

• be in writing, dated and signed by you and the debt repayment agency
• include your name, address and telephone number and the name, address, telephone number and if available the fax and email address of the debt repayment agency
• describe all the services that will be provided
• itemize all the fees you are required to pay
• list all creditors that will be paid under the agreement

Debt repayment contracts must also state:

• the total amount you owe
• the amount of each payment
• the schedule of payments
• the total number of payments for each creditor

What a debt repayment agent or agency cannot do

A debt repayment agent or agency cannot:

• charge any fee for an NSF cheque unless the agency has disclosed in writing prior to the submission of the cheque that a fee will be charged
• make any arrangement with you to accept a sum of money that is less than the amount of the balance due to a creditor as a final settlement without the consent of the creditor
• give any false or misleading information including references to the police, law firm, credit history, court proceedings, lien or garnishment
• lend you money to pay your debts
• offer to pay or give you any other form of compensation for entering into a debt repayment agreement
• collect any fee for referring or helping you get an extension of credit from a lender, creditor or service provider
• fail to provide a receipt for all cash transactions or payments made in person or at your request
• discuss your debt or the existence of your debt with any person except you, a guarantor of the debt, your representative or the creditor of the debt
• make a claim for breach of contract if you cancel the repayment agreement

More information is available in the Bill Collection and Debt Repayment tipsheet.

Debt records

• Collection and debt repayment agencies must create and maintain records of all their activities relating to collection or debt repayment. This includes, but is not limited to:
• contacts with creditors and debtors
• receipts and disbursements
• trust accounts
• telephone calls
• agreements
• authorizations from creditors to sue or accept a settlement on a debt
• all correspondence
• history of a debt and negotiations with creditors

Records must be retained for a minimum of 3 years after the date the record was made.

Keep your own records of:

• how much you have paid on your debts
• who you paid
• when you made payments
• the form of payment you used (such as cash, cheque, debit card, money order)
• who you talked to about your debt
• any payment arrangements you agreed to

Make sure you are able to verify any payment you made to an agency or creditor. This can be done by receipts, cancelled cheques and any other proof that a payment was made.