How To Deal With A Debt Collector You Can’t Pay

Estimated reading time: 12 minutes

Need to know about debt collectors? Understand your rights and how to handle debt collection calls effectively in Canada.

Discover what you need to know about debt collectors in Canada. Protect yourself and your personal information from aggressive debt-collection tactics.

The debt collector is the bill collector who will stop at nothing to get the money you owe to pay off your debt.

In Canada, certain laws must be followed when a debt collector contacts you, and all consumers are required to be aware of them.

Even if you don’t have debt or think you will be contacted by debt collectors, think again.

They can contact you on behalf of someone else who owes a debt, looking for personal information such as their phone number or address.

You will want to know how to handle a debt collector situation, as it may occur, and what you do is crucial.

I Can’t Pay The Debt Collector

Dear Mr.CBB,

My husband lost his job last year, and we have debt that we can’t repay, as my small income barely covers the cost of putting a roof over our heads.

It’s unfortunate since we always paid our bills on time, but we weren’t prepared for job loss with any extra money set aside.

Over the last few weeks, we’ve been receiving phone calls at least once every couple of days from a debt collection agency claiming they are after us to pay back a debt.

They want us to pay the money now, but we don’t have the money. I’m not sure what to do or what they can do to us if we can’t repay the debt we owe.

We owe $ 1,400, which isn’t a lot of money, but we can’t pay it in full now.

Thanks for any advice.

Marilyn.

Evaluate Your Financial Situation

Thanks for your question, Marilyn.

I will do my best to address your situation; if you need help with your budget, please don’t hesitate to contact me. 

First, I inform everyone about debt repayment to help them identify areas where they can adjust their budget.

If you can free up the money or earn extra money, that may help with debt repayment.

What If I Can’t Pay Back A Debt Collector?

If a debt collector calls you, you may be able to try negotiating with them, but often it’s too late once they own the debt.

Court-ordered debt collections may happen if the debt collector sues you, and they can for just about every debt.

Once you are unable to pay back a debt, the creditor can obtain a court order to garnish your gross wages up to 50%.

This is known as a wage garnishment in Canada, which requires your employer to deduct a portion of your wages to pay off your debt.

Related: 5 Facts about Wage Garnishment

When you have debt you can’t repay, it’s better to contact the person you owe money to and explain the situation.

You may find they would instead get some money from you than all of the money from you or put you on a payment plan that works for your budget.

Other Options To Consider

• Credit Card Balance Transfer Option
• Debt Consolidation (bank or loan company)
• Family or Friends Loan
• Credit Counselling
• Bankruptcy (last option)

If they send your debt to a collection agency, they risk getting nothing out of it and paying the debt collector.

It sounds like you have the debt collector coming for you, and since you can’t pay the debt back, all you can do is tell them so.

Below is everything I know about being in debt with a debt collector, so I hope it offers relief in understanding your rights as a consumer.

Mr.CBB

What is a Debt Collector?

A debt collector is a company or third-party collection agency that works to retrieve an unpaid debt on a loan, credit card, or line of credit.

A creditor may sell your debt to a debt collection agency, which will then attempt to recover the money or work on the creditor’s behalf for a fee.

How To Handle A Debt Collector’s Phone Call

If you answer your telephone and the person on the other end claims to be a debt collector, you first need a pen and paper.

Don’t even begin talking to them without something to document the conversation because you’ll need the info to fall back on.

Trust me, when you struggle to pay back the debt, you don’t want to try to remember what was said to you.

Before the debt collector tries to get information out of you, beat them to it with questions such as;

1. What debt Collector Company do you work for?
2. What is the debt collector’s name?
3. Who are they collecting the debt for? (Name of Company or Person)
4. What is the contact information for the debt collector? (just in case you need to call them back, but verify that the number belongs to a legitimate Canadian debt collection agency first)

These days, scam artists prey on anyone and everyone they can, and telephone scams are on the rise in Canada.

Scam artists particularly like to prey on older people or people who they know can be easily convinced, and they can tell from the moment you start talking to them.

These individuals are breaking the law and may not even be Canadian citizens, making it nearly impossible for authorities to track them down, especially if they receive money.

It’s Not My Debt

It happens, and credit agencies come looking for money only to find out they are chasing the wrong person or there has been a mistake.

If you receive a letter from a debt collector stating that you owe money for a debt they are collecting that is not yours, act quickly.

Contact the debt collection agency to inform them that the debt is not yours.

Please find the contact information of the person/business you supposedly owe the debt to and call them for clarification.

Order your credit report to review what is in the report, including any debts being attempted to be collected.

If the debt on your credit report is not yours, contact Equifax and TransUnion, as negative or incorrect information could indicate identity theft or fraud.

Debt Collector Written Notice Of Claim

We’ve seen our fair share of debt collection notices while dealing with debt collectors on behalf of family and friends.

I remember an afternoon when we were sitting in the living room at a relative’s house, and there was a knock on the door.

When the door was answered, a letter was handed to my mother-in-law, certifying that she had been served the letter in person.

This way, she could not dispute that she did not get a letter from a debt collector, which many people do.

Don’t try to scam the system, because a debt collector will find you when money is involved for them.

You will often receive a debt collection letter in the mail or via email if you provide an email address; however, I suggest obtaining a letter.

When it comes to debt and finance, I’m a firm believer in having paperwork in front of me. Perhaps I’m old-school, but that’s how I prefer it.

What Should A Debt Collection Letter Say?

If you owe money to someone and receive a debt collection letter, it should follow a legal procedure to inform you of the actions being taken.

The debt collector must include information in the debt collection letter such as;

1. Collection Agency name and contact number
2. For whom is the debt being collected?
3. Who owns the debt?
4. What type of debt is being collected? (Credit Card, Bank loan, School loan)
5. How much money the debt originally was for, and a breakdown of what is currently owed

If you don’t receive answers to the above questions, you can request that they provide this information to further clarify the debt they are trying to recover from you.

A debt collector then must wait six days after they send the debt collection letter before they can legally contact you.

This means that after six days, they can contact you by phone, email, or in person to discuss the debt you owe.

However, there are rules in place that a debt collector must follow in Canada.

When Can A Debt Collector Call You?

A debt collector can only contact someone a maximum of three times per week for money collection during certain hours, Monday through Sunday.

• Monday to Saturday, 7 am-9 pm (Imagine a nice wake-up call at 7 am or a ring before bedtime)
• Sunday from 1 pm to 5 pm

If you allow them to contact you more than three times per week, that is something you can allow via phone, text, email, or voicemail messages.

How Often Can A Debt Collector Contact Me?

Those are the only four legitimate ways that fall into the three times per week contact count.

They are brilliant, though, because if they don’t leave a message, that doesn’t count as a contact.

This gives them another opportunity to contact you by phone, as leaving a voicemail for someone to call back a debt collector is unlikely to be returned.

Besides, if you don’t answer the phone and see they called, that’s not a legitimate contact either.

How To Handle Threats From A Debt Collector

Debt collection agencies in Canada are aware that they are not allowed to threaten anyone they are trying to retrieve money from, as it is against the law.

They are not allowed to call you on a holiday, threaten you, or charge you any fees related to the debt you owe apart from;

• Interest
• Legal fees
• Fees for non-sufficient funds (NSF) on payments you submitted (for example: A cheque that bounced)

Years ago we received a phone call from a debt collector on behalf of my sister-in-law, and they were very pushy and threatening.

They wanted to know if she lived with us, where she worked, and her phone number, and were adamant that we provide this information.

We told them NOTHING.

Most people won’t give personal information to family and friends over the phone if it is a legitimate debt collector.

Debt collection agency phone calls are intimidating, even for the person trying to extract information.

Debt Collection Scams

If you are dealing with a threatening debt collector who engages in any of the following actions, you’re likely dealing with scam artists or illegal tactics by a Canadian debt collector.

• Requires payment on the spot via credit card, PayPal, or other means. Don’t!
• Threatens to take legal action and sue you
• Uses intimidating, threatening, or abusive language
• Start calling your contacts, including your employer.

Before you offer ANY personal information upon the phone call, you must;

• Ask yourself if you even have any debt that you owe. If not, then it’s likely a scam.
• Make Sure You Are Dealing With A Collection Agency
• Must Be Listed On Government Website- Ministry of Government and Consumer Services
• Debt Collector Must Send A Written Notice And Wait 6 Days Before Contacting you by phone, text, email, or in person (Did you get a written notice? If no, tell them to send it and then call you back)
• Contact the debt collection agency directly by searching for their phone number.
• Never use the number you gave, just in case it is a scam artist.

Don’t let a debt collector pressure you into giving up personal information by telling you that the written letter they are legally supposed to send is in the mail.

You need legal proof that the debt collector you are dealing with is an actual debt collection agency working on behalf of a client to retrieve money that you owe them.

If you don’t have it, you don’t talk. Be firm. What’s the worst they can do? Nothing.

6 Days After The Debt Collection Letter

After a debt collector sends you a debt collection letter, they must wait six days before contacting you.

They can also contact your friends, family, guarantor, and employer (subject to certain rules for employers) by law to retrieve your phone number and address.

A debt collector cannot directly call your cell phone unless you allow them to do so or unreasonably pressure others to pay back your debt.

Debt collectors are not permitted to make a false or misleading representation of you to anyone or use threatening or abusive intimidation.

What Is A Guarantor?

You will want to be careful before signing as a guarantor, as it’s not just something you do to help someone get a loan.

A guarantor or surety is someone who co-signs a loan or debt for another person, and they will pay back the debt if the borrower defaults.

Essentially, they are putting themselves on the hook to pay back a debt you don’t pay with their own assets.

The only way a debt collector can contact your employer is if they guaranteed the debt that you owe or you allow them to call.

Lastly, if a debt collector only wants to verify employment or business information, they have the right to do so, provided it is done only once.

If they request any additional personal information or provide false or misleading information, the debt collector is breaking the law and should be reported.

Debt Collector Complaints

Dealing with a debt collector that is not following the laws set out in Canada can be stressful, but there are steps you can take to file a complaint.

Firstly, contact the debt collector yourself and tell them that they are breaking the law, and ask them to follow the procedure.

If they know you are aware of debt collector laws in Canada, they may back off and follow procedure, especially if you say you will file a complaint.

If the debt collection agency is not following practices and won’t listen to your complaint, you can then contact the Financial Consumer Agency of Canada.

When a debt collector continues to threaten you then you can fire back by filing suit in small claims court or calling your local police department.

You can file a complaint against a debt collector that is a federally regulated financial institution,  hired by one or sold for collections.

The ministry can follow-up and fine the debt collection agency, ask them to stop contacting you or shut down their business.

For more detailed information:

• Dealing with a debt collection agency in Canada
• Contact the Financial Consumer Agency of Canada.

Discussion: Have you ever had a phone call from a debt collector that didn’t follow Canadian laws?

Share your comments below.

Thanks For Reading,

Mr. CBB