Over the past few weeks I have been doing a substantial amount of research into the new regulatory regime for the debt settlement industry in Ontario. As you might be aware, effective July 1, 2015, Ontario will have a new regulatory regime for those firms providing “debt settlement services”. This includes not only what might be described as traditional debt settlement firms but also credit counselling agencies.
Draconian restrictions on fees for post-July 1, 2015 debt settlement agreements
The new law will have a devastating impact upon existing debt settlement firms operating in Ontario negotiating lump sum settlements on behalf of clients. The new law contains draconian restrictions on fees–a maximum fee of ten percent of the amount of a debt at the time the debt settlement contract was signed. Furthermore, on any debt settlement contract signed on or after July 1, 2015, a debt settlement firm will not be entitled to charge any fees until such time that a settlement is actually paid out! These new restrictions regarding fees which affect all debt settlement contracts signed on or after July 1, 2015, except where the debt settlement provider is exempt from the Ontario Collection and Debt Settlement Services Act, will make it very difficult for a debt settlement firm to be financial viable in the future.
Anger directed towards some mortgage brokers operating illegally in Ontario
Over the past few weeks I have had the opportunity to get some feedback from a signficant number of owners of debt settlement firms in Ontario who are licensed as collection agencies and who have been “playing by the rules” in terms of complying with Ontario’s existing regulatory regime for firms providing traditional debt settlement services. What struck me these past few weeks is the anger felt by some of these debt settlement firm owners directed at certain mortgage brokers who they claim are operating illegally in Ontario–providing “debt settlement services” to their clients without being licensed as a collection agency in contravention of Ontario law.
Frustration with Ontario civil servants responsible for enforcing provincial law
What I have also learned over the past few weeks is the level of frustration among the owners of some Ontario-based debt settlement firms regarding the enforcement, or lack thereof, in connection with Ontario’s existing law regulating Ontario firms providing “debt settlement services”. It would appear that a number of members of senior management at Ontario-based debt settlement firms have provided the Ontario Government with information about firms they believe are offering “debt settlement services” to Ontario residents illegally and the lack of response from the Ontario Government.
Provide me with information regarding illegal debt settlement operatiors in Ontario
Over the next few weeks and months I plan on gathering as much information as I can in connection with firms providing debt settlement services in Ontario. Some of these firms–including some law firms and licensed bankruptcy trustees–might be exempt from the Act and, consequently they do not requrie an Ontario collection agency license. In contrast, other firms will not be exempt from the Act.
I anticipate that some of the firms that might be offering “debt settlement services” illegally might not be considered to be traditional debt settlement firms. It might be possible that a mortgage broker is providing “debt settlement services” illegally. It is also possible that a firm which is holding itself out as “financial advisers” or “debt consultants” is providing debt settlement services” illegally if their activities fall within the definition of “debt settlement services”, the firm is not exempt from the Act, and the the firm does not possess a valid Ontario collection agency license.
I would invite anyone reading this blog to forward information or documentation to me which would suggest that a particular firm has engaged in debt settlement services in Ontario in circumstances where it is doing so illegally. Feel free to send your material via e-mail to email@example.com. If you would care to discuss this issue on the phone with me then I would invite you to call me Toll Free at 1 (866) 996-9941 or at (519) 827-5513.