July 1, 2015, marks the first day of a new regulatory regime for those providing debt settlement services to Ontario residents. A number of firms that offered debt settlement firms to Ontario residents before July 1, 2015, will not do so after June 30, 2015. This group might have included some mortgage brokers, somed debt consultants, and some small debt settlement providers operating without a collection agency license.
Prior to July 1, 2015, many of these firms felt that their potential financial exposure for operating in contravention of Ontario law were within an acceptable range. This all changes on July 1, 2015. After June 30, 2015 any firm providing debt settlement services in contravention of the Ontario Collection and Debt Settlement Services Act and Regulation 74 faces huge financial exposure.
What conduct falls within the scope of the Act?
Subsection 1(1) of the Ontario Collection and Debt Settlement Services Act defines “debt settlement services” as follows:
“debt settlement services” means offering or undertaking to act for a debtor in arrangements or negotiations with the debtor’s creditors or receiving money from a debtor for distribution to the debtor’s creditors, where the services are provided in consideration of a fee, commission or other remuneration that is payable by the debtor.
This means that any firm which offers to negotiate settlements with an Ontario resident’s creditors receiving compensation for doing do will be caught by the Act unless it can bring itself within an exemption.
The Act also contains an anti-avoidance provision which might catch an entity or transaction in circumstances where, except for its outward form, it would be caught by the Act. Section 2.1 of the Act reads as follows:
In determining whether this Act applies to an entity or transaction, a court or other tribunal shall consider the real substance of the entity or transaction and in doing so may disregard the outward form.
No entitlement to fees unless a debt settlement provider is licensed
Under the Act a firm offering debt settlement services to an Ontario resident is not entitled to any fees unless it is licensed as a collection agency under the Ontario Collection and Debt Settlement Services Act or it is exempt from the Act.
An Ontario resident’s right to cancel a debt settlement services contract
An Ontario resident has the right to cancel a debt settlement services agreement, without any reason, within 10 days of receipt of the agreement.
Furthermore, in the event that a debt settlement services agreement does not satisfy the mandatory language required for a debt settlement agreement under the Act then an Ontario resident has the right to cancel the agreement within one year after entering into the agreement.
Ontario resident’s entitlement to a full refund upon cancellation of agreement
An Ontario resident who cancels a debt settlement agreement in circumstances permitted under the Act is entitled to a full refund of all payments made under the debt settlement services agreement.
Ontario resident can sue for return of all monies owing under the Act
An Ontario resident is entitled to sue a firm providing debt settlement services in Ontario for the return of all monies obtained in contravention of the Act. Furthermore, where the consumer’s lawsuit is successful, the court has the discretion to order exemplary or punitive damages.
Ontario consumers might be entitled to significant refunds
Any consumer who has entered into a debt settlement agreement after June 30, 2015, who would like to learn more about how they might be able to obtain a refund of all the payments they made under their debt settlement contract is welcome to call me at (866) 996-9941 or (519) 827-5513. Alternatively, they can send me an e-mail at firstname.lastname@example.org.