If you are a consumer who owes money to a bank then you might be receiving payment demands. These demands–typically in writing or by telephone–might be from people working for your bank, or the bank’s collection agent: a collection agency, a paralegal, or a law firm. Under federal law it is illegal for these people, or these organizations, to threaten to sue you concerning monies owing to a bank if they have no intention of suing you.
On January 1, 2010, the Credit Business Practices Regulations, SOR/2009-257, became the law in Canada. It applies where monies are owed to a bank provided the debt arose from a consumer transaction. A debtor is not entitled to the protections afforded under the federal Credit Business Practices Regulations where (1) the debtor is not an individual, or (2) the debt was incurred for a business purpose. Furthermore, a consumer might not be entitled to the protections available under the federal Credit Business Practices Regulations if their debt owing to a bank has been sold to an organization which is not a federally regulated financial institution.
You are receiving payment demands for an amount less than $2,500
If you owe monies to a bank and you owe less than $2,500 then I estimate that the odds that you are going to be sued are less than half of one percent.
You are receiving payment demands for an amount less than $5,000 and you do not own any real property
If you owe monies to a bank then the odds that you are going to be sued over a $5,000 debt, in circumstances where you do not own real property in your own name, are likley less than half of one percent.
You are receiving payment demands where the relevant statute of limitations has expired
If you owe an unsecured consumer debt to a bank and the relevant statute of limitations in the province where you live has expired then I estimate that the odds that you are going to be sued are less than half of one percent. The statute of limitations for unsecured consumer debt is two years for the residents of British Columbia, Alberta, Saskatchewan, Ontario, and New Brunswick, three years for Quebec residents, and six years for all other Canadian residents. Creditors, and their collection agents, rarely sue consumers after the expiry of a limitation period on unsecured consumer debt.
You are receiving payment demands from a collection agency
There are two different scenarios under which you might be receiving a payment demand from a collection agency. As a general rule, if you receive a collection call or a collection notice from a collection agency the collection agency is attempting to collect your account on a commission, or contingency basis, on behalf of your creditor. In some instances, however, a collection agency will have purchased your debt, in which case in steps into the shoes of your original creditor. In Canada, banks, however, have historically been very reluctant to sell their debt.
In my book The Wolf At The Door: What To Do When Collection Agencies Come Calling (2010), published by McClelland & Stewart, I estimate that collection agencies, collectively across Canada, only sue about one in ten thousand accounts placed with them for collection. The primary function of a collection agency is to hound consumers to pay their outstanding accounts through written collection notices and telephone calls. Most collection agencies sue an incredibly small percentage of unpaid account assigned to them by creditors for collection.
You receive a generic looking collection letter from a law firm
There are a number of lawyers and law firms in Canada that send out thousands, and in some instances, tens of thousands of demand letters each month in circumstances where the law firm has no meaningful involvement with respect to the collection of the account other than the letter itself. I would hazard a guess that many of these law firms sue less than one half of one percent of the debtors that receive one of their collection letters. In some cases the number of files sued might be closer to zero.
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