Over the next few weeks and months a substantial number of Canadian consumers entering into a debt settlement services agreement will not only be able to cancel the agreement but also obtain a full refund of all the payments they made under the agreement. That is, if they take appropriate action. In some cases, a consumer might be able to obtain a refund in the thousands of dollars.
The right to cancel a debt settlement services agreement is available with some, but not all, agreements entered into on or after July 1, 2015. These rights are not available to consumers, however, where the debt settlement firm is exempt from the Ontario Collection and Debt Settlement Services Act.
Who has the right to cancel an agreement and receive a full refund of monies paid?
These two rights, the right to cancel a debt settlement services agreement, and the right to a refund of all monies paid to a debt settlement firm—is available to the following consumers:
- Any Ontario resident who entered into a debt settlement services agreement after June 30, 2015
- Any person residing outside Ontario who entered into a debt settlement services agreement with a firm located in Ontario after June 30, 2015
If you are going to enter into a debt settlement services agreement you should make sure that the debt settlement firm does not back date the agreeement to a date prior to July 1, 2015. This tactic by an unscrupulous debt settlement firm might deprive you of the important protections for consumers afforded under the Ontario Collection and Debt Settlement Services Act.
The right to cancel a debt settlement agreement
A consumer has an absolute right to cancel a debt settlement agreement, at any time within 10 days of receiving a written copy of the debt settlement services agreement. There are also two specific situations where a consumer who has entered into a debt settlement agreement can obtain relief within 365 days of a specific event.
The following chart summarizes the relief that is available to a consumer under the Ontario Collection and Debt Settlement Services Act with respect to both cancelling a debt settlement services agreement and obtaining a refund for payments made to a debt settlement firm which are not lawfully permitted under the Act.
Fees: With respect to any debt settlement service agreements entered into after June 30, 2015, a debt settlement service provider is not entitled to charge a client a penny in fees until such time that a settlement is actually paid out. Once a debt is settled–and only then–is a debt settlement firm entitled to charge a fee under a debt settlement services agreement. This fee cannot exceed 10 percent of the original amount owing on the date the consumer entered into the debt settlement agreement.
Mandatory requirements: The mandatory requirements for a debt settlement services agreement are contained in paragraphs 1 through 6 of subsection 27(1) of Regulation 74, R.R.O 1990, 309/14, enacted pursuant to the Ontario Collection and Debt Settlement Services Act.
A copy of these provisions is reproduced below with the relevant provisions highlighted in yellow for clarity.
One of the provisions in this Regulation is that the first page of any debt settlement agreement must be a document titled Settling Debt–What You Need to Know, a copy of which can be found on an Ontario Government website. You can find a copy of this document at the very end of this post.
Requirement to provide written notice of cancellation of agreement
In order to cancel a debt settlement agreement a consumer must provide the debt settlement service provider with notice. What constitutes adequate notice is set out in subsection 92(1) of the Ontario Consumer Protection Act, which is reproduced below.
If a consumer wanting to cancel a debt settlement agreement also seeks a refund of payments made to a debt settlement firm it would be prudent for the consumer to provide the debt settlement provider with written notice using a method where the consumer can later prove such notice was received by the debt settlement firm. Depending upon how much time a consumer has to provide notice, a consumer might want to consider providing such notice by XPress Post, overnight courier, or registered mail.
Furthermore, this written notice should include a demand for the return of all monies paid to the debt settlement firm under the agreement.
Debt settlement firm’s obligation to refund monies within 15 days
Where a consumer who is entitled to cancel a debt settlement agreement cancels the agreement within the relevant time period, and satisfies the notice requirement, then the debt settlement service provider has 15 days from the date of receipt of notice of cancellation to refund any monies owing to the consumer under Ontario law.
If the debt settlement firm fails to provide a refund within 15 days then the consumer has a number of options:
1. File a complaint with the Ontario Ministry of Government and Consumer Services
A consumer can make a complaint to the Ontario Government where a debt settlement service provider fails to provide him with a refund. In order to make an official complaint to the Ontario Government a consumer must first send a written notice to the debt settlement firm complaining about its conduct and stating the remedy sought and then it must file a complaint using the Ontario Ministry of Government and Consumer Services’ online Complaint Form. Here is an online link for this form:
2. Sue the debt settlement service provider in an Ontario court
Where a debt settlement firm fails to refund monies to a debt settlement customer in accordance with Ontario law then the consumer has the option of suing the debt settlement provider in an Ontario Court. Where a consumer sues a debt settlement provider successfully then the court has the discretion to award exemplary or punitive damages.
Provide us with a copy of your debt settlement agreement entered into after June 30, 2015
If you have entered into a debt settlement agreement after June 30, 2015 then I would invite you to call me at (866) 996-9941 or at (519) 827-5513. Alternatively, you can send me an e-mail at firstname.lastname@example.org
Copy of document titled Settling Debt–What You Need to Know
Under the Ontario Collection and Debt Settlement Services Act the following document must be the first page of a debt settlement services agreement that is entered into after June 30, 2015.