Archive for March 2017

Licensed Insolvency Trustees and credit counselling agencies: the competitor-collaborator paradox

Credit counselling agencies and Licensed Insolvency Trustees (LITs), formerly known as bankruptcy trustees, offer debt relief options for debt-challenged consumers.  Credit counselling agencies offer Debt Management Plans under which a consumer will pay 100 percent to 120 percent of their current indebtedness to their creditors by way of installments.  Under federal insolvency law Trustees can offer two debt relief options; consumer proposals and bankruptcy.

In many instances, Licensed Insolvency Trustees and credit counselling agencies compete for clients.  Paradoxically, however, credit counselling agencies and Licensed Insolvency Trustees often collaborate serving as a significant source of referrals for one another.

For whatever reason, if a consumer communicating with a trustee’s office or a credit counselling agency chooses not to proceed with the “available” debt relief option then it is very common for that consumer to be given a referral.  This practice–where Licensed Insolvency Trustees and credit counselling agencies–routinely refer individuals to one another might not be in the best interests of a consumer.  An individual given this referral might not be given independent advice as to the full range of their debt relief options.

This practice of mutual referrals is based upon self-interest and not necessarily the best interests of a consumer.  If a Licensed Insolvency Trustee refers consumers owing less than $10,000 to one credit counselling agency–or a group of credit counselling agencies–then there is expectation that it will receive referrals from these credit counselling agencies involving consumers owing more than $50,000 in debt.



Most trustees decline a file where a consumer’s debts less than $10K


As a general rule, consumer proposals or bankruptcy do not take place where a consumer’s debts are less than $10,000.Licensed Insolvency Trustees will decline to make a consumer proposal or file personal bankruptcy where a consumer’s debts are less than $10,000.  A trustee cannot generate any net income on a consumer proposal where a consumer owes less than $10,000.  Furthermore, it doesn’t make a lot of sense for a consumer who owes less than $10,000 to his creditors to go bankrupt.  In Canada it is very common for a debt-challenged consumer who owes less than $10,000 to creditors to be referred by a Trustee to a credit counselling agency.


Consumer proposal a less costly debt relief option where consumer owes more than $10K

Under a consumer proposal a consumer will repay an amount–usually somewhere between 25 percent and 50 percent fo their indebtedness–to their creditors, by way of monthly installments over a period not to exceed five years.  In contrast, a consumer who enrolls in a Debt Management Plan with a non-profit credit counselling agency will pay somewhere between $1.00 and $1.20 to eliminated one dollar of their debt.  This means that for a consumer who owes more than $10,000 in unsecured consumer debt a consumer proposal is three times less expensive method for eliminating debt compared with credit counselling.


A consumer’s cost when eliminating debt might not be the sole factor, however, when choosing between a consumer proposal or credit counselling.  There are a number of scenarios where an individual might want to choose credit counselling over a consumer proposal:

  1. consumer proposal might not be available because an individual cannot satisfy the statutory insolvency requirement (many consumers are “house poor”)
  2. individual has significant student loan indebtedness in circumstances where the individual has ceased attending school as a full-time student less than seven years
  3. reputational issue: (any member of the public can pay $8.00 to conduct a search with the Office of the Superintendent of Bankruptcy to confirm if a specific individual has made a consumer proposal)
  4. employment-related concerns:  Some individuals might not choose a consumer proposal because they might be required to report the consumer proposal to an employer or a professional association
Affordability obstacle for credit counselling where debts exceed $50K

Under credit counselling a consumer is going to repay 100 percent of their current outstanding principal and interest owing on all of their unsecured consumer debt.  Credit counselling is attractive to some consumers because they are able to lower their payments to creditors because they are repaying their indebtedness by way of installment payments.

The fact, however, that it will cost a consumer between $1.00 and $1.20 to eliminate one dollar of their current unsecured consumer debt means that credit counselling becomes more unaffordable as the total amount of their indebtedness increases.  Few consumer proposals are for more than $50,000.  Scott Hannah, President and CEO of the Credit Counselling Society, Canada’s largest non-profit credit counselling agency, recently informed me that his organization’s average client enrolled debt in the $25,000 to $40,000 range.

Credit counselling agencies and LITs compete for clients where consumer owes $10k to $50k

As noted earlier, Licensed Insolvency Trustees seldom do consumer proposals where a consumer owes less than $10,00 to his or her creditors.  Furthermore, Debt Management Plans offered by credit counselling agencies are not common where an individual owes more than $50,000 in unsecured consumer debt.  This means that Licensed Insolvency Trustees and credit counselling agencies directly compete where the amount of unsecured consumer debt is between $10,000 and $50,000.  All things being equal, credit counselling might be a more attractive option where total indebtedness is closer to $10,000.  Similarly, all things being equal, for higher dollar amounts a consumer proposal might be more attractive than credit counselling.

Practice of mutual referrals often not in a consumer’s best interests

One of the consequences of these mutual referrals is that some consumers will be choosing a debt relief option in a bubble–limited to debt relief options offered by credit counselling agencies or Licensed Insolvency Trustees.

A consumer who is exposed to debt relief options available from credit counselling agencies and Licensed Insolvency Trustees may never be given information about the full range of debt relief options available to them including the following:

  1. Taking advantage of a limitation period to avoid paying a debt
  2. Learning that a consumer might be judgment proof or near-judgment proof in which case a creditor might never recover any monies from them
  3. Circumstances where it might be in a consumer’s best interests to negotiate a favourable one-time lump sum payment with a creditor
  4. Advice that a consumer should dispose of certain assets such as a principal residence


Consolidation in non-profit credit counselling industry inevitable

Canadians struggling with consumer debt spend millions of dollars to deal with their debt situation.  Some will take out a debt consolidation loan.  Some will hire a debt settlement firm.  Others will “go for credit counselling”.  Some will meet with debt consultants often referred to as “intermediaries”.  Finally, some will meet with a bankruptcy trustee, now known as a Licensed Insolvency Trustee (LIT), and make a consumer proposal or file for bankruptcy.

Make no mistake.  These debt relief service providers compete aggressively for these clients.  And a significant amount of revenues are at stake.  If you live in southern Ontario try listening to the radio without hearing an ad for a Licensed Insolvency Trustee or Consolidated Credit Services, one of Canada’s three largest non-profit credit counselling agencies.


Consolidation coming to non-profit credit counselling industry

The debt relief service industry is currently undergoing a period of consolidation.  We are already seeing this among Licensed Insolvency Trustees across Canada.  It is only a matter of time, however, before we will also see consolidation in the non-profit credit counselling industry.


The major players in the non-profit credit counselling

The Big 3 among Canada’s non-profit credit counselling industry includes Toronto-based Credit Canada Debt Solutions and Consolidated Credit Counseling Services, as well as New Westminster, B.C.-based Credit Counseling Society.  One might argue that the Credit Counselling Services of Atlantic Canada should also be included in this group.


3 Reasons Revenues for the Big 3 have flatlined

According to financial statements available on CRA’s website, the combined total revenues for the Big 3 have remained stagnant around $24 million since 2012, adjusted for inflation.  This is despite the fact that the Big 3 have spent, collectively, more than $4 million annually on Advertising and Promotion in taxation years 2012 through 2015.

  1. consumer proposals are becoming more popular
  2. higher household debt levels make DMPs less affordable
  3. bill collectors are less likely to “drive” consumers to non-profit credit counselling agencies


Consumer proposals are becoming a more popular alternative

One of the reasons that the total revenues for the Big 3 have hit a wall over the past several years is the increasing popularity of another debt relief alternative, the consumer proposal.

Consumer proposals are only available through Licensed Insolvency Trustees.  Under a consumer proposal a consumer will repay an amount–typically equal to 25 to 50 percent of their outstanding indebtedness–by making monthly installment payments over a period not to exceed five years.  In contrast, when a consumer enrolls in a Debt Management Plan he or she will repay an amount equal to somewhere between 100 percent and 120 percent of their indebtedness.

Licensed Insolvency Trustees routinely decline to do consumer proposals where the consumer has less than $10,000 in unsecured consumer debt.  Where a consumer owes more than $10,000 in unsecured consumer debt then a consumer proposal is three times less expensive to eliminate one dollar of debt.


Higher household debt makes Debt Management Plans less affordable

According to Doug Hoyes, Founder of Hoyes & Michalos, Licensed Insolvency Trustees, “Ten years ago a consumer who owed $10,000 could afford to do a Debt Management Plan where he or she repaid $1,100 by making monthly installments over three years. Today, however, higher household debt means that Debt Management Plans are becoming less affordable because either the monthly payments or higher or the Debt Management Plans are longer.”

According to Scott Hannah, President and CEO of Credit Counselling Society, the typical Debt Management Plan his agency sees is one where the consumer owes between $25,000 to $40,000.  He concedes that the higher the amount of money owing in a Debt Management Plan the more that affordability becomes an issue.


Consumers are receiving fewer collection calls from bill collectors

In the past anxiety generated by aggressive bill collectors to consumers with unpaid accounts were often sufficient motivation to persuade a consumer to contact a non-profit credit counselling agency and enroll in a Debt Management Plan.

Compared with ten years ago, however, bill collectors are much less likely to get a consumer who owes money on the phone to make a demand for payment.  Recent studies indicate that ninety percent of Canadians under 30 never talk on their cellphone.  In the future we should expect that bill collectors might get fewer and fewer consumers who owe money on the phone to make a payment demand.


Inevitable consolidation in the non-profit credit counselling industry

According to Scott Hannah, President and CEO of Credit Counselling Society, “in the next three years you will see some consolidation or mergers in the non-profit credit counselling industry.  I also expect that in the future that some of the smaller, community-based non-profit credit counselling agencies will no longer be financially viable in the marketplace.”


Share any relevant information with me and our readers

If you become aware of any information dealing with consolidation or mergers in the non-profit credit counselling industry then I would invite you to contact Mark Silverthorn at (519) 827-5513 or toll free at 1 (866) 996-9941 or via e-mail at

Guest Post: Saving money and having fun with food

Mark Silverthorn

I am delighted to announce that Danielle Lorimer, the President of Comprehensive Debt Solutions, will be contributing a guest blog post on the Mark Silverthorn Blog on a regular basis.  The focus of Danielle’s guest posts will be on personal finance issues.  This is the first of what I hope to be many guest posts from Danielle.

Danielle Lorimer


Over the past few years I have experienced a significant drop in my annual income–as much as 50 percent.  This has actually turned out to be a blessing in disguise.  I have challenged myself to not only live on a smaller household budget but also to have fun doing so.

Many of you who are reading this blog post may have experienced a similar reduction in household income.  In my series of blog posts I hope to share with you my journey.


Saving money buying heavily discounted grocery items

I now save a boatload of money by purchasing heavily discounted items at the grocery store–not to be confused with weekly specials.  Each week at a no frills supermarket it is possible to purchase items in various departments which have been heavily discounted.

Taking full advantage of these heavily discounted items requires some strategic considerations.  Firstly, when purchasing clearance items at the grocery store it is helpful if a shopper is opportunistic.  Secondly, the availability of heavily discounted clearance items is going to dictate, to some extent, what is on the menu over the next 48 hours.  If you buy a quantity of brussel sprouts from the clearance shelf in the produce section then ideally you should have brussel sprouts for dinner that evening.

It is possible to save significant amounts of money purchasing meat which has been heavily discounted.  These items will often contain stickers with the phrase “Reduced for Quick Sale” or “Enjoy me Tonight”.  If you purchase one of these clearance items you don’t have to eat it that same day if you put the item in your freezer at home.  In order to maximize your savings on buying meat you can try to limit your meat purchases to those which are heavily discounted.

In the produce section of a grocery store there is typically a clearance cart on wheels with multiple shelves containing heavily reduced fruit and vegetables.  I will often buy from this produce clearance cart and use these items in my meals that evening or the following day.

Near the cash registers at many grocery stores there is often a section containing clearance items for non-perishable items.  It never hurts to look at this shelf.  You might find something that you need heavily marked down in price.

Many items found in a grocery store contain a BEST BEFORE DATE.  An item is not unfit for human consumption after the expiry of a Best Before Date.  A food item with an expired Best Before Date may experience some deterioration in flavour and texture.


Saving money eating at home

I enjoy eating out at a restaurant from time to time.  Unfortunately, there are several reasons why I prefer to eat at home.  Firstly, eating out can be incredibly expensive, particularly when you consider the additional cost of gratuities and H.S.T. imposed on restaurant meals.  Secondly, when I prepare a meal I know what ingredients are used and how it is made.  Thirdly, I find that I can often prepare a meal better than when I eat it at a restaurant.  Fourthly, I have found that the service at many restaurants leaves plenty to be desired.  Finally, sometimes the conduct of other patrons in a restaurant can prejudice your ability to enjoy your dining experience.


Developing a repertoire of yummy recipes

I am in my 50’s and until a few years ago I couldn’t boil water.  I didn’t cook my first Christmas turkey until I was 50 years of age.  I was able to get some books at my local library on basic cooking techniques.

Now I am using the internet to find potential recipes.  One of my favourite sites for recipes is  I would invite you to check it out!

I still remember my first culinary success using heavily discounted ingredients.  I prepared a light lasagna using ground chicken and ricotta cheese.  It was delicious.


How to make eating meals fun

At dinner I like to try and recreate the romantic ambiance of a restaurant at home.  This means the lights are turned down, using candles and no distractions, including having the television on.

Just to mix things up a bit sometimes we will eat a fun meal–burgers or tacos in front of the television while we watch some special programming.


I am too tired to cook tonight

I don’t feel like Julia Childs every evening.  In anticipatation of this, I usually cook enough food earlier in the week so that I have a homemade meal that I can reheat in the microwave.  I also keep on hand ingredients for simple dishes that can be made quickly.  This includes frozen pizza crusts and ingredients suitable for use as toppings on a pizza.

What are some of your tips for saving money and having fun?  I would invite you to share your ideas with me and they may appear in a future blog post.  You are welcome to send your ideas to me at

Laws Regulating Collection Agencies a Confusing Patchwork Quilt


Mark Silverthorn has spent more than three decades as a student of the law regulating collection agencies in Canada.


In Canada each province and territory not only licenses but also regulates the conduct of collection agencies.  The result is a patchwork quilt of inconsistent laws across the country.

Collection agencies, for example, are legally permitted to call the workplace of a Saskatchewan resident with an outstanding account–but are prohibited from making any phone calls of any kind to the place of employment of a consumer living in Newfoundland.


Relevant law is the law where the consumer lives

An individual may be receiving phone calls from a collection agency which has offices in his or her province, in another Canadian province, or from outside Canada.  The relevant law regulating the conduct of collection agencies is the one where the recipient of the phone call from a collection agency resides.


Collection agency-specific statute versus component of provincial consumer protection law

Provincial and territorial law regulating collection agencies in Canada fall into one of two broad categories:

  • collection agency-specific regulation
  • consumer protection legislation

In some provinces the provincial law regulating collection agencies is specific to collection agencies.  These narrowly focused statutes describes provincial law regulating collection agencies in Ontario, Quebec, Saskatchewan, and the four Atlantic provinces. The law in British Columbia, Alberta, Manitoba and the three territories regulating collection agencies is contained in a much broader consumer protection statute regulating industries including but not limited to the collection industry.


Law regulating collection agencies may be contained in regulations

It is common for provincial statutes to permit some of the law in a provincial statute to be enacted pursuant to regulation.  The law regulating collection agencies in British Columbia, Alberta, Ontario, Quebec, Newfoundland and Nova Scotia can be found in the regulations.


Names of specific statutes regulating collection agencies

You can find the names of provincial  and territorial statutes and regulations regulating collection agencies at the following link on on a webpage titled “Provincial Regulation of Bill Collectors”.