In the past three months I arranged to meet with the owner of a collection agency over a coffee. This individual has worked in the collection industry for more than three decades. For the remainder of this post I will simply refer to this person as Hal.
Creditors have been squeezing collection agencies for years
Hal’s number one beef is that creditors have been squeezing collection agencies for years. Over the past three decades commission rates paid by creditors to collection agencies have declined dramatically. Costs associated with operating a collection agency, however, have not declined. The only way for collection agencies to overcome declining commission rates is to increase the number of files worked.
Creditors endless pursuit of better returns is encouraging bad behavior in the collection industry
Hal pointed the finger at creditors when it comes to the rising tide of consumer complaints against collection agencies. The fact that creditors have increasingly been treating collection agencies as a commodity has placed tremendous pressure on collection agencies to meet certain benchmarks or risk losing business. This, in turn, has lead collection agency management to place pressure on front-line collection staff.
Relationships with creditors are becoming less important
In the past relationships between a creditor and a collection agency might have counted for something. Today many creditors are simply looking to find the lowest cost collection agency. Hal cited the emergence of bidding websites including Merx and Biddingo.
Government regulators have made life tougher for collection agencies
Hal also raised concerns about how government regulators were making it more difficult for collection agencies to be financially viable. At one point collection agencies were contacting consumers using automated messages. The federal government ruled that those making these automated messages had to disclose on whose behalf these calls were being made. This decision meant that these automated messages were illegal under provincial law which prohibited collection agencies from disclosing the existence of a debt.
Collection agencies operate under a tough business model
Unlike most businesses, 100 percent of the revenues of a collection agency are commission based. Most of a collection agency’s expenses, however, including rent, overhead, and labour costs are fixed. This means that a collection agency that has some rough months faces the prospect of closing its doors.
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:
consumer proposal might not be available because an individual cannot satisfy the statutory insolvency requirement (many consumers are “house poor”)
individual has significant student loan indebtedness in circumstances where the individual has ceased attending school as a full-time student less than seven years
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)
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:
Taking advantage of a limitation period to avoid paying a debt
Learning that a consumer might be judgment proof or near-judgment proof in which case a creditor might never recover any monies from them
Circumstances where it might be in a consumer’s best interests to negotiate a favourable one-time lump sum payment with a creditor
Advice that a consumer should dispose of certain assets such as a principal residence
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.
consumer proposals are becoming more popular
higher household debt levels make DMPs less affordable
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 email@example.com
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.
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.
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 allrecipes.com. 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 firstname.lastname@example.org.
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 www.comprehensivedebtsolutions.ca on a webpage titled “Provincial Regulation of Bill Collectors”.
It is not every day that I receive an invitation from the owner of a collection agency to meet him and tour his premises. Therefore, I was surprised when earlier this year Greg Maitinsky, CEO of Hamilton, Ontario-based Go Beyond Collection Agency, did just that.
Not your typical collection agency or leadership team
I had the opportunity to spend several hours with both company CEO Greg Maitinsky and the firm’s Director of Sales, Clinton Kruger. What struck me was how strange it was that these two individuals ever found themselves working in the collection industry in the first place.
Greg Maitinsky was born and raised in Hungary, the son of Hungarian diplomats. He has a diploma in economics from the Western University of Hungary, formerly the Karl Marx School of Economics. Greg first became involved in the collection industry several years ago–as an entrepreneur–without prior experience in the collection industry. He believes in transparency and treating everyone with respect–including not only the firm’s clients, but also his staff, and the people the agency is collecting monies from.
Clinton Kruger was born in South Africa and emigrated to Canada when he was 11 years old. In his late teens Clinton did Christian missionary work in several countries including Ukraine, Thailand, and China. He worked in sales in Canada for nine years prior to accepting a sales position at Go Beyond Collection Agency. Clinton never worked a day in his life at a collection agency prior to joining the agency.
Having spent 12 years working on the premises of some of the largest collection agencies in Canada I have a preconceived idea as to what to expect on a collection floor. Typically, collectors sit, row on row, in small workstations, like chickens on a tractor trailer. Not at Go Beyond Collection Agency. Staff members sit at a real desk, the lighting is subdued, and different kinds of plants can be found throughout. The atmosphere is homey.
Go Beyond Collection Agency appears to be an attractive place to work. The collection floor has a comfortable feel to it, the firm offers flexible hours, and encourages the career aspirations of its employees. Collectors work at real desks and not at cramped sterile workstations. At the front of the room company CEO Greg Maitinsky (left) can be seen next to Director of Sales, Clinton Kruger (right).
Agency focuses on collecting delinquent accounts from residential tenants
Most of Go Beyond Collection Agency’s activities involve collecting monies owed by residential tenants living in Ontario. Its major clients include residential landlords, property management firms and REITs in the residential tenancy marketplace.
An innovator in the collection industry
In a variety of ways Go Beyond Collection Agency is an innovator in the collection industry.
1. Firm routinely posts the compensation of every staff member
Each payday Go Beyond Collection Agency posts the compensation received by every staff member including the company CEO.
2. Firm offers flexible hours to its staff
Go Beyond Collection Agency offers flexible working hours to all of its staff. Recently the firm dispensed with the requirement of a doctor’s note where a staff member misses a day’s work. Employees at the firm describe flexible working hours as one of the major attractions working there.
3. Firm supports career aspirations of its staff
In addition to formal training which is work-related, Go Beyond Collection Agency supports the career aspirations of its staff. Every three months CEO Greg Maitinsky meets individually with staff members to review their career aspirations. This often results in the firm contributing monies to a staff member’s career development.
4. Firm offers support to consumers struggling with debt
Go Beyond Collection Agency has a track record of attempting to assist consumers struggling with debt. When Greg Maitinsky learns that a consumer can’t pay an account because not presently working Greg has been known to offer to circulate the consumer’s resume to his contacts in the business community. In one instance a consumer was offered a job the same day he supplied Greg with a copy of his resume. At the present time Greg is working on a project enlisting the support of HR firms to assist consumers with delinquent accounts obtain work.
Go Beyond Collection Agency Inc., www.gobeyondcollect.com, is not your typical collection agency. This is reflected in the way it treats not only its staff, its clients, but also the consumers it collects monies from.
I recently received a tip about a Newmarket, Ontario-based debt settlement firm called Strategic Credit Solutions. It would appear that this firm–which focuses on paying mortgage brokers for referrals–is offering debt settlement services not only in Ontario but also across Canada. I was given a copy of an e-mail dated February 23, 2016, describing the firm’s services as well as a very professional looking 4-panel digital brochure.
In this e-mail dated February 23, 2016, Ms. Amanda Potts, Regional Business Coordinator for Strategic Credit Solutions, discloses that the firm works with a lawyer to provide debt settlement services. Nowhere in this e-mail or the attached marketing brochure is the name of the participating lawyer mentioned.
In February of this year a Newmarket, Ontario- based firm, Strategic Credit Solutions, has been using this 4-panel brochure to market the firm’s debt settlement services to mortgage brokers.
Are the activities of Strategic Credit Solutions subject to the Ontario Collection and Debt Settlement Services Act?
Debt settlement services is defined in subsection 1(1) of the Ontario Collection and Debt Settlement Services Act 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.
Based upon the contents of Ms. Potts’ e-mail dated February 23, 2016, the 4-panel marketing brochure, as well as the language contained in Strategic Credit Solutions’s website, www.scredit.ca, it would appear clear that the activities of Strategic Credit Solutions fall within the definition of “debt settlement services” as defined in subsection 1(1) of the Ontario Collection and Debt Settlement Services Act. The definition of “debt settlement services” includes “offering” debt settlement services.
Is Strategic Credit Solutions licensed to provide debt settlement services to Ontario residents under Ontario law?
Given the fact that Strategic Credit Solutions’ business model would appear to fall clearly within the definition of “debt settlement services” in the Ontario Collection and Debt Settlement Servics Act the first question one might ask is whether or not the firm possesses the appropriate license to “offer” debt settlement services to Ontario residents?
Any firm offering debt settlement services to Ontario residents must possess an Ontario collection agency license pursuant to the Ontario Collection and Debt Settlement Services Act unless it is exempt from the Act. Anyone visiting the homepage on Strategic Credit Solutions’ website, www.scredit.ca, could be excused for believing that the firm is licensed to provide debt settlement services in Ontario.
The website for Strategic Credit Solutions, www.scredit.ca, would certainly suggest that this Newmarket, Ontario-based debt settlement service provider is licensed by the Ontario government to provide debt settlement services. This is a screenshot of the homepage for www.scredit.ca, captured on February 26, 2016.
SCS is a Government licensed debt company that reduces consumers debt without filing consumer proposal or credit counselling.
This sentence is the first sentence which appears on the homepage for Strategic Credit Solutions’ website, www.scredit.ca
But is this statement true?
Ms. Stephanie Lawrence is the Ontario civil servant responsible for processing license registrations and renewals under the Ontario Collection and Debt Settlement Services Act. In this e-mail dated February 24, 2016, sent to me she confirms that Strategic Credit Solutions is not registered as a collection agency in Ontario.
Is Strategic Credit Solutions exempt from the requirement of being registered as a collection agency under Ontario law?
The Ontario Collection Collection and Debt Settlement Services Act does contain a number of exemptions in subsection 2(1) of the Act. I am, however, not aware of any information that would suggest that, given Strategic Credit Solutions’ business model, the firm is exempt from the Act.
Strategic Credit Solutions would appear to be operating as an unlicensed debt settlement firm in Ontario
The activities of Newmarket, Ontario-based Strategic Credit Solutions would appear to be clearly within the definition of “debt settlement services” as defined in the Ontario Collection and Debt Settlement Services Act. Furthermore, it would appear that Strategic Credit Solutions is not “registered” or licensed as a collection agency under the Act. Finally, there is no evidence to suggest that Strategic Credit Solutions falls within an exemption under the Act.
Is Strategic Credit Solutions operating as an unlicensed debt settlement firm across Canada?
On Friday, February 26, 2016, I phoned Ms. Amanda Potts, Regional Business Coordinator, Strategic Credit Solutions. During this telephone conversation I asked a number of questions in order to learn more details regarding the firm’s business model. When I asked her in which provinces the firm operated she informed me that Strategic Credit Solutions’ services were available across Canada.
It would appear that Strategic Credit Solutions is operating illegally as an unregistered debt settlement service provider in Ontario. What I have yet to determine is whether or not Strategic Credit Solutions is operating illegally as a debt settlement service provider in any provinces in addition to Ontario. Accordingly, I anticipate that over the next week or so I will be contacting senior civil servants outside Ontario asking them to satisfy themselves whether or not Strategic Credit Solutions is offering debt settlement services contrary to the law in their province.
Toronto lawyer Colina King working with Strategic Credit Solutions?
When I asked Ms. Potts how many lawyers were participating in providing debt settlement services in conjunction with Strategic Credit Solutions she informed me it was just one lawyer. The lawyer Ms. Potts named during this telephone call was Toronto lawyer Colina King. On Friday, February 26, 2016, I spoke with Ms. Colina King on the phone. During this phone call I identified myself, I advised her that Ms. Potts had identified her as the lawyer providing debt settlement services in conjunction with Strategic Credit Solutions. I informed her that I would be publishing a post concerning Strategic Credit Solutions’ business model and I asked her if she cared to make any comments. Ms. King told me she was busy and she was unable to speak with me.
In a telephone conversation on February 25, 2016, Ms. Amanda Potts, Regional Business Coordinator, Strategic Credit Solutions, identified Toronto lawyer Colina King as the lawyer providing debt settlement services in conjunction with Strategic Credit Solutions.
The LinkedIn Profile for lawyer Colina King does not make any reference to Strategic Debt Solutions nor to debt settlement services.
This is a screenshot of Ms. Colina King’s LinkedIn Profile–captured on February 28, 2016. Nowhere in her LinkedIn Profile does Ms. King make any reference to Strategic Credit Solutions nor debt settlement services.
Hamfisted attempt to avoid draconian limitations on fees imposed by provincial regulators?
Over the past couple of years provincial governments across Canada have been enacting laws intended to protect consumers from abusive practices by some debt settlement service providers. In many provinces these reforms included the introduction of draconian limitations on the fees charged by debt settlement service providers. This has motivated a number of traditional debt settlement service providers to attempt–with varying degrees of success to reinvent themselves–but in circumstances where they could avoid the severe restrictions on fees which they could charge their clients.
The most common tactic for a traditional debt settlement service provider to avoid the new draconican restrictions on fees is to have the consumer enter into a contract for debt settlement services with a lawyer–and not the traditional debt settlement firm–in an attempt to be exempt from the Act. The problem facing those attempting to successfully use this tactic is the narrow scope of the “lawyer’s exemption” contained in subsection 2(1) of the Ontario Collection and Debt Settlement Services Act, which reads as follows:
This Act does not apply to a barrister or solicitor in the regular practice of his or her profession or to his or her employees.
I would suggest that the current business model used by Strategic Credit Solutions is a hamfisted attempt to avoid the draconian limitations on fees imposed by provincial regulators.
Solicited comments from Josh Balner, Amanda Potts and Colina King prior to publication of this post
Prior to publishing this post I spoke to two representatives of Strategic Credit Solutions, Amanda Potts, Regional Business Cooridinator, and the firm’s Founder, Josh Balner. I also had a brief telephone conversation with Toronto lawyer Colina King. I also sent a draft of this post–via e-mail–to these three individuals before 1:00 p.m. on Sunday, February 28, 2016, requesting their comments on the post. They did not respond to my invitation to comment on this post.
Contact me if you have entered into a debt settlement agreement with Strategic Credit Solutions or any lawyer associated with that firm
I would invite anyone who has entered into a debt settlement agreement with Strategic Credit Solutions or any lawyer associated with the firm to contact me. You are welcome to call me at (519) 827-5513. Alternatively, you can e-mail me at email@example.com.
I would invite anyone who has entered into a contract for debt settlement services with either Strategic Credit Solutions or any lawyer associated with that firm to contact me.
Sometime in July of 2015 a new player entered the debt settlement marketplace in Ontario, Ontario Debt Law. The first two sentences of a marketing letter on Ontario Debt Law letterhead, dated August 12, 2015, reads as follows:
Ontario Debt Law (ODL) is a Canadian law firm that is owned and operated by Angelo Serafini, J.D. Angelo has been practising law for over 30 years and is currently a Deputy Judge.
This document–together with several other pages–were sent to a prospective client of Ontario Debt Law in August of 2015. In August of 2015 Ontario Debt Law held itself out to the public as operating from 188 Wilkinson Road, Brampton, Ontario, the same building where OCCA is located.
The only services performed by Ontario Debt Law appear to be “debt settlement services” as defined in subsection 1(1) of the Ontario Collection and Debt Settlement Services Act. In late 2015 a mystery shopper contacted Ontario Debt Law and made arrangements to meet in person with representatives from the firm.
Statements made to a mystery shopper in late 2015
Sometime in late November or early December a mystery shopper attended in person at 188 Wilkinson Road in Brampton, Ontario, home to Ontario Consumer Credit Assistance (OCCA), one of the largest debt settlement service providers in Canada over the past decade. During this meeting two individuals–one female and one male–encouraged the mystery shopper to become a client of Ontario Debt Law.
In this 1:00 video clip the person meeting with a mystery shopper describes herself as “just the greeter”.
In this 2:37 clip the female representative identifies herself as an employee of OCCA. She explains the various tasks performed by OCCA, Angelo Serafini, and Ontario Debt Law.
In this 1:22 video clip a male representative explains how OCCA and Debt Helpers–a marketing firm– work under the umbrella of Ontario Debt Law.
The mystery shopper advises the female representative that she is three months in arrears making payments on her Rogers bill. The representative advises her that if she becomes a client of Ontario Debt Law then the law firm can stop collection calls on her Rogers bill. In fact this statement is not entirely accurate. With respect to non-bank debt, a lawyer can take certain actions to stop collection calls from a creditor’s collection agents, collection agencies or law firms. A lawyer who is representing a debtor, however, cannot stop collection calls from the original creditor.
In this 1:12 video clip a female representative working at OCCA’s premises in Brampton, Ontario–who describes herself as an OCCA employee–misrepresents Ontario Debt Law’s ability to stop collection calls on the mystery shopper’s outstanding Rogers bill.
The mystery shopper spoke to a second representative from Ontario Debt Law who made a number of troubling statements on a variety of subjects including the merits of making a consumer proposal, the impact of an informal proposal on a consumer’s credit report, and the legal consequences of the expiry of Ontario’s 2-year statute of limitations.
The Law Society may have some concerns about some of the statements made by the male representative–captured on this 2:03 video clip–to a mystery shopper seeking information about Ontario Debt Law in late 2015.
This representative misrepresents the legal consequences of the expiry of Ontario’s 2-year statute of limitations. He also made the bizarre statement that “a consumer proposal is an expensive bankruptcy”.
Angelo Serafini is responsible for statements made by those marketing the services offered by Ontario Debt Law
A lawyer is responsible for the actions of anyone marketing his firm’s services to the public. Therefore, lawyer Angelo Serafini is responsible for statements made by those marketing the services offered by Ontario Debt Law regardless of who employs the individuals responsible for these representations.
Contact me if you are a client of Ontario Debt Law
I would invite anyone who has become a client of Ontario Debt Law since July 1st of 2015 to contact me. You are welcome to call me at 1 (866) 996-9941 or at (519) 827-5513. Alternatively, you can send me an e-mail at firstname.lastname@example.org.
You are welcome to contact me if you are a client of Ontario Debt Law.
Very few Canadians will have ever heard of a debt settlement law firm by the name of Ontario Debt Law. This debt settlement firm began carrying on business sometime around July of 2015. I have yet to be able to identify a single employee of this firm. It would appear that most of the tasks performed for Ontario Debt Law’s clients are done by employees of Ontario Consumer Credit Assistance Inc. (OCCA).
Most of the tasks performed on behalf of Ontario Debt Law’s clients are carried out by employees of Ontario Consumer Credit Assistance Inc. (OCCA) at its office located at 188 Wilkinson Road in Brampton, Ontario. This location is about 40 kilometers from the address listed for Ontario Debt Law on the firm’s website, www.ontariodebtlaw.ca, 447 Speers Road, Oakville, Ontario.
The other day someone asked me if a client of Ontario Debt Law, which would appear to provide no services other than “debt settlement services” as defined under the Ontario Collection and Debt Settlement Services Act, would be entitled to a one hundred percent refund of fees paid to the firm. After researching this issue, in my opinion anyone who has become a debt settlement client of Ontario Debt Law since July 1, 2015, might be entitled to a hundred percent refund of fees paid to the firm.
A majority of Ontario Debt Law’s clients might be unaware that the contract that they have entered into with Ontario Debt Law is a debt settlement services agreement because Ontario Debt Law calls its debt settlement services agreement a Membership Agreement. Some of Ontario Debt Law’s clients might also be under the impression that they are actually clients of OCCA because employees of OCCA would appear to perform the lion’s share of tasks associated with their debt settlements services agreement.
Ontario Debt Law’s nightmare scenario
If an Ontario judge, or the Ontario Government, were to take the position that Ontario Debt Law is not entitled to the “lawyer’s exemption” contained in paragraph 2(1)(a) of the Ontario Collection and Debt Settlement Services Act then Ontario Debt Law might find itself in for some significant difficulties.
Are you an Ontario Debt Law client who would like a full refund of fees paid to the firm?
Here is some food for thought for Ontario Debt Law’s clients and former clients. If you are interested in a refund of 100 percent of fees paid to Ontario Debt Law then you might want to consider sending them a written notice advising them that not only are you cancelling your debt settlement services agreement within one year of the date of the agreement but also you are demanding a refund of 100 percent of all fees paid to the firm.
In the event that Ontario Debt Law were to decline to provide you with a full refund within 15 days of receipt of your written notice of both cancellation and demand for a full refund then you do have a remedy available to you. You can sue Ontario Debt Law pursuant to sections 16.10(1) and (2) of the Ontario Collection and Debt Settlement Services Act seeking an order awarding you repayment of your fees. If your lawsuit were successful, in addition to awarding you repayment of your fees, and court costs, the trial judge has a statutory discretion to award you exemplary and punitive damages.
You might be saying to yourself that your cannot afford to sue a law firm to recover your fees. I have news for you! I can think of one or two dozen firms whom would be quite happy to pay all your legal expenses if you decided to sue Ontario Debt Law to recover fees paid to the law firm. This group would include some collection agencies, some bankruptcy trustees, and potentially some credit counselling agencies.
On July 1, 2015, a new regulatory regime came into effect in Ontario that had a dramatic impact upon the entire debt settlement industry. Beginning July 1, 2015, the Ontario Government imposed significant restrictions on the amount of fees that a debt settlement services provider could charge. Firstly, a debt settlement provider could not charge a penny in fees until such time that a settlement actually took place. Secondly, the amount of these fees was capped, not to exceed ten percent of the amount of the debt when the debt settlement services agreement was signed.
An example will help illustrate the new fee structure in place in Ontario as of July 1, 2015. If an Ontario resident signed a debt settlement agreement on July 2, 2015, and he had one outstanding credit card on which they owed $10,000.00 then the maximum fee which the debt settlement firm could charge its client would be $1,000.00, or ten percent of $10,000.00, the amount of debt on the date the debt settlement services agreement was signed.
These new restrictions on fees, together with a number of other onerous requirements on debt settlement service provider, encouraged many firms to leave the industry or reinvent themselves. A substantial number of debt settlement firms ceased operating in Ontario because of the new regulatory regime. A few debt settlement firms sought to avoid the new regulatory regime altogether–including its restrictive fee structure–by offering their services through a lawyer practising law in Ontario.
If you would like more background information about Ontario Debt Law and its Siamese-twin relationship with OCCA then you are welcome to read one of my earlier blog posts, dated August 16, 2015, and September 28, 2015 or my article appearing in the print edition of the Law Times on September 21, 2015.
On September 21, 2015, the Law Times, a weekly newspaper for Ontario’s lawyer, carried a story I wrote titled “Speaker’s Corner: Questions raised about deputy judge’s debt settlement activity.
What are the consequences if Ontario Debt Law were not able to bring itself within the “lawyer’s exemption” in the Ontario Collection and Debt Settlement Services Act?
As mentioned earlier, Ontario regulates firms providing debt settlement services to Ontario residents. The relevant law is the Ontario Collection and Debt Settlement Services Act. Any firm that provides debt settlement services to Ontario residents must be the holder of a valid Ontario collection agency license–except where it is exempt from this licensing requirement under subsection 2(1) of the Act.
The term “collection agency” is defined in subsection 1(1) of the Act as follows:
“collection agency” means
(a) a person, other than a collector, who obtains or arranges for payment of money owing to another person or who holds himself out to the public as providing such a service,
(b) any person who sells or offers to sell forms or letters represented to be a collection system or scheme, or
(c) a person, other than a collector, who provides debt settlement services
If a judge in a civil lawsuit or the Ontario Registar of Collection Agencies–the senior civil servant responsible for enforcing the Act–were to take the position that Ontario Debt Law does not fall within the “lawyer’s exemption” in paragraph 2(1)(a) of the Act then Ontario Debt Law would be required to possess an Ontario collection agency license.
Such a finding would affect the viability of Ontario Debt Law’s current business model because the firm would face the prospect of all of its clients seeking a one hundred percent refund of their fees paid pursuant to their debt settlement services agreements.
If Ontario Debt Law cannot bring itself within the “lawyer’s exemption” then it is not entitled to charge a penny in fees to anyone entering into a contract for debt settlement services after June 30, 2015. Paragraph 16.6(2) of the Ontario Collection and Debt Settlement Servies Act reads as follows:
A collection agency or collector that enters into a debt settlement services agreement before being registered shall not be entitled to receive any payment or security for payment under subsection (1) for debt settlement services provided under the agreement.
Why might Ontario Debt Law not fall within the “lawyer’s exemption” contained in paragraph 2(1)(1) of the Ontario Collection and Debt Settlement Services Act?
There are three distinct grounds upon which either a trial judge or the Ontario Registrar of Collection Agencies might base a decision that Ontario Debt Law does not fall within the “lawyer’s exemption” in the Act.
1 Mr. Serafini not providing services in the regular practice of his profession
Angelo Serafini’s law office is located in Oakville. Mr. Serafini’s website for his Oakville law practice is www.serafinilaw.ca. Nowhere on this website is there any reference to Ontario Debt Law–which according to e-mails sent out on behalf of Ontario Debt Law–is a law firm owned and operated by Angelo Serafini. This website lists various practice areas–real estate, wills and estates, and business law. There is no reference whatsoever on this website that would suggest that Angelo Serafini’s Oakville-based law firm offers debt settlement services.
On the ABOUT US webpage on www.serafini.law, Mr. Serafini’s bio does not contain any reference whatsoever to Ontario Debt Law.
Angelo Serafini makes no reference to Ontario Debt Law on his LinkedIn Profile.
Oakville Lawyer Angelo Serafini makes no reference whatsoever to Ontario Debt Law, a law firm he owns and operates, on his LinkedIn Profile.
In the second paragraph on one of the pages of Ontario Debt Law’s debt settlement services agreement–a document titled Membership Agreement–it states that any of Ontario Debt Law’s obligations under the contract can be performed by OCCA.
This clause found in Ontario Debt Law’s (ODL) debt settlement services agreement would appear to permit Ontario Debt Law to assign all of its contractual obligations pursuant to this agreement to Ontario Consumer Credit Assistance Inc. (OCCA), a firm whose Brampton office is located 40 kilometers from Angelo Serafini’s Oakville office. Coloured highlights have been added.
OCCA’s Brampton office is located 40 kilometers from Mr. Serafini’s Oakville office. To the best of my knowledge, there are no employees of Mr. Serafini’s Oakville-based law practice or Ontario Debt Law working at OCCA’s Brampton office. Some people might ask what tasks–if any–are Mr. Serafini and his employees performing in connection with Ontario Debt Law’s debt settlement service agreements?
Is Ontario Debt Law providing services in the regular course of Mr. Serafini’s practice of law?
2 Amount of work performed by Angelo Serafini or “his employees”
The “lawyer’s exemption” in paragraph 2(1)(a) of the Ontario Collection and Debt Settlement Services Act reads as follows:
This Act does not apply to
(a) a barrister and solicitor in ther regular practice of his profession or to his or her employees
Some people might ask what work, if any, pursuant to the debt settlement services agreements entered into by Ontario Debt Law, is being performed by either Angelo Serafini or “his employees”.
I obtained a better sense of the division of labour between Brampton-based Ontario Consumer Credit Assistance Inc. (OCCA) and Angelo Serafini and “his employees” after watching some video footage taken recently by a mystery shopper that visited OCCA’s Brampton office posing as an individual interested in becoming a client of Ontario Debt Law.
In December of 2015 a mystery shopper visited OCCA’s Brampton office at which time she sought clarification about the relationship between OCCA and Ontario Debt Law.
3 Disqualified because of the Act’s anti-avoidance provision?
Section 2.1 of the Ontario Collection and Debt Settlement Services Act contains an anti-avoidance provision which reads as follows:
In determining whether this Act applies to an entity or transaction, a court or Tribunal shall consider the real substance of the entity or transaction and in so doing disregard the outward form.
A trial judge might decide that Ontario Debt Law was created for the sole purpose of permitting Ontario Consumer Credit Assistance Inc. (OCCA) to avoid being licensed under the Ontario Collection and Debt Settlement Services Act and make a ruling that Ontario Debt Law is not exempt from the Act pursuant to paragraph 2(1)(a).
Contact Mark Silverthorn if you are a former or existing client of Ontario Debt Law
You are welcome to contact me if you are a current or former client of Ontario Debt Law. You can call me at (519) 827-5513 or send me an e-mail at email@example.com.
Sample Cancellation/Demand for Refund letter
The letter which appears below can be used by anyone seeking a refund from a debt settlement firm in circumstances where (1) the debt settlement services agreement was entered into after June 30, 2015, and (2) the debt settlement firm is not licensed as a collection agency in Ontario nor is it exempt from the requirement of being licensed.
This is a sample letter which any Ontario resident can use to obtain a full refund of fees from an unlicensed collection agency. For more information you are invited to contact me.
Copy of Ontario Debt Law’s debt settlement services agreement
Last week a Saskatchewan-based debt settlement firm, Canadian Customer Debt Relief Inc. (CCDR), cancelled its contracts with its Ontario clients. This means that there are a number of former clients of CCDR in Ontario without a debt settlement service provider. Tomorrow I have a phone call scheduled with one such “orphan” debt settlement client.
It would appear that Saskatchewan-based debt settlement provider Canadian Customer Debt Relief (CCDR), has sent a letter to its Ontario clients in late January cancelling their debt settlement service contracts leaving clients without a debt settlement service provider.
CCDR cancelling debt settlement agreements with Ontario clients
Today I received a phone call from an Ontario resident–who wished to remain anonymous–who described himself as a debt settlement client of CCDR living in Roseneath, Ontario. According to this individual, he received a letter dated January 28, 2016, from CCDR informing him that CCDR was cancelling its debt settlement contract with him.
This letter dated January 28, 2016, from Saskatchewan-based Canadian Customer Debt Relief (CCDR) informs one of its clients, a resident of Roseneath, Ontario, that the firm is no longer providing debt settlement services to the residents of Ontario. Some information has been “whited out” on this document to protect the identity of the recipient of this letter. This page is one of three pages of correspondence from CCDR sent to a client living in Roseneath, Ontario. The other two pages can be found at the bottom of this post.
Why did CCDR cancel its debt settlement contracts with Ontario clients?
According to the January 28, 2016, letter from CCDR addressed to one of its Ontario clients changes to Ontario’s debt settlement laws that came into effect in September of 2015 were instrumental in CCDR’s decision to cease providing debt settlement services to Ontario residents.
What I find odd about this statement is that there were no changes to the law in Ontario regulating debt settlement firms in September of 2015. If CCDR ceased offering debt settlement services to Ontario residents in January of 2016 then what was the reason for this decision? It is important to appreciate the fact that not only did CCDR stop taking on new clients in January of this year but also in 2016 it was issuing refunds to Ontario clients.
What I also find odd about this statement is that–according to my confidential source–it was “business as usual” with CCDR’s Ontario clients as late as October of 2015. This leads me to conclude that something incredibly important happend sometime between October of 2015 and January of 2016 to motivate CCDR to cease providing debt settlement services to Ontario residents.
CCDR’s failure to satisfy Ontario-based staffing requirements
I suspect that the real reason for CCDR’s cessation of operations in Ontario is its refusal to comply with the requirement in the Ontario Collection and Debt Settlement Services Act that its debt negotiator(s)–negotiating settlements on behalf of Ontario clients–work on the premises of its Ontario office. I wrote about this issue in a post on this blog on August 2, 2015. Furthermore, in August of 2015 I made a formal complaint to the Ontario Government stating that it would appear that CCDR was contravening Ontario’s Collection and Debt Settlement Services Act because it did not employ any collectors licensed under the Act that worked on the premises of its Ontario office situated at 55 King Street West in Kitchener, Ontario.
I suspect that within a few months of my June 2015 complaint that the Ontario Government was putting some pressure on CCDR to either hire a full-time collector licensed under the Ontario Collection and Debt Settlement Services Act to work on-site at its Kitchener, Office or wind up its Ontario debt settlement operations.
Strong response from CCDR owner Greg Roberts
My August 2nd blog post attracted a strong reaction from Greg Roberts, one of the owners of CCDR. Mr. Roberts added the following comment at the end of one of my two LinkedIn posts published in June of 2015.
Greg Roberts, one of the owners of Saskatchewan-based CCDR, posted this Comment at the end of one of my two LInkedIn posts about CCDR in June of 2015.
Contact me if you have any information regarding CCDR’s activities in Ontario
I would invite anyone with information regarding CCDR’s actities in Ontario to contact me. You are welcome to call me at 1 (866) 966-9941 or (519) 827-5513. Alternatively, you are welcome to e-mail me at (519) 827-5513. In particular, I would ask any Ontario resident who was a former client of Canadian Customer Debt Relief (CCDR) to contact me
You are invited to contact me if you have any information regarding the activities of Canadian Customer Debt Relief in Ontario.
Documents dated January 28, 2016, sent by CCDR to an Ontario client
According to an anonymous source, Canadian Customer Debt Relief (CCDR), sent its Ontario clients three pages of correspondence in late January in connection with the firm’s decision to cancel their existing debt settlement services contract. A redacted copy of one such letter can be found below. Any information which can identify the Ontario client of CCDR has been whited out to protect the individual’s identity.