On June 15, 2015, Ontario’s Ministry of Government and Consumer Services (Ministry) issued a consultation paper, “Strengthening Consumer Financial Protection,” (consultation paper) which, in addition to offering a discussion of potential approaches to strengthening protection for Ontario consumers of financial services perceived to be “high cost,” also offers discussion and a chance to provide feedback on debt collection proposals. Notwithstanding the fact that the consultation paper is meant to specifically target consumer financial products, it provides discussion and proposals on debt collection that is not limited to consumers.

The Ministry is seeking input from the public, community agencies, businesses, and municipalities on financial services including installment loans, payday loans, cheque cashing, money transfers, and in connection with debts in collection. This bulletin discusses the proposals relating to debt collection. For a discussion on the proposals relating to high-cost financial services (including payday loans), please refer to our June 2015 Blakes Bulletin: Stronger Protections for Financial Services Consumers in Ontario?

Comments relating to the consultation paper are due on August 14, 2015. Responses are being sought in two ways: (a) respondents can complete an easy survey (see here), or (b) they can read the full consultation paper and submit comments. The consultation may see a large take-up due to the easy-to-complete survey. Interested businesses should be aware of the opportunity to submit responses.

THE DEBT COLLECTION PROPOSALS

Proposed reforms about debt collection focus on the Collection and Debt Settlement Services Act (CDSAA).

The consultation paper contemplates reforming the CDSAA in order to regulate collection activities that are not currently caught by the CDSAA. Some of the questions on which the Ministry is seeking comment in the consultation paper and survey include:

  • Whether Ontario should expand the regulation of debt collection to apply to the collection of purchased or assigned debts that are in arrears
  • Whether collection notices need to be more comprehensive to help consumers understand the source of their debt and their options and rights
  • Whether consumers should have the right to demand contact in writing rather than by phone (currently a debtor must be contacted in writing first, before being contacted by telephone, but there is no ability for a consumer to opt-out of telephone communications entirely)

UNINTENDED CONSEQUENCES

The consultation paper highlights that CDSAA will be reviewed in order to ensure that there are no inadvertent consequences of expanding the definition of regulated businesses. The Ministry also asks which provisions of the CDSAA regulation should be adjusted if the proposed amendments are made. This provides an opportunity for businesses to provide feedback to the Ministry on the specific proposals and challenges they face, in general, when trying to reconcile the regulatory regime under CDSAA with business reality.

Some suggestions for improvement to CDSAA might include:

  • An exemption from the requirement to have a permanent place of business in Ontario for purchasers or assignees of debts in arrears. Although the consultation paper states that requiring purchasers of overdue debts to register is not expected to be onerous, the requirement to have a permanent place of business in Ontario could certainly be weighty.
  • Ensuring that the proposed exemption for a business that purchases debts through “acquiring or merging with a business” is broad enough to include purchases of a specific business portfolio, which might be considered less than “acquiring a business” in full.
  • An exemption for foreign bank branches, retail associations, and credit unions incorporated in other provinces in Canada, similar to the exemptions for Schedule I and II banks and credit unions incorporated in Ontario.
  • An exemption for corporations when collecting debts for other corporations that are affiliated with a corporation, similar to the affiliates exemption found in British Columbia’s debt collection laws.
  • Amending the CDSAA to apply only to the collection of consumer debts.
  • An exemption for service providers of creditors who are performing first-party collection activities in the name of the creditor and on behalf of the creditor. We note that Alberta’s debt collection laws exclude a collector performing collections in the name of the original creditor from the definition of collection agency.
  • Given the increased number of consumers who do not have landlines and who use cell phones and SMS text messaging, implementing a consent regime for such communications, even where consumers may incur charges for such communications.

NEXT STEPS

As noted above, comments relating to the consultation paper are due on August 14, 2015. A link to the survey can be found here.