Understanding the Statute of Limitations on Debt in Ontario
Dealing with debt can be challenging. The situation becomes even more stressful when collection agencies get involved. If you’re living in Ontario, it’s crucial to understand the laws around debt collection and the debt statute of limitations. This article aims to offer an in-depth explanation of your rights and how these laws can impact your life.
The Fundamentals of Ontario’s Debt Collection Laws
When a debtor fails to make a payment, the concerned creditor may delegate the debt to a collection agency. These agencies, tasked with recovering overdue debts, are governed by the Ontario Collection and Debt Settlement Services Act. This particular legislation applies only to collection agencies and not to the internal collection department of the creditor you owe.
Collection agencies earn their income based on what they can reclaim from you. Hence, they employ various strategies to recoup as much money as possible. They can even resort to legal action, such as freezing your bank account or initiating a wage garnishment. However, the Ontario debt collection laws serve as a check to ensure these agencies operate within a legal framework.
First Contact by Debt Collectors in Ontario
Ontario law stipulates that debt collectors cannot start calling you without notice. They must first send you a written warning, commonly referred to as a ‘notice of collection.’ This notice should provide details like:
- The creditor who is owed the money;
- The amount of debt owed;
- The type of credit (e.g. car loan debt or credit card debt);
- The original and current amount of debt owed;
- The name and contact details of the debt collection agency;
- Confirmation of the agency’s registration in Ontario;
- A statement offering a detailed breakdown upon request;
- A consumer disclosure statement outlining your rights, and how to file a complaint against the collection agency if necessary.
After issuing this notice, the collection agency must wait for six days before they can start making collection calls. This waiting period allows you to assess your options.
What Debt Collectors Can and Can’t Do
Ontario’s debt collection laws and the debt statute of limitations are designed to prevent harassment from debt collectors. According to the Collection and Debt Settlement Services Act, debt collectors are allowed to make reasonable attempts to collect their debts, provided a notice of collection has been received. They can also pursue legal action if necessary steps have been followed.
However, they cannot threaten legal action without prior authorization from the original creditor. They’re also not allowed to share any Draft Statement of Claims that appear to have been issued by the court. If you receive one, Consumer Protection Ontario should be made aware.
Frequency of Calls from Debt Collectors
Debt collection laws in Ontario permit calls to debtors between 7 am to 9 pm from Monday to Saturday, and 1 pm to 5 pm on Sunday. Statutory holidays are exempted. Collection agencies can only call you up to three times in one week unless you consent to more frequent contact. The discussion must be reasonable; harassment, threats, unreasonable, or offensive language are not permitted.
The Debt Statute of Limitations in Ontario
The debt statute of limitations in Ontario is essentially the legal time limit within which legal proceedings can be initiated for debt collection. For standard unsecured debts, including personal loans and credit card debt, this period is two years. Beyond this, the collection agency can no longer pursue legal action against you for an overdue debt.
However, it’s important to note that the debt doesn’t disappear after this period. You still owe the money, and debt collectors can continue to call you for repayment. Also, evading your debts can negatively impact your credit report as late payments and accounts in collection will remain on your report for six to seven years.
How Long Can Debt Collectors Try to Collect in Ontario?
According to the debt statute of limitations in Ontario, a debt collector or collection agency has two years to take legal action against you for a specific debt. This period resets if the debt is acknowledged or if any payments are made.
Handling Debt Collectors
There are several ways to deal with debt collectors:
Make your payments: If you’re sure you owe the debt and can afford to pay it off, this is the best way to stop them from contacting you.
Negotiate with debt collectors: You can manage this carefully and make sure that if you make a settlement, it’s legally valid.
Choose to not pay your debt: If you’re not worried about your credit score, you may choose to ignore debt collectors entirely and refuse to pay.
Speak to a Licensed Insolvency Trustee: These professionals can file all forms of debt relief and help you reduce your debt by up to 80%.
Conclusion
Understanding Ontario’s debt collection laws and the debt statute of limitations can help you navigate the often stressful world of debt collections. In the face of unmanageable debts and aggressive collection agencies, knowledge is your best defense.
