NewOntarioLawWillCreateFrankensteinCategoryofDebtSettlementServiceProvider

OntarioGovernmentReleasesaNewDebtSettlementLawfor2015
TheOntarioGovernmenthasgivenlifetoanewcreature,ahybridcategoryofdebtsettlement
provideronelegallyentitledtoofferdebtsettlementservicesandtoprovidethirdpartycollection
services.Thiscreation,whichwillinthesamebreathactinthebestinterestsofbothcreditorsand
debtors,isdestinedtoleaveatrailoftoxicconflictsofinterestandunhappyconsumers.Weare
witnessingtheemergenceofanewFrankensteincategoryofdebtsettlementprovider!
MarkSilverthorn,author,andformercollectionlawyerandcollectionindustryinsider
Debtsettlementprovidersincludeindividualsorfirmswho,onbehalfofaconsumer,negotiate
settlementswiththeconsumerscreditors,orthecreditorsauthorizedrepresentativeusuallya
collectionagencywherethecreditoracceptsaonetimelumpsumpaymentforlessthanonehundred
percentoftheoutstandingbalanceassettlementinfull.Overthepastfiveyearsitwouldhavebeen
difficultforanOntarioresidenttogoontheinternetorlistentotheradiowithoutbeingexposedtoan
adforadebtsettlementprovider.Atonepointintime,onesuchdebtsettlementfirm,CambridgeLife
Solutions,washeavilymarketingitsservicesonbothradioandtelevisiontoOntarioresidents.
InJanuaryof2015itbecamepublicknowledgethatthelawregulatingdebtsettlementservicesin
OntariowouldchangedramaticallyonJuly1,2015,undertheOntarioCollectionandDebtSettlement
ServicesActanditsRegulations.AnyfurtherreferencesinthisreporttotheActaretothislaw.In
Februaryof2015,inpreparationforJuly1,2015,andthenewregulatoryregimefordebtsettlement
serviceproviders,anumberoffirmsarereevaluatingthemixofservicesthattheycurrentlyoffertothe
public.Thesefirmsincludesomeofthefollowing:

ExistingfirmsprovidingtraditionaldebtsettlementservicestoOntarioresidents

SmallOntariobasedcollectionagencies

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SmallOntariobasedlawfirmsthatdonotcurrentlyoffertraditionaldebtsettlementservices

Ontariobasedfirmsofbankruptcytrustees

Furthermore,anumberoffirmsincludingsomesmallcollectionagenciesandlawfirmscarryingon
businessinOntario,andsomeOntariobasedbankruptcytrusteesarecurrentlyexploringtheprospect
ofofferingsometypeofdebtsettlementservicesafterJuly1,2015.
IwilladdressthistopicinmoredetailinthelastsectionofthisreporttitledWhoWillBeProvidingDebt
SettlementServicesinOntariointheFuture?

InthisreportIamgoingtoaddressthefollowingfourissues:
1. TheOntarioGovernmentsfailuretoadequatelyenforceexistinglawsregulatingtheproviders
ofdebtsettlementservicestoOntarioresidents
2. TheneedforreformstothelawinOntarioconcerningtheregulationofdebtsettlementservices
3. Thekeyprovisionsinthenewlawregulatingdebtsettlementserviceproviders
4. WhowillprovidedebtsettlementservicesinOntariointhefuture?

TheOntarioGovernmenthasfailedtoenforcetheexistinglawregulatingdebtsettlementservice
providers
ThenewlawregulatingdebtsettlementfirmsinOntariocomesintoeffectonJuly1,2015,anditwill
haveadramaticimpactontheprovisionofdebtsettlementservices.Whatmanypeopleforget,
however,isthattheOntarioGovernmenthashadlawsonthebooksformanyyearsregulatingfirms
providingdebtsettlementservicesandtheOntarioGovernmenthasnotdistinguisheditselfenforcing
theselaws.
UndertheOntarioCollectionAgenciesAct,nowknownastheCollectionandDebtSettlementServices
Act,anyfirmnegotiatingsettlementswithcreditors,ortheirauthorizedagents,onbehalfofanOntario
resident,hadtoholdavalidOntariocollectionagencylicenseandcomplywithmanyoftheregulatory
requirementsthatapplytoacollectionagencyincludingasuretybondrequirement,licensingofbranch
offices,aswellaslicensingsomeoftheiremployeesascollectors.
Today,morethanfiftypercentofthefirmsofferingdebtsettlementservicestoOntarioresidentsdo
notsatisfyOntarioslicensingrequirements,and,therefore,areoperatingillegallyinOntarioasan
unlicensedcollectionagency,andinsomecasestheOntarioGovernmentisawareoftheexistenceof
thesefirmsandforwhateverreason,noactionofanyconsequencehasbeentakenagainstthesefirms.
NimaTaheri,CEO,Markham,OntariobasedComplianceFirstFinancial
Inmanyinstancestheseunlicensedprovidersofdebtsettlementserviceshavebeenreportedtothe
OntarioGovernmentand,tothebestofmyknowledge,littleornoactionhasbeentakenagainstthese
illegalprovidersofdebtsettlementservices.Theseunlicenseddebtsettlementserviceprovidersarenot
limitedtoU.S.baseddebtsettlementfirms.Oneemployeeatadebtsettlementfirmadvisedmethathe

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hasreportedseveralmortgagebrokerstotheOntarioGovernmentforoperatingasunlicenseddebt
settlementserviceprovidersandtheOntarioGovernmenthastakennoactioninresponsetothe
complaint.NimaTaheri,CEOofComplianceFirstFinancial,adebtsettlementfirmbasedinMarkham,
Ontarioreportsthatmembersofseniormanagementfromanumberoflicenseddebtsettlementfirms
haveprovidedtheOntarioGovernmentwithlistsofnamesoffirmsprovidingdebtsettlementservices
illegallyinOntarioandnoactionwouldappeartohavebeentakenagainstthefirmscontraveningthe
law.

ReformstoOntariosexistingdebtsettlementregulatoryregimewererequired
TherehavebeennumerouscriticsofthedebtsettlementindustryinCanada.Manyofthecriticismsof
theindustryarevalid.Somedebtsettlementfirmsusequestionablemarketingpracticesandsomedo
notadequatelyservicetheirclients.Someofthecriticismsofthedebtsettlementindustry,however,are
partiallymotivatedbyselfinterestfromthosecompetingforrevenueswithdebtsettlementfirms.What
peopleoftenforget,however,isthatinmanyinstances,aconsumercanontheirown,negotiateavery
generoussettlementwithacreditorbymakingalumpsumpaymentforsubstantiallylessthanone
hundredpercentofthecurrentoutstandingbalance.

TheKeyProvisionsofOntariosNewDebtSettlementRegulatoryRegime
1. TheActwillregulatesomefirmsnegotiatingsettlementsinvolvinginstallmentpaymentsaswell
aslumpsumpayments
OneoftheinterestingaspectstothenewActisnotonlywhatactivityisregulatedbutalsowhose
activitiesareregulated.TheActregulatesnotonlywhatwewouldnormallythinkofastraditionaldebt
settlementservicesbutalsoservicesthatwewouldnormallyassociatewiththatofcreditcounselling
agencies.
Firstly,theActregulatestheconductofanyone,otherthanthosespecificallyexemptedfromtheAct,
whoresolvesoutstandingdebtsonbehalfofanotherbywayofinstallmentpayments.Ifadebtoris
goingtoresolveadebtbywayofinstallmentpaymentsthentypicallythecreditorwillinsiston
repaymentof100percentoftheoutstandingbalance.Traditionally,theonlyorganizationswhichhave
representedconsumersrepayingonehundredpercentoftheiroutstandingdebthasbeencredit
counsellingagencies.Therearetwokindsofcreditcounsellingagencies,nonprofitcreditcounselling
agenciesandforprofitcreditcounsellingagencies.Itwouldappearthatatsomefuturedatenonprofit
creditcounsellingagencieswillbecomeexemptfromtheAct.Thismeansthat,asapracticalmatter,at
somefuturedatetheonlyentitiesthatcouldpotentiallybeaffectedbytheprovisionsoftheAct
concerninginstallmentpaymentsareforprofitcreditcounsellingagencies.
TheActalsoregulatestheactivitiesofanyone,exceptthoseentitiesexemptfromtheAct,who
negotiateaonetimelumpsumsettlementonbehalfofanother.Thisiswhathastraditionallybeen
describedasdebtsettlement.Anyfirmwhichhasbeenor,inthefuture,willbeengagedinproviding
whatwecharacterizeasdebtsettlementserviceswillbesubjecttothenewAct.Thereare,however,a
numberofimportantexemptionsundertheAct.ThefollowingentitiesareexemptfromtheAct:

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Lawyersengagedintheprivatepracticeoflaw

Bankruptcytrustees

Nonprofitcreditcounsellingagencies(areexpectedtoobtainanexemptionatsomefuture
date)

Theseexemptionsareincrediblyimportantbecausethereisapossibilitythatasearlyas2017thata
substantialpercentageofallthedebtsettlementworkdoneinOntariopotentiallythemajorityofthe
workwillbedonebyentitieswhoareexemptfromtheAct.
2. Feesfortraditionaldebtsettlementserviceprovidersaredramaticallyreduced
UndertheActanyfirmprovidingdebtsettlementservices,wherethedebtormakesaseriesof
installmentpayments,canchargeanamountequalto15percentofeachpayment,plusaonetimeset
upfeeof$50peroutstandingaccount.Theremainderofthissectiondealswiththesituationwherethe
debtsettlementproviderisnegotiatingsettlementswherethedebtormakesaonetimelumpsum
settlementtoresolveanoutstandingaccount.
InOntario,whereanOntarioresidententersintoadebtsettlementagreementonorafterJuly1,2015,
thenthemaximumfeethatthedebtsettlementprovidercanlegallychargeistenpercentoftheamount
ofthedebt.Thismeansthatfirmsofferingtraditionaldebtsettlementserviceswillearnlessfeesfrom
clientsonanydebtsettlementcontractssignedonorafterJuly1,2015,andthereforetheywillbeless
profitablebusinesses.

Asimpleexamplewillhelpillustratethefeesunderthenewregulatoryregime
JoanSmithhasoneoutstandingcreditcarddebtwithanoutstandingbalanceof$10,000.Shesignsa
debtsettlementagreementwithadebtsettlementfirmonJuly1,2015.Themaximumfeethatthedebt
settlementfirmcanchargeJoanSmithis$1,000,or10percentofher$10,000debt.
Itisimportanttonotethat,priortoJuly1,2015,firmsprovidingdebtsettlementservicesinOntario
wereusingdifferentfeemodelsfortheirservices.Thelesscommonfeemodelisthecontingencyfee
model.Underthisfeemodel,adebtsettlementfirmonlyearnsafeeequaltoapercentageofthe
clientssavingsunderasettlement,ifandwhen,anoutstandingaccountisactuallysettledandalump
sumpaymentismadetothecreditor.Themorecommonfeemodelisthepercentageoftotalenrolled
debtfeemodel.Underthisfeemodel,adebtsettlementfirmchargesaclientfeesequaltoafixed
percentagetypically15percentofthetotaldebttheconsumerincludesinthedebtsettlement
agreement,plusa$50monthlyservicefeepayablefromthedateadebtsettlementcontractissigned
untilsuchtimethatthedebtsettlementcontractends.InourexamplewithJoanSmith,ifshesigneda
contractfordebtsettlementservicewithadebtsettlementservicesproviderandthefeescharged
were15percentoftheenrolled$10,000debtandsheaccumulatedsettlementfundsoveraperiodof
18months,thenshewouldhavepaidatotalof$2,400infees.
Incontrast,whatifJoanSmithhadsignedadebtsettlementcontractwithadebtsettlementfirmthat
provideddebtsettlementservicesata25percentcontingencyfeethedebtsettlementfirmwould
chargeafeeequalto25percentofthemoniesaconsumersavedwhenasettlementactuallytook

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place?IfthedebtsettlementprovidernegotiatedasettlementofJoanSmiths$10,000creditcarddebt
for$2,500thenthedebtsettlementproviderwouldearnacontingencyfeeequalto$1,875or25
percentoftheclients$7,500insavings.
Fromtheconsumersperspective,thecontingencyfeemodelismuchmoreattractiveprovidedthe
contingencyfeechargedbythedebtsettlementproviderisnotexcessive.Underthecontingencyfee
modeltheconsumerdoesnotpayapennytothedebtsettlementfirmunlessasettlementisactually
paidout.Unfortunately,asignificantpercentageofindividualswhosignacontractwithadebt
settlementproviderareunabletosuccessfullysettletheirdebtstypicallybecauseofaninabilityto
raisethenecessarysettlementfundsorbecausecreditorswhosedebtsareincludedinthedebt
settlementagreementsuethem.
AccordingtoBoazAvni,PresidentoftheTorontobaseddebtsettlementfirm,CanadaDebtSettlements,
thenewlaweffectiveJuly1,2015,willhaveamoredramaticfinancialimpactforfirmsthathave
historicallybeenchargingfeesasapercentageoftotalenrolleddebtcomparedwiththosefirmsthat
haveonlychargedaclientacontingencyfeeif,andwhen,asettlementisactuallypaidout.
3. Restrictionsastowhenatraditionaldebtsettlementproviderisentitledtoearnfees
OnJuly1,2015,thosedebtsettlementserviceproviderstypicallyforprofitcreditcounselling
agenciesarrangingsettlementscomprisedofaseriesofinstallmentpaymentswillbeentitledtoearn
their$50setupfeeforeachoutstandingaccountatanytime,andtheywillbeentitledtoearnan
amountequalto15percentofadebtorsmonthlycontributionundertheirDebtManagement
Planatthetimeaninstallmentpaymentismade.Theremainderofthissectionisgoingtoaddressat
whatpointintimedoesafirmnegotiatinglumpsumsettlementsbecomeentitledtoearnitsfees.
AsofJuly1,2015,whenanOntarioresidentsignsacontractfordebtsettlementservicesthen,anydebt
settlementserviceproviderexceptthoseexemptfromtheActisnotentitledtochargeapennyin
feesuntilsuchtimethatasettlementhasactuallybeenpaidout.Thisprovisionisgoingtomakeitvery
difficultforanyfirmtobefinanciallyviableprovidingdebtsettlementservicestoOntarioresidents
unlessithassubstantialrevenuestreamsfromothersources.LaterinthisreportIwillcanvassthetopic
ofhowsomesmallOntariobasedcollectionagenciesmightfinditquiteprofitabletoadddebt
settlementservicesasasidelinetotheirprimarybusinessofprovidingcollectionservices.
ThefactthatthenewlawinOntarionotonlycapsthefeesthattraditionaldebtsettlementservice
providerscanchargebutalsodeferswhenthosefeescanbeearnedwillmakeitverydifficultforadebt
settlementprovidertobefinanciallyviableunlessitisexemptfromtheOntarioCollectionandDebt
SettlementServicesActortheprovisionofdebtsettlementservicesisonlyasecondarysourceof
revenuesforthefirm.
4. Providersofdebtsettlementservicesmustcomplywithonerouslicensingregime
TheActdoesexemptlawyersengagedinthepracticeoflawandlicensedbankruptcytrusteesfromany
andallprovisionsoftheAct.Therefore,anylawfirmorlicensedbankruptcytrusteeswishingtooffer
debtsettlementservicesarenotsubjecttoanyoftherestrictionscontainedintheActorthe
Regulations.Anylawyerorbankruptcytrustee,however,whodoesprovidedebtsettlementservicesto
anOntarioresidentmustcomplywithanyoftherelevantrulesofprofessionalconductthatapplytoa

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lawyerlicensedtopracticelawinOntarioortoalicensedbankruptcytrustee.Asnotedearlier,itislikely
thatnonprofitcreditcounsellingagencieswillbecomeexemptundertheActatsomefuturedate.
AnyfirmwhichisnotexemptfromtheActseekingtolegallyprovidedebtsettlementservicestoOntario
residentsmustcomplywiththecostlyandonerouslicensingandregulatoryrequirementsimposedon
theholderofanOntariocollectionagencylicense.Theserequirementsincludethefollowing:

Examinationrequirement

Mustmaintainapermanentplaceofbusinesswithintheprovinceopentothepublicduring
businesshours

Suretybondrequirement

Trustaccountrequirement

Financialdisclosurerequirements

Recordkeepingrequirements

Licensingrequirementsforcollectionagencies,branchoffices,andindividualcollectors

Theserequirementsactasasubstantialbarriertoentrytoanyfirmthatwishestoprovidedebt
settlementservicestoOntarioresidents.
Asapracticalmatterthisprovisionwilldiscouragedebtsettlementfirmsoperatinginotherjurisdictions
fromprovidingdebtsettlementservicesinOntario.ItwillalsodiscourageindividualslivinginOntario
whowouldliketoprovidedebtsettlementserviceswhileworkingfromhomefromprovidingdebt
settlementservicestoOntarioresidents.
5. Restrictionsregardingmisleadingandpredatorymarketingpractices
ThenewlawthatcomesintoeffectonJuly1,2015,containsahostofmeasuresdesignedtoreduceor
preventpredatoryandmisleadingmarketingpracticesbydebtsettlementserviceproviderssubjectto
theAct.
6. Creationofdebtsettlementclientbillofrights
OneofthemostpositiveaspectsofthenewActisthatitcreatesaseriesofprovisionswhichIwill
collectivelyrefertoasadebtsettlementclientbillofrights.
7. Selfhelpremediesfordebtsettlementcontractclients
ThenewlawinOntariothatcomesintoeffectonJuly1,2015,doescontainanumberofselfhelp
remediesthatwillenableapersontoobtainreliefincourtwhereafirmofferingdebtsettlement
serviceshasviolatedtheAct.
8. Ontariocollectionagencylicenseholdercanprovidebothdebtsettlementandcollection
services
AtleastoneaspectofthenewOntariolaw,however,isclearlynotinthepublicinterest!Oneofthe
mostworrisomeaspectsofthenewlawisthatanyfirmlicensedasacollectionagencyinOntarioa

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requirementforbothcollectionagenciesanddebtsettlementserviceproviderswillbelegallyentitled
toprovidebothcollectionagencyservicesanddebtsettlementservices!Thisisgoingtocreateanew
typeofhybridfirm,onewhichprovidesnotonlycollectionagencyservicesbutalsodebtsettlement
servicesinOntario.Itisinevitablethatthesenewhybridserviceproviders,workingonbothsidesofthe
creditordebtorfencewillfaceawkwardconflictsofinterest.Consequently,onecouldsaythatthe
OntarioGovernmenthascreatedanewFrankensteincategoryofdebtsettlementserviceprovider!
ItisinterestingtocomparethesituationinOntariowiththelawinotherprovinces.Whileresearching
thisreportIspokewithDarrenThomas,theseniorcivilservantinAlbertaresponsibleforregulating
collectionagenciesandheadvisedmethatAlbertalawprohibitsafirmfromofferingbothdebt
settlementservicesandthirdpartycollectionservices.

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WhoWillbeProvidingDebtSettlementServicesinOntariointheFuture?
1. Whichentitieswillbelegallyentitledtoprovidedebtsettlementservices?
Asnotedearlierinthisreport,therearetwodifferentactivitieswhichareregulatedundertheAct

Thosenegotiatingsettlementswithcreditorswherethedebtorismakingaseriesofinstallment
payments

Thosenegotiatingsettlementswithcreditorswherethedebtorismakingaonetimelumpsum
payment

Thefollowingchartsummarizesthoseentitiesthatwillbelegallyentitledtoprovidedebtsettlement
servicesafterJuly1,2015,eitherastheholderofacollectionagencylicenseissuedundertheOntario
CollectionandDebtSettlementServicesAct,orasanentityexemptfromtheAct.

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2. Whatwillthedebtsettlementindustrylooklikein2017?
IanticipatetenpotentiallysignificantdevelopmentsintheOntariodebtsettlementindustrybetween
July1,2015,andJanuary1,2017:
i.

Therewillbefew,ifany,forprofitcreditcounsellingagenciesoperatinginOntario

Atsomefuturedateitisexpectedthatthosecreditcounsellingagencieswhichhavenonprofitstatus
willbecomeexemptfromtheonerousregulatoryregimeimposedundertheAct.Iforeseethatfor
profitcreditcounsellingagencieswillfindcompliancewiththeonerousregulatoryregimeimposed
undertheActtobepunitive.Consequently,Ipredictthattherewillbefew,ifany,forprofitcredit
counsellingagenciesoperatinginOntarioby2017.
ii.

Therewillbefew,ifany,firmslicensedasacollectionagencyundertheAct,negotiatinglump
sumsettlementswherethisactivityisthefirmsprimarybusiness

ThenewActandRegulation74enactedpursuanttoitcreatemajorheadachesfortraditionaldebt
settlementserviceprovidersnegotiatinglumpsumsettlementswithcreditorsonbehalfofclients.One
ofthekeyproblemsrelatestofees.Feesarenotonlycappedatanamountequalto10percentofthe
dollarvalueofadebtatthedateacontractissignedbutalsothedebtsettlementprovidercannotearn
anyfeesuntilsuchtimethatasettlementisactuallypaidout.
WithinafewmonthsofJuly1,2015,itmightbedifficulttofindmorethanahandfuloffirmslicensedas
anOntariocollectionagencywhosesolesourceofrevenuesisnegotiatinglumpsumsettlementswith
creditorsonbehalfofdebtors.
iii.

Someexistingdebtsettlementfirmsmightofferthirdpartycollectionservices

ItwouldalsoappearthatsomeexistingOntariobaseddebtsettlementfirmsarecontemplating
expandingtheservicesthattheycurrentlyoffertoincludethirdpartycollections.Whileresearchingthis
reportIspokewithNimaTaheri,CEO,ofMarkham,OntariobasedComplianceFirstFinancialCorp.,a
debtsettlementfirmthatworksprimarilywithmortgagebrokers.Nimahasconfirmedthis,Anumber
ofOntariodebtsettlementfirmsareactivelyinvestigatingthepossibilityofofferingcollectionservices
atsomepointin2015.
iv.

SomesmalllawfirmsinOntariowillbeginofferingdebtsettlementservices

ItwouldseemalmostinevitablethatsomelawfirmsinOntariowillbeginofferingsomeformof
traditionaldebtsettlementservicestoOntarioresidentsin2015.AlawfirmoperatinginOntario,
exemptundertheAct,notonlycanchargehigherfeesforprovidingtraditionaldebtsettlementservices
butalsoitwillbelegallyentitledtoearnfeesearliercomparedwithadebtsettlementfirmwhichis
licensedasacollectionagencyundertheAct.
AfterJuly1,2015,anylawfirmofferingtraditionaldebtsettlementserviceswillhaveahugecompetitive
advantageoveranydebtsettlementfirmlicensedasacollectionagencyundertheOntarioCollection
andDebtSettlementServicesAct.
v.

Someexistingdebtsettlementfirmswillchangetheirbusinessmodelandoffertheirservicesas
partofalawfirmandnotasbeinglicensedasacollectionagencyundertheAct

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IanticipatethatsomefirmsthathavebeenoperatingastraditionaldebtsettlementfirmsinOntariofor
thepastseveralyearswillstopsolicitingnewclients,butinsteadbeginsolicitingnewclientswhile
workingastheinhousedebtsettlementdepartmentatanOntariobasedlawfirm.Thischangewill
enablethedebtsettlementserviceprovidernotonlytoavoidthecostlyandonerousregulatoryregime
undertheActbutalsotochargehigherfeesforverysimilarservices.
vi.

SomesmallcollectionagenciesoperatinginOntariowillofferdebtsettlementservicesasaline
ofbusinesssecondarytotheirprimarybusinessofbeingacollectionagency

ItwouldappearthatanumberofOntariobasedcollectionagenciesparticularlysmalleragenciesare
consideringofferingdebtsettlementservicesinadditiontotheirprimarybusinessofthirdparty
collections.BlairDeMarcoWettlaufer,theManagingPartnerofKingstonDataandCredit,acollection
agencywithofficesinCambridge,Brantford,andPointeClaire,Quebec,confirmsthis.
Fromacostandregulatoryperspective,therearesignificantbarrierstoentrytobeingadebtsettlement
serviceproviderinOntariobecauseitisnecessarytosatisfytheprovinceshighlystructuredlicensing
requirementsforcollectionagenciesapermanentplaceofbusiness,atrustaccount,andthe
requirementnottochargeafeeuntilasettlementisactuallypaid.AnOntariobasedcollectionagency
thatwantstoofferdebtsettlementserviceshasvirtuallynoadditionaloverheadcostsbyaddingthis
businesslinetoitsexistingsuiteofservices,withapreexistingcallcentretonegotiateonthe
consumersbehalf,experiencemanagingtrustmonies,aswellasbeingpreequippedwithmanycreditor
contactsandrelationships.
BlairDeMarcoWettlaufter,ManagingPartnerofKingstonDataandCredit
vii.

SomeOntariobasedbankruptcytrusteesmightnegotiatelumpsumsettlementsonbehalfof
Ontarioresidents

Itispossiblethat,afterJuly1,2015,someOntariobasedbankruptcytrusteesmightnegotiatelumpsum
settlementswithcreditorsonbehalfofconsumers.Thisscenariomightarisewhereaconsumerisnot
eligibleforaconsumerproposalorpersonalbankruptcybecausetheyarenotinsolventunderfederal
bankruptcylawsomethingthatitquitecommonwhereconsumershavesignificantequityintheir
home.Idonotanticipatebankruptcytrusteestobeamajorplayernegotiatinglumpsumsettlements
becausetodosowouldriskalienatinglargecreditorsandharmingtheirconsumerproposalwork.
viii.

Somenonprofitcreditcounsellingfirmsmightnegotiatelumpsumpaymentswiththe
consumerscreditorsassettlementinfullofanoutstandingaccount

Atsomefuturedatenonprofitcreditcounsellingagencieswillbecomeexemptfromtheonerous
regulatoryregimeundertheAct.Itispossiblethatinthefutureoneormorenonprofitcredit
counsellingagenciesinOntariomightnegotiatelumpsumpaymentswithcreditorsonbehalfoftheir
clients.Itremainstobeseentowhatextentnonprofitcreditcounsellingagencieswillnegotiatelump
sumpaymentswithcreditorsafterJuly1,2015.AtthepresenttimeIdonotenvisioncreditcounselling
agenciesbecomingmajorplayersnegotiatinglumpsumsettlementswithcreditorsonbehalfof
consumersforavarietyofreasons.
ix.

ConsumerswilltakeadvantageofselfhelpremediesthroughOntarioscourtsagainstfirmsthat
violateconsumerprotectionsaffordedundertheAct

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ThenewActandRegulation74provideanumberofselfhelpremedieswhichwillenableconsumers
whohavebeenthevictimofillegalbehaviorbydebtsettlementproviderstoseekredressthroughthe
courtsystem.Theexistenceoftheseselfhelpremediesshouldmakeiteasierforconsumerstogoto
courttogetsatisfactionfromfirmsprovidingdebtsettlementservicesincontraventionoftheOntario
CollectionandDebtSettlementServicesAct.Ialsoanticipatethatitwillbemuchmoredifficultforafirm
toillegallyprovidedebtsettlementservicestoOntarioresidentsafterJuly1,2015,becauseofthe
potentialglareofbadpublicity.
x.

EmergenceoffirmsofferingcoachingfordebtsettlementDoItYourselfers

IalsoanticipatethatafterJuly1,2015,therewillbeademandamongOntarioresidentsfordebt
consultingservicesprovidedbyindividualswithsignificantexperienceinthecollectionindustryorthe
debtsettlementindustry.Ontariomightseetheemergenceofnewdebtconsultingfirmswhichoffer
coachingandadviceforthelumpsumsettlementdoityourselfer.Unliketraditionaldebtsettlement
providers,thesedebtconsultingfirmswillnotnegotiatesettlementswithcreditorsonbehalfof
consumerstheiractivitieswillbelimitedtoprovidingadviceandencouragementtothoseconsumers
wishingtosettletheirowndebtswiththeircreditorsontheirown.
Formoreinformationabouteliminatingyourdebtyoumightwanttocontactyourlocalbankruptcy
trustee.

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