Credit Basics
Your Credit Rights
Jack Lewis was being hounded by debt collectors about several past due debts. They called him so often at home and at work that he didn’t want to answer his phone for fear a debt collector would be on the other end of the line. One debt collector had warned Jack that he could end up in jail if he did not pay what he owed. That comment really scared Jack because he did not have the money to pay the debt collectors and they would not take “no” for an answer. Jack did not want to ask his parents for help because he was embarrassed that he had gotten himself into so much financial trouble. His only option, Jack thought, was to pay off the debts using cash advance cheques that his credit card companies sent him every month. He knew that the last thing he needed was more debt, however, he just wanted to get the debt collectors off his back!
It’s too bad that Jack did not know about a law called the Collection Agencies Act. If he did, Jack would have known that the debt collector that threatened him with jail time was breaking the law. Jack was unaware of laws that have been passed to protect consumers when they apply for and use credit, find problems in their credit records or fall behind on their bills. Knowing and understanding those laws is an important part of avoiding problems when using credit and maintaining a credit record in good standing. Every province has laws and regulations that financial institutions are required to follow. These laws regulate the creditors and protect the consumer.
Each law was created to make credit and finance fair and equitable for the consumer. Together, these laws set a standard for how individuals are to be treated in their financial dealings. To find information on laws and regulations specific to your province, visit www.consumerinformation.ca. The following is a general overview of each act:
The Bank Act
You have a right as a consumer to know the cost and conditions under which you are borrowing money. The Bank Act ensures that you will be informed of all of the costs and requirements of borrowing from a creditor. If you have ever applied over the phone for a credit card, you were probably read a disclosure that let you know what the interest rates, fees, billing cycle, etc were going to be on your new card. Not only was that company required to let you know that information over the phone, but they need to send it to you in writing as well. Don’t ever hesitate to request a copy of the terms and agreements of your credit accounts and ask questions if you don’t understand.
The Canadian Bank Act was first passed in 1871 and is regularly revised and updated. It is federal law that ensures consumers are fully informed about cost and conditions of borrowing and that banks are regulated according to how their businesses are organized and run. Banks are required by law to inform you of interest charges and any other costs related to borrowing their money. All specifics regarding loan payback must be disclosed to you as well. This would include prepayment rules, impact of late payments, and grace period information. All changes in terms to your credit card or loan must be communicated to you in writing as well. Tied selling is also prohibited in Canada. Tied selling is when a company requires you to accept one product in order to be approved for another. For example, a bank may not require you to sign up for their credit protection service in order to be approved for an account.
The Collection Agencies Act
When one is faced with the challenge of overdue bills, accounts that are behind may be sold to a collection agency. Communication is imperative when in a situation where you are unable to meet your financial obligations. Responsible communication is important on the part of the consumer (you) and of your bank. The Collection Agencies Act regulates the practices of collection agencies and holds them accountable for their actions. The act states that you must be notified in writing that you have a debt to be collected or if any legal action is going to be taken to collect a debt. Collection agencies may not contact you in any way that may be perceived as harassment. They may not call you on Sundays or before or after specific hours on statutory holidays. When contacting you, collection agencies must disclose the bank or company that originally held the debt that you owe. Collection agencies are not permitted to contact friends or relatives of yours unless there are provisions on the account that state otherwise. It is very important that you know your rights when dealing with a collection agency. It is also very important that you communicate your situation with your creditors and/or the collection agency. If you have made attempts and you are getting nowhere, contact your local government to file a complaint if the agency is not adhering to the law and then contact Consolidated Credit Counseling Services of Canada by calling 1-800-656-4079 for additional assistance.
The Human Rights Act
The Canadian Human Rights Act was originally drafted in 1976 and is regularly updated and revised. This act regulates how creditors lend money to customers. It prohibits any form of discrimination from being employed when making credit decisions. This is not just limited to approving an application for credit, but also includes credit line increases, decreases, interest rate changes and any other judgmental decision made on your account.
When applying for credit, a credit is prohibited from asking you questions like, “are you married?” or “how old are you?” They may ask you for your date of birth to ensure you are of legal age to apply for credit. The Human Rights Act ensures that you are evaluated on your income, your credit report, and your stability at your home and job only.
Personal Information and Electronic Documents Act (PIPEDA)
PIPEDA was established in 2000 and was created to protect the collection, distribution, and storage of personal information of consumers. This act regulates how banks maintain control over your personal information once they have collected it from you or a third party. It also regulates what they are able to report or extract from your credit report. Banks are required to obtain your consent to obtain your information and must be collecting your information for a reasonable purpose. Banks are only allowed to utilize your information for the purpose that you agreed to. The information obtained or disclosed must be accurate. After your bank obtains any information about you, they are responsible to keep your information secure. To ensure your information is kept safe, banks must allow their processes and procedures to be inspected by regulatory companies.
The Bankruptcy and Insolvency Act
If you are in a situation where you need to turn to filing bankruptcy as a last option to resolving your financial difficulty, the government will play an active role in your journey. The Bankruptcy and Insolvency Act ensures that bankruptcy is handled appropriately in the interest of both the creditor and the debtor. This law is applicable to both individuals and to businesses. It details the duties and powers of the Office of the Superintendent of Bankruptcy. This government agency ensures that your bankruptcy will be carried out in a fair and orderly manner.
In general, this act ensures that the assets of the person filing bankruptcy are distributed appropriately to creditors, but more importantly, it provides rehabilitation for the party filing bankruptcy. This rehabilitation provides guidance and counselling for the debtor to secure his or her financial future and prevent going down the same road twice. For more information and a complete document of the act visit http://laws.justice.gc.ca/en/B-3/.
