How tomorrow’s new legislation will protect consumers
(TORONTO, ON) – Ontarians seeking debt settlement will soon benefit from new regulations forcing companies to be open and clear about their fees and practices. Tomorrow, the Collection and Debt Settlement Services Act will become law as Ontario joins Alberta, Manitoba, and Nova Scotia in clamping down on companies that mislead and confuse consumers looking to settle their debts.
The measures come as a response to complaints about questionable debt settlement companies, who take advantage of Ontarians by promising unrealistic results, charging money up front, and failing to deliver. The new legislation requires increased clarity, puts an end to false advertising, and locks in maximum user fees.
Jeff Schwartz, executive director of Consolidated Credit Counseling Services of Canada, says the new rules will help weed out organizations that take a predatory approach to indebted Canadians.
“People turn to debt settlement when they are in a vulnerable position, financially and emotionally,” says Schwartz. “There absolutely needs to be protection in place, to keep the wool from being pulled over their eyes.”
Schwartz worries that many consumers enter into the debt settlement process while in a state of desperation, and some companies take advantage of that.
“There are a lot of people with a lot of debt in Canada,” says Schwartz. “They need help that is trustworthy and honest, and hopefully the new law will help to get rid of organizations that don’t fit that bill.”
Key changes in the legislation:
Clarity – The act says that debt settlement companies cannot exaggerate their services and can only make claims based on “typical results” (based on average results over a period of at least six months and no longer than 12 months in the preceding calendar year). This could bring an end to embellished advertisements promising debt repayment of pennies on the dollar.
Transparency – Debt settlers must provide details of the repayment plan, including a schedule of payments and an itemized list of all services that will be provided under the agreement. In the past, confused and unclear agreements have resulted in consumers paying thousands of dollars, only to have a substantial amount absorbed by fees.
Education – All agreements must include a copy of “Repaying Debt and Credit Counselling—What You Need to Know,” a publication produced by the Government of Ontario that provides important financial literacy information. This measure brings debt settlement closer to non-profit credit counselling organizations, which provide information and options to their clients.
Maximum fees – The new legislation reigns in the sometimes astronomical fees charged by debt settlement companies. As of tomorrow, they will only be able to charge up to 10 per cent of lump sum repayments.
Though the new regulations bring a level of consumer safety to the world of debt settlement, Schwartz encourages Ontarians to research all available options before they commit to a specific debt solution.
“I applaud consumers for taking the important step of admitting they need debt help, but if you’re going to commit to a plan, make sure you exercise due diligence and find the one that will work best for you, with an organization you can trust,” notes Schwartz.
About Consolidated Credit Counseling Services of Canada, Inc.:
Consolidated Credit Counseling Services of Canada is a national non-profit credit counselling organization that teaches consumers about personal finance.
For more information or to request an interview with Jeffrey Schwartz, please contact: