Most Canadians are no strangers to debt; a recent RBC poll revealed that only 24% of Canadians are debt-free.
Desperate to dig themselves out, consumers struggling with debt “are vulnerable to accepting solutions that may not be in their best interest,” says Andre Bolduc, trustee in bankruptcy and senior vice president at BDO Canada Limited. “Companies offering to settle the consumer’s debt for almost half of what they owe sounds like an enticing offer.”
New Safeguards For Debt Resolution Consumers
But those enticing offers sometimes come from companies who end up doing more harm than good. Complaints from Ontario consumers about debt settlement companies led to the Stronger Protection for Ontario Consumers Act, which passed at the end of November. The act aims to help safeguard Ontario consumers with debt.
The act was “spurred by the increasing number of complaints against debt settlement companies, door-to-door water heater rentals and sales, real estate fees and commissions and property bidding wars,” Bolduc explains. “The nature of the complaints that Ontarians were filing against some debt settlement companies related to the large upfront fees, not receiving the services outlined during their meeting and the services provided were described in language that was hard to understand.”
Bolduc identifies key measures within the act that will help protect Ontarians:
- Companies are banned from charging upfront fees for debt settlement services
- The amount of fees consumers are charged is limited and the payment of fees before services are provided is prohibited
- Clear, transparent and detailed contracts that include information about the effect of the contract on the consumer's credit rating are required
- Credit counsellors must disclose information to the consumer about how their organization is funded
- An implemented 10-day cooling-off period that gives consumers more time to consider their agreements with companies
- Non-compliant companies can have their licenses revoked
Before seeking out any debt settlement services, consumers need to educate themselves. Research all debt assistance options available and seek out a licensed trustee in bankruptcy who can help create a personalized approach to debt.
“There is no such thing as ‘saving money’ when you are responsibly repaying a debt,” Bolduc advises. “Any claim a company makes that sounds ‘too good to be true’ probably is worth avoiding.”