Collection Agency in Canada: Everything You Need to Know in 2021

If you’re drowning in large debt to the extent you can’t meet your obligations, you should be wary of a collection agency.

Perhaps your creditors have already sent you a notification for a collection agency, but you don’t know what to do.

If you’re in any of these situations, it’s time to pose and ask yourself some fundamental questions: What is a collection agency?; What can a collection agency do or can’t do?; What are your rights before a debt collector?

Finding answers to these questions is essential to avoid harassment and intimidation of debt collectors in Canada.

Fortunately, this post contains everything you need to know about collection agencies in Canada, covering their roles and limitations.

What is a Collection Agency?

A collection agency, also known as a debt collector, refers to a company responsible for recovering outstanding debt on behalf of creditors.

Whether you owe a credit card, loan, or line of credit, a debt collector can contact you once your creditor reports you for failing to make payment.

That said, different creditors have different time limits before reporting you to a debt collector, usually from 60 days and above.

Furthermore, there are different types of debt collectors. Your creditor may use its debt collection department, hire a debt collector, or sell your debt to a financial debt recovery agency to retrieve its funds.

As you continue reading, you will learn more about debt collectors in Canada and what to do to avoid them.

How Debt Collection Agencies Work

Since there are different types of debt collection agencies, you should expect them to operate differently.

However, the major aim of every debt collection agency is to recover creditors’ unpaid debt such as:

  • Credit cards
  • Automobile loans
  • Medical loans
  • Personal loans
  • Student loans

As a result, debt collection agencies adopt different strategies for recovering outstanding debt based on the behaviour of each debtor.

That said, you will receive prior notification before a debt collector contacts you. Usually, the notification will include the name of the collector, your creditor name and the amount you owe.

After recovering the outstanding debt, the creditor pays the collector a percentage of the debt as compensation.

Who Can a Debt Collector Contact?

A debt collector can contact anyone who a creditor reported owing an outstanding debt.

To this end, a debt collector can go to any length to contact you through your mobile number, employer, relatives, friends or even neighbours.

However, if you consent your creditor not to contact through a third party, so shall it be.

When Can a Debt Collector Contact You in Canada?

The federal government of Canada has rules regarding when a debt collector can contact you.

Thus, a Canadian debt collector can only contact you during the following days and times:

  • Monday Saturday: 7:00 a.m. & 9:00 p.m.
  • Sunday: 1:00 p.m. & 5:00 p.m

Furthermore, a financial debt recovery agency can’t contact you during holidays in Canada.

What Can a Debt Collector Do in Canada?

While the roles of debt collectors vary by jurisdictions, the following are the roles of debt collectors in Canada:

1. Retrieve Outstanding Debt

As mentioned previously, the major role of a debt collector is to retrieve creditors’ outstanding debt. This involves contacting debtors through phone calls and letters.

But when a debt collector can’t reach a debtor through their phone number, they can contact them through their employer, relatives, friends or even neighbours.

However, a debt collector can’t contact a debtor through a third party if a written agreement prohibits it by the debtor.

Consequently, the collection agency has to rely on other computer software and private investigations to reach the debtor.

2. Research Debtors Assets

Some debtors are liable to large debt because they don’t have the means to repay.

Consequently, a debt collector can perform underground research to explore a debtor’s assets and determine their repayment ability.

3. Report to Credit Bureaus Canada

Furthermore, debt collectors may report outstanding debt to credit bureaus in Canada, reducing debtors’ credit scores.

This is likely to encourage debtors to pay back due to the severe consequences of having a low credit score.

3. Pursue Legal Action

A debt collector in Canada can’t force a debtor to repay a loan, access their bank account or seize their paycheck.

However, a collector can pursue legal action against a debtor. By doing so, the debtor will be subject to court-ordered duties, which are often severe.

In most cases, the collector can have a legal backing of garnishing the wages and bank account of the debtor by contacting their employer and bank.

4. Enforcing Legal Judgment

Some debtors may fail or refuse to meet their obligations despite a legal judgement against them.

As a result, the debt collector has the legal backing to enforce compliance by placing levies on the debtor’s vehicles, bank accounts, forcing the sale of their assets or placing property liens.

What a Debt Collector Can’t Do in Canada?

Even though a debt collector has the right to collect unpaid debt, there’s a limit to what they can do in Canada.

Here are the things a debt collector can’t do in Canada, as stated by the federal government:

1. Contact a Third-Party

A debt collector doesn’t have the right to contact you on your mobile number without providing the number to them.

Also, a debt collector can’t contact you through a third party if you consent to an agreement prohibiting such.

Furthermore, a debt collector can’t ask your employer, relatives, friends or neighbours to repay your loan unless the person co-signed it.

2. Harass

Debt collectors don’t have the right to harass debtors in Canada. This means no debt collector should threaten, intimate or use abusive words against you.

3. Apply Force

A debt collector in Canada can’t force you to repay debt without legal judgement.

But even when there’s a legal judgement against you, a debtor can’t force you unless you fail to meet the court-ordered duties.

4. Misrepresent the Situation

A debt collector can’t misrepresent their roles or perform contrary to their duties.

Additionally, Canadian debt collectors can’t give false or misleading information while recovering unpaid debt.

5. Increase Cost

Finally, a debt collector in Canada doesn’t have the right to increase the cost of your debt beyond legal and non-sufficient fees.

That’s all about the limitations of debt collectors’ roles in Canada.

What Happens if You Don’t Pay a Collection Agency?

Now that you know your rights under the debt collector agency, it’s essential to understand the consequences of not paying a debt collector.

That said, here are the three major consequences of not paying a debt collector in Canada:

1. Reduce Credit Score

As mentioned previously, a debt collector has the right to report you to the Canadian credit bureaus in order to recover outstanding debt.

The implications of these are well known. Besides lowering your credit score, your chances of getting loans in the future will be limited.

But even if you’re approved for a loan, the interest rate will usually be high.

Also, reporting you to a credit bureau in Canada may lead to rent disapproval by landlords, high insurance premiums, and missing employment opportunities, among others.

3. Legal Action

Debt collectors have the right to pursue legal action against you if you fail to pay your debt for a particular period.

As a result, you may face stringent court-ordered duties that may go against your wish. If you fail to meet the duties, the debt collector has the right to place levies on your car, bank accounts or force you to sell your assets.

3. Financial Set Back

The overall consequences of not paying a debt collector may lead to undermining your financial security.

This will not only ruin your current financial goals but your future goals. As a result, you should not afford to owe a debt collector to avoid these inevitable consequences.

What to Do When a Debt Collector Calls?

With the increasing number of fake debt collectors in Canada, it’s essential to arm yourself with some tips for verifying real collectors.

To verify the legitimacy of a debt collector, ask them the following questions:

  • What is your name?
  • What is your company’s name?
  • How much do I owe?
  • Who do I owe?
  • When did I start owing?

So after receiving the call, you should authenticate the collector’s response on the amount you owe, who you owe and when you start owing. You can easily confirm this using your bills and bank statements.

If the collector responds with any wrong answer, that’s a red flag.

How to Pay Your Debt to a Collection Agency

If the debt collector responds correctly to the above questions, you need to act immediately to avoid more costly mistakes.

Thus, it’s essential to pay your debt in full if you have the means of doing so. When paying your full debt, send it through the debt collector that contacted you and ensure you collect a receipt.

But if you can’t pay your full debt, explain to the collector and discuss alternative repayment methods.

Furthermore, it’s a smart idea to make payment to the collector when explaining your inability to pay the full amount. This will show your commitment to paying off the debt.

When to Make a Complaint?

You have the right to make a complaint when your debt collector violates your rights. If you’re dealing with a federal-based debt collector, make your complaint to the Financial Consumer Agency of Canada.

But if you’re dealing with your local debt collector, contact your provincial/provincial consumer affairs office.

3 Practical Tips on Avoiding Financial Debt Recovery in Canada

While it may be difficult to avoid debt in Canada, it is possible to avoid debt collectors or financial debt recovery agencies.

The following are tried and tested ways of avoiding financial debt recovery agencies in Canada:

1. Look for Extra Income

Extra means of income mean more money in your account. When you have more cash flow, meeting your debt obligations will not be a problem.

So by considering one of the extra means of earning income from home and online, you can pay more than your monthly dues, helping you pay off your debt fast.

2. Seek Help

We all make mistakes, but what makes the difference in your ability to know when you need help.

That said, most Canadians like you are able to meet their debt obligations through debt consolidation, debt settlement and debt counselling.

However, seeking debt help should not be your priority unless that’s your last option. This is because you may end up accruing more debt or damaging your credit score unless the help is from your friends or family members.

3. Consult Expert

Finally, you may need to consult a certified debt counsellor or financial advisor to help you with customized solutions to manage your debt.

By examining your financial situation, the total debt amount, income and expenses, a financial advisor can easily suggest cost-effective ways to pay off your debt and manage your finances.

Here at Money Reverie, our financial advisors provide FREE customized financial recommendations for Canadians like you. Contact us now for your recommendations.

READ: The Definitive Guide on How to Get Out of Debt in Canada


A debt collection agency should be the least of your worries if you know your rights and ways to pay off your debt in Canada.

While debt collectors have the right to recover creditors’ debt from you, there’s a limit to what they can do.

So understanding the limitations of debt collectors can help you avoid harassment, intimidation and threats.

However, avoiding contact with debt collectors is the best thing to do. But how do you achieve that? By increasing your source of income to meet your debt payment.

Furthermore, you can seek debt help or consult a certified debt counsellor or financial advisor to help pay off your debt without involving a debt collector.

So whether you’ve received a notice from a debt collector or have already been reported to one, you know what to do now.


Can I Ignore Collection Agency?

If the collection agency is legit and from your creditors, you can’t ignore it. But if you spotted some red flags when the debt collector calls you, you can ignore it as it may be a scam.

What to Do When You Receive Notice of Being Transferred to Debt Collection Agency?

If you want to avoid contact with a debt collection agency, it’s essential to contact your creditor immediately to make a payment or negotiate repayment.

But if you don’t have an option or your creditor disagrees with your request, you should be ready to face the debt collector. However, you should know your rights before the debt collector.

What You Should Do if the Debt Isn’t Yours

If a debt collector contacts you for a debt that isn’t yours, you should inform them immediately and contact your creditor to rectify the error.

How Long Can a Collection Agency Collect on a Debt in Canada

Six years is the maximum period set by the federal government on the duration a collection agency can collect debt in Canada.

How Long Can a Collection Agency Collect on a Debt in Ontario?

Unlike the federal government duration, Ontario sets two years as the maximum duration a collection agency can collect debt in Canada.

Have more questions? Drop them in the comment section.

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