A foreign collection agency that attempts to collect any form of debt in Canada without a local licence is breaking Canadian law. Over the past few years, the Canadian government has modified provincial legislation to discourage foreign collection agencies from collecting within Canada.
The definition of a “collection agency” is repeatedly outlined in each provincial Collection Agencies Act. In general, the definition is “a person who carries on the activities of collecting or attempting to collect a debt or debts from a debtor that differs from that of the creditor to whom the debt is or was originally owed, regardless of to whom or where the payment is made.” This implies that any other representative of a foreign creditor, be it collector, or collection agency, that attempts to collect within the province is obliged to follow the regulations of the provincial Acts.
As mentioned in the Act, the “agency” may only attempt to collect debt within the province if the proper provincial license has been issued. The application process for each province can vary; however, they all require the applicant to have representatives physically located in each province wherein they wish to be licensed or to attempt to collect a debt. Additionally, these representatives must pass the licensing requirements and have a certain degree of experience that is required in order to even qualify for obtaining the license.
While each province does have its own legislation, they all have a very similar outlook in regards to the application of the various Collection Agencies Acts and the necessity for a provincial license. By way of example, section 5 of the New Brunswick Act states that “a collection agency or collector that carries on business in New Brunswick, either by correspondence, by serving written demands, or by making verbal demands on alleged debtors, without the license required by this Act, commits an offence punishable under part 2 of the Provincial Offences Procedure Act”….a penal offence!
The penalties for attempting to collect debt without the approved license usually entail a large fine and potential imprisonment. Section 28 of the Ontario Act specifies the offenders as “every director or officer of a corporation, who knowingly concurs in such furnishing, failure or contravention, is guilty of an offence, and on conviction is liable to a fine of not more than $50,000 or to imprisonment for a term of not more than two years less one day, or to both.” This penalty applies to the collector, the owners or directors of the agency, and even the client.
Fortunately, while the rules for foreign agencies are fairly strict, in certain cases some Canadian law firms may be able to assist American collection agencies in collecting Canadian claims from the USA, while still not contravening the Provincial laws.
The Canadian law firm of Charness, Charness, & Charness has developed a specialized program for qualified American collection agencies who want to collect debt in Canada from the US. Their approach is based on their 90 years of experience in the collections industry since their establishment in 1925.
by Jordan W. Charness, D.C.S., B.A., L.L.L., Barrister and Solicitor, Senior Partner. Listed in Canadian Who’s Who, he has been practicing since 1985 and is an accomplished trial lawyer who has successfully represented some of the world’s largest companies before the courts. His legal advice is sought after by clients at all stages of their legal situations. An expert negotiator, his advice has solved many of his clients problems before they escalated into court litigation.